THE NEW CONCESSION LAW: WHAT CHANGES ARE AWAITING THE PPP

Державно-приватне партнерство – один з найбільш перспективних способів залучення інвестицій у розвиток економіки України. Доволі часто співпраця у рамках ДПП здійснюється у формі концесії, за якою приватний інвестор отримує можливість вкладати кошти у розвиток об’єктів інфраструктури, переданих йому в управління, та отримувати частину прибутку від їх діяльності.

Public-private partnership is one of the most promising ways of attracting investments in the development of Ukraine’s economy. Quite often, cooperation within the framework of PPPs is carried out in the form of a concession, under which a private investor gets the opportunity to invest in the development of infrastructure objects transferred to him for management and to receive part of the profit from their activities.

For quite a long time, the legislation of Ukraine in the field of concession remained outdated, imperfect and uncoordinated, considering that the concession was not in demand among potential investors, nor among state authorities and local governments.

However, on October 3, 2019, the Verkhovna Rada finally took a big step forward in the development of PPPs in Ukraine and adopted the new Law No. 155-IX “On Concession”. On October 18, the Law was signed by the President, and already on October 20, its provisions entered into force.

The law defines a concession as a form of public-private partnership, under which the state, in accordance with the procedure and under the conditions stipulated in the concession contract, transfers to the investor the right to:

  • creation, construction or management of the concession facility;
  • provision of socially significant services.

At the same time, the majority of the operational risk, which covers the risk of demand and the risk of supply, rests with the concessionaire.

WHAT INNOVATIONS DOES THE ADOPTED LAW OF UKRAINE “ON CONCESSION” ENVISAGE?

Changing the procedure for holding a tender for the determination of a concessionaire

First of all, the law changes the procedure for defining a private partner, that is, a concessionaire. So, from now on, there are 3 main ways to determine a concessionaire:

  • Concession competition;
  • Competitive dialogue;
  • Direct negotiations with the tenant of state property.

At the same time, the holding of a concession contest or a competitive dialogue can take place in an electronic trading system such as Prozorro on a competitive basis, which increases the level of openness of the contest. For each of the methods of determining the concessionaire, a separate detailed procedure is established, strict deadlines are provided for the stages of its implementation.

Change of terms of conclusion of the concession contract

According to the new law, the concession contract is concluded for a term that cannot be less than 5 years and more than 50 years. At the same time, the term of the concession contract for the construction and further operation of highways should be at least 10 years.

Restrictions on concessionaires

The new law stipulates that the concessionaire under the concession contract is only a resident legal entity, while under the old law the concessionaire could be any business entity, resident or non-resident.

The possibility of pledging property rights arising from the concession agreement

Property rights of the concessionaire, which arise as a result of the conclusion of the concession agreement, upon agreement with the concessionaire, may be the subject of a pledge, provided that the concession agreement does not stipulate otherwise. The transfer of property rights in pledge is possible only in the case of transfer in pledge of the entire set of rights of the concessionaire arising from the concession contract. Foreclosure on the subject of the pledge in this case is carried out exclusively by replacing the concessionaire.

Consolidation of the right to replace the concessionaire

The new law provides for the possibility of replacing the concessionaire with another concessionaire either at the initiative of the concessionaire (in the case of a significant violation of the terms of the contract by the concessionaire), or at the initiative of the creditor of the concessionaire (in the order of foreclosure on the property rights of the concessionaire arising from the concession agreement that were pledged) .

The procedure and conditions for replacing the concessionaire are determined by a direct agreement concluded between the concessionaire, the concessionaire and the creditor(s) no later than 180 working days from the date of conclusion of the concession agreement.

The new concessionaire must meet the selection criteria established by the tender documents. In case of replacement of the concessionaire, the party in the concession contract is replaced.

State support of the concessionaire

The Law “On Concession” provides for state support of the concessionaire, which can be provided in one of the following ways:

  • payment of fees for operational readiness;
  • acquisition by the concessionaire of a certain volume of goods, works or services produced or provided by the concessionaire in accordance with the concession agreement;
  • supply to the concessionaire of goods (works, services) necessary for the execution of the concession contract;
  • construction of adjacent infrastructure objects, which are not objects of the concession, but are necessary for the execution of the concession agreement.

At the same time, the law establishes guarantees of the rights of subjects of concession activities, especially concessions on markets that are in a state of natural monopoly, as well as regarding the construction and operation of highways.

In addition, the new law:

  • establishes a clear procedure for initiation and decision-making regarding PPP implementation, which is consistent with the Law of Ukraine “On Public-Private Partnership”;
  • expands the list of essential conditions of the concession contract;
  • provides for the possibility of transferring the resolution of disputes that arise in connection with the execution of the concession contract to international commercial or arbitration;
  • establishes the responsibility of the concessionaire for the actions of the involved subcontractors;
  • provides for the possibility of the concessionaire to withdraw from the concession agreement in the event that within one year from the date of conclusion of the concession agreement, due to the fault of the concessionaire, he does not acquire the right to lease the land plot necessary for the implementation of the project carried out under the terms of the concession;
  • simplifies the procedure for allocating land plots for PPP projects in the form of a concession;
  • expands the list of types of concession payments.

The Law “On Concession” was developed taking into account the norms and standards of European legislation, therefore, of course, its adoption is of great importance for the development of the PPP sphere in Ukraine.

It is expected that the Law will allow attracting both domestic and foreign investors to the development of Ukraine’s infrastructure on mutually beneficial terms for all parties to the concession agreement.

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