{"id":2296,"date":"2017-07-26T19:27:25","date_gmt":"2017-07-26T22:27:25","guid":{"rendered":"https:\/\/cspabogados.com.ar\/?p=2296\/"},"modified":"2026-08-19T12:54:33","modified_gmt":"2026-08-19T15:54:33","slug":"ppp-contracts-in-argentina","status":"publish","type":"post","link":"https:\/\/cspabogados.com.ar\/en\/ppp-contracts-in-argentina\/","title":{"rendered":"PPP Contracts in Argentina: modifications to the traditional public procuring regime. Protection and other dispositions of interest to the private partner"},"content":{"rendered":"

PPP Contracts in Argentina: modifications to the traditional public procuring regime. Protection and other dispositions of interest to the private partner<\/h1>

by Mario Eduardo Castro Sammartino<\/a><\/span> | 26 Jul 2017<\/span><\/p><\/div><\/div><\/div>

Different laws govern the Federal Public Procuring Regime in Argentina.<\/p>\n

On the one hand, the traditional public procuring methods are regulated by Law Number 13,064 (Public Works), Law Number 17,520 (Concession of Public Works), and Decree Number 1,023\/2001 (Public Procurement of the National Administration), and its regulation by Decree Number 1,030\/2016.<\/p>\n

On the other hand, the new Public \u2013 Private Participation Contracts (the PPP Contracts) established by Law Number 27,328, and is regulatory Decree Number 118\/2017 (both legal dispositions, the PPP Regime), as an alternative new tool to try to boost infrastructure development in the country[1].<\/p>\n

The traditional public procuring regimes are based on certain legal principles that entitle the Procuring Authority to unilaterally exercise powers far exceeding those powers parties to a contract have under private law, such as to interpret the contract\u00b4s provisions, to modify the terms and conditions of the agreement, to impose sanctions, and to early terminate the contract based upon grounds of public interest, all without any judicial intervention.<\/p>\n

To protect the Private Partner\u00b4s rights and attract investments that otherwise might be discouraged, the regulations on PPP Contracts in Argentina have introduced significant modifications to the traditional public procuring regime, suppressing or limiting the powers of the Procuring Authority. The PPP Regime brings about such significant changes to the extent of creating a brand new paradigm for public procuring in Argentina, as it will be explained below.<\/p>\n

a) General legal regime of PPP Contracts in Argentina<\/strong><\/p>\n

PPP Contracts in Argentina are and alternative to the traditional public procurement methods. Therefore, no provision contained in any of the laws regulating such traditional public procuring methods will apply to the PPP Contracts, neither directly, nor in a supplementary or analogical way (Law Number 27,328, Article Number 31).<\/p>\n

Before choosing the PPP Contract as the public procuring method for a particular project a comparative assessment must be run by the Procuring Authority. PPP Contracts may be entered into when it is previously determined that this contracting method allows fulfilling the public interest goals to be satisfied (Law Number 27,328, Article Number 1, final paragraph, and Regulatory Decree Number 118\/2017, Annex I, Chapter I, Article 1).<\/p>\n

b) Interpretation of the PPP Contract<\/strong><\/p>\n

The PPP Contract shall provide for procedures and methods to solve disputes on interpretation of the contract, technical or patrimonial issues (Law Number 27,328, Article Number 9, Section w), thus excluding any power of the Procuring Authority to interpret the contract by itself.<\/p>\n

c) Modification to the PPP Contract<\/strong><\/p>\n

The Procuring Authority\u00b4s power to introduce modifications to the PPP Contract is tempered. In this line, the PPP Contracts must set out such powers, if any, and in no case may the Procuring Authority decide modifications other than those related to the project\u00b4s performance and up to a maximum of 20 percent, either above or below the total value of the contract.<\/p>\n

Any alteration shall be in all cases fairly compensated, preserving the original economic-financial balance, and the financial possibilities and conditions (Law Number 27,328, Article Number 9, Section i)).<\/p>\n

The Private Partner\u00b4s compensation for any modification introduced to the PPP Contract must be granted by modifying any factor of the contract\u00b4s economic regime. The factor\u00b4s variation must be set out so as to achieve that the net present value be equal to zero, considering the discount rate as determined by the bidding documents and the economic impact the variation may have on the project (Regulatory Decree Number 118\/2017, Annex I, Chapter I, Article 9, Section 8).<\/p>\n

Additionally, any potential extension of the PPP Contract\u00b4s original term shall be provided for in the agreement. In no case, may the term of the contract be longer than 35 years, including its extensions (Law Number 27,328, Article Number 4, Section d, and Article Number 9, Section a).<\/p>\n

d) Sanctions to the Private Partner<\/strong><\/p>\n

Under the PPP Regime (Regulatory Decree Number 118\/2017, Annex I, Chapter I, Article 9, Section 11), no sanction may be imposed to the Private Partner unless expressly provided for in the bidding documents and PPP Contract. Likewise, when sanctioning, it is forbidden to exceed the limits established in the bidding documents and PPP Contract. The Private Partner\u00b4s due process must be protected, having the possibility to be heard and present its case, and provide evidence. Any breach of contract cannot be subdivided to hold the Private Party accountable for more than one count for a single infringement. Likewise, counts may not be multiplied for a single obligation. Sanctions may be challenged in the ways set out by the bidding documents or the PPP Contract, with suspensory effect if established by said documents.<\/p>\n

e) Anticipated termination of the PPP Contract<\/strong><\/p>\n

Anticipated termination of the PPP Contract on the grounds of public interests[2] may only be executed by a President\u00b4s Decree. The Federal State\u00b4s liability will not be limited whatsoever in case of termination of the PPP Contract (Law Number 27,328, Article Number 9, Section p), and Regulatory Decree Number 118\/2017, Annex I, Chapter I, Article Number 9, Section 12)[3].<\/p>\n

Further, in all cases of anticipated termination, prior to taking possession of the assets, a compensation must be paid to the Private Partner, following the stipulations of the contractual documents but never being it less than an amount equivalent to the unamortized investments, based upon principles and procedures generally and internationally accepted (Law Number 27,328, Article Number 10. Regulatory Decree Number 118\/2017, Annex I, Chapter I, Article Number 10,\u00a0 (Regulatory Decree Number 18\/2017, Annex I, Chapter I, Article Number 10, first paragraph).<\/p>\n

Furthermore, the repayment of the financing effectively applied to the project must also be assured (Regulatory Decree Number 18\/2017, Annex I, Chapter I, Article Number 10, second paragraph).<\/p>\n

Notwithstanding all of the above, the private contractor may be held liable to pay damages in case of breach of contract if any (Law Number 27,328, Article Number 10, final paragraph).<\/p>\n

f) Protection and other dispositions of interests to the Private Partner<\/strong><\/p>\n

i) Price of the PPP Contract. Collaterals<\/span><\/p>\n

To protect the Private Partner against currency depreciation,\u00a0 the PPP Contract shall provide for procedures for revision of its price, to preserve its economic-financial equation (Law Number 27,328, Article Number 9, Section f). Consistent with this content, the PPP Regime excludes the application of the prohibition of indexation set forth by Law Number 23,928 (Law Number 27,328, Article Number 31, Section d).<\/p>\n

The price may also be agreed upon in foreign currency, and the Procuring Authority may not discharge its obligations paying the equivalent in local currency (Law Number 27,328, Article Number 31, Section c), expressly excluding the application of Article Number 765 of the Civil and Commercial Code of the Nation).<\/p>\n

As to collaterals, the payment commitments the Procuring Authority takes on may be secured through the following possibilities listed by the PPP Regime (Law Number 27,328, Article Number 18):<\/p>\n