Some of the innovations that have been introduced, including within the framework of the Civil Code reform, have brought the PPP legal environment in Russia one step closer to international best practices in the fields of PPP and project finance. | These include concepts such as: - options;
- independent guarantees;
- security deposits;
- pre-contractual liability;
- the reimbursement of losses arising from the occurrence of certain events specified in a contract (the intended equivalent of the English law concept of an “indemnity”); and
- representations (“zavereniya ob obstoyatelstvakh”) (an intended equivalent of “representations” and “warranties” as used in contracts under English law).
Despite these legal developments, further amendments to the current civil legislation are still required to address the concerns of financing organisations and increase the bankability of PPP projects in Russia. PPP projects in Russia are generally structured based on market practice and experience accumulated by market players. At the same time, the legislation is rather broad and usually does not elaborate in sufficient detail on various aspects of PPP projects, which leaves room for interpretation and negotiations. Most of the time, disputes are settled amicably through negotiations because all the parties involved are interested in the success of the project. It means that there are rather few court rulings available that could bring light on the potential interpretation of the PPP legislation. In the past years there have been three major landmark disputes involving: - the Orlovsky Tunnel;
- the Kaga-Sterlitamak-Magnitogorsk automobile road tender; and
- LLC Glavnaya Doroga (a concessionaire for a toll road).
The takeaways from these cases are rather mixed. On the one hand, some of the instruments that are crucial for PPP projects (like ‘special circumstances’ allowing cost and time relief) have been confirmed as viable, which is very positive. On the other hand, PPP related disputes have been exempt from commercial arbitration (both international and domestic) because the courts considered them of public importance. Each of these disputes came as a shock to the market and the whole PPP community, as they have shown that even concepts that seem well established for experienced investors may at any moment be criticised and sometimes challenged in court by some authorities who only occasionally deal with PPPs (like the Federal Anti-monopoly Service), unless such legal concepts are expressly provided for in the legislation. |
