CO N C ES S I ON

Definition
• Scholar (Nicholas Miranda) define it is an
agreement between a government and a private
company (the “concessionaire”), in which the
government transfers to the company the right
to maintain, produce, or provide a good or
service within the country for a limited period of
time, but the government retains ultimate
ownership of the right. The elements here are:
– Transferring right or service
– Limitation of time
– Retaining of right
 Continued
• Art 3207 sub 2 define it The concession of a public
service is the contract where by a person, the grantee,
binds himself in favor of an administrative authority to
run a public service getting a remuneration by means
of fees received on the use there of.
– Running a public service
– Taking remuneration from user or fund prepared
• In procurement proclamation no 649/2009 article 2
sub 27 and 28 indicates the concession agreement as
one part of public private partnership.
 Justification and difference
• Article 3207 (1) justify the reason why we need
concession agreement. inadequacy of private
initiative in participating in public service because
of lack of infrastructural capital, expert
management and exposure to externalities.
• It is different from other public procuring
agreements in the following manner:
– Administrative authorities have supervisory role art
3208 (1)
– No direct payment
– There is no price discriminatory
 In doing so
• Administrative can make regulation to control
the grantee, art 3209
• It cannot force grantee for need of approval
section by section performance
• Interpretation of the content of contract shall
not prohibit enforcement of new regulation
• It cannot you police force for performance
purpose
 Duration of concession
• The parties can agree the duration of
concession, but not more than sixty years.
• If the time is not specified the duration will be
assumed as seven years.
• Renewal is possible. Failure to renew the
concession within two years implies the
implicit renewal of the concession for another
seven years.
• Are concession perpetual in nature?
 Relationships
• In concession we have three parties, grantor, grantee
and user.
• The grantor cannot represent user in case of claiming
compensation from grantee.
• Any user can claim provision of service at fixed price.
• User can claim restitution of unduly payment with in
one year only, art 3225 sub 2.
• Similarly, the grantee claims unpaid payments within
one year.
 Variation clause
• The concession contract may have a
stipulation to the effect that adjustments in
prices and tariffs will be in place by default. It
shall consider:
– Change of price in certain material or service
– The change of tariff must be proportional
• In adjustment, if the parties cannot agree,
courts have a responsibility to fix the amount,
what is proportional.
 Revision clause
• The parties can put a revision clause where economic
circumstances change considerably, called bilateral
modification.
• Here what magnitude of economic change modify the
concession?
• Prerogative right of the grantor, unilateral modification
is also possible. But limited to
– Fit for the proper operation…of the service
– fit for the improvement of the service
• However the grantor has no right to modify condition
that alter the object of contract or affect financial
interest of grantee.
Termination of concession: 1. Causes
• Stipulations stated in the agreement
• Redemption: can be taken to mean improving of
something: the act of saving something or somebody
from a declined, dilapidated, or corrupted state and
restoring it, him, or her to a better condition.
• The reason for this is either to abolish or reorganize
public service art 3236 (2)
• It is an act of the grantor to terminate/wind up
concession in the above reasons. But it cannot be take
for the purpose of replacing the grantee by other
grantee.
 Continued
• Withdrawal order: the parties can have a clause in the
concession, grantor can order withdrawal in case of
special grave fault of grantee in providing service.
• In no clause, courts can order withdrawal, moreover
they have the power to determine whether a given
fault is grave or not.
• Sequestration: is the act or process of legally
confiscating somebody's property temporarily until a
debt that person owes is paid, a dispute is settled, or a
court order obeyed. Here also there is fault like
incompetence or incapacity.
 2. Effects of termination
• Suspending rights of grantee specially in case of
sequestration
• Winding up: settling the accounts of grantee and
grantor/authorities.
– Returning immovable property without compensation
– Returning movable property with compensation unless specified
to do so in concession
– Returning security
• Compensation grantee in case of prerogative
termination.