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Law of Public-Private Partnerships MAY 2019

Law No. 11/19 of 14 of May established the general bases applicable to the prioritization, design, launching, modification, monitoring and overall monitoring of Public-Private Partnerships ("PPP").

This law repeals Law no. 2/11, of 14 of January. The regime in this new Law applies to all PPP processes, although the respective agreements have already been concluded.

Excluded from the scope of this Law:

  • PPPs that cumulatively involve a gross burden on the public sector over the duration of the Partnership and an investment lower than the amounts set by the Executive for the purpose of evaluating Partnership projects;
  • All other agreements compatible with the legal regime established in this Law, with a term of 3 years or less;
  • Concessions that have been assigned by law specify, by the State, entities of public nature or exclusively public capital.

PPP is understood to mean:

  • The relationship established by an agreement or the union of agreement whereby legal entities or private entities, designated by Private Partners, are permanently obliged to a Public Partner, by means of counterpart, to ensure the development of a tending activity to the satisfaction of a collective need in which the Private Partner assumes, in whole or in part, responsibility for the financing, investment, exploitation and associated risks;
  • The incorporation of a specific purpose company whose shareholdings are held by the Public Partner and the Private Partner for the implementation of a joint project or for the provision of a public service with a view to meeting a collective need.

The following agreements are compatible with the PPP scheme:

  • Concession of public works;
  • Concession of public service exploration;
  • Acquisition of services;
  • Management;
  • Other public contracts that are or will be part of the legal system and that are compatible with the Legal Regime of PPP.

Whenever the PPP entails the incorporation of a specific entity, owned or controlled by the Partners, the special purpose company that involves the shareholder participation of the Public Partner and the Private Partner must be incorporate. This company is responsible for implementing and managing the object of the PPP, without prejudice to the coexistence of contractual relations and agreements that structure the distribution of responsibilities and risks among the Partners. The form and amounts of the participation in the company will result from the negotiation with the Private Partner.

In terms of allocation of responsibilities, the following applies:

  • The Public Partner is responsible for monitoring, evaluating and controling the implementation of the object of the Partnership in order to ensure that the underlying public interest objectives are achieved;
  • The Private Partner is responsible for the financing, in whole or in part, as well as the exercise and management of the contracted activity, in cases in which there is no immediate transfer to the Public Partner of the built infrastructure.

The agreements must include a risk matrix, which includes the summary description that allows the clear identification of the typology of risks assumed by each of the Partners. The risks allocated to the Private Partner are exemplary in nature and the risks allocated to the Public Partner are of a restrictive nature, so that all risks not allocated to the Public Partner are interpreted as allocated to the Private Partner.

The choice of procedure for the formation of the PPP agreement must comply with the regime established in the Public Contracts Law.

The procedure for forming a PPP agreement is conducted by a jury, appointed by the competent body to decide on the hiring.

The procedure for setting up the PPP may be terminated at any time without entitlement to any compensation where, according to the assessment of the objectives to be pursued, the results of the analyzes and evaluations carried out or the results of the negotiations with competitors don`t, in satisfactory terms, to the purposes of public interest underlying the constitution of the PPP, including their estimated global charges.

A negotiating committee should be set up when, during the performance of the PPP, facts are invoked that could justify a contractual change, namely a benefit sharing or its full attribution to the Public Partner, restoring the financial equilibrium or renegotiating the agreement.

Conflicts emerging from relations established under these agreements are solved through alternative methods of conflict resolution, including negotiation, mediation, conciliation and arbitration, in accordance with the law.

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