29 May 2017
Public - Private Partnership Contracts New Legal Framework
- On 30 November 2016, Law no. 27.328 (Law) on Public–Private Partnership Contracts (PPP Contracts) was published in the Official Gazette.
- It is expected that the implementation of the Law would ease and promote an adequate institutional framework for private investment in infrastructure works and services that are necessary for the development of a sustainable economic activity in Argentina.
- The Law establishes mainly that:
- PPP Contracts may be entered into by agencies and entities of the National Public Administration (including companies with governmental participation) as the contractor (Contractor), and public or private entities as the contracted party, with the purpose of developing projects of design, construction, expansion, improvement, maintenance, supply of equipment and goods, exploitation or operation and/or financing in the fields of infrastructure, housing, activities and services, productive investment, applied research and/or technological innovation.
- PPP Contracts shall have a flexible design to adapt its structure to the special requirements of each project and its financing, in accordance with the best international practices regarding the subject.
- PPP Contracts shall consider, among other issues, (i) the term (which shall not exceed 35 years, including its extensions); (ii) the distribution of contributions and risks among the parties; (iii) the enforcement control mechanisms and the penalties to be imposed; (iv) the payment conditions, its guarantees and the price revision mechanism to keep the financial-economic equation; (v) the Contractor's power to introduce variations in the contract enforcement up to 20% (higher or lower) of the total value; (vi) the power to assign the PPP Contract and subcontract, and the requirements to meet in each case; and (vii) the applicable dispute resolution mechanisms, including the possibility of agreeing arbitration or dispute boards.
- Should the Contractor terminate the PPP Contract in advance, Contractor shall pay the pertinent compensation (which shall not be lower than the non-amortized investment) and the repayment of the financing made on the project, before taking possession over the assets.
- Stock companies with specific purposes, financial trusts, and other types of vehicles or associated schemes may be created for the enforcement of the PPP Contract.
- The selection of the contracted party shall be made by public tender (national or international) with the possibility of carrying out preliminary procedures with potential interested bidders to define the project, and it shall be awarded to the most convenient offer.
- It shall not apply to PPP Contracts the rules regarding (i) the National Public Administration Contracting Regime; (ii) the Public Works Law and Public Works Licenses Law; (iii) payment in local currency of debts expressed in foreign currency (section 765 of the Argentinian Civil and Commercial Code); and (iv) indexation prohibition (sections 7 and 10 of Law no. 23.928).
- It shall be created (i) the Public–Private Partnership Unit, which shall provide advisory, operational and technical support to the Contractor on the project formulation, documentation production and the enforcement of the PPP Contract; and (ii) the Bicameral Committee to Oversee PPP Contracts, which shall control PPP Contracts entered into.
- The Provinces and the City of Buenos Aires are invited to adhere to these rules.
- the procedure and requirements (technical, economic, financial and environmental) that the projects shall meet to be executed through a PPP Contract, and the projects excluded from the PPP Contracts' regime;
- the rules to be considered when drafting the PPP Contracts, such as the possibility that (i) the contracting party (Contracting Entity) delegates to the contractor (PPP Contractor) the technical conditions to be analyzed when identifying the assets subject to eminent domain to execute the project; (ii) the PPP Contractor contracts another company (Executing Company) to execute the project; (iii) partial receipts of the project by functional sections be admitted; (iv) the PPP Contractor's consideration be established in money or other assets, be paid by the Contracting Entity (Public Consideration) or by the users of the project or third parties (Consideration for Use), and revision mechanisms be established in order to conserve the financial-economic equation due to costs modifications, significant alteration because of unforeseeable reasons or unilateral modification of the contract by the Contracting Entity; (v) the project be financed by different means (loans, debt securities, trusts, etc.); (vi) sanctions and the procedure before their imposition be established; (vii) unilateral termination due to causes of public interest be only made through a decree of the Executive Power; and (viii) the creation and functioning of the technical board in charge of disputes resolution be regulated, among others;
- the obligation of awarding the PPP Contracts by tender; the procedure stages and the publication and communication requirements; the guarantees to be granted; the requirements that offerors shall meet and the preferences and comparative advantages that shall be observed; and the rules the Contracting Entity shall comply with when issuing the justifying assessment about the convenience of executing the project through a PPP Contract;
- the requirements, guarantees and procedures to comply to contract external auditors in charge of controlling the PPP Contract's execution;
- the obligation to dismiss offers submitted by persons included in the World Bank or Inter‑American Development Bank's lists of ineligible parties, or those convicted with a final judgment rendered due to bribery; and
- the procedure and the requirements to be met to agree upon arbitration as a dispute resolution mechanism (number of arbitrators, appointment method, arbitration procedure, etc.).
View more extensive details on the new PPP Law here.