New draft of law regarding the public-private partnership

by Cristina Stamboli, Senior Associate, NOERR

This article is aimed to cover and present the latest legal issues regarding the draft of law as recently posted for public debates on the official site of the Government General Secretary. The legal initiative belongs to the current Delegated Minister for infrastructure project of national projects and foreign investments.

It is of notoriety that even if the legal framework of the public-private partnerships (hereinafter referred to as “PPPs”) in Romania was set up as a distinct law governing PPPs projects since 2010, the respective piece of legislation was almost entirely neglected mainly due to the lack of IT support from ESPP (in Romanian SEAP) and other setbacks for structuring a PPP project. That happened while for instance France alone accounted 62% of the overall European market value in 2011 followed by UK, Germany, Italy, Belgium, Spain etc( according to EPEC review of the European market in 2011).

Recent economic developments have led to the need to respond to the challenging conditions to raise private finance projects, and we hope that the new draft of law on PPPs, will create the favorable legal and economic context to successfully implement an increased number of PPPs projects in Romania.

The draft of the PPPs law brings several changes to the former law whereas the most important can be summarized as follows:

- the public partner may initiate a procedure to award a PPP contract if the following conditions are cumulatively met:

• The public partner does not hold the funds necessary for the entire financing of the project and

• The public partner is not objectively in the position to define in advance the technical specifications able of satisfying its needs and/or to establish the financing and/or the legal structure of the project.

- the private investor/partner is selected based only on competitive dialogue procedure. The law does not stipulate for any other tendering procedure (open tender, restricted negotiation etc). The public partner enters into a dialogue with each of the candidates. The purpose of such dialogue is to define the technical means and the legal and financial arrangements best suited to satisfy its needs. The public partner chooses the preferred technical solution among the solutions submitted by the private investors and it is followed by the final offer presented by the private investors based on the preferred technical solution communicated by the public partner;

- the public partner could be a co-investor to the PPP project ensuring financial resources along with the private investor.

This new approach will enable:

• greater alignment of interests between the public and private sectors, and a more collaborative approach to improving project performance and managing risk;

• better partnership working, with the public sector having greater visibility of project information and more involvement in strategic decision making;

• more transparency, including in relation to the financial performance of the project company, through its project company board membership; and

• value for money to be improved as, subject to the appropriate management of project risk, the public sector will share in the ongoing investment returns, reducing the overall cost of projects to the public sector.

- the PPP may be performed either based on a contractual basis or by incorporating a project company having as shareholders both the private and the public partners:

It is to be mentioned that there is no specific definition for PPP at the EU level, the structure of a PPP’s project being rather flexible be means of cooperation between the public and private partners for the purpose of achieving a public interest in various industries (infrastructure, public utilities, education, health etc). It seems that also at the national level, the PPP structure becomes more flexible being regulated beside the institutional PPP also the contractual form for PPPs projects.

However, we expect that the legal norms for the application of the PPP law will bring all the necessary details and clarifications aimed to make the PPPs proceedings smoother and faster than the ordinary public procurements projects. On this purpose, it is recommended to be stipulated firm deadlines for both the public and private partners during the entire process until the project awarding and conclusion of the PPPs agreement.