On Friday, 1 December 2017, the newly adopted Concessions Act was published in the Bulgarian State Gazette. The law will enter into force on 1 January 2018. Only a few provisions require additional effort in order to be fully implemented and will enter into force later – in December 2018 and January 2019.
The new Concessions Act implements the provisions of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts. It further introduces certain improvements to the priory existing national concessions regulation.
The Concessions Act significantly reforms the regulation of the concession's economic balance and duration.
The economic balance of the concession is defined as the balance between the benefits of the concessionaire, respectively the benefits of the concession grantor and the risks assumed by them. The economic balance of the concession shall be preserved for the whole duration of the contract. The law allows different options for determining the incomes from the concession. Incomes can be based on payments from consumers, on payments from the concession grantor or on a combination between payments from consumers and payments from the concession grantor. In certain cases it is also possible the concessionaire to owe payments to the concession grantor.
With respect to the duration of concession contracts, the new requirement is that the term shall not be longer than the time, necessary for the concessionaire to achieve the estimated rate of return on investment. The term of the contract is predefined. The initial term can be up to 35 years for works / 25 years for services. Extensions up to one third of the initial term are available.
Another innovation, introduced by the said law, is the possibility the public and private partners to create a special purpose company for the concession. In this case, the winner of the concession tender (the private partner) and the concession grantor (the public partner) establish a joint venture. The concession contract is awarded to such joint venture. The public partner has a veto right by virtue of law on major questions, regardless of its share in the joint venture.
The new Concessions Act contains detailed rules on the competitive procedures for awarding concessions, signing and performing of concession contracts and their early termination - questions, which under the previous law were regulated by either the secondary legislative acts or the tender documentations.
Three types of concessions are regulated by the new law, depending on the subject of the concession agreement:
- a concession for works;
- a concession for services; and
- a concession for use of public State / municipal property.
Additionally, a concession can be a State concession or a municipal one, depending on who grants the concession – whether it is a centralised Bulgarian authority or a municipality.
The Concessions Act contains lists of works and services which can be awarded under concessions, as well as services, for which the law does not apply. From December 2018 onwards there will be a national and municipal plans for concessions. Concessions will be granted only if included in, and based on, such plans.
The Bulgarian Government trusts that the new modernised and improved regulation of concessions will boost foreign investments in sectors, which are vital for the economy, like infrastructure, energy, transport and logistics.
