What Is a Concession Agreement

The concession should not be confused as part of a concession contract and a lease agreement. A “lease” is an interest in a property, while a “grant” is a license to operate the property, but has no inherent ownership rights. Ownership of the project assets under a concession contract remains the property of the authority, while the concessionaire receives only constructive ownership. Once the contract is terminated, all project resources are returned to the authority. The right to use runways for a defined period of time may also be part of a concession (or franchise) contract. These agreements generally cover the construction, maintenance and operation of a rail network and involve significant investments. They therefore grant the right to operate defined networks or individual lines longer than track access agreements and often grant exclusivity to the rail operator. In the private sector, the owner of a concession – the concessionaire – usually pays either a fixed amount or a percentage of the income to the owner of the company from which he operates. [2] Examples of concessions within another company include concessions in sports venues and cinemas, as well as concessions in department stores operated by other retailers. Short-term concessions can be granted as advertising space for periods of a single day. Public services such as water supply can be operated as a concession. In the case of a public service concession, a private company enters into an agreement with the government to have the exclusive right to operate, maintain and implement investments in a public service (e.g.

B, privatization of water) for a number of years. Other forms of contracts between public and private entities, namely leases and management contracts (often referred to by the French as leasing in the water sector), are closely related, but differ from a concession in terms of rights and remuneration of the operator. A lease gives a company the right to operate and maintain a public service, but the investments remain the responsibility of the public. Under a management contract, the operator collects revenue only on behalf of the government and in turn receives an agreed fee. Concession contracts are used by public authorities to provide services or to build infrastructure. Concessions involve a contractual agreement between a public authority and an economic operator (the concessionaire). The latter provides services or performs work and is remunerated by the fact that he is authorized to exploit the work or service. However, there are also some drawbacks to implementing WAB. Often, the format and language of ACMs are copied without due regard to the specific impact of each project. The structure of MCAs is rigid.

Concession contracts are often complex and long-term contracts, and it is not possible to foresee all the risks that may arise during the execution and operation of the completed project. In these circumstances, the lack of a flexible approach harms the interests of private parties. Reading the article, I wondered why a company would do such a thing. However, I can understand why a government would make concessions if it really had to do business with the other side. Muhammad Ali of Egypt used contracts called concessions to build cheap infrastructure — dams and railways — with foreign European companies raising capital, building projects and collecting most of the operating revenue, but Ali`s government providing some of that revenue. [3] For more examples of concessions, see Gibbons v. Ogden and the Railroad Policy of the United States. The new Directive establishes a stable legal framework for public authorities and economic operators to ensure non-discrimination and fair access to markets, as well as EU-wide competition for high-quality concessions.

It gives the most efficient suppliers a fair chance to win orders by offering the best deals. The Directive: In the UK, the threshold for concession contracts is £4,104,394. However, it stands to reason that there should be some sort of contract between the two companies. As the article indicates, the concessionaire company may want the exclusive right to sell concessions on the site and, of course, there are other issues that also need to be resolved. Concession contracts typically define operating life and insurance requirements, as well as fees. Payments to a landlord may include site rent, a percentage of sales proceeds, or a combination of both. Any additional expectations may also be set out in the Agreement. For example, the agreement may determine which of the parties is responsible for utilities, maintenance and repairs. Model Concession Agreements (MCAs) have played an important role in unbundling the complexity of these transactions. The use of a standardized form for concession contracts reduces unnecessary delays and higher transaction costs. It also simplifies the tendering process and creates trust between bidders and financiers who invest in infrastructure development.

In addition, compliance with standardized ACM reduces the costs and risks of small government agencies and private parties that manage small projects at the local level, as in most cases they do not have the same level of expertise as the organizations and forums that develop ACM. Concession contracts are very different from other more common trade agreements on the supply of goods and services. Unlike other business contacts, which are usually made for transactions of assets and real estate owned by private parties, concession contracts concern public goods and services and are intended to provide essential facilities and services. Apart from that, concession contracts are long-term contracts and are usually high-value transactions. Concession contracts are sometimes used to take advantage of other nations. For example, foreign countries and companies forced China to make various concessions in the 19th and early 20th centuries. These concessions have given foreign companies the right to develop and operate railways and ports in China. In addition, citizens of other countries often enjoyed extraterritoriality as part of their concessions.

Extraterritoriality meant that foreign laws and courts settled legal disputes between Chinese and foreigners in concessions. Of course, the decisions of these courts tended to be directed against Chinese companies and consumers. At best, concession contracts are a form of outsourcing that allows all parties to enjoy comparative advantages. Often, a country or company has resources that lack the knowledge or capital to use them effectively. By outsourcing the development or exploitation of these resources to others, it is possible to earn more than they could on their own. For example, a country may lack the capital and technical skills to use offshore oil reserves. A concession contract with a multinational oil company can create revenue and jobs for that country. Interestingly, the term “concession contract” has two different meanings when it comes to commercial contracts. Personally, I think the company is as confusing as it is, each term should only mean one thing! In India, the Supreme Court adopted the doctrine of essential bodies with respect to concession contracts in VST Industries Limited v. VST Industries Workers` Union and Anr.

In this case, the Supreme Court ruled that a private entity that controls or operates infrastructure in India under a concession contract should be considered a public mission and that such entities are required to act in the public interest. Example 6: Peru – Contrato de Concesión de los Ferrocarriles del Sur Sur Oriente (Spanish) – Concession contract between the Peruvian State and a private entity (Ferrocaril Transandino S.A.) which operates the concession for the southern (Matarani/Mollendo to Cusco) and south-eastern (Cusco to Machu Pichu) railway lines. .