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New Public-Private Partnership Law Can Bring About Important Changes

The Law of Ukraine "On Public-Private Partnership" (the "PPP Law") was adopted by the Parliament of Ukraine on 1 July 2010. The law was signed by the President and will become effective three month after its official publication. The PPP Law aims to establish a legal framework for attracting private investments into projects that are in the public interest and determines the basic principles of public-private cooperation.

Definition of PPP

The PPP Law defines public-private partnership (the "PPP") as cooperation between public partners (state and municipal bodies) and private partners (legal entities and natural persons-entrepreneurs) based on an agreement. PPP projects may be realized through concession, joint activity, production sharing or other types of agreements.

Sectors where PPP projects may be implemented include exploration and extraction of natural resources, construction and operation of motorways, railways, airport runways, bridges, tunnels and subways, sea and river ports and their infrastructure, tourism, recreation, sport, healthcare, electric-power generation, property management etc.

PPPs are long-term projects that last from 5 to 50 years.

What is the status of PPP facilities?

The PPP facilities (objects) can be existing facilities, including ones in need of reconstruction, objects under construction or purchased objects owned by the state and municipalities. Transfer of an object to a private partner does not entail the transfer of title to the object. PPP objects are to be returned to a public partner after expiration of the agreement concluded within the framework of the PPP. The designated use of the PPP objects cannot be altered. PPP objects cannot be privatized during an operational PPP project.

How a private partner is selected?

Decisions with regard to the PPP are taken by the relevant public partner. The private partner is selected through a tender. A tender notice is published in the official publications and on the public partner's website. PPP projects using state property would have to be approved and private partners selected by the Cabinet of Ministers or a state agency authorized by the Cabinet. For municipal property these decisions would have to be approved by the city or village council.

How does the PPP Law change existing laws?

The PPP Law introduced the following changes in land law:

a public partner must provide all land allocation project documents and other necessary documents for leasing the land plot, obtain approval of the documents from the respective authorities, and, if necessary, obtain a positive report of a land use expert. The relevant costs are reimbursed by the private partner; the right to use state or municipal land for a PPP can be obtained through a simplified procedure. The private partner can obtain this right as part of the tender to choose the private partner for PPP purposes; because land use rights can now be obtained as part of the PPP tender, land auctions will not be required to allocate land for PPP purposes. The PPP Law makes amendments to the Land Code to this effect; the private partner may use a land easement (servitut) on behalf of the public partner if this is envisaged by the terms and conditions of the PPP agreement.

The PPP Law introduces the following changes in the Concessions Law:

there can be more than one concessionaire (private partner) for a single PPP object; the list of possible concession objects have been extended to correspond to the extended list of PPP objects in the new PPP Law (see above); the public partner is now required to prepare land use documentation for the lease of land by the concessionaire; the concessionaire would have to enter into land lease agreement within one year after the effective date of the concession agreement; concession payments for distressed concession objects can be reduced or suspended; depreciation of assets which are part of the concession object will be deduced from concession payments and the funds so released would have to be used for improvements of the concession object; the Law establishes a fine in case the private partner uses such released funds for any purposes other than the improvements of the concession object.

For further information please contact

Oleksiy Didkovskiy
Managing Partner
oleksiy.didkovskiy@asterslaw.com

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