On Public-Private Partnerships

Ludmila Baleevskikh, a senior lawyer of Muranov, Chernyakov & Partners, discusses the problems of Russian legislation on public-private partnerships.

Ludmila Baleevskikh
senior lawyer

Muranov, Chernyakov & Partners
+7 495 783-74-50

In recent years, the usage of public-private partnerships has significantly increased. This growth, however, is restricted by the underdevelopment of the legislative framework in the field of PPPs. In particular, there are the following problems:

  • The current legislation doesn’t fully reflect all the specifics of PPPs;
  • There are no legal acts specifically on PPPs;
  • Areas and fields where PPPs can be used are not specified by the law;
  • The law is silent on the powers of public authorities in the PPP context;
  • The legislation does not provide sufficient detail on contractual relationships in the PPP projects;

These problems cause serious risks for PPP projects:

  • The risk of re-qualification of a PPP agreement, which is not a concession, into the concession agreement subject to the Federal Law "On Concession Agreements". The law on concession has several drawbacks. Namely, it substantially restricts the usage of collateral as a form of security by the concessionaire to the lenders; it restricts the arbitrability of disputes in international commercial arbitration;

 

  • There are risks arising from the fact that any financial obligation of a public body is valid only if this expenditure is included in the budget of that public organisation. At the same time, state and municipal budgets are drafted for much shorter periods than the lifespan of PPPs projects;
  • Risks associated with land. Difficulties arise due to the fact that a PPP project often needs land from many different owners: the Russian Federation, the Subject of the Federation, the municipality;
  • Risks associated with the absence of specific partner selection procedures for PPP projects;
  • The Budget Code of the Russian Federation does not provide a special form of appropriations that are suitable for the financing of state obligations under PPP projects;
  • Risks associated with the future obligation of a party to a PPP project to hand over ownership over property to the other party. Such future obligations can be unenforceable in Russia;

The above-mentioned risks can be reduced by creating a well-functioning legal system for public-private partnership at the federal and regional levels.

Given the interest of the govern