On 28 March 2011 new regulations for the provision of state support to public-private partnerships ("PPPs") took effect. This is connected with the publication of Resolution of the Cabinet of Ministers of Ukraine (the "CMU") No.279, dated 17 March 2011, approving the Procedure for Providing State Support for Realization of Public-Private Partnership (the "Procedure").

In accordance with Law of Ukraine "On Public-Private Partnership" of 1 July 2010 and the Procedure, state support may be provided to PPPs in relation to objects of state and municipal ownership in the following forms:

  • provision of state guarantees or local guarantees; and
  • financing from state or municipal budget.

The Procedure governs provision of state support to PPPs in relation to objects owned by the State. Provision of support in relation to objects held in municipal ownership is subject to regulations adopted by respective municipal authorities.

Provision of state support to PPPs

Under the Procedure, the CMU or an authority appointed thereby are competent to take decisions as to granting state support to PPPs. To this end an initiator (a state partner or a private partner upon the latter's approval) submits an application together with supporting documents to the Ministry of Economic Development and Trade of Ukraine (the "Ministry"). The exhaustive list of supporting documents is set forth in the Procedure.

The Ministry reviews the application within 2 weeks and afterwards issues an opinion as to the expediency of state support, its form and scope, which is subject to prior approval of the Ministry of Finance of Ukraine. The opinion is further notified to the initiator. Within 30 days from the issuance of its opinion, the Ministry submits it to the CMU (or its appointee) for its final approval.

The Procedure sets out criteria to be taken into account in the process of approval of state support to the PPPs, namely:

  • urgency and social orientation of the PPP arrangements;
  • correlation of costs and expected outcome of the PPP arrangements;
  • analysis of the effectiveness of use of budget funds;
  • level of detail of business plan and substantiation of scope and form of state support;
  • level of innovation of PPP arrangements;
  • probability of adverse effect of realization of a PPP on the environment; and
  • availability of human resources, material, technical and methodological base for the implementation of a PPP.

Flaws of the Procedure and its application

  • The main flaw of the Procedure is that it fails to set out certain time limits for the State to exercise its powers in regard to provision of support to PPPs (in particular, (а) a time limit for the submission of the Ministry's opinion to the state body authorized by the CMU to take decision as to provision of support, and (b) a time limit for the CMU or its appointee to take decision as to the provision of state support to a PPP). Accordingly private partners are deprived of a possibility to forecast when the decision as to the provision of state support may be available.
  • The legislation on PPP is new and a significant number of legislative acts for its implementation have not yet been approved. This practically disables effective realization of PPPs in Ukraine. In this respect the adoption of the Procedure is an important step forward.
  • Currently the state budget does not envisage funds for providing state support to PPPs. However the CMU by its resolution along with approval of the Procedure also requests the state bodies to envisage respective expenses for the support to PPPs in their proposals for amendment of the state budget for 2011 and when compiling the state budget for the next years.

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.