China: Ministry of Construction Issues Administrative Measures on Concession Arrangements For Municipal Public Utilities

Last Updated: 1 June 2004

The Ministry of Construction ("MOC") recently issued the Administrative Measures on Concession Arrangements for Municipal Public Utilities ("the Concession Arrangements"), which guide local governments on how to promote concession arrangements for local public utility services in the water, natural gas, public transportation (including expressways, subway lines, light rail, and bus routes), and sewage and waste treatment industries. The Concession Arrangements do not prohibit foreign-invested enterprise ("FIE") involvement, but according to the Catalogue Guiding Foreign Investment in Industry, FIEs that provide public utility services must have majority Chinese ownership. The Concession Arrangements came into effect on May 1, 2004.

The Concession Arrangements are aimed at allowing full use to be made of private and overseas capital. The MOC believes that the Concession Arrangements will not only reduce operating costs for infrastructure facilities, but will also enhance service quality.

Public Tendering and Award of Concessions

According to the Concession Arrangements, concession rights will be awarded through public tendering, based on fair, open, equitable principles with the best interests of the public as the first priority. Bidder requirements are somewhat vague: Bidders must hold legal person status, have reasonable registered capital, necessary facilities and equipment, relevant experience, good bank credit and sound financial standing, feasible and practical operational service plans, and a reasonable number of technical, financial, and operational personnel.

Content of Concession Contracts

The winning bidder must sign a concession contract with the relevant local public utility authorities, which must contain terms governing the contract term and scope, the service standards, price calculation and adjustment mechanisms, maintenance of the facilities, safety management, performance guarantees, termination, liability for breach, and dispute resolution. The local public utility administrative departments must calculate and monitor the operational cost of the concession and propose price adjustments, ensure that the concession holder fulfills the obligations stipulated in the concession contract, and handle public complaints on the quality of the public utility's products and services. The concession contract must be filed by the responsible authority with the immediate higher level public utility authority within 30 days of its execution.

Length of the Concessions and Remedies for Breach

Concession contracts can be valid for up to 30 years, but generally the term will be determined with reference to the specific industry and the scale of the operation. The government will provide the concession holder with appropriate compensation for any losses suffered as a result of government decisions made in the public interest. Where either the responsible authority or the concession holder breaches the concession contract, the party in default will be responsible for compensating any losses suffered by the nondefaulting party arising from the breach.

Termination

Where the concession holder wishes to terminate the concession contract, it must give notice to the responsible authority, which must then respond within three months. Before the responsible authority agrees to terminate the concession, the concession holder must ensure continuation of normal operation. The responsible authority is entitled to terminate the concession contract and take over the contract, where the concession holder transfers the concession or disposes of the properties it manages, and where there are serious quality problems, interruption, or suspension of business without authorization that seriously affect public interests or public security.

The responsible authority is empowered to revoke the concession contract where the concession holder engages in improper conduct such as bribery or deception. The name of the concession holder and the nature of the improper conduct will be released to the media and the concession holder will be forbidden from bidding for any public utility concessions for three years.

Independent Monitoring

During the operational period, the responsible authority is required to arrange for experts to conduct interim evaluations of the operation of the concession project. Normally such evaluation will be conducted every two years, although in special circumstances an annual evaluation may be undertaken.

Next Steps

The MOC is undertaking research into appropriate regulations relating to product quality and service standards. It is also preparing sample concession contracts for water supply, gas supply, public transportation, sewage disposal, and wastewater treatment. Finally, the MOC intends to issue guidelines in due course for the operation of the Concession Arrangements.

Conclusion

China is committed to moving toward a market-oriented economy, and the Concession Arrangements are an important step in this process. This is illustrated by the more than 700 road, water, gas, and waste disposal projects that have been submitted by local governments for approval. The cost of these projects is estimated to be approximately US$18 billion.

To put it all into context, Morgan Stanley has estimated that 10 million people leave their villages to move to urban areas every year, and this factor has led the government to project that China’s urbanization rate will be at least 50 percent by the year 2020, from 37.7 percent in 2002. China Daily reports that China has 662 cities and 20,358 towns, with a total urban population of 481 million. There is no doubt that construction of urban infrastructure facilities will accelerate as this process of urbanization continues, and the Concession Arrangements are therefore a timely development, which should enhance the procurement of urban infrastructure in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions