Directive on the award of concession contracts – new platform for investment

Triniti

On February 2014, European Council is expected to vote on the new directive of the European Parliament and of the Council on the award of concession contracts. The purpose of this directive is to unify the regulation of award of concession within the internal market.  Currently there is no unified legal framework of the award of concession in the European Union (EU). Public works concessions are regulated by the public procurement directives, while the EU public procurement directives are not applicable to the concessions of services. The Services Directives are basically applied in the light of the principles laid down in the Treaty on the Functioning of the European Union. Hence, in the absence of clear-cut legal regulation, the development of the EU internal market in respect to the award of concessions is limited.

The European Commission, having additionally evaluated the results of the public consultation, has prepared the draft directive on the award of concession contracts and launched an EU legislative procedure in 2011. The new Directive, with certain exceptions, should be applied to both works and services concessions.

The new Directive is primarily aimed at the following:

1) Ensuring legal certainty (clarity and explicitness) both for awarding authorities implementing concession projects as well for the participating economic operators;

2) Eliminating obstacles preventing economic operators from participation in the EU concessions market.

1. Legal clarity in the concessions market

In the absence of unified legal regulation of the works and services concessions, both economic operators and awarding authorities seeking implementation of the concession projects face legal uncertainty in certain cases. This complicates the implementation of concessions projects. Economic operators are unable to participate in concession projects in a clear, effective and not-discriminatory manner, whereas awarding authorities are unable to use private investment efficiently.

In this draft Directive legal clarity in awarding of concessions will be sought by the following means:

Providing unified definitions.

A definition of concession contracts provided in this draft Directive is more precise, associated with the concept of substantial operating risk. The draft Directive also explains in which case a concessionaire shall be deemed to assume a substantial operating risk.

Incorporating the principles enshrined in the EU Treaty and the case law-based interpretations.

According to this draft Directive, a majority of the obligations which are currently applicable to the award of public works concession contracts would become equally applicable to all services concessions. It also lays down a number of specific and more precise requirements based on the EU Treaty principles (applicable at different stages of the award process), as they have been interpreted in the case law of the Court of Justice of the European Union.

Defining mutual cooperation of public entities.

The draft Directive provides that concession agreements entered into between contracting authorities are not subject to the concession award rules. Such provision stems from the case law of the Court of Justice of the European Union.

Allowing for modification of a concession agreement during its validity period.

It will be provided in the Directive, that it would be possible to modify concession agreements modified during their validity periods in certain cases. This regulation builds upon the case law of the Court of Justice and provides a reasonable solution for dealing with unforeseen circumstances calling for modification of a concession agreement during its validity period.

2. Better access to the concessions market for economic operators

The proposal provides for a fundamental improvement concerning the economic operators’ access to the concessions market, by increasing transparency and fairness in award procedures and aiming for involvement of a larger number of economic operators in concession projects. In order to achieve this objective, the following measures will be adopted in the draft Directive:

Compulsory publication of concession awards.

The present proposal provides for compulsory publication in the EU Official Journal of concession awards with a value equal to or greater than EUR 5,186,000 (safe for a few exceptions).

Minimum submission deadlines applicable in the concession award procedure.

This draft Directive also sets a minimum deadline for submission of applications and proposals concerning concession.

Requirements for the selection and award criteria.

The proposal provides for obligations relating to the selection criteria to be applied by the awarding authorities or contracting entities when awarding concessions. The Directive intends to limit the selection criteria to those related to the economic, financial and technical capacity of the bidder and reduce the scope of the acceptable exclusion criteria. The criteria should primarily be associated with the subject matter of the concession.

Procedural guarantees.

Provisions of the Directive are not intended to impose any particular procedure of awarding concessions in the Member States. Conversely, awarding authorities and contracting entities will be able to apply more flexible procedures when awarding concessions, which would be in concert with local legal customs and make the award process as efficient as possible. On the other hand, the proposal establishes a number of clear-cut procedural safeguards to be applied to the award of concessions, notably in the negotiation phase.

The overview of the new draft Directive suggests that a more efficient and flexible implementation of concession projects is to be expected. The Member States are obliged to implement this Directive within two years of its entry into force. Judging from the present regulation of awarding of concessions in Lithuania, it is likely that, following the implementation of the new Directive, we would see considerable benefits of the public-private partnership as the long-term complex and high-value projects in the public sector would be implemented more frequently.

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