Romania’s President Klaus Iohannis promulgated yesterday the law on public-private partnership three years after the Government led by Victor Ponta initiated the project.

The law establishes the mechanisms by which projects can be developed through public-private partnership. It also sets the relative duration of ongoing contractual relations that allows the private partner to recover the investment and make a reasonable profit.

The law also establishes mechanisms for financing projects, either through private funds, or by bringing private and public funds together and distributing the risks between the private and the public partners based on the capacity of each part to assess, manage, and control a risk. Private partners will be able to recover the investments through a contract that allows them to collect and use tariffs from the users of the public services or goods that are the object of the public-private partnership.

The law replaces a similar project from 2010, which has drawn criticism from the European Commission for the way contracts were awarded and verified. EC warned that the law allowed including state-owned companies to receive such contracts, which would have been interpreted as a form of state aid.

The new law was submitted in the Parliament by the Ponta Government in 2013. However, the former president Traian Basescu refused to promulgate it due to an article which provided that the Romanian state was able to unilaterally denounce the contract. Basescu said that the provision was illegal and harmful to the business environment.

The law’s current form, which was approved by the Parliament in November, doesn’t permit this unilateral denunciation.

editor@romania-insider.com