BESCO Position Paper on the Draft Public-Private Partnership Act

BESCO Position Paper on the Draft Public-Private Partnership Act

To
THE MINISTRY OF ECONOMY, INVESTMENT AND INDUSTRY
Attention: Mr. Alexander Pulev
Minister of Economy, Investment and Industry

from
The Association "BULGARIAN ENTREPRENEURSHIP ASSOCIATION", UIC 177239971, represented by its Executive Director Alexander Nutsov

Re: Position on the Draft Public-Private Partnership Act, consultation no. 12666-K

DEAR MR. PULEV,
LADIES AND GENTLEMEN,

On behalf of the Association "BULGARIAN ENTREPRENEURSHIP ASSOCIATION" (BESCO), which brings together more than 1,000 companies, we submit this position on the draft Public-Private Partnership Act, published for public consultation under consultation no. 12666-K.

We support the aim of attracting private investment and expertise to projects of public interest. However, we believe the draft law needs to be rethought as a whole and substantially reworked. The problems we have identified concern the core elements of the regime: its scope, the award procedures, the protection of public resources and the security of investments. They cannot be resolved through isolated editorial corrections or through future secondary legislation. Our considerations are set out below.

1. Unclear distinction between the proposed regime and public procurement and concessions

The draft law excludes public procurement and concessions from its scope, but does not establish a sufficiently clear criterion for which legal relationships remain to be awarded under the proposed new procedure. "Public-private partnership" is not a classification that in itself excludes the application of public procurement and concessions, because by their very nature they are public-private partnerships. Article 1(1), Article 7(1) and Article 8(1) of the current Concessions Act (CA) expressly regulate construction and service concessions as forms of public-private partnership. The distinction between a concession and a public contract rests on the actual content of the contract. In a concession, the private operator is granted a right of operation and the operating risk is transferred to it, whereas the award of construction or services to an economic operator without a transfer of operating risk must follow the procedure of the Public Procurement Act (PPA), by inference from Article 3(1) and (2) of the CA.

Under Article 4(2) of the draft, a PPP exists where three conditions are met cumulatively: the project falls within the competence of the public partner, the private partner assumes the operating risk in carrying out the project, and the financing is provided wholly or partly by the private partner. The last two conditions, assumption of operating risk and private financing, are the essential, defining features of a concession under both Bulgarian and EU law. The draft contains no countervailing, negative criterion to show when these conditions lead to a concession and when to a PPP under the new law. The only boundary is purely formal and is found in the exclusionary provision of Article 1(4), item 1, rather than in the objective characteristics of the project.

This gap is deepened by the way the law regulates the proceedings for determining the applicable regime. Under Article 16(3) of the draft, when submitting the application the public partner merely declares that the project will not be carried out under the PPA or the CA. There is no provision for a counter-check, independent of that declaration, of its accuracy against the objective characteristics of the project, nor are there criteria or rules by which the Unit under Article 8 or the Council under Article 7 could identify a discrepancy between the declared and the actual content of the project. The only safeguard is found in Article 24, and only for the case where the proceedings were initiated by a private partner under Article 13(2), not where the initiative comes from the public partner itself, which is also the party submitting the declaration under Article 16(3). In this way, the decision on which regime applies is placed largely in the hands of the body whose interest may well be to choose the route with fewer procedural safeguards.

The practical consequence of the lack of a clear, objective distinguishing criterion is that the same project of public interest, for example the construction and operation of an infrastructure facility in return for assuming demand risk and payment by users or from the budget, could be structured and submitted under either the CA or the proposed law, depending solely on the will of the submitting party and the content of its application, rather than on the objective legal nature of the relationship. This creates parallel regimes under two laws with different degrees of procedural strictness, different publicity requirements, different supervisory bodies and different limitation periods and appealable acts. It is also unclear how a competence dispute would be resolved if it were later established that a project awarded under this law should have been awarded under the CA.

The existence of parallel, interchangeable legal bases for a relationship that is economically the same is a classic source of heightened corruption risk. It gives the contracting authority discretion to choose the regulatory regime not on the basis of the objective characteristics of the project but on grounds of expediency, including to circumvent the stricter procedural and control requirements of the CA. These include the obligation to publish a notice in the Official Journal of the EU above the threshold under Article 8 of Directive 2014/23/EU, and the specialized oversight under the CA. The possibility of choosing between two regimes for economically identical relationships is precisely the situation in which objective, predictable legislation is replaced by administrative discretion. Discretion without clear criteria that can be reviewed in court is in itself a risk factor for corrupt practices, regardless of whether abuse actually occurs in a particular case.

2. The institutional framework provided for in the draft law

The draft introduces two new administrative structures responsible for assessment, coordination and oversight of PPP projects. The first is an Interdepartmental Council for Public-Private Partnerships to the Council of Ministers, chaired by the Deputy Prime Minister and Minister of Economy, Investment and Industry, with the ministers of nine other bodies as members (Article 7). The second is a Specialized Unit for Public-Private Partnerships to the Ministry of Economy, Investment and Industry, with representatives of eleven institutions, including several ministries, the Bulgarian Investment Agency, the Public Procurement Agency and the National Association of Municipalities (Article 8). These bodies are tasked with assessing the expediency and financial sustainability of projects, analyzing risk allocation, state aid and national security, and coordinating between state bodies in the preparation and implementation of projects (Article 8(2) and Article 12).

The current Concessions Act already has an established institutional and oversight apparatus for functionally similar tasks. It includes a specialized oversight body with functions expressly assigned by law in the area of concession oversight, a national register for the publicity of concession projects and contracts, and subsequent external audit by the Court of Audit. To the extent that the definition of PPP in Article 4(2) of the draft, built on the criterion of transferring operating risk to the private partner, substantially overlaps with the substantive elements of a concession, it is reasonable to ask whether the newly created Council and Unit would carry out analysis and oversight of the same subject matter as the bodies that already exist under the CA, but applied to contracts whose actual legal nature may not differ materially from that of a concession. Furthermore, the draft itself contains no justification for why the review, risk analysis and approval of PPP projects require a new advisory and oversight apparatus with the participation of such a wide range of bodies, rather than assigning the relevant functions to an existing structure with established experience in similar proceedings.

It is also telling that the current Concessions Act of 2018 expressly repealed the former separate Public-Private Partnership Act, precisely in order to unify the regime and the institutional framework for projects involving a transfer of operating risk. Creating a new, parallel law reproduces the division that the latest reform of the concession regime was meant to eliminate, and the draft itself contains no justification for returning to the previous model.

The practical consequence is a risk of fragmenting administrative capacity between two parallel structures tasked with analyses of a similar nature, and a risk of contradictory assessments of projects with a borderline legal qualification (concession/PPP). This in turn means delay and higher costs in project preparation, in direct contradiction with the stated objective in Article 2, item 2 of the draft of efficient use of public resources.

3. Risk of delay for projects awarded under the Public Procurement Act and the Concessions Act

The proposed law may also affect projects that public bodies intend to award under the PPA or the CA. Article 20, item 2 provides that the Council must refuse to designate a project for implementation under the new law where it will be carried out under the PPA or the CA. At the same time, Article 77 provides for significant fines for concluding a contract for a "project of public interest" in violation of the law, and "project of public interest" is defined quite broadly in § 1, item 1 of the Additional Provisions. This creates legal uncertainty for officials when choosing the applicable procedure.

The draft does not establish a general obligation for the contracting authority to first obtain a decision of the Council in order to apply the PPA or the CA. That distinction is significant. Nevertheless, a practical effect is foreseeable: where a large-scale project also has features of a public-private partnership, the public body may prefer to refer it to the Council in advance and await an express refusal under Article 20, item 2, rather than take on the risk that its own assessment of the applicable law will later be challenged. In this way, a procedure that the draft does not declare a mandatory prerequisite for awarding under the PPA or the CA may in practice become an additional stage before it.

Such prior referral would delay the opening of the procedure under the applicable law. Before the Council rules, the project goes through review by the specialized unit, for which Article 8(4) provides a period of up to 60 days. If, after a refusal, the project must be prepared and awarded under the PPA or the CA, the time is extended further. The new law could thus lengthen the preparation even of projects that will ultimately not be carried out under its procedure.

For large investment projects, the predictability of the start and duration of the award process has independent importance. Prolonged uncertainty about the applicable procedure makes it harder to plan financing and to commit project teams, and makes participation less attractive to investors. The risk is therefore not limited to administrative delay: the proposed regulation may also weaken interest in significant projects that should be carried out under the existing PPA and CA regimes.

4. Unjustified need for a new, standalone regime for awarding public-private partnerships

The draft proceeds from the assumption that creating a new procedure for public-private partnership will facilitate the implementation of large projects and attract private capital. Before accepting that conclusion, it should be established why the existing possibilities are not being used sufficiently. The Concessions Act already regulates public-private partnership for construction and services with a transfer of operating risk, including mechanisms for long-term performance, risk allocation and payments by the grantor. The limited number of projects implemented therefore does not in itself prove the absence of a legal instrument.

For large-scale projects, what matters most is lasting public commitment, consistent planning and the administration's ability to prepare an economically, technically and legally sound procedure. Frequent changes in governance priorities and insufficient administrative capacity can prevent a concession from starting regardless of the quality of the legislation. An assessment of data on projects prepared, terminated and not awarded is needed to investigate the possible causes, and it cannot be replaced by the presumption that adopting a new law will lead to more investment.

The new regime will also require the public partner to prepare preliminary assessments, a financial model and documentation, to secure inter-agency coordination and to conduct a selection procedure. If it is precisely the preparation and maintenance of a long-term project policy that are the weak points, changing the legal basis for awarding does not remove them. On the contrary, the administration will have to build up practice under yet another regime, in parallel with the Concessions Act and the Public Procurement Act.

For these reasons, the rationale and impact assessment of the draft are incomplete. It is not enough to state the expectation of a better investment environment without analyzing and presenting which specific projects cannot be carried out under the existing regimes and how the new law removes that obstacle. Without such an analysis, there is a risk of creating an additional regulatory regime while the causes of the insufficient number of prepared and awarded projects remain unaddressed.

5. Lack of statutory conditions and criteria for selecting a private partner

Chapter Four of the draft regulates the selection of a private partner mainly through general principles. Article 25 proclaims equal treatment, competition, proportionality and transparency, and Article 26 provides for a decision to open the procedure, documentation and publication of a notice on the public partner's website. However, the law does not define the basic conditions for the eligibility of candidates, the grounds for exclusion, the stages of the procedure or the documents to be submitted. Nor does it outline a statutory framework for the criteria by which eligible tenders will be compared. Instead, Article 23(2) and Article 28 leave it to implementing regulations to determine the types of procedures and the conditions and rules for conducting them.

These are matters that determine economic operators' real access to the project and the limits of the public partner's discretion. The general requirement of equal treatment does not answer when a candidate may be excluded, how the required capacity is demonstrated, or on the basis of what indicators one tender is chosen over another. Without a statutory framework, the secondary act would have to create a substantial part of the award regime itself, rather than elaborate on rules already established in the law.

The distinction also matters from the standpoint of the hierarchy of legal acts. Implementing regulations serve to apply the law and should not replace the legislator in regulating the essential elements of a new legal regime. The Constitutional Court holds that the law itself must outline the basic content of the regulated relationships, while the executive may be entrusted with elaborating them. In this case, it is precisely the rules that decide who may participate and how the private partner is determined that remain outside the law.

For potential private partners, this creates legal uncertainty, because at the time the law is adopted they will not be able to foresee the basic requirements and conditions for participation. The lack of statutory limits also increases the risk that different public partners will apply substantially different requirements to similar projects.

By comparison, the Concessions Act and the Public Procurement Act regulate the conditions for participation, the grounds for exclusion, and the order and conditions for conducting the procedures, which is the correct regulatory approach.

6. Incomplete regulation of property relations between the partners

The draft permits different forms of participation in the project, but does not build a consistent regime for rights over the property through which the project will be carried out. It provides for a legal analysis of ownership during project preparation, contractual regulation of the exercise of rights over assets (Article 31), their transfer upon termination (Article 33) and the possibility of non-cash contributions to a joint venture (Articles 45–49). These provisions address separate stages of the project but give no clear answer as to who acquires ownership of the assets provided and of the newly created assets.

For contractual PPPs, it is not clarified what it means for the public partner to "provide" a property or other asset: mere factual use, a limited right in rem, or a transfer of ownership. Nor is it determined what effect in rem arises when the private partner finances construction on public property. Financing alone does not make it the owner of what is built. Under the general rule of Article 92 of the Property Act, the owner of the land is also the owner of the buildings on it, unless otherwise established. The distinction between ownership, a right to build and a contractual right of use is therefore decisive both for the return on the investment and for whether the project can be financed at all.

For PPP enterprises, Article 47 expressly allows the state and municipalities to participate with non-cash contributions. However, the draft does not distinguish between properties that are public state or municipal property and those that are private state or municipal property. The distinction is essential: public property is subject to restrictions on disposal and cannot be treated as an ordinary asset to be contributed in kind. The prohibition in Article 49 on the PPP enterprise subsequently selling or encumbering the contributed properties does not resolve whether a property can be contributed to its capital at all, since a non-cash contribution presupposes that the company acquires the corresponding right.

There is also uncertainty about the outcome of this participation. Article 33 provides for the transfer of assets and rights to the public partner upon termination of the contract, while Article 52 gives the public partner a pre-emption right to acquire real estate at market price upon termination of the PPP enterprise. Handing over possession, transferring ownership and buying out a company's property are different legal consequences. The draft does not clarify how they relate to one another, including where the property was originally contributed by the public partner.

The form of the private contribution is also insufficiently clarified. Article 4(2), item 3 requires the private partner to provide the project's financing wholly or partly, but this does not tell us whether it may also provide its own real estate, equipment or rights in rem, or what their regime will be during the project and upon its termination. In addition, the participation of the two partners as shareholders in a PPP enterprise does not make them co-owners of the company's property. Co-ownership between them of a specific property is a separate property-law scenario, whose admissibility depends on the status of the property and the manner of acquisition, and the draft does not expressly regulate it.

These are not matters that can be left entirely to the individual contract. Ownership of the facility, rights over new construction and the fate of contributed assets determine the value and legal risk of the investment throughout the term of the PPP. The absence of a clear statutory framework for them creates uncertainty at once for the protection of public property, for the private investor and for the financing institutions.

7. Unclear conditions and consequences when the economic balance is disrupted

Article 36(1) of the draft obliges the parties to agree on restoring the initial economic balance only when unforeseen circumstances beyond their control disrupt it materially. The materiality requirement itself is justified: not every deviation from financial forecasts should be passed on to the other party. The problem is that the draft gives no criterion for when a deviation crosses that threshold. The definition in § 1, item 3 describes the elements of the economic balance but does not clarify whether materiality is assessed against the total value of the project, the private partner's return, public payments or the cumulative effect of several circumstances.

This uncertainty affects both parties. The private partner may bear a significant cost increase that the public partner refuses to recognize as material. Conversely, the public partner may claim that a later development has improved the private partner's position at its expense, without the private partner accepting that the balance has been disrupted. In long-term contracts, individual changes may seem insignificant in themselves, but their accumulation may materially alter the originally agreed allocation of benefits and burdens. The draft does not clarify how this cumulative effect is taken into account.

Even if the parties accept that a material disruption exists, the wording "are obliged to negotiate" does not resolve a dispute over how the balance is to be restored. Article 36(2) requires a reasoned proposal and a new comprehensive analysis, but does not specify what follows if the other party contests the analysis, the proposed change or the very existence of grounds for negotiation. An obligation to seek agreement cannot in practice guarantee that agreement will be reached. In the meantime, the contract continues to be performed with a disputed allocation of the financial burden.

The uncertainty is deepened by the relationship between Article 36 and the other rules on amendment and termination. Article 34(2), item 4 prohibits amendments to the contract that change the economic balance, while Article 36 allows changes to the term, activities and financing precisely in order to restore it. The two provisions could be read together as a prohibition on changing the originally agreed balance, but the text does not make this distinction clear.

As drafted, the mechanism does not provide a predictable outcome precisely when the parties have opposing interests in recognizing the disruption as material. The risk is that the financial burden remains with the party currently bearing it, or that the dispute leads to termination of the project instead of preserving its economic sustainability.

8. Contradiction between the minimum contract term and the possibility of reducing it

Article 29(1) provides that a PPP contract has a term of no less than 10 years. At the same time, Article 36(6) allows the term to be reduced by up to one third of the originally agreed term when the economic balance is restored. For a 12-year contract, this would mean a reduction to 8 years, and for a 10-year contract, to 6 years and 8 months. The draft does not state whether the minimum term under Article 29 continues to apply after the amendment. Thus one provision establishes a statutory minimum, while a literal application of the other allows it to be breached.

The duration of the contract is an essential element of the financial model. On its basis, the private partner determines the size and schedule of the investment, the expected revenues and the terms for servicing the financing raised. A ten-year minimum does not guarantee recovery of the funds invested, but it gives a statutory limit that the investor can take into account when deciding whether to participate. If it later turns out to be permissible for the contract to end before that term, predictability decreases from the standpoint of either partner, and the law thereby creates conditions for legal uncertainty.

A reduction cannot be imposed unilaterally. Under Article 36(7), the amendment is made by an additional agreement. However, this does not remove the uncertainty about the permissible final term when the parties negotiate the restoration of the balance. Article 38(2) is also relevant: it provides that upon expiry of the term the public partner owes no equalizing payments to reach the set rate of return. If the agreed term is shortened and the contract ends upon expiry of the new term, the law offers no independent protection against an unrecovered investment.

The issue is therefore not merely editorial. The relationship between Article 29 and Article 36 determines whether the statutory minimum term is a guarantee in force throughout the life of the contract, or only a condition at the time of its initial conclusion.

9. Inconsistent regulation of financing and creditors' rights

The draft allows different sources of financing and states that projects may be financed wholly or partly "on a project finance basis" (Article 54 and Article 55(1)). However, the term is not legally defined. Article 55(2) links debt servicing to revenues from the operation of the facility, without clarifying whether these include the availability payments from the public partner that the project itself allows. For a financing institution, this is a question about the source from which the loan is expected to be repaid, not merely a matter of terminological imprecision. In the usual structuring of a PPP, the financial model accounts for both revenues from users and payments from the public partner.

Article 54(2) allows financing with the private partner's own funds, and Article 55(1) provides for project finance as an option. At the same time, Article 57(1) provides that the financing of the project company is secured through a combination of equity, subordinated debt and borrowed capital. It is unclear whether this enumeration defines the permissible sources of financing or requires that they be combined. The use of the conjunction "and" allows an interpretation that all three sources must be used simultaneously, including where available equity is sufficient to carry out the project. The provision should be refined so that it allows the listed sources to be used individually or in combination, according to the financial model and the needs of the specific project.

There is also an inconsistency in the very concept of "borrowed capital". § 1, item 6 defines it as external financing from creditors that the project company repays with interest. However, Article 57(3), item 4 lists among its possible sources a grant from European funds or the national budget. A grant is not, in principle, a loan to be repaid with interest. This contradiction should be eliminated.

The protection of financing institutions is also developed mainly around the project company, the use of which, under Article 43, is an option and not an obligation. The direct agreement under Article 59 is also concluded with the project company, the security provided for in Article 60 is created by it, and some of the grounds for step-in under Article 62 are explicitly tied to its default or insolvency. At the same time, Article 62(1) speaks of stepping into the rights of "the private partner (the project company)", as if the two concepts always coincide. The use of a separate project company is usual for large infrastructure projects, but PPP financing can also be structured through direct corporate financing, especially where the cost of a separate structure is disproportionate to the project. The draft permits more than one participation model but does not consistently regulate the financial consequences of each. That is, the provisions should be carefully edited so that they comprehensively cover all the ways in which a PPP may be implemented, and legal terms and concepts should be used carefully and consistently.

10. Unclear consequences and compensation upon early termination of the contract

The draft provides for compensation upon early termination of the contract. Under Article 61(2), the public partner owes it according to the ground for termination, the agreed risk allocation and the residual value of the project. Article 30(2), item 9 leaves the consequences and compensation to be regulated in the contract. This does not provide a sufficiently clear basis for determining the amount that will be due upon termination.

The draft does not define how the "residual value" is determined, whether by unrecovered costs, the value of the assets or future revenues, nor how payments already received, unperformed obligations and costs saved as a result of termination are taken into account.

The ground for termination should be decisive, but the draft does not consistently regulate the different scenarios. Where the public partner defaults, the private investor may lose the chance to recover its investment through the revenues provided for the remaining term. Where the private partner is at fault, the public partner should not bear the same financial burden, including the costs of ensuring continuity of the service. Where termination is without fault on either side, the question is how the risk of the unrecovered investment is allocated. The general reference in Article 61(2) to the ground for termination does not allow the outcome in each of these situations to be assessed in advance. Distinguishing between them is an essential element of the usual structuring of long-term PPP contracts.

Paragraph 3 of Article 61 is particularly unclear. It excludes the application of the compensation rule if termination is due to the private partner's fault and the creditors have declined to exercise their step-in right. The consequence of a culpable default is thus made dependent on the creditors' decision as well. The text gives no clear answer as to what happens when the project has no creditors, or when they have no applicable step-in right. It is also unclear how compensation is determined if the creditors try to exercise this right but the project is nevertheless terminated because of the private partner's default.

The limitation in Article 61(2) that compensation must not include credit obligations that the public partner has not assumed or guaranteed protects public resources from automatically taking over private debt. However, it does not clarify how unpaid financing relates to the project's residual value, or what amount can realistically be paid to the investor and the creditors. The transfer of compensation to pledged accounts provided for in Article 59(3), item 4 regulates the manner of payment, but not how the amount is determined.

After termination, the private partner may be obliged under Article 41 to continue performance for up to six months until the activity is taken over by another party. The draft does not expressly regulate the financial consequences of this continued performance. Taken together, these gaps do not allow the investor and the financing institution to assess, already when participating in the procedure, the amount of the possible loss upon early termination. This directly affects the cost of financing and interest in the project.

11. Unjustified restriction on dispute resolution methods

Article 74 of the draft prohibits the PPP contract from providing for mediation or any other method of out-of-court dispute settlement, which deprives private investors of the possibility of resolving legal disputes more quickly and effectively. We propose that it be expressly provided that out-of-court methods of dispute resolution, including arbitration, are permissible. Excluding the possibility of referring disputes to arbitration would significantly limit financing options, since international and foreign banks may have different rules on the choice of jurisdiction.

12. Inconsistency regarding the grounds for amending the contract term

Article 29(2) of the draft provides that the cases in which the term of the PPP contract may be amended are to be determined in the regulations implementing the law. At the same time, Article 34(1) allows the contract to be amended only on the grounds provided for in the contract itself and in the law. We propose that this contradiction be eliminated by regulating the grounds for amending the contract in the law itself.

13. Inconsistency in the rules on replacing the private partner

The restriction on replacing the private partner under Article 34(3) is not coordinated with the possibilities for substitution under Article 59(3), item 3 and the final transfer of the contract under Article 66. The latter provisions could be interpreted as special exceptions to the general prohibition. However, this remains a matter of interpretation, whereas substitution is an essential part of creditor protection, and all exceptions should be comprehensively regulated in Article 34(3).

14. Incorrect identification of the party creating a pledge over participation in the project company

Article 60, item 2 allows the project company to pledge the shares or interests in its own capital. This does not correspond to the usual structure of rights in a capital company, because the holders of the participation are the shareholders or partners, whose property is separate from that of the company itself.

The company may secure obligations with its own assets and receivables. However, a pledge over participation in its capital requires a declaration of will and proper action by the holders of the relevant rights. Merely naming the company as pledgor does not give it power of representation over its partners, nor does it authorize it to dispose of their rights.

The defect affects the legal structuring of the security and the conditions for drawing down financing. Although the participants can create the necessary pledges in the ordinary way through the actual holders of the rights, the special law creates a wrong impression of who must take part for the security to arise.

15. Risk of deadlock in the PPP enterprise

The blocking quota under Article 50(2) covers decisions of direct importance for the financing and development of the company, regardless of the size of the public participation. Protecting the public interest may justify special rights for the public shareholder. At the same time, exercising them affects the company's ability to meet its obligations. A refusal to increase capital or to approve a transaction necessary for the project to continue may prevent the performance for which the private partner bears contractual responsibility.

The draft does not specifically regulate the consequences of persistent disagreement over such decisions or their relationship to the allocation of risk between the partners. Contractual regulation may be relevant, but it cannot override a blocking right established by law.

This creates a risk that the private partner will bear a significant part of the financial and operational consequences without having the necessary influence over the decisions on which preventing them depends. Such a mismatch between responsibility and the ability to manage risk makes it harder to assess the investment.

16. Administrative penal liability

Article 77(3) of the draft provides for penal liability of the representative who signed the contract on behalf of the private partner, instead of the private partner itself as a legal entity. This construction is incorrect. The model of the CA, which regulates a similar matter, can be adopted by analogy. Under Article 195 of the CA, a sanction is provided for the grantor, the party that exercises public authority and has discretion over the choice of procedure. The sanction is proportionate to the value of the concession (2 percent of the value including VAT, up to a ceiling), including for failure to ensure publication of the notice (paragraph 1) and for concluding a contract with the characteristics of a concession contract without conducting a procedure (paragraph 2). For the concessionaire (the private entity), the law provides no liability for the mere fact of concluding a contract whose regularity depends on a procedure conducted and controlled by the public body.

The logic of this model is clear: administrative penal liability follows the holder of discretion and control over the procedure. When the legislator decides to hold the private party liable as well, consistent application of this logic requires that the addressee of liability be the private partner itself as a legal entity, not its representative. It is the company, not the individual, that holds the economic benefit of the contract and has the financial capacity to bear a sanction commensurate with the scale of the project.

We propose that paragraph 3 be reworked accordingly, given that the draft provides no sanction at all for the private partner.

17. Technical errors

17.1. The cross-reference in Article 19, item 5 is to a non-existent paragraph 3 of Article 9.

17.2. In Article 65, item 2, the final substitution is tied to Article 63, which regulates notice to creditors, not the final transfer of the contract itself.

As is well known, on 9 September 2026 the European Commission adopted a proposal for a new Public Procurement Regulation, which will unify the rules on public procurement and concessions for all Member States. The stated aim is to create a single, simpler European public-private partnership regime. In view of this, and of the statement in the explanatory notes to the draft law that a year will be needed to build administrative capacity for applying the new law if it is adopted, the question arises whether it is advisable to adopt national legislation that will obviously soon be replaced by the new European regulation.

In view of the above, we believe that the draft law should not be submitted to the National Assembly in its proposed form. A complete overhaul is needed, preceded by a thorough assessment of the need for a standalone regime and of its relationship with the existing instruments under the Concessions Act and the Public Procurement Act.

If the approach of a separate law is retained, it should clearly define its scope and regulate at the statutory level the essential conditions for awarding and implementing projects, in compliance with EU law and with predictable safeguards for the public interest and private investment. The revised draft should be subject to a new public consultation.

BESCO remains available to take part in expert discussions and working groups.

Yours sincerely,
Alexander Nutsov
Executive Director