How are concessions granted?

How are concessions granted?

The subjects of concessions under the Concessions Law may be: 

a) construction, use and maintenance of: 1) roads and related infrastructure facilities, 2) railways, navigable canals and ports, 3) airports, b) use of public water good: 1) water for technological process in performing economic activities, 2) water and water land for the use of hydro-accumulations, baths, ponds, 3) water land for realization of some economic activities or for realization of other subjects of concession in accordance with this Law, 4) for extraction of materials from watercourses (gravel, sand, stone) according to the program of watercourse arrangement, c) construction and use of energy facilities installed with a power exceeding 250 KW, except bio-mass and bio-gas energy facilities and solar plants with photovoltaic cells at facilities independent of installed power, d) construction or reconstruction and use of oil pipelines, gas pipelines and facilities for the storage, transportation and distribution of oil and gas, e) exploration and exploitation of mineral raw materials, f) planned shooting of venison while performing hunting activities and fishing, g) games of chance, h) postal and telecommunication services, except reserved postal services and joint and international communications, i) passenger and freight railway transport, j) public road transport, k) spaces and objects of natural, construction and cultural-historical heritage, l) communal activities, except water supply to the population, as well as construction, maintenance and use or reconstruction and modernization of communal objects, m) waste management activities, n) construction or reconstruction and modernization of spa facilities and their use, construction of tourist infrastructure facilities and suprastructures, o) hospitality industry activities; p) agricultural land; q) construction, use and maintenance of sports facilities, r) performing activities in protected areas as protected natural goods, and the right to construct and use the facilities required to perform those activities in accordance with special regulations.

The Concession Law specifically predicts that the subject of a concession may be the use of other goods of general interest and the provision of public services, in accordance with regulations that are arranging a particular economic or other area.

Concessions that envisage the construction or reconstruction of facilities, plants or drives can be realized according to a BOT model (Build-Operate-Transfer), which means the construction or reconstruction and financing of a complete facility, plant or drive, its use and handover in ownership of the Concendant in the agreed deadline or according to other models. It is also allowed to contract other models for realization of concessions in accordance with the Document on Concessions Grant Policy and the subject of concessions.

Concessions Grant Policy 

In accordance with the Concession Law, the Concession Grant Policy includes measures and activities aimed at establishing and maintaining an effective system of granting concessions, protecting and sustainable use of public goods, natural resources and other goods of general interest, enhancing the activities that are the subject of concessions, and achieving the most favorable financial and economic effects to meet the parameters of sustainable development and to achieve direct and indirect benefits for Republic of Srpska.

The Concessions Grant Policy is arranged and implemented by the Document on  Concessions Grant Policy. The Document on Policy contains description of the economic and other areas in which concessions can be granted, the goals and priorities, the types of BOT and other concession grant models, the elements for making the study, as well as the measures and activities undertaken to achieve long-term concession goals, established by strategic and other planning documents.

The Document on Policy is prepared by the Concession Commission, in cooperation with the competent authorities. The National Assembly of Republic brings the Document on Policy, on the proposal of the Concession Commission. The Document on Policy is published in the “Official Gazette of Republic of Srpska”.

The implementation of the Document on Policy is followed by the Concession Commission and, if necessary, proposes its harmonization with the strategic and planning documents that refer to the economic development of Republic of Srpska and local self-government units.

The Document on Policy must be harmonized every three years.

Concession Grant procedure

The Concession Law regulates, among other things, the procedure for granting a concession.

The implementation of the concession grant procedure is based on the principles of transparency, non-discrimination, market competition, equal treatment, freedom of movement of goods and providing services, protection of the public interest, efficiency, economy, proportionality, environmental protection, autonomy of the will and equality of the contract parties.

The proclaimed principles of the concession grant procedure provide for: improvement of economic activities through investment of domestic and foreign capital, which all together should achieve more favorable economic effects for Republic of Srpska; for domestic and foreign companies to obtain, on equal terms, the right to use public goods, natural resources and other goods of general interest, as well as the right to perform activities of general interest in accordance with the Concession Law; the same legal position of domestic and foreign companies in the concession grant procedure; equality of conditions for signing and termination of concession contracts; protection of the public interest in the concession grant procedure; the right of Republic of Srpska to grant concessions when the subject of the concession is realized in its territory; the limited duration of the concession period, whose maximum deadline is established by the Concession Law and the Concession Contract; handover of constructed facilities, devices and plants upon termination of the concession to the property of Republic of Srpska.

Initiation of the Concession Grant Procedure

The procedure for granting a concession may be initiated based on the initiative of the competent authority, the initiative of the interested entity and the offer in the negotiated procedure.

The decision to initiate an initiative for Concession Grant is made by the Government of Republic of Srpska, i.e. the Assembly of the Local Self-Government Unit and it is published in the “Official Gazette of Republic of Srpska”.

An initiative of an interested entity is carried out in a way where an interested entity submits a proposal to initiate a concession grant procedure to the competent authority, under condition that the initiative does not refer to a concession for which the competent authority initiated the concession grant procedure.

Exceptionally, without implementing a public invitation prescribed by the Concession Law, a concession may be granted through negotiated procedure, in the case of: a) an offer by a public company that is carrying out an activity of general interest and whose activity is a subject of concession, b) implementation of signed agreements by the Government of Republic of Srpska or public companies, that refer to the realization of the subject of the concession and c) the extension of the deadline for which the concession was granted. Concession Grant through negotiated procedure falls within the exclusive jurisdiction of the Government of Republic of Srpska.

The Government of Republic of Srpska is competent for the concessions grant, except for concessions for communal activities, water supply to the population, as well as construction, maintenance and use or reconstruction and modernization of communal activities, and for which concessions the Assembly of the local self-government unit is competent. Except of mentioned, the Government of Republic of Srpska may authorize a unit of local self-government for granting concessions determined by law, as follows: for spaces and objects of natural, construction and cultural-historical heritage, construction or reconstruction and modernization of spa facilities and their use, construction of tourist infrastructure and supra-structure facilities, and for the activities in the hospitality industry.

Concession Contract 

The Concession Contract regulates the mutual rights and obligations of the Concendant and the Concessionaire related to the subject of the granted concession, it is signed in accordance with the documentation for the concession grant, the submitted tender and the decision on selection of the most favorable bidder and the concession grant. Depending on the subject of the concession, the Concession Contract contains: a) the concession subject, including the nature and scope of the works to be performed and the services to be provided by the concessionaire and the location where the concession activity will be performed, b) the conditions and way of use of the concession subject, c) the concession period, d) the beginning of the concession activities performance, e) the ownership rights over the property connected with the performance of the concession activity, including the rights over the land on which the concession activity will be performed and the definition of ownership relations upon termination of the contract, f) property given for use by a Concendant, g) amount, deadlines and way of paying, as well as the way of changing the amount of the concession fee for use, h) the way and deadlines for providing funds for financing the concession activity and the dynamics of investment, i) minimum standards of quality of services, criteria and methods for determining prices, i.e. tariffs for end-user of services, j) minimum technical standards to be applied in environmental protection, k) rehabilitation and recultivation of areas degraded by the performance of concession activity, l) right of control from the Concendant, m) scope and way of reporting on performance of contractual obligations, n) right of the Concendant to approve project documentation, as well as contracts signed by the Concessionaire, especially with the owners of the concessionaire or other related persons, o) the type, amount and way of securing the guarantee for execution of the concession contract, as well as the insurance policies that the Concessionaire must maintain during concessions, p) legal remedies in case of non-fulfillment of obligations by either contractual party, q) description of events deemed changed by circumstances and force majeure, as well as conditions for modification or termination of the contract in case of their occurrence, r) rights and obligations of the contractual parties regarding confidential information, s) rights to cede a concession contract and change of the ownership structure of a Concessionaire, t) a way to modify a concession contract, u) conditions for termination of a concession contract, v) a way of handover of real estate, devices and facilities to the Concendant in the state in which they must get handover at the end of the concession period, w) a way of regulating mutual relations in case of termination of the concession contract, and z) other elements relevant to the subject of the concession. The Concession Contract shall be concluded in writing form and signed by the authorized person of the Concendant and the authorized person of the Concessionaire.

Duration of concession

The Concession Contract, concluded between the Concessionaire and the Concendant, is concluded for a term not exceeding 50 (fifty) years. The term of the concession contract is determined depending on: the subject of the concession, the time required to return the invested capital and the realization of the planned profit on the basis of the concession activity. The period for which the concession has been granted may be extended in the negotiation process and is the exclusive jurisdiction of the Government of Republic of Srpska.

Concession fees and guarantees

The Concessionaire is obliged to pay a concession fee in the amount and in the way determined by the Concession Law and the Concession Contract to the Concendant. The concession fee is a mandatory element of the Concession Contract. The concession fee is of a monetary nature, and consists of a fee for the assigned right, which is paid once when signing the Concession Contract and a concession fee for use. Depending on the subject of the concession, the concession fee for use is expressed in percentage in relation to the annual income realized from the performance of the concession activity, or per unit of measure. The concession fee for the assigned right is the income of the budget of Republic of Srpska, i.e. the budget of the local self-government unit, depending on the competence for granting the concession. The concession fee for use is divided between the budget of Republic of Srpska and the budget of the local self-government unit on whose territory the concession activity is performed in the proportion prescribed by the Concession Law. 

The control of the calculation and payment of the concession fee, determined by the Concession Contract, is performed by the Tax Administration of Republic of Srpska, in accordance with the provisions of the law governing the tax procedure. 

Also, the Concessionaire is obliged, after signing the Concession Contract, to submit bank guarantees whose type, amount and term for which the guarantee is provided, are determined by the Concession Contract (performance guarantee, maintenance guarantee, etc.) to the Concendant. 

Assignment of the Concession Contract and change of the ownership structure of the Concessionaire 

The Concession Law provides the possibility of assigning a Concession Contract, and changing the ownership structure of the Concessionaire in a percentage higher than 50%, with the consent of the Concession Commission of Republic of Srpska. The procedure of assigning a concession, i.e. changing the ownership structure of the Concessionaire is more closely regulated by a special Rulebook adopted by the Concession Commission of Republic of Srpska.

Settlement of disputes and legal protection

The provisions of the Law on General Administrative Procedure (“Official Gazette” of Republic of Srpska”, number: 13/02, 87/07, 50/10 and 66/18) will be applied to the procedures carried out by the Concession Commission of Republic of Srpska within its competences, if it is not otherwise prescribed by the Concession Law. For settlement of disputes arising on the basis of Concession Contract, the territorially competent courts according to the headquarters of the public entity are really competent. These provisions do not apply if the parties have agreed on the arbitral settlement of disputes arising on the basis of Concession Contract.

The jurisdiction of the court in Republic of Srpska is exclusive for settlement of disputes arising in connection with real estate Concession Contract in Republic of Srpska. For settlement of disputes arising from the fulfilment of other mutual rights and obligations, the Concendant and the Concessionaire may agree on the jurisdiction of domestic arbitration. If the contracting parties agree, the Concession Commission of Republic of Srpska may mediate in the peaceful settlement of disputes arising from the Concession Contract. The territorial jurisdiction of the court in disputes whose subject is real estate rights is regulated by the provisions of the Code of Civil Procedure. The contracting parties are obliged to extremely precisely define the jurisdiction of the arbitration with the Concession Contract or to accept the jurisdiction of the domestic court in all disputes arising from the Concession Contract. 

Therefore, when it comes to decisions made by a public body in the procedure prior to the signing of the Concession Contract, positive law in Republic of Srpska determines the competence of the administration and administrative procedure, both in their adoption and on the complaint or appeal, except when it is regulated differently by the special law. On the other hand, for decisions for which the Concession Law does not provide for the possibility of a regular legal remedy, the possibility of initiating an administrative dispute in front of the competent court is provided. When it comes to disputes related to Concession Contracts, the jurisdiction of regular courts of general jurisdiction has been established.

Termination of the Concession Contract

The Concession Contract terminates a) upon termination of the subject of the concession, b) upon expiration of the term for which it was signed, c) by initiating bankruptcy or liquidation proceedings against the Concessionaire, d) upon unilateral termination, e) by agreement between the Concendant and the Concessionaire, f) upon the day of finality of decision on determining general interest for the construction of facilities or performance of works on the concession good in accordance with the regulations governing the field of expropriation, g) upon the finality of the court decision declaring the Concession Contract null and void, h) by canceling, revoking or annulling the decision on selection of the most favorable bidder and grant of the concession, after concluding the Concession Contract, i) by meeting the conditions prescribed by the other law, resulting in the termination of the Concession Contract.

Also, if the decision on determining the general interest for the construction of facilities or performance of works on the concession good in accordance with the regulations governing the area of expropriation refers to a part of the concession good, the Concession Contract for that part of the concession good is terminated by force of law, if it is not contrary to the nature of the concession activity. 

In case of breaking of the contract on said basis, the Concessionaire may, within six months, retain those parts of equipment, buildings etc., which he built in accordance with the subject of the Concession Contract and which serve to perform concession activity or seek compensation for the actual value of equipment which may be determined for equipment, devices, facilities etc., which cannot be exempted if they are installed in accordance with the subject of the Concession Contract and serve to perform the concession activity.

Breaking of the Concession Contract

The Concendant may unilaterally break of the contract in cases if: a) the Concessionaire does not perform or fails to perform the necessary actions within the agreed period or by its own fault does not start performing the concession activity within the agreed period, b) The Concessionaire does not perform the concession activity in accordance with the dynamics and scope specified in the Concession Contract, except in case of unforeseeable circumstances or force majeure, c) the performance of the concession activity endangers the environment and human health or legally protected public goods, through permitted and prescribed standards, d) the Concessionaire does not provide public services in accordance with the agreed quality standards, e) the Concessionaire does not pay the concession fee three times in a row or irregularly pays concession fee, f) the Concessionaire transfers the Concession Contract, changes the ownership structure or disposes of the property contrary to the provisions of this Law and g) in other cases in accordance with the provisions of the Concession Contract.

The criteria based on which the Concendant determines the existence of the listed reasons for breaking of the Concession Contract are determined by the Concession Contract.

Before initiating the procedure of unilateral breaking of the Concession Contract in the cases referred to in points a), b), c), d) and e), the Concendant is obliged to warn the Concessionaire in writing and set a reasonable deadline for fulfillment of contractual obligations which are the reasons for breaking of the Concession Contract.

If the Concessionaire does not eliminate the reasons for breaking of the Concession Contract within the set deadline, the Concendant breaks of Concession Contract with a decision against which an administrative dispute may be initiated.

The Concessionaire may break of the Concession Contract unilaterally, in accordance with the provisions of the Concession Contract and the general rules of the law of obligations.

In case of breaking of the Concession Contract, the Concendant i.e. the Concessionaire is entitled to compensation in accordance with the rules of law of obligations.

Contact

  • Save Mrkalja 16
    78 000 Banja Luka, BA
  • komisija@koncesije-rs.org
  • +387 51 490-890
  • +387 51 490-481