I. Basic Provisions
1. Subject Matter of the Law
This Law shall govern the conditions for, modality of and procedure for granting a concession for the use of natural resources or goods in general use, which is the property of the Republic of Serbia under law, and for the conduct of a business of general concern, the subject matter of concession, the contents of concession agreements, the authorities competent for granting concessions, the rights to benefits, the severance and dissolution of a concessionary relationships, the project financing according to the B.O.T. system, the organization competent for dealing with technical matters associated with concessions, and other matters of importance for the utilization of concessions.
2. Notion of Concession
For the purposes of this Law, a concession shall be understood to mean the right to exploit natural resources or goods in general use, granted to a domestic or foreign person (hereinafter: the Concessionaire) by a competent state agency (herein after: the Conceder) under specially prescribed conditions and against a suitable compensation.
For the purposes of this Law, a concession shall be understood to mean also the issuance to the persons referred to in paragraph 1 of this Article of licenzes for conducting business of general concern.
For the purposes of this Law, a domestic person shall be any legal entity whose head office is in the territory of the I FRY and any individual whose residence has been in the territory of the FRY for at least two years.
A foreign person shall be understood to mean any person defined as such in the federal foreign investment regulations.
3. Special Form of Concession (B.O.T. System)
For the purposes of this Law, the special form of concession shall be understood to mean the letting of the construction of a building, installation or plant, on the basis of the B.O.T. system (build-operate-transfer), under an agreement concerning the construction and financing of a complete building, installation or plant, its operation and transfer to the Republic of Serbia within the contracted term, which shall not be longer than 30 years.
4. Concession Granting Conditions
A concession may be granted in order to provide for:
- Rational exploitation of natural resources or goods in general use;
- Technical and technological advancement of the business constituting the subject matter of a concession and technical and technological uniformity of systems in the field of infrastructure, and efficient operation and rational control of such systems;
- Protection and improvement of the environment in conformity with the environmental protection regulations.
Natural resources and goods in general use, as well as buildings, devices and installations exploited by public enterprises founded by the state or a local government unit, may be conceded to another person, provided that such public enterprises are unable to provide for their rational exploitation or trouble free operation in conformity with the regulations governing the conduct of the business of such enterprises.
5. Subject Matter of Concession
The following may constitute the subject matter of a concession:
- Prospecting for, or prospecting for and exploitation, or only exploitation of all kinds of mineral raw materials;
- Construction, maintenance and exploitation of water management facilities (dams, water storages) and water supply systems, and irrigation and drainage systems;
- Construction, maintenance and exploitation of roads, power supply facilities, construction of railways and other railway facilities, air transport facilities, airports, oil pipelines, gas pipelines;
- Construction, maintenance and exploitation of public utility facilities, for the purpose of providing public utility services;
- Construction, maintenance and exploitation of telecommunications facilities, or their remodeling, modernization and exploitation;
- Development and exploitation of river banks and lake shores and construction of facilities, for the purpose of conducting business;
- Construction of facilities, remodeling, modernization and exploitation of in spas and localities having natural curative properties and other natural values, for the purpose of their exploitation;
- Remodeling, modernization and exploitation of the existing facilities as those referred to in Item 3 of this Article, for the purpose of conducting business;
- Pursuing such lines of business as are designated by law as lines of business of general concern.
Foreign persons may not be granted concessions for such activities as for the pursuit of which foreign persons may not be co-founders of enterprises under foreign investment regulations, and for activities in the areas that are designated as restricted zones under federal law.
6. Duration of Concession
A concession may be granted for a period of up to 30 years.
The duration of a concession shall be set depending on its subject matter and anticipated profit from the concessionary activity involved.
The period for which a concession has been granted may be extended in exceptional cases because of a substantial change in the conditions under which the concession was granted, though only up to the term referred to in paragraph 1 of this Article;
The duration of a concession shall not include the time necessary to carry out the work preparatory to the construction of facilities and for the concessionary activity to be started up. The duration of preparatory work shall be specified in the concession agreement.
II. Performance of Technical Operations Associated With Concessions
1. Organization for the Performance of Technical Operations
The Agency for Investment in Activities of Concern to the Republic shall be established as a special organization for the performance of technical, operations associated with concession granting and for checking the performance of the concessionary activities (herein after: the Agency).
2. Kinds of Technical Operations
The Agency shall perform the following technical operations: preparation of the documents necessary for determining the subject matter of concessions (reports, analyses, studies); preparation of recommendations for the enactment of concession granting decrees; conducting the biddings; keeping a record of concluded concession agreements (register of concessions); monitoring the exercise of rights and duties by the concessionaires and conceders and extending technical assistance towards the exercise of such rights and duties; marketing operations in connection with capital and other investments of foreign and domestic persons in the Republic; promoting the Republic's interest in such investments; other operations in connection with investments of foreign and domestic persons.
In the performance of the operations referred to in paragraph 1 of this Article, the Agency shall cooperate directly with relevant ministries concerning the preparation of documents for the enactment of concession-granting decrees, determination of the concession subject matter and conduct of the biddings.
The Agency shall present at least once a year a report to the Government of the Republic of Serbia, concerning the implementation of concession agreements and other investments in the Republic, for information and or/taking appropriate action.
III. Procedure for and Modality of Granting Concessions
1. Recommendation for Granting a Concession
The recommendation for granting a concession shall be submitted to the Government of the Republic of Serbia (hereinafter: the Government) through the Agency, and it shall include the following in particular: subject matter of concession, size of investment, duration of concession, basic conditions for the utilization of concession, suggested compensation, purpose of exploiting the subject matter of concession, and when the recommendation is presented by an interested party, also particulars about that party (title of firm, name, proof of registration).
A recommendation as that referred to in paragraph 1 of this Article may be presented by the ministry competent for the area involved and a competent local government agency, as well as an interested party.
In the case of a recommendation as that referred to in paragraph 1 of this Article, which is presented by a local government agency or an interested party, the Agency shall obtain the opinion of the ministry competent for the area involved, before forwarding it to the Government.
The Agency shall notify the applicant of the position taken by the Government on the presented recommendation.
2. Recommendation for the Enactment of a Concession-Granting Decree
Pursuant to the Government's intention to grant a concession, the Agency shall prepare, in cooperation with the ministries competent for the area involved, a recommendation for the enactment of a concession-granting decree (hereinafter: the Concession Decree), on the basis of economic, financial, social and other indicators and a break-down of the effect of the operation and buildings associated with the concession involved on the environment.
Depending on the subject matter of concession, a recommendation as that referred to in paragraph 1 of this Article shall include the following:
- Reasons for which the concession should be granted; the necessary funds and other resources and the timelimits for raising them;
- Anticipated income and expenditure associated with the concession involved in the whole period for which it is to be granted and technological capacity for its utilization;
- Particulars about the effect of the concessionary activity on the infrastructure and other economic areas, as well as on the uniformity of technical and technological systems and their efficient operation and rational control;
- Duration of concession;
- Modality of payment and issuance of guarantees or other sureties for the performance of concessionary duties, and the amount to which the bid bond is to be made out;
- Appraisal of the effect of the concessionary activity on the environment;
- Estimated number of employees for concession utilization purposes and their qualification structure;
- Particulars about the necessity of dealing with proprietary relationships and other particulars concerning the peculiarities of the concession subject matter.
The recommendation for the enactment of a Concession Decree concerning the construction of public utility facilities or the performance of activities relating to public utilities, shall be prepared by a competent local government unit and presented to the Agency together with the opinion of the ministry competent for the area involved.
3. Enactment of the Concession Decree
The Government shall enact any Concession decree.
Any Concession Decree shall be published in the "Sluzbeni glasnik Republike Srbije".
4. Contents of the Concession Decree
Any Concession Decree shall contain the following:
- Subject matter of concession and designation of the area in which the concessionary activity is to be pursued;
- Duration of concession;
- Modality of granting the concession;
- Conditions to be fulfilled by the Concessionaire;
- Kind, amount and modality of presenting the bid bond;
- Criteria for the selection of the best bid (bidder's credit rating and financial standing, offered compensation for the concession, as well as the share in the profits generated and other matters);
- Conditions for and modality of pursuing the concessionary activity (conditions for and modality of providing services to customers);
- Conditions concerning the environmental protection;
- Kind and amount of guarantee or other kind of surety for the implementation of the concession;
- Modality of setting the compensation for concession;
- Basic components of the bidding announcement;
- Other matters of importance for the regulation of mutual rights and duties of the Concessionaire and the Conceder (engagement of domestic contractors, equipment, labour, etc.).
If the subject matter of a concession involves the revamping, remodelling and modernization of existing facilities, the Concession Decree shall also include the size of investment, which shall be set in relation to the value of the facilities constituting the subject matter of concession.
5. Modality of Concession Granting
Any concession shall be granted on the basis of conducted public biddings.
Exceptionally, when a public bidding for the performance of an activity of strategic importance for the Republic and for the construction of infrastructure facilities has failed, a concession may be granted on the basis of previously collected quotations. Public biddings for the granting of concessions to domestic and foreign parties shall be conducted in the manner provided by the federal regulations governing the conduct of public biddings concerning foreign investment.
6. Biddings Commission
The Agency or a competent local government agency shall form a commission (or some other technical body) for the conduct of biddings (herein after: the Commission), consisting of a chairman and four members.
The Commission formed by the Agency or a local government agency shall include at least two representatives of the ministry competent for the area in which the subject matter of the concession for which the biddings are conducted is included.
Once a bidding is completed, the Commission shall examine the bids made, prepare minutes and a report on the results of the bidding and forward them to the Agency within 30 days from completion of the bidding.
When the bidding is conducted by a competent local government agency, the minutes and the report on the results of the bidding shall be forwarded to the Agency within the time-limit referred to in paragraph 3 of this Article, in which case the Agency shall forward such documents to the Governmene within 15 days from receipt.
7. Decision Designating a Concessionaire
The decision designating a concessionaire shall be rendered by the Government.
Any decision as that referred to in paragraph 1 of this Article shall be published in the "Sluzbeni glasnik Republike Srbije".
8. Rights of the Bidders at Biddings
Once the concession-granting procedure has been completed, the Agency shall notify all bidders of the results thereof and the name of the successful bidder.
Any bidder shall have the right to lodge a complaint concerning the lawfulness of the bidding conducted.
Any complaint shall be filed with the Government within 15 days from receipt of the notification concerning the bidding results.
Any filed complaint shall be decided on within 15 days from the complaint filing date. The decision of the authorities on any complaint shall be final.
9. Restitution of Bid Bond
The participants in any bidding shall be entitled to the restitution of their bid bonds in the manner set out in the public bidding announcement or in the invitation to submit quotations.
The right referred to in paragraph 1 of this Article shall not apply to a participant who after being selected by the conceder desists from concluding the concession agreement, under the conditions set out in the announcement or the invitation referred to in paragraph 1 of this Article.
10. Failed Bidding
Any bidding shall be deemed successful if at least two bidders are registered.
If less than the required number of bidders are registered for a bidding or if a bidder in a bidding who has been selected by the conceder withdraws or refuses to conclude the concession agreement, a new bidding shall be announced or the collection of quotations shall be carried out.
IV. Concession Agreement
1. Grounds for Conclusion and Form of Agreement
Any concession agreement shall be concluded in conformity with the conditions set out in the Concession Decree and this Law, and if the Concessionaire is a foreign party, also in conformity with the foreign investment regulations, within 60 days from the date of designation of the Concessionaire.
The agreement shall be made in writing.
2. Contents of the Agreement
Any concession agreement shall include provisions relating to the following:
- Contracting parties, subject matter of concession, duration of preparatory operations;
- Duration of concession and conditions under which it may be extended, and when the subject matter of concession is the exploitation of mineral deposits, particulars about the exploitable reserves;
- Modality of and time limits for raising funds towards the performance of the concessionary activity and the schedule of their investment, and the amount and modality of obtaining guarantees for the performance of the concessionary activity;
- Conditions for the performance of the concessionary activity
- Standards of the products and services, as well as the criteria for setting the price/rate of the products and services for the end-users;
- Compensation for concession (amount, time-limits, conditions for and modality of payment);
- Rights and duties concerning the application of the measures of general security and protection of the environment;
- Conditions for the denunciation of agreement and consequences thereof, modality of settling disputes and application of ruling law;
- Right of concession assignment;
- Time and modality of handing over the building, installation or plant and the state in which it has to be handed over;
- Other matters mutually agreed upon by the contracting parties.
The agreement shall also provide the modality of mutual reporting concerning the implementation of the agreement and the modality of monitoring such implementation and the exercise of the rights and duties of the Concessionaire and the Conceder.
3. Conclusion of the Agreement
Any concession agreement shall be concluded by the Government and the Concessionaire concerned. If a concession is granted to several parties, the concession agreement shall be concluded by each concessionaire or a person duly authorized by it.
When the subject matter of a concession is the construction of public utility facilities for the purpose of pursuing a public utility activity, the agreement shall be signed by the Concessionaire concerned and the competent local government agency, with the Government's approval.
4. Registration of the Agreement
Any concession agreement concluded with a foreign party shall be reported and registered in the manner provided by the federal law governing foreign investment.
Any agreement as that referred to in paragraph 1 of this Article and any concession agreement concluded with a domestic party shall be reported to the Agency for record keeping purposes.
V. Concession Compensation
1. Payment Obligation
The compensation for any concession granted (herein after: the Concession Compensation) shall be payable in conformity with the concession decree and concession agreement.
2. Criteria for Setting the Concession Compensation
The Concession Compensation shall be set according to the kind, quality or category, quantity, purpose and market price of the natural resource or good in general use involved, and the kind of activity, market conditions, duration of concession, contracted risk and anticipated profit.
3. Allocation of the Concession Compensation
The funds stemming from any Concession Compensation shall be regarded as revenue of the Republic, though with the exception of those stemming from the compensation for concessions relating to the performance of public utility activities, which shall be regarded as revenue of the local government unit concerned.
VI. Exercise of Concessionary Rights and Duties
1. Conditions for and Modality of Pursuing a Concessionary Activity
Any concessionaire shall build, maintain and exploit facilities and pursue the concessionary activity, and exploit goods of general concern, in conformity with the regulations governing the regional and town planning and exploitation of the goods of general concern and the conditions for and modality of pursuing the activity constituting the subject matter of the concession, as well as in conformity with the standing environmental protection regulations.
Any concessionaire shall acquire the right of exploitation and management in relation to the subject matter of the concession concerned in the manner and under the conditions set out in the Concession Decree and the concession agreement, in conformity with law.
2. Concession Assignment
Any Concessionaire may assign to some other party the concession granted to it, in the manner and under the conditions set out in the concession agreement.
Any concession may be assigned on the basis of a special agreement that is approvable by the Conceder.
Any concession assignment agreement, which has been concluded without the Conceder's approval, shall be null and void.
3. Increase in the Value of the Subject Matter of Concession
Any increase in the value of a state-owned building, device or installation exploited as the subject matter of a concession or which is contributing to its intended exploitation, which has arisen in the performance of the concessionary act, shall be the property of the Republic of Serbia, unless otherwise provided by the concession agreement.
Once the concessionary activity has been terminated, the Concessionaire shall be entitled to a compensation for any improvement made pursuant to paragraph 1 of this Article, only if so is provided by the concession agreement.
4. Treatment of Found Items
The Concessionaire shall hand over to the Conceder without any compensation any item of historic, cultural or natural value that is found in the soil.
If further work could pose a threat to the entirety or value of the item found, the Concessionaire concerned shall discontinue work and notify the authorities in charge of the protection of historic, cultural and natural values accordingly.
The agreement shall regulate the rights and duties of the Concessionaire and the Conceder in a case as that referred to in paragraph 2 of this Article.
5. Protection of the Concessionaire's Rights
Any concessionaire shall be guaranteed the rights provided by law, concession agreement and project financing agreement, while foreign parties shall be guaranteed also the rights provided by international agreements on the foreign investment fostering and protection, whose signatories are the Federal Republic of Yugoslavia and the Republic of Serbia.
In the event of a change in the republic regulations on the basis of which a concession agreement has been concluded, the regulations which were in force on the agreement conclusion date shall apply to the relations set out in that agreement, or the changed regulations, should that be more favourable for the Concessionaire concerned.
Any Concessionaire who has prospected for mineral raw materials, shall be given priority in being granted a concession for the exploitation of such materials, under the conditions provided by law and the prospecting concession agreement.
6. Other Rights and Duties
Should it be necessary to expropriate and/or develop building land in connection with the granting of a concession, the costs involved with the expropriation and/or development of building land shall be charged to the concessionaire conceded, and the concession agreement shall provide the modality of and time limits for the payment of such costs.
In a case as that referred to in paragraph 1 of this Article, the determination of general interest and the expropriation shall be carried out by the summary procedure.
If the competent state agency issues, pursuant to the expropriation regulations, a decree forfeiting or limiting the right of use in relation to the built facilities constituting the subject matter of a concession, the Concessionaire concerned shall be entitled to a compensation which may not be lower than market value.
VII. B.O.T. System
1. Mutual Relations
The relations of participants in the financing of a project based on the B.O.T. system shall be regulated by a project execution agreement concluded by the Government and the Concessionaire/Developer concerned.
Any agreement as that referred to in paragraph 1 of this Article shall regulate the mutual rights and duties concerning the construction of the whole facility together with the funding scheme, conditions for the exploitation of the facility built and the time-limit for the transfer of the facility to the Republic.
2. Contents of the Agreement
An agreement as that referred to in Article 32 of this Law shall include the provisions relating to the following in particular:
- Contracting parties, subject matter of the agreement gather with a description of the project or building, installation or plant, modality of project execution (technical aspect), designs, working drawings and other documents;
- Technology transfer;
- Financing sources and terms, construction deadline, completion phases, commissioning, extension of some deadlines, obligation to engage domestic producers and contractors, exploitation period, modality of exploiting the facility, organizational aspects;
- Compensation for the exploitation of the facility, modality of using the facilities backing up the facility built and compensation for their use, guarantees associated with the project (technical, legal, financial), maintenance of the facility built, declaration of financial results, profitability;
- Product and service usage standards, modality of setting prices/rates, guarantees for operation stability;
- Force Majeure changed circumstances and their impact, ruling law, settlement of disputes, denunciation of agreement, time and modality of the facility hand over, state in which the facility has to be handed over.
3. Enterprise Formation
The Concessionaire/Developer concerned shall form an enterprise for the execution of the project constituting the subject matter of the agreement, and such enterprise shall have the same legal status as the concessionary enterprise.
VIII. Concessionary Enterprise
1. Formation, Organization and Operation
For the purpose of pursuing a concessionary activity, the Concessionaire concerned shall form an enterprise within 60 days from the date of the concession agreement, and the head office of such enterprise shall be in the Republic, unless the Concessionaire concerned already has an enterprise registered for the same activity.
A concessionary enterprise shall be formed, operated and organized in conformity with the law governing the legal status of enterprises and other regulations dealing with the conditions for and modality of enterprise operation.
2. Change of Head Office and Status Changes
The head office and status of a concessionary enterprise may be changed with the approval of the Conceder concerned.
3. Dissolution of a Concessionary Enterprise
Any concessionary enterprise shall be dissolved with the expiration of the period for which it had been formed, unless otherwise provided by the concession agreement, as well as in such other cases as are provided by law or the concession agreement.
In the event of dissolution of a concessionary enterprise, it shall be liquidated under the conditions set out in the regulations governing the liquidation of enterprises.
In the event of dissolution of a concessionary enterprise, the buildings, devices, installations and other things used for concessionary purposes, shall be handed over to the Conceder, and they shall not be regarded assets of that enterprise.
Tax Relieves and Exemptions
Customs duty, tax and other relieves and exemptions shall be enjoyed by any concessionary enterprise in the same manner and under the same conditions as those applicable to foreign investment in domestic legal entities, in conformity with law.
Any amendment to the regulations referred to in paragraph 1 of this Article shall not apply to any concessionary enterprise, should it be less favourable for it than the relieves and exemptions valid on the date of the concession agreement.
X. Settlement of Disputes
Court and Arbitration Competence
Any dispute arising in the exercise of concessionary rights and duties, the subject matter of which is an immovable, shall be settled by a competent court in the Republic.
The competence of the Arbitration Court attached to the Yugoslav Chamber of Economy or some other domestic arbitration institution may be stipulated for the settlement of any dispute arising in the exercise of other rights and duties, and also that of a foreign arbitration institution, if the Concessionaire concerned is a foreign person.
XI. Interruption and Termination of a Concessionary Relationship
1. Interruption of a Concessionary Relationship
Any concessionary relationship shall be interrupted in the following cases:
- If the pursuit of a concessionary activity is posing a threat to the environment or the regions and buildings protected by law, and such threat could not have been foreseen at the time when the concession was granted;
- In the event of a war or for other reasons causing a state of war to be declared;
- In the event of the impossibility to conduct business because of substantial damage sustained by the concession buildings;
- In other cases provided by the agreement.
The concession agreement shall govern the mutual guts and duties in the event of interruption of the concessionary relationship.
2. Termination of a Concessionary Relationship
Any concessionary relationship shall be terminated in the following cases:
- Expiration of the concession agreement;
- Redemption of the concession;
- Forfeiture of the concession;
- For other reasons set out in the concession agreement.
Any concession agreement may expire with the expiration of the period for which it has been concluded and by its cancellation (by mutual agreement or unilaterally).
Any concessionary relationship may be terminated when the Conceder concerned redeems the concession, if so provided by the concession agreement in which are set out the conditions for and manner of redeeming the concession, and exceptionally, if so required by general interest, a concession may be redeemed under the conditions and in the manner set out in the expropriation regulations and under the conditions set out in the concession agreement.
A concession may be forfeited under a decree rendered by the Conceder, if the Concessionaire concerned has not been pursuing the concessionary activity for more than a year, if it is defaulting and if the pursuit of the concessionary activity is posing a threat to the environment and the health of people and the measures provided by special regulations are not good enough to prevent that, in the manner and under the conditions set out in the agreement.
3. Hand over of Facility
In the event of termination of a concessionary relationship, the buildings, devices, installations and other assets used for concessionary purposes shall become the property of the Republic of Serbia.
The Concessionaire concerned shall hand over the buildinqs, devices and installations referred to in paragraph 1 this Article in such a state as will allow their trouble-free exploitation and operation, taking into account the duration of their hitherto exploitation (depreciation).
XII. Transitional and Concluding Provisions
1. Transitional Provisions
In the case of the concession agreements concluded prior to the effective date of this Law, the relations established under such agreements shall be governed by the provisions thereof and the laws on the basis of which they were concluded, if so is more favourable for the concessionaires conceded, unless the contracting parties regulate certain matters by mutual agreement in conformity with this Law.
Any enterprise or some other legal entity which has been exercising the right of prospecting for or exploiting mineral raw materials in a prospecting/exploitation locality prior to the effective date of this Law, may continue doing so under the conditions it had acquired such right.
2. Concluding Provisions
This Law shall supersede on its effective date the Law on the General Conditions for Granting Concessions to Foreign Parties in the Republic of Serbia ("Sluzbeni glasnik Republike Srbije, no. 6/90).
This Law shall come into force on the eight day upon its publication in the "Sluzbeni glasnik Republike Srbije".