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Romania: How to Create and Develop a Robust and Long-Lasting PPP Culture

Romania: How to Create and Develop a Robust and Long-Lasting PPP Culture

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In Romania, the first legal enactment specifically addressing PPP projects was adopted in early 2002. In the 20 years that followed, four primary pieces of legislation on this topic have been passed, with the declared objective to provide a sound legal basis for the implementation of PPP projects. Nevertheless, each of these successive enactments was adopted not to keep pace with the practical developments in PPP matters, but rather to respond to criticism of the absence of a proper legal basis to structure and implement PPP projects.

Getting There

After numerous attempts, the current legal framework applicable to PPP projects in Romania – Government Emergency Ordinance No. 39/2018 – may be considered to create the proper legal basis for PPP projects. First, the GEO properly identifies the main criterion for a project to be classified as PPP: the largest part of the revenues collected by the SPV should originate from the public sector. Secondly, to enhance the attractiveness of PPP projects, the GEO clearly allows contributions from the public sector to finance the investment effort. Thirdly, it properly regulates sensitive concepts which have, at times, hampered the implementation of PPP projects, such as the step-in rights of the lenders and the replacement of the SPV during the contract term. Fourthly, to avoid any doubts as to the transparency and competitiveness of the procurement procedure for the award of PPP contracts, it provides that the award procedures to be used will be those generally applied for the award of public procurement contracts or concession contracts, as relevant. In other words, PPP contracts may take the form of public procurement contracts or concession contracts, depending on the allocation of risks among the parties, and they cannot take a different form that would be subject to special award provisions.

Still, despite the above and the various attempts made from time to time to implement PPP projects, no significant PPP project is currently being deployed in Romania. This naturally raises the question of what else is required to enable the carrying out of PPP projects and to create and develop a PPP culture.

The Missing Ingredients

The answer is not straightforward. The existence of a proper legal framework would indeed be necessary, but many other prerequisites should be in place. Experience has shown that PPP projects may be structured and implemented even in the absence of a specific PPP legal enactment, but this would not be feasible without significant administrative capacities and converging efforts from the public and private sectors.

To contribute to the creation of a PPP culture, the PPP concept and its benefits and downsides should be well understood. PPP projects bring value for money. They are not necessarily inexpensive, nor can they always be used to provide financing from the private sector without being qualified as on-balance from the perspective of public accounting treatment.

The roles and the various interests and concerns of the parties involved in a PPP project should be carefully considered. Making sure that financing is available is key to the success of a PPP project. Closer involvement of potential lenders before and during the award procedure is, therefore, required for proper project structuring and a balanced approach to parties’ rights and obligations. The suitable preparation of a PPP project is of the essence. Lenders would carefully scrutinize the technical surveys on which the project relies, and the hasty start of a project may actually be to its detriment. The appointment of specialized consultants to assist the public sector in the preparation and structuring of PPP projects is another key element.

Achievable Goals

The careful selection of future PPP projects is also important. At first, medium-sized projects could be selected. On the one hand, there might be an appetite for providing financing for projects of this size and, on the other hand, a successful outcome may create opportunities to develop larger PPP projects.

Therefore, the existence of a sound legal framework is only the first step toward the creation and development of a robust and long-lasting PPP culture in Romania. If matched by administrative efforts, it may pave the way for the implementation of a successful pool of PPP projects that will, in turn, contribute to the development of the infrastructure sectors and the entire Romanian economy.

By Vlad Cercel, Partner and Co-Head of PPP/Infrastructure, Tuca Zbarcea & Asociatii

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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Țuca Zbârcea & Asociații is a full-service independent law firm, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counsellors, economists and staff members. It also operates a secondary law office in Cluj-Napoca (Romania), and has a ‘best-friend’ agreement with a leading law firm in the Republic of Moldova. In addition, thanks to the firm’s dedicated Foreign Desks, the team provides the full range of services to international investors seeking to gain a foothold or expand their existing operations in Romania. Since 2019, the firm and its tax arm are collaborating with Andersen Global in Romania.

Țuca Zbârcea & Asociaţii is providing legal services in every aspect of business, covering all major areas of practice: corporate and M&A; litigation and international arbitration; corporate tax; public procurement; TMT; employment; insurance; banking and finance; capital markets; competition; healthcare and pharmaceutical; energy and natural resources; environmental; intellectual property; real estate; regulatory legal services.

Țuca Zbârcea & Asociaţii is a First-Tier law firm in all international legal directories and a multiple award-winning law firm both locally and internationally. It received the CEE Deal of the Year Award (DOTY Awards 2021) and the Law Firm of the Year Award: Romania (IFLR Europe Awards 2021). 

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