Public private partnership

Public-private partnership (PPP) is one of the ways to develop public infrastructure based on long-term interaction between the state and business in which the private party is involved not only in the design, financing, construction or reconstruction of the infrastructure, but also in its subsequent operation (provision of services at the created facility) and (or) maintenance.

In the ranking of the regions of the Russian Federation in terms of the level of development of public-private partnerships for 2019, formed by the Ministry of Economic Development of Russia, the Kaliningrad region took 24th place among 85 subjects improving its position by 13 points compared to the previous year, and the second in the North-West Federal District.

For comparison in 2013 the region was at 62d place in the all-Russian rating. The PPP development level indicatorcalculated when compiling the rating by the Ministry of economic development of Russia together with the National Center for PPPs and independent expert organizations is also an integral part of the National Rating of the Investment climate in the subjects of the Russian Federation formed by the Agency for strategic initiatives. In recent years the region has risen substantially in this ranking.

 

The purpose of PPPs from an economic point of view is to stimulate the attraction of private investment in the production of services, work and consumer goodswhich must be provided by public law entities at the expense of the respective budgets as well as to reduce the state's participation in economic turnover when the same tasks can be more effective executed by business.

 

From a legal point of view we are talking about the relationship between public law entities (the Russian Federation, subject of the Russian Federation, municipal unity) and private individuals. These relations are built on an agreement on public-private partnership (PPP) or a concession agreement (COP)concluded between them and are by their legal nature civil law contracts.

The normative definition of public-private partnerships, municipal-private partnerships is contained in Federal Law of July 13, 2015 No. 224-ФЗ “On Public-Private Partnerships, Municipal-Private Partnerships in the Russian Federation and Amendments to Certain Legislative Acts of the Russian Federation” (Art. 3): it is a partnership of a public partner, on the one hand, and a private partner, on the other hand, based on a public-private partnership agreement, a municipal-private partnership agreement concluded in In accordance with this Federal Law, in order to attract private investment into the economy, to ensure the availability of access to goods, work, services and improving their quality.

The PPP and the COPare independent legal institutions, the consideration, conclusion and implementation of which are regulated by separate federal laws. At the same time, the Constitutional Court is one of the forms (models) of PPP.

The basis for the conclusion of the PPP or the COP is always the decision of the authorized public body representing the interests of public law education on the implementation of a certainproject.

The method of concluding PPP or the COS is tendering in the form of a tender for the right to enter into an agreement. Also federal laws separately indicate cases whereconclusion of an agreement is possible without a tender. PPP mechanism is a popular and rapidly developing forminteraction between private investors and the state because it involves a complete sharing of risks between them.

The main PPP models:
1. Concession modelproviding for the right of state (municipal) ownership of the object of the agreement (in accordance with the Federal Law of July 21, 2005 No. 115-ФЗ “On Concession Agreements” (hereinafter - the Law on the Constitutional Court).
2. The PPP modelin which the object of the agreement will be privately owned, subject to the requirements stipulated by the Federal Law of July 13, 2015 No. 224-ФЗ On Public-Private Partnerships, Municipal-Private Partnerships in the Russian Federation and amendments to certain legislative acts of the Russian Federation ”(hereinafter - the Law on PPP).

COP Law and PPP Law. Key differences.
  • According to the COS the concessionaire is obligated at its own expense to create and (or) reconstruct the property defined by this agreement, the property right to which belongs or will belong to the concessor, as well as to carry out activities using (operating) this property, which is provided to him for this purpose in possession and use for a period specified by agreement.

  • In 2015, law was adopted on the PPP which allowed the use of new, effective and balanced PPP models in Russian practice. Key element of its legal regulation is the settlement of the PPP.

  • Novel provided by the Law of PPP is the possibility of private ownership directed to public infrastructure. In this case, the investor is obliged to provide full or partial financing for the creation of such infrastructure and the operation of the facility in accordance with its intended purpose which is recorded as an encumbrance of the facility.

  • In the interests of investors, the Law of PPP and the Law on the COS provides a mechanism to guarantee the invariability of the main parameters on the basis of which a decision was made on the implementation of the project. In case of changes in macroeconomic conditions or legislation directly affecting the project (taxes, benefits, etc.) reasonable changes are made to the agreement in terms of the amount of co-financing by the public side of the project and the timing of its implementation.

Key differences
COP
PPP
Property rights
always retained by the public party (grantor)
arises from a private partner
Operation
always assigned to the concessionaire
may be assigned to a public partner