New Bill on Trusts in Public-Private Partnership Contracts

On November 30, 2016, the Public-Private Partnership Contracts Law No. 27,328 was published in the Official Gazette (the “PPP Law”).

Among other matters, the PPP Law contemplates the creation of trusts as a means of subscribing and carrying out public-private partnership contracts until their full completion. Furthermore, it foresees that payment obligations undertaken by the public contractor could be settled or guaranteed through, amongst other forms, the creation of trusts or the utilization of existing trusts.

On September 15, the Federal Executive Branch submitted the General Budget Bill for the Federal Administration for Fiscal Year 2018 (the “Bill”) before the Federal Congress.

Chapter IX of the Bill regulates the “PPP Trust”.

As it is envisaged, the PPP Trust could be established by way of one single trust or through many individual trusts. In any case, it can be organized as an administrative, financial, payment or guarantee trust.

Its purpose will be to channel the financing of PPP contracts or projects, the payment or payment guarantee due under PPP contracts, the issuance of fiduciary values, work-progress certificates, capital contribution payments and the acquisition of financial instruments destined to the implementation and financing of PPP contracts or projects, amongst others.

Their estate will be composed of goods, guarantees and budgetary credits allocated by the Federal Government, contributions from other trusts, specific charges, fees and/or compensations of use, payments that the public contractors must conduct under the PPP Law, among others to be established by the implementing regulations.

The Bill also includes the following provisions:

• The exemption of payment for all current and future federal taxes, fees and contributions for the PPP trust, within the scope of operations relating to the PPP Law.
• The supplementary application of the Federal Civil and Commercial Code to both the relationships within the PPP Trust and between the individual trusts and the contractors under the PPP Law.
• The PPP Trust is included as a beneficiary of the trust created by Decree No. 976/2001 (gas oil fee), and the Hydric Infrastructure Trust created by Decree No. 1381/2001.

The PPP Regime was promoted by the current Government to provide a legal framework that attracts investment, particularly in the infrastructure sector.

A close follow-up of the Bill will be of outmost importance as it advances through Congress, considering that it complements and facilitates the implementation of the PPP Regime by enhancing the funding of this kind of projects.