MONGOLIA ASSESSMENT OF THE QUALITY OF THE PPP LEGISLATION AND OF THE EFFECTIVENESS OF ITS IMPLEMENTATION 2011 I- PPP Legislative Framework Assessment (LFA) Compliance of the PPP legal framework with PFI Guide recommendations 1 and Best Practice Core Area Rating Assessment 1- PPP Legal Framework Existence of specific PPP law or a comprehensive set of laws regulating 11/15 concessions and other forms of PPP and allowing a workable PPP legal framework 2-Definitions and Scope of the Law Existence of a clear definition of the boundaries and scope of application of the concession legal framework (e.g. definition of "PPP", sectors concerned, competent authorities, eligible Private party) limiting the risk of a challenge to the validity of PPP contracts, irrespective of whether 19/21 3-Selection of the Private Party 4-Project Agreement 5-Security and Support Issues the act is specifically targeted at PPP Mandatory application of a fair and transparent tender selection process. Limited exceptions allowing direct negotiations, competitive rules for unsolicited proposals and the possibility to challenge illegal awards. Flexibility with respect to the content of the provisions of the Project agreements which should allow a proper allocation of risks without unnecessary or unrealistic/not bankable/compulsory requirements/interferences from the Contracting Authority (obligations, tariff, termination, compensation). Availability of reliable security instruments to contractually secure the assets and cash-flow of the Private Party in favour of lenders, including "step in" rights and the possibility of government financial support, or guarantee of, the Contracting Authority s proper fulfilment of its obligations. 42/45 27/27 21/21 1 UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide")
6-Settlement of Disputes and Possibility to obtain proper remedy for breach under the applicable law 15/15 Applicable Laws through international arbitration and enforcement of arbitral awards. General LFA Rating 92,7% Very High Compliance II-Legal Indicators Survey Effectiveness Assessment : How the PPP law works in practice (LIS) Core Area Rating Legal Indicator Survey 7- Policy Framework Existence of a policy framework for public private partnerships 20/24 8 Institutional Framework Existence of an institutional framework for public private partnerships 14/27 9- PPP Law Enforcement Award and implementation of PPP projects in compliance with the Law 17/21 General LIS Rating 72% High Effectiveness OVERALL RATING 82,3/% High compliance/effectiveness Local Expert 2 : Zoljargal Dashnyam, Partner, GTs Advocates LLC 2. 2 The Local Experts in charge of each country have been consulted for the elaboration of the responses to the Checklist in their capacity of well recognized established law firm in the country but the Local Experts as well as EBRD are in no way responsible for the responses given to any question in this Checlist as the Consultant was free to use any other sources of information for its final determination.
3. RATING: Key for assessment of Each Question Yes 3 points Yes, with reservations 2 points No, with Limited compliance / redeeming 1 point features No 0 point N/A Not applicable 0 point/ Not included in total Key for Assessment of Each Core Area and for Overall Assessment > 90% Very High Compliance/Effectiveness 70%-89% High Compliance/ Effectiveness 50%-69% Medium Compliance/ Effectiveness 30%-49% Low Compliance/ Effectiveness < 30% Very low Compliance/ Effectiveness TERMINOLOGY So as to keep answers consistent and avoid ambiguity, we set out below some brief definitions of the terminology used in this questionnaire. Any definition is provided solely to clarify some of the terminology used below. The reader should note that any such definition does not correspond with any given definition under best international practice (which does not provide for any standardised PPP legal definitions recognised worldwide) neither should it be interpreted that we recommend the adoption of such definitions under actual documentation, but they are included in the interests of clarity for the completion of this questionnaire, and we should be grateful if you could adopt such definitions for the purposes of completing the questionnaire.
"Public Private Partnership" -"PPP" or "PPP project" includes all types of long-term arrangements between public authorities and private institutions, including but not limited to; Concessions, BOT and derived forms, PFI and Institutional PPP. For the purposes of this questionnaire, PPP excludes the sale of public assets or of public company shares which are part of a privatisation process and also excludes public works, services or supply contracts which are subject to public procurement rules. The following types of Public - Private Partnership Agreements may be adopted by a Contracting Authority for undertaking infrastructure projects. These are solely indicative in nature and the Contracting Authority may seek to adopt a combination of the different contractual arrangements, which incorporate some of their elements or combine elements. 4. "BOT" - (Build-Operate-and-Transfer)- and derived forms : a contractual arrangement whereby the Private Party undertakes to finance, design, construct under a turnkey risk basis, operate and maintain an Infrastructure project for a specified period after which period the project facilities are transferred to the Granting Authority usually without payment of any compensation. The Private Party has the right to collect contract or market based tariffs or fees from the users of the infrastructure project, as specified in the PPP agreement, to recover its investment and operating and maintenance expenses for the project. A BOT type of PPP arrangement may provide for all the implementation and operational efficiencies of the private sector, together with new sources of infrastructure capital. Derived forms of BOT contractual arrangements exist such as Build-Own-Operate-and-Transfer (BOOT) similar to the BOT agreement, except that the Private Party owns the Infrastructure project during the specified term before its transfer to the Contracting Authority or its designee, or such as Build-Own-and-Operate (BOO) which is a contractual arrangement similar to the BOT agreement, except that the Private Party owns the Infrastructure project and no transfer of the project to the Contracting Authority or its designee at the end of the fixed period is envisaged. Derived forms incorporating Lease right rather than Ownership or dealing with rehabilitation or extension rather than construction which extent the possible combination which for the purpose of this questionnaire will all be hereafter refferred to as BOT for simplification purpose exept where legal specificcity requires specific treatment. "Concession": is an act attributable to the State whereby a Contracting Authority entrusts to a third party the total or partial management of public services for which that authority would normally be responsible and for which the third party assumes all or part of the risk. "PFI" (Private Finance Initiative) : a form of cooperation and partnership between public authorities and Private Parties which aim to ensure the funding, construction, renovation, management or maintenance of an infrastructure or the provision of service to the infrastructure without the delegation of the public service itself. It is a contractual arrangement whereby the Private Party undertakes the financing and the construction of an infrastructure project and after its completion transfer it to the Contracting
5. Authority or its designee. This arrangement may be employed in the construction of a public service facility for which the public service must be operated directly by the contracting authority for whatever reason but the operation and maintenance of the facility remain the responsibility of the Private Party for the entire duration of the PPP agreement. The contracting authority will reimburse the total project investment on the basis of a rent based of an agreed schedule with the payment starting from the date of commencement of operation and pay for the services rendered to the facility on a performance basis. "IPPP"(Institutional PPP): a structural or corporate form of PPP which provide for the cooperation between public authorities and a Private Party through a joint venture or mix (publid- private shareholding) company in which case all reference to the slection process refers to the selection of the Private Party. Other definitions: The "Law" or "PPP Law": a law regulating any form of PPP including but not limited to Concession, BOT, PFI, IPPP and including, for the purpose of this questionnair, the set of rules applicable to any PPP in the absence of a specific PPP law. The Law for the purpose of this questionnaire also includes any implementing regulation and any form of governemental act regulating PPP. "BOT Law" : a law regulating a BOT type of PPP in their multiple forms. "Concession Law": a law regulating a Concession form of PPP. "Contracting Authority": a public authority empowered to award a PPP and enter into Project Agreements "PFI Law": a law regulating a PFI form of PPP. "PPP unit" : specialized institution/agency/ministerial department established to promote and take care of PPP. "Private Party" : Private Party or other entity in the form of a special purpose company to which a Project Agreement in general has been awarded. [The word Private party will be used for the sake of this study even in case the PPP regulation allows PPP business partner to be a mix company or even a public entity.] "Project Agreement": an agreement(s) between the Contracting Authority and the Private Party regulating their respective rights and obligations with respect to the PPP project.
6. REFERENCE TO BEST PRACTICE UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects, 2001 (hereinafter the "PFI Guide") and UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects, 2003 (UNCITRAL Model Legislative Provisions). EC - Commission Interpretative Communication on Concessions Under Community Law dated 12 April 2000; together with additional EU major documents/decision /recommendation on concessions including Directives 2004/18/EC and 2004/17 EC of 31 March 2004; Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions dated 30 April 2004; Report on the public consultation on the Green Paper (SEC(2005) 629- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions (Brussels, 15.11.2005.COM(2005) 569) European Parliament resolution on public-private partnerships and Community law on public procurement and concessions (2006/2043(INI)); European Commission Guidelines for Successful Public-Private Partnerships (2003).Commission Interpretative Communication Brussels, 05.02.2008 C (2007)6661on the application of Community law on Public Procurement, and Concessions to Institutionalised Public-Private Partnerships (IPPP); EBRD Core Principles for a Modern Concessions Law selection and justification of principles Prepared by the EBRD Legal Transition Team.2005; UNIDO Guidelines for Infrastructure Development through Build Operate Transfer (BOT) Projects, 1996 (UNIDO BOT Guidelines); and OECD Basic Elements of a Law on Concession Agreements, 1999-2000.
7. OVERALL ASSESSMENT 2011 MONGOLIA Compliance of PPP Framework with PFI Guide Recommendations and Best Practice Concession Law of Mongolia 2010 ( Concession Law ) was formulated by taking guidance from UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects, OECD Basic Elements of Law on Concession Agreements, EC Green Paper on Public Private Partnerships and Community law on Public Contracts and Concessions as well as considering recommendations of UNDP, ADB and USAID. The Concession Law which is the first adopted by this country without any past experience on concession except in the mining sector is one of the very few legislation of all EBRD Countries of operation which explicitely provides for a full range of PPP deal as well as for all sort of security instrument and for the possibility of Governement support and guarantee toghether with specific chapter on Lenders rights providing for the possibility of direct agreement as well as step in right all in accordance with Lenders expectation to ensure the bankability of project fionance deals. Concession Law has eight chapters and 36 articles providing legislative and institutional frameworks including scope of the law, determining but not limiting concession types, list of concession objects, granting concession rights, concession agreements, powers of the concessionaire and the concession financier, guarantees for the implementation of concessions and dispute settlement. Main legislative framework of PPP is Concession Law, Constitution of Mongolia, Civil Code, Law on Government, Law on State and Local Property, and Law on Foreign Investment. In accordance with Article 11.1 of Concession Law, the Government has adopted procedures on the selection of the private party. (Regulation on the Tender of Concession Provision, Resolution No. 177, dated 07 July 2010). Following this regulation, Model Prequalification Document on Granting Concessions, Model Request for Proposal Document for Tender and Tender Evaluation Guidelines was adopted by Annexes to the Resolution of State Property Committee no 342, dated 22 July 2010. With respect to procedures on the selection of the private party, there is a room for further clarity and transparency in connection to relationships among State Property Committee/Governors of aimag or capital city, Chairman, Secretary and members of the tender committee.
8. Effectiveness The main policy framework of PPP is the State Policy on PPP as adopted by the Parliament Resolution No.64, dated 15 October 2009. It expresses strong will of the State to promote private sector and to reduce the burden of the government to develop infrastructure and social services with limited funding and human resources. With respect to institutional framework, institutional capacity and human resource of the PPP central unit (PPP and Concession Department and to a greater extent the State Property Committee itself) needs to be improved. At this stage, it is not possible to provide views on PPP law enforcement. Concession Law has a potential to improve the management of state-owned as well as local properties and to enhance transparency at the central government and local level. The future will say if such copy and paste PPP new regulations even inspired by the best international standards will be sufficient to allow the rapid take off of PPP projects in Mongolia with no prior concession expertise and without the full revision of their existing legal framework and business environment.
9. ASSESSMENT & LEGAL INDICATOR SURVEY 1. LEGAL FRAMEWORK 1.1 Existence of different forms of PPP legal framework QUESTION ANSWER ARTICLE COMMENTARY 1. Does the country have a single act dealing specifically with Concessions or a generalised act incorporating the legal framework for PPP, including Concessions?. LAW ON CONCESSIONS dated 28 January 2010 Granting a concession regulations on the detailed procedures for tender /Government resolution number 177 in 2010/
10. 2. Does the country have an act that allows BOT or derived forms such as BOOT, BOO or other forms either as part of a specific act or as part of a general PPP Law? 4.1-4.2 4.1. Concessions may be of the following types: 4.1.1. Build-Operate-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, operates it within the period specified in the agreement and transfers the concession item upon the expiration of the agreement to the state or local ownership in accordance with the conditions specified in the agreement; 4.1.2. Build-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, and transfers the concession item to the state or local ownership in accordance with the conditions specified in the agreement; 4.1.3. Build-Own-Operate a concessionaire builds the concession item by using its own funds or funds it has raised, and owns and operates the concession item in accordance with the conditions specified in the agreement; 4.1.4. Build-Own-Operate-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, owns and operates it
11. within the period specified in the agreement, and transfers it upon expiration of the agreement to the state or local ownership in accordance with the conditions specified in the agreement; 4.1.5. Build-Lease-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, transfers the possession of the concession item to the authorized entity under a financial lease arrangement as specified in the agreement, and transfers it to the state or local ownership upon the expiration of the lease; 4.1.6. Design-Build-Finance-Operate a concessionaire designs the concession item, builds it by using its own funds or funds it has raised, operates it within the period specified in the agreement, and transfers it to the state or local ownership upon the expiration of the agreement in accordance with the conditions specified in the agreement; 4.1.7. Renovate-Operate-Transfer a concessionaire renovates the concession item by using its own funds or funds it has raised, operates it within the period specified in the agreement, and transfers the concession item together with the renovated item to the state or local ownership in accordance with the conditions specified in the agreement. 4.2. Concession types other than those specified in Article 4.1 of this law may be adopted depending on the nature of the specific concession item and the works
12. and services to be rendered. 3. Does the country have an act that allows PFI, either as part of a specific act or as part of a general PPP Law? 4.1.5-4.2 4.1.5. Build-Lease-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, transfers the possession of the concession item to the authorized entity under a financial lease arrangement as specified in the agreement, and transfers it to the state or local ownership upon the expiration of the lease; 4.2. Concession types other than those specified in Article 4.1 of this law may be adopted depending on the nature of the specific concession item and the works and services to be rendered. 4. If the answer is No to any of the three first questions concerning a specific form of PPP does the Constitution or other general act (ex: the Civil Code, sectoral law) recognise the basic principles of the concerned PPP and regulate its granting? N/A For our general information: Is a new PPP Law or an amendment to the existing Law being prepared, or considered, in the country? No If so, at what stage of the legislative process is such new PPP Law or amendment to the existing Law?
13. 1.2 Specificity and integration of PPP the legal framework 5. If the country has a Public Procurement Law, is it clear to what extent does the Public Procurement Law apply or not to the granting of a PPP? The scope of the PUBLIC PROCREMENT LAW dated 01 December 2005 is determined as: 3.1. This Law shall apply to procurement of goods, works and services with state and local funds. 3.2. Unless otherwise provided in international agreements to which Mongolia is a party, this Law shall apply to procurement of goods, works and services with funds generated from foreign aid and loans. 3.4. This Law shall not apply to procurement of special purpose equipments, facilities, goods, works, services and firearms that are considered state secret by Law and related to safeguarding of national security. (As amended on 16 June 2011.) 3.5. This Law shall not apply to a state owned legal entity which is entitled to undertake works and service relating to repair and maintenance of national auto roads in accordance with laws and regulations. (As amended on 16 June 2011.) That is to say, the purpose of CONCESSION LAW
14. (2010) is to regulate matters relating to concession/ppp. Whereas PUBLIC PROCUREMENT LAW (2005) which is based on the UNCITRAL model, applies to procurement of works and services or supply with state and local funds. 6. If the country has sectoral laws regulating PPP in specific sectors, is it clear which law is applicable to the granting of PPP for each particular sector? N/A 7. Does the country have a Law allowing the Institutional form of PPP (IPPP) which regulates IPPP participation to PPP?
15. 2. DEFINITIONS AND SCOPE OF THE PPP LAW(S) 2.1 PPP definition 3 QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law define one or several term(s) (i.e. "PPP", "Concession", "BOT", "Partnership" etc. and/or respective agreements) for the arrangements to be regulated by the Law which specify the limits of application of the Law? For our general information,: please provide the given definition(s), if any. 3.1.1; 4.1 3.1.1. concession means an exclusive right to possess, operate, create and renovate state and local own property assets for the purposes of rendering basic social and infrastructure services to the public on the basis of an agreement on conditions and terms specified in this law; 4.1.1. Build-Operate-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, operates it within the period specified in the agreement and transfers the concession item upon the expiration of the agreement to the state or local 3 PFI Guide, Consolidated Legislative Recommendations, Recommendation 3and Commission Interpretative Communication on Concessions Under Community Law dated 12 April 2000; together with additional EU major documents/decision /recommendation on concessions including Directives 2004/18/EC and 2004/17 EC of 31 March 2004; Green Paper on Public Private Partnerships and Community Law on Public Contracts and Concessions dated 30 April 2004; Report on the public consultation on the Green Paper (SEC(2005) 629- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on Public-Private Partnerships and Community Law on Public Procurement and Concessions (Brussels, 15.11.2005. COM(2005) 569) European Parliament resolution on public-private partnerships and Community law on public procurement and concessions (2006/2043(INI))
16. ownership in accordance with the conditions specified in the agreement; 4.1.2. Build-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, and transfers the concession item to the state or local ownership in accordance with the conditions specified in the agreement; 4.1.3. Build-Own-Operate a concessionaire builds the concession item by using its own funds or funds it has raised, and owns and operates the concession item in accordance with the conditions specified in the agreement; 4.1.4. Build-Own-Operate-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, owns and operates it within the period specified in the agreement, and transfers it upon expiration of the agreement to the state or local ownership in accordance with the conditions specified in the agreement; 4.1.5. Build-Lease-Transfer a concessionaire builds the concession item by using its own funds or funds it has raised, transfers the possession of the concession item to the authorized entity
17. under a financial lease arrangement as specified in the agreement, and transfers it to the state or local ownership upon the expiration of the lease; 4.1.6. Design-Build-Finance-Operate a concessionaire designs the concession item, builds it by using its own funds or funds it has raised, operates it within the period specified in the agreement, and transfers it to the state or local ownership upon the expiration of the agreement in accordance with the conditions specified in the agreement; 4.1.7. Renovate-Operate-Transfer a concessionaire renovates the concession item by using its own funds or funds it has raised, operates it within the period specified in the agreement, and transfers the concession item together with the renovated item to the state or local ownership in accordance with the conditions specified in the agreement. 2. Does the Law apply to all contracts entered into that fall under the definition(s) given above, irrespective of the name given to such contract (concession, license, usufruct right, lease, etc.)? 2.2; 11.4; 2.2. If any international treaty to which Mongolia is a party is inconsistent with this Law, the provisions of the international treaty shall prevail.
18. 11.4. The government shall adopt regulations on the detailed procedures for tender, sample [/ benchmark] documents and criteria for the evaluation of proposals. 11.2.1 [Authorized public authority shall] prepare and approve tender documents, stages of the tender and criteria for its evaluation. 3. Does the Law make a clear distinction between a PPP agreement (such as a Concession) and a license (i.e. an authorisation to operate by a public authority)? 29 Article 29. Granting licenses and permits 29.1. The fact that a participant in the concession tender does not have a license required for the particular works and services as specified in the relevant laws shall not serve as a ground for excluding the participant from the tender. 29.2. If the works and services to be rendered by the concessionaire require a license, the relevant license shall be granted to the concessionaire as soon as possible [/immediately] upon the conclusion of the concession agreement.
19. 2.2 Contracting Authority QUESTION ANSWER ARTICLE COMMENTARY 4. Does the Law identify (or allow clear identification by reference to other laws or regulations) the public authorities ("Contracting Authorities") that are empowered to select projects, prepare for, and award PPPs and enter into Project Agreements? 20.1 20.1. The following shall be parties to a concession agreement: 20.1.1. In the case of a concession that is a state-owned property, the state administrative authority in charge of state property, and, in the case of a concession that is a locally-owned property, the governor of the aimag or the capital city; For our general information: If yes, which of the following authorities are identified: National authorities (e.g.: the government, ministries, and independent agencies); Regional/state-level authorities; Local or municipal authorities; or State owned companies? PARLIAMENTARY LEVEL 6.1.3. [The Government shall] report annually to the Economic Standing Committee of the State Great Khural (Parliament) on the implementation of concession law and regulations. GOVERNMENTAL LEVEL 6.1.1. [The Government shall] approve and revise the list of state concession items. 6.1.2. [The Government shall] decide on granting a concession and authorise the authority specified in Article 6.2. of this law to enter into a concession agreement.
20. GOVERNMENT AGENCY LEVEL (The State Property Committee) 6.2. The state administrative authority in charge of state property shall have the following powers: 6.2.1. prepare and submit to the government a draft list of concession items for state-owned property; 6.2.2. research and prepare proposals for inclusion in the list of concession items for state-owned property 6.2.3. inform the public about the list of concession items; 6.2.4 provide methodological and expert assistance to other relevant authorities on matters related to granting and implementing concessions; 6.2.5. evaluate and oversee the implementation of concession agreement and implement concession laws and regulations; 6.2.6. establish and maintain national centralised registry and database on concessions; 6.2.7. adopt legally binding norms when specifically authorised to do so by a law and a regulation; 6.2.8. prepare tender documents specified in Article 11 of this Law jointly with the relevant state administrative authority and announce the tender, organise and evaluate it; 6.2.9. enter, with concessionaire and other entities, into a concession and such other related agreements as contracts of the concessionaire to obtain financing; and 6.2.10. other powers specified in the laws and regulations 6.3. The state administrative authority in charge of state properties shall provide professional and methodological assistance to relevant local authorities on matters relating to concessions. REGIONAL LEVEL (Citizens Representative Assemblies and Governors of aimags and the capital city) 7.1. With regard to the concession items that are locally owned, the governors of the aimags and the capital city shall prepare and submit to the Citizens Representative Assemblies the draft list of local concession items, and undertake powers provided in Articles 6.2.2.-6.2.6. and 6.2.8.-6.2.10. of this Law. 7.2. With regard to locally-owned concession items, the Citizens Representatives Assemblies of Aimags and the capital city shall have powers provided in Articles 6.1.1.; 6.1.2. and 6.1.4. of this Law. 2.3 Private Party and Project Company
QUESTION ANSWER ARTICLE COMMENTARY 21. 5. Is it possible for a PPP to be awarded to a foreign company, a Private Party or to a domestic company with foreign participation in the share capital and/or management (without discrimination)? 13.1 13.1. Mongolian and foreign legal entities or their consortia meeting [/satisfying] the general requirements specified in Article 12.1.3 of this law shall have a right to submit to the authorized entity sealed proposals to participate in the tender prepared in accordance with the information specified in Article 12.1 of this law. For our general information: can a PPP be awarded to public entities or to entities jointly owned by private and public entities (IPPP)? Are there restrictions imposed on such contracts? 3.5. This Law shall not apply to a state owned legal entity which is entitled to undertake works and service relating to repair and maintenance of national auto roads in accordance with laws and regulations. (As amended on 16 June 2011.) 2.4 Concerned sectors 4 QUESTION ANSWER ARTICLE COMMENTARY 6. Does the Law identify (or allow identification by reference to other laws or regulations) the sectors and/or types of infrastructure and/or services in respect of which a PPP may or may not be granted? 6; 7, and9 At the state level, the state administrative authority in charge of state properties (State Property Committee) and at the local level, governors of the provinces and the capital city conduct research and prepare proposals for inclusion in the list of concession items (Art 6.2.2; 4 For further information on the concerned sectors please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendation 3 and 4.
22. Art. 7.1; Art. 9.3; and Art 9.4.). At the state level, Government (Art. 6.1.1) and at the local level Citizens Representative Assemblies (Art. 7.2.) approve and modify the list of concession items. CHAPTER THREE. LIST OF CONCESSION ITEMS Article 9. Preparation of the list of concession items 7. Do the list of sectors eligible for PPP correspond to an open-ended one (as opposed to being exhaustive) allowing (or at least not preventing) PPP to be granted in numerous sectors? N/A 9.1. The state central administrative body in charge of the relevant matter and the state administrative body in charge of investment shall submit to the authorised entity a proposal for concession item [ ]. 9.3. The state administrative authority in charge of state property [State Property Committee] shall submit to the government the final list of concession items for state owned properties based on the opinion of the state central administrative authority in charge of finances. 9.4. The governors of aimag and capital city shall submit to the Citizens Representatives Assemblies of the aimags and the capital city the draft list of concession items [ ]. 9.5. The governors of the aimags and the capital city shall obtain the opinions of central state administrative authority in charge of relevant matter and state administrative authorities in charge of state property and investments before submitting the draft specified in
23. 8. Do the sectors eligible for PPP includes non commercial activities such as the provision of government services (such as schools, hospitals, prisons, defence and housing) in addition to the merchant sectors of the economy (energy, transport, water, oil and gas). Article 9.4 of this Law to the Citizens Representative Assemblies. Not specified but not excluded For our general information: Please indicate the restrictions if any imposed by the Law on the sectors eligible for PPP: 2.3. This Law shall not apply to matters related to possession, operation, creation and renovation under a concession agreement of state and local public properties specified respectively in Articles 4.2 and 74.2. of the Law on State and Local Properties. Article 4.2 of the Law on State and Local Properties provides the following. [ ] 1)land that is not in citizens ownership; 2) subsoil with its mineral wealth; 3) water and water resources; 4) forest and its wealth; 5) flora and fauna resources; 6) historic and cultural relics and monuments; 7) archaeological and paleontological findings; and 8) other items considered as State property for public use by law. Article 74.2 of the Law on State and Local Properties provides that [t]he property of public utility comprises the property that for public utility of the local population.
24. 3. SELECTION OF THE PRIVATE PARTY 5 3.1 General Considerations QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law require, in principle, the Contracting Authority to select Private Parties through a competitive tender process? 2. Is there reference in the Law to the principles of transparency, equal treatment and proportionality? 11.1 11.5 11.1. In cases other than those specified in Article 17 of this law, a concession shall be granted by selecting the project through a tender (hereinafter referred to as tender ). 11.5. All the participants of a tender shall be treated equally, provided the same information, subjected to the same requirements, and all tender-related activities shall be conducted transparently 3. Is there a provision in the Law concerning the publication of information related to the competitive procedures in the country media and in the international media (for large projects)? 12.2 12.2. An announcement of the tender shall be published in national daily newspapers and other media and, if necessary, in an industry publication issued in a language commonly used in international trade. 5 For further information on the selection of the Private Party, please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendations 14 to 39 included.
25. 4. Are there provisions within the Law or any special manual or recommendations governing in detail the selection of the Private Party (i.e.: the pre-selection of bidders, the procedure for requesting proposals or other procedure such as competitive dialogue/two stage procedure)? 11.4 11.4. The government shall adopt regulations on the detailed procedures for tender, sample documents and criteria for the evaluation of proposals. In accordance with this provision, Government Resolution number 177 was adopted on 07 July 2010. It has the following components: 1.General Provisions; 2.Definition of Terminologies; 3.Tender Commission and its Internal Management; 4.Overseeing the Commission; 5.Competitive Selection Steps; 6. Miscellaneous; 7.Dispute Resolution and two annexes. Section 5 - Competitive Selection Steps sets forth the procedures of the tender selection process. And Annex Two provides the draft form of a tender selection schedule.11.2 The authorized entity shall organize and prepare a conclusion of results of the tender and shall have following functions: 11.2.1. prepare and approve tender documents, stages of the tender and criteria for its evaluation. Article 16. Two-stage procedure for submitting project proposals 5. Does the Law provide that if the Contracting Authority rejects an applicant at the time of preselection or disqualifies a bidder, it must make public the reasons for the decision (or inform the rejected bidder thereof explaining the reasons for rejection)? 11.5 14.5 34.1 11.5. [ ] and the principle of transparency shall be applied for tender selection activities. 14.5 The procedures for submission of the project proposals and their evaluation shall be open to the public and, if necessary, could be published in the daily national press. 34.1. Complaints related to granting the concession shall be filed with the authorized entity within 10
26. business days after such activity took place, and, if the complainant is not satisfied with the decision of the authorized entity, the complainant shall have a right to file a claim in court. 3.2 Award of PPP QUESTION ANSWER ARTICLE COMMENTARY 6. Does the Law provide that all proposals are ranked solely on the basis of a predefined evaluation criteria set forth in the pre-selection documents/ request for proposals? 14.4 14.4. The authorized entity shall evaluate the project proposals as specified in Article 14.3 of this law and rank them beginning with the best proposal. 7. Does the Law provide for the publication of a notice of the award of the project, identifying the Private Party and including a summary of the essential terms of the project agreement? 11.5; 14.5 11.5. [ ] and the principle of transparency shall be applied for tender selection activities. 14.5 The procedures for submission of the project proposals and their evaluation shall be open to the public and, if necessary, could be published in the daily national press.
27. 8. Does the Law provide that the Contracting Authority or any other public authority maintain records of key information pertaining to the selection and award proceedings? 6.2.6; 7.1; 33.4 6.2. The state administrative authority in charge of state property shall have the following powers: 6.2.6. establish and maintain the national centralized registry and database on concessions; 7.1. The governors of the aimags and capital city shall [ ] have powers specified in Article 6.2.2-6.2.6 [ ] of this law. 33.4. The authorized entity shall archive all documents and materials related to the tenders and keep them in a database. 9. If the answer to the previous question is Yes, does the Law provide that such record is accessible to the public, or at least to interested parties? 11.5; 14.5 11.5. [ ] and the principle of transparency shall be applied for tender selection activities. 14.5 The procedures for submission of the project proposals and their evaluation shall be open to the public and, if necessary, could be published in the daily national press. 3.3 Final negotiations
28. QUESTION ANSWER ARTICLE COMMENTARY 10. Does the Law contain provisions regulating final negotiations (i.e. post contract award) so that transparency, equal treatment and competition are preserved? 15.3; 19 15.3. The authorized entity shall prepare a conclusion to enter into an agreement with the participant with whom it negotiated the best terms of the agreement and submit it to the government or the Citizens Representatives Assembly of the aimag or the capital city within five business days. Article 19. Decision to conclude an agreement 11. Does the Law provide that the Contracting Authority has the authority to terminate negotiations with the invited bidder if it becomes apparent that the bid will not result in an agreement and start negotiations with the second ranked candidate? 15 15.2.1. the authorized entity shall begin to negotiate with the participant which offered the best proposal but shall retain a right to terminate the negotiations and start negotiations with the next participant; 15.2.2. negotiations shall be conducted in the order of ranking specified in Article 14.4 of this law. 3.4 PPP Award without competitive procedure QUESTION ANSWER ARTICLE COMMENTARY
12. Does the Law provide that the Contracting Authority has the authority to award a PPP without a competitive process only in limited/ exceptional circumstances? 17 29. Article 17. Concluding a direct agreement 17.1. A concession can be granted by concluding a direct agreement under the following circumstances: 17.1.1. when it is deemed that conducting a tender would jeopardize national security; 17.1.2. when one or several entities with common interest own intellectual property that is only capable of implementing concession. essential for implementation of the concession; 17.1.3. when no proposal was submitted in response to the tender announcement or no proposals met the requirements of the tender and, in the opinion of the authorized entity, itis deemed unlikely that any proposals would be submitted within the required timeframe if a tender is announced again; 17.1.4. when a concession item is transferred to other entities in accordance with Article 28 of this law. 17.2. The authorized entity shall issue an opinion to conclude a direct agreement and submit it to the government or the Citizens Representatives Assembly or the capital city. 13. Does the Law provide for a procedure, set of 17.2;
rules or principles to be respected when awarding a PPP without a competitive process? 30. 6.1.2; 7.2 17.2. The authorized entity shall issue an opinion to conclude a direct agreement and submit it to the government or the Citizens Representatives Assembly of the aimag or the capital city. 6.1. The government shall have following powers: 6.1.2. decide on granting a concession and authorize the authority specified in the Article 6.2. of this law to enter into a concession agreement. 7.2.With respect to locally-owned concession items, the Citizens Representative Assemblies of aimags and capital city shall have the powers specified in Articles [ ] 6.1.2 [ ] of this law. For our general information, please specify the conditions which would allow such direct negotiations? There are 4 scenarios whereby direct negotiations are allowed but it is subject to the statutory approval of the Government or the local Citizens Representatives Assemblies (Articles 17.2; 6.1.2 and 7.2). 17.1. A concession can be granted by concluding a direct agreement under the following circumstances: 17.1.1. In a case whereby it is deemed that conducting a tender would jeopardize national security; 17.1.2. In a case whereby one or several entities with common interest own intellectual property that is only capable of implementing concession. 17.1.3. In a case whereby no proposal was submitted in response to the tender announcement or no proposals met the requirements of the tender and, in the opinion of the authorized entity, it is deemed unlikely that any proposals would be submitted within the required timeframe if a tender is announced again; 17.1.4. In a case whereby a concession item is transferred to other entities in accordance with Article 28 of this law.
31. 3.5 Special case of unsolicited proposals QUESTION ANSWER ARTICLE COMMENTARY 14. Does the Law provide for an adequate framework for the Contracting Authority to manage unsolicited proposals/private initiatives (i.e. a proposal relating to the implementation of a PPP that is not submitted in response to a request or solicitation by the Contracting Authority) that ensures transparency and equal treatment and does not distort competition? 18 Article 18. Submission of unsolicited proposals to conclude a concession agreement 18.1. Mongolian and foreign legal entities and their consortia may submit to the authorized entity an unsolicited proposal to conclude a concession agreement together with the cost-benefit analysis. 18.4.If the authorized entity considers that the proposal specified in Article 18.1 of this law should be added in the list of concession items in accordance with the procedure specified in Article 9 of this law or be included in the list of concession items for the next year, it shall submit its recommendation to that effect to the government or the Citizens Representatives Assembly of the aimag or the capital city. 18.5.If the government or the Citizens Representatives Assembly of the aimag or the capital city decides to include the particular item in the list of concession items, the authorized entity shall organize a tender in accordance with the procedures specified in this law. 18.7. If several entities participate in the tender, the original proponent shall be given some preference in the process of evaluating the project proposals and preparing a conclusion on the results of the tender, and such preference shall be reflected in the tender documents.
32.. 3.6 Review procedures QUESTION ANSWER ARTICLE COMMENTARY 15. Does the Law allow the bidders who claim to have suffered, or that may suffer loss or injury, to seek review of the Contracting Authority s actions or failure to act? 34 34.1. Complaints related to granting the concession shall be filed with the authorized entity within 10 business days after such activity took place, and, if the complainant is not satisfied with the decision of the authorized entity, the complainant shall have a right to file a claim in court.
33. 4. PROJECT AGREEMENT 6 4.1 Model or list of provisions QUESTION ANSWER ARTICLE COMMENTARY 1. Does the Law give flexibility to the negotiation of most terms of the Project agreement and if it contain (or refer to): (i) a model PPP agreement it is an optional template agreement for guidance only or (ii) a list of mandatory material provisions which must be included in the agreement, the content of such provisions is left for negotiation)? 21 Article 21. Contents of a concession agreement 4.2 Duration and extension of the Project Agreement QUESTION ANSWER ARTICLE COMMENTARY 2. Does the Law provide that the duration of the 6 For further information on the project agreement definition, please refer to:pfi Guide, Consolidated Legislative Recommendations, Recommendations 12 and 40 to 68 included.
34. Project Agreement should depend on the length of time taken for the amortisation of the Private Party's investment and an appropriate return on the capital? 22 Article 22. Duration and extension of a concession agreement 22.1. The parties to the agreement shall determine the duration of the concession agreement taking into account particulars of the industry in question, timeline of the investment, volume of investment, time to recoup the investment, expected profits, duration of the operation of the concession item and other factors. its extension 3. Does the Law provide that the renewal or extension of the Project Agreement should be limited and depend on exceptional circumstances (such as Contracting Authority default or an event of force majeure)? 22 22.2. The authorized entity shall extend the concession agreement if: 22.2.1. the activities specified in the concession agreement have been disrupted or delayed as a result of force majeure; 22.2.2. the activities specified in the concession agreement have been disrupted or delayed as a result of a decision taken by state authorities; 22.2.3. requests and demands by the authorized entity, not included in the concession agreement, and which resulted in an increase of the concessionaire s costs that could not be recovered without extending the concession agreement. 22.3 The authorized entity may extend the concession agreement if unforeseen circumstances arise which have a financial impact on the concessionaire or which may lead to imposing tariff and payments for the
35. population that are too high. For our general information, please provide the given minimum and maximum duration (if any) There is no statutory minimum and maximum duration. Art. 22.1.The parties to the agreement shall determine the duration of the concession agreement taking into account particulars of the industry in question, timeline of the investment, volume of the investment, time to recoup the investment, expected profits, duration of the operation of the concession item and other factors 4.3 Termination of the Project Agreement QUESTION ANSWER ARTICLE COMMENTARY 4. Does the Law leaves open to the Project Agreement negotiations the list of possible ground for termination and the content of to the termination provision? 24 24.1. Concession agreement shall be terminated namely in the following cases: 24.1.1. by the mutual agreement of the parties; 24.1.4. the concession agreement was terminated in accordance with this law or the concession agreement. 24.3.3. other grounds specified in the law and the concession agreement.
36. 5. If the answer to the previous question is No does the Law provide for a list of grounds of termination which does not affect the balance between the parties rights and obligations (one sided provisions) or the stability of the contractual relation under the Project Agreement (e.g.: too large or non exhaustive list)? 6. Does the Law provide for (or at least does not prevent) compensation of the Private Party for losses incurred as a result for termination on the grounds of public interest for losses incurred as a result of public authority acts? N/A 21 24.4. Article 21. Contents of the concession agreement 21.1.13. the right of the concessionaire to receive compensation in the event of increase of the concessionaire s costs or decrease of its revenues as a result of changes in the legislation directly related to the implementation of the particular concession; 21.1.4. other issues agreed by the parties. 24.4. The agreement shall specify how compensation due to either party is calculated in the event of the termination of the concession agreement, providing, where appropriate, for the proper value of the works rendered under the concession agreement, expenses incurred, and losses sustained by the relevant party including, as appropriate, lost profits.