Concessions Law Amended - International Law Office

Introduction
Step-In Rights
Approval of Contracts

Introduction

Concessions have become an increasingly important form of public-private partnership in Albania, being particularly utilized in projects for the construction or rehabilitation of hydropower plants. The most recent projects include:

• the build, own, operate and transfer (BOOT) concession awarded to EVN at a value of just under €1 billion for three hydropower plants on the Devolli River;
• the concession awarded to Verbund for the rehabilitation of the ASHTA hydropower plant on the Drini River; and
• the current BOOT concession offer for Skavica Hydropower Plant, also on the Drini River, which is still under the tender procedure.

Step-In Rights

Several amendments were introduced late last year to the existing Concessions Law (9663) by Law 9995.(1)

Among other amendments, Law 9995 introduced and consolidated the lender step-in right for concession projects. This new amendment introduces an additional provision under Article 22:

"(1) The contracting authority may conduct the negotiation of concession contracts without using the selection procedure only with the approval of council ministers where:... (c) as a result of a serious infringement on the part of the concessionaire, the substitution of the concessionaire is required by the financing institution based on a step-in right."

In furtherance of this change, Article 27 of the Concessions Law suggests an item that should be covered in concession contracts, the 'step-in right of financing institutions'. It is merely suggested as the law provides a list of indicative provisions that may optionally be included in concession contracts (eg, concerning the nature and scope of works), and it is in this list that the step-in right is included.

There is no mention in the law as it stands now as to whether a direct agreement between the authority and the lenders in order to regulate the step-in rights is mandatory or expressly permitted. This aspect is presumed to be subject to negotiation with the contracting authority.

Approval of Contracts

A further key amendment was the introduction of a requirement for all concession contracts with a term exceeding 35 years to be approved by an act of Parliament. This appears to be required regardless of the value of the project. There is no preclusion from concession contracts with a term less than 35 years being approved by an act of Parliament.

Under the current law, a concession contract may be for a term of 35 years only. However, there are provisions that enable its duration to be extended. Although not explicitly stated, one of the suggested provisions for a concession contract in Article 27 is the duration and conditions, if any, for its extension.

At present, all concession contracts must be sent to the Council of Ministers after signature for approval regardless of the value or size of the project. Following the amendments, only those concession contracts with an investment value of over €20 million shall require the approval of the council of ministers. Those with a value of less than €20 million shall become effective upon signature by the contracting authority (without the need for the council of ministers' approval).

For further information on this topic please contact Sophia Darling at Kalo & Associates by telephone (+355 4 2233 532) or by fax (+355 4 2224 727) or by email (s.darling@kalo-attorneys.com).

Endnotes

(1) Published in Official Gazette 156 dated October 10 2008.