Termination of the concession agreement: investments, receivables
A concession agreement is a serious multi-year agreement between the state and business on cooperation regarding the modernization or reconstruction of large facilities.
The concession agreement is concluded, executed and paid by the customer in the manner determined by a number of laws and regulations in their development. This is a complex conglomerate of legislative regulation, rights and obligations of the parties under a concession agreement.
Accordingly, if a party to a contract is a state represented by various organizations with state participation, then such agreements are concluded on the basis of procurement procedures.
Judicial act: Decision of the Arbitration Court of the Samara Region of April 12, 2018 in the case of A55-11320 / 2017
Plot of affairs
Between the company (the plaintiff) and the administration of the rural settlement (the defendant) a concession agreement was concluded on the reconstruction of the object for a period of 30 years.
Payment under the terms of the agreement should be made in the order of the monthly payments of two types: a simple monthly payment in respect of part of the work and discounted (with a deferred payment) in relation to another part of the work.
Upon completion of the investment and work under the agreement, assuming that the administration of the rural settlement makes monthly payments in less than necessary amount, the company sends an agreement to the counterparty to terminate the concession agreement with a condition on returning investments in greater volume than stipulated by the terms of the concession agreement.
The administration of the rural settlement refuses the company, after which the company goes to court with a claim for termination of the concession agreement. The argument of the company is that the administration does not return investments in due amount due to the fact that the public debt on utility bills is growing, many court decisions on recovery are not executed, and bailiffs stop enforcement proceedings due to the impossibility of their execution.
The court denied the claim.
Court position
1. The court analyzed the possibility of applying to the current situation three cases of lawful termination of the concession agreement: no transfer of the object; transfer of the object in a condition not conforming to the agreement; failure of the customer (concessor) to finance the facility under the agreement.
2. The court concluded that the cases stated in the company's claim cannot be attributed to the cases established for judicial termination of the agreement by law, which is why the claim was denied.
3. The court found that the decrease in the return of investments cannot be due to the growing debt of consumers of utilities, as well as the impossibility of their recovery due to the fact that this does not depend on the administration of the rural settlement.
4. The court determined that the company did not indicate which provisions of the contract were violated, did not provide evidence of such a violation, and did not provide reasonable arguments allowing the court to satisfy the claims.
5. The company's arguments regarding misrepresentation at the stage of signing the agreement were also not accepted by the court: the procurement procedure was not violated, therefore, the company was familiarized with all the provisions of the concession agreement being concluded, including the investment limit in the object (which the company exceeded ).
Comments
1. A concession agreement is concluded on the basis of procurement procedures, the procedure for which involves a detailed review of the terms of the agreement in full.
2. The limit of investment in the facility is determined by the terms of the concession agreement and must be respected.
3. Termination of the concession agreement is possible solely on the grounds specified in the law: lack of transfer of the object; transfer of the object in a condition not conforming to the agreement; refusal of the customer from financial participation within the limits stipulated by the agreement.
4. Issues of debts of third parties (in this case, consumers of utility services) cannot be correlated with obligations on return of investments by the customer (supplier).
5. When filing a claim, it is necessary to specify violations as specifically as possible, to support the position with evidence and appropriate arguments.
In the event that your litigation or other dispute, contractual work or any other form of activity concerns the issues discussed in this or other of our material, we recommend checking and making sure that your legal position corresponds to the latest changes in practice and legislation.
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