05 Ene 24 Bill of Law: Modifications to the Public Works Concession

Agustín Cerolini, Matías Ferrari, Natalia Artmann and Dana König

On December 27, 2023 the Bill for Bases and Starting Points for the Freedom of Argentines (the “Bill”) was introduced to the Argentine National Congress by the Executive Power (the “PEN” for its acronym in Spanish). Among the issues set out, the Bill proposes a series of amendments to the Public Works Concession Law No. 17,520 (the «CCCN» for its acronym in Spanish).

In this regard, the main amendments introduced by the Bill are detailed below.

First, the PEN broadens the scope and purpose of concessions and their remuneration by establishing that, if the Bill is approved, public works and infrastructure concessions may be granted for the construction, maintenance or operation of public infrastructure and the remuneration of the concessionaire may consist of tariffs, tolls or other remuneration.

Likewise, the Project establishes that concessionaires may only be private companies. Consequently, the terms and conditions of the contract may contemplate the constitution of a special purpose company, trusts, other types of vehicles, or associative schemes, which will be in charge of the execution of the concession contract until its full termination. Concessions will only be granted through public bidding.

In turn, the Bill provides that concessions may be for a fixed or variable term. In any event, the Bill clarifies that variable term concessions will have the purpose of mitigating the demand risk due to the impossibility of predicting the volume of traffic and avoiding the need for permanent renegotiation of contracts.

On the other hand, according to what is indicated in the Bill, the financing of the concessionaire may be guaranteed by payment obligations assumed by the Public Administration, through: (i) the specific allocation and/or transfer of tax resources, goods, funds and any kind of credits and/or public revenues with the authorization of the National Congress; or (ii) the creation of trusts and/or the use of existing ones.

Likewise, the financing of concessions may consist of: (i) the granting of bonds, guarantees, by entities of recognized solvency in the national and international market and/or the constitution of any other instrument that fulfils the function of a guarantee, provided that it is admitted by the current legislation; or (ii) guarantees on the rights of exploitation of public or private property granted to the contractor to guarantee the repayment of the financing necessary to carry out the projects that are carried out within the framework of the Law.

Additionally, the Bill mentions that, during the entire term of public works concession contracts, the Public Administration must guarantee the intangibility of the economic-financial equation taken into account at the time of its execution. In this sense, it agreed the power of both parties to renegotiate the contract in situations of distortion of the economic-financial equation for reasons not attributable thereto.

Likewise, the bidding and contractual documentation must include mechanisms to restore the contractual balance in the event of a significant breakdown of the economic-financial equation. This will be done through the readjustment of the tariffs, the modification of the concession term and, in general, by means of any modification of the economic clauses included in the contract.

In any case, it is important to note that the Public Administration may unilaterally modify the contract only with regard to the execution of the project, and up to a maximum limit, more or less, of 20% of the total value of the contract.

Finally, the Bill indicates that all contracts must provide for dispute prevention and resolution mechanisms, conciliation, mediation and arbitration. However, discrepancies of a technical or economic nature that may arise between the parties during the execution of the concession contract that have not been resolved in the light of these mechanisms may be submitted to a Technical Panel or Arbitration Tribunal at the request of any of the parties.