Legal certainty and the Public-Private Partnership framework in Argentina

Abstract

Public-Private Partnership contracts (PPP contracts) were introduced in the Argentine legal framework with the enactment of Law No. 27.328 on 16 November 2016, as a result of a significant social consensus regarding the need of establishing a regulation that allowed a paradigm change in administrative contracting. The law was implemented by Decrees No. 118/2017 and 936/2017. This new regime, whose flexibility allows a wide variety of transactions to be developed within its scope, is structured as an alternative to other administrative contracts contained in our legal framework and aims to improve the efficiency in public contracting, whilst it fosters other public-interest objectives, such as social inclusion, creating jobs and protecting the environment, amongst others. This article focuses on the analysis of the regime and particularly emphasizes its structural aspects through which legal certainty is offered to investors, contractors, and the Government, in particular the establishment of clear rules which grant confidence to those who are interested in participating in this kind of contracts. Thus, it is explained that contracts must clearly establish their current term, risk allocation between parties, obligations undertaken by the contractor, payment conditions and procedures, price review procedures, and sanctions for breaches of contract, amongst other clauses. Moreover, the article emphasizes the importance of foreseeing clearly the Government’s prerogatives during the contract development, especially those referred to unilaterally modifying the scope of work under the PPP agreement or premature termination for convenience, establishing suitable compensation systems to guarantee the public party’s indemnity. In this respect, clauses directed to maintain the original economic and financial balance of the contract are essential. Also, the regime establishes rules regarding damage liability of the Government which are more favorable to the private party than those contained in the general administrative regime. On the other hand, the article explains how the public tender or bidding procedures used to select an awardee –as established in the Law- are the most convenient for the public interest. There are also specific warranties that ensure payment obligations assumed by the public party, one of which consists of a PPP trust created with public resources to ensure payments. Regarding dispute resolution mechanisms for controversies arising in relation to the execution, application, and interpretation of PPP contracts, the framework provides that they may be submitted to technical panels or arbitral tribunals, subject to a specific regime that grants wider warranties for investors. Last but not least, the article refers to control and follow up of the PPP’s procurement processes and execution of PPP agreements, which shall be performed as follows: the design and implementing of general regulations will be in charge of the PPP Sub-Secretariat, the contract development inspections will be held by the contracting authority, and there will be a Bicameral Committee responsible for the supervision of the execution of PPP agreements.