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Montenegro: The Use of PPPs in the Development of Infrastructure

Montenegro: The Use of PPPs in the Development of Infrastructure

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Aware of the fact that an effective system of infrastructure creates the preconditions for the normal and undisturbed functioning of the wider social system, Montenegro has made significant efforts in recent years, both in terms of the normative definition of the sector and in finding optimal mechanisms for national infrastructure. In many European countries, a public-private partnership represents the optimal mechanism for national infrastructure, which has considerable advantages and is being ever more used.

Having an effective legal framework is a precondition for creating an environment that supports private investment in infrastructure. Based on this premise, the long-awaited law regulating public-private partnerships in Montenegro was adopted at the end of 2019 and has been applicable as of July 2020. Along with this new legislation, the amended Law on Concessions also began to apply in mid-2020 with a large portion of its subject matter being transposed into the Law on Public-Private Partnership (Law). In addition, the ensuing months marked the adoption of a set of by-laws that set the Law in motion.

The Law has created a new framework for investment policy in Montenegro based on the model of public-private partnerships. In this way, a synergy between the authority of public institutions and the expertise and knowledge of the private sector is achieved to build and reconstruct public infrastructure, as well as perform public works and provide public services.

According to this Law, a public-private partnership is based on the principles of protection of the public interest, free management which ensures a high degree of quality, safety, affordability, transparency, protection of competition, and protection of the environment.

The Law covers contractual and institutional public-private partnerships and elaborates in detail on the procedure for concluding a public-private partnership contract, which regulates the public and private partners’ respective rights and obligations with respect to the public-private project. Moreover, key contractual terms such as those related to subcontracting, the liability of a private partner, financing, taking security, and termination have all found their place in the Law.

In addition, it is important to note that the Law brings novelties to the institutional framework in the entire Montenegrin investment policy. This primarily refers to the formation of a new body – the Montenegrin Investment Agency, established to promote and monitor the realization of public-private partnerships and investments. In addition, the Agency and the Ministry of Finance and Social Welfare give an opinion on public-private project proposals. At the same time, all public-private partnership contracts shall be registered before the Contracts Register of the agency and published on its web page.

The Law also precisely defines the issues related to the preparation of tender documentation and justification analysis and regulates the entire procedure through which the proposal of one project passes to the final adoption. It is also important that the legislator especially emphasized the importance of the public interest, since the analysis of justification that accompanies each public-private partnership project is its important segment.

The public-private partnership concept represents an established systematic approach of many governments and local self-governments around the world when it comes to financing public infrastructure. Over the past few years, the Government of Montenegro as well as municipalities in Montenegro have made the first tentative steps towards the introduction of public-private partnerships.

Therefore, it will be important to monitor the appetite of the business community for seeking alternative means of private sector involvement in public infrastructure/service projects. It remains to be seen whether the potential of the cooperation between governmental bodies and the public sector through the public-private partnership concept will be fully used in Montenegro.

However, it could be concluded that further reforms are needed in infrastructure, especially for roads and certain municipal and environmental sectors. These sectors could benefit from greater commercialization, especially through public-private partnership projects.

By Igor Zivkovski, Partner, Zivkovic Samardzic

This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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