Lithuania’s PPP legislative framework was updated in the period from 2012 to 2017 and the consolidated versions of the main legislative Act are expected to enter into force in January 2018.
Lithuania has established a well-rounded and highly compliant legislative framework fulfilling the highest international standards.
The Investments Act was amended in June 2017, while the Concession Act was amended in June 2016. Consolidated versions of both acts are expected to enter into force in January 2018. The latest amendments to the Resolution on the public- private partnership (2009) date from November 2015.
Non-concession PPPs are being awarded under the Public Procurement Act as amended in May 2017. The Act on Procurement of Water, Energy, Transport and Postal Services came into effect in July 2017.
Public works concessions as defined in the Concession Act are being awarded pursuant to the Public Procurement Act. Service concessions are being awarded under the tendering procedures set out in Section One of Chapter III of the Concession Act.
The legal framework allows for a large variety of BOT models with much flexibility. Government pay agreements (PFIs) are permitted. The Act on Management, Usage and Disposal of State and Municipal Property of May 1998, as amended, provides for the possibility of institutional PPPs (IPPPs).
PPP can be awarded in any sector, both merchant and non-merchant. Non-concession PPPs must be assessed prior to tendering under the Methodological guidelines for the drafting and implementation of partnership projects, which include VfM defined criteria and the financial sustainability/budgetary study, as approved by the Central Project Management Agency (“CPMA”). Methodological guidelines for the drafting and implementation of partnership projects effectively serve as the set of criteria under which a preliminary economic evaluation/feasibility is performed. Non-concession PPPs are further examined by the Commission for Public Private Partnership. There is a reference in the Resolution on the public-private partnership to the requirement for a prior assessment of the socio-economic impact of the projects.
Private Party Selection
The private party is selected in a competitive tender procedure under a predefined, objective and non-discriminatory set of criteria. Pre-selection or pre-qualification of tenderers is a mandatory phase of the tendering procedure for non-concession PPPs. The tendering procedure may do away with the preselection phase only if the Government (for national concessions), or the municipal council (for local concessions) decides to do so. Competitive dialogue is restricted to specific, limited circumstances prescribed by the Concession Act. The Law provides for a set of rules or principles to be respected when awarding a PPP/concession without a competitive process. A similar transparent competitive procedure for the selection of the private party is applied for IPPPs.
Unsolicited proposals are permitted but there are no clear rules on how these will be handled.
Bidders are allowed to challenge the validity of the contracting authority’s decisions under a clear set of rules. The legal framework allows bidders who claim to have suffered loss or injury to seek a review of the contracting authority’s actions (or failure to act) following a tender process and to seek financial compensation. In general, legal remedies have no suspending effect.
Content of Contract
Provisions of a project agreement can be negotiated unless awarded under the Public Procurement Act, in which case negotiation terms are restricted by the essential terms of the tender and the tender documentation. There is a model Partnership Agreement.
The minimum duration of the project agreement is 3 and the maximum duration is limited to 25 years; renewals are permitted but never beyond the maximum threshold.
The framework permits the contracting authority to enter into a project agreement that is subject to international arbitration. The New York Convention on recognition and enforcement of foreign arbitral awards (1958) has been ratified and is in force.
Securities and Government Support
The Law expressly permits the contracting authority to enter into side agreements to the project agreement (such as a direct agreement with the lenders to the project or a support and guarantee agreement in respect of the project agreement) that are governed by foreign law.
The Investments Act provides for the creation of security interests; however, it is silent on the types of security that can be created. The Concession Act is explicit that a security interest can be created over the property rights, proceeds and payment receivables, other property as well as security created in any other manner provided for by law. Under the model partnership agreement, the assignment of rights under project agreements can be achieved with prior written consent of the contracting authority, but only to an affiliate or subsidiary over which the private party is exercising decisive powers.
In non-concession PPPs, the Investments Act provides the possibility for the state or a public authority to provide support to the contracting authority to ensure the proper performance of its obligations under the project agreement. Government support can also be applied in concession PPPs.
The framework does not provide for, but does not specifically prevent, the public party from entering into a “direct agreement”. “Step-in” is not permitted in non-concession PPPs, while in concession PPPs in the event that the private party defaults, the concession Act allows for the lenders to “step-in” or substitute the private party with a qualified new private party without initiating a new tender process.
No PPP Policy
The country does have a general/national policy framework for PPPs for infrastructure or public services, but additional efforts should be made in the successful and efficient practical implementation of policy and strategy documents, which is highly dependent on political will. The general public and state officials involved in the identification, selection, award and implementation of PPPs should be better equipped with knowledge about the main features and benefits of PPPs. An awareness campaign would certainly contribute to the general positive perception of PPPs, which are often and for no justified reason treated as a synonym for hidden privatisation.
Although the institutional framework is established and functions rather well, it could be further improved. A central PPP unit, the Central Project Management Agency (CPMA) at times acts strictly and lacks proactivity. Some clarity is needed about its actual scope of competencies. The idea of a single centralised PPP institution that would unite all the necessary competence, knowledge and experience that is crucial for the proper and smooth implementation of PPP projects is welcome in the country. Such an institution would be seen as the independent and professional institution representing the public sector in all PPP projects, in particular during the procurement stage. Such a centralised unit would furthermore be expected to ensure the development of PPP policy, as well as to represent the commitment of the public sector to implement PPP projects.