For Whom the Motorway Tolls

Motorway Law
Motorway Tolls
Authorities
Finance
Concessions
Transitional Rules

Motorway Law

The Law on Toll Motorways (October 27 1994) has been substantially amended by the Amended Law on Toll Motorways and other laws, adopted by Parliament and signed by the president.

Among other things, the Motorway Law stipulates the conditions for granting concessions for the construction and operation of toll motorways. The amended law introduces the concept of obtaining a concession exclusively for the operation of motorways. Now certain expressways (as specified in an ordinance of the Council of Ministers) may be constructed and operated according to the same rules as toll motorways.

Motorway Tolls

The Motorway Law specifies the rules for collecting tolls for the use of motorways. Generally, the concession holders collect motorway tolls. The proceeds may constitute the revenue of the concession holder or the National Motorway Fund.

Motorway tolls constitute the fund's revenue in the event of the concession holder being granted additional financing in the form of direct payments designated for the operation of motorways. The amounts are specified in the concession agreement and the concession itself.

The conditions and procedure for settling accounts between the concession holder and the fund are to be specified by a government ordinance.

If the motorway tolls constitute the concession holder's revenue, the concession agreement must specify the conditions for dividing profits between the concession holder and the fund.

The level of motorway tolls must be established pursuant to the conditions that will be set out in the minister of transport's ordinance. The amounts of particular tolls are to be specified by either an ordinance of the minister of transport, if such tolls constitute the fund's revenue, or by the concession holder if the tolls constitute its revenue.

Authorities

Generally, the minister of transport is the authority responsible for the construction and operation of motorways, as advised by the Motorway Council. His orders and ordinances are performed by the Agency for Motorway Construction and Operation.

Agency for Motorway Construction and Operation
The duties of the agency include:

• conducting motorway studies;

• cooperating with the relevant authorities;

• purchasing and managing real estate on behalf of the state Treasury;

• establishing criteria for the evaluation of offers in the tender process;

• constructing the tender procedures;

• developing drafts of concessions;

• coordinating construction plans in accordance with technical and building regulations; and

• supervising compliance of the construction and operation of motorways with the terms of the granted concession.
  

The amended law changes the policy concerning the agency's finances. Generally, the agency's revenues consist of the proceeds resulting from its own activity, concession fees and other sources. The agency receives annual subsidies from the Treasury, designated for:

• studies and documentation related to the construction of motorways;

• acquisition and management of real estate;

• compensation and fees connected with the protection of forests;

• redevelopment of technical infrastructure facilities; and

• archaeological and environmental research.

The amended law introduces a new provision concerning the foreign aid funds received by the government for implementing tasks related to financing the construction and operation of motorways (or exclusively for the operation of motorways). The agency may manage the proceeds of these funds on the basis of appropriate agreements or donors' declarations. Moreover, the agency may draw long-term loans and issue bonds with the permission of the minister of transport and the minister of finance. The Treasury will guarantee these loans provided that the resulting proceeds will be designated for the construction of motorways.

Motorway Council
The Motorway Council is the advisory body of the minister of transport. Council members are appointed and dismissed by the minister of transport. The duties of the council are specified in the Motorway Law and are not presently subject to any substantial amendments.

Finance

The amended law introduces a new system of financing the construction and operation of motorways. The new system is sometimes described as a public-private partnership because the amended law increases the Treasury's participation in this process.

Motorways will now be financed by the following:

• the holder of the concession, either from its own funds or through obtained loans. According to the amended law, such loans may be secured by guarantees and suretyships granted by the Treasury without limitation, on the basis of the Law of Suretyships and Guaranties Granted by the Treasury or Certain Legal Persons (May 8 1997);

• the Treasury, by means of the annual subsidies granted to the agency;

• the resources of the National Motorway Fund; and

• other sources.
  

If the concession is to be granted exclusively for the operation of a motorway (or a section of motorway), then its construction is financed by the Treasury according to the rules relating to the finance and construction of public roads.

Additional finance
The amended law provides for the creation of a National Motorway Fund that is to be designated for additional financing for the construction and operation of motorways. The fund is to be established at Bank Gospodarstwa Krajowego and its revenues will come from, among others:

• the Treasury's income arising from excise duty on vehicles;

• the fund's capital investments;

• revenues from the sale of shares in privatized companies;

• motorway tolls;

• loans incurred by the agency;

• earnings on bonds issued by the agency; and

• other sources.

The proceeds of the fund are aimed primarily at additional financing for the operation and construction of motorways. The proceeds may be also designated for the repayment of loans and the repurchase of bonds issued by the agency, and for the payment of obligations arising from guarantees and sureties granted to the agency by the Treasury in connection with the construction and operation of motorways. In certain cases, the minister of transport can designate up to 25% of the fund's financial resources (with the consent of the minister responsible for public finances) to cover the costs of the agency's activities. The financial resources of the fund will also be used to pay commission to Bank Gospodarstwa Krajowego.

The amended law introduces the possibility of obtaining proceeds for the construction and operation of motorways from the fund. The proceeds from the fund may be transferred to the concession holders in three different ways. First, during the construction of a motorway (or a section of motorway), proceeds from the fund may be transferred in the form of subsidies or interest-free loans granted to the concession holders, under conditions specified in the concession and concession agreement. Second, while the motorway is already being used, interest-free loans may be granted to the concession holders for the operation of a motorway in order to ensure maintenance of the motorway and the repayment of loans or bonds issued in connection with its construction. The third manner of disposing of the fund's proceeds takes place only if motorway tolls constitute revenues of the fund. This comprises direct payments in favour of the concession holders of fixed costs borne in connection with the maintenance of the motorway and of floating amounts, depending on how the concession holders have fulfilled the requirements of the concession and the relevant agreement.

The Treasury automatically guarantees all payments from the fund (within the scope accepted by the government and described in the concession and the concession agreement).

The relevant provisions of the Law on Suretyships and Guaranties Granted by the Treasury or Certain Legal Persons apply to such guarantees.

Concessions

The Motorway Law requires that a concession be obtained for the construction and operation of a motorway. Pursuant to the amended law, the concession may be granted for the construction and operation of a motorway, or solely for the operation of a motorway or its section.

Selection of the concessionaire takes place in tender proceedings conducted by the agency. Moreover, a concession agreement must be concluded between the minister of transport and the concessionaire in order to determine all the rights and obligations of the parties. The Motorway Law stipulates the procedure for granting concessions and related matters.

Tender proceedings
In order to expedite and facilitate the concession procedure, the amended law introduces a provision requiring that the concession agreement be negotiated before the concession is granted. Thus, the tender proceedings comprise three stages:

• the preliminary selection;

• the limited tender for those eligible to submit a bid; and

• the negotiation of a concession agreement.
  

According to the amended law, participants in a tender procedure must be joint stock companies with their registered seat in Poland, with a share capital not lower than the equivalent of €5 million and whose scope of activities includes the construction and operation of motorways. However, it is possible for participants that do not fulfil these conditions to submit documentation at the preliminary selection stage. These participants can take part in further stages of the tender procedure provided that, after finishing the preliminary selection, a company meeting the specified requirements is registered. The draft statutes, draft articles of incorporation and deeds for taking over shares in such a company should be submitted for the preliminary selection.

Preliminary selection
The agency invites participation in the preliminary selection by placing notices in the national press and the Official Journal of the European Communities. The specifications of the terms and conditions of the preliminary selection consist of:

• basic technical information concerning the motorway;

• basic requirements of the preliminary selection procedure; and

• information on the scope and forms of additional financing of a motorway construction from the fund's resources.
  

Participants of the tender are selected by the tender commission, as appointed by the minister of transport. The selection is performed on the basis of the documentation submitted by the participants. The documentation is evaluated by the tender commission in accordance with the criteria established by the minister of transport.

Limited tender
After the preliminary selection the selected participants receive a written invitation to the tender. After paying the agency and submitting a written confidentiality declaration, participants receive information on tender terms and conditions. The tender commission evaluates the bids and selects the winning company.

Negotiations
The agency conducts negotiations with the company whose bid was considered by the commission to be the most competitive. However, the negotiations with respect to the content of the submitted bids can be conducted with more than one company simultaneously, if the bids were considered by the tender commission to be equal.

If the negotiations are successfully completed and agreement is reached on the content of the concession agreement, the agency's president provides the minister of transport with a draft of the concession and the concession agreement, with the minutes of the negotiations. However, if the negotiations are not completed within nine months, the agency's president can declare the tender procedure to be ineffective (with the consent of the minister of transport), or conduct negotiations with the company whose bid was the second most competitive.

Content of the granted concession
Generally, the concession is granted to the company with whom the content of the concession agreement has been agreed. The minister of transport is the competent authority to grant and withdraw concessions. The granting and withdrawal of a concession occurs by means of an administrative decision. The amended law requires that the concession fee be paid either as a single payment or in instalments.

According to the Motorway Law the concession should state:

• the company's name and seat;

• the scope of activities embraced within the concession;

• the date of commencement of activity;

• the obligations of the concessionaire; and

• the period for which the concession has been granted.
  

In addition, the amended law provides for two other elements of the concession, namely the amounts and forms of additional financing for construction of a motorway from the fund's proceeds as approved by the government, and the amount and method of payment of the concession fee.

Concession agreement
The amended law requires that the concession agreement be completed within 30 days of the date when a decision on granting a concession becomes final. Otherwise the concession may be withdrawn.

The Motorway Law specifies the issues that must be regulated by the concession agreement. The amended law introduces the issues that must be specified in the concession agreement. The agreement should specify:

• the level and forms of additional financing for construction of the motorway from the fund's resources;

• the conditions and extent of the distribution of profits resulting from the collection of toll money between the concessionaire and the fund;

• the method and terms of payment for making land available for the construction of a motorway in favour of the concession holder by the agency (including conditions regarding structures, installations, trees and crops that are located on the land);

• the conditions for approving the motorway for operation; and

• the scope of concessionaire's powers as the motorway operator.

A concession agreement that concerns only the operation of a motorway must specify the conditions of taking over a motorway from an existing operator. Concession agreements are terminated by virtue of law on the date that a decision to withdraw a concession becomes legally valid. Similarly, when the concession agreement is terminated the concession expires automatically.

Transitional Rules

Existing concessions that were granted before the amended law enters into force will remain valid and enforceable. The same applies to concluded concession agreements.

According to the amended law, if the concession is already granted but the agreement is not concluded at the moment when the law enters into force, the previous provisions of the Motorway Law will apply with the appropriate amendments. However, if the tender procedure is initiated before the law enters into force, the newly issued regulation of the amended law will apply.

The amended law represents a new stage for the construction and operation of motorways. When the amendments enter into force the Treasury will be able to participate actively in these activities and influence the development of the motorways.

For further information on this topic please contact Andrew Kozlowski at CMS Cameron McKenna by telephone (+48 22 520 5555) or by fax (+48 22 520 5556) or by e-mail ([email protected]).