What is a PPP project contract? Regulations on PPP contract termination in Vietnam

What is a PPP project contract? Regulations on PPP contract termination in Vietnam (Source: Internet)

1. What is a PPP project contract?

According to Clause 16, Article 3 of the Law on Public – Private Partnership Investment 2020, PPP project contract means a written agreement between a contracting authority and a PPP project investor or enterprise on the State's concession to that investor or PPP project enterprise to execute a PPP project according to provisions of this Law, including the following types of contracts:

- Build – Operate – Transfer contract (hereinafter referred to as BOT contract);

- Build - Transfer - Operate contract (hereinafter referred to as BTO contract);

- Build - Own - Operate contract (hereinafter referred to as BOO contract);

- Operate - Manage contract (hereinafter referred to as O&M contract);

- Build - Transfer - Lease contract (hereinafter referred to as BTL contract);

- Build - Lease - Transfer contract (hereinafter referred to as BLT contract);

- Mixed contract specified in Clause 3, Article 45 of the Law on Public – Private Partnership Investment 2020 is the contract which is the result of combination of those contracts prescribed in Clause 1 and 2 of Article 45 of the Law on Public – Private Partnership Investment 2020

2. PPP contract term in Vietnam

The term of a PPP project contract in Vietnam under Article 51 of the Law on Public – Private Partnership Investment 2020 is as follows:

- The contract term shall be agreed upon between parties based on the decision on approval of investor selection results.

- The contracting parties may adjust the contract term on condition that the aggregate contract term, including the adjustment period, does not exceed the land allocation or lease term in accordance with the land law, and such adjustment does not change other contents of the project investment policy decision.

- Cases in which adjustment in the contract term is required, including:

+ There is any delay in completing the construction phase or any interruption in the operation of the construction work or infrastructure system due to any substantial change in circumstances as provided in the civil law to the extent that it goes beyond the reasonable control of a contracting party;

+ The project is suspended by the competent authority or other competent authority of the State, except as it is suspended through the PPP project enterprise’s fault;

+ As additional costs incurred due to the competent authority’s request have not yet been determined by the contracting authority after the contract conclusion, in case of failure to obtain permission for such extension, the PPP project enterprise cannot recover these costs;

+ There is any change in planning, policies and related laws to the extent of a reduction in revenue by less than 75% compared with the revenue in the financial plan specified in the contract;

+ The revenue increases by at least 125% compared to the revenue inscribed in the financial plan specified in the contract.

3. Regulations on PPP contract termination in Vietnam

According to Article 52 of the Law on Public – Private Partnership Investment 2020, the termination of PPP project contracts is as follows:

- The contract termination shall comply with the provisions of the contract, and may serve as a basis for the contract discharge.

- Termination of a PPP project contract before its expiry (briefly called early termination) only occurs in the following cases:

+ If the project is affected by a force majeure event, despite all remedial actions taken by parties, the continued execution of the PPP contract will not be ensured;

+ Early termination occurs to gain the state interests; meet the requirements concerning national defence, security and state secrets;

+ The PPP project enterprise loses its solvency in accordance with the law on bankruptcy

+ Either party seriously defaults on contractual obligations;

+ Other cases appear due to substantial changes in circumstances in accordance with civil law to the extent that the contracting parties agree to terminate the contract.

- The contracting authority must report to the competent authority before the contract termination.

- In case of termination of a PPP contract before its expiry, the contracting authority shall perform the following tasks:

+ Cooperating with the lender in selecting an alternative investor to sign a new PPP contract;

+ Pending the implementation of the response plan, if an alternative investor has not been selected yet, the contracting authority shall be responsible for the safety and anti-deterioration of the work or infrastructure system with respect to the project under construction; the operation and commercial use of the work or infrastructure system to ensure the continuity of the provision of public products and services with respect to the project in operation.

- The authority entering into a contract to perform the tasks may use the funding sources specified in Clause 3 of Article 73 in Law on Public – Private Partnership Investment 2020 and other lawful income.

- In case where the PPP contract is terminated before expiration of the term for in the national interest; ensure requirements on national defense and security, and protection of state secrets or due to the contracting authority’s serious default on the performance of the contractual obligations:

Funds for acquisition of the PPP project enterprise or compensation for contract termination shall be allocated from the state capital according to the provisions of law;

In the event of a termination due to the fault of the investor, the investor is responsible for transferring shares or contributing capital to the replacement investor.

Quoc Dat

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