Trend 2018

A new law on public-private partnership (“PPP”)

The government adopted Emergency Ordinance no. 39/2018 on PPP (the “GEO no. 39/2018” or the “New PPP law”) that replaces the former Law no. 233/2016 on PPP (the “Former PPP law”).

PPP agreements are administrative agreements concluded between a public partner (namely a public authority or institution) and a private partner (the “project company”) to build, rehabilitate, or extend an asset or a property belonging to the public partner or for the operation of a public service (“Public Project”) by the project company. To apply to a public project more than half of the project company’s income resulting from the use of the Public Project must be generated by payments from the public partner.

The changes brought by the New PPP law include:

(i) the public partner may contribute to the achievement of the PPP project by granting certain rights in favor of the private partner without needing to carry out a separate public procurement procedure. The Former PPP law did not provide that this right could be given to the private partner.

(ii) the participation of the public partner in the financing of PPP agreements with public non-reimbursable funds is limited to the 25% of the total value of the investment. The public partner may support the Public Project, by including EU non-reimbursable funds together with the national contribution related to the EU funds.

(iii) the Government will set up a special fund for financing PPP agreements to facilitate and avoid delays in the payments to be made to the project company or the private partner by the public partner;

(iv) the PPP agreements must last for more than five years, which will allow the private partner to recover the investment and to achieve a reasonable profit. The former PPP law provided that the period for which PPP agreements would be extended should allow the private partner to recover the investment and to achieve a reasonable profit, but it did not regulate a timeframe for the PPP agreements.

While under the Former PPP law only the private partner offered warranties to the financier of the PPP project, under the New PPP law, the public partner may also directly provide warranties and may undertake obligations towards such financiers.

The New PPP law provides that the public partner on its own or at the request of the financiers may replace the private partner if the private partners fails to fulfil its obligations from the PPP agreement or towards the financiers of the Public Project and this option is included in the award documentation and the PPP agreement subject to the public procurement award rules. Under the Former PPP law, only the main financiers of the Public Project had the right to replace the private partner with the public partner’s consent if the private partner failed to fulfil the obligations towards the financiers, if this option was included in the award documentation and the PPP agreement, and if it was subject to the public procurement award rules.

The New PPP law became effective on 18 May 2018

Stratulat Albulescu - Attorneys at law