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Parliament adopts Law on Concessions

03 October 2019, 14:10

Parliament adopts Law on Concessions

The Verkhovna Rada adopted Law on Concessions (No.1046) stipulating attraction of private capital to the management of state property.

According to Interfax-Ukraine, 257 deputies voted for adoption of the bill in the second reading during the plenary meeting on Thursday.

In the view of authors of the document, the specified bill should facilitate improvement of the legal regulation of concession activities which, in its turn, will provide the opportunity to attract effectively domestic and foreign investment in the Ukrainian economy for infrastructure development. The document also defines a clear mechanism for selection of the concessionaire and introduces concession conditions in line with international practice.

Pursuant to the text of the law, the term ‘concession’ defines a form of public-private partnership (PPP) where the concessor shall grant the concessionaire with rights to establish and/or construct (repair/technical re-equipment, etc.), and/or manage the concession object, and/or provide services on the conditions determined by the concession agreement, and foresees transfer to the concessionaire greater part of the operational risk.

The law, in particular, specifies clear separation of concession regulation and other forms of PPP implementation; a unified procedure for initiating and making decisions on the implementation of PPP for all its forms (including concessions); introduction of a transparent procedure for concessionaire selection (concession tender, competitive dialogue) consistent with international practices as well as possibility of attracting advisers and independent experts to elaborate PPP projects in the form of a concession.

The document also stipulates additional guarantees for concessionaires and creditors, in particular, determination by the concession agreement of the right to replace one concessionaire with another one.

Furthermore, the law simplifies procedures to allocate land plots for PPP projects in the form of concessions; determines peculiarities of the concession in markets that are in a state of natural monopoly as well as peculiarities of the concession for construction and operation of the motorways.

At the same time, the new revision of the law introduces clear regulation of the ownership of the concession object aimed at preserving the state/territorial community's ownership of the concession object.

In addition, the document provides potential concessionaires with the opportunity to initiate a concession.

The law stipulates that concession objects cannot comprise forests, but aerodromes, and concession payments for motorways will serve as a source of the Road Fund support.

At the same time, according to conclusion of the Parliamentary Committee for Ukraine's Integration with the EU, the law does not comply with the Association Agreement and needs to be revised taking into consideration relevant comments.

The Verkhovna Rada adopted the bill on Concessions (No.1046) in September 2019 as the basis.

In September 2019, the Ministry of Infrastructure announced tender for concession of the property of SE ‘Stevedoring Company (SC) Olvia’, SE ‘Kherson Sea Trade Port (KSTP)’ and the corresponding property of SE ‘Ukrainian Sea Ports Authority’.

According to Taras Boichuk, Chairperson of the SPILNO Public-Private Partnership Project Management Office for Ports of Ukraine, the tender procedures will be held in compliance with the current legislation, and the contracts to be signed with the successful tenders will contain provisions of the new law ‘On Concessions’.

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