The issue of ownership of concession projects

As Chinese laws are silent on the question of the ownership of project facilities during the term of a concession, this is an issue that parties carefully avoid when negotiating concession projects. However, this sensitive issue is always present, and investors and government authorities must ultimately face it. Examining various provisions of current laws, we are of the opinion that the ownership of project facilities during a concession term should vest in the concessionaire (the project company).

Foreign-invested projects

As early as 1995, the former State Planning Commission, the Ministry of Power Industry and the Ministry of Communications jointly issued the Issues Relevant to the Examination, Approval and Administration of Trial Foreign-Invested Concession Projects Notice. Article 2 of this Notice specifies that “during the term of a concession, the project company shall own the concession project facilities; shall have the right to engage in investment, financing, engineering design, construction, equipment procurement, operation and management in respect of the concession project, and to charge reasonable fees for the concession project; and shall be responsible for the repair and maintenance of the concession project facilities”.

Although the legal weight of the Notice is relatively low, it nonetheless remains, to date, the first and only regulatory document expressly to address the issue of title to project facilities during a concession term.

Wang Jihong is the managing partner of V&T Law Firm. She practises in the field of infrastructure development