How to avoid the legal risks of PPP projects?

First, the legal risks of project establishment

Ppp projects are mostly infrastructure or public service facilities projects, which need to be completed before recruiting social capital. According to the National Development and Reform Commission OrderNo. 1 1 Measures for the Administration of Government-Approved Investment Projects, the State Council Guofa [20 14] No.53 Notice on Publishing the Catalogue of Government-Approved Investment Projects (updated to 2014) and the relevant provisions of the Measures for the Administration of Investment Projects where the project is located. Project management is divided into approval and filing. Enterprises investing in fixed assets investment projects in the catalogue of investment projects approved by the government shall report to the relevant project approval authorities for approval in accordance with regulations; Items outside the investment approval catalogue will be put on record.

Before making investment decisions, social capital should understand the relevant laws and policies of project investment, ensure that the project can be established according to law and accurately estimate the workload and input of the project, so as to make corresponding arrangements for project investment and the distribution of rights and obligations with the government.

Second, the legal risks related to ppp project identification and withdrawal

The identification and confirmation of ppp projects are led by the government. However, a lot of fake ppp projects have appeared recently, which eventually led to the compliance dilemma of ppp projects, thus affecting the implementation of government procurement and related preferential support policies. Therefore, social capital needs to check the confirmation results of ppp projects to be invested.

According to the current ppp policy, the government should incorporate the project into the ppp alternative project of the government at the corresponding level and make an annual development plan, which will be screened and confirmed by the financial department at the corresponding level (government and social capital cooperation center) and the competent department of industry. Specifically, the financial department (government and social capital cooperation center) and the competent department of industry will carry out value-for-money evaluation and financial affordability demonstration. After passing the "two arguments", the government at the same level will issue a ppp project reply. The social capital party should check the confirmation documents of the above ppp projects and their effectiveness as soon as possible.

In addition, under the "can enter and exit" system of ppp projects, social capital parties should make the projects conform to the necessary characteristics of ppp projects as much as possible in the process of project implementation, so as not to be cleared out by the competent authorities.

Three, the purchase price into the budget related legal risks

Under the full-caliber budget management system of government revenue and expenditure, the expenditures of governments at all levels, departments and units must be based on the approved budget, and those that are not included in the budget may not be spent; The people's congress at the corresponding level has the right to revoke inappropriate decisions and orders of the government at the corresponding level and the people's congress at the next lower level and its standing Committee on budgets and final accounts. Therefore, in order to ensure the return on investment of social capital, the financial department needs to make a budget plan and report it to the government at the corresponding level and the National People's Congress for approval according to the budget law and other relevant provisions, and then report it to the higher level government for record after approval, and ensure that the total budget expenditure of ppp projects that will not be borne by the government at the corresponding level due to the procurement of this project exceeds 10% of the general budget expenditure of the government at the corresponding level.

In addition, according to the provisions of document Jin Cai [20 15] 109, the government should input important materials and data such as ppp project value-for-money evaluation report, financial affordability demonstration report, procurement documents and contract text into the comprehensive information platform of government and social capital of the Ministry of Finance. In practice, social capitalists can't directly inquire about other ppp projects and the financial budget expenditure burden of the government at the same level, and can't confirm whether the proposed projects touch the red line of 10% of the general public budget expenditure of the government at the same level. Therefore, the government should be required to disclose information comprehensively and accurately, and relevant risk prevention clauses should be set in the agreement.

Four. Legal risks related to project procurement methods

This kind of risk includes the legal risk of project procurement mode selection and the legal risk of project procurement procedure. The current procurement rules for ppp projects stipulate five procurement methods that ppp projects can adopt, such as public bidding, invitation bidding, competitive negotiation, competitive negotiation and single-source procurement, and their applicable conditions. Project implementation agencies shall select qualified procurement methods according to law and implement procurement in accordance with procurement procedures. Wrong selection of procurement methods or improper procurement procedures may lead to social capital winning the bid or invalid transaction results. Social capital should pay special attention to the following points:

(1) If it is a project that must be subject to bidding according to law, social capital should be selected through bidding, otherwise the legal effect of ppp contract cannot be guaranteed;

(2) The procurement procedure should be strictly standardized, otherwise the procurement procedure may be blocked by complaints from other (potential) bidders;

(3) In the ppp project integrating investment, financing, design, construction, operation, management and maintenance, if the social capital party bids by a consortium composed of investors and epc general contractors, it should ensure that the project procurement is operated in the mode of "two bids and one bid", rather than the simple mode of "consortium bidding". According to the provisions of the Bidding Law, in general consortium bidding, all parties in the consortium are required to have the corresponding ability to undertake the bidding project, and all of them should have the corresponding qualifications. However, if real investors do not have epc general contracting qualification, they will be very passive.

(4) According to the Regulations for the Implementation of the Bidding Law, if the employer can build, produce or provide it by himself, it is no longer necessary to select construction and material suppliers through bidding. However, this situation is limited to "investors selected through bidding". If the social capital party is not selected through the bidding procedure or the project franchise is not carried out through the bidding procedure, then whether the corresponding social capital party can directly serve as the project construction contractor or material supplier without bidding, even if it has the qualification of construction contracting or material supply, the law does not clearly stipulate that there is legal risk.

Verb (abbreviation of verb) and legal risks related to the qualification of project implementation agency

Ppp project implementation agencies must obtain the explicit authorization of the government at or above the county level to which the project belongs according to ppp policy. Without authorization, the effectiveness of the signed ppp contract is uncertain.

In practice, if the Development Zone Management Committee or its subordinate management office or local government financing platform company is the implementing agency of ppp project, the social capital party will check the relevant responsibilities and authority or authorization documents of the Development Zone Management Committee or its subordinate management office. For local government platform companies, they can act as representatives of government investors, but as ppp project implementation agencies, they do not meet the relevant regulations of the Ministry of Finance.

VI. Legal Risks Related to Payment Settlement

The purchase price of ppp project generally consists of project cost, operation and maintenance cost, financial cost of investment and financing and investment income.

For the project cost, the standard of cost settlement and the way of price adjustment should be clearly stipulated in the ppp contract, and at the same time, conduction clauses should be set up to smoothly introduce all reasonable cost requirements of the project contractor into the purchase price. It should be noted that infrastructure and public service projects generally need government audit, but according to relevant judicial interpretations, the results of government audit are certainly not the basis for settlement between the two parties. If the government and the social property right party have not agreed that the final settlement of the project shall be subject to the government audit, the third-party cost consulting agency may make the settlement according to the cost conclusion issued by the valuation measurement standard agreed in the contract.

Even if the social capital party has to accept the project cost and accept the government audit, it should clearly stipulate the standards that the government audit should follow in the contract, and at the same time, it should pay attention to the pricing and measurement standards of funds that are not stipulated in the government audit but should be included in the purchase price.

Seven. Legal risk of equity financing of project company

Social capital may need equity financing of the project company, and related financing schemes may lead to equity transfer or even control transfer of the project company. The government generally hopes that social capital can make stable and continuous investment during the cooperation period, so it is very sensitive to the equity transfer of the project company, especially the transfer of controlling rights. This requires reserving space for equity financing operation in ppp contract in advance, otherwise it will hinder equity financing.

Eight. Legal risks related to local government support policies

According to the Guarantee Law, Guofa No.201462, Caizong No.68 [2006] of the Ministry of Finance, Guoban No.42 [2015] and Jincai No.57 and other relevant regulations:

(1) The government guarantee commitment is invalid.

(2) Without the approval of the State Council, governments at all levels shall not formulate preferential tax or financial policies on their own. Resolutely cancel the preferential fiscal expenditure policies formulated in violation of laws and regulations and linked to the tax or non-tax income paid by enterprises and their investors (or managers).

(three) the revenue and expenditure of land transfer should be strictly separated, and no region, department or unit may reduce or exempt the revenue from land transfer in the name of "attracting investment" or in the form of project land use, tax refund and subsidies.

(4) The government shall not promise a fixed return on investment, and it is strictly forbidden to carry out financing in disguised form by means of guarantee, repurchase arrangement, and debt clearing, and package the project into a ppp project.

Social capitalists should pay attention to checking whether the relevant government support policies for ppp projects involve the above legal risks.

Nine. Legal risks related to project subsidies and resource compensation

In order to vigorously promote the ppp model and improve the supply capacity and efficiency of public goods and services, the government has repeatedly issued policies to increase support in finance, taxation, prices, land and finance to ensure that social capital and the public benefit together, and attract social capital to participate in investment and service projects of public goods and services through capital markets, development and policy finance.

Therefore, social capital should fully understand the subsidy compensation, policy loans and other support policies for the projects to be invested, and make arrangements in the agreement as far as possible to fully enjoy the relevant preferential treatment. For public welfare projects, if the government has limited financial resources, it should strive for resource compensation as much as possible, and clearly stipulate in the agreement, such as franchise rights, naming rights, advertising rights, resource development rights, property and investment service opportunities.

X. The project company manages and disperses relevant legal risks.

According to the current policy, the social capital party should hold a controlling position in the ppp project where the government and the social capital party jointly set up the project company. In order to ensure the unity and efficiency of project company's decision-making, social capital generally requires government investor representatives to give up their decision-making rights, the right to choose managers and the right to share dividends. If the general contractor of the project also shares in the project company, it can also be handled by reference. In practice, there are also cases where representatives of government investors did not pay their capital contribution to the project company during the cooperation period. In this case, such an arrangement should be made.

XI. Sources of legal risks related to the purchase price of government projects

Social capitalists should strive for the government to plan or arrange the source and financing of ppp project procurement in advance. Involving the local retained part of tax, local administrative fees, land transfer income and government bonds, the corresponding authority and policy restrictions of the government should be verified.

In practice, the government has promised to simultaneously list and sell supporting land, so that the proceeds from the sale can be used to pay the future purchase price of the project. According to the "Regulations on Land Management", "Planning Law", "Regulations on Land Reserve Management" and "Regulations on Land Transfer Revenue and Expenditure Management", the legitimacy and feasibility of government authority and corresponding arrangements should be verified.

Twelve. Legal risks of planning and construction docking of ppp projects or related projects.

In the ppp project, social capital should be the project operator to plan and design the whole project to ensure the project development progress and investment income. However, in practice, the following situations will be involved, and arrangements need to be made in the agreement in advance:

(1) The supporting facilities for project construction shall include necessary supporting facilities such as project land, construction land, water and electricity supply and construction roads. The government should promise to put them in place and meet the construction conditions before the project starts.

(2) Related projects outside the 2)PPP project package but within the design scope, such as water management network, greening project, highway section across railway bridge, etc. , often monopolized by local platform companies or designated companies in the power and railway industries, should be coordinated by the government and carefully designed related rights, obligations and responsibilities.

(3) There are also projects adjacent to or nested with ppp projects, which are not within the investment scope of social capitalists. Relevant rights, obligations and responsibilities should also be set in advance to minimize the adverse impact on the planning, design and construction of ppp projects.

Thirteen. Legal risks related to project evaluation

In ppp projects, the government confirms the purchase consideration according to the availability, use or performance of the project. Therefore, the availability, usage or performance evaluation of the project is related to the realization of the expected return on social capital investment. In order to make the evaluation more transparent, operable and predictable, it is necessary to comprehensively clarify the relevant evaluation standards, methods and procedures in advance, even in the special agreement documents.

Fourteen Legal risks related to project liquidation and transfer

For ppp projects where the government and social capital jointly set up a project company, they often face the choice of project asset transfer or equity transfer in project liquidation and handover, that is, the project company will hand over the project assets to the government, and then social capital will liquidate and dissolve the project company; Equity transfer means that the social capital party transfers all its shares in the project company to the government investors, and the social capital completely withdraws from the project company. Social capital needs to be designed in advance in combination with the specific conditions of the project and fiscal and taxation factors.