In general, there is a comprehensive legal framework regulating concessions and PPPs in Slovakia but there is no specific PPP or concession act. Until April 2016 the “old” Act No. 25/2006 Coll. on Public Procurement was in force. This was then replaced by the “new” Act No. 343/2015 Coll. on Public Procurement (the “PPA”), which regulates the public procurement process, including the award processes for PPPs and concessions.
The legal framework remained in essence the same and the main reason for a new piece of regulation was the need to transpose the three new EU directives (Directive 2014/23/EU, Directive 2014/24/€ and Directive 2014/25/EU) into Slovakian law. As the PPA was adopted quite recently, few if any projects have been awarded and no guidance/model documentation has been issued under the newly adopted regulation.
Although the different types of PPPs are not explicitly named by the applicable laws, they all fall under the scope of the PPA and the relevant sectoral regulations. However, the terms used by the PPA are often quite broad and in particular there is no definition of non-concession PPP.
The Law does not explicitly set out an obligation for the Contracting Authorities to conduct preliminary/feasibility studies or to audit financial sustainability. Nevertheless, such studies/audits are usually carried out prior to the commencement of the selection process. The public is not typically involved in the selection process.
Selection of the Private Partner
The Public Procurement Act, which sets out the general legal framework for the process of selecting the private partner is based on the principles of non-discrimination, transparency, economy and efficiency during the selection process. It defines limited circumstances under which direct negotiations and awards without a competitive tender are allowed.
The Law gives Private Parties a possibility to have the selection process reviewed and in particular to challenge the decisions of the Contracting Authorities. The Law does not regulate unsolicited proposals, so they fall under the general provisions providing for non-discrimination and fair competition.
The PPA only gives a general definition of a PPP project agreement and does not stipulate any mandatory provisions that such agreements would have to contain. Therefore, the legal framework allows the parties to choose various PPP models and gives them flexibility with respect to the content of the project agreement. However, the PPA stipulates that a PPP project agreement must not conflict with the tender documents or concession documentation and the offer submitted by the successful tenderer or tenderers. The flexibility of the parties for the negotiation of the project agreement, combined with a developed equity/bond capital market, provides for a favourable business environment. Still, the use of PPP models in large public projects in Slovakia has been limited to the national level.
The Law neither permits nor prohibits entering into a project agreement that is subject to international arbitration. However, it is not typical to do so in practice. Slovakia has ratified the NY Convention on the recognition and enforcement of foreign arbitral awards as well as the ICSID convention.
The PPA does not mention security instruments, direct agreements or step-in rights. Nevertheless, all such instruments are used in practice. However, in the case of concessions, the Law forbids the establishment of a security such as a pledge over the project assets. Other types of security are not excluded.
In 2005 the Slovak government adopted a general policy on supporting (non-concession) PPPs and has since issued various guidelines, model documentations and recommendations. However, most of this documentation is out of date.
A coherent institutional framework that would deal with (non-concession) PPPs has not been established. The Ministry of Finance does not provide consulting and economic support to contracting authorities anymore. As for concessions, if the value of the concession under the respective agreement is equal to or above certain thresholds, the Awarding
Authority needs the consent of the Slovak government before it can conclude a concession project agreement (with the exception of a municipality, a higher territorial unit, a budgetary organization and a contributory organization established by them – these terms need to be interpreted under Slovak law).
There is also the Slovak Public-Private Partnership Association (Asociácia pre podporu projektov spolupráce verejného a súkromného sektora), consisting of private members. This association seeks to support public private partnerships in Slovakia. There are no publicly available statistics for PPP projects awarded in individual sectors. The capital market in Slovakia is quite developed and PPP projects are typically co-financed through private capital market instruments. We are not aware of any Slovak financing/guarantee funds established expressly to facilitate PPP financing. There is a certain foreign exchange control regulation (Slovak Act on Exchange Control); however, such regulation comes into play only in specific critical macroeconomic situations. Under normal market conditions, there are no restrictions to foreign exchange.
Slovakia has a lot of experience in very large (non-concession) PPP projects, mainly in the roads sector.
The first major PPP project in Slovakia and first concession contract (the terms 'PPP' and 'concession' were at this time considered as just two words for the same kind of project) awarded for a PPP structure for motorway projects in Slovakia related to the construction and operation of R1 expressway. The project’s financial close was in 2010. The total value of the R1 PPP was in excess of € 1.2 billion.
The most recently awarded (non-concession) PPP project was the project for the design, construction, finance, operation and maintenance of the D4 Highway and the R7 Expressway. The project agreement was signed in May 2016, the winning consortium comprised Spanish Cintra Infrastructuras Internacional S.L.U., Australian Macquarie Corporate Holdings Pty Limited and Austrian Porr AG. The project involved the construction of the roads in question and the maintenance of these roads for a period of 30 years. The total value of the project is in excess of € 1.7 billion, making it one of the largest PPP projects in Europe in 2016.
Other examples are a (non-concession) PPP for an electronic highway tolling system for trucks and other highway (non-concession) PPPs.
Results of the 2017/2018 PPP assessment
As a consequence of all this, Slovakia has almost identical scores for (non-concession) PPPs and concessions (due to there being very few specific provisions on concessions in the PPA and a long list of credentials in PPPs but not for concessions). Its results are poor for the legal framework and project preparation, but high for the award process due to having implemented EU procurement rules.
The few legal provisions regulating the content of the project agreements result in a medium score in this field. However, investors need not expect any surprises in this area and there are no red flag issues. Slovakia has even fewer explicit rules on securities and government support, resulting in a markedly low score, i.e. only very low compliance, for this chapter.
The almost complete lack of political framework and complete absence of any institutional framework results in very low effectiveness in these two fields. Due to the long track record of PPPs, Slovakia's results are much better in chapter 8 of this assessment and somehow contradict the low ranking in chapters 1, 2, 6 and 7.
The ranking in respect of the business environment is also just “very low“. The main reasons are the lack of a specialised banking industry and a lack of specialised infrastructure funds. However, taking into account the very small size of the Slovak market, these should not be a major obstacle for investors and should only act as a reminder to Slovak politicians that government support for infrastructure projects is required.