magyar
European PPP Center

Slovenia

1. HISTORICAL BACKGORUND

Like in all ex socialist countries also in ex Yugoslavia the term of public service was unknown. Although it does not mean that this legal subject was not known. It was known under the term of “activity of special community interest” and later “activity which is necessary for the work and life of citizens, organizations and organs of local community on the territory of mentioned local community”. There was a division between social services (e.g. culture, schools, education, etc.) and material infrastructure (e.g. electrical plants, telecommunications, etc.). Mainly all these services were run by state companies or state organizations. The regulatory and supervisory boards were self-regulated interest communities consisting of the representatives of service providers, service users and political interest. These organizations were responsible also to set the price and quantity of services (type of regulated market). All investments were done by the fiscus, by the price of service and also by “self-donations” (accepted by referendum).

The first attempt of public sector privatization was in the Republic of Slovenia in 1991, when the law on institutes was introduced. This law enabled the participation of private sector in non-commercial public services (e.g. education, culture, research, etc.). For the first time the possibility of concessions was introduced. The first sectors with concessions were culture, education and health. In 1993 the law on economic public services was introduced (for waste management, telecommunications, electricity, etc.). This law also introduced concessions and two types of possible public private partnerships: public holdings and via investment of public money in private companies to provide public services.
Both laws gave only the basic legal framework. How certain public service should be “produced” it should be regulated by each specific law for each type of service. These laws were accepted very slowly because there was a lack of legal knowledge in the field of concessions and it resulted in some “strange” solutions:

  • concession acts and concessions agreements are very short (first up to 5 pages; second up to 10 pages) so they are unclear and in practice created and are still creating a lot of troubles;

  • concessions in some fields (e.g. health) were given for eternity;

  • prices went up or the quality of service falls (because there were no given standards what is expected quality).

The process of entering in the EU, lack of public finance and the increased demand for public services led in the Republic of Slovenia at the end of 2006 to the introduction of the law on Public Private Partnerships. This law became fully operable in the middle of 2007 when all the necessary bylaws were adopted.

2. PUBLIC PRIVATE PARTNERSHIP ACT

The Public Private Partnership Act was published in the official journal of the Republic of Slovenia no. 127/2006 on 7/12-2006. This Act regulates

  1. the purpose and principles of private investment in public projects and/or of public co-financing of private projects that are in the public interest (hereinafter: public-private partnership),

  2. the methods of encouraging public-private partnership and the institutions concerned with its encouragement and development,

  3. the conditions, procedures for creation of PPPs,

  4. the forms and methods of operating public-private partnerships,

  5. the special features of works and service concessions and of public-private equity partnerships,

  6. the transformation of public companies,

  7. the system of law that applies to resolving disputes arising from public-private partnerships and the jurisdiction of the courts and arbitration services to decide on disputes arising from such relationships.

Article 2 defines PPP as a relationship:

  • involving private investment in public projects and/or public co-financing of private projects that are in the public interest, and such relationship is formed between public and private partners in connection with the construction, maintenance and operation of public infrastructure or other projects that are in the public interest, and in connection with the associated provision of commercial and other public services or activities provided in a way and under the conditions applicable to commercial public services, or of other activities where their provision is in the public interest,

  • of other investment of private or private and public funds in the construction of structures and facilities that are in part or entirely in the public interest, or in activities where their provision is in the public interest.
By article 11 of the mentioned law, decisions determining the public interest in establishing public-private partnership and on implementing projects in one of the forms of public-private partnership pursuant to this law shall be taken by the Government or by the representative body of a self-governing local community. Such body shall also, within the remit of its competence under law or under a regulation issued on the basis thereof:
  • determine policy in the area of public-private partnership or plan this;

  • adopt regulations and other general acts that regulate the method of operating public-private partnerships;

  • adopt other regulations and other general acts serving to regulate the issues of operating public-private partnerships;

  • adopt regulations and other general acts that regulate the payment for public-private partnership services, and in compliance with the public-private partnership contract determine the price of public-private partnership goods and services or consent to them;

  • issue individual acts associated with establishing, operating and terminating public-private partnerships;

  • supervise public-private partnership contractors.

Other public partners may take decisions determining the public interest in establishing public-private partnership and on implementing projects in one of the forms of public-private partnership only on the basis of the agreement of the founder or of authorization provided by law. Public-private partnership contracts shall be adopted by other public partners after obtaining the consent of the founder.

In the procedure some basic principles should be respected:

  • principle of equality (art. 12) - no distinction is made between candidates at any element or stage of the procedure of establishing and operating a public-private partnership, and that it does not create circumstances that entail local, objective or personal discrimination against candidates, discrimination stemming from classification of the activities performed by the candidate, or any another discrimination;

  • principle of transparency (art. 13) - in establishing a public private partnership the public partner must ensure the objective seeking of candidates by ensuring the highest possible degree of public information in proportion to the purpose, nature, subject and value (scope) of the public-private partnership project;

  • principle of proportionality (art. 14) - In the procedure of establishment and in operating a public-private partnership, the public partner may only employ those measures to achieve the objective provided by law or by a regulation;

  • principle of balance (art. 15) – In a public-private partnership a balance of rights, obligations and legal benefits between the public and private partners shall be ensured;

  • principle of competition (art. 16) – in the procedure of establishing a public-private partnership the public partner may not restrict competition among candidates. In creating and operating a public-private partnership the public partner shall act in compliance with the regulations on protecting or preventing the restriction of competition;

  • principle of procedural autonomy (art. 17) - the parties to a public-private partnership may freely arrange the contractual relationship of the public-private partnership, in compliance with the act regulating obligation relationships;

  • principle of subsidiary liability (art. 18) - the public partner shall bear subsidiary liability for damages caused to the users of services or other persons by the contractor in operating a public-private partnership;

  • principle of cooperation (art. 19) - the public partner shall assist the public-private partnership contractor in securing the necessary material and other rights and the various permits which the contractor alone cannot obtain, in compliance with regulations and the public-private partnership contract.

Public-private partner relationships may be operated as:

1. Relationships of contractual partnership in the forms of:

  1. a concession; i.e. a bilateral legal relationship between the state or self-governing local community or other person of public law as the awarding authority and a legal or natural person as a concessionaire, in which the awarding authority awards to the concessionaire the special or exclusive right to perform a commercial public service or other activity in the public interest, which may include the construction of structures and facilities that are in part or entirely in the public interest (hereinafter: concession partnership), or

  2. a public procurement relationship; i.e. a payment relationship between the client and supplier of goods, contractor of works or provider of services, of which the subject is the procurement of goods or the performance of works or services (hereinafter: public procurement partnership).

2. Relationships of institutional or equity partnership:

  1. by establishing a legal person under the conditions provided by this law;

  2. through the sale of an interest by the public partner in a public company or other entity of public or private law;

  3. by purchasing an interest in an entity of public or private law, recapitalization or

  4. in another manner in comparative terms legally and actually similar and comparable to the aforementioned forms, and through the transfer of the exercising of rights and obligations proceeding from the public-private partnership to such person (for instance performing commercial public services).

This law establishes also the minimum requirement for concession contract as:

  • the form and purpose of the works concession,

  • the type, amount and form of joint funds or funds provided through co financing or of invested private funds,

  • the relationships in connection with possible funds invested by the public partner and on the manner of refunding or purchasing invested public funds,

  • a timetable of the use of public funds,

  • the method of supervising the appropriated spending of funds,

  • a timetable and method of carrying out investments in structures and facilities and fulfilling other obligations,

  • the model of ownership right to structures and facilities,

  • the conditions for awarding business to subcontractors,

  • changes in the concessionaire company for which it must obtain the consent of the public partner,

  • the possibilities of entering into a concession relationship in place of the existing concessionaire (“step in”), contractual penalties and other reasons for cancellation, annulment or rescission of the contract and the rights and obligations of contracting parties in such cases.

3. CONSIDERATIONS

Although the law is very exact on all the procedures to form public private partnerships and although there is also a law on public procurement, some considerations should be mentioned:

  • the above mentioned law does not cover all the possible types of public private partnerships (e.g. agency, service contracts, profit sharing contracts, etc.);

  • there are no manuals for operating public private partnerships;

  • state and local communities look at public private partnerships as a magical stick to resolve all the problems in public sector but there are no ideas what are expected standards of provided service, how to protect public interest, how to promote the use of public service etc.;

  • there is no real political wish for public private partnerships;

  • there is strong people’s opposition against public private partnerships as a way of public service privatization.

Yet there are some quasi PPP projects going on: Emonika (main railway and bus station in Ljubljana), sport facility in Ljubljana, considerations about modernization of Slovenian railways.

Source: Dr. Borut Strazišar, Senior Lecturer, Faculty of Management Koper

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