Category: Issue 11.5

An in-depth look at Roman Ivanov of Vernon David covering his career path, education, and top projects as a lawyer as well as a few insights about him as a manager at work and as a person outside the office.

Career:

• Vernon David; Partner; 2009-present
• Lextal Law Offices; Associate; 2008-2009
• Victor Burac Individual Law office; Associate; 2008-2008
• Ministry of Justice of Moldova’s Foreclosure and Enforcement Department; Consultant, Legal Department; 2006-2008

Education:

• Moldova Academy for Public Administration; LL.M; 2007
• Moldova State University; LL.B; 2005

Favorites:

• Out-of-office activity: Jogging and traveling
• Quote: “No limits, but the sky” – Cervantes
• Book: Metro 2033 by Dmitry Glukhovsky
• Movie: Green Book

Top 5 Projects:

• Advising on Victoriabank’s acquisition of BCR Chisinau – the Moldovan subsidiary of BCR Romania, an Erste Group bank. The deal which was closed in January 2024 represents a premier for the Moldovan banking market. For the first time in Moldovan history, one local financial institution acquired another local bank.

• Advising on the Moldovatransgaz and Vestmoldtransgaz lease agreement. The deal was closed in September 2024. By entering into this lease agreement, the entire natural gas pipeline network of the country was handed over for the use and management to an independent network operator, thus implementing a historical unbundling for Eastern Europe.

• Advising on EUR 150 million+ in trade commodity financings for Trans Oil Moldova’s operations. During the period of 2014 to 2018, we acted for a series of international lenders and investment funds to finance the business operations of the largest agri-businesses of Moldova, the Trans-Oil group of companies.

• Advising on the acquisition of Farmaprim by Amring Holding. In 2017, we assisted one of the world’s largest pharma holdings, Amring, on the acquisition of Moldovan pharmaceutical producer Farmaprim. The deal, implemented in a series of steps and finally closed in 2022, represented the only acquisition of a Moldovan pharmaceutical company in the country’s history.

• Advising on the acquisition of Sun Communications by Orange Moldova, the local subsidiary of Orange France. In 2016, we assisted Orange Moldova on the acquisition of the largest cable TV operator in Moldova, Sun Communications. With this deal, in addition to being one of the largest mobile phone operators, Orange Moldova became an important player in the cable TV market.

CEELM: What would you say was the most challenging project you ever worked on and why?

Ivanov: The lease agreement between Moldovatransgaz, as lessor, and Vestmoldtransgaz, as lessee. The subject matter of this lease agreement was the entire natural gas pipeline of the Republic of Moldova, while its execution was imposed by the provisions of Moldovan and European legislation, mainly the Third Energy Package.

The most challenging part of this project is exactly the fact that both parties “were forced” by the provisions of Moldovan law to enter into this agreement, i.e., there was no independent decision from either of the parties to execute it. Given this, the negotiations were extremely difficult, while in relation to certain essential terms and conditions, it was almost impossible to identify a consensus or a mutual decision.

In addition, considering the ownership structure of the parties and the underlying (geo-)political background of the deal, the negotiations were highly affected by the emotions and personal attitudes of the parties regarding the subject matter of the agreement. Even if the active phase of negotiations lasted only two weeks, including a series of breaks and back-and-forth exchanges of comments and various drafts of the documents, the issues above transformed negotiations into one of the most difficult projects in my entire career.

CEELM: And what was your main takeaway from it?

Ivanov: The conclusion below was not necessarily generated by this specific project, it was rather re-confirmed by it: A transactional lawyer is not only a highly-motivated practitioner having good knowledge of the law, but also a psychologist who should be ready to provide their client with mental support and assistance during the negotiations.

CEELM: What is one thing clients likely don’t know about you?

Ivanov: I am extremely hard on myself when it comes to the results of my work and my mistakes. My clients are used to meeting and talking to positive, smiling individual and don’t know the real feelings and emotions boiling inside of me.

CEELM: Name one mentor who played a big role in your career and how they impacted you.

Ivanov: It’s a former Partner and head of the Moldovan office of Vernon David, Diana Neagu. Diana is one of the most clever, fast, and experienced lawyers and individuals I met in my life. She managed to enable the best parts of my character, taught me business law, and guided me to understand the needs and expectations of clients. Being my direct supervisor, she was the one who reviewed my work, assessing progress, and making suggestions for improvement.

CEELM: Name one mentee you are particularly proud of.

Ivanov: It’s my colleague Adelina Braga, Associate at the Moldovan office of Vernon David. She joined the team in 2017 and since then her progress rocketed. Currently, Adelina (although she continues to disagree) is one of the best commercial lawyers, able to handle multiple and diversified projects. She is extremely attentive to details and able to read and understand client’s needs and expectations. At the same time, while working closer with me for a longer period, she also took over my weak points, such as, for instance being a “formatting freak.”

CEELM: What is the one piece of advice you’d give yourself fresh out of law school?

Ivanov: Be ready to fall, be ready to make mistakes, and be ready to stand up and move forward. There are no catch-22 situations as long as you believe in yourself and are ready to make sacrifices.

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The use of PPP mechanisms in Ukraine is not common and has been only recently gaining momentum. Even though the Law on Concessions was adopted back in 1999 and the Law on Public-Private Partnership in 2010, these instruments have long been underestimated.

The main reasons were imperfect legislation and the public sector’s low institutional capacity, traditionally more oriented toward leases or privatization. The state was not ready to undertake long-term budgetary obligations and participate in lengthy feasibility study procedures. In all fairness, it should be noted that there were no legislative mechanisms for this.

Real infrastructure projects, structured with the technical support of the IFC, appeared only in 2019 when the preparation of two concession projects in the ports of Olvia and Kherson started. The financial closing of both projects took place at the end of 2021. In addition to the successful completion of these transactions, the team of consultants identified weak points in the legislation, which required the fastest possible response from the government and parliament.

During the implementation of the first concession projects in ports, changes were made to the Law on Concessions aimed at implementing Directive 2014/23/EU on concessions. The changes considered the existing international experience and significantly improved the rules for granting concessions and procedures for developing feasibility studies and conducting tenders.

The improvement of the legal framework and the successful completion of the two port concessions became the impetus for the preparation of several new projects in the field of transport infrastructure. Not only the public sector but also private companies contributed to these activities.

Thanks to a private initiative, the preparation of feasibility studies of several more projects in the port sector was started. The implementation of the projects was planned for 2020-2023. Examples include the concession of the Odesa port passenger terminal and the concession of the Berdyansk and Izmail ports.

Between 2019 and 2021, the Ministry of Infrastructure launched a few infrastructure projects with the support of the WBG. In particular, a pre-feasibility study was prepared for five airports, eight railway stations, and six highways. Advisers were involved in preparing a feasibility study of two concession projects in the port of Chornomorsk. Further implementation of these projects was stopped by the full-scale military invasion.

Significant damage or a complete destruction of critical infrastructure became the reason for an intensive search for financing the reconstruction of the country. In this context, PPP appears to be one of the most promising tools.

In this regard, during the two years of the war, the government worked out appropriate changes to the legislation on PPP. A massive draft law on amendments to the laws on PPP and concessions was adopted in October 2022 in the first reading. Currently, the draft law is being prepared for the second reading. Key legal advancements include: (i) the definition of a new type of project – restoration projects, for which a simplified preparation procedure is provided that allows reducing the time for implementation (critical in the current context of Ukraine); (ii) the regulation of a new type of project – restoration projects; (iii) the expansion of sources of funding for PPP projects and sources for state support, in particular, the possibility of financing PPP projects through grants; and (iv) the initiation of the opportunity to implement PPP projects in the field of housing construction.

Furthermore, this draft law introduces systemic changes in legislation in the fields of highways, railway transport, waste management, water supply, education, and healthcare. As previous experience has shown, the imperfection of industry legislation is a key factor restraining PPP development.

Despite the martial law, the prospects of PPP projects in Ukraine are also indicated by the fact that the WBG has renewed the preparation of projects in the port of Chornomorsk (concession of ferry crossing and container terminal) and launched the pre-feasibility study of PPP projects in the field of healthcare.

Consequently, in April, the World Bank updated its Benchmarking Infrastructure Development 2023 rating, which demonstrates the quality of legal regulation in the countries of the world in terms of the possibility of implementing large infrastructure projects with the involvement of the private sector. Ukraine demonstrated one of the best results in the world, increasing its indicators by 41 points. This shows the existence of a favorable legislative environment for attracting private investments to Ukraine under PPP conditions. Hopefully, it will become the basis for financing future infrastructure projects.

By Maryna Sharapa, Partner, Arzinger

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On January 11, 2024, Romania enacted significant amendments to its legislation on public-private partnerships (PPPs). While the country has had a dedicated PPP legal framework since 2002, no major infrastructure projects have been developed through this mechanism. To attract private investors and international financial institutions to participate in such projects in Romania, Government Emergency Ordinance no. 39/2018 on PPPs (GEO no. 39/2018) has been amended substantially.

The amendments were drafted by Tuca Zbarcea & Asociatii and the International Finance Corporation (IFC), part of the World Bank Group, as legal and financial advisors to the Romanian government and the Romanian Ministry of Finance.

Parties to the PPP Contract

Prior to the amendments, each PPP contract was concluded between three parties: (i) the public partner; (ii) the private partner; and (iii) a special purpose vehicle (SPV) set up by the private partner to implement the project. In practice, it was noticed that private investors were reluctant to enter into PPP contracts due to the specific obligations they had to assume toward the public partner and the liability they faced in case of non-performance. The new regulation takes important steps to eliminate this inconvenience by expressly allowing the public partner to sign the contract only with the SPV, which thus becomes the only entity to assume obligations under the PPP contract.

The Public Partner’s Contribution to the PPP Financing

The previous regulation limited the public partner’s contribution to the PPP financing to 25% of the capital costs. This limit was unsustainable in social infrastructure projects (such as hospitals and schools), where the public partner needs to make a substantial contribution from the construction phase of the PPP project. The new regulation removes the limit on the public partner’s contribution and allows it to contribute as much as necessary from the start of the PPP contract, provided that the contribution is consistent with EU limits on the public deficit and debt.

Financing Municipal PPP Projects

The previous legislation was unclear as to whether the national government could finance municipal PPP projects. Some of these projects are vital for local communities, but municipalities cannot afford to properly finance them. The new regulation addresses this issue. The Romanian government can now participate in financing municipal PPP projects and there is now a clear set of administrative procedures, decisions, and approvals for allocating funds from the central budget to local budgets to successfully finance economic and social infrastructure projects.

Resolution of Disputes Arising from PPP Contracts

Romanian legislation does not provide for a special procedure for the resolution of disputes arising from PPP contracts. Instead, the standard procedures for public procurement and concession contracts apply. The parties may choose to submit their dispute to the administrative divisions of the competent courts or to an administrative body (the National Council for Solving Complaints). The new regulation is a big step forward as it allows the parties to a PPP contract to include an international arbitration clause. It also streamlines the process for public partners to engage specialized law firms to represent them in international arbitration.

Currently, there is no established administrative or judicial practice for applying the new provisions of GEO no. 39/2018, given that they recently came into force. However, Romanian public authorities have already shown interest in developing the country’s economic and social infrastructure through PPP contracts. The best-known project is the modernization of the Timisoara Municipal Hospital, with an estimated value of EUR 120 million.

By Robert Rosu, Partner, and Tudor Bonifate, Associate, Tuca Zbarcea & Asociatii

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Slovenia is adopting the EU’s strategy to boost renewable energy (RE) for electricity to enhance decarbonization. Unlike France’s reliance on nuclear power, Germany’s focus on renewables like wind, solar, and hydro hasn’t significantly reduced CO2 emissions, evidenced by its emissions being eight times higher than France’s.

Renewable energy’s effectiveness is hindered by its dependency on variable weather and geographic conditions, necessitating constant backup from other energy sources. Germany, for example, has had to reactivate coal plants due to the closing of nuclear facilities. Additionally, storing excess electricity from renewables is still undeveloped, costly, and energy-intensive, requiring substantial financial and time investment. Infrastructure upgrades are also needed to integrate new renewable plants, with some Slovenians facing grid congestion issues when trying to connect solar installations or electric vehicle chargers. The broader environmental impact of renewables, including the materials for solar panels and their recycling, must be accounted for in their carbon footprint. As Slovenia contemplates a new nuclear facility, these factors play a crucial role in its energy planning.

As green electricity remains a primary goal for the EU, Slovenia has already adopted in July 2023 the Act on the introduction of installations to produce electricity from renewable energy sources (ZUNPEOVE) which aims to deploy installations to produce electricity from RE sources in cases where it is feasible to do so. The ZUNPEOVE sets out specific spatial planning requirements and requires both municipalities and the state to make it mandatory to plan for photovoltaic installations when drawing up spatial plans. It also introduces the possibility of so-called “ancillary energy activities” by installing photovoltaic installations and wind generation facilities on agricultural and forest land, provided that such activities allow the land and facilities to serve both the main purpose and the ancillary energy activity at the same time. Furthermore, in the case of the installation of a photovoltaic installation on freehold property, the ZUNPEOVE stipulates that such installation may be carried out with the consent of the owners of the freehold property who hold more than three-quarters of the ideal shares. The ZUNPEOVE also provides for the possibility of establishing an easement or building right on buildings owned by the state or a municipality, free of charge, for the purpose of installing a photovoltaic installation, if it is established for the benefit of a community in the field of RE, whose members are only natural persons, non-governmental organizations, or a self-governing local community.

The ZUNPEOVE also provides for the mandatory installation of photovoltaic installations in the case of reconstructions and new constructions of all buildings and car parks with a roof area of 1,000 square meters or more and in the case of all existing buildings and car parks with a roof area of 1,700 square meters or more. An exception to the mandatory installation of a photovoltaic installation is given in case of inappropriate use or type of building, inappropriate location or insolation of the building, provision of green spaces and nature-based solutions, and in case of protection of cultural heritage. The ZUNPEOVE does not set a time limit for the mandatory installation of photovoltaic installations on existing buildings but foresees that this time limit shall be prescribed by the government by a special regulation, whereby such time limit cannot be shorter than two years and longer than 10 years. On April 13, 2024, the Regulation on more detailed spatial planning rules for the siting of photovoltaic installations and solar energy receivers (Regulation) entered into force, which also does not set a deadline.  When setting the deadline, the Government will also have to consider the European Parliament legislative Resolution on 12 March 2024 on the proposal for a directive of the European Parliament and of the Council on the energy performance of buildings. The proposal for a directive, which is expected to be adopted by the end of 2024, provides in Article 10 that member states shall ensure suitable solar energy installations on public and non-residential new and existing buildings from 2027 onward and on new residential buildings from 2029 onward. It is therefore clear that green energy will not only drive the energy industry but also determine the infrastructure which will be built from now on.

By Masa Kramar, Partner, Senica & Partners

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Public-private partnerships (PPPs) are cooperation agreements between public and private sectors for providing public services traditionally provided by the state and funded by taxpayers. These partnerships involve sharing investments, risks, liabilities, and revenue between the parties, ensuring public welfare by addressing economic challenges in essential sectors. PPPs offer an alternative approach to traditional state-financed projects, allowing faster and more efficient construction of large-scale projects.

The above holds especially true in the development of critical energy infrastructure, which has historically been at the forefront of PPPs in Turkiye. The country enacted the first Electricity Build-Operate-Transfer (BOT) Law No 3096 published in the Official Gazette dated December 19, 1984, and numbered 18610 as its first BOT law, and later adopted the model in further sectors with further domestic legislation. Today, Turkiye is one of the leading countries using PPPs investments for critical infrastructure development, with a total contract value of USD 19.7 billion between 1986 and 2021 for the development of energy assets.

While traditional PPP models such as BOT and Build-Own-Operate (BOO) for energy projects are still permissible and viable under Turkish law, the sector was further liberalized in the 2000s with the enactment of Electricity Market Law No. 4628 published in the Official Gazette dated March 3, 2001 and numbered 24335 (Repeated) and its successor Electricity Market Law No. 6446 published in the Official Gazette dated March 30, 2013 and numbered 28603. With these reforms, private sector actors now can act directly in the energy market, essentially resulting in PPPs in the sector gradually moving away from traditional PPP models to more modern agreements. As a result, besides the traditional mega-project PPP models, a conventional loan structure model and borrowing base model are now also common project financing structures in Turkiye for energy infrastructure projects.

New Models in Renewable Energy

As Turkiye continues to liberalize its energy sector, there is a noticeable shift toward renewable energy, creating a fertile landscape for a new type of PPP. Unlike traditional energy projects which have gradually moved toward liberal market practices, green energy initiatives are increasingly supported by government incentives and initiatives, marking a significant evolution in the way public involvement is conceptualized in the Turkish energy sector.

In this context, while the framework was developed much earlier and incentives have been in place regarding license applications, annual licensing fees, and taxes, the first concrete step was taken in the form of the Renewable Energy Support Mechanism (YEKDEM), which provides feed-in tariffs in the form of above-market purchase guarantees for renewable energy projects put into operation before 2021, essentially providing a public guarantee for the long-term stability and cashflow for the project.

The YEKDEM model was then followed up with the Renewable Energy Resources Area (YEKA) model. According to the YEKA Regulation published in the Official Gazette dated October 9, 2016 and numbered 29852, the Ministry of Energy and Natural Resources (Ministry) determines an area as a YEKA zone and opens it up to investment via engaging potential investors by public tender. The tender then proceeds with the reverse bidding model, where the lowest bidder has the right to conclude a YEKA Usage Rights Agreement with the Ministry. Under the YEKA Usage Rights Agreement, just like in the YEKDEM model, the investment is guaranteed with a feed-in tariff and a 15-year purchase commitment.

Conclusion

Turkiye, as a country highly exposed to climate change due to its geographical location and natural resources, committed to transitioning to a low-carbon economy by becoming a signatory to the Paris Agreement and setting an ambitious target of achieving net-zero emissions by 2053 and prepared the Green Deal Action Plan to align with the EU. Moreover, the country has set ambitious concrete goals for the near future to substantially increase its renewable energy, which are expected to comprise 64.7% of the total installed capacity, according to the National Energy Plan published by the Ministry.

All in all, the current regulative and economic framework in Turkiye, along with its strong PPP tradition and its commitments to green energy, has created an environment of new opportunities for foreign and local investors looking into the energy sector. By taking concrete steps in renewable energy with the YEKDEM and YEKA models, Turkiye is not only moving toward the goals set forward by the Paris Agreement and the Green Deal Action Plan but also opening a new avenue for PPP in energy and creating new opportunities for investors.

By Zahide Altunbas Sancak, Partner, and Yasemin Keskin, Senior Associate, Guleryuz Partners

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In 2021, a new Construction Act (No. 283/2021 Coll.) was adopted in the Czech Republic. This groundbreaking legal norm was designed to solve problems in the permitting process for infrastructure and other projects, such as lengthy administrative procedures, a cumbersome process of obtaining consents and opinions from various authorities, and often a lack of coordination among authorities, which frequently caused inconsistencies in interpreting the law as well as delays.

The new Construction Act is therefore intended to simplify and speed up the process, improve transparency, and enable better coordination between authorities and other stakeholders. To achieve this, the digitalization contemplated by the new Construction Act will be an important tool.

One key part of the new Construction Act was the creation of a new state construction administration system within the concept of institutional integration. Although this comprehensive reform was not implemented to the original extent due to several amendments to the new Construction Act, where the mixed model is still maintained, it has given rise to a major office with an integrated agenda: the Transport and Energy Construction Authority (Dopravni a energeticky stavebni urad; DESU). This is now the key single authority for permitting infrastructure construction projects, which are defined by law as “designated construction projects” and specified in Annex 3 of the new Construction Act. These projects – which include motorways, railways, civil aviation facilities, large power plants with a capacity exceeding 100 megawatts, and structures in the field of nuclear facilities and power transmission systems – are of special importance for the state and their permitting process is more strictly regulated.

A state organizational unit, the DESU is under the Ministry of Transport or the Ministry of Industry and Trade of the Czech Republic, depending on the specific project it authorizes. Its scope is nationwide and includes key transport and energy infrastructure projects. The DESU integrates the agendas of several previously separate offices, making efficient use of expertise and resources to significantly simplify and speed up the construction permitting process. In doing so, the DESU eliminates redundancy and improves communication between different sectors. The DESU now includes experts from the Ministry of Transport, the Railway Authority, the Civil Aviation Authority, regional authorities and Prague City Hall for transport construction projects, and experts from the Ministry of Industry and Trade and the mining authorities for energy construction projects. This integration allows the DESU to assess and approve projects in a broader context, which includes not only the structures themselves but also related aspects, such as their impact on transport and energy.

As an authority specialized in major infrastructure, DESU’s competence primarily consists of permitting designated construction projects and related projects, which would otherwise be permitted by other authorities. The DESU also issues framework permits for nuclear installations and related structures located inside and outside the nuclear installation site.

When assessing a project, the DESU takes into account the technical and economic aspects, as well as the project’s impact on the environment, public health, and other public interests. As concerns public health issues, the DESU will be the only construction authority to assess public health issues, replacing regional health offices in the case of building permits, while in the case of assessing environmental impacts, it will have to rely on the Single Environmental Statement (SES), which is governed by Act No. 148/2023 Coll. and represents the integration of various environmental assessments into a single binding document. The SES replaces up to 26 separate administrative acts and is issued by the competent authorities for all projects permitted under the new Construction Act.

The DESU is also an administrative appeal body against decisions of regional building authorities in the area of non-reserved transport and energy infrastructure projects, to which the exercise of certain powers in the field of decision-making on minor transport and energy infrastructure projects is transferred from municipal building authorities. Last but not least, the DESU takes over part of the execution of expropriation proceedings, which was previously exercised by local authorities. Although the new Construction Act generally does not come into force until July 1, 2024, the new processes for permitting designated construction projects by DESU started on January 1, 2024. However, it is important to note that the permitting process may be affected by transitional provisions that apply to proceedings initiated before the new Construction Act comes into force. In such cases, the former Construction Act (No. 183/2006) will be followed.

By Vaclav Rovensky, Partner, Kocian Solc Balastik

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Public-private partnerships (PPPs) offer a way to procure infrastructure and services that traditionally do not include private capital involvement with private finance participation. PPPs have been introduced as a general acknowledgment of the need to solve the infrastructure gap in many countries – especially in emerging market and developing economy (EMDE) countries. EMDE countries need to rely on private resources as a means of accelerating infrastructure development. Attractive for a high degree of flexibility in light of multiple variations across the globe regarding the scoping of a PPP, PPPs enable efficiency and high value for money.

There is no universally accepted definition for the PPP concept. Similarly, at the level of the European Union (EU), the EU Commission has not defined the term PPP by way of statutory definition. Nevertheless, it is widely accepted that the term refers to forms of cooperation between public authorities and the world of business, aiming to ensure the funding, construction, renovation, management, and maintenance of infrastructure for the provision of services. Indeed, the definition of PPP is often defined in national legislation of individual jurisdictions. In Austria, however, the PPP model has not yet received the necessary support from the Austrian legislator to become a regular procurement tool.

Particularly, for a long time, Austrian law did not provide for a specific legal framework regarding PPPs. The first (tender) phase is generally governed by the general public procurement rules. Other provisions related to PPPs are, however, fragmented through the system of Austrian legislative acts. For instance, section 55h of the Austrian Railway Act explicitly allows the procurement of functions associated with the construction and operation of railways to be performed by parties to PPPs. Furthermore, section 42h of the Austrian Copyright Act allows for PPPs to reproduce works without consent for personal use or for a research institution or a cultural heritage institution for research purposes, using automated text or data analysis. In this context, in 2023, the Austrian legislator added an obligation for Media Hub Austria – an innovative media support institution – to enter PPP models with external media companies, institutions, universities, or networks to fulfill its tasks.

As part of the requirement to implement Directive 2014/23/EU, the awarding of concession contracts is subject to the Federal Procurement Act Concessions 2018. This allows contracting authorities a more flexible organization of the award procedure. In particular, contracting authorities can determine the individual procedural steps themselves and therefore have more leeway than when awarding public contracts in accordance with the Federal Procurement Act 2018. The qualification of a contract as a concession therefore has far-reaching consequences for the award procedure.

Indeed, concession contracts for works or services are characterized by two features: (1) The consideration for the work consists of the right to use or exploit the works or services in question. In addition to this right of use, a price may be paid. (2) The concessionaire bears the operating risk.

In addition to the right to use or exploit the building or service, a concession is characterized by the transfer of the operating risk for the use of this concession right to the concessionaire. An economic risk is borne if under normal operating conditions, there is no guarantee that the investment expenditure or the costs of operating the structure or providing the service can be recouped. In principle, the payment of a subsidy by clients is not detrimental as long as the transfer of operating risk means that concessionaires are actually exposed to the uncertainties of the market and therefore their estimated potential losses are not merely nominal or negligible.

Nonetheless, despite a certain – albeit dispersed – legal framework, the PPP structure is not a regular phenomenon in the Austrian legal landscape. Subsequent to the A5 highway project 15 years ago, transactions were smaller, like the nine new Viennese school campuses which tried to utilize an innovative approach. Moreover, the PPP model was criticized in the past by the Federal Court of Auditors, one of the authorities competent for the supervision of PPPs in Austria, because of their alleged cost overruns and negative value for money. This highly successful model elsewhere must therefore first prove itself in Austria.

By Jasna Zwitter-Tehovnik, Partner, and Martin Navara, Associate, DLA Piper

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Major infrastructure and industrial projects depend on careful government planning and resources. However, Bulgaria’s government has been in flux since 2021, with six general elections in the last four years. Nevertheless, there have been some legislative developments that could stimulate private investment in the fields of utilities, transport, postal services, energy, and industrial manufacturing.

Concessions Act – Untested Opportunities

Important amendments to the Bulgarian Concessions Act were enacted in 2021 but remain untested in practice and little publicized. According to the changes, concessions can be granted by so-called “contracting entities,” meaning entities carrying out specific sectoral activities and awarding a concession for any of those activities.

In addition to public authorities (state, regional, or local governments), contracting entities are also the bodies governed by public law, the public undertakings, and other entities that operate on the basis of special or exclusive rights granted for the exercise of one of the sectoral activities. The activities concerned include: operation of networks for providing a service to the public in connection with the production, transport, or distribution of gas, heat, or electricity; public services in the field of transport; postal services; and extraction of oil or gas, among others. 

The concept of contracting entities (as opposed to contracting authorities) is not new – it was introduced in 2014 by Directive 2014/23/EU on the award of concession contracts. However, it was not transposed into Bulgarian law until the 2021 amendments to the Concessions Act. Concessions can therefore be awarded not only with regard to state- or municipality-owned property but also in cases concerning assets owned by entities (including commercial companies) that perform the specified sectoral activities.

Although introducing contracting entities is a good step, the Concessions Act remains ambiguous as to whether such entities may effectively award concessions. This appears to not yet be possible as the law only allows the powers of a concession grantor to be exercised by a minister or municipal mayor. This could be one of the main reasons why the concession options related to entities carrying out sectoral activities have not yet been tested in practice.        

Forthcoming Amendments to the Industrial Parks Act

A legislative initiative for amending the Industrial Parks Act was brought forward in early 2024 and a draft bill is currently with the parliament. The amendments aim to improve the investment environment and encourage investors to engage in manufacturing activities in industrial parks. Three significant amendments can be singled out: the introduction of a new type of industrial park, the criteria for determining key industrial parks, and the enhancement of the development phase of industrial parks in terms of spatial planning.

The current minimum threshold for an industrial park is set at 300,000 square meters, with limited exceptions applicable to industrial parks for high-tech activities and services. The amendments envisage another exception – industrial parks specialized for a single or similar type of manufacturing activities with a threshold of 150,000 square meters. The proposal has been criticized by stakeholders for lacking justification. The approval of such an amendment would be a test of the government’s initial goal to stimulate the formation of clusters.

An industrial park may be declared as a key industrial park if approved by the Council of Ministers, but no specific statutory criteria for inclusion exist. Secondary legislation is therefore proposed to determine such criteria. Owners and investors of key industrial parks would benefit from preferential treatment when applying for support under the Investment Promotion Act and for financial support at the national and EU levels.

An industrial park is allowed to be created at an early stage of the spatial planning of the included land plots. If the draft bill is adopted, the park owner should proceed quickly with the development phase after registration, as pursuant to the amendments, the industrial park would be deregistered if a detailed development is not entered into force and submitted within two years of registration.

While we have not yet witnessed any concession granted by a contracting entity and cannot predict the timeline for the approval of the amendments to the Industrial Parks Act, both developments send an overall positive signal to investors.

By Boryana Boteva, Head of Projects and Infrastructure, and Simeon Vachev, Senior Associate, Kinstellar

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Serbia’s booming construction sector and ongoing infrastructure projects establish it as a vital economic hub in the region. In 2023, construction works valued at over EUR 5 billion contributed around 5.5% to the national GDP. The country’s strategic location and ambitious infrastructure plans have attracted significant foreign investment. With projects like highways, railways, and energy facilities underway, Serbia is strengthening its position as a critical economic connector in Southeast Europe.

EXPO Belgrade 2027 – Infrastructure Development

Serbia recently secured the opportunity to host the high-profile EXPO 2027 international exhibition. It has taken decisive steps toward realizing the exhibition, which has been declared a project of national significance. Preparations for the event are expected to involve a wide range of infrastructure projects, including transportation networks, public spaces, and facilities upgrades with a lasting impact. Seen as an opportunity for local and international companies, the project is expected to stimulate economic activity significantly. In the context of EXPO 2027, Public-Private Partnerships (PPPs) could play a crucial role as one of the essential methods to support economic growth and investment in infrastructure development.

The Notion of Public-Private Partnerships

PPPs were introduced in the Serbian legislature through the Public-Private Partnership and Concessions Act (Act) in 2011 and amended twice in 2016. Article 7 of the Act defines PPPs as long-term cooperation between a public and a private partner for financing, constructing, reconstructing, managing, or maintaining infrastructure and other facilities and provision of services of public importance, which can be contractual or institutional.  This legislative definition draws inspiration, at least in part, from the European Commission’s Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions.

PPP Projects in Serbia

PPP Projects are generally regarded as beneficial for local economic development and growth.  The number of PPPs in Serbia has seen an upward trajectory in recent years, reflecting a growing appreciation for their role in leveraging private sector efficiency and resources.  As of April 2024, the Serbian Commission for PPPs has approved 284 PPP projects, approximately 90 of which incorporate a concession component. High-profile initiatives like the concession of Belgrade Airport and the E-763 highway PPP represent significant national projects. However, most PPPs are smaller, local endeavors that, while less grand in scale, are crucial in their impact. These local PPPs play an essential role in enhancing the business environment and contribute to local communities’ economic development and sustainability.

Significantly, a substantial portion of the PPPs in Serbia are carried out by small and medium-sized enterprises (SMEs). These PPPs play a pivotal role in fulfilling the demand for specific public and utility services within communities and stimulating local economies. By engaging SMEs, PPPs contribute to generating employment in the private sector, which in turn helps streamline public sector staffing at the regional level. In this regard, PPPs are often directly associated with or sometimes can become synonymous with local economic development (LED). By leveraging the capabilities and investments of the private sector, PPPs help catalyze economic growth in services and regions that might otherwise struggle to attract direct investment.

A recent study sheds light on the sectors most frequently served by local PPPs in Serbia.  Transportation services lead with 28% of the PPPs focused on this area, followed closely by public lighting, which accounts for 24.5%. Other significant sectors include the production and distribution of heat (8.5%), communal waste management (6%), local road reconstruction (9.5%), and the management of public garages (2.5%). The remaining 16% of PPPs span a variety of other services. The study’s insights are essential in understanding the realities of how PPPs are being utilized to develop public infrastructure and services across Serbia, and they point to potential areas for further development, especially in underrepresented regions.

Final Remarks

In conclusion, Serbia’s pursuit of PPPs reflects a strategic approach to infrastructure development, emphasizing collaboration between the public and private sectors to drive economic growth and enhance service provision. The upcoming EXPO Belgrade 2027 presents an opportunity for further infrastructure development through PPPs, which is crucial in driving investment and economic growth.

By Ognjen Colic, Partner, and Nikola Ivkovic and Dusan Jablan, Associates, Gecic Law

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Macedonian legislature has amended multiple laws for the purpose of introducing special rules for facilities of strategic importance, which are highly significant for the development of the infrastructure. Pursuant to the latest amendments of the Law on Spatial Planning (LSP) and the Law on Construction (LC), both of which entered into force on May 30, 2023, the “facilities of strategic importance” category includes state roads, railway lines, backbone gas pipelines, and any other facilities of public interest that are built as strategic investment projects or projects of strategic national importance.

The project scope for a facility of strategic importance (Facility) would be regulated by means of a spatial project for facilities of strategic importance (Spatial Project). The law provides alternative approaches for investors, who can decide whether they want to define the boundaries of the project scope in one Spatial Project or in stages by preparing multiple Spatial Projects.

The producer of the Spatial Project is obliged to submit a request detailing the project scope to obtain necessary data from relevant entities (e.g., legal entities, ministries, institutions, and other authorities for spatial planning, energy, water supply, infrastructure, agriculture, environmental protection, transport, etc.). The relevant entities are obliged to provide the data and information within seven working days from the date of the request, which is shorter than the general deadline of 15 days for the same entities to respond in all other cases. Among other things, the LSP also stipulates shorter deadlines than the general ones for the issuance of spatial planning terms by the Agency for Spatial Planning (three working days from the date of receipt of the request), the adoption of a decision on the spatial planning terms by the Ministry of Transport and Communications (two working days from the date of receipt of the request), and conducting the digital overlay of the project by the Real Estate Cadastre Agency (Cadastre Agency) (five working days from the date of receipt of the project). The above approach is intended to speed up the completion of the necessary formalities for the preparation of the Spatial Project and emphasizes the priority assigned to such projects.

The Government of the Republic of North Macedonia (the Government) would decide on the Spatial Project based on the documentation submitted and the completed Spatial Project. In case of a positive decision, the Cadastre Agency conducts the pre-registration in the Real Estate Cadastre ex officio, indicating that the Facility is under construction based on the Government’s decision and a geodetic survey.

Additionally, the Law on Minerals stipulates that a concession for detailed geological exploration of minerals for the construction of European road corridors of strategic interest and/or a concession for the exploitation of minerals for the construction of European road corridors, state roads, and hydrotechnical facilities may be granted based on a request, although the general regime stipulates preparation and publication of a public call for granting of concession rights. The above enables the construction of the Facility with reduced construction costs and administrative burdens.

The LC also stipulates a special regime for Facilities. Among other things, the rules on conceptual design, issuance of a construction permit, conditions for commencement of construction, alterations during construction, deadlines for completion of construction works, and dislocation of grids, substations, or pipelines would not be applicable.

Construction works for a Facility would be performed in accordance with the Spatial Project, as no construction permit is required. Upon completion of the construction works, an as-built design of the Facility is to be prepared and subsequently verified by the supervising engineer who monitored the construction.

A use permit may be issued for the Facility even if not all real estate rights have been fully regulated in cases where a decision on granting possession of the land was issued in an expropriation procedure. However, registration of the Facility in the public record of real estate can only be conducted following the regulation of real estate rights with the owner(s) of the land on which the Facility has been constructed. The above approach enables the use of the Facility prior to its registration in public records.

The determination of the Macedonian authorities to create a favorable legal framework for the implementation of infrastructure projects is indisputable. However, it remains to be seen whether the enacted legislation will be sufficient to boost infrastructure development.

By Marija Filipovska Jelcic, Partner, and Aleksandar Josimovski, Senior Attorney-at-Law, CMS Skopje

This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.