Recently the Argentine Government has announced 52 new project opportunities to be developed through public-private partnerships (PPP) under a freshly Public-Private Partnership Contracts Law.
These projects cover key sectors of the economy, such as roads and motorways (13 projects), railway (5 projects), energy transmission lines and related works (8 projects), penitentiary services (3 projects), health (7 projects), housing (1 project), and water distribution and remediation (14 projects).
It is expected that the government will launch the bi- dding processes before the end of the year, in order to start and develop the projects in 2018.
As a general background, on November 30, 2016, the Argentine Congress passed Law 27,328 on PPP Contracts, which was later regulated by implemen- ting Decree 118/2017 of February 20, 2017.
The purpose of this regime is to regulate and stimu- late private investment in the areas of infrastructu- re, housing, services, production, applied research and technological innovation and following public purposes such as design, construction, expansion, improvement, maintenance, exploitation, opera- tion, financing of projects and the supply of equip- ment or other goods.
The main aspects of the new PPP regulatory fra- mework are the following:
- PPP contracts are not subject to the administra- tive contract regulation (i.e. public works law, pu- blic works concession law, and public contracts general regime).
- PPP contracts are granted the necessary flexibi- lity to adapt it to the needs of the project and the financing, having to set a deadline that considers the investments committed, the repayment of the financing applied to the project and a reaso- nable profit. The maximum term of PPP contracts cannot exceed 35 years.
- PPP contracts may be structured through an existing company, a specific purpose company or through financial trusts and other types of vehi- cles or associative schemes. Both public limited companies and trusts will be entitled to make public offerings of their marketable securities in accordance with capital market Law 26,831, in or- der to improve their sources of financing.
- Contractor can enter into loans with financing entities, providing that in the event of a breach by the contractor, the control of the contracting company (or contract) may be transferred to the creditor(s), in order to facilitate restructuring and ensure continuity of benefits ("step in rights").
The Law authorizes the possibility to transfer collecting rights, as well as the securitization of future cash flows.
- PPP contracts can set forth contractor's right to totally or partially assign the PPP contract to the extent the assignee meets the proper conditions to be a contractor and at least either 20% of the contractual term has expired, or 20% of the com- mitted investment has been made. Once the as- signment has been approved, the assignor is re- leased from all responsibility.
- No limitation of the State's liability is applied in case of termination of the PPP contract for rea- sons of public interest. Similarly, the early termi- nation by the State party is subject to prior com- pensation to the contractor, which can never be less than the non-depreciable investment, gua- ranteeing the repayment of the financing.
- Selection of the contractor will be made through national or international public tender. Bidding documents shall provide that the goods and services involved in the PPP contracts may have a 33% national component, being the National Executive Branch able to exclude this limitation on a case-by-case basis.
- Prohibition of indexation is excluded, being the parties also able to agree that payments shall be only made in foreign currency.
- PPP contracts may foresee procedures for pri- ce revision in order to preserve the original eco- nomic-financial balance of the contract and the conditions of the financing.
- Disputes arising from the PPP contracts may be submitted to arbitration. Selection of a foreign jurisdiction is admitted but requires the Execu- tive's prior approval. Technical disputes arising from the PPP contract may be submitted to tech- nical panels. In domestic arbitrations, the award can only be subject to annulment proceedings (excluding appeals and any other remedy which allows the revision of substantive aspects of the arbitral award).
For accessing the law, the implementing decree and useful information on the PPP projects please click on the following links (only available in Spanish):
https://www.minfinanzas.gob.ar/uppp/index.php
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
