The regime of public-private partnerships in Kosovo is governed by the Law on Public-Private-Partnerships of 2011 (the “PPP Law”). The provisions of the PPP Law generally comply with the EU standards. It is a single act with a clearly defined scope of application and allows for the use of various PPP models, including BOT models.
The PPP Law regulates both non-concession PPP and concession PPPs, which may be in the form of work concessions or services concessions. PPP may be implemented in a contractual or an institutional form and includes non-merchant and merchant activities. The sectors and types of infrastructure and services for which a PPP may be granted includes transport, energy infrastructure, water administration, waste management, telecommunication or education. The PPP Law interrelates with the Law on Public Procurement. It prescribes the subsidiary application of the Public Procurement Law in cases when a procedural (award) matter regarding a PPP is not regulated by the PPP Law. The Public Procurement Law will be exclusively applicable to the award procedure for a public contract under the PFI model.
The PPP Law requires that, in order for the project to be selected, it must comply with the government investment plan or with government priorities, as well with certain prescribed criteria: value-for-money, affordability, financial viability approval and socioeconomic analysis. These are assessed in a prior feasibility study whose purpose is to determine the economic, social, technical, financial and environmental feasibility of the potential project, its ability to attract private financing, and its compliance with sector policies and the legal framework.
Content of Contract
Rights and obligations between the public and private partner regarding PPPs are governed by a PPP project agreement. The PPP Law only prescribes minimum mandatory provisions and the parties are given flexibility in negotiating the terms. This includes the grounds for termination, which are not clearly specified but are left to the parties' agreement. The right to an early termination is established by the PPP Law. Should a termination result in the obligation to compensate, the contracting authority can exercise the termination right only with the prior approval of the Public Private Partnerships Committee. Amendments of the project agreement are limited and depend on exceptional specified circumstances.
Private Party Selection
The private partner is selected in a competitive tender process. The PPP Law sets out clear rules for the procedure, which comprises pre-qualification, proposal, evaluation and final negotiation. The PPP Law also prescribes a division of competences between the public authorities. The Public Private Partnerships Committee, set up at the Ministry of Finance, is a central PPP unit which oversees and coordinates PPP projects, provides leadership and makes recommendations to the Government of Kosovo.
Regarding implementation, there are various model documents and standard forms which may be found on the Ministry of Finance’s webpage.
Securities and Government Support
The implementation of PPP projects is further facilitated by the possibility for a private partner to create security interests over the project’s movable assets, shares in the project vehicle, proceeds or other valuable securities and by the possibility for the public authority to provide financial, budgetary or other support for the proper implementation of the project agreement including providing a guarantee. However, security interests cannot be created over any publicly owned property or other publicly owned assets or rights needed for the provision of a public service or over a public infrastructure.
The PPP Law does not provide for possibilities such as entering into “direct agreements”, “step-in right“ of the contracting authority or a substitution of the private partner by the entities extending financing. Such rights are usually contracted in the project agreement.
The PPP Law does not exclude the application of a foreign law or the possibility of an arbitration clause. The governing law and the mechanisms for the settlement of disputes are stipulated in the project agreement. Also, the government of Kosovo has ratified the Washington Convention on the Settlement of Investment Disputes (ICSID) (1965).
A bond market was established in Kosovo in 2011 and proper functional structures exist to facilitate modern financial transactions. There are several commercial banks present in the PPP market as well as funds facilitating the concession and PPP financing.
There are no significant social or political obstacles to implementing PPPs in Kosovo. The business environment remains positive and the government’s policy is rather open toward private participation in public infrastructure and services, especially toward foreign direct investments.
Kosovo put PPP legislation in place quite recently, but only a limited number of PPP projects have been awarded so far, namely:
• Pristina Airport;
• Rt 7 Motorway Service Areas, Route 7 O&M;
• Peja Urban Bus;
• Suhareka Waste Management;
• Pristina Underground Parking;
• Gjilan School Support Facility;
• Gjilan Urban Bus;
• Pristina Urban Bus;
• Viti Green Market;
• Lipjan City Square;
• Prizren Commercial Centre, and
• Prizren Cemetery.