General PPP frameworkOverview
How has the concept of public-private partnership (PPP) developed in your jurisdiction? What types of transactions are permitted and commonly used in your jurisdiction?
The PPP framework was created in Colombia in 2012 by Law No. 1508/12 (the PPP Law). This law defines a PPP as an instrument of private capital linkage, manifested in a contract between a state entity and a natural person or legal entity, for the provision of public goods and their related services, that involves the retention and transfer of risks between parties. Payments to the private sector are conditional on the availability of the asset or service, as well as the accomplishment of performance standards.
The types of transactions permitted by the PPP Law are design, construction, repair, improvement or equipment of an asset and its related services, all of which must involve the operation and maintenance of the infrastructure.
It is important to note that the PPP Law includes concessions’ contracts as a form of PPP, and prescribes that PPPs may also be used for the provision of public services.
The principles that govern PPPs in Colombia are of public administrative function of public procurement and fiscal sustainability.
PPP schemes may be used when, in the planning phase, economic studies, cost-benefit analyses or comparative opinions show that they are an efficient or necessary method for project execution.
The regulatory PPP Framework as of 2019 is as follows:
- Law No. 1508/12 (the PPP Law);
- Presidential Decree No. 1082/2015 (a compilatory decree that regulates part of the PPP Law);
- Law No. 80/93 modified by Law No. 1150/2006 (the Public Procurement Law);
- Law No. 1682/2013 (the Infrastructure Law);
- Resolution No. 789/2017 issued by the Water and Sewage Regulatory Agency, which governs PPP contracts for this specific sector; and
- Law No. 1882/2018 (modifies and clarifies some parts of the Public Procurement Law, the Infrastructure Law and the PPP Law).
What categories of public infrastructure are subject to PPP transactions in your jurisdiction?
The PPP framework in Colombia can be used for physical and social infrastructure. This includes the transportation, energy, water and telecoms sectors, as well as the provision of schools, hospitals, government buildings, prisons, hotels, museums, etc.Legislative framework
Is there a legislative framework for PPPs in your jurisdiction, or are PPPs undertaken pursuant to general government powers as one-off transactions?
The PPP framework in Colombia is the PPP Law and its regulatory decrees. However, article 3 of the PPP Law dictates that those sectors that already have their own private investment regime will not be subject to the PPP Law until those frameworks are updated to include the particularities of PPP contracts. For example, the PPP Law does not include the ports and terminals concessions contracts, which are regulated by Law No. 1/1991, Telecommunications contracts, or energy, mining, oil and gas.Relevant authority
Is there a centralised PPP authority or may each agency carry out its own programme?
There is no centralised authority on PPPs. Any national or subnational entity can carry out its own PPP programme. However, notably, the National Infrastructure Agency is the public entity responsible for all national transportation projects, such as ports, airports, trains, roads and highways. The Ministry of Finance and Public Credit and the Department of National Planning play a supervisory role.Procurement
Are PPPs procured only at the national level or may state, municipal or other subdivision government bodies enter into PPPs?
PPPs can be procured at a national or subnational level. However, both need authorisation from national authorities. The National Planning Department will make a value-for-money analysis (public-private comparator) and the Ministry of Finance and Public Credit must review and approve the assessment of the contingent liability valuations carried out by the state entities in the development of PPP schemes, in the terms defined in Law No. 448/98.Remuneration
How is the private party in a PPP remunerated in your jurisdiction?
The government sponsor makes milestone payments to the private party when the infrastructure is available. These payments are subject to deductions if the performance standards are not met. It is possible to agree that the compensation is payable from revenues generated by user fees (eg, tolls).
The PPP framework also provides that national entities or authorities (the public party) may remunerate the private party with proprietary rights of land. Although, originally, this was only available to national entities, the Constitutional Court ruled that local and regional entities may also remunerate in this way under the argument that local entities are entitled, by constitution, to the administration of their own goods without any interference from the national government (judgment C-346 of 2017).
As of the date of this ruling (24 May 2017), national, local or regional entities can remunerate the private party of a PPP by means of establishing a right in rem in their favour over an immoveable property of such entity.
After the Constitutional Court ruling, Congress passed Law No. 1882 of 2018 explicitly recognising the possibility of subnational entities remunerating the private party with proprietary land rights.Sharing revenue and usage risk
May revenue risk or usage risk be shared between the private party and the government? How is risk shared?
The PPP Law establishes that PPPs must have an efficient allocation of risks, transferring each of them to the party that is better suited to manage them. The idea behind this is to mitigate the impact that the consolidation of any of these risks can have on the availability and quality of service of the project.Government payment obligations
In situations where the private party is compensated in whole or in part through availability or other periodic payments from the government, are the payment obligations of the government subject to the relevant legislative body approving budgetary funding in the future?
No. The public entity cannot start a tender process if the budgetary funding has not been previously approved. Once the PPP contract is signed, the resources are transferred to the trust of the project, to which all assets and liabilities for the project must be transferred. This trust is responsible for the periodic payments.Rate of return caps
Is there any cap on the rate of return that may be earned by the private party in the PPP transaction?
The PPP framework does not establish a cap on the rate of return that may be earned by a private party. The rate of return of the project is calculated using a methodology from the Ministry of Finance and Public Credit. If the rate of return presented by the private party is higher than that set for the project, it is most likely that the proposal will be rejected.
In port concessions, which are not governed by the PPP Law but by Law No. 1/1991, the rate of return must be greater than 12 per cent for the project to be financially profitable.Restriction of ownership transfer
Is the transfer of direct or indirect ownership interests in the project company or other participants restricted?
The PPP Law does not restrict the transfer of direct or indirect ownership interests in the project company or other participants. Nevertheless, in all public contracts, including PPPs, the public entity always includes clauses that prohibit the transfer of ownership without its authorisation. For example, in the 4G infrastructure PPP contracts, which cover the latest (fourth generation) road contracts in Colombia, there is a clause stipulating that the National Infrastructure Agency can only authorise the transfer of ownership interests in the parent company when:
- the transferee complies with all enabling requirements established in the invitation to pre-qualify that were evaluated by the agency;
- the guarantees of the contract are not diminished on the occasion of the assignment;
- the transferees comply with the information obligation established in article 23 of the PPP Law; and
- at least one of the leading parties that participated in the offer remains with a minimum of 25 per cent participation.
Procurement processRelevant procedure
What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?
The procedures that apply to a PPP procurement are divided into two different types of initiative: public initiatives and unsolicited proposals. Any project that requires more than 30 per cent of national or subnational budgetary disbursements must be selected using the public initiative procedure. The threshold for road concessions is 20 per cent.
In the first case, the procurement process must be granted by a public tender. In this process, the entity may use a pre-qualification process, establishing a limited group of bidders to participate in the selection process. The public entity inviting tenders for such projects provides the following information:
- preparation of studies: technical, economic, environmental, land rights, financial and legal;
- description of the project: design, construction, maintenance, duration, financial model and phases;
- cost or profit assessment, specifying social, economic and environmental impact;
- threat and vulnerability analysis; and
- typology, estimation and allocation of risks, potential contingencies and matrix of associated risks.
Unsolicited proposals are divided into two different procedures that lead up to the tender, depending on whether the unsolicited project requires public resources or not. If the project requires less than 30 per cent of centralised national government disbursement (20 per cent for road concessions), the process must be granted using a public tender. In this case, the PPP Law grants the original proponent of a project a qualification bonus that ranges from 3 to 10 per cent over its initial qualification, depending on the size and complexity of the project.
On the other hand, if the unsolicited proposals do not require public funds, the procurement procedure is the abbreviated selection of minor account as stated in Law No. 1150/07, which can be defined as a shorter-term public tender. In this case, the original proponent of the project is given the right to improve the subsequent better offer submitted by a third party during the tendering process.
In relation to the evaluation process, successful bidding contractors are selected considering the following evaluation criteria:
- formal requirements: legal, financial capacity, investment and structuring experience; and
- assessment factors: service levels, quality standards, current value of expected revenues, lower level of state funding and consideration offered by the bidder.
May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?
The private party may present proposals that deviate from the scope or technical characteristics of the procurement documentation, but according to article 12.2 of the PPP Law the government may only evaluate proposals based on the criteria established in the procurement documentation or scope statement. In other words, proposals that deviate from the scope of the procurement documentation may be presented, but the deviation will not constitute a factor for evaluation by the government.Unsolicited proposals
May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?
Private investors may structure projects at their own risk and bearing all structuring costs, and then submit these to the public authorities in strict confidence. The preparation process follows with a two-stage viability test.Pre-feasibility
The sponsor must provide a complete description of the project (minimum construction design, operation and maintenance, organisation and exploitation), indicate the scope of the project, prepare demand studies and identify sources of financing. Once the project is submitted, the state entity has three months to assess the project’s viability. If its decision is favourable, the private entity may continue to the second phase (feasibility), although this does not mean that the state has awarded the project to the sponsor.Feasibility
During this phase, the sponsor must:
- provide a detailed financial model;
- describe the phases and duration of the project;
- submit a risk analysis and environmental, economic, social impact, land rights, financial and legal viability studies;
- indicate the value of the structure;
- provide documents regarding its legal and financial capacity and experience; and
- provide a copy of the contract template.
If the sponsor is not awarded the project, the costs for compiling the studies will be covered. Once the project is submitted, the public entity has six months to decide whether the project is viable or not. This period may be extended for three more months. If the project is viable, the public entity will inform the sponsor of all the conditions for accepting the proposal, including the costs of the structuring studies. The sponsor has two months to accept the conditions or to suggest alternative options. If the parties fail to reach an agreement within these two months, the project will be rejected.Government stipend
Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?
In case the originator of a private PPP is not chosen for its execution, the awardee and not the government party must pay the originator the cost of all the studies made for structuring the project, determined by the government party. This is the only type of stipend that the unsuccessful proponent shall receive.Financing commitments
Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?
In Colombian law, the government body requires that every proposal includes documents that detail the financial capacity of the private party, or its capacity to obtain funding for the project and investment experience (project finance). The government body shall bear this in mind while evaluating the proposal. But these documents are not necessarily required to be commitments.
One way in which to ensure that the PPP transaction, once awarded, is financeable, is to add a clause to the contract specifying that failure to obtain the financial closure required will be deemed a breach of the contract, causing termination of the PPP agreement.Legal opinion
May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?
There is no specific obligation for the government party to ask for a legal opinion on the enforceability of the PPP agreement. Nonetheless, Law No. 80/93 establishes that the attorney general’s office may intervene in the selection process or execution of the agreement to ensure enforcement of the law. The reason behind this is that most government entities have a legal department that participates in the PPP agreement process.Restrictions on foreign entities
Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?
According to Law No. 80/93, which applies to what is not regulated by the PPP Law, foreign entities are welcome to participate in PPP projects with no restriction. In fact, according to article 20, foreign proponents shall receive the same treatment as domestic ones. Therefore, foreign entities may exercise control over the project company.
Design and construction in greenfield PPP projectsForm of contract
Does local law mandate that any particular form of contract govern design and construction activities? Does it mandate the choice of governing law?
PPP Law does not mandate any particular form for governing design and construction activities. However, Law No. 80/93 dictates that contracts regarding direction, programming and execution of designs are consultancy contracts.
According to Law No. 80/93 and the Civil Code, in Colombia, the rule of lex loci solutionis is fully applicable. Therefore, any contract that is to be executed in Colombia will be governed by Colombian law.Design defect liability
Does local law impose liability for design defects and, if so, on what terms?
Local law does not specifically impose liability for design defects, but these defects are customarily included as risks of the agreement and are normally incurred by the private party.Warranties
Does local law require the inclusion of specific warranties? Are there implied warranties in cases where the relevant contract is silent? Does local law mandate or regulate the duration of warranties?
PPP regulation only requires specific warranties to ensure the commitment of the proposer. These are mandatory in order to bid for the project and must be equivalent to 10 per cent of the budget for the project. The warranty may be an insurance policy, bank warranty or warranty trust, among other things. The warranty must cover at least one year, or until the contract is signed.
The execution of the contracts requires another type of warranty that is not included in the PPP Law, but in Law No. 1150/07. This warranty may be an insurance policy or bank warranty, among other things, and must cover several events. An insurance policy is also demanded for state liability.Damages for delay
Are liquidated damages for delay in construction enforceable? Are certain penalty clauses unenforceable?
Liquidated damages for delay in construction are enforceable by the government. These damages may be enforceable during the execution phase of the contract by the public contractor or at the moment of liquidation, which is carried out at the end of the contract. If the private party does not pay, they public party can claim it before a judge.
Penalty clauses are enforceable if they are included in the contract, according to article 17 of Law No. 1150/07.Indirect or consequential damages
What restrictions are imposed by local law on the contractor’s ability to limit or disclaim liability for indirect or consequential damages?
As public contracts are used to provide a public service, the contractor and the government are understood to be the same person. Therefore, any limitation for indirect or consequential damages is forbidden because it would mean a limitation of the government’s liability, and therefore be considered unconstitutional.Non-payment
May a contractor suspend performance for non-payment?
Since PPP projects are developed in order for an individual to provide public services, under no circumstances can the private party suspend the provision of these services, even in the event of non-payment. Nevertheless, this type of conduct constitutes a cause of non-compliance that can be alleged before a dispute board, an arbitral panel or a judge.Applicable clauses
Does local law restrict ‘pay if paid’ or ‘paid when paid’ clauses?
No. These types of clauses may be included in the PPP contract after evaluating the type and the scope of the project.
Are ‘equivalent project relief’ clauses enforceable under local law?
The PPP framework does not regulate equivalent project relief clauses, although they may be agreed upon by the parties to the PPP agreement.Expansion of scope of work
May the government party decide unilaterally to expand the scope of work under the PPP agreement?
According to the PPP Law, the contract is an agreement of wills, so government may not unilaterally decide to expand the work of the PPP. Any additions to the PPP agreement are limited to a percentage of the original contract. Public PPP and private PPP with public resources can only add 20 per cent of the value of the original contract (articles 13 and 18 of the PPP Law), and private PPP without public resources cannot add public resources to it.Rebalancing agreements
Does local law entitle either party to have a PPP agreement ‘rebalanced’ or set aside if it becomes unduly burdensome owing to unforeseen events? Can this be agreed to by the parties?
Article 27 of Law No. 80/93 establishes that the balance of the agreement between rights and duties must be maintained (economic equilibrium). In order to do this, when the balance is broken for causes not attributable to the affected party, additional agreements and measures must be taken by the parties to reach a no-loss point in the contract.Liens laws
Are statutory lien laws applicable to construction work performed in connection with a PPP agreement?
No. The private party does not own the construction work and therefore it cannot be subject to any assessment or burden.Other relevant provisions
Are there any other material provisions related to design and construction work that PPP agreements must address?
Bid documents must contain every material provision related to design and construction work, particular to each project.
Operation and maintenancePerformance obligations
Are private parties’ obligations during the operating period required to be defined in detail or may the PPP agreement set forth performance criteria?
The PPP contract must define, in detail, the obligations during the operating period. In addition, Decree No. 1082/15 stipulates that service levels and quality standards must be included in the agreement and establishes the possibility of agreeing deductions to the private party’s remuneration when these levels and standards are not met.Failure to maintain
Are liquidated damages payable, or are deductions from availability payments possible, for the private party’s failure to operate and maintain the facility as agreed?
Decree No. 1082/15 establishes that deductions from the private’s party remuneration that may be applied when it does not meet the agreed levels and standards of service and quality must be included in the PPP agreement.Refurbishment of vacated facilities
Are there any legal or customary requirements that facilities be refurbished before they are handed back to the government party at the end of the term? (To what degree must facilities be refurbished?)
The conditions of the facilities and goods that are to be handed back to the government are to be set in the PPP agreement. Therefore, whenever the private party does not meet these conditions at the time the facilities are handed back, the private party must refurbish them to meet this criterion. It is common to include in the PPP contract that the facilities must be in perfect condition (refurbished, updated or new) when handed back.
How is the risk of delays in commercial or financial closing customarily allocated between the parties?
As this is a risk that is better handled by the private party, customarily this risk is allocated to the private party.
How is the risk of delay in obtaining the necessary permits customarily allocated between the parties?
According to the National Council for Economic and Social Policy (CONPES) Document 3760 (regarding PPPs in roads and highways), the risk of obtaining the necessary permits is to be allocated to the private party. It could be said that it is customary for the private party to be allocated this risk.Force majeure
How are force majeure and geotechnical, environmental and weather risks customarily allocated between the parties? Is force majeure treated as a general concept relating to acts outside the parties’ control or is it defined with reference to specific enumerated events?
It is common for both parties to include a clause in the agreement regarding what should be understood by force majeure and to whom the risk is to be allocated.Third party risk
How is risk for acts of third parties customarily allocated between parties to a PPP agreement?
It is customary that the party who is best able to handle this is allocated this risk, so, depending on the specific risk, it could be allocated to either party. For example, lack of access to property is usually allocated to the private party, but, depending on the percentage of cost overturn, some of that risk may be allocated to the government body, according to CONPES Document 3760.Political, legal and macroeconomic risks
How are political, legal and macroeconomic risks customarily allocated between the parties? What protection is afforded to the private party against discriminatory change of law or regulation?
According to Law No. 80/93 and CONPES Document 3107, the treatment of these risks must be stipulated in the agreement, and is usually allocated to the public entity.Mitigating events
What events entitle the private party to extensions of time to perform its obligations?
The private party may request an extension after the first three years and before 75 per cent of the initial time agreed has passed. However, extensions cannot exceed 20 per cent of the initial time. PPP contracts, by general rule, have a maximum term of 30 years. The only way to increase this term is if the CONPES approves it.
What events entitle the private party to additional compensation?
There are no specific events under the current PPP framework that entitle the private party to additional compensation. However, the addition of resources is regulated by the PPP Law and this may never be more than 20 per cent of the original contract.Compensation
How is compensation calculated and paid?
Compensation is calculated on a case-by-case basis depending on the project that is to be developed. This compensation can be paid by the operation of the project itself (users of the project) or by authorised future public funds, or a mixture of both.Insurance
Are there any legal or customary requirements for project agreements to specify a programme of insurance? Which party mandatorily or customarily bears the risk of insurance becoming unavailable on commercially reasonable terms?
Even though there is no specific or broad regulation on insurance in the PPP Law, Decree No. 1082/15 is applicable. Therefore, the risk of the insurance becoming unavailable on commercially reasonable terms is allocated to the private party.
Default and terminationRemedies
What remedies are available to the government party for breach by the private party?
The government party has several options regarding breach by the private party. The viability of these options depends on the type of breach and whether it seriously and directly affects the execution of the PPP agreement.
As article 22 of the PPP Law establishes, PPP contracts shall include the ‘exceptional clauses’ that govern every public contract according to Law No. 80/93. Therefore, if the breach seriously and directly affects the execution of the agreement, the government party may apply a cancellation clause, which allows the government to terminate and liquidate the contract in any state of development and which also leads to penalties for the private party, such as not being able to sign any contract with the government during a five-year period. In addition, should the private party incur any of the causes listed in article 17 of Law No. 80/93, the government could also terminate the contract unilaterally.
If the breach by the private party is not one of the aforementioned types, the government body may sue the party before a judge in order for the judge to declare a breach, and the government party may claim any damages it may have suffered because of the breach.
The government can also impose several fines to force the private party to fulfil the contract if this possibility has been agreed in the PPP contract.Termination
On what grounds may the PPP agreement be terminated?
There are no specific grounds for the PPP agreement to be terminated in the PPP Law. However, the traditional grounds for termination for any public contract may apply, so in compliance with Law No. 80/93, in general terms, PPP agreements may be terminated in the following cases:
- breach of contract by any of the parties that gravely affects the provision of the public service;
- application of the exceptional clauses; or
- if the agreement is null and void.
The way in which the termination takes place differs for each of the above-mentioned cases.
For example, article 20 of Law No. 1882/18 prescribes that when a judicial authority declares the absolute nullity of the state contract, or when an administrative or judicial authority or the contracting state entity orders its termination originated in a ground of absolute nullity, the updated value costs, investments and expenses executed by the contractor, including interest, minus the remuneration and payments received by the contractor by virtue of compliance with the contractual object must be recognised to the private party.
To recognise this compensation, a third-party expert (an engineer) must validate the following criteria:
- the acknowledgments have been executed, totally or partially, to help satisfy the public interest;
- the acknowledgements are associated with the object of the contract;
- the acknowledgements correspond to prices or market conditions at the time of the causation according to the type of contract; and
- the acknowledgements do not correspond to costs or penalties, agreed or not, that have been applied to the contractor due to the early termination of non-labour contractual relationships, except in the case of those associated with credit agreements, financial leasing or termination of the derivative contracts of financial coverage of the project.
The private party will not be able to receive as a remainder, after the payment of the credits, a sum superior to the contributions of capital of its partners minus the dividends decreed, dividends paid and under capitalisations made by the partners.
The way in which the contract should be liquidated is stated in article 20 of Law 1882/2018, which was deemed constitutional by the Constitutional Court (C-207/2019).
Is there a possibility of termination for convenience?
As exceptional clauses from Law No. 80/93 are to be included in all PPP agreements, one of the causes for unilateral termination is when the needs of the public service provided by the agreement, or the public order situation, demands it. These situations may be understood as a termination for convenience.
Regarding this matter, it is important to bear in mind that article 32 of the PPP Law, modified by article 20 of Law No. 1882/2019 defines how the public party should be paid in case of termination.
If the PPP agreement is terminated, is compensation available?
According to the current regime, any type of termination of a PPP agreement engenders compensation for either the government party or the private party if they are entitled to it. Under article 32 of the PPP Law, modified by article 20 of Law No. 1882/18, in the contracts that develop PPP projects a clause will be included in which a mathematical formula will be established to determine the possible reciprocal benefits to which the parties are entitled if the contract is terminated in advance by mutual agreement or unilaterally by the state agency.
Does the government provide debt financing or guarantees for PPP projects? On what terms? Which agencies are responsible?
The National Finance and Development Agency (FDN) aims to manage and incentivise the financing and structuring of infrastructure projects. The financial products that it can provide are as follows:
- subordinate multipurpose: this is a product that constitutes an additional multipurpose, contingent and subordinated source of liquidity in payments to senior debt, which allows mitigating the volatility of the characteristic cash flows in infrastructure projects;
- subordinated debt: debt whose amortisations are conditional on the payments of the preferential debt and has later deadlines than the preferential debt. This product will allow projects to improve the efficiency of their capital structure, reduce the risk of commercial debt and mitigate liquidity risk;
- partial security: this is a guarantee to stabilise the cash flow of projects if there is a temporary drop in revenue. The partial security will improve the qualification of the project upon exit to the capital market, convert the liquidity risk and mobilise the capital of the institutional market;
- long-term senior debt: debt with a priority of payment and through which the FDN will provide financing for longer terms than the market offers. This product will align the cash flow of the project and ensure that the costs correspond to the risks of each of the phases;
- miniperm debt: a medium-term project finance kind of credit to cover the construction period and the beginning of the operation and maintenance period. Before the credit is due, there is a refinancing of the debt that helps optimise the cost of financing. Given its shorter term, these types of structures also make it possible to offer loans in foreign currency, given the greater ease in establishing exchange hedges;
- multipurpose liquidity: additional source of liquidity throughout the life of the project that allows coverage of missing cash for the payment of the senior debt, as well as anticipating payments guaranteed by the public party as additional project costs and toll collection rights;
- funding in Colombian pesos (COP): line of credit in local and long-term currency, destined for international financial entities (commercial banks, multilateral entities), with flexible terms and conditions, to be used in the financing of infrastructure projects; and
- bank guarantee: payable at first requirement, irrevocable and unconditional, offered in order to support the capital contributions based on a sponsor or shareholder of an infrastructure project.
Are lenders afforded privity of contract with the government party through direct agreements or similar mechanisms? What rights will lenders typically have under these agreements?
No privity of contract is afforded by the lender directly with the government party. Lenders have a direct contract with the private party that is used to finance the project.Step-in rights
Is there a mechanism under which lenders may exercise step-in rights or take over the PPP project? Are lenders able to obtain a security interest in the PPP agreement itself?
Article 30 of the PPP Law prescribes that in case of breach of contract by the concessionaire, lenders may exercise step-in rights and take over the PPP project directly or through a third party.Cure rights
Are lenders expressly afforded cure rights beyond those available to the project company or are they permitted to cure only during the same period and under the same conditions as the project company?
This matter is not regulated under the Colombian PPP framework.Refinancing
If the private party refinances the PPP project at a lower cost of funds, is there any requirement that the gains from such refinancing be shared with the government? Are there any restrictions on refinancing?
No specific regulation in this matter exists in the PPP framework. It is a matter solved mostly on the agreement itself, and usually there is no obligation to share the gains with the government, because it is a reward to the private party for its efficiency.
Governing law and dispute resolutionLocal law governance
What key project agreements must be governed by local law?
According to Law No. 80/93 and the Civil Code, all contracts that are to be executed in Colombia must be governed by Colombian law (lex loci solutionis).Government immunity
Under local law, what immunities does the government party enjoy in PPP transactions? Which of these immunities can be waived by the government?
Under article 22 of the PPP Law, every PPP agreement must include the exceptional clauses regulated in Law No. 80/93. These clauses may be understood as immunities that the government party enjoys and cannot be waived. Some of these clauses are:
- unilateral interpretation of the contract;
- unilateral modification of the contract;
- unilateral termination of the contract; and
- cancellation and submission to national laws.
Is arbitration available to settle disputes under the project agreement between the government and the private party? If not, what regime applies?
Although this is not regulated in the PPP Law, the Arbitration Law (Law No. 1563/12) allows public contract disputes to be settled by arbitration.Alternative dispute resolution
Is there a requirement to enter into mediation or other preliminary dispute resolution procedures as a condition to seeking arbitration or other binding resolution?
Normally, under Colombian law, if the dispute involves monetary issues and is considered tradable, the parties must first try to settle in a settlement hearing before they come before a judge; there is no such requirement when parties want to settle their disputes before an arbitration tribunal. Also, most PPP contracts include dispute boards.Special mechanisms
Is there a special mechanism to deal with technical disputes?
There is no special mechanism. Depending on what the parties have agreed, they can take the case before a judge, a dispute adjudication board or an arbitration tribunal in order to settle the technical dispute.
Updates and trendsKey developments of the past year
What are the current issues of note and trends relating to public-private partnerships in your jurisdiction? Are there any identifiable trends in the financing of PPP projects in the jurisdiction?Key developments of the past year56 What are the current issues of note and trends relating to PPPs in your jurisdiction? Are there any identifiable trends in the financing of PPP projects in the jurisdiction?
In 2020, the most important infrastructure projects to be adjudicated in Colombia will be:
- the concession contract for the Bogotá Metro;
- the Bosa Hospital (PPP contract);
- a BTR project (Transmilenio Carrera Septima);
- Accesos al Norte (road PPP); and
- Regiotram - Light Train (PPP contract);
- construction of three new sectors of the Great Malecon of the Magdalena River: Great Melacon Family Sector, Great Malecon Sports Sector, Great Malecon Cultural Sector; and
- light train;
- light rail train;
- soccer stadium (PPP contract); and
- Antioquia train (PPP contract);
- national projects:
- Chiriguaná-Dibulla train (PPP contract);
- public schools (PPP contracts);
- prisons (PPP contracts); and
- remaining 4G road concessions.