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THE PUBLIC-PRIVATE PARTNERSHIP LAW REVIEW Second Edition Editors BRuNo WERNECK AND MAruo SAADı LAw BusrNEss REsEARCH LTD PUBLISHER Gideon Robenon SENIOR BUSINESS DEVELOPMENT MANAGER Nick Barette SENIOR ACCOUNT MANAGERS Thomas Lee, Felicicy Bown, Joel Woods ACCOUNT MANAGER Jessica Parsons MARKETiNG COORDINATOR Rebecca Mogridge EDITORIAL ASSISTANT Sophie Arkell HEAD OF PRODUCTION Adam Myers PRODUCTION EDITOR Janina Godowska SUBEDITOR Gina Mete CHIEF EXECUTIVE OFFICER PauJ Howarth Published in the United Kingdom by Law Business Research Ltd, London 87 Lancaster Road, London, Wl 1 1QQ, UK © 2016 Law Business Research Ltd www.TheLawReviews.co.uk No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors' firms or their clients. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions comained herein. Although the information provided is accurate as of March 2016, be advised that th.is is a developing area. Enquiries concerning reproduction should be sem to Law Business Research, at ehe address above. Enquiries concerning editorial contenc should be direcced to the Publisher - gideon.roberton@Ibresearch.com ISBN 978-1-909830-87-5 Printed in Great Britain by Encompass Prim Solutions, Derbyshire Tel: 0844 2480 112 THE LAW REVIEWS THE MERGERS AND ACQUISITIONS REVlEW THE RESTRVCTURING REVIEW THE PRIVATE COMPETITION ENFORCEMENT REVIEW THE OlSPUTE RESOLUTION REVIEW THE EMPLOYMENT LAW REVIEW THE PUBLIC COMPETITION ENFORCEMENT REVIEW THE BANKING REGULATION REVIEW THE INTERNATIONAL ARBITRATION REVIEW THE MERGER CONTROL REVIEW THE TECHNOLOGY, MEDlA AND TELECOMMVNICATIONS REVIEW THE INWARD INVESTMENT AND INTERNATIONAL TAXATION REVIEW THE CORPORATE GOVERNANCE REVIEW THE CORPORATE IMMIGRATION REVIEW THE INTERNATIONAL INVESTIGATIONS REVIEW THE PROJECTS AND CONSTRUCTION REVIEW THE INTERNATIONALCAPITAL MARKETS REVIEW THE REAL ESTATE LAW REVIEW THE PRIVATE EQUITY REVlEW THE ENERGY REGULATION AND MARKETS REVIEW THE INTELLECTUAL PROPERTY REVIEW THE ASSET MANAGEMENT REVlEW THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW TH.E MINING LAW REVIEW -- THE EXECUTIVE REMUNERATION REVIEW THE ANTl-13RIBERY AND ANTI-CORRUPTION REVIEW THE CARTELS AND LENIENCY REVIEXI THE TA.ı'C DISPUTES AND LITIGATION REVIEW THE LiFE SCIENCES LAW REVIEW THE INSURANCE AND REINSURANCE LAW REVIEW THE GOVERNMENT PROCUREMENT REVIEW THE DOMINANCEAND MONOPOLIES REVIEW THE AVIATION LAW REVIEW THE FOREIGN INVESTMENT REGULATION REVIEW THEASSETTRACING AND RECOVERY REVIEW THE INTERNATIONAL INSOLVENCY REVIEW THE OILAND GAS LAW REVIEW THE FRANCHISE LAW REVIEW THE PRODUCT REGULATION AND LIABILITY REVIEW THE SHIPPING LAW REVIEW THE ACQUISITION AND LEVERAGED FINANCE REVIEW THE PRIVACY, DATA PROTECTION AND CYI3ERSECUR1TY LAW REVIEW THE PUBLIC-PRTVATE PARTNERSHJP LAW REVIEW THE TRANSPORT FINANCE LAW REVIEW THE SECURlTIES LITIGATION REVIEW THE LENDING AND SECURED FINANCE REVIEW THE INTERNATIONAL TRADE LAW REVIEW THE SPORTS LAW REVIEW www.TheLawReviews.co.uk i ACKNOWLEDGEMENTS The publisher acknowledges and thanks the following law firms for their learned assistance throughour the preparation of this book: AIRD & BERLIS LLP ALLENS G ELlAS &CO GRATA LAW FIRM HERBERT SMITH FREEHILLS LLP KILPATRICK TOWNSEND & STOCKTON LLP LETT LAW FIRM P/S LIEDEKERKE M&M BOMCHIL MAPLESAND CALDER MATTOS FlLHO, VEIGA FILHO, MARREY JR E QUIROGAADVOGADOS MORJ HAMADA & MATSUMOTO PARQUET & ASOCIADOS ROSSELLÖ ABOGADOS SETH DUA & ASSOCIATES SYCIP SALAZAR HERNANDEZ & GATMAITAN TACIANA PEAO LOPES E ADVOGADOS ASSOCIADOS Ack11owledgmıeııts ii VELMALAW VlEIRA DE ALMEIDA & ASSOCIADOS , SOCIEDADE DE ADVOGADOS, RL WHITE&CASE ZHONG LUN LAW FIRM iii CONTENTS Editor's Preface Chaptcr 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 . ............................................................................................................ vii Brııno Wcmeck and Mdrio Saadi ARGENTINA ................................................................................ 1 Mııria lııes Corrd aııd Leopoldo Si/va Rossi AUSTRALIA .............................................................................. 1O David Donııelly, Nicholas Ng and Timothy Leschlu BELGIUM .............................................................................. 20 Chrisıel Van den Eyndeıı, Frank Judo, AıırelieııVandebıırie and A1arjolei11 Beynsberger BMZIL ................................................................................ 35 Bruno Wcmeck aııd Mdrio Saadi CANADA ........................................................................................ 47 Doı,glas j S Yoımger, Heidi Visser, Pııtrick Ouji CHINA ........................................................................................... 64 Hui Sun DENMARK ............................................................................ 78 Henrik Pııggıuırd and Lene Lmıge FRANCE ............................................................................... 90 Frımçois-Gııilhem Vaissier, Hugues Mıırtin-Sisteron aııd Anna Seniutıı INDIA .......................................................................................... 110 Srmil Seth and Vasanth Rajasekarım Coııtmts Cbapter 10 Cbaptcr 11 Cbapter 12 Cbapter 13 Cbaptcr 14 Chapter 15 Cbapter 16 Chapter 17 Chaptcr 18 Chapter 19 Cbaptcr 20 Chapter21 IRELAND ................................................................................ 119 Mary Dunııe ımd Fergal Rumıe JAPAN .................................................................................. 129 Masıınori Sııto, Shigeki Okııtani and Yımıke Suehiro KAZAKHSTAN ................................................................... 144 Shaimerden Chik1111ayev MOZAMBIQUE .................................................................... 166 Tırciıına Peiio Lopes NIGERIA .............................................................................. 173 Fred Oııııobia, Okechııkum J Okoro and Bibitııyo Mimiko PARAGUAY ........................................................................ 184 javier Maria Parqııet Villızgm and Karin Basiliki loannidis Eder PERU ..................................................................................... 195 Migııel Sdnchez-Moreno Cisneros aııd Pierre Nıılvıırte Salvatierra PHILIPPINES ........................................................................ 206 Marievic G Ramos-Afıonuevo and Ar/ene M Mımeja PORTUGAL .......................................................................... 218 Manııel ProtdJioımd Fredmco Quintela TANZANIA ........................................................................... 229 Nicholızs Zervos UNITED KJNGDOM ............................................................... 238 Adrian Cloııgh, Dıtvid Uy/es and Pıml Butcher UNITED STATES .................................................................... 255 Robert H EdwardJ, Jr, Rıındııll F Haftr, Mark J Riedy, Bmjamin P Dminger and Ariel 1 Oseasohn iV • Coıııeııı.s Append.ix 1 Appcndix 2 ABOUT THE AUTHORS .................................................. 281 CONTR1BUTING LA'1/' FIRMS' CONTACT DETAJLS ... 299 V EDITOR'S PREFACE We are very pleased to present the second edition of The Public-Privııte Partnership Lauı Review. Notwithstanding ehe exisrence of arcicles in various law reviews on topics involving public-privare partncrships (PPPs) and private finance iniciatives (in areas such as projecrs and conscruccion, reaJ escare, mergers, transfers of concessionaires' corporate control, special purpose vehicles and government procurement, to name a few), we identified the nccd for a deeper understanding of ehe specifics of this copic in different councries. 1he first edition of the book was an iniciaJ cfforc to fulfil this need. Braz.il marked the 10th year of the publicacion of irs first Public-Private Partnership Law (Federal Law No. 11,079/2004) in 2014. Our expericnce with this law is stili developing, especially in comparison with other countries where discussions on PPP models and the need co attract private invesrmenr imo large projects dates back co the 1980s and 1990s. This is the case for counuies such as the United Kingdom, the United States and Canada. PPPs have been used in the United Scates across a wide range of seccors in various forms for more chan 30 years. From 1986-2012, approximarely 700 PPP projects reached financiaJ closure. The UK is widely known as one of ehe pioneers of PPP model; Margarer Tharcher's governrnencs in ehe l 980s embarked on an extensive privatisation programme of publicly owncd utilicies, including relecoms, gas, elecuicity, warer and waste, airports and railways. The Private Finance lnitiative was launched in the UK in 1992 aiming co boosr design-build-finance-operate projecrs. Canada has developed a sustained and robust market for the development of pubüc infrastrucrure using ehe PPP model. Since ehe l 990s PPP procuremenc has significancly expanded to the extent that PPP projeccs are now procured in ehe federal, provinciaJ and municipal levels of governmenc across rhat counrry. On rhe other hand, in developing countries with similarities with Brazil, PPP laws arc more recenr. Argencina was ehe fust country in Latin America to enact a PPP Law (Decree No. 1299/2000, rarified by Law No. 25,414/2000). The PPP Law was designed to promore privace investment in public infr:ıstruccure projecrs that could not be afforded exclusively by ehe srare, especially in ehe areas of healeh, education, vii Ediror's Prefııce justice, tr.ınsportation, consrruction of airport facilities, highways and invcsrmencs in locıl safery. in Mozambiquc, Law No. 15/2011 :ınd Decree No. 16/2012 stipulared ehe Public-Private P:ırrnerships (PPP) Law and other related PPP reguJations, which escablishes procedures for concraccing, implemcncing and monitoring PPP projects. In Paraguay, a regulation esrablishing the PPP regime has reccntly been enacred (Law No. 5102) co promotc public infrastrucrure and ehe expansion and improvemenc of goods a..nd scn·ices provided by ehe state; rhis law has been in force since iare 2013. In 'İew of ehe foregoing, wc hope a comparative srudy covering pracrical aspecrs and different perspectivcs on public-privace p:ırmership issues will become an imporrant rool for the strcngcl1ening of this model worldwide. Xle are cercain chis scudy will bring abouc a berter d.isseminarion of besc practices implemenced by privare professionals and governmenc authorities working on PPP projects around the globe. Xlith respecc to Brazil, the experience evidenced abroad may lcad to ehe suengthening of this model in rhe country. In this preface, we cali your arcenrion ro one specific feacure of rhe PPP law in Brazil - srate guarancces. This feacure permits paymenc obligacions undercaken by ehe public party in PPP agreemencs be guaranceed by. among orher mechanisms authorised by law: (l) a pledge of revenues; (2) creacion or use of spedal funds; (3) purchase of guaranree from insurance companies thar are nor under public conuol; (4) guarantees granced by international organisations or financial instirurions not controlled by any governmenc authority; or (5) guaramees by guaramor funds ora srace-owned company created especially for that purpose. Thestate guarancee pursuant to PPP agreemencs is, without question, an imporcanr innovacion in administrative agreemencs in Brazil; it assures paymenc obligations by ehe public partner and serves as a gu:ırantee in ehe evenc of lawsuits and claims againsr rhe governmem. This rool is one of the main facrors distinguishing ehe legal regimen of PPP agreements from ordjnary administrative agreemencs or concessions, and is viewed as crucial for thc success of PPPs, espedally from the private invesmrs' standpoinr. Nevertheless, the difficulty in implememing state guarantees on PPP projects has been one of ehe main issues in the execution of new PPP projects in the country. This poim is made worse due co the history of governmenc default in administrative conrracts. in other jurisdictions, however, stace guaranrees are nor a ru.le. On ehe contrary, unlike PPP projects in developing councries, governmenc solvency has not historically been a serious consideration. That is ehe case in countries such as Australia, Canada, Francc, Ireland, Japan, ehe Unitcd Kingdom and the United Srares. We expeccthat eheconsolidacion of PPPsand ehestrengthening of the governmenr in Brazil may lead co a similar model, enabling privace investmencs in areas where ehe coumry lacks them most. in the firsr edicion, our contributors wcre drawn from ehe mosr renowned firms working in ehe PPP field in their jurisdictions, including Argentina (M&M Bomchil), Australia (Allens), Belgium (Liedekerke), Canada (Fasken Marcineau}, China Qun He Law Offices), France (White & Case), Ireland (Maples and Calder), Japan (Mori Hamada & Matsumoto), Mozambique (TPLA), Paraguay (Parquet & Asociados), Philippines (SyCip Sa1azar Hernandez & Gatmaitan), Turkey (Paksoy), the Unired Kingdom (Herberc Smith Freehills) and rhe United States (Kilpatrick Townsend & viii ...... Editor's Prefacc Scockron LLP). Y/c would like co th:ınk :ı.ll of ehem :ınd our ncw contributors for cheir support in producing 1he Pııblic-Priııate Part11ership lııw Review and in helping in ehe collcccive conscruccion ofa bro:ıd study on ehe main aspects of PPP projects. Y/e strongly belicvc ch:ıt PPPs arc an imporcant cool for gcneracing investmcncs (and devclopment) in infrascrucrurc projects and crcating cfficiency not only in infrascrucrurc, bur also in ehe provision of public serviccs, such :ı.s educaeion and health, as well as public ligheing scrvices :ınd prisons. PPPs :ıre :ılso an importanc means of combating corruprion, which is common in ehe old :ınd inefficienc model of direcr srare procurement of projccts. We hope you enjoy ehis second edirion of Tbe Pııbiic-Privaıe Partnership i.Aw Reııiew and we sincercly hope chat chis book will consolidacc a comprehensive inrernacional guide to ehe anatomy of PPPs. Y/c also look forward to hearing your ehoughcs on chis edicion and particularly your comments and suggcstions for improving fucure edieions of this work. Bruno Y/emeck and Mario Saad.i Martos Filho, Veiga FiU10, Marrey Jr e Quiroga Advogados Sio Paulo March 2016 ıx Chapter 1 ARGENTINA M.aria lneı Corrıi and Leopcldo Si/va RrısJi I OVERVIEW A puhlic:-private parmership (PPP) is an instirurion designed rodevelop an infrastrucrure projea dırougb a stable parmer.ship between ebe puhlic and privare secrors, and on ehe gmunds of joinc inrercscs an.ela d.iruibution of risks. Undeı- a PPP rcgime, individuals and companies may emer inco a cooperarive agrer:menr widı ehe state ro devdop infı-asuuaure projea:s or ro provide puhlic services. ln Argcnrina, ehe fi.st legal framework to govern PPPs was established by Dc:cree No. 1299/2000, rarifıe.d by Law o. 25,414 (2000). This Decre.e aimed at promoting private im·csonent in public infrasınıcnıre projects dıat could not be afford.ed e:xdusivdy by� suı.e, cspeci.ally in ehe areu ofbealth� educarion, jusrice, domestic cransponarion, aiıpon fa.cilitio, highways and homdand seaıriey. Uıuitt ehe provisions of w Decrce, parnıeı:ships lud ro be creaıed bycontract, in acco.dancc widı dı.e corrcsponding concraaing procedure. The main char.aaeristi.cs of eh.ese partiaılar parrnerships are: (1) a community of intereM beıween dıc puhlic and private sccıon; (2) a propcr d.isrribution of risks; (3) the 6nanciaJ susuinabiJicy of ehe projea; (4) reductions of ehe cosrs of th.e infrastrucrure projc:cu; (5) bcner con.ditioru w access ehe c.apical markrıs; (6) proh.ibicion of early u:rmination by� s� based on ebe criceria of oppomınicy, merit or converuence; and (7) prohibicion of me llSC of iw variandi power by ehe state. ln panicular.. unckr th.e provisioru of Occree No. 1299/2000, rhe improvemenc of ehe financiaJ condirions and ehe reduction of com became possible as a resule of ch.e c:rearion ofa fiduciary furuL which sc.cures rhc paymerus and coscsrdarcd co ehe projcct. l M.via l� G:m:a i.ı. .a ,n.nnc:r and le:opoldo Silva Ros�i is an associatc 21 M llc M Bomdul. 1 Argenti1111 Since Argencina is a federal councry, with both federal and provinciaJ lcvcls of legal organi.sation, ehe federal govcrnmcnr and each province havc cheir own body of law on public infr:ıstructurc. Following ehe passage of Decrce No. 1299/2000, several provinccs adhered to ehe regime approved eherein. In early 2001, Law No. 25,414 was abrogated by Law No. 25,556. Thereforc, Dccree No. ] 299/2000 shall be deemcd abolishcd from chac cime on. On 16 August 2005 the cxecutive branch issued Decree No. 967 /2005, published in ehe OfficiaJ Gazccce on 17 Augusc 2005 (stili in force). This Decrec approved ehe General Regime for Public-Privacc Parmcrships, as Annex 1 (the 2005 Regime). SevcraJ provinces haYe adhered co ehe new regime. This 2005 Regime emphasises thc necessicyof obraining financiaJ rcsources from ehe capital markcts. To do so, ehe regimc scaces thar parcnerships shaU be constituted and organised as trust funds or publicly traded companies. Finally, just as in the regimc approvcd by Decrec No. 1299/2000, ehe new rcgime anempts to provide legal certaincy and prediccabilicy by limiring rhc regularory risk, in order to rcduce ehe costs and improve ehe cond.itions to access to the capital markets. Despite ehe artempts eo esrablish general rcgimes ro boost PPPs chrough the rwo legal frarncworks enacced, there is no record of any major developmenr of projects under chese regimes. Nonetheless, cerrain cypes of association in, or concriburion to, some projcccs of infrascrucrure arc carried our by both ehe public and privare secrors in Argenrina. However, thosc projects are based on a case-by-case legal regime. Y/e underscand thar ehe lack ofa relevanc experience is due ro exogenous causes rather than the mcrits of ehe regulacion irself. Ve agree wich ehose who clıink rhar ehe success ofa PPP is deccrmined by poliricaJ and economic facrors such as ehe ban.kabilicy of the projecr, the scace's risk racing and irs actual opporcunities to access ro capiral markecs. The absence of a predictable legal and economic environmenc may have d.iminished the success of Argentine PPP regimes until 2015. The new environment resulcing from ehe December 2015 elections creates reasonable expectations on having more opponunicies co access to capical markecs and co cake advantage of the PPP rools for the developmenc of infrascructure projecrs in several scracegic areas. il THE YEAR lN REVIEW Two imporrant projects relaccd co ehe generacion of eleccricity were compleced with the construction of rwo thermoelectric plants (ehe Manuel Belgrano and Jose de San Martfo plancs) and one infrascruccurc projecc relaced co wind-energy generation plancs (Rawson I and II in ehe Pacagonia area) were carried ouc through PPP structures, alchough they werc based on specific legal regimes, raehcr than ehe general regimes mentioned above. At ehe time of wricing, scvcral wind-generation projeccs were stiU in process under Law No. 26,190 (2006) and Resolurion of the Secrecary of Encrgy No. 712/2009. 2 - Argentina Even though most of thc filcd projccrs relate co thc cncrgy industry, thc PPP rcgimc could gcncrare incrcasing activity in arcas including road :ınd highway conscruccion, airport facilides, corrcctional inscitutions and hospiral construction, and ehe provision of public services. To improve ehe usc of PPPs, policy changcs aimcd at attracting domcscic and foreign investmenc should be implemcnced. Thcse changcs will allow infrasrruccurc projects relaccd not only ro clectricity gcncration but also to a variety of other infrastruccure projeccs to be developed under ehe rcgime. As for legal developments, a new Civil and Commercial Code entered into force on 1 Augusc 2015 (Law No 26,994 as amended by Law No. 27,077). The new Code sets forch several provisions on Trust Funds (see Arcicles 1666 co 1702). According co the new Code, Trust Funds shall be regiscered, shall carry eheir own accountability and shall use a civil liability policy to cover civil damages arising from their assecs (sec Anicles 320, 1669 and I 685). in :ıddicion, according co the new Code, ehe scace civil liability (which was wuil 2015 governed by ehe former Civil Code asa resuleofa generally accepced case law) shall be governed by Public Law (see Anide 1765). 111 GENERAL FRAMEWORK Types of public-private partnership Pursuanc co Section 4 of ehe 2005 Regime, ali PPPs shall be constituted and organised as trust funds or publicly traded companies, such as corporations, commercial limited parmerships, limited liability companies, foreign corporations and cooper:ıcives. in essence, the 2005 Regime scaces that PPPs shall be conscinıted and organised in such a way thac allows ehem co issue securities under ehe provisions of the C:ıpital Market Law No. 17,811 (which has recencly been replaccd by Law 26,831). PPPs can pursue the following public purposes: (]) performance, operation or maintenance of public works or services; (2) expansion of exiscing public works or services; (3) planning or design, project financc and construction of public works :ınd services, including turnkey projects; (4) total or parcial financing of public scrvices, whether or not preceded by the performance of the relaced public work; among others (Section 2 of the 2005 Regime). ü The auehorities AccorcUng co the 2005 Regime, the Ministry of Economy and ehe Ministry of Federal Planning, Public lnvestment and Services are joindy the enforccmenc and inrcrpretation authorities, and arc empowered to issue additional rules or clarifications. These minisuies are charged with establishing ehe Commicree on Evaluation and Development of Public-Private Partnerships (the PPP Committcc) as thc entiry responsible for receivingand evaluating all PPP projecrs proposed by public bodies. Under this regime, individuals and companies cannot propose PPP projects by rhemselves. in addition, when the proposed PPP pursues a purpose rhat exceeds ehe compecence of ehe aforementioned ministries, rhe PPP Committee will also include personnel of the ministry wieh competence in the relevanc areas. 3 Argmtina ıu General requirements for public-private pannership contracts X'henever a public body considers it convenienr to develop :ı public work or a public senice under the PPP regime, it shall file thc proposcd project with ehe PPP Committee. Anne.x l ro rhe Decrce providcs thar thc propos:ıl shall include, at lcasc, thc following items: (1) idenrification of the projecc; (2) :ı juscificacion of ehe projccc's cechnical, economic and financial feasibiliry; (3) the estimated amounr of invcscmcnc invol'ed; (4) rhe cype of corporarc strucrure under which ehe p:ırrncrship will be organised, specifying the role and p:ırricipation of the st:ıte; (5) complete idenrific:ıcion of rhe respeccive responsibilirics of ehe public and privarc secrors in thc projcct; and (6) a der:ıiled repon of cl1e projecr prep:ıred by rhe proposing body (Seceion 1 l of Annex 1). Besides ehe requiremencs lisced :ıbove, rhc PPP concraccs must include, as :ı minimum: (l) a specific clause wieh ehe dur:ıcion of ehe p:ırtncrship conrr:ıcr, which has to be long enough co repay ehe investmenr; (2) rhe possibiliry co cnrer into subcontr.ıcts for the parcial execution of ehe public works or services; (3) sanccions ro be imposcd in case of breaches of the public or privace seccors' respective oblig:ıtions; (4) provisions regarding ehe e:ırly termination of ehe PPP relacionship; (5) ehe adhesion ro rhe capic:ıJ market public offer regime (which implies the submission of an initial public offer on :ı scock e.xchange). The 2005 Regime does not providc :ı maximum or minimum duration for a projea. Xlhen the projecc is aimed at performing public works or providing public services, rhe rerm of rhe contract may vary (in practice) from 10-30 years. The 2005 Regime does not provide a value rhreshold for PPP conrraces. Howevcr, the - now abrogaeed - Decrce No. 1299/2000 stated rhac che PPP struccure was aimed at promocing privare investment in public infrascrucmre projeccs thar the srare could not afford alonc, and this can be raken as a guide for the interprctacion of this Decree. ünce the proposal of partnership is filed, the PPP Commiccee fnırhers informarion from rhe proposing public body within a 30-day period on cl1e grounds of its proposal. After that, ehe PPP Comminee has 60 days to evaluare ehe public inceresr involved in ehe proposed projecc and to prepare a detailed reporc on ehe proposal recommending ics acceprance or refusaJ. The repon will be sem co rhe executive branch for approvaJ. If approved, rhe execucive will qualify the proposal as a project of public inrerest and will aurhorise irs inclusion in the PPP regime. Ünce the PPP proposaJ is approved by the executive branch, the Ministry of Federal Planning, Public Invesunem and Services will begin rhe proce.ss of sdeaing rhe privace concracror. The relacionship berween ehe privace and public encicies shall be governed by ehe law applicable ro the cype of private or public association adopted. Therefore, the PPP conrraa may be subjecc co privare rules if such rules are rhe appropriace co rhe cypc of PPP association proposed. 4 ... Argeııtbııı 5 IV BIDDING AND AWARD PROCEDURE E.xprcssion of intcrcst As c.xpbined abovc, for ehe proposed PPP projcct to be approvcd it must be dcclared as a public incerest projccc by ehe cxccucive branch. ıı Request for proposals and unsolicited proposaJs ünce the proposal is approvcd and the execurive branch has qualified it as a projccc of public inccrest, ehe Miniscry of Federal Planning, Public Invcscmcnt and Serviccs will acrivate the mechanisms for selection of ehe privaee concractor governed by Decrce No. 1023/01 (the General Public Contracc Rcgime), Law No. 13,064 on Public Vork Comraccs and Law No. 17,520 on Public Work Concessions. Despice ehe fact that thc ehrce above-mcntioncd frameworks providc various procedures of selcccion, chcre is no free choicc a.mong ehem and ali ehree consider public ccndering as ehe default sclection procedure. Rcgardless, ehe main proccdurcs opcrate as follows. Pııblic teııdering or public contest ThecaJl forcompetition is addressed to any incercseed opera tor through broad publicıtion. Public rendering applies, provided the crirerion for scleccion of ehe governmem's co-concraccor is based primarily upon economic faccors. Public concese, instead, shall be followed if thc decisive cricerion is not economic, but bascd on cechnical-sciencific ability, arcisric skills or othcrwise. A cendering may be of single or mulriplc scages. Single-scage rendering occurs when ehe analyses of ehe bids and ehe evaluation of thc biddcrs' qualities cakc place in one single act, whereas in a multiple-srage tendcring chcre are two or more sragcs aimed for the evaluacion and analyses of thc bidders, chcir backgrounds, financial capacity, ete. This modality is used when the purposc of thc contract is complex, or when ehe spccial cbaracreristics of the tcndcring justify it. The process has different stages. in general terms they are: (1) prepar.ıtion of the biddfog terms by ehe adminiscrarive authority; (2) broad publication of ehe call for competition chrough İnternet and ehe Official Gazctte; (3) submission of ehe bids, which shall be vaJid for a spccific term; (4) evaluation of biddcrs; and (5) awarding of the contracc. Private tmdering or private contest For privatc tendcring or a concest, invitacions co tender are delivered ro a minimum of five operators and a cali for compctition is published in a more limited way than in public cendering or concesr proccdures. Any inccrested opcrator may submit a tender. Thesc proccdures arc applicablc to concracts amounting up to 800,000 pcsos. Direct contractiııg For direct contracting, invications to tender are dclivcred coa minimum of threc opcrators regisccred in the Providcrs Jnformacion System. Howcvcr, any incerestcd operator may Argentinıı 6 submit a tender. This proccdure applies for contracr.s not exceeding 200,000 pesos and in e..xcepcional circumstances expressly provided in ehe 2005 Regime - namely, reasons of urgency. For concracrs not exceeding 75,000 pesos, a fast-track process is foreseen. Since PPPs generally involve the execucion of large-scale contraccs, imge invesunents, reorganisation of scate enricies, assignmenr of public assets co private parties and ehe creation of conrrolling agencies, as a general rulc, ehe private parcy to such concraccsshall be selected according to ehe procedure of public cendering. The submission of private proposals for PPP contraccs is not foreseen under ehe 2005 Regime. Privaee initiatives related to public work or public services are governed by ehe Nacional Private lniciacives Regime (Decree No. 966/2005). Under ehe Private lniciatives Regimc, privace partics may file a proposal to ehe Committee on Evaluacion and Developmenc of Private Iniriacive (ehe Privace Initiacive Commiceee, which is distinct from ehe PPP Committee) including, at leasc, ehe following items: (1) idenrification and nacure of ehe projece; (2) ehe basis of ehe eechnical, economic and financial feasibilicy of ehe project; (3) ehe eseimated amount of invescmenc; (4) ehe background of ehe auchor of ehe inieiaeive; (5) complece identification of ehe financial resources; and (6) a guaramee, which has to be calculaced on ehe estimated invescment. Ünce ehe requirements liseed above are completed, ehe Privace lniciative Committee will send ehe proposal to ehe competent public body and require İt to prepare a detailed reporr on ehe proposal wiehin 30 days. ünce ic has ehe deca.iled repon, ehe Private lnitiative Committee has 60 days co decide wheeher ehe proposal can be qualified as a project of public interest and will prepare a second repon chac will be sene to ehe executive branch, which will qualify ehe proposal as a projecc of public interese and will auehorise irs inclusion in ehe Privaee lniciaeive Rcgime. ünce ehe proposal is approved by the executive branch, ehe Ministry of Federal Planning, Public Invescmenc and Services will initiate ehe process of selection of ehe private concractor chrough public eendering or public concese as explained above. iii Evaluation and grant Pursuanc to Decree No. 1023/2001, such seleccion of ehe publk contractors should be made on ehe hasis of the mose convenient bid, considering ehe price, qualicy, ehe cenderer's credencials and fureher conditions deeailed in the tender. See Decree No. l 023/01, Annex I, Section l 5. V THE CONTRACT i Payment As pointed out, ehe PPP Regime aims at prornoting private investment in public infrastructure projeccs that the state could not, or deems it not convenienc to a.fford alone. As regards ehe stace's contributions and paymencs, according co Decree No. 967 /2005, Anncx I, Section 5, these concriburions may consist of. cash paymencs; tax rcduccions or other benefits seaced by Law No. 17,520; righcs upon real esrate propercy of ehe staee; or oeher legally authorised contributions. Argmtina 7 As rcgards ehe possible schemes of public-privaee partnership, concracts of infraseruccure projects ehar are exclusively affordcd by the seaec, bur financcd by thc privacc pany, include: eurnkey contraces, shadow roll concraccs and leasing. in rurnkcy conrraccs, ehe privaee parry has to financc and build thc public work. Ünce ehe projcce is compleeed, the seare will rcpay the cosc in one or scvcral payments. in shadow coU contraccs, ehe privace parry has to finance, build, operaee and maimain the public work. ll1e repaymenr of thc invescmcnc is madc by cash payments tied up to ehe public use of ehe infrastructurc work. FinaJly, in leasing concraccs, ehe seaee wiU pay for the use ofa privaeely financed and buile infrastructure work. lf the PPP aims at providing a public service, ehe privaee party will also chargc ehe uscrs of ehe public service the auchoriscd fee. ıı State guarantees in order eo secure thc payments and coses relared ro the projece, the regime establishcd by ehe Decree No. 1299/2000 creared ehe Fiduciary Fund for Federal Infrasuucrure Development. l11c Fiduciary Fund had an initial capieal consisting of ehe concriburions made by ehe national government and ehe provinccs thae subscribed eo thc regime. Ar ehe cnd of the eerm of thc PPP, ehese concribueions should recurn to both ehe federal govemment and the local authorities. Decree No. 967/2005 has no provision regarding the seaee's guaraneecs co enforce the public seceor's obligations and payments in a PPP. Therefore, these guarancees shall be established on a case-by-case basis (i.e., in ehe rerms of the eendering and ehe relevam contracr). in contrasr, ehe regime seipulaees thar the srare shall requesr thar rhe privace parry to the PPP make ehe proper guarancees co ensure thc performance of irs undercakings. Thespecific PPP regimes csrablished for the setting up of thermoelecrric plancs and wind-generation planrs (see Section II, supra) contain explicit provisions on p:ıyments and guarancees aimed at ensuring ehe repaymenc of the privare invcscmenc (generally ehrough trusts or funds created solely for such purpose). m Distribution of risk The PPP regulations tend to distribute risks between the state and ehe private parry in order to reduce the relaced costs. Jn order to do so, Decree No. 967/2005, Anncx I, Section 1 (g) states, asa general principle, that risk musr be distribuced according to ehe capaciry of each parry co manage each risk and according to a criterion of efficiency. Regulacory risks may be diminished by prohibicing early cermination for reasons of opportuniry, meric or convenience, or ehe use of iııs variandi power. Technical, economic and financial risks may also be diminished by assigning them to each party according to facrors such as the namre of the projecc, ics phascs and its durarion. Argentina For example, in cases in which the development of ehe projecc depends on unknown f.ıccors, the cerms may seace that those costs have co be dividcd among ali ehe biddcrs. Finally, expropriacion :ınd force majeurc risks may also be distribuced wich pre-csublished compcns:ıtions. in ehe cxarnple of ehe thcrmoelectric plams mcncioncd in Section II, sııpra, to distribuce ehe risks, ehe st:ıtc (through ehe encicy in chargc of rcgulaeing ehe wholesalc elccericicy market) assumcd ehe obligation ro purch:ıse a ccrtain perccntagc of the energy produced and ro supply cJ1e fuel necdcd for ehe funceioning of ehe planrs. ıv Adjustmene and revision The PPP rcgime docs not contain specific rulcs reg:ırding ehe :ıdjuscment or revision of concr:ıccs. Therefore, ehe adjuscmenc mcchod shall be cstablished on a c:ıse-by-case hasis in ehe cerms of ehe rclcvanc tendering. In chose cases in which ehe PPP concr:ıct is subjecc co public rules, ehe adjusemenc or revision will be subject to ehe general rules :ıpplicablc co public conrract (according co which the parcies are not free to adjusr or review ehe contract at cheir murual discrccion, but the scace is forced to cnsurc ehe mainrenance of the original cconomic balance of ehe contracr in favour of che priv:ıce parry). v Ownership of underlying assets Regarding ehe ownership of che underlying :ıssets, ehe 2005 Regime leaves no room for doubr, since it expressly sratcs chac whenevcr a public work has ro be builc, at the end of thc partnership ehe propercy will belong co ehe stace. Jn cach case the rerms of chc relevanr tendering shall describe the w:ıy in which the assets can be used :ınd shall be rerurned ro ehe srace. vi Early termination Early terminarion is a widcly known power of the state, and it may be used for several reasons. Early cermination is one of ehe principal regulacory risks that PPPs could face and for rhac reason it secms imporrant fora PPP regime to reasonably limit it. Dccree No. 967/2005, Annex I, Seccion 3 (d) requires the PPP proposal ro include a dcrailed list of reasons for early termination. These reasons shaU be lisred in the cerms of ehe relevant rendcring and will usually include ehe breach of the agreed obligarions. The now abrogared Dccree No. 1299/2000 expressly provided ehat a prohibition of early cermination for reasons of opporcunicy, merit or conveniencc clauscs may be included in ehe parcnership agreemenc. VI FINANCE Üne of ehe mosr important requiremencs for a PPP project to gec the approvaJ of ehe executive branch is that it has to be constituted and organiscd in such way thar it can access ehe capital market undcr the provisions of the CapicaJ Market Act in force (Law No. 26,83I). Thc rcason for chis is that ehe regime aims at promocing privare investmenc 8 ... 9 in public infrasuucrurc projeccs that thc srare cannot or decms it not convenicnt to afford alone. Therefore, the PPP associarion shall adopc a legal form ablc ro acccss thc c:ıpiml markecs to devclop ehe projecr. in some cases ehe scace will financc pare of thc projccr. Howevcr, chis contriburion c:ınnot exceed a cerrain percencage of ehe invescmenc. Accordingly, as usuaJly happcns, u1e resources needcd co financc ehe projects of ehis kind are sought at ehe capital markers. The legal framework does not cxplicidy resrricr access co internarion:ıl capical markecs. As a conscqucnce, cross-border finance could be included in ehe terms of ehe cendcring process for awarding ehe PPP concract. VII RECENT DECISIONS As scated above, ehere is no record of major PPP projeccs under rhc general regimes explained in ehis arcicle. in addicion, according to Section 9 of ehe 1995 Regime, any dispure char may arise during ehe exccucion, enforcemenc or incerprerarion of PPP conuacrs can be broughc co arbieracion if such possibilicy has been included in the rerms of ehe cendering. The specific regimes mencioned in Seccion 2, suprıı also include arbieration as a dispuce resolurion mechanism. Accordingly, no relevanc judicial decisions are publicly available on ehe matter. le may be worch mentioning ehat ehe Fiduciary Fund for Federal Infrastructure Developmenc creaced by Decree No. 1299/2000 has been considered a public encicy (i.e., a public legal person) by ehe Suprcme Court, owing co ehe public nature of ehe funds comprising it and ehe righcs and obligarions explicitly attribured ro ehe fund by ehe law (in re: La Pıımpıı, Provincia de c!Fondo Fidııciario de Jnfrae.strııctımı Regionııl si bıcumplimiento de contrato, ruling dated 8 October 2013). VIII OUTLOOK As described above, ehe general PPP framework in force does not providc sufficient legal certaincy to permic the developmenc of ehe PPP sysrem. The key faccors of any PPP regime (such as paymencs, seaee guarantecs and limiracions of sracc power) are not sufficiently regulaeed by law. in emerging countries, wich a hiseory of economic crisis and high politicaJ risks, ehe absence of explicit legal rules proteccing privace incerests appears eo presenc a serious obscacle for ehe promotion of PPP projects. As scaced ar the beginning of this chapcer, co increase ehe use of PPPs, it is imporrant to have a prcdictable legal and economic environmenc. in this concexr, legal, policicaJ and economic changes have to be implcmented to attract privace invcstors interested in entering into PPP concraccs, especially changes direcced at bringing legal and economic prediccabüicy to ehe financial and economic communicy. As a resule of ehe December 2015 elections, we have reasonable cxpectations on reaching a more prediccable environmenr for privace investmcncs and, therefore, for ehe development of PPP projects. 10 Chapter 2 AUSTRALIA David Domıelly, Nicholas Ng a11d Timothy Leschke 1 I OVERVI.EW PPPs have been used in Australia for nearly 30 years, and began tluough state governmems developing eheir own implemcntation and development models. Victoria was very much a front runner, escablishing the Partnerships Victoria body and developing models based on ehe Uniced Kingdom's 'privace finance initiacive' in ehe early 2000s. The cerm 'public privace parmership' (PPP) was formally adopted to cover those types of pubüc and private arrangements, and policies developed in ocher Australian states were heavily based on ehe Viccorian model. A national approach was irnplemented in 2005, with ehe Auscralian federal government introducing ehe National PPP Policy and Guidelines, with ehe aim of harmonising ali Auscralian governments' approaches to PPP implementation and development. Australia does not have a specific legislative frarncwork for PPPs, but rather ehe National PPP Policy and Guidelines set out ehe processes chac auchoricies should foUow in ehe investment, procurement, development and operations stages of PPPs, along wich sc.andard risk allocations and commercial principles co be adopted. State governments have cheir own jurisdiccional requirements and departures that are read in conjunction wieh ehe National Guidelines. The current federal government's recenc policy regarding capital recycling bodes well for an increase in PPP activicy, not only rhrough ehe construction of new infrastruccure, but also through sales or long-term leases of governmenc assets (such as ehe A$10.25 billion long-cerm lease of pare of ehe New Souch Wales governmenc's 'poles and wires' business, and ehe long-term lease of ehe Port of Darwin). David Donndly and Nicholas Ng arc parmcrs, a.nd Tımothy Lcschkc is an associace, ac Allcns. 11 Australiıı lhe currcnt cconomic and political climatc in Australia suggests chat govcrnmcnt ıs more than willing to use the PPP dclivery model. Reccnt cxa.mplcs includc new hospitals, such as ehe Northern Beaches Hospital in NSW, awarded in 2015, and schools, like the recencly awarded Yictoria New Schools PPP and Wcstern Auscralia Schools PPP. Virtually ali categories of public infrastructure havc bcen or are prospeccivcly subject to PPP transactions in Australia. Transport and social infrastructure projccts fearure most prominencly in all Australian states and territories, but therc have also becn energy, water and relecommunications projects. II THE YEAR IN REVIEW The Ausrralian PPP market continued co grow in 2015, with several new projects coming to market and others rransirioning from development inro their operarions phase. The Sydney Lighr Rail PPP, NorthConnex PPP, Norchern Beaches Hospieal PPP, Toowoomba Second Range Crossing, Victorian New Schools PPP, WA Schools PPP and the ACT Courts PPP reached financial close. New projects rendered in rhe market rhrough expressions of inrerese or requesrs for proposal included Srage 2 of the Gold Coase Lighc Rail PPP, ehe High Capacity Metro Trains Project and the ACT Capital Merro lighc rail PPP. As pare of ehe 2014 Federal Budget, ehe Nacional Parmership Agreemenr on Assee Recycling becween ehe Commonwealth government and each of ehe scates was signed. This package sets oue an asset-recycling regime, which involves the Commonwealth contributing A$5 billion of incentive paymenrs comprising 15 per cenr of ehe value of the asset proposed to be sold. These incemive paymenes are expected to be used to fund infrasrruccure within ehe sraces. in 2015, ehe New South Wales governmenr secured A$2 billion of funding from the Asset Recycling Fund to fund irs transport and infrasuucrure in.ieiatives, after the ACT government had already secured A$60 million to support an investment inco ehe ACT Capital Metro lighe rail PPP. There has also been arı increase in unsolicited or 'markee-led' proposals received by ali levels of government in Australia, which bodes weU for conrinued privace sector investmenr in delivering infrastrucrure, including ehrough PPPs. IIl GENERAL FRAMEWORK Types of public-private partnership There are several srrucrures of PPP that have historically been used in Australia, including DCM (design-construce-maineain), DCMO (design-construct-mainrain-operaee), B00 (build-own-operate) and BOOT (build-own-operate-transfer) forms of projece delivery, but in essence, PPP projects are frequently simply another version or versions of ehe BOOT scheme. The design-build-finance-operate (DBFO) model is commonly used for PPP projects in Auscralia, particularly where ehe project hasa 25 co 30-year cerm and as a resule is required to ra.ke a whole-of-life approach to service delivery. A common theme for recenc PPPs has seen the inclusion of some form of governmenc conrribution. Conrribueions are generally structured as cash paymems and 12 Au.stralia may be made during ehe developmenc ph:ıse, imrnediately following completion or on est:ıblishmenc of steady-st:ıte oper:ıcions. P:ıyments a.re usually subject co pre-agreed conditions being mer. u The auchorities Xlithin e:ıch governmenc, borh federal and scatc, rhcre is usually acencralised PPP authority :ıssociaced wieh ehe rre:ısury departmenc (such as Building Queensland). However, in mosr jurisdicrions individual projecrs are usually procured by, or in conjunction wich, ehe specihc governmenc departmenc that is most appropriate ro deliver ehe project. For example, Transport for NSW or ehe Roads and Maririme Service would administer a road or r.ıil infrascructure projecc in ehe state of New South Wales. 1his also means thac cercain Australian government departments have morc experience in ehe PPP landscape chan ochcrs, purely due ro ehe nacurc of ehe functions they adminisrer, for example, governmenc departmenrs thar deal primarily wich road and other transport infrascrucrure. The experience of government depanments wieh PPPs can greacly inAuence both cl1e bidding and delivery processes, owing ro knowledge of risk profile and market scandards for similar projects. \7hile not an auehoricy ehat awards PPPs, Infrascructure Auscralia is a seminal Auscralian scarurory body thac works with induscry and government co develop ali other aspeccsof cl1e PPP process. Escablished under cl1e Infrascruccure Auscralia Act 2008 (Cch), which came inco effect on 9 April 2008, Infrascructure Ausualia's primary function is ro provide advice ro cl1e Commonwealch, scate, cerritory and local governmencs on infrasmıcrure matters, including advice regarding ehe harmonisacion of policies and laws relacing ro ehe development of, and investment in, infrascruccure. This includes publishing ehe Nacional PPP Policy and Guidelines, as weU as other publications regarding infrascrucrure investmenc :ınd PPPs. üi General requirements for PPP contracts There are few limitacions in Australia when it comes ro ehe use of the PPP delivery model by government (which, beyond ehe National PPP Policy and Guidelines, are also subject ro change depcnding on ehe contraccing government). At ehe present time, there are no projects or services char are deemed 'off limics' for consideracion as a PPP project in Ausrralia, especially considering ehe wide range of industries that have already used ehe model. Thac said, when assessing whether a PPP model is co be used, governments ordinarily perform a detailed business case assessment to ensure a PPP is likely ro deliver betcer value for money to govcrnment chan more tradicional forms of governmenc procuremenc. llıe federal and scace governments ali have a value threshold for which they must consider PPP as a potencial procurement mechod, but ehe value varies becween governments, and is usually around A$50 co A$100 miHion. Projeccs under thi.s value threshold can also be considered for PPPs if they represent significant value for money, but it is not mandacory to do so. Some jurisdictions also permic ehe bundling of projeccs to mect this value threshold. Mosc Australian governments also require a public interesr, public benefic or public policy test when considering a PPP delivery method. This usually involves conducting 13 Austrıılia a busincss-case assessment, which includes considering ehe impace of ehe projece on ehe public, especiaJly on ehose stakeholders idencified as bcing dfrccdy affected by ehe projecc. Revicws of this nature should undergo further dcvelopmenc in ehe interim business case wieh a focus on issues that may arise ehrough project developmenc and delivcry. The National Guidelines also recommcnd liaising with public intcrese groups and ocher relevanc bodies and considering possible ourcomes ofa qualicative or quantita.tive nature ehae may impace upon ehe valuc-for-money analysis. Therc are also no legal resuictions on foreign entities engaging in ehe PPP process wieh Ausrralian governmencs, apart from building licensing obligacions in some jurisdictions. This freedom has resulted in many foreign cntiries being involved in consortia that have bid for and won Australian PPP projects. These have included ehe New Generarion RolJingscock projecc in Queensland, and ehe Viccorian Desalinarion Plane. IV BIDDING AND AWARD PROCEDURE i Expressions of interest To ensure adherence ro ehe value-for-money principles ehac underpin ehe National Guidelines, it is typical fora competitive tender process to be used ro procure a PPP. This process is carried out in accordance with serice probity rules in relation to issues such as confidentiality and eenders submitted by related companies. The procurement process usually comprises rwo phases: the publicacion of a broad invirarion ro submir expressions of interest, followed by a targeted request for proposals from a shortlist of selected tenderers. The exacr process varies between Ausrralian governments, but ordinarily includes a degree of interaction wich government ehroughout ehe tender process. u Requests for proposals and unsolicited proposals Government parties may consider unsolicired or 'markec-led' proposals for PPP cransactions. In facc, ehere has been a recent growth in ehe privace seccor pucting forward unsoliciced proposals in Auscralia due co ehe reduced bid costs of ehe unsoliciced proposal process compared eo a traditional tender process. For example, ehe NorehConnex project was an unsolicieed proposal broughc to ehe New Souch Wales state government. Unsoliciced proposals have become more popular in Australia in recent years due to ehe benefits of ehe process, and a numbcr of states updated eheir policies in 2015 to provide uansparency and cercainty for the private sector in putring forward uruoliciced proposals. While ehe traditional tender process offers value for money rhrough competitive bidding of tenderers, unsoliciced proposals offer value for money in a differenc conrext (generally through the private sector proponent offering a 'unique' element ebat would not oeherwise be available). The overall process is usually less expensive ehan going co tender and ofcen ehe uniqueness of the projecc is such chat ehe proponenr is ehe only entity rhat can actually implemenc ehe projece, ac leasr in ehe form broughc co govemmenc. Each state's unsoliciced proposal policy is designed co evaluare chis uniqucness against other factors (including tra.nsparency) so that value for money can be demonscraced to ehe public. 14 Australia iii Evalu.ation and grant it is usu:ıl practicc for governmencs ro publish a dcrailed set of evaluarion criteria in the request for proposaJ documentation sene our ro renderers. These crireria would usually rdate to the tenderer's rechnicaJsolurion, compliance wirh a proposed form of contracr, and price (in parcicular, comparacive value for money). The scope is usually defined in cerms of an outpur specification clcarly setring out ehe outputs ehe governmenr is secking. le is designed ro promoce innovarion and, accordingly, thegovernment parry is usually open to receiving deviacions. The government may consider proposals which dcviace from ehe scope or rechnicaJ characccristics of rhc work included in the procurement documencation during rhe procuremenc process. Oeviations are generaJly assessed on the value for money provided by ehe proposed solurions, both in quanticarive and qualitativc cerms. Upon considering ali ehe proposals agafosc rhe crireria and any deviarions from documenracion, the government will pick a preferrcd bidder and encer into negotiarions. This process is idcally progressed as quickJy as possiblc in ordcr ro achieve financial close :ınd ro minimise the number of issues char must be resolved in an environment of reduced competitive cension. le is usual for governmcnc ro have reached agreerncnt with a bidder on ali or subscamially ali of the issues raised in the bidder's proposaJ before announcing the prefcrred bidder. V THE CONTRACT Payment Paymem for privare parcies under PPP conrracts in AusrraJia usually depends on the rype of asset that is being built as part of the projecr. Economic infrastrucmre, such as coll roads, bridges and runnels, has rradicionally used a 'user-pays' system whereby the end-user of the asset (e.g., a motorist) pays tolls, fares or other similar charges for use of ehe assct directly to ehe privace party. These charges are cakulated such that ehe revenue covers ali costs for ehe projecc, including construcrion, operacing cosrs, and repayment of debc, as well as provide a return co investors. However, significant differences becwcen modelled and acrual rraffic fıgures resulced in ehe failure of some early Australian greenfıeld road PPPs. ln light of this history, investors and financiers are very hesitant co 'bank' any PPP on ehe basis of forecasr patronage or usage, and recent economic infrastructure PPPs have utilised an 'availabiliry payment' approach discussed below. Social infrasrructure, such as hospirals, schools and correctional facilities, typicaJly operares on an availabilicy-based system, and is reliant on payment directly from ehe government parcy. The payment regime will usually be dependenr on ehe private party achieving cercain crireria or key performance indicarors while performing ehe services over the life of ehe PPP, with performance directly inRuencing ehe amounr of service payments. Some commentators suggest that the time may be right to rerurn ro ehe private sector having some degree of 'patronage' or 'market' risk for economic infrastructure (through, for example, the governmenr underwriting minimum revenue levels) but this has nor yer been seen in ehe Australian market. Australiıı 15 ii State guar.ıntees in ehe currenc market, Australian governmcnts do not generally provide guaranrees for PPP projeccs. The cxceprion is New Sourh Wales, which has specific lcgislarive proccdures for irs treasury to issue sovcreign guarancees. Australian governmenc credir rarings mean sovereign guaranrees arc not cypically necessary whcn contraccing wirh ehe Crown. Howevcr, difficulry ariscs wherc the conrraccing governmcnr enricy is not a major dcparcmenc, buc another encicy, such as a government-owned corporacion. This may pocenciaJly raise creditworchiness concerns for private invcsrors who may consider that a government guarancee is necessary. Both the private company and its financiers may wish to seck some cercaincy and avoid assuming the credit risk of ehe concraceing enciry, especially wherc it is likely that thc cnticy may be privacised during ehe life of ehe PPP (a possibilicywhich has been heighcened with the currenr trend of government assec and business divestmenrs), or ehe industry in which ehe company operates is likcly co be resrruccured and adversely impact projecced revenue srrea.ms. As with any payrnenc from a governmenr encicy, it must be cnsured thae ehe governmenr enricy has both the powcr ro gram ehe guaranree and ehe acrual abilicy co appropriate funds for ehe purposes of ehe guarancee. This, of course, needs co come chrough the correcc appropriacion channels, buc it is fundamencaJ chac this is considered as pare of ehe guarantee issue. Where a governmene entity decides co not provide a guarancee, there are addicionaJ mcans by which the privacc enciey or irs financiers can receive some form of governmenc support. These mechanisms are rare in ehe AustraJian market. m Distribution of risk Risk analysis is usually undercaken in the preliminary scages of the bidding and award procedure by boch parcies under an Auscralian PPP. The Nacional Guidelines (wich jurisdiction-specific amendmencs) offer specific guidance on boch ehe risks ehac will arise and optimal risk allocacion in mosc PPPs. This is aJso an excellent indicaror for private investors as to ehe posicion chat will usua1Jy be olfered by ehe governmcnc encicy. The following is a liseof ehe main risks ehat are usually considered in PPP contracts and ehe standard allocation of ehese risks. Risk is ideally allocated in such a way chac the parcy best able ro manage a risk be:ırs ehat risk, as thcy h:ıvc ehe besc opporruniry to reduce ehe likelihood of occurrence and deal wieh ehe consequences. However, while thcre are market-stand:ırd posicions, uleimacely ehe risk allocarion will depend on wh:ıc is agreed by ehe parcies and ehe risk assessment for ehe relevant projecc. Project delays The risk of delay is prominent in ali aspects of an infrastrucrurc project, even before the financial close of the projece. Fulfılmem of cond.itions precedcnt to financiaJ close is normaJly a shared responsibility of ehe parties. Similarly, risk of delays in conscruction are generally borne by ehe privace parcy, except where explicitly agreed otherwise. The governmenc parcy may be required to grant Australia 16 excensions of time and pay delay or prolongaeion costs under certain agrced circumstanccs, ordinarily inclucling delays caused by government or certain delays beyond rhe privace parry's reasonable control. Conversely, risk of delay for approvals is usuaJly divided berween ehe partics, wieh ehe government parry obeaining mosc of ehe 'whole of projecc' environmenc and planning approvals, and ehe privaee parry obcaining ali oeher approvals. Ri.sks outside thc coııtrol of parıies Specifically defined risks ehat arise oucside of ehe private parry's concrol ordinarily emirle ehe privace parcy co relief from defaule or cerminacion and also excensions of time for performance in some circumstances. The Naeional Guidelines offer some guidance in ehis regard. TI1ese risks are ordinarily referred co as 'relief events'. Where relief evencs matcrially impcde performancc for significanc pcriods of time, ehe govcrnmenc ordinarily has ehe righc to cerminaec ehe projcct concracc. Projecr concraccs also usually define a narrow cacegory of evcncs beyond ehe privare parry's concrol (ordinarily marcers wichin ehe concrol of the governmenc parry) ehe occurrencc of which will enticle ehe privaec parry eo relicf from performance, an excension of time for performance and compensaeion. Political, legal ımd macroeconomic risks Primarily, polieical risk is borne by ehe governmenc parcy in a PPP in Ausrralia. The governmenc wiU usuaJly bear ehe moneeary and performance impaccs ofa projecc-specifıc change in law; orher changes in law are usuaJly a shared risk. Macroeconomic risk is usually dealc wieh rhrough variation of ehe service charge (see subseceion iv, infrıı), alchough 'rise and fail' type provisions are rare. Iıısurance in an Auscralian PPP, ehe privare parry is ordinarily requircd to obcain projecr-specific insuranccs ehat cover both the privare party and ehe government party. The insurances char arc typically acquired fora PPPinclude: a concracc works insurance; b induscrial special risks insurancc; c propcrcy or material damagc insurance; d advanccd consequencial loss insurance; e public or produccs liabiliry insurance; f professional indemnicy insurance; g workers' compensation insurance; h motor vehicle insurance; and i marine cargo or transit insurance. The privace parcy musr cypically demonstrate ehe currency of rhese insurances for ehe life of the project. l11e governmenr may also effect and maintain insurances where ehe private parcy fails to do so and deduct premiums from amounrs owing to thc privare party undcr ehe PPP agreemenc. Insurance proceeds are usually required ro be used ro reccify insured damage to ehe project before a daim can be made upon the government. Austrıılia 17 iv Adjuscment and revision it is usual for PPP conrracts to havc an inbuilt clıange or modificacion regimc to deal with variations ro the conrract's technical scopc or commercial rcrms rhroughour thc concession period. Thc change or variation mcchanism usually cont:ıins a methodology for calculating the financial implicarions of the ch:uıge, as well as the impact of rhc ch:uıge upon ehe performa.nce :ınd orhcr requirements under ehe conrract. Changes are, once ordered by governmenr, ordinarily self-execuring and do not require the PPP contract to be formally amended. Service ch:ırges can also be varied indepcndendy ofa specific ch:ınge to eheservices provided.'föere will ofren be :ı regime in place to vary the service charge in response to inAation, usually through a pre-agreed indexation regime. Projects may also employ a cosr benchmarking regime throughour the tcrm to ensure that the government entiry is not paying in excess of market rates over time. v Ownership of underlying assets For most PPP projects in Australia, the governmenr party will own the projecc assets from commencemenc of ehe operations phase at no cosr. There will also usually be a handover period at ehe end of ehe term wich spccific condicions on ehe privaee parry transferring ehe asset, such as ensuring ehe serviceable condicion of ehe asset. To the extent ehe private party owns any projece assets, ehe governmenc will ordinarily prohibit the project company from collateralising those assets cxcepc under approved projecc finance arrangements. vi Early termination Terminaeion rights under PPPs are usually limited co chosc expressly stated in the terms of the PPP concract. The governmenc party usually has grearcr rights for rerminarion chan the privare enciry. Beyond rcrminacion for brcach of the PPP agrecmenc, other common righcs chat givc rise to cerminacion are: a where there is an cxtended cvenr outside of ehe parcics' control clıae macerially disrupts the projece (a forcc majeure evenr); or b the privace parry becomes insolvcnr. A generous cure regime (including separate financier rights) usually applies. Thc government normally aJso has a right to terminate the PPP agreemcnt for convenience without thc need for defaulc by ehe private sector party, but such a provision also requires ehe payment of compensarion ro the privaee contractor. This is effeccively a compromise thac aUows thc government to cerminate for reasons beyond default or insolvency of ehe privace concraccor, such as change of policy, and aJso reduces sovereign risk for the privatc party entering into an agreeınenr with a governmenr enticy. it is excremely rare for the government to terminate a PPP for convenicnce. However, the Victorian governmenc's decision to terminatc the proposcd Easc X'cst Link projcct in earJy 2015 provides an example of an Auscralian governmcnc terminacing for convenience in unusuaJ circumstances. Austrııiiıı 19 Mr Tony Murphy broughr an aceion against the Stace and ehe LMA alleging chac ehe project proponencs, through ehe published business case and mcdia releascs, had made represenracions in conneccion wich ehe project chac werc misleading or deccprivc in contravcnrion of Seccion 18 of ehe Auscralian Consumer Law as applied in Viccoria by ehe Auscralian Consumer Law and Fair Trading Acc 2012 (Yic). Mr Murphy also soughc an incerim injunccion resrra.ining ehe Scare and ehe LMA from cnccring into concraccs wich ehe Easc West Connecr consorcium relacing ro conscruccion of the mocorway. This applicacion was unsucccssful and the consrruccion conrract was signed in Sepecmber 2014. Vhile chis licigarion was largely conccrned with civil procedure and ehe approach rakcn by the trial judge, the Viccorian Courc of Appeal also madc commencs regarding t.he misleading or deceptive conducr allegacions. Essencially, ehe Courr indicaced thac a governmenc could be found to be engaging in misleading and decepeive conducc during the tender process, as ehe government can be considered ro be carrying ona business as soon as it scarts co cake sceps ro acquire ehe assec for ehe purposes of chac operarion. 1he Court emphasised char there is notlüng i.n the accivicies of informing and engaging ehe communiry regarding ehe claimed benefirs of a proposed infrasrruccure project which renders ehe excrcise an essencially governmcncal acriviry. A governmenc can also be carrying on a business ar the sanıe time as performing irs regularory funccions Overa.11, the Courc did not presenc irs statemencs as final dererminations and emphasised thac the ourcome would depcnd on findings of facrs co be decermined ar trial. Since the licigation has been halred due ro abandonmenc of ehe mororway projecc, the staternencs are helpful co indicace thac, in cerrain circumscances, a governmenr or projecc proponent may be liable for misleading or decepcive conducr from rhe represencations made in the course of promoring a PPP in the markerplace. VIII OUTLOOK 2016 promises co be another accive year in the infrastructure space in Auscralia. in terms of new projeccs, projecrs that are proposed to be funded through sc:ıre and federal capital recycling projeccs (parcicularly those wishing co use ehe federal governmenc's co-funding scheme) are likely ro come to market, and rapidly progress chrough their respecrivc procuremenr processes. Award and financial close of those projects is likely to follow once the relevant capiral recycling projeccs reach fin:ınci:ıl close. Simila.rly, it is likely that governmenc at ali levels will conrinue to receive numerous unsolicired proposals in 2016, some of which will progress chrough to invesrmenc evaluarions and an exclusive mandate for the proponent to deliver the project. In relation to existing projects, a number of projeccs will move from their higher risk developmem phase inro operacions. This rransirion is a natura! time for the investor mix within a project ro change, due co ehe change in ovcrall project risk profile, which may drive activicy wirhin the equiry investor market. Overall, indications are for a year of srrong market acciviry, as well as a strong pipeline of projeccs over ehe coming years. Chapter 3 BELGIUM O,mui 1w dm EJ·ndm, Frıııık judo, Aıırilien Vııııd,•burieımd A1mjolein Bqwberga1 I OVERVIEV While the de"·elopment of infra.srrucrure projeccs and thc provision in general of public services in Belgium in the form of public-private parmerships (PPPs) is not new, ics importance in governmcnc policy has grown r:ıpidly over thc pasr nvo decades. Hiscorical underinvescment in qualicacive infrasuucrure, the dcmand for berter qualicy projeccs to be real.iscd more quickly for rhe same price, and, imporrantly, a lack of available public funding necessitating spreading out investment needs over time, havc a11 made for ehe srrong rcvivaJ of PPP projeccs in recent years. This has largely occurred ar :ı federal level but to an even greacer exrenc in ehe Flemish Rcgion, where PPP was one of the pilJars of ehe govemmem's invcstment policy during che 2009-2014 administracion. Howcver, the evolving views on ESA-conformicy have inspired ehe Flemish governmem to adopc :ı more reserved position during ehe 2014-2019 adminisuarion. Ar ehe federal !evci, prominenr examples of largc PPP projccts include ehe development ofa new railway conneccion between ehe Cicy of Brussels and ehe nacional airport and ehe conscruction ofa prison complex in Haren ehat will become ehe 1:ırgest prison complex in Belgium. in ehe Flemish Rcgion, major invescments were made in ehe creation of ehe Flemish PPP Knowledge Cemre to furcher boost ehe inrroduction and implemenracion of PPPs. As a result, a largc number of PPPs have becn cendered in various secrors, including uansport and related infrastructurc projeccs, renewable energy infrasrructure and social infrasrrucrure. Christd Van den Eyndcn and Frank Judo arc panncrs, M:ırjolcin Beynsbcrgcr is counscl and Aurclicn Vandcburie is scnior anomey ac Licdckerkc Woltcrs Waclbrocck Kirkpatrick. 20 ı... Belgium 21 So far, PPPs have been less of a facror in thc Brussels and Walloon Rcgions. Nevertheless, some large investmcnts have becn madc ehrough PPP projects in ehesc regions, induding transport, social infra.structure and, morc rcccntly, shopping malls comprising leisure facilities and aparements. il THE YEAR iN REVIEW i Major awards granted During ehe course of 2015, somc major PPP projeces have eicher reached 'preferrcd bidder' scage or financial close. These include ehe conscruction and exploicat.ion of a new nacional foocball sradium in ehe Heysel area, ehe conserucrion and maintenance of various sports facilities ('Flemish Sports Cluster 3'), ehe conscruceion and maincenance ofa new eramline running chrough norchern Anewerp ('Brabo 2'), and ehe tram tine in Liegc. u Procedures initiated Oeher major PPP projeces currendy under tender include ehe replacemene or refurbishment of seven exisring bridges crossing ehe Alberc canal in ehe provinces of Anrwerp and Limburg, as well as ehe widening of ehe canal (first cluster of ehe 'Albert canal bridges PPP'), ehe renovation of ehe existing Nouvelle Filature Orleans (FNO) site in Ghenc and ehe conscruceion of new residential facilities ('Ghent Urban Regeneration PPP'), ehe conseruct.ion of ehe N60 in Ronse (VIA-lnvese), ehe Blue Gace Antwerp PPP relating to ehe developmenr of a brownfield into an eco-effective business park, ehe Walloon schools bundle II, ehe Antwerp police hcadquarters and ehe renovaeion of ehe Leopold il runnel in Brussels. üi Significane legal changes The Belgian legislacion on public procurernent was recently amended pursuanc to ehe final cransposition of ehe Public Procurement Directives 2004/17 2 and 2004/18 3 and ehe adoption of ehe implemencing royal decrees of ehe Public Procuremenc Acc of 15 June 2006. 4 l11ese new rules emered into force on 1 July 2013 5 and apply to 2 Direcrive 2004/17/EC of the European Parliarnent and of the Council of 31 March 2004 coordinating the procurement procedures of enticics oper:ıting in ehe wacc:r, cncrgy, transport and postal scrvices scctor, OfficiaJ Journal, 30/04/2004, L 134. 3 Dircctivc 2004/18/EC of the Europcan Parliarnent and of the Council of 31 March 2004 on thc coordinacion of procedu.rcs for the :ıward of public works concracts, public supply contracts and public service concracts, Official Journal, 30/04/2004, L 134. 4 Law of 15 June 2006 on thc procuremenc procedurcs and certain proccdurcs for public works contracts, public supply concracts and public service concraccs, Official Gazecce, 15 Februa.ry 2007. 5 Royal Decrce of 2 June 2013 relating to thc date of cncry into force of the Public Procuremcnc Act and thc implemcncing royal decrces, Official G:ızettc, 5 June 2013. Belgium 22 all pubüc procuremenc comracts thar have been published or, in the absence of any publication require.rnents, for which from thac dace onwards an invicacion co panicipace has becn sene. The vasc majoricy of the exiscing provisions have, however, essentially been maimained. The encry inco effecr, on 1 Sepccmber 2014, of the ESA 20 l O Rules 6 (replacing the less scringenr ESA 95 Rules) 7 is also key and has had and will have an impacc on ehe scrucruring of pending and furure PPP projects. The ESA 201 O rules retroaccively applr co ehe en tire period berween 1995 and 2014, so thar the ESA neuuality of some existing PPP projeccs suddenly raised budgec ncurraliry issues. Some of these losr ESA neucralicy and had to be shifted onco ehe governmem's balance sheet. 8 in addirion, for chose PPP projects thar arc currencly being negotiated, 9 the risks associaced wieh ehe contraccual obligations of thc concraccing authoriry have been or are being scrutinised. The new ESA ruJes are scricrer than ehe 1995 version in chac ehey set forch adcürional requiremencs in order for PPP assecs co be deemed 'non-governmenc asscts', which may be booked on thc privace parrncr's balance sheet. In addicion co rcquiring ehat the privace parmer rakc on thc consrrucrion risk and cieher ehe demand or ehe avaiJabiliry risk (as u.nder ESA 95), thc new ESA Rules consider thac ehe risks associated wieh a PPP project are dcemed not co have cransferred ro ehe privace partner, co the excenc rhac: 10 a during the consrruccion phase, ehe termination clause requires ehe concracring auchoricy co refund the capical cosr withouc any penalties being due by ehe private partner and, during the operating phase, ehe compensation due to ehe private partner e.xceeds the currenc market value of ehe assecs, wlıich is ro be assessed by an independenr experc; b ehe discribucion of risks under the concract is significantly shifted; 6 Rcgularion (EU) No. 549/2013 of ehe European Parliarncnt and of the Council of 21 May 2013 on ehe European system of national and regional accouncs in ehe European Union, OfficiaJJournal, 26/06/2013, L 174. Ali EU Member Srares are required to comply ,..,-ieh the rules on ehe European Syscern ofNational and Regional Accounts (the ESA Regularion). The ESA Regulation is ehe system of national and regional accounts and defincs ehe accounting stand.ards/framework for ali EU Member Sraces, :ı.llowing each EU Mcmbcr Scate to cakulace irs annual budget (deficit) and ehe total government debt. 7 Council Regularion (EC) No. 2223/96 of 25 Junc 1996 on the European syscem of narional and regional accounts in ehe Community, Official Journal, 30 November 1996, L 31O. 8 The ESA �ı.ion providcs ehac cen.ain long-tcrm debts contracted by the authoricy can be ESA-neutral, which means that - except for the acnıal coscs made in a given financial year - ehe invcstments made wiU not incrcase ehe anoual budget ddicic and the outscanding govemment debt. For instancc, owing to thc rccharacterisacion of some PPP projects in 2013, Bdgium's annuaJ budget deficit increased by €50 million and the total government debt by €500 million. 9 Such as the rram line PPP project in Llegc and the Haren prison complcx PPP. JO According co Eurostat, whcrc ehe usual approach based on risks and rewards is inconclusive, the comrol criccrion sbould be used to asscss ehe degrce of govcmment involvement in the ddinition of ı:he PPP asscts and ehe scrviccs to be ddivered from them. Belgiıınz 23 c in case ehe conrraceing authoricy hasa seakc in the spccial purpose vehicle (SPV), it bears more than 50 per cenr of ehe total capital cosr of the project or the conrracting authoricy hasa conrrolling (minoricy) srake in ehe SPV; and d ali or pare of ehe debr service rransfers to a public body as a result ofa guaranree provided by it, the guarancee covcrs more than 50 per cenr of the capital cost of the projecr or there is a change of ehe economic ownership of the assers resulting in a transfer of the risks when the guaramee is called upon. III GENERAL FRAMEWORK Types of public-private partnership PPPs in Belgium can rake many forms. Because of ehe complexity of irs political and administrarive conrexr, Belgium does not rea.lly have a unificd policy or a rrue Belgian PPP model. A basic discinction is chat becween 'conrracrual' PPPs and 'participarive' PPPs. XThile rhe conrracrual varianr stili bears ::ı rcsembl:ınce co an employer-conrraccor relacionship, ehe parcicipacive varianr implies rhe setcing-up ofa special purpose vehicle b}' borh ehe auchoriry and ehe privacc partner. Combinacions of borh varianrs are also possible, bur ehe panicipacive variant has recencly come under pressure following ehe enrry inro force of ehe ESA 201 O Rcgulacion. Various comracrual scrucrurcs are used, including (1) a more craditional (more basic) conuacr secring forrh specific performance criceria with limited PPP characreristics; (2) a more inregrared conrracr approach with either a design and buiJd conrracr (DB), a design, build and finance conrracr (DBF) or a design, build, finance and maintain conrracc (DBFM), possibly combined wich an operating conrracr (DBFM(O)). Another model introduced in Belgium is ehe DBM + F, whereby the DBM and cl1e finance renders are split at bidding phase and merged afcervnrds. in other srrucrures, long-term lease agreemenrs, building righcs agreemems, concession agreemencs, ocher mi generis conrracrs, or a combination thereof are used. ıı The authorities Each public body, whecher at national, regional or loca( level, can initiare a PPP. No previous auchorisation is required, excepr in rhe Flemish Region, where rhe Flemish PPP Knowledge Cemre has ro give irs 'advice' before a projecr ofa Flemish public body can formally be accepted as a Flemish PPP. The responsibilicy for strucruring, awarding and implementing PPPs remains a cask of the relevanc adminisrration - and chis is also true in the Flemish Region - bur the supervising authorities (at ehe relevant regional, community or national level, as applicable) can always repeal or reform rhe decisions of the lower public bodies. in Flanders, the Flemish PPP Knowledge Cemre advises and guides rhe PPP policy of aJI public bodies and supports PPP projects in the Flemish Region. it assumes an advisory role (both in general and with regard co ehe specific project) and coUeccs and shares PPP knowledge, experience and models wirh aJI parties involved. It has contribured substantively co standardising ehe conuacrual approach co PPPs in the Flemish Region. There is no equivalent public body ar federal level or in ehe Brussels Region. 24 Belgiıını ln ehe °''alloon Region, the goveromenr has esrablished the Financial Reporting Cd1. an cncicy of the Valloon ad.miniscr.uion thac provides advice on PPPs for the "'alloon Rcgion. the Fre.nch Community and for relaced public bodies before the adoption ofa decision ro implemem PPP projeas. It also has a role in ehe follow-up and ass.ists the:sc cmicies wich the implemencation ofa PPP. ili Gcnc.ral rcquirements for PPP contracts AJchougb there are no specific legal constr.ıims or requiremencs ch:u apply co PPPs, general public procuremenr ntles (as inrerpreted by case law) apply. 11 The Flemish and '(alloon Regions ba,·e alsa adopted additional regulacions wich a view to fucilicating PPPs in their respecrive regions. 1 � Public comracrs, including PPP concraccs, remain equaUy subjecc co general adm.iniscrach·e law 13 and the Civil Code, as well as t0 more specific legislation such as ehe Companies Code, cax legislacion :ınd insurance legislation, e.xcepr to the excent e.xplicicly provided othernise. From a comracrual poinc of view, ehe compecent auehoriry is free to organise its projeas as it sees fü, 14 no va.lue threshold applies and, e.xcept for craditional ser.·ices and m.issions of the scace, such as ehe police and ehe army, al1 cypes of public works, supplies and sen;ces can be concracced ehrough a PPP scrucrure. IV BIDDING AND AWARD PROCEDURE To ehe e.�renr ehe PPP concract falls ,virhin the scope of the Belgian public procurement rules, 15 ehe general public procuremenc rules apply. in accordance wich ehe EU Public 11 Sec Seaion IY, i,ifra ,-.;th respect to the rulcs applicable to thc awarding of concracts. 12 Thc rulcs applicablc in the Flcmish Region concern rhc: 'arious PPP projeccs, whilc the rules applicable in thc Walloon Region and thc Frcnch Community are secı:or specific. For inscınce..the Flcmish Dcc.rc:e of 18 Julr 2003 concerning public-pri.vacc panncrships, by mc:aru of which ccrtain consrraims in thc public procurcment rules were add.resscd, such as. undcr specific conditions, ehe participarion of public bodics in PPP projeccs and ehe granting of se-curicy rights on public domain, thc MiniStcrial Dccrec of ehe Walloon Govcmmem conceming ehe esrablishment ofa reporting celi for alccmacive financing and financial statcmrncsofindependcnc public autboritics (Official Journal. 13 April 2005) and the Ministerial Decree of thc Frcnch Community rcgarding ehe cstablishrnem ofa reporting celi for alrernath-e financing and fınancial sucemcncs of independcnr public authorirics (Official Journal, 5 April 2006). 13 lncluding the principles of equalicy upon award, rraosparency, due mocivarion, fair play, ere. 14 This bcing s:aid, the Flemisb PPP K.nowledge Centrc evaluaces whether a proposed projccr is suita.ble to be strucrured as a PPP and the Walloon Financial Rcponing Cell ex.arnines the 1�. finmcial and accounring aspects ofa comemplated PPP project. 15 Law of 15 Junc 2006 on Public Procurcmcnr; Royal Dccrce of l 5 July 20 l 1 conccrning thc award of public procuremenc contr:ıets in ehe ordinaıy sccrors; Royal Dccrcc of 16 July 2012 concerning ehe award of public procure.mcnc conrr:ıcrs in the Utility Secror; Belgiıım 25 Procuremenc Direcrives, Belgian public procurement rules cover ali concraccs in wricing for consider.ıcion becween a concraccor, :ı supplier or a service provider and a public purchaser for the undercaking of works, supplics and scrvices. Belgian public procuremenr legisbcion discinguishes bctween the following cypes of procuremenc procedures: a adjudic:ıcion: award exclusively on ehe basis of the lowest price; b quote request: :ıwa.rd on the basis of the award critcria, and noc exclusively ehe price; c negotiated procedure; and d compccicivc dialogue. The negotiated procedure with prior notificacion, based on Anide 30.1 b) of the Public Procurement Direcrive 2004/18/EC, 16 is the procedure most commonly used ro awa.rd DBFM concracts. 17 le is alsa ofren applied ro ::ıward concessions for public works, 18 but less for build and finance contracrs. 19 More recendy, however, some PPP projecrs have been awa.rded under ehe compericive dialogue procedure. 20 The condirions for using the negotiated procedure and the competieivc dialogue are rhose provided in ehe Public Procuremenc Oireceives. The awarding authority muse subseamiace its choice for one procedure over ehe other. Expressions of interest The invicacion of incereseed parcies and ehe assessment of expressions of interest are governed by ehe public procurement rules, providcd thar ehe project falls within eheir scope. All public contraccs, whatevcr their value, musc be advercised in advance in the Belgian Public Tender Bulletin, which is an annex ro ehe Belgian Staee Gazccce. If Royal Decree of 14 January 2013 concerning ehe general comracting conditions for public procuremem contr:ıcts :ınd for conccssions of public works (collcccivcly 'thc 2006 Public Procuremcnt Rules'). Sec, for more details, Lindemans, Judo, V:ındeburie :ınd Maey:ıcrt, 'Belgium', The Goııernment Procıırmıent Reııiew, Law Business Rcse:ırch, London, 2014, pp. 27-39. 16 Contracting :ıuthoricics may :ıw:ırd public contracts by negoti:ıtcd proccdure, :ıfter publication ofa concracr nocice, in ehe following cası:s: 'in cxccptional cascs, when ehe n:ıturc of ehe works, supplics, or scrvices or ehe risks attaching chcreto do not permit prior over:ıJI pricing'. 17 This procedure was uscd for projects including the prison cornplex in Haren, ehe Bus Dcpots Cluster il, the Projccr N60 Ronse and rhe clustcr of school infr:ıstruccure projccts in ehe Flemish Rcgion. 18 This procedure was uscd, among others, fora complex public parking in Licge, a rest home in Moercbeke and rypically also for gas stations aJong the highway such :ıs ehe concession in Nazarcch. I9 For example, for thc Belgian Embassy in Kinsha.sa, social housing and thc Dcsign Cemre in Licgc. 20 Such as the Nco projcct, the cram roure in Licge and thc 'Ecoquartier de Genappe'. Belgiımı contracts meet ehe Europea.n threshold level, :ı noeice should also be published in thc Official Joumal. The negotiated procedure with prior notifıcation and the compecitivc dialogue are restricted procedures, which me:ıns rhac only the preselected cenders arc inviced co submic an offer. As long as the principles of transparency and equal ereacmcnt are respecced, the cendering authoricy is allowed co concact the candidates co ask for clarification or ro complere their expression of incerest. For PPP concracts that fal! outside ehe scope of the Belgian public procurement rules, such as land agreements and service concessions, appropriate advertising is also required. 21 in the absence of any specific rules, the awarding of such comraccs is subject to the basic scandards regarcUng advertising and concract award thae are mencioned in the European Commission's Communicacive Incerprecation on ehe Communiry Law. 21 The concracting encicies are responsible for deciding ehe mose appropriate medium for advertising their concracrs. Other adequate and commonly used means of publication include the İnternet, national journals specialising in public procurement announcemencs, newspapers with national or regional coverage and specialise publicaeions. The awarding authoriry can set criteria for qualitative sclection, again, as long as the principles of transparency and equal creacmenc are respecccd. it is also allowed to contacc ehe cenderers ro ask for clari.fıcation or to complece eheir cxpression of incerest, under ehe samc condicions. u Requests for proposals and unsolicited proposals The use of e-rendering to solicit or submit a bid is permitred, required or prohibiced, depending on the public procuring body involved. The federal authorities have developed iT cools to process public concracts elecrronically, which a.re also made available co ehe authorities of ehe other levels. If a bidder has not been selected during ehe seleceion phase, he or she cannot submit an offer, except together wieh anoeher bidder who has been selecced. ıu EvaJuation and granc in ehe concexr of the negoriated procedure with prior nocification and ehe comperitive dialogue, the concracting authority may provide that the procedure is conducced in srages, by applying rhe award criteria in the contracr documents so as ro reduce ehe numbcr of cenders co be negociated. Bidders are invited to submit a second offer ora best and final offer. The same procedure can be organised for ehe concraccs thar fall oucside the scope of ehe public procurement rules. During ehe negotiacion procedure, as long as ehe objece of ehe contracc remains ehe same and ehe principles of rransparency and equal rrearmenc are respeceed, rhe offers 2) CJE, )4 Novembcr 2013, C-221/12, Belgacom; Council of State, 26 May 2014, No. 227.535, Belgacom. 22 Commission incerpretative communication on ehe Community law applicablc to comract awards not or not fuJly subject to ehe provisions of ehe Public Procurement Oirectives (2006/C 179/02), Official Journal, 1 August 2006, C-179. 26 ... 27 Belgiıım can be amendcd. 111erc are no spccific legal provisions rcgarding ch:ınges :ıt the prefcrred bidde.rstagc. le is, howcver, gcnerally :ıccepeed eh:ıt 'subseanrial' changes ro ehe concr:ıct arc no longer possible ar ehacse:ıge. During ehe compecitive dialogue, thc alecrn:ıtives proposcd by ehe can