China Drafts Rules for Infrastructure and Public Utilities Concessions

In order to guide and regulate cooperation between government and social capital (public private partnership, or PPP) and promote PPP projects, the National Development and Reform Commission has recently initiated the process of drafting the Interim Regulations on Infrastructure and Public Utilities Concessions. Views are currently sought from the relevant departments of the State Council and from the local authorities.

PPP projects may take diverse forms, including concession, equity partnership and government procurement of services. In actual practice, the overwhelming majority of PPP projects are infrastructure projects. Infrastructure and public utilities concession is the principal and most common form of PPP in China. Equity partnership and government procurement of services are already regulated by the Company Law, Government Procurement Law and other laws and regulations. Only concession projects are not specifically governed by national laws. There is thus an urgent need to speed up concessions legislation for infrastructure and public utilities projects in order to properly guide and regulate PPP activities.

Following the guidelines of the State Council, the National Development and Reform Commission will, on the basis of the Measures for the Administration of Infrastructure and Public Utilities Concessions (Decree No. 25 jointly issued by NDRC and five other ministries) and proceeding from the pressing need for legislation in actual practice, make specific institutional arrangements such as clarifying the terms and scope of concession, enhancing government’s contract performance, encouraging private investment, improving dispute resolution mechanisms, and better aligning with other laws and regulations.