Law 17,520 is subject to several amendments, which include the following:

1. Forms of concession and sole purpose vehicles

The National Executive Power may, acting as grantor, award public works, infrastructure concessions and public services for a fixed or variable term to private companies, acting as concessionaires, for the construction, maintenance or operation of public works, infrastructure or public services by charging of fees, tolls, or other payment conditions.

Special purpose vehicles incorporated solely for the purpose of holding the concession is enabled.

2. Private initiatives

Private initiatives are admissible and shall be analyzed by the enforcement authority. In all cases the financing must be private.

3. Requirements of the bidding process and terms of the concession agreement

Material terms of the concession agreement (e.g., term, payment, allocation of responsibilities) shall be clearly defined in the relevant bidding process, which shall also include:

  1. The terms applicable to each party’s obligations, and the consequences which may arise upon either party falling out of compliance with its obligations.
  2. The terms of payment, as well as the procedures for revising the contract price to preserve its financial balance.
  3. The features to adapt the execution forms to technological advances, financing needs and requirements that may arise during its term.
  4. The power of the national public administration to unilaterally establish variations to the contract only with respect to the execution of the project up to a maximum limit of twenty percent (20%) of the total value of the contract, preserving its financial balance.
  5. The grounds for termination of the contract due to fulfillment of the object, term-expiration, mutual agreement, default of either party, reasons of public interest or other causes, indicating the applicable procedure, the compensation corresponding to cases of early termination, its scope, method of determination and payment.
  6. The right to transfer the contract to a third party if such party meets similar requirements as the transferor and that, at least twenty percent (20%) of the original term of the contract or of the committed investment has passed, whichever occurs earlier. The authority of control must issue a legal opinion prior to authorization by the contracting authority.

Prior to any assignment, the consent of the financiers and guarantors must be obtained, as well as the authorization of the concession grantor.

4. Works financing

The Foundations Law includes certain provisions regarding financing of works to enhance the likelihood of third-party financing, including the following:

In case of economic imbalance in the contract due to causes not attributable to its parties, both parties shall be entitled to renegotiate the contract to re-balance it, or otherwise agree on its termination by mutual consent.

At the time of making its offers, bidders shall indicate the economic-financial equation, explaining the Current Net Value and/or the Internal Rate of Return (IRR).

In the event of force majeure or acts by the Government that cause an alteration of such equation, the term of the concession may be extended. Likewise, in the event of force majeure, the grantor must guarantee the minimum income that may be agreed in the contract.

5. Termination

In the event of termination of the concession contract by the grantor for convenience, limitation of liability laws (e.g., State liability law) shall not be applicable.

The grantor’s decision to terminate the contract by convenience must be duly founded, indicating:

    1. the impartial technical reports that justify the termination of the contract;
    2. the causes and the reasons that support a different evaluation of the public interest;
    3. the submission of the determination of the scope of the concessionaire’s compensation to the consideration of the technical panel and/or the arbitration tribunal acting within the framework of the contract, in those cases in which the concession contract does not contemplate formulas or other mechanisms for its determination; and
    4. the term of payment of the compensation.

6. Dispute settlement mechanisms

All concession contracts must consider as dispute prevention and settlement mechanisms resolution, conciliation, and arbitration mechanisms to resolve technical or economic disputes between the parties. If matters are not settled through these mechanisms, they may also submit them to a Technical Panel or solve them through Arbitration.

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For additional information, please contact Nicolás Eliaschev and/or Javier Constanzó.