Concession

The role of concessions in the global economy is increasing. If during the 20th century, concessions were mainly used in subsoil use, in the 1990s numerous other objects of state ownership began to be transferred to concessions.

The objects of the concession agreement are primarily socially significant objects that cannot be privatized , such as airfields , railways , utilities and other infrastructure facilities, as well as public transport systems, healthcare, education, culture and sports facilities.

Concession can be considered as a form of public-private partnership agreement. With this approach, it can be put on a par with the “feeding” that took shape in the XII century and existed up to the reforms of Peter I and the “farmer”, which was a transfer by the state of the right to collect taxes and other state revenues for private individuals (payers) for a fee . ^[one]

Feeding

Feeding is a type of award of grand and specific princes to their officials, according to which the princely administration was maintained at the expense of the local population during the period of service.

Initially, feeding was episodic. In accordance with the norms of the Russian truth, the collectors of the fine (vira), city builders and some other categories received a certain in-kind allowance from the population. In the XII-XIV centuries, feeding played a significant role in the formation of the local government system. The princes sent boyars to the cities and volosts as governors and volostels, and other servants to tiunami. The population was obliged to support them (“feed”) during the entire period of service. The feeding system reached its greatest development in the 14th – 15th centuries.

Remedy

Repayment - transfer by the state for a certain fee on certain conditions of the right to levy taxes and other state revenues. The buy-out system is essentially a prototype of concessions, a form of state contract with entrepreneurs.

Initially, farms were used in conditions of subsistence farming , underdeveloped credit , financial difficulties of the state, and weak communications . For the first time, farms became widespread in Ancient Iran ( VI century BC ), in Ancient Greece and Ancient Rome ( IV century BC ).

In the Middle Ages, farms became one of the important sources of the initial accumulation of capital .

In international practice, the following types of concession agreements are distinguished ^[2] :

• BOT (Build - Operate - Transfer) - "Construction - Management - Transfer". The concessionaire carries out construction and operation (mainly on the basis of ownership) within the prescribed period, after which the facility is transferred to the state;
• BTO (Build - Transfer - Operate) - "Construction - Transfer - Management". The concessionaire builds an object that is transferred to the state (concessor) in the property immediately after completion of construction, after which it is transferred to the operation of the concessionaire;
• SBI (Build - Own - Operate) - "Construction - Ownership - Management". The concessionaire builds the facility and carries out subsequent operation, owning it on the basis of ownership, the validity of which is not limited;
• BOOT (Build - Own - Operate - Transfer) - "Construction - ownership - management - transfer" - the ownership and use of the constructed object on the basis of private property is carried out for a certain period, after which the object becomes the property of the state;
• BBO (Buy - Build - Operate) - "Purchase - Construction - Management" - a form of sale that includes the restoration or expansion of an existing property. The state sells the property to the private sector, which makes the necessary improvements for effective management.

History

New Economic Policy ( 1920s )

In the era of the NEP, concessions were widespread in the RSFSR . In April 1921, in a speech “On Concessions and the Development of Capitalism”, V. I. Lenin stated ^[3] :

Isn’t it dangerous to invite the capitalists? Does this mean developing capitalism? Yes, this means developing capitalism, but it is not dangerous, for power remains in the hands of the workers and peasants, and the property of the landowners and capitalists is not being restored. Concession is a kind of lease . The capitalist becomes the tenant of part of the state property, under the agreement, for a certain period, but does not become the owner. The property remains with the state.

Before the Hague Conference of 1922, L. B. Krasin proposed returning to foreigners, former owners of enterprises, up to 90% of nationalized property, but only in the form of long-term concessions. Many foreign concessionaires agreed, but the idea met with strong resistance within the country ^[4] .

In 1922 - 1927 the country received more than 2,000 concession proposals, of which almost 10% were implemented ^[5] .

Legislation

In accordance with the 2005 law “On Concession Agreements” ^[6] , under a concession agreement, one party (the concessionaire) undertakes to create and (or) reconstruct the real estate specified in this agreement, the ownership of which belongs or will belong to the other party ( to the grantor), and carry out activities using the object of the concession agreement. In turn, the concessor undertakes to provide the concessionaire with the rights to own and use the object of the agreement for the period established by this agreement.

The precedent is the Russian Federation , or the subject of the federation , or the municipality . The concessionaire - an individual entrepreneur or legal entity - by investing in a project under a concession agreement, receives the object of the agreement after putting into operation and registering rights to it as real estate for management (operation on a paid basis for the purpose of reimbursing investments). The income from the operation of the object of the agreement, depending on the agreement of the parties, receives either the concessionaire or the concessionaire. In the first case, the investor’s investments are paid back by operating the facility on a paid basis, in the second, by the grantor’s fees (budget subsidies).

Thus, of the listed types of concession agreements, the Law "On Concession Agreements" provides only the first type - BOT ("Construction - Management - Transmission") . In fact, the second type is used - BTO (“Construction-transmission-management”).

From January 1, 2014, information on open tenders for the right to conclude concession agreements is subject to placement on the official website of the Russian Federation for posting information on bidding - www.torgi.gov.ru [1] .

Art. 1027 of the Civil Code of the Commercial Concession Agreement “Civil Code of the Russian Federation (Part Two)” dated 01/26/1996 N 14-ФЗ (as amended on 03/28/2017) reads:

1. Under a contract of commercial concession, one party (copyright holder) shall provide the other party (user) with a right to remunerate for a period of time or without specifying a period of time the right to use a set of exclusive rights belonging to the copyright holder in the user's business, including the right to a trademark, service mark, as well as rights to other objects of exclusive rights stipulated by the contract, in particular to the commercial designation, production secret (know-how).

(Clause 1 as amended by the Federal Law of December 18, 2006 No. 231-FZ)

• Ilf and Petrov , the authors of the novel The Twelve Chairs ( 1928 ), often refer to its main characters as "concessionaires." Before marrying Gritsatsueva, Ostap Bender said: “What can’t you do for the benefit of the concession!” The corresponding terminology at that time was very widespread.
• Having received a long-term concession for managing the South Container Terminal in the port of Constanta ( Romania ), the Jebel Ali Directorate from the UAE was able to achieve an increase in cargo turnover by more than 400% and reach 500,000 TEU as of November 23, 2005, whereas in 2004 this figure amounted to 100,000 TEU.
• The first municipal concession agreement in Russia was concluded in 2016 between the urban settlement Naro-Fominsk of the Naro-Fominsk municipal district of the Moscow Region and the investing company LLC Naro-Fominsk Toll Road. It is concluded for a period of 49 years. In accordance with the terms of the agreement, the concessionaire will design and build by 2019 in Naro-Fominsk a new highway with a modern bridge and overpass without attracting budgetary funds, entirely at the expense of private capital. The volume of investments in the design, construction and operation of a 2.6 km long road running from the Kubinsky highway to the Naro-Fominsk- Vasilchinovo highway will amount to more than 1 billion rubles. ^[7]

• Subbotin Michael. The return of the concession // Russian Business Newspaper. - 2004. - No. 452 .
• Kashin Sergey. Not in friendship, but in civil service // Secret of the company. - 2005. - No. 30 (117) .
• Popov Alexander. Unnecessary concessions // Finance. - 2006. - No. 21 . Archived {a.

• Rent
• Leasing
• Superficial
• Franchising
• Cession