Law on public-private partnership and concessions

Concessions

The Law on public-private partnership and concessions (“Off. Herald of RS”, Nos. 88/2011, 15/2016 and 104/2016) governs:

  • conditions and method of preparing, proposing and approving of public-private partnership projects
  • specifies the entities competent, i.e., authorized to propose and realize the public-private partnership projects
  • rights and obligations of public and private partners
  • form and content of the contract on public-private partnership with or without elements of concession (hereinafter: the public contract) and legal protection in procedures of awarding public contract
  • conditions and manner of concession awarding, subject matter of concession, entities competent, i.e., authorized to conduct concession award procedure, termination of concession
  • protection of rights of the participants in the procedures of awarding public contracts
  • establishing, status and competence of the Commission for Public-Private Partnership, as well as other issues of significance for a public-private partnership, with or without elements of a concession, i.e. for a concession.

A concession, within the meaning of the Law on public-private partnership and concessions, is a contractual or institutional public-private partnership with the elements of a concession where a public contract regulates the commercial use of a natural resource, resource in general use that is in public ownership, or a resource owned by a public body, or conducting of an activity of general interest, that a public partner assigns to a private partner, for a definite period of time, under specially stipulated conditions, against payment of a concession fee by the private, i.e. public partner, whereas the private partner assumes the risk related to the commercial use of the subject matter of concession.

Special forms of a concession are the concession for public works and concession for public services.

A concession for public works, within the meaning of the Law on public-private partnership and concessions, is a contractual relation identical to the contract on public procurement of works in compliance with the law regulating public procurements, except for the fact that the fee for public works comprises either of the right itself to commercial exploitation of executed works or alternatively of such right together with payment.

A concession for public services, within the meaning of the Law on public-private partnership and concessions, is a contractual relation identical to the contract on public procurement of services in compliance with the law regulating public procurements, if the fee for services provided comprises either of the right itself to commercial exploitation, i.e. service provision, or alternatively of such right together with payment.

Subject Matter of Concession

A concession may be awarded for the commercial exploitation of a natural resource, resource in public use that is public property, i.e. resource owned by a public body, or for conducting an activity of public interest, and specifically:

  1. For exploration and exploitation of mineral raw materials and other geological resources
  2. For certain activities within the protected areas of nature, as well as for the exploitation of other protected natural resources
  3. In the field of energy
  4. For ports
  5. For public roads
  6. For public transportation
  7. For airports
  8. In the fields of sports and education
  9. On cultural resources
  10. For utility services
  11. In the field of railways
  12. For the commercial exploitation of cableways
  13. In the field of healthcare
  14. In the field of tourism
  15. As well as in other fields.

Except for the issues related to the procedure, all other issues of significance for awarding a concession for individual field or activity, referred to above, may be regulated by a special law regulating the field or the activity in question.

Notion of a Public-Private Partnership

Public-private partnership, within the meaning of the Law on public-private partnership and concessions, is a long-term cooperation between public and private partner for the purpose of providing financing, construction, reconstruction, management or maintenance of infrastructural and other facilities of public importance and provision of services of public importance, which may be either contractual or institutional.

Fundamental elements of a public-private partnership relate to:

  1. The subject matter of a public-private partnership, which may not be solely a commercial exploitation of resources in general use or of other resources or an exclusive supply of resources
  2. The form of a public-private partnership that may either be an institutional public-private partnership or a contractual public-private partnership, or a concession that represents a special form of a public-private partnership in compliance with the Law on public-private partnership and concessions
  3. The obligation of the private partner to take over from the public partner the construction, i.e. reconstruction of public infrastructure, i.e. facilities of public significance, as well as the maintenance of public infrastructure, i.e. provision of services of public importance, with one or more obligations, such as: financing, management and maintenance, with the aim of providing services of public importance to final beneficiaries within the framework of the competences of the public partner, or with the aim of providing necessary preconditions to the public partner for the provision of services of public importance within the framework of its competences, or the provision of services of public importance within the framework of the competences of the public partner to the final beneficiaries
  4. Partial or complete financing of public-private partnership projects by a private partner
  5. The option for a public partner to transfer certain rights in rem to a private partner in exchange for the undertaken obligations, or to award it a concession, or to make it a pecuniary payment for obligations undertaken, or to allow it to charge fees to end-users for services rendered, if so provided in the public-private partnership project proposal/concession bylaw; where a public partner transfers certain rights in rem to the private partner, a relevant record shall be made in the register in which data on immovable property and rights thereon is maintained, that those rights were transferred for the purpose of the realization of a public contract
  6. Assuming the responsibility by each individual partner for the risk that can be better managed, i.e. that can be influenced, or the risks are shared in a balanced proportion, all with a view to achieve optimum risk management during a public-private partnership project term, with the use of managing, technical, financial and innovative capacities of the private partner, as well as by improving the exchange of skills and knowledge between the public and the private partner, and especially assuming the risk of demand or the risk of availability of a facility, service, infrastructure, and the similar
  7. The option available to a public partner to allow the private partner to conduct a commercial activity or to construct other facilities as a part of the public-private partnership project realization, only in case where it is otherwise impossible to provide the required level of cost-effectiveness of a public-private partnership project realization and the return on invested funds.

Public-Private Partnership Forms

Contractual Public-Private Partnership

The contracting parties stipulate in the public contract the mutual rights and obligations in the realization of a public-private partnership project, with or without elements of concession, the content of which is laid down by the provisions of the Law on public-private partnership and concessions.

The public contract awarding the concession regulates the rights and obligations of concession grantor and concessionaire in compliance with the provisions of the Law on public-private partnership and concessions and provisions of special regulations governing the field of the subject matter of the concession.

Provisions of the law regulating contracts and torts apply to the issues related to public contracts that are not specifically regulated by the Law on public-private partnership and concessions.

Institutional Public-Private Partnership

An institutional public-private partnership, with or without the elements of a concession, is based on the relation between a public and a private partner as members of a joint company that is in charge of the realization of a public-private partnership project, where such relation may be based on founders’ contributions to the newly established company or alternatively on the acquisition of an equity share, i.e. share capital increase of an existing company.

A joint company, respectively special purpose company shall be established for a public contract realization, except if the public-private partnership project proposal, i.e., concession by-law stipulates otherwise, and may participate exclusively in the implementation of public-private partnership project/concession for the purpose of which it has been established.

Provisions of the law regulating establishment and business operations of companies and provisions of the contract on establishment apply to the joint company. Founding and managing rights are regulated freely among the members of a joint company in compliance with the law regulating the status of companies.

The law regulating privatization (‘put’ and ‘call’ option) does not apply to the disposal of stakes or shares in the joint company in the manner as it was agreed in its establishment memorandums.

Provisions of the Law on public-private partnership and concessions regulating the registration of public contracts and supervision of their realization also apply to the public contracts on institutional public-private partnership.

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