8 PPP Concessions Assessment - Country Report (2008)

WS0101.4426825.1

MOLDOVA Core Area Summary of PFI Guide recommendations1 / Best Practice Rating Assessment

1-General Policy and Concession Legal

Framework

Existence of a policy framework for public private partnerships ("PPPs").and existence of specific concession law or of a comprehensive

set of laws regulating concessions and allowing easy access to a clear and stable legal environment for PPPs.

8/24 0,33

Low compliance

2-Definitions and Scope of the Concession Law

Existence of a clear definition of the boundaries and scope of application of the concession legal framework (definition of "concession", sectors concerned, competent authorities, eligible concessionaires) limiting the risk of a challenge to the validity of concession contracts irrespective of

the name given to the act.

21/36 0,58

Medium compliance

3-Selection of the Concessionaire

Mandatory application of a fair and transparent selection process. Limited exceptions allowing direct negotiations, competitive rules for unsolicited proposals and the possibility to challenge illegal awards.

36/45 0,8

High compliance

4-Project Agreement Flexibility with respect to the content of the provisions of the concession agreements which should allow a proper allocation of risks without

unnecessary or unrealistic/not bankable/compulsory requirements/interferences from the contracting authority (obligations,

tariff, termination, compensation).

11/27 0,41

Low compliance

5-Security and Support Issues Availability of reliable security instruments on the assets and cash-flow of the concessionaire in favour of lenders including "step in" rights and

possibility of government financial support or guarantee of the contracting authoritys proper fulfilment of its obligations.

7/18 0,39

low compliance

6-Settlement of Disputes and Applicable Laws

Possibility to obtain proper sanction for breach under the applicable law through international arbitration and enforcement of arbitral awards.

10/15 0,67

Medium compliance

OVERALL RATING 53%/ Medium Compliance 1 UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide") Checklist Moldova Local Expert: Lideika, Petrauskas, Valiunas ir partneriai LAWIN, Dovile Burgiene

2.

Checklist Moldova WS0101.4426825.1

OVERALL ASSESSMENT OF THE QUALITY OF CONCESSION LEGISLATION: The Moldovan Law on Concessions was adopted in 1995 and completed by International Tender Regulations in 1996. The scope of application of the Law and the selection procedure are clear (e.g. concession definition includes the notion of "risk", publicity provided, pre-selection, and procedure for requesting proposals provided, notification of the applicants on the tender results, registration, limited grounds for direct negotiations, etc). It is one of the few Laws in the region that refers to the grantors participation in concession company organs. Certain provisions in relation to the project agreement may give rise to inflexibility in negotiations (e.g. the use of model concession agreement is compulsory, reference to "obligatory conditions" of concession agreement to be fixed by the Parliament, prohibition of concession transfer, only grounds for the Contracting Authority's right to claim early termination provided). The Law contains no specifications regarding security interests to be created by the concessionaire and lender's rights. However, it does refer to the possibility of government support (for concessionaires using "progressive technologies" and accomplishing "priority activities"). International arbitration is no longer provided for; Article 23 (3) of the Concessions Law providing to the concessionaire the possibility to defend his rights by means of international arbitration was repealed in 1996. There are only references to administrative and other local courts (e.g. for disputes in case of unforeseen circumstances) or the necessity to refer to International Conventions providing for international arbitration (ICSID). [IF: Article 23 (3) of the Concession Law provides to the concessionaire the possibility to defend his rights by means of competent court (including international), as well as by arbitration, according to the agreement between the parties. Therefore, the concession agreement may provide an international arbitration clause.]. Thus, Moldova has a relatively solid legal framework for the development of PPP. However, serious amendments may be required in order to create a clearer, more flexible and more stable legal environment for PPP.

3.


Key for assessment of Each Question

DDD Yes 3 points DD Yes, with reservations 2 points UU No, with limited compliance / redeeming

features 1 point

UUU No 0 point N/A Not applicable 0 point

Key for Assessment of Each Core Area and for Overall Assessment

> 90% Very High Compliance 3+1 points 70%-89% High Compliance 3 points 50%-69% Medium Compliance 2 points 30%-49% Low Compliance 1 point

< 30% Very low Compliance 0 point

4.


1.

GENERAL POLICY AND CONCESSION FRAMEWORK

QUESTION

ANSWER

ARTICLE

COMMENTARY

1. Is there a general/national policy framework (explicit or implicit) for PPPs in infrastructure or public services?

PPPs are understood in this context as different forms of cooperation between public authorities and the world of business which aim to ensure the funding, construction, renovation, management or maintenance of infrastructure or the provision of a public service.

UUU

2. If the answer to 1 is yes, is PPPs policy framework distinct from that for privatisation?

UUU

5.


3. If the answer to 1 is yes, is such policy framework supported by:

3.1. certain policy framework documents? 3.2. certain institutions (a "task force" or other institution specialised in the promotion and development of PPPs)? For information, are there:

reference to PPPs in the Constitution? sector-specific policy frameworks dealing with

PPPs?

municipal policy frameworks dealing with PPPs?

If the Country's legal or institutional framework contains undesirable restrictions on PPPs in infrastructure or public services, please mention these.

UUU

UUU

No

Yes

No

. - Moldovan Energy Strategy until 2010

(Government Resolution No.360, 11 April 2000); - National Policy Concept in the Area of Water

Resources (Government Resolution No.325, 18 July 2003).

6.


QUESTION

ANSWER

ARTICLE

COMMENTARY

4. Does the country have a concessions or a PPPs law (the "Law") or if the answer is no, do the Constitution or other general laws (e.g.: the Civil Code, sectorial law) recognize the basic principles of concessions and regulate the granting of concessions in such a way that concessions are legally possible in the country?

[.For the purpose of this questionnaire, the set of rules applicable to concessions in the absence of a specific concession law will also be referred to as the Law] .For information, is a new concessions/PPP law or amendments to the existing Law being prepared?

DDD

No

Concession Law n534-XII of 13/07/1995, as amended (22/10/1996; 27/02/1998; 15/04/1999; 15/07/1999; 14/03/2002; ; ; 13/06/2003; ; 28/07/2006) ("Concession Law") Law on Administration and Degovernmentalisation of Public Property n121-XVI of 4 May 2007, Article 15 "Concessions" ("Public Property Law")

7.


5. If the country has a Public Procurement Law, is it clear to what extent the Public Procurement Law applies or not to the granting of concessions?

For information:

is the application of the Public Procurement Law specifically excluded?

does it apply for certain types of concessions only?

is it applicable to the selection of the concessionaire?

is it applicable to all or some sub-contracts to be entered into by the concessionaire?

DDD

Yes

No

No

No

Art. 4 (g) Public

Procurement Law

Public Procurement Law No. 96-XVI of 13 April 2007. "The dispositions of the present Law are not applicable to: (g) Public Works and Public Services Concession Agreements"

6. If the country has sector-specific laws regulating the granting of concessions in specific sectors, is it clear which law is applicable to a particular sector and/or infrastructure and/or services?

UU

Art. 2 Concession

There are no sector-specific laws. Concessions are generally regulated by the Concession Law and the Regulations on International Concession Tenders approved by Government Resolution No. 102 of 27 February 1996 on the Implementation of the Concession Law. ("Regulations"). The Law also refers to other normative acts which have not been adopted yet: "Concession and related matters are regulated by the present Law and other

8.


Law

normative acts".

7. If the country has a "local public services" law (i.e. law regulating basic legal framework for municipalities using PPPs for the construction of "local infrastructure" and/or the provision of "local utility" services) is it clear which law is applicable to a particular infrastructure and/or services?

UU Art. 14(c,d),

43(e,d), 77(2,5) Local

Administration Law

There is no "local public services" law. There is only the Local Public Administration Law No. 436-XVI of 28 December.2006 which names the local bodies responsible for granting the local property into concession: Local Councils and District Councils. See commentary for 6.

9.


2.

DEFINITIONS AND SCOPE OF THE CONCESSION LAW 2.1 Concession definition 2

QUESTION

ANSWER

ARTICLE

COMMENTARY

8. Does the Law define one or several term(s) (ie: "PPP", "concession", "BOT", others) for the arrangements to be regulated by the Law which specify the limits of application of the Law?

For information, please provide the given definition, if any. (Irrespective of the name given in the Law the word

DDD

Art. 1(1) Concession

Law

Concession: an agreement pursuant to which the state grants to the investor (natural or legal person, including foreigners) the right to conduct the activities of exploration, exploitation, development or rehabilitation of the natural resources on the territory of the Republic of Moldova, to provide public services, to operate public (municipal) property, which, in accordance with the legislation is totally or partly excluded from the civil

2 For further information on concession definition please refer to: PFI Guide, Consolidated Legislative Recommendations, Recommendation 3 and Commission Interpretative Communication on Concessions Under Community Law dated 12 April 2000;together with additional EU major documents/decision /recommendation on concessions including Directives 2004/18/EC and 2004/17 EC of 31 March 2004; Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions dated 30 April 2004; Report on the public consultation on the Green Paper (SEC(2005) 629- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions (Brussels, 15.11.2005. COM(2005) 569) European Parliament resolution on public-private partnerships and Community law on public procurement and concessions (2006/2043(INI))

10.


concession will be used for all types of defined agreements for purposes of this questionnaire)

circulation and also the right to conduct certain activities, including those representing a state monopoly, in exchange for a compensation, operation of the concession facility, assumption of risk and property responsibility.

9. Does the Law provide that it applies to all contracts entering into the definition of concession irrespective of the name given to such contract (concession, licence, usufruct right, lease, etc.)?

UUU

10. Does the Law make a clear distinction between concessions and public procurement contracts (i.e.: public works, supply or services) whereby the distinguishing criterion is the transfer of risks inherent to the exploitation?

DD

There is a different Law regulating public procurement contracts which is not applicable to concessions (see n5). But there is no reference to the distinguishing criterion of the transfer of risks inherent to exploitation. In case of concession, concessionaire bears all the risks and patrimonial liabilities inherent to the exploitation, as of concluding of the agreement. In case of public procurement, the Law does not provide expressly the risks inherent to the exploitation. But, according to Article 318 of the Moldovan Civil Code, the risks of property shall be borne by its owner. Therefore, he Contracting Authority bears all the risks as of concluding of the public procurement contract.

11. Does the Law make a clear distinction between concession/PPPs and licence (i.e an authorisation to operate granted automatically by a public authority when certain criteria are

DDD

Art.13(5) Concession

Law

The conclusion of a concession contract exonerates the concessionaire from the obligation to obtain a license to conduct the concession activity.

11.


met)? 2.2 Application of the Law

QUESTION

ANSWER

ARTICLE

COMMENTARY

12. Does the Law provide that it prevails over any sector-specific law or other laws dealing with concession?

UU Art. 2 27

Concession Law

Not specified. The Law provides that the Government shall harmonize all its regulations with the present Law and make the legislative proposals to the Parliament aiming at harmonizing of the effective legislation with the present Law.

2.3 Entities involved 3

2.3.1 Public Authorities

QUESTION

ANSWER

ARTICLE

COMMENTARY

13. Does the Law identify (or allow identification by reference to other laws or regulations) the public authorities that are empowered to award concessions and enter into project agreements ("Contracting Authority")?

DDD

Art. 4 Concession

Law

The public authorities are: - Government: for concessions of soil and other natural

resources. The concession contract is signed by the concessionaire and the central body of public administration responsible for the respective area of the

3 For further information on the entities involved, please refer to: PFI Guide, Consolidated Legislative Recommendations, Recommendation 2, 6 and 42.

12.


If yes, for information, which of the following

authorities are identified?

national authorities (e.g.: the government, ministries, independent agencies)?

provincial authorities? local or municipal authorities? public enterprises?

Yes Yes

Yes

No

Art. 7, 9 Concession

Law

national economy and duly authorized by the Government

- Central body of public administration responsible for

the respective area of the national economy and local public administration bodies (not defined in the Law but specified in the Local Administration Law No.436-XVI of 28 December 2006 as local and district councils - see commentary for 7): for concessions of property of state (municipal) enterprises and infrastructure:

Parliament, Government and local councils are involved.

14. Is there a specialised agency established to take care of concessions (which consent or recommendation is necessary for the granting of a concession, e.g.: Concession / PPPs Agency)?

UUU

15. Is the division of power between different public authorities involved in the concessions granting process simple and coordinated (e.g.: one stop shop)?

UU Art.7,8,9 Concession

Law

Parliament, Government and local authorities are involved. Responsibilities are clearly indicated but numerous bodies are involved.

2.3.2 Concessionaire and Project Company

QUESTION

ANSWER

ARTICLE

COMMENTARY

16. Can concession be granted to a domestic and/or foreign person or to a domestic person with foreign shareholders? Can the shareholders of

DDD

Art.1(1) Concession

Law

The definition of the term "Concession" specifies that "the investor" in the concession contract may be "natural or legal person, including foreigners".

13.


the concessionaire be domestic and/or foreign persons (without discrimination)?

Art. 5

Concession Law

It is specified that the "Concessionaire" may be any natural or legal person of the Republic of Moldova or others states.

For information only, can concession be granted to public entities or to entities jointly owned by private and public entities?

No


Law Art.13(1-m) Art. 18(1-a) Concession

Law

Concession enterprise can take any legal form, except state/municipal enterprise. But concession grantor may participate in the administration and control bodies of the concession enterprise.

2.4 Concerned sectors4

QUESTION

ANSWER

ARTICLE

COMMENTARY

17. Does the Law identify (or allow identification by reference to other law or regulations) the sectors and/or types of infrastructure and/or services in respect of which concessions may or may not be granted?

DDD Art. 3(1)(2) Concession

Law

- Concession may be granted in all sectors of the economy and for all activities, if this does not contradict the legislation (unclear).

- Concession facilities are:

. soil and other natural resources, their exploration, exploitation and development;

. movable and immovable property of

4 For further information on the concerned sectors please refer to: PFI Guide, Consolidated Legislative Recommendations, Recommendation 3 and 4.

14.


Art. 15(1)

Public Property

Law

state/municipal enterprises and organizations.

The concession facilities may be: communal facilities and services, public transport, alternative highways, power plants, sports centres, leisure centres and other objects and kinds of public services of national or local use or interest.

18. Do the sectors eligible for concessions correspond to a large extent to those listed below, or if not, is the list of eligible sectors an open-ended one (as opposed to being exhaustive) allowing (or at least not preventing) concessions to be granted in numerous sectors?

For information:

a) does it include the transportation sector?

is the railway system included? are rail transport services included? are ports included? are airports included? are public roads included?

b) does it include the electricity sector?

is the generation of electricity included? is the transmission of electricity included? is the distribution of electricity included?

c) does it include the water and wastewater sector?

is water production included?

DD

See commentary for 17. The list of eligible sectors isn't exhaustive.

15.


is water treatment included? is wastewater treatment included? is water distribution included? is wastewater collection (sewerage) included?

d) does it include solid waste collection, transfer or

disposal?

e) does it include the oil, gas and mineral sector?

f) does it include other public services such as

education, health care and prisons?

g) Does it include any other sectors or infrastructure

(please specify)?

16.


3.

SELECTION OF THE CONCESSIONAIRE5

3.1 General Considerations

QUESTION

ANSWER

ARTICLE

COMMENTARY

19. Does the Law require in principle the Contracting Authority to select a concessionaire through competitive procedures?

DDD

Art. 12 (2) Concession

Law

Art. 15 (3) Public Property

Law

Art. 2 Regulations

If there are several tender offers for a single concession facility, the international tender is competition-based. The selection of private partners for concession is operated through a public competition held by central or local body of public administration according to the legislation on concessions. The tender is held for the purpose of competition-based selection of a more preferable bidder

20. Is there reference in the Law to the principles of transparency, equal treatment and proportionality.

DD

Art. 3 Regulations

Although the Law does not specifically refer to these principles, the similar principles are mentioned in the Regulations: - equal conditions of competition for all tender applicants, including foreign natural and legal persons; - the minimum number of tender applicants is two; - publicity of the tender and its outcome;

5 For further information on the selection of the concessionaire, please refer to: PFI Guide, Consolidated Legislative Recommendations, Recommendations 14 to 39 included.

17.


For information, please specify if a reference is made to the principle of mutual recognition.

No

- the possibility given to all applicants to visit the facility proposed for concession, study the credit, financial and other terms of the concession contract. IF: Public Property Law provides for a broader concept called "degovernmentalisation" which also includes, award of concessions. According to the Article 3 of the aforementioned Law, the main principles of the "degovernmentalisation" shall be: equality, transparency and efficiency. Therefore, the concession is governed by the same principles.

21. Is there a provision in the Law concerning the publication of information related to the competitive procedures in the Country media and in the international media (for large projects)?

DDD


Law Art. 7,17,18 Regulations

The grantor shall publish in local and international press the information on the concession tender. The publication shall be done no later than three months before the beginning of examination of tender offers.

22. Are there provisions of the Law, regulations or special manual, recommendation governing in detail the selection of the concessionaire ("Regulations") (i.e.: the pre-selection of bidders, the procedure for requesting proposals, other procedure such as competitive dialogue/two stage procedure) ?

DDD

Regulations on International Concession Tenders approved by the Government Resolution No. 102 of 27 February 1996 on the Implementation of the Concession Law

18.


23. Does the Law / Regulations provide that, if the Contracting Authority rejects an applicant at the time of preselection or disqualified a bidder , it must make public the reasons for the decision (or inform the rejected bidder thereof explaining the reasons for rejection)?

DDD

Art. 35,44,6263 Regulations

- The tender committee shall notify applicants in writing of the reasons why they were not selected to participate in the tender.

- The tender committee shall notify the bidders whose offers were declined, giving reasons for the rejection.

- The tender committee shall publish a report on tender results within 7 days from the date of their approval by the Contracting Authority.

3.2 Award of concession

QUESTION

ANSWER

ARTICLE

COMMENTARY

24. Does the Law / Regulations provide that all proposals are ranked solely on the basis of the evaluation criteria set forth in the pre-selection documents/ request for proposals?

DDD

Art. 51

The tender committee shall select the bidder whose offer most fully complies with the requirements of the tender documentation. The winner is selected according to the "number of points" method on the basis of the criteria laid down in the tender documentation.

25. Does the Law / Regulations provide that a notice of the award of the project, identifying the concessionaire and including a summary of the essential terms of the project agreement is to be published?

DDD

Art. 63 Regulations

The information on the tender outcome shall be published by the tender committee no later than one week after its approval by the Concession grantor.

26. Does the Law / Regulations provide that the Contracting Authority or any other public

DDD

Art. 54 Regulations

The outcome of the tender committee's session shall be recorded in the minutes containing:

19.


authority maintain records of key information pertaining to the selection and award proceedings?

- members of the tender committee - list of bidders - information on the winner - information on the second-ranked bidder - name of the concession facility - initial and final price of the concession - parties' obligations with regard to signing of the concession agreement. The minutes shall be signed by all bidders, the winner and the tender committee members.

27. If the answer to 26 is yes, does the Law provide that such record is accessible for public or at least to interested parties?

UUU

3.3 Final negotiations

QUESTION

ANSWER

ARTICLE

COMMENTARY

28. Does the Law /Regulations contain provisions regulating final negotiations (i.e. post contract award) so that transparency, equal treatment and competition are preserved?

UUU

29. Does the Law / Regulations provide that the Contracting Authority has the authority to terminate negotiations with the invited bidder when it becomes apparent that the bid will not result in an agreement and start negotiations

DDD

Art. 56 Regulations

If the tender winner doesn't sign the tender outcome minutes within the time limits, he loses the right to sign the concession agreement. In this case, the second-ranked candidate gets the right to sign the concession agreement. If the latter refuses to sign the minutes, the

20.


with the second ranked candidate?

Art.65 Regulations

tender outcome shall be void. If the winner doesn't make the second deposit payment (guarantee of the realization of the contract representing 5% of the initial concession price), the concession grantor may cancel the tender results. In this case, the second-ranked candidate gets the right to the concession. If the latter refuses the given right, the tender shall be cancelled.

3.4 Concession Award without competitive procedure

QUESTION

ANSWER

ARTICLE

COMMENTARY

30. According to the Law / Regulations, does the Contracting Authority have the authority to award a concession without competitive procedures only in limited exceptional circumstances such as the ones listed below?

For information, which of the following conditions allowing direct negotiations are provided for?

when there is an urgent need for ensuring continuity of the provision of service and engaging in a competitive selection procedure would be impractical?

for projects of short duration and with an anticipated initial investment value not exceeding a specified minimal amount (or with

DDD

Yes

No


Law

Art. 47 Regulations

Art. 47

Regulations

Art. 47

Direct negotiations are allowed when there is only one bidder whose tender offer complies with the tender requirements. Possibility of closed tender is some cases (see below). When the open tender may postpone dealing with important public matters.

When military or other important public interests do not allow keeping of the open tender.

21.


an anticipated turnover not exceeding a specified minimal amount)?

reasons of national defence or national security?

cases when there is only one source capable of providing the required service (e.g.: in the case of patented technology or unique know-how)?

when an invitation to the pre-selection proceedings or a request for proposals has been issued but no applications or proposals were submitted or all proposals failed to meet the evaluation criteria?

others (please specify)?

Yes

No

No

Yes

Regulations

Art. 47 Regulations

Art. 47 Regulations

When it is necessary to have particular professional skill or trust for the purpose of concession activity When previous open tenders did not result in the conclusion of a concession contract.

31. According to the Law / Regulations, is there a procedure (rules) to be respected for the award of a concession without competitive procedures?

DDD Art. 47-50 Regulations

Rules to be respected for the award of a concession following the closed tender.

3.5 Special case of unsolicited proposals

QUESTION

ANSWER

ARTICLE

COMMENTARY

32. Does the Law / Regulations provide for the adequate framework for the Contracting Authority to handle unsolicited proposals/private initiative concessions (proposal relating to the implementation of a concession that is not submitted in response to a

DDD Art. 10(2-b) Concession

Law

Following the publication of the tender information (the list of objects offered for concession and the essential provisions of the concession agreement), the applicants for concession tender have the right to propose to the concession grantor to include in the list other objects which were not initially included in the list.

22.


request or solicitation by the Contracting Authority) that ensure transparency and equal treatment and do not distort competition?

Art. 29

Regulations

The applicant has the right to submit an alternative tender offer in addition to the tender offer which respects the requirements of tender documentation.

3.6 Review procedures

QUESTION

ANSWER

ARTICLE

COMMENTARY

33. Does the Law allow the bidders who claim to have suffered or that may suffer loss or injury, to seek review of the Contracting Authoritys acts or failures to act?

UU

Art. 16, 64 Regulations

Not specified and not prevented in the Law. No review by the Contracting Authority itself. No review by higher administrative organs of the Government. Only judicial review: The bidders may contest the tender outcome before the competent judicial authority within a period of 30 days from their publication according to the established procedure.

23.


4.

PROJECT AGREEMENT6

QUESTION

ANSWER

ARTICLE

COMMENTARY

34. Does the Law contain (or refer to) a model concession/PPP agreement which use is optional (for guidance only as opposed to being mandatory) or a mandatory list of provisions to be included in the agreement (the content of such provisions being left for negotiation) ?

DDD


Law

The Law contains a non-exhaustive list of provisions to be contained in the project agreement. There is also a model concession agreement in Annex 2 to the Regulations. The use of the model agreement is compulsory.

4.1 Duration and extension of the project agreement

QUESTION

ANSWER

ARTICLE

COMMENTARY

35. Does the Law provide that the concession duration should depend on the length of time taken for the amortization of the private investment and an appropriate return on the capital?

For information, please provide the given duration (if any) and relevant information in the Law with respect

UU Art. 13(4) Concession

Law Art. 15 (4)

Public Property Law

Art. 14 (1)

The concession contract cannot be concluded for more than 50 years. Upon the expiry of term of the concession contract, its

6 For further information on the project agreement definition, please refer to: PFI Guide, Consolidated Legislative Recommendations, Recommendations 12 and 40 to 68 included.

24.


to the conditions for extension. Concession Law

duration may be prolonged on condition that the concessionaire complies with the requirements of the contract. Article 23 (1-c) of the Concession Law provides the reimbursement of non-amortized part of private investment in case of liquidation of the project company (termination of the concession contract).

4.2 Termination of the project agreement

QUESTION

ANSWER

ARTICLE

COMMENTARY

36. Does the Law provide for a restrictive list of termination events (such as those listed below)?

DD

Art.14(5) Concession

Law


Law

A concession contract is terminated upon expiry of its term, in case of early termination, liquidation of the project company, infliction of damage on the concession object or rendering it useless before the expiry of the term of concession. The Law specifies that the concession grantor shall have the right to claim early termination of the contract on the following grounds: - in case of occurrence of facts or events allowing the concession grantor to end the contract; - in case of violation by the concessionaire of the conditions of the contract; - in case of liquidation of the concessionaire (legal person) or death of the concessionaire (natural person);

25.


material breach by the other party;

if performance is made impossible by the occurrence of circumstances beyond either

Yes

No

No


Law


Law

Art. 15 (7) Public

Property Law

Art. 14(3) Concessions

Law

- bankruptcy of the project company; - if there is a decision of the competent court recognizing as invalid the constituent documents of the project company. The Law specifies that the concession contract shall provide for the list of legal facts allowing the modification of the concession agreement or its termination on demand of one of the parties. The Law specifies that the concessionaire shall have the right to unilateral termination of the contract and compensation of losses in case of public expropriation/ requisition of soil and other natural resources granted for concession. We note a contradiction between the Concession Law and the Public Property Law. In fact, the Public Property Law stipulates that the unilateral termination or modification of the concession contract are "null and void". Moldovan lawyers apply the provisions of a more recent Public Property Law (May, 4, 2007) according to the rule "lex posterior derogat priori" But only in case of breach by concessionaire. Consequently, the concessionaire shall not have the right to terminate the contract in case of material breach by concession grantor.

26.


partys control; mutual consent .

37. Does the Law provide for (or does not prevent ) compensation of the concessionaire:

37.1. in case of termination for public interest? 37.2. for losses incurred as a result of public authorities acts?

UU

DD


Law

Art. 11(4), 13 (3)

Concession Law


Law

Not specified. Not prevented. Compensation provided in case of concessionaire's losses incurred as a result of unilateral modification of the concession contract by the concession grantor due to unforeseen circumstances (to be provided by administrative court.) Compensation for losses is also provided in case of public expropriation/requisition of soil and other natural resources granted for concession. The Law also specifies the rights of the concessionaire: (e) to contest in the competent administrative court the actions of central (local) public authorities responsible for regulating the concession relations.

27.


37.3. in all cases of early termination (including in case of serious breach or failure by the concessionaire), for the non-depreciated value of assets financed by the concessionaire-?

DD

Art. 23 (1-

c), 24 Concession

Law

Article 6 (4) Concession

Law

The Law also specifies that the public authorities' acts contrary to the present Law or violating the rights of the concessionaire set forth in the concession contract shall be recognized by the court as null and void, and the actions based upon them as unlawful. But the Law doesnt provide for any compensation. Article 23 (1-c) of the Concession Law provides the reimbursement of non-amortized part of private investment in case of termination of the concession contract. . But article 6 (4) provides that upon the expiry or termination of the concession contract, the concessionaire shall have the right to obtain compensation for the improvements of the concession facility made with the concession grantor's authorization, unless otherwise provided in the concession contract.

4.3 Tariff setting, service standards

QUESTION

ANSWER

ARTICLE

COMMENTARY

38. Does the Law provide for clear guidance for all aspects of interaction between the bodies that have the power to award concessions and the bodies that regulate tariffs and service

UUU

28.


standards? 4.4 Financial responsibilities of concessionaire and Contracting Authority

QUESTION

ANSWER

ARTICLE

COMMENTARY

39. Does the Law provide that the concessionaire can collect tariffs or fees for the use of the facility or its services?

UU

Although, the Law does not expressly provide, the concessionaire may collect certain fees for rendering commercial and industrial public services.

40. Does the Law provide the possibility for fixed and/or consumption-based payments to the concessionaire by the public authorities?

UUU

5. SECURITY AND SUPPORT ISSUES7

5.1 Security Interests

7 For further information on support and financial securities, please refer to:

PFI Guide, Consolidated Legislative Recommendations, Recommendations 13, 49, 57 and 60.

29.


QUESTION

ANSWER

ARTICLE

COMMENTARY

41. Does the Law provide for the possibility for (or not specifically prevent) a concessionaire to create security interests on the project assets and proceeds or other valuable guarantees related to the project?

UU

Not specified. Not prevented.

42. If the answer to 41 is yes, does the Law clearly state which types of security can be provided and includes some of the most common type of guarantees in project financing (such as those listed below)?

For information, can a concessionaire pledge or assign:

the proceeds and receivables arising out of the concession?

the assets for which it has rights of use under a project agreement;?

its property? shares of the Project Company? the project agreement? or obtain other valuable guarantees (please

UU

30.


specify)?

5.2 Government support

QUESTION

ANSWER

ARTICLE

COMMENTARY

43. Does the Law provide for the possibility (or not specifically prevent) the public authorities to provide support to the Contracting Authority and guarantee for the proper implementation of concessions by the Contracting Authority?

UU

Not specified. Not prevented.

44. Does the Law provide for the possibility (or not specifically prevent) the public authorities to provide financial or economic support for the implementation of concessions?

DD

Art. 7 (1-c) Concession

Law

The Parliament is responsible for awarding privileges to concessionaires using progressive technologies and accomplishing priority activities.

45. If the answer to 44 is yes, does the Law clearly state which public authorities may provide such support and which types of support can be provided?

For information, are the following types of support

provided for:

interest-free or low interest public loans? loan guarantees? direct or indirect equity participation by the

DD

Art. 7 (1-c) Concession

Law

See commentary for 44.

31.


government in the project?

subsidies for operations in non-profitable sectors?

direct subsidies? pro-poor subsidies? tax and customs benefits? foreign exchange protection (convertibility and

transfer guarantees)?

protection from competition?

5.3 Lenders rights

QUESTION

ANSWER

ARTICLE

COMMENTARY

46. Does the Law provide for the possibility for the lenders to step-in or substitute a qualified new concessionaire in case of concessionaire defaults without a new tender?

UUU

Art. 17 Concessions

Law

The transfer by the concessionaire of the concession object partly or totally to third persons is forbidden.

6. SETTLEMENT OF DISPUTES AND APPLICABLE LAWS8

8 For further information on the settlement of disputes, please refer to: PFI Guide, Consolidated legislative Recommendations, Recommendations 57, 69 and 71.

32.


6.1 Settlement of disputes

QUESTION

ANSWER

ARTICLE

COMMENTARY

47. Does the Law permit the Contracting Authority to enter into concession agreement that is subject to international arbitration?

UUU


Law


Law

Art.16(1-e) Concessions

Law

Article 23 (3) of the Concessions Law providing for concessionaire the possibility to defend his rights by means of international arbitration was repealed in 2006. However, International Agreements still prevail over the Law. At present: Disputes concerning the level of concessionaires losses incurred as a result of unilateral modification of the concession contract by the concession grantor due to unforeseen circumstances are to be resolved by a competent administrative court. The Law also specifies the rights of the concessionaire: (e) to contest in the competent administrative court the actions of central (local) public authorities responsible for regulating the concession relations.

48. Has the government of the country ratified the following international conventions? 48.1. the Washington Convention on the Settlement of Investment Disputes (ICSID) (1965)?

DDD

[IF: ICSID was signed by Republic of Moldova on 12 August 1992, but not ratified an entered into force.

33.


48.2. the New York Convention on recognition and enforcement of foreign arbitral awards (1958)?

DDD

1958 (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards - has been ratified by Resolution of the Moldovan Parliament No. 87-XII dated 10 July 1998. This Convention is in force for Moldova as of 17 December 1998.].

6.2 Applicable laws

QUESTION

ANSWER

ARTICLE

COMMENTARY

49. Does the Law permit the Contracting Authority to enter into concession agreement that is governed in whole or in part by foreign law or at least allow the concessionaire to enter into financing and construction agreements governed by foreign law?

UU Not specified.

50. Has the country ratified any international convention for the protection of foreign investments?

DDD The Country has ratified the Convention on Protection of Investors Rights signed in Moscow on 28 March 1997 and the Agreement on Cooperation in Investments Area signed in Ashgabat on 24 December 1993. The Country has also ratified bilateral investment protection treaties with Austria, Belgium-Luxembourg Economic Community, Croatia, Czech Republic, Germany, France, Iran, Israel, Italy, the Netherlands, Kuwait, Kyrgyzstan, Tajikistan, Slovenia, Bosnia-Herzegovina, China, Azerbaijan, Belarus, Bulgaria, Finland, Georgia, Greece, Hungary, Latvia, Lithuania,

34.


Poland, Romania, Turkey, Uzbekistan, Russia, Switzerland, Ukraine, Cyprus, UK, and USA

EFECTIVENESS ASSESSMENT: HOW THE LAW WORKS IN PRACTICE: (please comment based on the previous 2006 effectiveness general assessment)

1. GENERAL POLICY AND CONCESSION FRAMEWORK2. DEFINITIONS AND SCOPE OF THE CONCESSION LAW 2.1 Concession definition 2.2 Application of the Law 2.3 Entities involved 2.3.1 Public Authorities 2.3.2 Concessionaire and Project Company

2.4 Concerned sectors 3. SELECTION OF THE CONCESSIONAIRE 3.1 General Considerations 3.2 Award of concession 3.3 Final negotiations 3.4 Concession Award without competitive procedure 3.5 Special case of unsolicited proposals 3.6 Review procedures

4. PROJECT AGREEMENT 4.1 Duration and extension of the project agreement 4.2 Termination of the project agreement 4.3 Tariff setting, service standards 4.4 Financial responsibilities of concessionaire and Contracting Authority

5. SECURITY AND SUPPORT ISSUES 5.1 Security Interests 5.2 Government support 5.3 Lenders rights

6. SETTLEMENT OF DISPUTES AND APPLICABLE LAWS 6.1 Settlement of disputes 6.2 Applicable laws

Documents

8 PPP Concessions Assessment - Country Report (2008)