Extension Of The Duration Of Concession Contracts: Room For Doubt

Author:Mr Emmanuel Paillard
Profession:Gowling WLG
 
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The reform of the law on concessions implemented by order No. 2016-65 of 29 January 2016 on concession contracts (hereinafter "the Order") and its enacting decree amended a number of previously well-established rules. These included the rules on extending the duration of concessions.

Previously the subject of specific legislative provisions, extending the duration of concessions is no longer covered as such by the Order.

Should it be concluded that extending the duration of concessions is no longer framed by the law? Certainly not, but the legal framework must now be interpreted from the standpoint of another set of rules on changes to concessions - with all the resultant uncertainties.

The express framework for extending the duration of concessions

Law No. 93-122 of 29 January 1993 on the prevention of corruption and the transparency of economic life and public procedures, the so-called Sapin law, provided in article 40 that delegation of a service may be extended exclusively in two cases: (i) for reasons of public interest but without the extension exceeding one year or (ii) when the delegatee is obliged to make material investments not provided in the initial agreement that modify the overall economic fairness of the delegated service and which cannot be amortised in the remaining duration of the agreement - other than by imposing a manifestly excessive price increase.

In the first case, an exceptional extension limited to one year of the duration of the delegated service is granted if immediate expiry of the concession would prejudice the public interest. This faculty has mainly been used to limit any interruption of the delegated service when no successor for the delegatee has been appointed.

In the second case, an extension is granted to allow a delegatee obliged to make unforeseen investments to amortise its outlay rather than recouping the investment by increasing the cost of the delegated service. The Council of State has held that the new investments must be essential for satisfactory conduct of the service or the extension of its geographical scope and must significantly compromise the delegatee's overall return from provision of the delegation service (Council of State, 29 December 2004, Société SOCCRAM, No. 239681).

The law was, therefore, clear and no extensions of the duration of concessions were permitted except in the above two well-defined hypotheses. Apart from in these two situations, no extensions were possible.

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