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Law on Public-Private Partnership and Concessions (“Official Gazette of RS’’ no. 88/2011, 15/2016 and 104/2016)

On December 22nd, 2016, the National Assembly of the Republic Serbia, adopted the Law on Public-Private Partnership and Concessions (“Official Gazette of 104/2016, hereinafter: the
“Law”), on the Sixth sitting of the Second Regular Session in 2016, which enters into force December 31st, 2016. The main reason for amending the previous Law on Public-Private
Partnership and Concessions (“Official Gazette of RS” 88/2011 and 15/2016) was further and more detailed regulation of certain provisions and compliance with international practice.
Firstly, the Law additionally regulates elements and procedure for granting concessions, by prescribing a model of institutional public-private partnership with elements of concession thus
enabling public entities to participate in public-private partnership with the elements of concession, through forming a joint company with the private partner, for better protection of
the public interest. Additionally, the Law now defines concession for public services and concession for public works as separate forms of concession, and defines concession for public
service in detail.

Furthermore, the possibility of granting concession for use of goods owned by a public body is now prescribed as an option, unlike the previous solution. Thus, if the grantor is a public body, a
public company or legal person authorized by special regulations for granting a concession, the concession act should be approved by the authority under whose competence is the grantor (the
Government, the Government of the autonomous region, or assembly of the local selfgovernment unit). Additionally, the Law specifies which provisions of the law governing public procurement are not applicable in the procedure of selection of the private partner through concession, if such concession is implemented through the public procurement procedure.

The content of the proposal for the adoption of the concession act is also amended, so that in addition to previously regulated elements, the proposal should now also contain information on
other contracts which are concluded simultaneously or after the conclusion of a public contract and other data relevant to the concession. The Law also specifies that the guarantee requested in
the tender documents by grantor must be unconditional, irrevocable, without protest and payable on first call. Finally, concession for projects worth more than EUR 50 million can be specially arranged and implemented in stages, which shall be specified through the act of the Government, which should be adopted in the course of 90 days upon entering into force of the Law.
As for other significant changes, the Law somewhat confirms the so far developed practice by stipulating the option for the private partner to charge the arranged fee for the services provided,
directly from the end users, if such an option is provided by the private-public partnership project proposal/concession act.

Provisions regulating special purpose vehicle („SPV“) are also significantly amended in order of neutralizing certain practical dilemmas, mostly regarding the mandatory formation of the SPV.
Thus, the Law now prescribes that the SPV is formed solely for implementation of the publicprivate partnership project/concession, unless otherwise provided in the tender documents, and
also that the private partner is the contracting party in the public contract, regardless of the formation of the SPV. One of the novelties, compared to the previous Law, refers to the duration of the public contract, i.e. the Law now prescribes that the time the public contract is concluded for does not necessarily starts from the date of signing of the public contract, but other options can be provided in the public contract or the tender documents.

Furthermore, certain documents prepared in the procedure for selecting the private partner are now regulated in detail, or their obligatory content has been extended. For instance, the decision
on selection of the most favourable bid, must contain the type of implemented procedure, the number of received bids and criteria of selection that has been applied. The provisions regulating the content of the public contract are specified and amended, while, governed by international practice, the Law now prescribes the possibility of concluding a contract on assigning certain tasks by the private partner to third parties (outsourcing), and the possibility of intervention by the public partner in order to protect the public interest (step-inright). Furthermore, the Law prescribes new provisions governing amendments to public contracts that are implemented at the request of the financiers, which must be economically justified, legally documented and acceptable to partners. The amendments may not disturb the balance of risk sharing at the expense of the public partner, nor the value of public contracts may be increases by more than 3%.

The Article 60 of the Law has also been rephrased so that, unlike the previous version that forbade contracting arbitration as an alternative dispute resolution mechanism when private
partners were domestic entities, the new solution expands the possibility of contracting arbitration to, not only foreign private partners, but also private partners that are directly or
indirectly owned by foreign entities. Finally, the Law stipulates that the compensations can denominated in foreign currency, but the payment must be done in dinars. The final provisions of the Law prescribe that all proceedings that have been initiated up to the day of entering into force of the Law shall be continued in accordance with this Law.

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