Home >> News & Publications >> Lee and Li Updates >> Newsletter >> Competent Authorities Suspend PPPIP Projects from When Best Applicant Is Selected to Signing of Concession Agreement—Shifting Stances in PPPIP Disputes


Competent Authorities Suspend PPPIP Projects from When Best Applicant Is Selected to Signing of Concession Agreement—Shifting Stances in PPPIP Disputes



Projects initiated by the Act for Promotion of Private Participation in Infrastructure Projects (the "PPPIP Act") involve the implementation of policies and protection of the public interest. Consequently, some projects may be suspended owing to policy review, changes or other special circumstances. Where a concession agreement is already signed, the legitimacy of the project suspension and the subsequent procedure for closing the project should depend on the terms of the agreement. However, if the best applicant has been selected, and the competent authority suspends the project before the two parties sign a concession agreement, since there is no signed concession agreement, at least two major issues will need to be clarified: (1) whether the decision to suspend the project is legal; and (2) if it is legal, should any compensation be paid to the best applicant.
 
Determination of the legality of a suspension decision has shifted from favoring the competent authorities to a more rigorous review. Meanwhile, while early court decisions indicated no compensation needed to be paid, currently the prevailing opinion is the best applicant should be compensated for the damage sustained for acting on the assumption that the project will commence, beginning from when the best applicant was selected to when the project suspension was announced.
 
1.  The Supreme Administrative Court once held that the competent authority’s suspension of BOT projects on the grounds of policy change was legal and there was no need to compensate the best applicant. The reason was BOT projects involve the public interest; hence, public opinion must always be considered while the authority is implementing the policy. To prevent disputes, a longer period for preparing and signing a concession agreement is required. Furthermore, according to the legislative intent of Article 146 of the Administrative Procedure Act, administrative agencies have a right to unilaterally adjust or terminate the contract out of consideration for the public interest. Since administrative agencies have such right after the concession agreement is signed, they in theory enjoy a substantial period to reconsider, which empowers them to prevent damage to the people or other parties due to the signed contract. In other words, during the period of reconsideration, the best applicant may not request compensation for losses since the competent authority has not adjusted or terminated the contract.
 
2.  Subsequent court decisions indicated that "policy" includes political considerations and does not consist entirely of administrative actions; it is difficult to require that policy be as substantial and specific as administrative actions. Furthermore, Point 59 of the annulled Precautions for Administrative Agencies to Handle PPP Projects stated: "During negotiation and contract signing, if the competent authority changes the policy, the exit mechanism should be initiated." That is, the court believed that a change in policy could be a legitimate reason to suspend the project.
 
3.  However, more recently, the review of the legitimacy of PPP project suspension seems to be increasingly stricter; the underlying belief seems to be the selection of the best applicant is an administrative disposition, so suspension of the project on the grounds of policy change is equivalent to revocation of an administrative disposition for choosing the best applicant because the facts based on which the administrative disposition was rendered have changed. Therefore, revocation of the best applicant decision should comply with Article 123 of the Administrative Procedure Act. That is, the official decision to suspend a PPP Project cannot be based on policy change only; it is also necessary to examine whether the policy change meets the criteria as stipulated in the Administrative Procedure Act. In addition, if the competent authority suspends the project by Paragraph 4 or 5 of Article 123 of the Administrative Procedure Act, and the suspension is considered lawful, then by Paragraph 1 of Article 126 the Administrative Procedure Act the best applicant should be compensated for the damage caused by the preparation and negotiation and signing of the contract, undertaken on the assumption of the validity of the best applicant decision from when the decision was rendered to its revocation.


TOP