Serbia: Amendments to the Law on Public-Private Partnership and Concessions effective as of March 4, 2016

Infrastructure

Marija Bojović

Publisher: Bojović & Partners

After more than four years of implementation of the Law on Public-Private Partnership and Concessions, it proved necessary to further harmonize the Law with the legislation and EU acquis as well as to strengthen the role of the Ministry responsible for finance in the PPP project approval process.

The two main objectives of the latest amendments to the Law could be singled out: protection of budget and attraction of private investments. 

Namely, the new rules relating to the control of fiscal risks in PPP projects have been introduced so that the PPP projects not being acceptable in terms of the fiscal policy shall not get a green light from the Ministry responsible for finance. The introduction of the analysis of the fiscal impact is aimed to prevent spending of taxpayers’ funds to remedy negative effects of the badly structured PPP projects. 

However, the opinion of the Ministry shall be necessary only for PPP and Concession projects where the contracting authorities / public bodies proposing the project are under the governmental authority and if their value exceeds 50 million EUR, while the local projects and the other small-scale projects still remain to be developed in a decentralized manner. 

The novelty is also that the subject of the PPP project cannot be solely supply of goods. Also, the public partner may allow to the private partner, not only carrying out commercial activities, but also construction of other facilities (e.g. petrol stations, hotels, etc., along highway routes, a commercial / residential building near public stadium / sports facility or other public facilities, etc.) within the PPP project, if it is not possible to otherwise ensure the necessary level of cost-efficiency in the realization of the PPP project and its investment return. These “other objects” which are not functionally connected with the subject-matter of the public contract (public facility, public service, public infrastructure, etc.) shall remain in the ownership of the private partner. 

It should be noted that the amendments to the Law specify that service concessions are classified as the group of contracts awarded based on the Law on Public Procurement. 

All collaterals will be presented and handed over at the time of entry into force of the public contract (i.e. at the financial closure), instead of on the day of signing the contract, which is more common for these types of contracts. Also, now it is clearly specified that requests of financiers and the private partner that the public partner provides certain collaterals or accepts the assumption of certain responsibilities must not distort the allocation of project risks defined in the already concluded contract. 

Instead of obtaining funds for the construction and development of infrastructure and systems for the performance of activities of public interest through loans, it is expected that the state shall tend to enter into partnerships with private capital more frequently.