Preliminary Considerations On The On The New PPP Law

  1. Romania's new PPP law - main benefits/challenges

    The much-awaited Law no. 233/2016 on the public-private partnership came into force on 25 December 2016. While this law is not operational until the Romanian Government approves the methodological norms for its enforcement, it establishes the premises for implementation of PPP projects in Romania.

    During the past six years, Romania had a PPP law (namely, Law no. 178/2010 on the public-private partnership) solely on paper, no project being promoted based on its provisions. Investors, lenders and public sector alike considered the mechanisms provided by Law no. 178/2010 nonbankable, ambiguous and risky. That situation was caused by several flaws of Law no. 178/2010, such as the disregard of the EU principles and practice on public contracts and available remedies, the massive overlapping with the public procurement and concession legislation - leading to an uncertain scope of Law no. 178/2010, the interdiction to bring public funds into a PPP project, the obligation of the public partner to contribute only private assets to the project company and the regulation of PPPs of an institutional nature only.

    The new PPP Law manages to clarify and improve a variety of aspects which allow for the structuring of long-term PPP projects, by creating the framework for the public and private sectors to cooperate and pool together financial, human and infrastructure resources with the purpose to procure public assets and services.

    First, the law comes with a more flexible approach, by distinguishing two types of PPP:

    PPPs of a purely contractual nature. In this case, the partnership is based solely on contractual links and the PPP agreement is concluded between the public partner, the private partner and the project company, which is wholly owned by the private partner; PPPs of an institutional nature. These PPPs involve cooperation of the private and public partner within the project company, which is held jointly by the public sector and the private sector, and becomes a party to the PPP agreement after its registration. The new PPP law also clarifies the difference between PPPs and concessions, detailing that PPP projects are funded wholly or primarily through government payments, while in case of concessions the project is primarily funded through user payments.

    Under the new law, investment costs of the project can be funded entirely by the private partner, or by both partners. In case of the public...

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