In France, public-private partnerships (PPPs) are implemented in many economic sectors (e.g., transport, health, justice, education, urban equipment, environment, energy efficiency, telecommunications and culture) for more than €100 billion of activity each year.

The French PPP legal framework was reshaped a few years ago through the transposition of the European directives pertaining to public procurement and concession agreements under Ordinance No. 2015-899, dated 23 July 2015,2 relating to public procurement and partnership agreements (the Partnership Contract Ordinance) and its implementing Decree No. 2016-360, dated 25 March 2016 (the Partnership Contract Decree), and Ordinance No. 2016-65, dated 29 January 2016,3 relating to concession agreements (the Concession Agreement Ordinance) and its implementing Decree No. 2016-86, dated 1 February 2016 (the Concession Agreement Decree).

Even though the transposition of the European directives and the enforcement of the aforesaid ordinances and decrees aimed at clarifying and modernising the French legal framework, the legal rules governing public procurement agreements (including partnership contracts) and concession agreements remained scattered in about 30 different texts. Therefore, in 2018, it was decided to carry out the adoption of a Public Procurement and Concession Agreements Code. The main purpose of this codification project is to gather in one single document all rules related to public procurement and concession agreements so as to offer all companies a better access to it, with a focus on small and medium-sized companies (i.e., there are no changes on the substance of the legal provisions).

The Public Procurement and Concession Agreements Code was finally enacted at the end of 2018 through Ordinance No. 2018-1074, dated 26 November 2018, Decree No. 2018-1075, dated 3 December 2018 and Decree No. 2018-1225, dated 24 December 2018. This new Code will enter into force on 1 April 2019.4

In this chapter, we will focus on the two main forms of PPP implemented in France: concession agreements, as regulated by the Concession Agreement Ordinance and the Concession Agreement Decree; and partnership contracts, as regulated by the Partnership Contract Ordinance and the Partnership Contract Decree.


Although political events have weakened the French market for PPP projects,5 it remains quite dynamic and appealing.

In particular, major PPP projects in the transportation sector have been refinanced, such as the A65 motorway project, initially financed in 2007; the A355 motorway project; and the high-speed railway Sud Europe Atlantique, which was the biggest rail PPP project ever launched in Europe and financed initially in 2011.

During 2018, public local authorities also signed several PPP projects, including:

  1. the design, construction, operation and maintenance of the future biology–pharmacy–chemistry centre located in Saclay in the south of Paris (around €283 million);
  2. the financing, design, construction and maintenance of a building complex including childhood development centres and schools in the municipality of Fréjus (around €20 million);
  3. the financing, design, construction and maintenance of a cultural complex in the municipality of Arcachon (around €21 million); and
  4. the financing, design, construction and maintenance of a nursing home for dependent elderly people in the municipality of Bar-le-Duc (around €20 million).

In another field, a noticeable €250 million concession agreement tendering procedure has been launched by the urban community of Evreux for the financing, design, construction, maintenance and exploitation of a recreation park. Besides, another partnership contract tendering procedure has been launched for the financing, design, construction and maintenance of the Futuroscope Arena, with a capacity of 6,000 seats, in the department of Vienne (around €38 million).

In addition, 2018 was a fruitful year for the definition of public investment programmes in the European Union and the implementation of the Juncker Plan. In July 2018, the European Commission and the European Investment Bank (EIB) published a joint report that stated that more than €335 billion had been invested from 2015 to mid 2018 in the European Union, which went beyond the initial target of €315 billion for this period. As French companies were allocated €10.4 billion within this period, France has thus been the EU country that benefited the most from the Juncker Plan. This Juncker Plan was initially a three-year European investment programme (2015–2018) but it has been extended until 2020. It is now planned to finance investments for a minimum amount of €500 billion until this date, in particular in the energy and research and development sectors, with a prime focus on small and medium-sized companies. However, this EU financial support to foster innovation could go beyond 2020. Indeed, in June 2018, the European Commission expressed the view that such EU investment policy should be addressed in the next long-term budgetary EU framework (2021–2027) through a new policy tool named InvestEU that will follow up on the Juncker Plan.

Several PPP project announcements have also been made in France, especially in the green energy and transportation sectors.

In June 2018, the French President Emmanuel Macron, announced that six offshore wind farms will be implemented in the coming years. These projects to be implemented under a PPP scheme imply a very significant level of private investment (estimated around €2 billion for each project at the time of writing). Moreover, during summer 2018, the construction phase of the first floating photovoltaic power plant was launched.6

In September 2018, the French Minister of Transport Elisabeth Borne unveiled a two-phase investment programme for transport infrastructures and the development and the refurbishment of road, railway and river networks. An investment of €13.4 billion is expected for the first phase (i.e., the 2018–2022 period), while €14.3 billion would be spent during the second phase (i.e., the 2023–2027 period).

Borne unveiled an ambitious programme to finance investments for the maintenance and renewing of the high-speed train network. This programme also plans the development of the current network through the construction of new railway connections (i.e., Bordeaux to Toulouse, Montpellier to Perpignan, Marseille to Nice, Paris to Le Havre, and Charles de Gaulle airport and several cities in the region of Picardie) and suggests that the €26 billion Lyon–Turin high-speed line project still has a chance to get off the ground despite the reticence of the new Italian government.

In addition to these PPP projects announced in the transportation sector, it has to be highlighted that during the coming five years, the building phase of four new highway sections will begin. These new sections are the A69 Toulouse-Castres highway, the A79 highway in the department of Allier, the A133 and A134 circling the city of Rouen in Normandy and lastly, the completion of the A154 Rouen-Orleans highway.


i Types of public-private partnership

As stated above, there are two types of PPP that are mainly used in France: concession agreements, which serve to implement major infrastructure projects such as canals, motorways, water distribution systems and toll bridges; and partnership contracts, which can be compared to private finance initiative contracts.

Concession agreements7 and partnership contracts8 are both administrative contracts under French law. This distinction is important as the contractual relationship in an administrative contract is different from that in a private contract. Indeed, the parties are, de facto, unequal insofar as the public person benefits from public authority powers.

As stated in the Concession Agreement Ordinance, a concession agreement is defined as an agreement under which a grantor assigns, for a limited period of time, to one or several economic entities, the performance of works or the management of a service, it being specified that: a risk linked to the operation of such works or service must be transferred to the economic entity in exchange for the right to operate the said works or service; a fee in favour of the entity can be added to such operation right; and the risk transfer to the economic entity necessarily implies a real exposure to the market's fluctuation.

A partnership contract is an administrative contract under which a grantor entrusts to a private party, for a period set according to the amortisation of investment or agreed financing terms, a comprehensive project relating to the design, construction or conversion, maintenance, operation or management of works, equipment or intangible assets necessary to the public service, as well as to the total or partial financing of the latter.

The Partnership Contract Ordinance also clarifies that dismantling and destruction works, as well as the management of a public service, can be transferred to the private party under a partnership contract.

The two main PPPs can be differentiated according to their payment terms: under a partnership contract, the grantor will pay rent to the private partner in exchange for the performance of the mission, while under a concession agreement the compensation of the concessionaire will mainly arise from payments made by users of the service.

ii The authorities

The Concession Agreement Ordinance provides that, in addition to public authorities (the French state, local authorities and their public institutions), private entities (entities specially created to satisfy a non-commercial public interest or formed by several public entities in order to jointly perform certain activities and public undertakings acting as network operators) will be allowed to grant concession agreements.

The Partnership Contract Ordinance is also flexible regarding the grantor that may enter into a partnership contract. The state and its public institutions, local authorities and local public institutions, as well as public health facilities, social security bodies and some public or private entities pursuing a public-interest mission and mainly financed by public funds9 (i.e., public-private joint ventures and state-owned public industrial and commercial institutions) may all enter into partnership contracts.

For partnership contracts executed by the state, the ministries that are involved will depend on the scope of the particular contract. For partnership contracts, approval by the Minister of the Economy and the Budget is additionally required before signature.10

The Partnership Contract Ordinance provides for an extended list of potential procuring authorities. Indeed, the granting authorities will be the same as those described in the Concession Agreement Ordinance.11 As such, private entities could also enter into a partnership contract.

Nevertheless, central administrations, public health facilities and medical cooperation public structures that used to be grantors before the European Directive will no longer be able to enter into partnership contracts.12

Another important actor in the PPP sector in France is the PPP Support Service (FIN INFRA). The FIN INFRA is a dedicated unit within the Ministry of the Economy that assists grantors in the implementation of partnership contracts.13 The FIN INFRA is primarily responsible for the validation of the preliminary evaluations prepared by grantors before launching a tender. The FIN INFRA also assists and advises public authorities in the preparation and negotiation of partnership contracts as well as any other complex public contracts or public contracts implying an innovative financing scheme.

According to the Partnership Contract Ordinance, the FIN INFRA will still be a major actor given that it will also have to issue an opinion about the financial sustainability of each partnership contract.14 This new requirement should be an efficient way to avoid the financial difficulties deriving from the implementation of some partnership contracts in France.

iii General requirements for PPP contracts

Requirements are different for the use of partnership contracts and concession agreements.

The Concession Agreement Ordinance provides that concession agreements must include provisions pertaining to the duration of the contract and the tariffs applicable to service users. The Concession Agreement Ordinance also provides that concession agreements can include provisions pertaining to sustainable development and social objectives.

Moreover, to optimise cost monitoring, the Concession Agreement Ordinance aims to increase transparency relating to the performance of concession agreements.

As a consequence, concession agreements must specify that the concessionaire will be required to provide an annual report to the grantor and that the grantor will have to annually publish essential data pertaining to the concession (i.e., type of investments and applicable tariffs).

Unlike concession agreements, the use of partnership contracts is strictly regulated. The contemplated project has to be related to the construction or conversion, upkeep, maintenance, operation or management of work, equipment or intangible assets necessary for public service and to all or part of their funding. First, a preliminary evaluation has to be carried out to evaluate the project's implementation method. Then, a second evaluation must assess the financial sustainability of the project. In light of these evaluations the grantor must demonstrate that the use of a partnership contract shows better cost-effectiveness than any other type of agreement. Finally the grantor is compelled to submit these evaluations to the FIN INFRA, which is in charge of issuing an opinion on the project's implementation structure.

This preliminary procedure was introduced by the Partnership Contract Ordinance, aiming to simplify the former implementation procedure and answer criticisms raised during the past decade regarding the implementation of partnership contracts.

A partnership contract must include several mandatory provisions, such as the duration of the contract, the conditions for sharing risks between the grantor and its co-contracting party, the performance objectives assigned to the co-contracting party, the payment terms and the consequences of termination of the contract.

Both partnership contracts and concession agreements are thus entered into for a period determined by the depreciation period of the selected investments or financing terms.


Bidding and awarding procedures for partnership contracts are closely regulated.

Regarding concession agreements, the Concession Agreement Ordinance and the Concession Agreement Decree regulate the bidding and award procedures for concessions of a value greater than or equal to €5.548 million, excluding tax.15 The new legal framework applicable for concessions will remain flexible, with the aim of ensuring effective and non-discriminatory access for all potential bidders (including small and medium-sized companies). Nevertheless, in practice, most of those minimal requirements already existed in French case law.

As regards partnership contracts, the Partnership Contract Ordinance provides that three granting procedures can be implemented:

  1. a competitive dialogue,16 in the case of particularly complex projects where grantors are not objectively able to define the technical means or specify the legal or financial aspects of a project;
  2. a negotiated procedure17 for small projects below a certain amount defined by decree;18 or
  3. a restricted call for tenders.19

As competitive dialogue is the most common procedure for the awarding of partnership contracts, we will focus on that.

i Expressions of interest

To allow effective competition among applicants (it being specified that applications can be submitted through a consortium), partnership contracts and concession agreements must be the object of adequate publicity.20

Nevertheless, partnership contracts may only be used in the following cases: if the value exceeds €2 million for immaterial assets or if the contract contains specific targets on performance; if the value exceeds €5 million for network infrastructures; or if it exceeds €10 million in the other cases.21

Regarding concession agreements, publication requirements are less strict. The public tender notice has to be published in a newspaper authorised to carry legal advertisements and in a specialised newspaper of the relevant economic sector. The notice must also specify the procedures for the applications' submission and the essential characteristics of the concession agreement, including its purpose and nature. Granting authorities may also require the production of documents from the bidders in support of their applications (i.e., the presentation of sufficient professional and financial guarantees to ensure the continuity of the public service).

In both cases, the publication notice must specify the deadline for applications.

ii Requests for proposals and unsolicited proposals

For both partnership contracts and concession agreements, tendering documents will be communicated to shortlisted applicants.22

Regarding concession agreements, the grantor shall deliver a programme document to the applicant that defines the quantitative and qualitative characteristics of the required benefits and, if applicable, the service pricing conditions applicable to the end user.

Regarding partnership contracts, in a competitive dialogue, the grantor has to define the detailed needs and objectives that the project will have to meet in a functional programme that will be transmitted to the applicants selected for the dialogue.

The possibility of an unsolicited proposal is contemplated neither for concession agreements nor for partnership contracts.

iii Evaluation and grant

For partnership contracts, a dialogue will be conducted with each candidate to define solutions on the basis of the functional programme. The dialogue typically involves two or three phases, which are normally carried out over a period of nine to 12 months.

At the end of the dialogue period, the procuring authority will invite the candidates to submit a tender based on the considered solutions. After analysis of the tenders, a partnership contract will be awarded to the candidate with the most economically advantageous tender in accordance with the criteria set out in the contract notice or in the tender procedure. The awarding criteria must include the overall cost of the tender23 and performance objectives defined according to the purpose of the contract. As soon as the preferred bidder is selected, the contracting authority shall inform the unsuccessful candidates that their tender was rejected. A standstill period of at least 16 days is required between the date of notification of the decision and the date of execution of the contract24 to allow for any eliminated candidate to initiate a summary proceedings challenge on grounds of a breach of the relevant procurement rules.25

For the sole partnership contracts to be entered by the state or entities linked to the state, the FIN INFRA must assess the impact on public finances and the fiscal sustainability of such agreement before its execution.

For all partnership contracts, once they have been signed, the procuring authority is required to send an executed copy of the partnership contract to the FIN INFRA.

At the end of the awarding procedure, a notification must be sent within 30 days to the European Union Official Journal.

Regarding concession agreements, before the negotiation phase, the grantor selects the potential bidders based on their capacities and abilities in accordance with the criteria set out in the publication notice.26 Once they have been selected, applicants have to submit tenders that will be freely negotiated with the contracting authority. At the end of these negotiations a concessionaire will be chosen and the applicants who have had their offers rejected will be notified. A standstill period, however, shall be respected.27


i Payment

Concession agreements and partnership contracts can be differentiated according to their payment terms.

Under a concession agreement, the operating risk is transferred to the concessionaire and this transfer necessarily implies a real exposure to the market's fluctuations. As such, the compensation of the concessionaire is linked to the results of such operation. Therefore, the concessionaire's compensation mainly arises from service users.

However, this requirement does not prevent the payment of subsidies by the procuring authority. Given the requirements that could be imposed by the concession agreement, maintaining the financial viability and economical balance of the concession agreement is necessary so that the concessionaire does not apply very high rates to service users. For example, significant financial contributions are paid in concession projects related to railway infrastructure (high-speed railway) or motorways. Local authorities usually subsidise public transport or school catering concessions.

Apart from the revenue collected from service users and subsidies granted by public authorities, the concessionaire may also earn additional revenues (e.g., proceeds from side activities such as advertising and fines).

Unlike concession agreements, partnership contracts are characterised by a regular payment from the grantor to the private partner throughout the term of the contract. This remuneration is determined for the services provided by the private partner (works, intangible investments, supplies and services) and is divided into several parts. One part represents the compensation of the partner for the supply of equipment and the cover costs for servicing the loans contracted to carry out the investment, financing costs, taxes and fees that the partner pays on its investments. The compensation also takes into account the services provided by the private partner. Finally, the compensation of the partner must cover the maintenance costs and expenses for major maintenance and the renewal of certain infrastructures.

The partnership contract shall define the terms of the calculation and disbursement of the payment to be made by the grantor. Such payment may be monthly, quarterly or half-yearly.

Under partnership contracts, the compensation is not necessarily fixed as it can take into account:

  1. the completion of performance objectives – the compensation of the private partner may depend on performance targets set in the partnership contract. Premiums or bonuses may be paid (e.g., if the works are completed before the date specified in the contract). Likewise, penalties (e.g., in the case of a delay in completion) may reduce the amount of the rent to be paid by the grantor; and
  2. the collection of ancillary revenues28 – the Partnership Contract Ordinance allows the private partner to develop structures and equipment in order to benefit from complementary incomes.

The Partnership Contract Ordinance specifies that should a partnership contract include the transfer of a public service management, the contractor could receive direct payments from service users on behalf of the public authority responsible for this public service. As such, the cash flows of each of the parties will have to be expressly distinguished in order to avoid any confusion with the legal framework applicable to concessions.

ii State guarantees

There are no state guarantees per se issued for PPPs in France.

However, in early 2009, the state established a guarantee system for priority PPP projects in response to the financial crisis, which was affecting a number of very large PPPs. The FIN INFRA29 examined four projects worth a total of over €13 billion, but only one project – under a concession agreement scheme – was selected to benefit from the guarantee: the high-speed railway, Sud Europe Atlantique, which was the biggest rail PPP ever launched in Europe (financing of €7.8 billion). This concession agreement was granted by Réseau Ferré de France to a consortium led by VINCI, and the state guaranteed a €1.06 billion senior secured debt to the lenders.

Unlike the state, local authorities may guarantee loans subscribed by the project company under a concession agreement or a partnership contract.

Moreover, the contracting authority (including the state) may enter into direct agreements with the private party and its lenders to cover specific issues (cancellation or nullity of the concession agreement or the partnership contract) and preserve the lenders' interests.

iii Distribution of risk

PPPs rely on a clear allocation of the risks between the public and private entities. This allocation of risks is negotiated by the parties and is usually the object of a 'risk matrix'. Except for the risk of use of the works, the risk matrix is fairly similar for concession agreements and partnership contracts.30

Risks relating to the performance of the contract (e.g., delays in the completion and delivery of the works, archaeological discoveries and design risk) are generally transferred to the private entity.

In France, particular attention is given to public authority powers (i.e., powers to unilaterally amend or terminate the contract on public interest grounds) as the contract provisions may define the financial consequences of the use of public authority powers by the grantor.

iv Adjustment and revision

Being long-term agreements, PPPs often include specific clauses for the review of contractual terms, such as tariff-variation clauses, indexation clauses31 and meeting clauses.

Amendments can also be entered into, but only if the overall structure of the contract is not materially altered. Should the grantor be a public authority, the PPP contract can, as a principle, be unilaterally modified by it. As stated in Section V.iii, French administrative case law establishes the possibility for the public authority to unilaterally amend the contract for reasons of general interest. However, the power of amendment is regulated so that the modification cannot result in a disruption of the overall structure of the contract. Administrative case law protects the co-contracting party of the administration. In fact, the economic balance of the contract must be maintained, and the private co-contractor must be adequately compensated for the damages suffered.

The new legal framework applicable to both partnership contracts and concession agreements strictly regulates their amendments by stating six limitative alternative cases under which modifications are acceptable.32

Regarding concession agreements, any with a duration of more than five years will be determined in light of the period needed to amortise the investments required.

The provisions of the Partnership Contract Decree and the Concession Agreement Decree pertaining to the modification of French PPP contracts will apply even for contracts entered into before 1 April 2016. This improvement clarifies the legal regime and provides for greater flexibility in the implementation of concession agreements.

v Ownership of underlying assets

The legal regime applicable to concession agreements where the grantor is a public authority is organised around a classification distinguishing three types of assets:

  1. assets of compulsory reversion that shall revert to the public authority automatically once the contract ends. Because they are crucial to the provision of the public service, these assets are considered, when the contract does not address this issue,33 as the property of the public authority ab initio, that is to say, from the moment the concessionaire acquires an asset or completes specific works. Assets of compulsory reversion must necessarily return free of charge to the public authority at the end of the contract;
  2. assets of optional reversion, which are useful to the provision of the public service but are not necessary to ensure its continuity. The concessionaire is the owner of such assets for the duration of the concession agreement and they only become the property of the public authority if the public authority exercises its recovery right at the end of the concession agreement. The terms of payment of such assets are specified in the contract; and
  3. assets that belong to the concessionaire. They are not subject to being returned to or eventually recovered by the public authority as they do not aim to ensure the continuity of public service.

Regarding partnership contracts, the private partner is the owner of the assets. The private partner sets up a financing that covers: the acquisition of assets; the cost of the works; and the cost of maintenance and renewal. Consequently, by paying rents to the private partner, the contracting authority pays for the acquisition of proprietary interests in certain assets. At the end of the partnership contract the partner transfers the assets to the contracting authority.

Assets that are not integrated in the financing base (i.e., not acquired by the grantor through the rent) can remain the property of the private partner. However, they may be subject to a contractual provision providing for their transfer against payment to the public authority at the end of the contract.

vi Early termination

The provisions for early terminations are the same for partnership contracts and concession agreements.

Specific legal frameworks exist for two types of termination: termination on the grounds of general interest and termination for contractual breach by the contracting authority.

Termination on the grounds of general interest

Should the grantor be a public entity, it cannot waive its unilateral right to terminate a public law contract on the grounds of general interest. The quantum of the indemnity owed to the private entity is the highest of all termination cases.

Termination for contractual breach by the public authority

Should the grantor be a public entity, the termination for contractual breach by the grantor cannot be a contractual ground under which the concessionaire may require the termination of a concession agreement.

To terminate a concession agreement on the basis of a contractual breach by the grantor, the concessionaire must request such termination before the relevant administrative jurisdiction. The concessionaire would then be entitled to be indemnified in accordance with the principles established by administrative case law, namely, to be indemnified in respect of losses suffered, as well as in respect of the loss of profits. Recent case law confirmed the possibility of including in a contract, not related to the performance of the public service, a provision allowing the partner to terminate the contract for a contractual breach by the public authority.34 Consequently, certain partnership contracts not related to the performance of the public service could potentially include such contractual provision.

Termination for failure to fulfil the obligations as determined by the Court of Justice of the European Union

Both the Concession Agreement Ordinance and the Partnership Contract Ordinance provide that the agreement has to be terminated, in the case of a major breach, if the Court of Justice of the European Union states that the grantor has awarded the contract without complying with the obligations imposed by the European Directive (as provided under Article 258 of the Treaty on the Functioning of the European Union).

Except for these types of termination that are regulated, the terms and conditions of other forms of termination can be freely negotiated by the parties.

If a force majeure event or an unforeseen event occurs, the contract may be terminated and the contract will usually provide that the private entity will be indemnified on the basis of the 'useful expenses' theory developed by the Supreme Administrative Court.35 As it is a jurisprudential theory, it is still difficult to determine which costs are deemed to be useful expenses and consequently are to be indemnified. However, financial expenses should be indemnified.36

One of the major points of both the Partnership Contract Ordinance37 and the Concession Agreement Ordinance,38 is the enshrinement of the principle of indemnification of financial expenses incurred under the partnership or the concession agreement in case of judicial cancellation following a third-party challenge.

Indeed, in case of cancellation of the contract, the private entities can seek indemnification for all expenses incurred in accordance with the concession agreement or the partnership contract, which may include the financial expenses incurred to ensure the performance of the contract, to the extent that the said expenses have been useful to the grantor.

In respect of the concession agreement, such financial expenses are defined broadly and include the costs for the concessionaire relating to the financing instruments and those arising from the early termination.

It shall be noted, however, that the indemnification of the useful expenses can only apply when a schedule of the concession agreement and the partnership contract specifies in respect of the concession agreement, the main characteristics of financing to be set up for the purposes of the contract performance, and in respect of the partnership contract, the provision that binds the contracting partner to the financial institutions.

Finally, both the Partnership Contract Ordinance and the Concession Agreement Ordinance provide that, if an indemnification clause is provided under the partnership contract or the concession agreement, then it is deemed separable from the rest of the said agreements.

The Concession Agreement Ordinance clarifies the quantum of the financial indemnification applicable in the case of cancellation or termination of a concession agreement by a judge following a third-party challenge.

As a consequence, the concessionaire may request to be indemnified for the expenses incurred under the concession agreement that have been useful to the grantor, including financing expenses and costs.

From a project finance perspective, such express reference to the theory of 'useful expenses' should be reassuring for both sponsors and lenders.

Indeed, the indemnification of useful financial expenses constitutes a major achievement for the lenders and all finance parties involved in a partnership or concession project because it covers the risk of third-party challenge, in particular, should a concession agreement or a partnership contract be held to be void as result of a challenge.

The contract may also be terminated for breach by the private entity. The possibility to terminate the contract on this ground and its consequences must be provided for in the contract. In this case, the private entity cannot receive compensation for the damage resulting from the early termination of the contract.

In any case of termination, it is preferable to contractually provide the financial consequences and terms of payment of owed indemnities in the contract.


In France, PPPs are usually financed under a project finance scheme. The key feature of project financing is that it is an 'off balance sheet' financing for the sponsors.

Project finance generally involves high debt-to-equity ratios depending on the particular project and market. It refers to a limited recourse (or non-recourse) financing structure that does not impose any obligation on the project sponsors to guarantee the repayment of the project debt, should the project revenues not be sufficient to cover the total debt service. Shareholders of the project company are generally only liable up to the extent of their shareholdings.

In respect of the partnership contract, the Partnership Contract Ordinance provides that the procuring authority must be informed of any change in the project company shareholding. The partnership contract must contain provisions regarding the procuring of authority information, and as applicable, the proceeds sharing terms in the case of the sale of the project company shares.

The borrowing entity is a project company, namely, a special purpose vehicle (with no previous business or record) that will finance, design, build, operate and maintain the project. In France, project companies are often incorporated as liability companies or partnerships.

The repayment of the project loans by the project company relies on the future cash-flow projected to be generated from the operation of the project (primarily allocated to operating costs and then to debt service).

One of the main concerns of the lenders is to analyse the bankability of the project, which depends on several factors. For instance, the project's cash-flow capacity, the mitigation of the risks between all stakeholders, the project company's contractual documentation and the security package must all be examined to ensure the successful financing of a PPP in France.

Many sources of financing are available, including commercial lenders (banks, insurance companies, credit corporations, etc.), sponsors' equity, public bodies, international (multilateral) agencies, bilateral agencies and bondholders. These financiers might be based in France or abroad.

Prohibited under the 2004 Ordinance, the Partnership Contract Ordinance now contemplates the possibility for a procuring authority to contribute to the financing of the project.

State or local authorities or other public bodies, whether acting as procuring authority or not, are now entitled to take a minority stake in the project company. In this case, the project company by-laws must specify the allocation of risk between the shareholders and the measures implemented to prevent any conflict of interest.39

The Partnership Contract Ordinance also provides that partnership contracts are eligible for subsidies or other financial contributions. The terms and the payment schedule of the subsidies and other financial contributions can be adapted to the duration of the contract.

In respect of financing adjustment, the Partnership Contract Ordinance also specifies that the procuring authority may provide that financing terms referred to in the final tender can be adjusted, provided that this adjustment may not affect the conditions of the bidding procedure by exempting the procuring authority of the obligation to respect the principle of choice of the most economically advantageous tender or allowing the prospective candidate to affect the economic balance of its tender.40

In a typical project finance transaction, the lenders provide different types of debt to the project. Senior lenders provide a debt with a right of payment senior to that of the subordinated lenders. Moreover, some lenders might provide a tranche of debt for a specific period of time and with a specific interest rate and an amortisation differing from the tranche provided by others lenders. A wide range of French law debt instruments are also available to issue subordinated, high-yield or convertible bonds.

The standard types of project finance credit agreements may notably include:

  1. the term sheet – an initial agreement between the project company (in its capacity as future borrower) and the lenders outlining the key terms and conditions of the financing;
  2. senior facility agreements – agreements between the lenders and the project company (in its capacity as borrower) setting out the rights and obligations of each party regarding the senior debt;
  3. a common terms agreement – an agreement entered into by the financing parties and the project company that defines the terms and conditions that are common to all the financing instruments and the relationship between the parties (for instance, definitions, events of default, order of drawdowns, project accounts, permitted investments, voting process for waivers and amendments, undertakings, covenants, representations and warranties, etc.). Such agreement ensures that all the finance parties have a common understanding of the key definitions and critical events;
  4. subordinated loan agreements – loan agreements whereby subordinated creditors agree not to be paid until the senior creditors have been repaid. These loans are usually provided by the project sponsors or by third-party investors such as investment funds;
  5. a shareholders' agreement – an agreement that sets forth the rights and liabilities of each project company shareholder especially with respect to capital contributions, transfers, conflicts of interest and restrictions on competition;
  6. an intercreditor agreement – an agreement between the project company and the lenders (senior lenders, mezzanine lenders, hedging counterparties, loan noteholders and intra-group lenders, etc.), which regulates the creditors' rights to receive payments (such as principal, interest and fees), notably in the event of default;
  7. hedging agreements – agreements that enable the project company to fix the interest rate on all or part of its debt or to limit its exposure to exchange rate risks;
  8. a direct agreement between the lenders and the project company under which the lenders will be entitled to take over the project (step in) regarding the key project agreements should the project company default under certain circumstances;
  9. sponsor support and third-party guarantee – senior lenders will often require sponsors or third parties to put in place certain credit-enhancement measures (parent guarantee, letter of credit, comfort letter);
  10. public sector support – public sector support instruments may also be set up (e.g., direct funding support by way of public sector capital contributions);
  11. contingent support or guarantees by the public sector or other private sector participants involving specific risks that cannot otherwise be effectively controlled by the project company or other private sector participants (e.g., minimum traffic and revenue guarantees for a toll road); and
  12. EU loan guarantee – an example is the Loan Guarantee for Trans-European Transport Network Projects, which is a credit-enhancement instrument set up and developed jointly by the European Commission and the European Investment Bank, facilitating a larger participation of the private sector involvement in the financing of Trans-European Transport Network infrastructure.

As project finance is carried out on a limited (or non-recourse) basis, it is critical to secure the finance parties through a collateral security package, which also helps to enhance the bankability of the project and the creditworthiness of the project company in its capacity as borrower.

Under French law, a security interest is generally created in favour of the creditors of the secured obligation.

French law recognises the role of security agent. Pursuant to Article 2488-6 of the Civil Code, a security agent may be in charge of setting up, registering, managing and enforcing any security interest for the benefit of the secured creditors.41 Indeed, security interests are granted in favour of each lender and not only for the benefit of the security agent, which means that each of the lenders might be entitled to act individually in enforcing its specific security interests rights (subject to any restrictions in the financial documentation). The security agent is thus appointed by the creditors and acts under a power of attorney granted by the lenders.

The most common types of security interests used in PPP project finance transactions in France are:

  1. a pledge over bank accounts (governed by Article 2355 et seq. of the Civil Code);
  2. a pledge over securities accounts (governed by the provisions of Article L211-20 of the Monetary and Financial Code) involving a pledge over shares or other financial securities and a pledge over the bank account on which cash proceeds relating to such shares or financial securities are credited (e.g., dividend);
  3. a pledge over the project company's ongoing business (governed by Article L142-1 et seq. of the Commercial Code) notably involving lease rights, logo and corporate name, goodwill, commercial furniture, equipment and machinery used for the operation of business, and certain intellectual property rights attached thereto;
  4. a pledge over equipment (governed by Article L525-1 et seq. of the Commercial Code or Articles 2333 et seq. of the Civil Code);
  5. a pledge over intellectual property rights (governed by Article 2355 et seq. of the Civil Code);
  6. a pledge over receivables – including future receivables, if such receivables are sufficiently identified – (governed by Article 2355 et seq. of the Civil Code);
  7. assignment by way of security over receivables (including contingent or future receivables if such receivables are sufficiently identified). Under French law, receivables are assigned by way of security, which is a simplified form of assignment of receivables for security purposes. It transfers the ownership of a receivable to the relevant secured creditor. Such security interest, which is governed by Article L313-23 et seq. of the Monetary and Financial Code, is only available, provided that:
    • the assignee is a credit institution licensed in France or otherwise licensed to carry out its activities in France through the European Passport, a financing company or, since Ordinance No 2017-1432, dated 4 October 2017 and applicable as of 3 January 2018, an alternative investment fund;
    • the assigned receivables secure a credit granted by a credit institution (the assignee) to the assignor in connection with its business activities; and
    • the assigned receivables relate to business or professional activities;
  8. a trust by way of security (governed by Article 2011 et seq. of the Civil Code) whereby a debtor assigns the ownership of its assets on a temporary basis into a dedicated estate. Such a dedicated estate is managed by a fiduciary specifically appointed for this purpose;42
  9. delegation of receivables (governed by Article 1336 et seq. of the Civil Code). A delegation is commonly used to take security over receivables under insurance policies. The debtor (i.e., insurance company) agrees to make payments directly to the secured creditor; and
  10. security interests (mortgage, lender's lien, antichresis) on real property (land, buildings, rights of way and easements). Such security interests must be entered into by way of notarised deed and registered to the relevant land registry to become enforceable against third parties.

In addition to the above-mentioned security interests, creditors may require the sponsors to provide personal guarantees, notably independent guarantees such as first-demand guarantees and standby letters of credit.

A bill that aims to enhance the attractiveness of the French legal framework, including security law, is currently being discussed before Parliament (the PACTE Bill).43 The PACTE Bill, if enacted, may, inter alia, simplify the publicity formalities related to security interests on movable property, establish an ordinary-law assignment of receivables for security purposes, and amend the rules governing security interests within the framework of insolvency procedures.44

At the closing date and before any subsequent disbursement of the loan, lenders will require that the borrower first comply with a set of conditions precedent, including (for the first drawdown): organisation and existence of the project company; execution and delivery of facility agreement, and related financing documents; security interests filings; availability of funds; related equity documents; sponsors supports documents; third-party support documents; guarantees; enforceability of project contracts; permits; insurances policy endorsements and insurance report; real estate surveys and title insurance; financial statement of project company and other project participants; construction budget and construction drawdown schedule; revenue and expenses projections; engineering reports; consultant reports; environmental review; legal opinions; 'know-your-customer' processes; no material adverse change; no defaults; and no litigation.


In 2018, few major rulings affecting the legal framework for PPPs were issued by administrative judges.

First, in a decision dated 5 February 2018, the French Supreme Administrative Court developed its case law relating to the possibility of entering into a concession agreement without implementing a prior tendering procedure.45

In such case, the French Supreme Administrative Court confirmed a precedent ruling dated 14 February 201746 in which it stated that the duration of such concession agreement cannot exceed either: the required duration to initiate and implement a new prior tendering procedure; or the required duration to properly prepare the service provision by the public authority itself.

In the decision dated 5 February 2018, the French Supreme Administrative Court added that the signing of a temporary concession agreement cannot be justified by a purely financial interest put forward by the public authority.47

Then, on 9 March 2018, the French Supreme Administrative Court ruled on the conditions under which a concession agreement in force may be modified through a contract amendment.48 In this case, it has been ruled that the parties cannot introduce a substantial provision through a mere contract amendment. Indeed, a contract amendment can neither modify the main purpose of the concession agreement nor substantially alter the economic equilibrium of the concession agreement resulting from its duration, the amount of investments needed or the revenues collected from services users.49

In a decision dated 14 May 2018, the Tribunal des conflits50 detailed in which hypothesis the disputes arising from direct agreements51 performance can be settled by the French administrative courts.52

In addition, in two decisions, the French Administrative Supreme Court clarified the legal regime applicable to the termination of the tendering procedure:

  1. In a decision dated 4 April 2018,53 the Court ruled that the public notice of invitation to tender should be regarded differently when the tendering procedure is initiated by the French state, on the one hand, or by another public entity, on the other hand. There is no obligation for the French state to adopt such a formal decision. Publishing a public notice of invitation to tender is only a declaration of intention without prejudice of the decision that would be taken at the end of the process. Thus, the French state remains free to reject all offers. Nevertheless, other public authorities are in that case compelled to adopt a formal public notice of invitation to tender.
  2. In a decision dated 17 September 2018,54 the French Supreme Administrative Court ruled that, under certain conditions, a public authority that launched a tendering procedure is not compelled to select an offer. Thus, the Court ruled that the lack of competition among the offers that have been submitted constitutes an adequate ground to refuse to select an offer.
  3. In a decision dated 18 July 2018,55 the Administrative Court of Cergy-Pontoise ruled that the state's decision to terminate the Ecotaxe PPP56 on the grounds of general interest was not legally justified and consequently unlawful. Therefore, the companies that suffered a direct and certain loss because of this fault could be compensated.

Finally, the French Supreme Administrative Court dealt with the legal regime applicable to assets of compulsory reversion. In a decision dated 29 June 2018,57 it has been held that all assets owned by the concessionaire prior to the signing of the concession agreement and which are necessary for the public service provision are also classified as assets of compulsory reversion. Therefore, when not otherwise provided under the contract, such assets are handed over to the public entity for free at the contractual termination date of the concession agreement.


The transposition of the 2014 European directives pertaining to concession agreements and public procurements substantially modifies the existing French PPP laws, which include several regimes with strong specificities (i.e., administrative long-term leases, temporary occupation permits, partnership contracts and concession agreements).

The key date in 2019 in the field of French PPP law is likely to be 1 April, when the new Public Procurement and Concession Agreements Code will enter into force. This new Code will not substantially change the legal rules governing public procurement and concession agreements, as it only aims at aggregating existing legal norms. The approach that was adopted while drafting this Code was to gather not only applicable laws and decrees but also legal principles resulting from existing French and European case law, provided that such case law can be deemed stable.

The entry into force of this Code, comprising 1,747 articles, will undoubtedly simplify the legal framework governing PPP contracts, which will benefit public authorities, companies and practitioners. Such changes, along with the renewed support of certain local entities, are likely to trigger noticeable dynamics concerning PPP projects in several key sectors (e.g., transport, health, education, urban equipment, environment, energy efficiency and telecommunications).


1 François-Guilhem Vaissier is a partner, and Olivier Le Bars and Diane Houriez are associates at White & Case.

2 Ratified under Article 39 of Law No. 2016-1691, dated 9 December 2016.

3 Ratified under Article 40 of Law No. 2016-1691, dated 9 December 2016.

4 From this date, it would be necessary to refer to the “articles” of the Code Instead of the “articles” of the ordinances or of the decree.

5 In January 2018, the state put an end to the Notre-Dame-des-Landes airport project. This termination echoes the termination of the Ecotaxe partnership contract by the French state in 2014.

6 This 17 MWc project which implies an investment of €17 million is about implementing 47,000 panels on an artificial lake in the Vaucluse region.

7 Article 3 of the Concession Agreement Ordinance.

8 Article 3 of the Partnership Contract Ordinance.

9 As mentioned under Articles 10 and 11 of the Partnership Contract Ordinance.

10 See Article 156 of the Partnership Contract Decree stating that a partnership contract may be signed by the state or a state public institution only after approval by the Minister of the Economy and Minister of the Budget. In addition, a public body established by the state must obtain the approval of the minister in charge of its supervision. Such approvals will be presumed if no reply is given within one month from the transmission of the contract. For local authorities, the principle of their free administration exempts them from any requirement for state approval. Thus, such authorisation by the Ministers of the Economy and the Budget is not needed.

11 Article 10 of the Partnership Contract Ordinance and Article 9 of the Concession Agreement Ordinance.

12 Article 71 of the Partnership Contract Ordinance.

13 Before 2016, the FIN INFRA was the MaPPP, which was created by Decree No. 2004-1119, dated 19 October 2004, and modified by Decree No. 2016-522 of 27 April 2016.

14 Article 76 of the Partnership Contract Ordinance.

15 Notice relating to the procedural thresholds and the list of central public authorities (JORF No. 0305 dated 31 December 2017).

16 Article 42 of the Partnership Contract Ordinance. The grantor conducts a dialogue with the candidates admitted to the procedure with the aim of developing one or more suitable alternatives capable of meeting the specified requirements.

17 The negotiated procedure is defined as the procurement procedure in which 'the contracting authorities consult the economic operators of their choice and negotiate the terms of contract with one or more of them'. The negotiation process enables grantors to negotiate the terms of the contract.

18 Article 42 of the Partnership Contract Ordinance.

19 Article 42 of the Partnership Contract Ordinance.

20 Article 41 of the Partnership Contract Ordinance and Article 35 of the Concession Agreement Ordinance.

21 Article 75 II of the Partnership Contract Ordinance.

22 In concession agreements, the public authority lists applicants admitted to tender after consideration of their professional and financial guarantees and their ability to ensure the continuity of public service and equality of service users.

23 The 2004 Ordinance specified that the overall cost of the tender is intended to mean the sum, in current value, generated by the design, financing, construction or conversion, upkeep, maintenance, operation or management of works, equipment and intangible assets, and the provision of services specified for the term of the contract.

24 The duration is either 11 or 16 days depending on certain criteria (i.e., in case of electronic transmission of the decision to the rejected bidders).

25 Article L551-1 of the Code of Administrative Justice.

26 Article 22 of the Concession Contract Decree.

27 Article 1-1 of the Decree No. 93-471 of 24 March 1993 and in 2016, Article 29 of the Concession Agreement Decree.

28 The collection of ancillary revenues serves as a financial incentive for the partner, but also for the public party. Indeed, the rent paid by the public body may be reduced depending on ancillary revenues collected by the partner.

29 At this time, the name of the FIN INFRA was 'MaPPP' (Mission d'appui aux PPP). The MaPPP was replaced by the FIN INFRA in 2016.

30 Under concession agreements, the risk of the works being used by the end user is borne by the concessionaire.

31 These clauses must comply with Articles L 112-1 to L 112-3 of the Monetary and Financial Code that prohibit, with certain exceptions, indices based on overall inflation and requires the use of indices related to the obligations whose price is indexed.

32 Article 139 of the Partnership Contract Decree and Article 36 of the Concession Agreement Decree.

33 The contract may assign: (1) ownership of the works to the concessionaire for the duration of the contract, which, although necessary for the operation of public service, are not established as the property of a grantor; or (2) rights on such property (Supreme Administrative Court, 21 December 2012, Commune de Douai, No. 342788). At the end of the contract, if assets of compulsory reversion are not fully amortised, the co-contracting party is entitled to a payment equal to the net book value shown on the balance sheet if the depreciation period of the assets involved is less than or equal to the duration of the contract, or the net book value resulting from the depreciation of these assets over the term of the contract, when the term of the agreement is less than the normal depreciation period of the assets.

34 Supreme Administrative Court, 8 October 2014, Société Grenke Location, No. 370644. It must be noted that: the case law did not concern a concession agreement or a partnership contract but there is a reference to administrative contract; and the termination is not automatic. Indeed, the public authority shall have the possibility to contest the termination.

35 Supreme Administrative Court, 19 April 1974, Société Entreprise Louis Segrette, No. 82518.

36 The Supreme Administrative Court has recently held that financial expenses can be considered as useful expenses (Supreme Administrative Court, 7 December 2012, Commune de Castres, No. 351752). However, it must be specified that in this case, the concession agreement was not terminated on the grounds of force majeure.

37 Article 89 of the Partnership Contract Ordinance.

38 Article 56 of the Concession Contract Ordinance.

39 Article 80 of the Partnership Contract Ordinance.

40 Article 82 of the Partnership Contract Ordinance.

41 The legal regime applicable to the security agent has been modified by Ordinance No. 2017-748, dated 4 May 2017. However, please note that, according to most of French practitioners, this modification provides for an incomplete legal regime and does not answer to many uncertainties.

42 Although this mechanism appears to be quite akin to the mechanism of 'trust' in common law jurisdictions, it differs from the trust as it is not based on a dismemberment of the right of ownership of the assets transferred into the dedicated estate (i.e., beneficial ownership versus legal ownership).

43 Bill No. 1088 relating to Companies' Growth and Transformation.

44 Article 16 of the PACTE Bill.

45 Supreme Administrative Court, 5 February 2018, No. 416581.

46 Supreme Administrative Court, 14 February 2017, No. 405157.

47 In this case, the court held that the city of Paris cannot justify the signing of a temporary service concession with the risk of losing revenues in the case of termination of the information boards' local services.

48 Supreme Administrative Court, 9 March 2018, No. 409972.

49 In the decision, dated 9 March 2018, the court held that a contract amendment that increases the applicable prices from 31 per cent to 48 per cent is a substantial modification that goes beyond what could be lawfully decided by the parties through a mere contract amendment.

50 Tribunal des conflits, 14 May 2018, No. C4119. The Tribunal des conflits is a court responsible for settling conflicts of jurisdiction between the two French orders of jurisdiction, judicial and administrative.

51 When a PPP agreement is implemented under a project finance scheme, a direct agreement is usually entered into between the project company, the grantor and the financing parties in order to establish a direct relationship with themselves and specify the circumstances under which the financing parties may step in to remedy a default under the project documents.

52 It could be deduced from such ruling that, in some circumstances, direct agreements can be classified as public contracts. Therefore, the project finance practices could change as regard these agreements since the legal regime applicable to public contracts would apply to them (legal challenges from third parties, termination terms and conditions, etc.). However, the consequences of this ruling are not clear-cut today and additional rulings (especially from the French Administrative Supreme Court) will be necessary to understand them from a practical standpoint.

53 Supreme Administrative Court, 4 April 2018, No. 414263.

54 Supreme Administrative Court, 17 September 2018, No. 407099.

55 Administrative Court of Cergy-Pontoise, 18 July 2018, No. 1507487.

56 In 2011, the state and the company Ecomouv entered into a 13-year partnership contract for the design, financing, delivery and operating of a heavy-vehicle satellite tolling project. But in 2014, the state, facing heavy political lobbying from truck drivers and consumers against the tax over pass-through costs, terminated the agreement on the ground of public interest just before the beginning of the operating phase.

57 Supreme Administrative Court, 29 June 2018, No. 402251.