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The New Concessions Law in Lithuania

The New Concessions Law in Lithuania

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The new Lithuanian Concessions Law came into force on January 1, 2018. With the new legislation, Lithuania has adopted European Parliament and Council Directive 2014/23/EU on the award of Concession Contracts, which establishes a balanced and flexible legal framework for the award of concessions and ensures effective and non-discriminatory access to the market for all economic operators. The new Lithuanian legislation aims to ensure transparency and fair competition in the development of infrastructure and the provision of services of general economic interest, as well as the attraction of national and EU-wide private investors to the public sector.

Lithuania’s new Concessions Law changes the central concept of concessions, leading to a more flexible and competitive concession process. Under previous legislation, the subject-matter of the concession was limited to certain sectors. The new law distinguishes between works and services concessions, and allows mixed contracts that cover the provision of both works and services. In addition, the scope of subjects over which concessions can be awarded is now wider. Under the new Concessions Law, a concessionaire may be an “economic operator” — defined as any natural or legal person, public entity, or group of persons or entities. This includes temporary associations or undertakings that offer the execution of projects, supply of products, or provision of services in the market. 

Due to complex technical and financial arrangements, concession contracts are often subject to changing terms and conditions. Although such changes are necessary for the proper and efficient execution of a contract, they may also risk violating the principles of equal treatment, non-discrimination, mutual recognition, proportionality, and transparency. To avoid such violations, and to ensure greater legal clarity, the new legislation requires the initiation of a new concession procedure where material changes to the initial concession arise. Minor changes to a concession contract do not require the creation of a new concession, but changes can not be regarded as minor if: 1) they introduce new conditions which, had they been part of the initial concession award procedure, would have attracted other economic operators; 2) the modification changes the economic balance of the concession in favor of the concessionaire; 3) the modification considerably extends the scope of the concession; or 4) a new concessionaire replaces the one to which the contracting authority had initially awarded the concession.

The new provisions in the Concessions Law also change the requirements governing time limits on the validity of concessions. The previous law provided a maximum term of 25 years. The new legislation sets no maximum term, but allows the contracting authority to define the term of the concession in accordance with the public need for works or services. To speed up the process of dispute resolution, the legislation introduces a new dispute settlement procedure, which sets a shorter time limit for settling disputes. These changes will prevent unnecessary delays in litigation, and also secure the public and private interests, both of the contracting authorities and of the economic operators.

One of the major changes included in the new Concessions Law, designed to protect the award process from favoritism or corruption, is a new and detailed negotiation procedure. While previous legislation provided only that the successful candidate must be invited to negotiate, the new regulation requires that the candidate whose bid ranks second be invited if its proposal was similar to that of the successful candidate and its rating differs by no more than 15%. The contracting authority also has the right to invite other candidates even where the difference exceeds 15%. The concession contract will therefore be concluded with the candidate that proposes a better bid during the negotiations, and qualifies under the criteria of the concession requirements.  

Changes introduced under the new Lithuanian legislation on concessions aim to promote new investments, increase the number of concessions being offered, encourage more operators to participate in tenders, and ensure the most efficient use of public funds. The new Concessions Law also benefits PPP (public-private partnership) regulation in Lithuania, helping to improve public access to the services of highest quality at the best prices.

By Inga Kostogriz-Vaitkiene, Partner, and Ieva Zablasckaite, Paralegal, CEE Attorneys Lithuania 

This Article was originally published in Issue 5.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.