The use of concession agreements helps to increase the investment attractiveness of the domestic economy, the quality of the services provided, work performed and manufactured products. Within the framework of contracts, a more efficient use of resources is made.
The essence of the concession agreement
As part of the transaction, one participant undertakes to reconstruct or create real estate, the ownership of which belongs or will belong to another entity. The concession agreement regarding the municipal property provides that the user will conduct activities related to the operation of material assets. In this case, the owner agrees to transfer the rights to use and own them for a period determined by the participants. The concession agreement in respect of the municipal property contains elements of different agreements. Accordingly, the Civil Code rules on contracts are applied, the components of which are present in the document, unless otherwise provided by its content or established by law.
Reconstruction
The concessionaire under the concession agreement assumes the obligation to carry out certain activities. They can be aimed at the creation or reconstruction of real estate. For example, an agreement may include activities such as:
- Reconstruction based on the introduction of new technology.
- Automation and mechanization of production.
- Modernization and replacement of physically and morally worn out equipment.
- Changing the functional or technological properties of an object or its individual components.
- Other activities that contribute to the improvement of the operational characteristics of fixed assets.
Nuances
The object of the agreement, which is subject to reconstruction, at the time of the transaction must be owned and free from the rights of others. It is not allowed to pledge or alienate the user of material values accepted by him. It is forbidden to change the purpose of the object. The user can derive income and produce products during the operation of fixed assets. They are his property, unless otherwise provided in the contract. The risk of accidental damage or destruction of fixed assets is borne by the concessionaire, unless otherwise specified by agreement. The contract may impose an obligation to insure material assets at its own expense.
OS composition
A concession agreement in respect of a municipal property may involve the transfer to use of tangible assets that form a single whole with the fixed asset or will be used for the general purpose to conduct the activities agreed upon by the transaction participants. In this case, their composition and description, term and purpose of use are included in the contract. The contract also prescribes the procedure for their return to the owner upon termination of the agreement. As part of the transaction, additional obligations for the user may be established. They are determined by mutual agreement of the participants drawing up the concession agreement. Examples of such responsibilities: the modernization of worn-out equipment, the replacement of production lines, another improvement in operational properties. Material assets acquired or created in the process of carrying out activities and which are not operating systems, become the property of the user, unless otherwise specified in the contract. The exclusive rights to the products of intellectual labor, which the concessionaire received for his own funds during the implementation of the concession agreement, belong to another participant in the transaction. Subjects can establish another rule.
Costs
The costs of fulfilling obligations under contracts are borne by users of material assets. A concession agreement in Russia often includes a clause suggesting that the owner may bear part of the costs of the reconstruction / creation of the fixed asset. The amount of costs should in this case be indicated in the announcement of the tender or in the decision to sign the contract (if the tender is not held), as well as directly in the contract itself.
registration
Rights transferred to the user for the operation and ownership of material assets provided by the owner are an encumbrance. Accordingly, they must be registered in the manner prescribed by law. The procedure in relation to the created object of the agreement is carried out simultaneously with the state registration of the concessor's ownership of this property.
Categories of wealth
The legislation provides a list of fixed assets, the transfer of which can be formalized as a concession agreement. Examples of material assets - structures that are part of:
- Highways and engineering communications networks of transport infrastructure. The latter, among others, includes viaducts, checkpoints, car parks, bridges, tunnels and so on.
- Railway facilities.
- River and seaports, including their hydraulic structures, engineering and production infrastructures.
- Pipeline transport facilities.
- Aerodromes, buildings intended for landing, take-off, parking, moving aircraft.
- Objects of engineering and industrial infrastructure of airports.
- Waterworks.
- Facilities for the production, distribution, transfer of heat and electricity.
- Communal infrastructure systems.
- Objects of education, culture, healthcare, sports, etc.
- Metro and other public transport.
- Objects intended for medical, tourism, medical and preventive activities, recreation.
Additional features
The object of the agreement and other property that is not in municipal / state ownership may be intended for general purpose operation, conducting specified activities and ensuring a single production process. In this case, the owner of the OS has the right to sign a civil contract with the user that defines the features of their provision. However, in this case, the owner must connect the emergence of obligations and rights under it with relations under a concession agreement.
Transaction participants
The legislation defines the following parties to the concession agreement:
- Government or executive federal authority, regional or local government structure. These institutions act as owners (concessors).
- Individual entrepreneur, foreign or domestic commercial company, or 2 or more legal entities operating in accordance with a simple partnership agreement . These entities are concessionaires (users).
Legislation permits a change of persons in the transaction. It is carried out by assigning the right of claim or transferring the debt with the consent of the owner at the time the object of the agreement is put into operation. The user cannot transfer his rights under the transaction as a pledge. The transfer of the duties and legal capabilities of the legal concessionaire during its reorganization to another company is carried out in accordance with the organization that has arisen with the requirements defined in the decision to conclude an agreement.
Validity
When determining the period during which the concession agreement in respect of the municipal property will be valid, the following shall be taken into account:
- The time required to create / reconstruct the OS.
- The volume of investments for the implementation of the activities agreed upon by the parties to the transaction and the payback period.
- Other obligations of the user under the contract.
Payment
The concession agreement in respect of the municipal property determines the amount that the user must transfer over the life of the material assets transferred to him. Payments can be set both throughout the agreed period and in individual time periods. The amount of payment, its form, rules and terms of payment are determined by the participants in the transaction. The legislation provides for several options for paying off monetary obligations:
- The fixed amount. It can be made at one time or periodically in the budget fund of the appropriate level.
- The share of income or products received by the user in carrying out activities specified in the transaction.
- Transfer of ownership rights to the concession holder to property belonging to the concessionaire.
Participants in the transaction may establish mixed forms of payment.
User rights
The concession agreement regarding the municipal property establishes the following legal possibilities:
- Dispose of material assets according to the rules defined in federal law and the contract.
- Fulfill the terms of the concession agreement independently or with the involvement of third parties. In this case, the user will be responsible for the actions of third parties as for their own.
- Use free of charge according to the rules defined in the contract, subject to confidentiality conditions, exclusive rights to products of intellectual work, obtained by fulfilling the terms of the agreement at their own expense, in order to conduct activities agreed by the parties.
User Responsibilities
In the process of carrying out activities specified by the concession agreement, the concessionaire shall:
- To carry out the reconstruction or creation of an operating system within the time period established by the contract and to begin its operation.
- Use material assets for the purposes and according to the rules defined by the transaction.
- Do not suspend or terminate the activities provided for in the agreement without the consent of the owner.
- To ensure, when fulfilling the contract, the possibility of obtaining services, products and works by consumers.
- Provide buyers / customers with the benefits established by federal law and other regulations, in cases and according to the rules defined in the transaction.
- Maintain the operating condition of the OS, carry out ongoing and overhaul at your own expense, and bear other expenses for the maintenance of material assets, unless otherwise specified in the contract.
Key clauses of the contract
The most important stage of the transaction is the preparation of a concession agreement. It involves the coordination of all key clauses of the contract. Preparation of a concession agreement includes, inter alia, determining the amount and form of payment for operating the OS, the rules in accordance with which it will be introduced. In addition, the following clauses must be present in the contract:
- The obligations of the user to reconstruct or create an operating system, to comply with the agreed deadlines, to carry out established activities.
- The validity period of the contract.
- Composition and description of the object. This paragraph, among other things, indicates the technical and economic characteristics of the OS.
- The rules for the provision of land to be used for the agreed activities, the term for signing a lease / sublease agreement (if necessary).
- Objectives and duration of the operating period of the OS.
- Other material conditions defined in federal law.
Additionally
The concession agreement in respect of a municipal property may also include clauses on:
- Production volumes when conducting the activities specified in the transaction.
- The rules for establishing and adjusting tariffs (prices) for work performed, manufactured products, services rendered, as well as extra charges to the cost of conducting the agreed activities.
- The volume of investment in the reconstruction / creation of the object of the agreement.
- Other items not prohibited by law.
Important point
The legislation establishes a specific procedure for concluding a concession agreement. It is drawn up as part of the competition. The document is prepared in a standard form, including the mandatory clauses listed above. Changes to the concession agreement are made by agreement of the participants. In this case, the adjustment of the items determined in accordance with the tender proposal is allowed only in exceptional cases established by law. Amendment of the agreement may also be carried out by judicial decision on the grounds stipulated in the Civil Code.
Termination of contract
It takes place in cases:
- The end of the deadline.
- By agreement of the participants.
- By the tribunal's decision.
After the termination of the agreement, the user is obliged to transfer the property to the owner, unless otherwise provided by contract or law. In this case, material assets must remain in the condition specified in the contract. The return of property is carried out with the execution of the deed of transfer.
Judgment termination
The termination of the agreement is allowed at the request of one of the parties in the presence of violations of its paragraphs by another participant. Other circumstances may also serve as grounds. Significant violations of the terms of the agreement include:
- Failure to comply with the terms of the reconstruction / creation of the OS.
- Exploitation of material assets for purposes that are not provided for by the agreement.
- Violation of the rules for using the OS.
- Failure by the concessionaire to conduct the activities agreed upon by the transaction participants.
- Suspension or termination of activities established by the contract.
- Failure or improper performance of obligations related to the provision of works, products and services to consumers.
Guarantees
When conducting activities specified by the parties to the agreement, the user has the right to protect his interests in accordance with constitutional provisions, international treaties, federal legislation and other regulatory acts. In particular, he can count on compensation for losses that have arisen as a result of unlawful actions of state, local and regional authorities, as well as officials of these structures. The responsibility of the guilty comes in accordance with applicable law.