STRUCTURE OF THE

CONCESSION AGREEMENT
1. The basic terms of the concession
2. Implementation of the project
3. General obligations throughout the concession
period
4. Breach of contract and other failures to
perform
5. Assignments and public sector changes
6. Miscellaneous provisions
7. Appendices
 IMPLEMENTATION OF THE
PROJECT
1. Construction of project facilities
• Land acquisition and use
• Design
• Construction
• Testing and acceptance of construction
• Delay in completion

2. Financial Management:
The way in which expenses are revenues are to be
incurred, recorded and disbursed should be precisely
specified in a concession agreement
 IMPLEMENTATION OF THE
PROJECT
3. Operation and maintenance
• Operation parameters
• Maintenance and repair standards
• Inspection and monitoring
• Toll/tariff formulas and adjustment of the
formulas
• Toll/tariff collection system
• O&M bond
• Services to users of the project facility
 GENERAL OBLIGATIONS THROUGH
OUT THE CONCESSION PERIOD
1. The general obligation of the government:

• Protection of the project company against the consequences of

changes in the laws and regulations of the host country that
would adversely affect the project company
• Import and export permissions
• Tax and duty incentives
• Safety and security protection
• Employment permits
• Access to public utilities
• Performance guarantees for public sector entities that are parties
to the construction and operations of the project
• Protection from competition
 GENERAL OBLIGATIONS THROUGH
OUT THE CONCESSION PERIOD
2. General obligations of the project company

• Must comply with laws and regulations of the host country

• Required to take all reasonable steps for environmental protection
• Compliances with safety standards
• Obtainment and renewal of approvals and permits
• Use of competitive national constructors, services and goods
• Protection of labour rights
• Employment and training of national personnel
• Transfer of technology
• Project company’s responsibility for subcontractors and their
employees
• Insurance
 GENERAL OBLIGATIONS THROUGH
OUT THE CONCESSION PERIOD
3. Common obligations for the government and the
project company

• Force majuere
• Rights to project documents including ownership
of design and drawing
• Confidentiality as to information and documents
obtained
• Obligations to cooperate
• Warranty against improper payment
 BREACH OF CONTRACT AND
OTHER FAILURES TO PERFORM
1. Contract Termination
• The government’s right to terminate the project
agreement
• The project company’s right to terminate the
project agreement
• Termination notice
• Rights and obligations of parties upon
termination
• Compensations payment
• Notice to lenders
• Rights to lenders
 BREACH OF CONTRACT AND
OTHER FAILURES TO PERFORM
2. Liability for breach of contract

• Terms and conditions for the compensations

• Exemptions from obligations to pay
compensations
• Benefit gain from failure to perform
• Duty to mitigate the loss
• Currency of damages
 BREACH OF CONTRACT AND
OTHER FAILURES TO PERFORM
3. Liability for personal injury and damage to
property of third person

• Provisions cover personal injury to users or

employees of the facilities and other third parties
or in damage to their property.
• The parties may wish to provide for the liability
insurance coverage against such risks
• Liability for environmental damage
 ASSIGNMENTS AND PUBLIC
SECTOR CHANGES
A project agreement should ensure that a
party cannot assign the contract or any
essential part of it without consent from the
other party. It should also ensure that in
case of changes to an entity due to
merger/takeover or privatisation of a public
entity, the new or surviving entity will
become fully liable to honor the contract.
MISCELLANEOUS PROVISIONS
Depending on the legal tradition of the
contracting parties, there may be some additional
provisions in a project agreement covering such
issues as interpretation of project agreement,
resolution of disputes and procedural matters.
International lenders to BOT projects in developing
countries usually expect the project agreement to
be governed by the law of a neutral jurisdiction and
for disputes to be settled by international
arbitration.
 APPENDICES
• Project description and specification
• Necessary licenses, and permits and approvals
• Description of land and right of way
• Preliminary design criteria
• Procedures for government to approve design changes by project company
• Procedures for government to request design changes
• Environmental impact assessment
• Quality control system
• Programme and procedures for testing
• Operation parameters
• O&M criteria
• Insurance
• List of pre-approved contracts
• Form of bonds
• Overseeing and monitoring rights of government
• Form of legal opinion for the project company
• Form of legal opinion for the government