FAS won a Court hearing on concession for constructing a highway in Bashkiria
The Court confirmed that 100% financing of a concession agreement by the government is unlawful.
Moscow Arbitration Court confirmed legitimacy of FAS decision and injunction with regard to the State Committee of the Republic of Bashkortostan on Transport and Road Facilities.
In January 2017, FAS abolished a tender of the State Committee of the Republic of Bashkortostan on Transport and Road Facilities for a concession agreement on financing, construction, reconstruction and operation of “Sterlitamak – Kaga – Magnitogorsk” highway.
The tender was abolished because under the agreement the work costs were supposed to be fully covered from the budget. The total spending of the budgetary funds in the Republic in the next 15 years would reach around 22 billion RUB.
Under the current concession law the government (municipality) can undertake only some costs of a concession agreement; the remaining expenses should be covered for other sources. The concession provides for either 100% financing by investors or partial co-financing by the state. 100% financing by the state is not allowed.
Head of FAS Igor Artemiev explained: “The situation when the government accepts all costs of a concession agreement is contrary to the legal nature and the economic sense of concessions. The line between a concession agreement and a government contract in this case fades; therefore, procurement should be conducted in accord with the law on the contractual system”.
The State Committee of the Republic of Bashkortostan on Transport and Road Facilities and “Bashkirdorstroi” Ltd. (the tender winner) disagreed with the decision and the injunction of the antimonopoly body and filed a lawsuit. The Court dismissed the claim supporting the FAS position.
Igor Artemiev pointed out: “The law on concession agreements needs improvement to exclude fake concessions. Most funds should be provided by investors, the government should be only particularly involved in project financing”.