Business and Government: why partnership doesn't always work perfectly

Public-private partnership (PPP) is one of the key mechanisms for implementing infrastructure projects in Russia. It allows the state to attract private investment, and businesses to gain access to large contracts, long-term projects, and government support measures.

In practice, PPP is perceived as a "winning model": the state solves socially significant tasks, and businesses receive a guaranteed market. However, partnerships don't always work perfectly. Companies face barriers that reduce efficiency and make participating in projects risky.

In Russia, there are two basic laws-on concession agreements and on PPP. Despite the similar economic nature, regulatory mechanisms differ. This leads to legal uncertainty: projects are essentially the same, but the state's approach to their implementation is different.

For example, the procedure for selecting investors or the terms of termination of agreements are significantly different. Businesses have to spend additional resources on legal structuring of the transaction and risk mitigation.

Conclusion: legislation requires harmonization. Practice shows that investors are more willing to invest in projects with predictable and clear rules.

Entering into a PPP agreement is a long and multi-layered process. Approvals go through different levels of government, often accompanied by lengthy contests, expert reviews and revisions of conditions.

For a large investor, this is just extra time. For medium-sized businesses, such costs can become critical. It is no coincidence that many potential participants leave at the negotiation stage.

One of the main barriers remains the issue of confirming funding. Courts often invalidate agreements if the initiator of the project has submitted only a letter of intent from the bank to finance the project, but without a "hard" commitment.

📌 Example: in case No. A73-3044/2024, the concession agreement for the construction of the campus was declared invalid. The reason is that the bank's letter was interpreted as a declaration of interest, and not a legal guarantee of the loan. At the same time, the investor has already incurred costs: prepared documentation, purchased materials, and attracted contractors. As a result, the business was at a loss.

Arbitration courts are increasingly considering cases of termination of concessions and invalidation of PPP agreements. Main reasons:

• unconfirmed funding;
• errors in competitive procedures;
• conflicts with industry legislation;
• claims of the prosecutor's Office and control bodies.

For businesses, this means one thing: the invested funds can be lost, and obligations to banks and investors remain.

The PPP Law exists separately from industry-specific laws. As a result, conflicts arise: for example, a project in the field of housing and public utilities or healthcare may meet general PPP standards, but contradict special requirements in the industry.

This creates an additional risk for companies that are forced to find a balance between two sets of rules.

In case of early termination of the agreement, the business is in an extremely vulnerable position. Actual expenses incurred are often not reimbursed. Moreover, if a capital grant was received, it is subject to full repayment, even if the money was partially used to fulfill the agreement.

Thus, the company may be left with debts, an unrealized project, and legal costs.

In this situation, the key success factor isthe correct alignment of Government Relations (GR)and legal strategy.

Companies that properly build a dialogue with government agencies and take into account the requirements of regulators in advance have a much better chance of success.
YANG CONSULT's lawyers and GR experts help businesses:

• analyze the risks of PPP projects and concessions;
• structure transactions in accordance with the requirements of laws and judicial practice;
• support negotiations with government agencies;
• protect business interests in arbitration courts;
• develop a strategy for interaction with the authorities at the federal and regional levels.

Despite all the difficulties, the PPP mechanism will continue to evolve. In the coming years, we can expect:

• growth of projects in industry, IT and high-tech areas;
• adaptation of legislation for bond loans and other forms of financing;
• strengthening judicial practice to protect investors;
• more attention to municipal projects and regional development.

The potential of PPP is huge: the state needs investment, and businesses need guaranteed projects. The only question is how quickly legal and bureaucratic barriers will be removed.

Partnership between business and the state is an opportunity to implement large-scale and socially significant projects. But it requires fine-tuning of legislation, careful attention to legal details, and strategic support.

Without reliable legal protection, businesses risk losing their investment and reputation. That is why today it is important not just to conclude PPP agreements, but to support them in a comprehensive way-at the intersection of law and GR.

For advice and project support, please contactYANG CONSULT:

Website: yangconsult.com
Email: info@yangconsult.com

📲 Telegram: @yangconsult — stay connected and subscribe to get more up-to-date information, analytics, and news about business and the state.