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The Warsaw Voice » Law » April 29, 2009
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Pinning Hopes on PPP
April 29, 2009   
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Michał Kubicz, a legal counselor at the Gide Loyrette Nouel law firm, talks to Beata Gołębiewska about the legal aspects of new the act on public-private partnership (PPP).

The market’s hopes linked to PPP have revived again. Do you share this optimism?
In the current situation it’s not hard to be optimistic. As a reminder: the 2006 act on public-private partnership was in force for almost two-and-a-half years and was the subject of dozens of specialist conferences, commentaries and press articles; generally speaking, people pinned great hopes on it. Lawyers from our firm warned back in 2006, even before the act came into force, that its regulations created more problems than solutions and would not be an incentive for the development of inter-sector cooperation. Looking back, we can only say regretfully that the arguments we put forward at the time turned out to be accurate.

The regulations in place so far evidenced a general suspicion toward anything where the public and private spheres meet. The act of 2006 was designed in such a way that it discouraged even rich public entities and large international investors from cooperating.

The new act on public-private partnership that came into force Feb. 27, 2009, seems to take into account the suggestions offered by both the public sector and private entities. Will the hopes linked to it be fulfilled? Remembering that no major public-private partnership project was carried out under the previous act, it’s easy to ensure that the new regulations double, triple or even quintuple the number of PPP projects. However, this cannot really be termed a success.

It’ll take time before we see the effects of the new act on PPP. For now, potentially interested parties are still familiarizing themselves with the new regulations and analyzing the legal advantages they may offer. I don’t think any significant number of PPP projects will appear over the next few months, not even in an initial stage.

What conditions does an entrepreneur have to meet to enter into a PPP project?
The terms of taking part in a PPP project are not regulated by the act. This form of cooperation is open both to large multinational market players and to small entities. Of course, certain restrictions may stem from the nature of a given project and the conditions specified individually by public entities. Such restrictions, though, have to be objective and justified. The regulations on the procedure for selecting a private partner (the law on public orders and the act on licenses for construction work or services) contain the principle of equality, honest competition and non-discrimination.

What legal steps does an entity have to take to join a PPP project?
The regulations are very flexible. They enable an investor to join a project as a private partner, but also as a company formed by an investor for a specific project. Another option is a partnership implemented by a company with mixed capital—from a public entity and a private partner.

How does PPP differ from a standard tender?
The act on PPP provides a framework. Its regulations have the general objective of enabling many different kinds of public-private partnership projects to be carried out under this law. That’s why these regulations have been reduced to the essential minimum.

We need to remember, though, that public-private partnership and “standard” tenders held under the law on public orders have many things in common. Generally speaking, the formula of a “standard” tender is generally applied to orders for deliveries, construction work or services under the following model: the public entity pays while the contractor provides/completes the service/construction/delivery. Public-private partnership usually involves a much more complicated legal and economic relationship—complex investment duties and duties related to remunerating the private partner. As a result of this complexity, the way in which a private partner is selected is regulated by two separate acts: the law on public orders and the law on licenses for construction work or services. Which of them is applied in a given situation depends on the chosen model of relationship between the public entity and the private partner.

Can the PPP formula be applied to projects that make use of European Union funds?
The regulations amending the act on PPP contain a provision that says explicitly that projects carried out under operational programs developed on the basis of the act on the principles of implementing development policy may assume the form of a public-private partnership. We need to remember, however, that certain limitations may stem from the terms of financing specific projects from European Union funds.
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