The Public-Private Partnership Law Review: Germany


The German public-private partnership (PPP) market was subject to considerable changes in recent years. In July 2017, the German parliament passed a reform of the motorway administration2 that may lead to more PPP projects for the construction and operation of German motorways. The reform is on the way to implementation and will enter into force on 1 January 2021. Several new projects are planned as PPP projects, although a decrease of new PPP projects could be observed in the first half of 2019 following the cool-down in the European PPP sector.3 The volume of investments in particular in rail infrastructure will substantially increase in the new decade, and PPP will certainly play an important in role in urban mobility initiatives.

The term PPP, which has been used in the German Federal Constitution since 2017 (Article 90(2)), is (at least in Germany) not conclusively defined. It involves forms of long-term cooperation between the government and a private company often relating to cost-intensive infrastructure projects. The PPP discussion in Germany often focuses on projects involving cooperation in the construction, maintenance or operation of public roads and buildings (e.g., hospitals). Apart from these projects, public-private cooperation has other, practically important, forms. Many German cities have granted concessions to private companies for the refurbishment and operation of urban electricity grids. Out-of-home advertisers conclude long-term contracts with major German cities. They offer professional advertisement services to the private sector, but also contribute to the investment in and maintenance of the cities' infrastructure. The German toll collection scheme for the use of the motorways by heavy goods vehicles (HGVs) was designed, built and has until recently been operated by a joint venture of private sector companies. The agreements require substantial investments from the private sector companies and include cooperation obligations. Further, public authorities and the private sector established institutionalised PPPs in the form of joint ventures, inter alia, for the operation of airports (e.g., the international airports in Frankfurt, Düsseldorf and Hamburg).4 These complex and diverse projects should be taken into account to better understand the potential for public-private cooperation in Germany.

The year in review

General framework

i Types of public-private partnership

PPP projects may be structured in very different manners in Germany. For the construction of public buildings (e.g., hospitals, schools or administrative buildings), the public authorities in most cases want to continue to hold the property rights in the real estate and only transfer the right to build and operate or manage a building used for public purposes to a private investor.36 From a legal perspective, it is also possible that the private investor acquires title to the real estate and either has an obligation to re-transfer the real estate to the public authority37 or remains the owner at the end of the fixed term.38

Public authorities may also award concessions to a private investor. The main difference between a public contract and a concession is the type of consideration granted to the contractor.39 While the contractor under a public contract usually gets a remuneration, a concession holder obtains a right to use or market the provided service or goods (e.g., market the service to third parties). These types of contracts are predominant, for example, in the transfer and operation of electricity and gas grids in municipalities and cities (see Section 46(2) German Energy Act (EnWG)) with approximately 20,000 agreements in Germany.40 The concession holder obtains the right to market the capacity of the electricity or gas grid to third parties (i.e., to electricity or gas providers)41 for a maximum period of 20 years. Although in recent years some municipalities and cities have shown a tendency to establish or mandate a public entity to operate the electricity and gas grid (re-municipalisation), the law provides that municipalities may not award concessions in-house without a public procurement procedure (see Section 46(4) German Energy Act (EnWG)).42 Therefore, private sector parties can participate and – with a good offer – be awarded such concessions in a public tender.

In addition, the public authorities may establish joint ventures with private partners (sometimes this is called institutional PPP),43 for example, in the corporate structure of a limited liability company.44 Such entities may be used, for example, in the areas of waste management, water supply services and sewage treatment. Public law restrictions generally require that the public authority holds a majority of voting rights in the joint venture. The shareholders' agreement will also include additional safeguards for ensuring the fulfilment of public tasks. This may include a restriction of the statutory purpose of the company to fulfil the public task, obligations to fund the legal entity and options for the public authority to call shares under certain circumstances. Alternatively, a public law structure – institution under public law – has been used for such public-private joint ventures (e.g., previously for the operator of Berlin's water supply system Berliner Wasserbetriebe until October 2012).45 This requires, however, an act of parliament that explicitly allows the participation of a private investor.

ii The authorities

The 16 federal states in Germany have certain political competences. For certain tasks – such as military, federal waterways and rail infrastructure – the federal government has (some) administrative competences. At the federal level, the Federal Republic of Germany is often the contract partner, represented by the ministry in charge of the relevant task (e.g., the Federal Ministry of Transport and Digital Infrastructure, the Federal Ministry of Defence or the Federal Ministry of Finance) or by a subordinated federal authority. Other public tasks and much of the infrastructure are administered by the federal states – such as state roads, universities, schools and prisons. At the state level, the state may be the contracting authority, represented by the state ministries or subordinated state authorities. In addition, projects may also be administered on the municipal or county level. This applies, inter alia, to hospitals, schools, local and regional transport by bus and train, electricity and water supply. The contracting authorities on the municipal level are the municipality or city, or its entities. In the case of regional tasks (e.g., hospitals) the contracting authority may be the county. Municipalities may also form special purpose entities fulfilling certain public tasks, in particular, in relation to regional traffic, water supply and waste management.

iii General requirements for PPP contracts

In Germany, there is no specific act on PPP projects or contracts, apart from the constitutional provision on the administration of motorways. The civil law framework and regulatory requirements apply to PPP projects (e.g., laws on taxes, social security, minimum wage, trade unions and health and safety). More specific requirements can derive from budgetary provisions, public procurement law and provisions on specific sectors, such as energy.

Before using a specific procurement structure such as a PPP, the government – under budgetary requirements – has to conduct a cost-benefit analysis on different procurement possibilities (see Section 7(2) Federal Budget Act (BHO)). State legislation contains similar requirements for the states' and municipalities' decisions. This analysis shall also take into consideration the risks of different structuring possibilities and, in particular, the possibility to involve the private sector for the fulfilment of the task or service. For PPP projects, permits or consents may be required under the budgetary provisions. In particular, the consent of the ministry of finance or – for municipalities – the supervisory authority may be necessary for contracts under which the public authority grants a guarantee, takes a loan or enters into an agreement similar to a loan. In addition, approval of the federal or state parliament or the municipal council may be necessary for costs in the budget.46

A specific public law entrustment is necessary if the private partner will be authorised to take authoritative decisions with regard to third parties. Such an entrustment may only be granted in or based on an act of parliament.47 For example, the operator of the German toll collection scheme has been publicly entrusted with certain tasks in connection with the levying of tolls for the use of federal motorways and federal roads (Bundesstraßen) by HGVs (see Section 4(2) Federal Road Toll Act (BFStrMG)). However, in most PPP projects the private partner acts only as an administrative assistant and the transfer of such tasks generally does not qualify as a public entrustment. Certain tasks may not be subject to PPP projects under German law, for example, tasks that (regularly) require the use of direct force.48 The details are controversial and have been discussed, for example, in connection with PPP projects concerning prisons.49

Bidding and award procedure

The legal framework for public procurement within the European Union is harmonised for public contracts (including supply, works and services contracts) and concessions that exceed certain EU harmonised thresholds. The relevant EU provisions were reformed in 201450 and Germany has implemented these provisions as of April 2016, so they are relatively recent. The main provisions under German law are implemented in Section 97 et seq. of the Act against Restraints of Competition (GWB). In addition, there are implementing regulations, such as the Public Procurement Regulation, the Concessions Regulation, the Regulation on Procurement in the Sectors of Transportation, Water and Energy Supply and the Regulation on the Procurement in the Sector of National Defence and Security.51

i Requests for participation

The contracting authority has to publish a contract notice in the Supplement of the Official Journal of the European Union if the value of a public contract exceeds certain thresholds.52 The standard form of a contract notice shows, inter alia, information on the type of the contract, its value, the criteria for the selection of the tenderer and the award criteria. The public authority has to review whether the applicants fulfil the selection criteria. The selection criteria relate to certain grounds for exclusion, for example, the commission of certain defined criminal acts by the management or responsible employees or the initiation of insolvency proceedings against the bidder. In addition, the contracting authority may use selection criteria that relate to the economic and financial standing of the bidder (e.g., minimum requirements on a specific annual turnover or minimum insurance requirements) and criteria that relate to the technical and professional capacities (e.g., references, licences necessary for the business or a sufficient number of suitable employees in order to execute the contract).

ii Requests for proposals

The contracting authority further defines the requirements for the proposals in the tender documents and invitation to tender. This may include requirements on works or service specifications, prices and additional information on the quality of services or works. Generally, the public authority will provide a rather extensive list of requirements for the tender.

iii Evaluation and award

The selection of the successful tenderer has to be based on the evaluation criteria as provided by the public authority in the tender documents. Permissible criteria are price-only or a mix of price and quality criteria, and possibly also environmental or social criteria. In most PPP projects the public authority will use a mix of criteria and assess the tenders accordingly.

After the selection of the successful tenderer the contracting authority has to notify the other tenderers of the envisaged award decision (see Section 134(1) GWB). The public authority may conclude the contract with the successful tenderer 10 to 15 days after the submission of the notification – depending on the form used for the notification – unless a competitor has filed a complaint against the award with the competent procurement chamber. The procurement chamber for federal cases is the procurement chamber at the Federal Cartel Office in Bonn. The procurement chamber's decision can be appealed at the competent Higher Regional Court. The Higher Regional Court in Düsseldorf is competent for appeals in federal cases.

The contract

i Payment

The scope of payment depends on the individual contract type. In PPP projects relating to the construction of a building, the payment may include components of the planning, construction, financing, operation stages and in some cases the transfer of real estate. The public authority will in these cases make regular payments to the private partner for the contract term. The contract, generally, splits up the payments with regard to the individual components. The agreements may contain provisions on inflation adjustments as common also for other long-term service agreements.

With regard to the construction or enlargement of motorways, public authorities use different types of contracts. Some contracts – such as the contract for Motorway 94 – include a monthly payment by the government to the consortium. The public authority may reduce the payment if the motorway's use is limited, for example, if a motorway lane is blocked for construction or if a speed limitation is necessary because of the (bad) quality of the road (availability model). Other motorway PPP contracts include a payment that is linked to the toll paid for the relevant section of the motorway. In Germany, HGVs have to pay a toll based on the number of motorway sections they use, which was extended to further federal routes (Bundesstraßen) as of 1 July 2018. Further, by 1 January 2019, new weight categories were introduced and lighter HGVs (7.5 tons and more) included in the toll collection scheme.53 Under this type of contract, the private investor obtains a claim against the public authority in the amount of the HGV toll paid for the relevant section by the users (extension model).54

ii State guarantees

The government often uses state guarantees and state grants to assist private investors to secure financing (e.g., in the case of motorway projects). With regard to municipal projects for the construction of buildings for public use, the private partner may apply for loans from public banks, such as the Kreditanstalt für Wiederaufbau or the European Investment Bank. The private partner may also apply for state grants (e.g., under programmes to finance hospitals). It is also possible for the public authority or the state to grant guarantees for bank loans. Such guarantees require a specific permit or consent from the ministry of finance or a municipal supervisory authority. State guarantees and state grants are subject to strict European requirements on state aid. In particular, large-scale public funding may trigger an obligation of the public entity to notify the funding to the European Commission.

iii Distribution of risk

Major risks for PPP projects relate to the planning stage, the construction stage (specifically delays in construction), the operation stage and the subsequent use of the asset.55 With regard to the risk of construction (e.g., obtaining a permit, usability of the real property, delays), under German law – as a general rule – the risk is allocated to the party from which sphere it originates. If a property provided by the public authority cannot be used for the project because of (severe) environmental damages, the risk is, under German law, generally allocated to the public authority (see Section 645 German Civil Code (BGB)). In contrast, if the architect's plan commissioned by the private partner is incorrect and not appropriate for use, this risk is, under German law, generally allocated to the private partner. Exceptions apply – as usual – if the contracting parties concluded in their agreement that the potential risks arising from the subsoil shall be allocated to the private partner. This has been the matter in a recent lawsuit concerning the construction and operation of the Motorway 8 between Augsburg and Ulm. The Higher Regional Court München upheld the contested clause allocating the total planning risk to the private partner although the public authority conducted the reference planning.56

The parties may deviate from these general provisions in the contract. With regard to the construction of motorways, the main difference between the models used for PPP relates to the allocation of risks for the use of the motorway (by HGVs). Whereas the private partner has the risk that the motorway is not sufficiently used in contracts that base the payments on the amount of toll incurred for the section (i.e., under the extension model),57 the public authority takes this risk with regard to contracts that base the payment on the availability of the relevant section (i.e., under the availability model; see Subsection i). Similarly, in the case of the award of concessions, which allow the private partner to market its services to third parties (e.g., use public space for advertisement or levy a fee for the use of a parking deck in the city centre), the private partner assumes the risk that the facility is used sufficiently. In some of these cases, such as awarded electricity or gas concessions, these risks are reduced because the grid constitutes a natural monopoly for the private partner on the relevant services.

iv Adjustment and revision

Under public procurement law, the adjustment and modification of PPP contracts may require a new public procurement procedure if the contract has been materially changed (see Section 132 GWB). An adjustment or modification qualifies as material if it changes material provisions of the agreement and the amendment shows the intent of the parties to renegotiate the agreement. Further specific provisions regulate the exchange of the contractor, a change in pricing, a modification of the contract term and of the scope of works or services.

v Ownership of underlying assets

In most cases discussed in this section, the government would generally retain the private property. However, if the project encompasses a transfer of real estate, such an agreement has to be notarised (see Section 311b(1)(1) BGB). The actual transfer of ownership has to be registered in the private real estate register (see Section 873(1) BGB). In addition, the sale of real property by the public authority may require a permit from the ministry of finance or a supervisory authority.

vi Early termination

The term of PPP contracts may reflect the amortisation period of the project, which in major infrastructure projects is often 15 to 30 years. Fixing the term under German law means that a termination without reason is excluded, unless the agreement contains an explicit right to terminate the agreement. From a procurement law perspective, it is helpful to include options for the prolongation of the agreement. PPP contracts usually contain additional termination rights for the contracting authority, most commonly for a material delay of the project, the non-compliance with material requirements for construction or financing, bankruptcy and cases of non-compliance with the law (e.g., corruption or antitrust violations).


PPP projects are often financed from mixed sources, including private and public funding. There are possibilities for state financing in programmes for specific sectors (see Section V.ii). Most PPP projects are at least partially funded by bank loans. In many cases the public authority will have a better credit rating than the private investor. To ensure the lowest interest rate possible, the private investor will have the right to sell its claims against the public authority to the banks in order to finance the project. The public authority will waive its rights to certain or all objections against the payment claim (forfeiting with objection waiver).58

With regard to motorway PPP projects that require a significant investment, generally, a mix of different instruments is used. The federal government finances part of the construction costs as advance payment. The rest of the investment amount has to be financed by equity and bank loans. The loans for these projects are provided by consortiums of banks, which may include private and public banks. The loan agreements between the project company and the consortium address the main risks for the bank consortium.59 During the construction phase, the main risk for the bank consortium is that the project is not realised. Therefore, the loan agreement may include partial loan instalments pursuant to a milestone plan. The bank consortium will also require a sufficient equity ratio to be provided by the sponsors and may require the sponsors to make additional contributions in the case of changes to the project plan or cost structure. In addition, the bank consortium will require that the construction agreement contains sufficiently strict contractual penalties for the contractor to ensure that the project is realised on time.

Recent decisions

During recent years, several municipalities have planned to transfer concessions for the operation of electricity and gas grids 'in-house' to wholly owned and controlled subsidiaries. In two landmark decisions on the award of concessions for electricity and gas grids, the Federal Court of Justice ruled that if a municipality awards a concession, this must be done in a non-discriminatory way and the municipality is prohibited from preferring its own municipal utility without objective reasons.60

With regard to certain types of PPPs, courts hold that the private sector company may itself, because of the influence of the state, qualify as a public authority. The Higher Regional Court in Düsseldorf ruled that even if the state does not hold any shares in a PPP joint venture, the contractual relationships can allow the government to have a dominant influence on the company.61


The year 2019 brought only smaller changes to the PPP market in Germany, especially compared with the significant changes of 2017. New projects are being initiated, which demonstrates a solid basis for continued development in the future. However, the rejection of the claim for additional payment of the Motorway 1 consortium for the completed motorway section between Bremen and Hamburg, in particular, is likely to have an indirect impact on how future major PPP projects in Germany will be funded.

The legal framework for the administration and financing of motorway projects was modified through an amendment to the Federal Constitution in 2017. The implementation of the amendment continues throughout the upcoming year. Although privatisation of the motorways has been excluded, PPP projects in this area could continue to increase, not least because of the debt brake for the federal and state governments where PPP projects could help to fund such major infrastructure projects. Besides PPP projects and investments in the traditional sectors of high-building and transportation, there is potential for future PPP projects, particularly in the IT as well as in the mobility sector.



1 Jan Bonhage is a partner at Hengeler Mueller Partnerschaft von Rechtsanwälten mbB and Marc Roberts is general counsel and head of compliance at Raisin GmbH.

2 Gesetz zur Änderung des Grundgesetzes (Artikel 90, 91c, 104b, 104c, 107, 108, 109a, 114, 125c, 143d, 143e, 143f, 143g), Federal Law Gazette 2017 Part I, No. 47, pp. 2347 et seq.

3 Cf. Transport Infrastructure Financing Company, Financial market report No. 19, August 2019, pp. 5-7:

5 Legislative proposal of the federal government to change the Constitution (Article 90 et al. of the German Federal Constitution), Bundesrat document dated 15 December 2016, No. 769/16.

6 Most notably, the federal government issued a formal instruction to the government of Lower Saxony in 2013 to use a PPP structure for the extension of Motorway 7 between Salzgitter and Göttingen. See

7 The administration of federal roads (Bundesstraßen) remains with the federal states; for an overview to the reform cf.

8 By establishing an infrastructure company for construction and maintenance of motorways (Die Autobahn GmbH des Bundes) on 13 September 2018: cf. With retroactive effect of 1 January 2019, the Transport Infrastructure Financing Company (Verkehrsinfrastrukturfinanzierungsgesellschaft mbH VIFG) was merged with the new infrastructure company. The Federal Ministry of Transport and Digital Infrastructure plans to merge DEGES with this company as well in the course of 2020, cf.

9 For the federal states Hamburg and Schleswig-Holstein, the company took over the planning and construction on 1 January 2020, cf.

10 By establishing the Federal Office for motorways (Fernstraßen-Bundesamt) on 1 October 2018: cf. https:/

23 Higher Regional Court of Celle, judgment of 26 November 2019, Case: 13 U 127/18, see: BeckRS 2019, 29586; District Court of Hannover, judgment of 7 September 2018, Case: 9 O 106/17, see: BeckRS 2018, 21922;

26 Several companies that have participated in the award procedure are reviewing or already preparing lawsuits against the federal government based on the early termination of the procedure, cf.

29 ECJ, opinion of Advocate General of 6 February 2019, Case: C-591/17, Austria vs. Germany, see:

31 See Federal Ministry of Finance, Kompendium zur Schuldenbremse des Bundes, March 2015.

32 See Federal Ministry of Finance, Kompendium zur Schuldenbremse des Bundes, March 2015, p. 21.

33 e.g., Finance Minister of Lower Saxony, In addition, some states have introduced debt brake provisions for their municipalities.

34 See Article 143d (1)(7) Federal Constitution.

35 See Article 143d (1)(4) Federal Constitution.

36 This model is known, generally, as a build–transfer–operate model. In many cases, the public authority will already be the owner of the real estate and does not require the private investor to acquire title. See Jacob/Kochendörfer/Drygalski/Hilbig, 'Ten years of PPP in Germany', Management, Procurement and Law Volume 167, p. 180 et seq.

37 Such a build–operate–transfer contract would include a payment for a term sufficiently long for the investor to amortise its investment plus any profit and risk adjustment. See Jacob/Kochendörfer/Drygalski/Hilbig, 'Ten years of PPP in Germany', Management, Procurement and Law, Volume 167, p. 180 et seq.

38 This model – known in Anglo-Saxon practice as build–operate–own – is discussed in Germany in two subcategories. The difference mainly relates to whether the public authority has an option to acquire the real estate at the end of the term for a fixed price or not. See Jacob/Kochendörfer/Drygalski/Hilbig, 'Ten years of PPP in Germany', Management, Procurement and Law Volume 167, p. 180 et seq.

39 ECJ, judgment of 10 March 2011, Case: C-274/09 Rettungsdienste Stadler, ECLI:EU:C:2011:130, Paragraph 24; ECJ, judgment of 10 September 2009, Case: C-206/08 Eurawasser, ECLI:EU:C:2009:540. See also Section 105 Act against Restraints of Competition (GWB).

40 See Common Guideline of the Federal Cartel Office and Federal Network Agency for the procurement of electricity and gas concessions and to the change of the concession holder in such agreements, dated 21 May 2015, p. 2.

41 For the energy sector, there are provisions on the unbundling of the network operator and the provider of electricity and gas, see Section 6 et seq. German Energy Act (EnWG).

42 The Federal Court of Justice, judgment of 17 December 2013, Case: KZR 65/12, has confirmed this understanding and has obliged municipalities to award concessions in a transparent and non-discriminatory procurement procedure even if they intend to award the concession to an entity under public law fully controlled by the municipality.

43 Cruz/Marques, Infrastructure Public Private Partnerships, 2013, p. 4.

44 For example, the airports of Düsseldorf and Hamburg, see Section I.

46 See for the limits of the emergency competencies of the Minister of Finance for permitting expenses: Constitutional Court of the State of Baden-Württemberg, judgment of 6 October 2011, Case: GR 2/11.

47 Federal Constitutional Court, judgment of 18 January 2012, Case: 2 BvR 133/10. This case related to the transfer of powers for the operation of a facility for the treatment of persons not legally responsible for their criminal acts because of a psychiatric condition.

48 Ibler, in: Maunz/Dürig, GG, 84. Ergänzungslieferung, 2018, Art. 86 Rn. 119; Burgi, Funktionale Privatisierung und Verwaltungshilfe, 1999, p. 209 et seq.

49 Wagner, Zeitschrift für Rechtspolitik, 2000, p. 169; Mühlenkamp, Die Öffentliche Verwaltung, 2008, p. 525.

50 See Directive 2014/23/EU of 26 February 2014 on the Award of Concessions, Official Journal L 94, 28 March 2014, pp. 1–64; Directive 2014/24/EU of 26 February 2014 on Public Procurement, Official Journal L 94, 28 March 2014, pp. 65–242.

51 See Bonhage, in: Meyer-Sparenberg/Jäckle: Beck'sches M&A Handbuch, 2017, Section 83 Vergaberecht, on the legal framework in Germany.

52 The value threshold depends on the type of contract. As of 1 January 2020 the threshold for works contracts is €5.35 million and for service contracts €139,000 or €214,000 depending on the type of the contracting authority. See Commission Delegated Regulation (EU) 2019/1828 of 30 October 2019. Similar provisions exist for other types of contracts. Below the threshold, certain – limited – procurement obligations may apply, see also Ordinance on the Procurement Below Thresholds (Unterschwellenvergabeordnung, UVgO) of 2017.

54 In addition, the government offers a third type of contract that gives the private investor the right to levy an (individual) toll for the use of the relevant road (F-Model). This model has been used for very few bridge and tunnel projects. To date, these projects have been regarded as less successful.

55 Lorson/Haustein/Albrecht/Perlick, Der Betrieb, 2015, pp. 2705, 2711.

56 Higher Regional Court München, judgment of 12 February 2019, Case: 9 U 728/18 Bau, see: Zeitschrift für deutsches und Internationales Bau- und Vergaberecht, 2019, pp. 462-467; previous instance: District Court München I, judgment of 31 January 2018, Case: 11 O 6461/17, see: Neue Zeitschrift für Bau- und Vergaberecht, 2018, pp. 672-681.

57 See Section II, especially the lawsuit concerning the Motorway 1 between Bremen and Hamburg (A-model).

58 Lorson/Haustein/Albrecht/Perlick, Der Betrieb, 2015, pp. 2705, 2707.

59 Baums, Recht der Unternehmensfinanzierung, 2017, Section 67, paragraph 10, et seq.

60 Federal Court of Justice, judgment of 17 December 2013, Cases: KZR 65/12 and KZR 66/12.

61 Higher Regional Court Düsseldorf, decision of 19 June 2013, Case: VII – Verg 55/12.

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