The Public-Private Partnership Law Review: Germany

Overview

The German public-private partnership (PPP) market has been subject to considerable changes in recent years. The reform of the motorway administration of 20172 that entered into force on 1 January 2021 centralised and harmonised PPP projects for the construction and operation of German motorways. Several new projects in other areas are planned as PPP projects. While the number of new PPPs decreased in the first half of 2020, the European PPP market increased by volume and the volume of the average project more than doubled.3 The volume of investments in particular in rail infrastructure will substantially increase in the new decade, and PPPs will certainly play an important role in urban mobility initiatives as well as in the economic transformation of coal regions following the government's decision to phase out coal-fired plants by 2038.4

The term PPP, which has been used in the German Federal Constitution since 2017 (Article 90(2) and has found its way into several laws,5 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 cities' infrastructure. The German toll collection scheme for the use of motorways by heavy goods vehicles (HGVs) was designed, built and, until recently, 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, Dusseldorf and Hamburg).6 In the context of the covid-19 pandemic, PPPs involved the development and operation of digital infrastructure, most notably the government's coronavirus exposure notification app.7 Similarly, a form of public–private cooperation is the government's large-scale funding of research into and development of a covid-19 vaccine and the rapid scale up of manufacturing capacity in exchange for a reasonable share of the vaccine.8 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

The year 2020 marked a trend towards increased transparency of PPPs at the federal level. The Federal Ministry of Transport and Digital Infrastructure published ongoing PPP contracts for the construction of federal motorways pursuant to the coalition agreement between CDU/CSU and SPD.9 Absent a legislative mandate to publish PPP contracts, the Federal Ministry had to obtain the consent of each contracting partner. The government also published its quadrennial report on ongoing PPP projects to further transparency that also sets out its general policy on PPPs.10

While motorways have been and must remain in the ownership of Germany, the federal states had been responsible for the administration of the motorways and acted as agents of the federal government. Based on these divided responsibilities, the federal and state governments were not always aligned on a potential use of PPP structures for motorway projects.11 Based on the reform of the motorway administration of 2017,12 the revised constitutional provision now allows the centralisation of the administration of motorways at the federal level only,13 starting from 1 January 2021. The federal government therefore established a private law entity in the corporate structure of a limited liability company, Autobahn GmbH des Bundes,14 for the administration of motorways, which can decide – subject to the federal government's consent – to use PPP structures for motorway projects. Since 1 January 2020, the company can conduct the planning and construction of federal motorways with the federal government's and the respective federal state's consent.15 Additionally, the federal government has established a new federal office responsible, inter alia, for the supervision of the sovereign rights transferred to this company.16 A comprehensive or substantial privatisation of the motorways, as well as private shareholders in the newly established federal motorway corporation, however, remain excluded.

In 2015, the federal government initiated a programme for a new generation of PPP projects for 600km of motorways with a total investment amount of €15 billion: €7.5 billion for construction and €7.5 billion for maintenance and operation.17 For now, this new generation programme includes 10 projects for which the government reviews the PPP procurement option.18 The financial close of the PPP motorway project of Motorways 10 and 24 between Neuruppin and Pankow was reached in February 2018 and the project is now under construction, envisaged to be finished in December 2022.19 The project consists of an extension of the motorway by 58.8km and maintenance of 64.2km, with a total volume of approximately €1.4 billion for 30 years until February 2048.20 A consortium of two private companies were awarded the PPP contract in December 2017.21 Further, the public procurement procedure for PPP motorway projects of Motorways 3 between Biebelried and Fürth/Erlangen and 49 between Fritzlar and Ohmtal were concluded in 2020. The Motorway 3 PPP contract was awarded in April 2020, consisting of the operation and maintenance of approximately 76km, including the building of 71km of an additional lane with a total volume of approximately €2.8 billion, for 30 years.22 The Motorway 49 contract was awarded in August 2020 and involves the maintenance of 62km, including the new construction of 31km, with a total volume of approximately €1.4 billion for 30 years.23 The Kallmerode bypass on Federal Route 247 has been under construction since 1 October 2019, with completion expected in February 2022.24 Other motorway projects are in preparation.25 The Federal Ministry of Transport has published several of these PPP contracts with only few redactions of business secrets as well as a sample contract under the availability model (V model) on its website.26

These new generation projects were all designed based on the V model27 rather than the extension model (A model).28 Under the availability model, which has been more frequently used since 2009, the level of remuneration for the private operator depends on the availability of the respective motorway section (rather than, for example, the amount of toll revenue) and thereby sets quality incentives. These models have also been discussed in the context of a legal dispute of the Motorway 1 consortium regarding the completed motorway section between Bremen and Hamburg. Since the revenue from the HGV toll – calculated and agreed as compensation for the project costs – has been far lower than expected, in particular due to the decreased HGV traffic volume during the financial crisis, the consortium claimed additional payment of approximately €778 million in a lawsuit against Germany in 2017, although without success.29 Following the reasoning of the courts of first and second instance, the circumstances did not meet the criteria for the clausula rebus sic stantibus doctrine (see Section 313 of the German Civil Code (BGB)) to adjust the contract, because the risk for the traffic volume had been contractually allocated to the contractor. A respective limitation of such allocation could not be proved in court. According to the courts, this leaves no room for a supplementary interpretation of the contract.30

In 2016, the federal government initiated a public procurement procedure for the operation of the toll collection scheme for HGVs on all federal roads. The government envisaged using a call option on the shares in the current project company. The public tender provided for the acquisition of the shares in the project company by a private investor together with a new contract for the operation of the toll collection scheme for HGVs for a duration of 10 to 15 years. In January 2019, the government terminated the public procurement procedure without any contract award31 and, having used the call option,32 will keep running the project company and toll collection scheme as state-owned.33

The initiative of the federal government to also introduce a toll scheme for the use of motorways by passenger cars has been declared inconsistent with EU law in an infringement procedure promoted by Austria and supported by the Netherlands.34 In the meantime, the European Commission has terminated its own infringement procedure after having reached an agreement with the German Federal Ministry of Transport and Digital Infrastructure on a reasonable pricing scheme for the vignettes.35 In contrast to the HGV toll scheme, the toll for passenger cars was planned to be charged on a time-based basis (10 days, two months or one year). Therefore, the levying of the tolls was envisaged by the public entrustment of another private company. At the end of 2018, the contract for setting up and operating the system was awarded to a German–Austrian consortium for 12 years with an extension option for another three years. The start of the toll levying had been envisaged for October 2020. However, the ECJ found, contrary to the opinion of the Advocate General,36 that the toll scheme constitutes an indirect discrimination on grounds of nationality and infringes the principles of the free movement of goods and services. Since late 2019, a parliamentary investigation committee has been conducting an inquiry into the circumstances of the tender and the signed contracts as well as any potential political responsibilities.

PPPs are also used for the construction and operation of public buildings such as hospitals, schools, administrative buildings, sports facilities and prisons. These types of projects had a total value volume of approximately €118 million in 2018 (down from €242 million in 2017). Contrary to the construction and operation of public buildings, the total value volume of PPP projects for streets increased from €491 million in 2017 to approximately €500 in 2018. On the state and local level, the PPP market differs widely across Germany, with some states such as Hesse having concluded more than 50 PPPs with a total volume of €1.2 billion, and some states such as the states of Hamburg and Saarland having not concluded any PPPs at all.37

General framework

i Types of public-private partnerships

PPP projects may be structured in very different manners in Germany. For the construction of public buildings (such as hospitals, schools or administrative buildings), the public authorities in most cases want to continue to hold the property rights in the real property and only transfer the right to build and operate or manage a building used for public purposes to a private investor.38 From a legal perspective, it is also possible that the private investor acquires title to the real property and either has an obligation to re-transfer the real property to the public authority39 or remains the owner at the end of the fixed term.40

Public authorities may also award concessions to private investors. The main difference between a public contract and a concession is the type of consideration granted to the contractor.41 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 Industry Act (EnWG)), with approximately 20,000 agreements in Germany.42 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)43 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) EnWG).44 Therefore, private sector parties can participate and – with a good offer – be awarded such concessions in a public tender.

In addition, public authorities may establish joint ventures with private partners (sometimes this is called institutional PPP),45 for example, in the corporate structure of a limited liability company.46 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).47 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 district 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 their respective entities. In the case of regional tasks (e.g., hospitals) the contracting authority may be the district. Municipalities may also form special purpose entities fulfilling certain public tasks, in particular in relation to regional traffic, water supply and waste management. In addition, the Federal Audit Office (i.e., federal auditors) and its respective equivalents at the state level scrutinise ongoing and future PPP projects.48

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). State legislation contains similar requirements for state and municipality decisions. This analysis shall also take into consideration the risks of different structuring options 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.49

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.50 For example, the former operator of the German toll collection scheme had been publicly entrusted with certain tasks in connection with levying tolls for the use of federal motorways and federal roads by HGVs (see Section 4(2) Federal Road Toll Act). 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.51 The details are controversial and have been discussed, for example, in connection with PPP projects concerning prisons.52

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 2014,53 and Germany implemented these provisions as of April 2016. The main provisions under German law are implemented in Sections 97 et seq. of the German 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.54

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.55 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 employee 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 of Dusseldorf 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 and operation stages and in some cases the transfer of real property. In these cases, the public authority will 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 is 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 as of 1 July 2018. Further, effective as of 1 January 2019, new weight categories were introduced and lighter HGVs (7.5 tons and more) included in the toll collection scheme.56 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).57

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.58 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 whose sphere it originates. If a property provided by the public authority cannot be used for the project because of (severe) environmental damage, the risk is, under German law, generally allocated to the public authority (see Section 645 BGB). In contrast, if the architect's plan commissioned by the private partner is incorrect and not appropriate for use, this risk is 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 case, for example, in a lawsuit concerning the construction and operation of Motorway 8 between Augsburg and Ulm. The Higher Regional Court of Munich upheld the contested clause allocating the total planning risk to the private partner even though the public authority conducted the reference planning.59

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 PPPs relates to the allocation of risks for the use of a 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),60 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 a public space for advertisement or levy a fee for the use of a parking deck in a 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.

The dispute settlement clauses vary in PPP contracts. Generally, contracts concluded for the construction of federal motorways prescribe mediation before the matter can be filed to the local courts.61 Several PPP contracts of the Federal Ministry of Transport provide for an expert determination for technical issues that becomes binding unless a party submits the dispute to the local court.62 In contrast, the essentially single PPP contract of the Federal Ministry of Defence for the design, construction and operation of military barracks contains an arbitration clause.63

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 would be 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, and 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 property, such an agreement has to be notarised (see Section 311b(1) BGB). The actual transfer of ownership has to be registered in the land 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).

Finance

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 to finance the project. The public authority will waive its rights to certain or all objections against the payment claim (forfeiting with objection waiver).64

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.65 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 the past decade, 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 German 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.66

With regard to certain types of PPPs, courts have held that a private sector company may itself, because of the influence of the state, qualify as a public authority. The Higher Regional Court of Dusseldorf has 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.67

Outlook

The year 2020 brought only small changes to the PPP market in Germany, especially compared with the significant changes of 2017, which became effective in 2020 and 2021. 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 for 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, becoming effective in 2021. The implementation of the amendment continues. Although the privatisation of motorways has been excluded, PPP projects in this area could continue to increase: for example, in 2020, two major motorway PPP contracts were awarded. Besides PPP projects and investments in the traditional sectors of the construction of buildings and transportation, there is potential for future PPP projects, particularly in the infrastructure, IT and mobility sectors.

Footnotes

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

2 German Act for the Amendment of the Federal Constitution (Articles 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.

4 cf. Section 6(4) of the German Act on Investment in Coal Regions of 8 August 2020, Federal Law Gazette, Part I, 2020, p. 1795.

5 cf., e.g., Sections 1(19), (28) of the German Code on Capital Investments.

7 The tracking app was developed by SAP and Deutsche Telekom, with the Deutsche Telekom CEO describing the app development as the 'best public-private partnership he had ever seen during his career': https://www.bundesregierung.de/breg-de/aktuelles/pressekonferenz-zur-vorstellung-der-corona-warn-app-1761058.

8 Federal Ministry of Education of Research, Directive for a Special Programme for the Acceleration of Research and Development of Urgently Needed Vaccines against SARS-CoV-2 of 11 June 2020, Federal Gazette of 18 June 2020, Official Part, B6 (BAnz AT 18 June 2020 B6).

10 Report of the Federal Government on Ongoing PPP Projects, Bundestag document dated 16 December 2020, No. 19/25285.

11 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 http://www.mw.niedersachsen.de/aktuelles/presseinformationen/rechtsgutachten-zu-oepp-a-7-liegt-vor--weisung-trotz-kritik-des-bundesrechnungshofes-rechtlich-unangreifbar--118125.html.

12 Legislative proposal of the federal government to amend the Federal Constitution (Article 90 et seq. of the Constitution (Basic Law)), Bundesrat document dated 15 December 2016, No. 769/16. For an overview in English, see Hartmut Bauer/Michael Meier, 'Green Light for PPP on German Motorways?', Frontiers of Law in China 14 (2019), pp. 311–334, available at http://academic.hep.com.cn/flc/EN/Y2019/V14/I3/311.

13 The administration of federal roads remains with the federal states except for the city states of Bremen, Hamburg und Berlin. In these three city states, the federal motorway corporation is responsible for federal roads. For an overview of the reform cf. https://www.bmvi.de/SharedDocs/DE/Artikel/Stab-IGA/reform-der-bundesfernstrassenverwaltung.html.

14 By establishing an infrastructure company for construction and maintenance of motorways, Autobahn GmbH des Bundes, on 13 September 2018: cf. https://www.autobahn.de/. 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 initially planned to merge DEGES with this company as well in the course of 2020, but the merger has been deferred for the foreseeable future, cf. https://www.bmvi.de/SharedDocs/DE/Artikel/Stab-IGA/reform-der-bundesfernstrassenverwaltung.html.

15 For the federal states of Hamburg and Schleswig-Holstein, the company took over the planning and construction on 1 January 2020, cf. https://nord.autobahn.de/.

16 By establishing the Federal Trunk Road Authority, Fernstraßen-Bundesamt, on 1 October 2018: cf. https://www.fba.bund.de/EN/About-FBA/about_fba_node.html.

18 https://www.bmvi.de/SharedDocs/DE/Artikel/StB/oepp-projekte-der-neuen-generation-liste.html. The expansion of Motorway 4 between Gotha and the Thüringen-Saxony boundary has been abandoned.

30 Higher Regional Court of Celle, judgment of 26 November 2019, case: 13 U 127/18, ECLI:DE:OLGCE:2019:1126.13U127.18.00: see http://www.rechtsprechung.niedersachsen.de/jportal/portal/page/bsndprod?feed=bsnd-r-og&showdoccase=1¶mfromHL=true&doc.id=KORE236052019; Local Court of Hannover, judgment of 7 September 2018, case: 9 O 106/17: see BeckRS 2018, 21922; https://www.lto.de/recht/kanzleien-unternehmen/k/olg-celle-13u127-18-a1-mobil-bund-muss-keine-hoehere-verguetung-zahlen/.

33 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. https://www.capital.de/wirtschaft-politik/scheuer-drohen-weitere-mautklagen.

36 ECJ, opinion of Advocate General of 6 February 2019, case: C-591/17, Austria v. Germany: see http://curia.europa.eu/juris/document/document.jsf?text=&docid=210529&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=3196574.

38 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.

39 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.

40 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 property at the end of the term for a fixed price. See Jacob/Kochendörfer/Drygalski/Hilbig, 'Ten years of PPP in Germany', Management, Procurement and Law, Volume 167, p. 180 et seq.

41 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).

42 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.

43 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 Industry Act (EnWG).

44 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.

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

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

48 'Öffentlich-Private Partnerschaften im Fokus der Rechnungshöfe', in Hartmut Bauer/Marek Szewczyk/Bozena Popowska/Michael Meier/Adrian Fuks (eds.), Publizisierung öffentlicher Aufgaben, Universitätsverlag Potsdam, 2018, pp. 87–106, available at https://publishup.uni-potsdam.de/opus4-ubp/files/40939/kwischr11_S.87-106.pdf.

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

50 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.

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

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

53 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.

54 See Bonhage in Meyer-Sparenberg/Jäckle: Beck'sches M&A Handbuch, 1st edition 2017, Section 83, and 2nd edition 2021, Section 93 Vergaberecht, on the legal framework in Germany, as well as Bonhage/ Terbrack in The Government Procurement Review, 8th edition, 2020, Germany chapter.

55 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 of 2017.

57 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.

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

59 Higher Regional Court Munich, 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: Local Court of Munich I, judgment of 31 January 2018, case: 11 O 6461/17: see Neue Zeitschrift für Bau- und Vergaberecht, 2018, pp. 672–681.

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

61 See https://www.bmvi.de/SharedDocs/DE/Anlage/StB/oepp-systematische-darstellung-projektvertraeglicher-regelungen.pdf?__blob=publicationFile, §§ 56, 64 of the sample clauses. These sample clauses formed the bases of the PPP contract at issue in the Motorway 1 dispute before the Local Court of Hannover and the Higher Regional Court of Celle: Local Court of Hannover, judgment of 7 September 2018, case: 9 O 106/17: see BeckRS 2018, 21922, Paragraph 93.

62 See Section 59 of the PPP contract for the construction of Motorway 3 between Fürth/Erlangen and Nuremberg, available at https://www.bmvi.de/SharedDocs/DE/Artikel/StB/oepp-vertraege.html.

63 Report of the Federal Government on Ongoing PPP Projects, Bundestag document dated 16 December 2020, No. 19/25285.

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

65 Baums, Recht der Unternehmensfinanzierung, 2017, Section 67, Paragraph 10, et seq.

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

67 Higher Regional Court of Dusseldorf, decision of 19 June 2013, case: VII – Verg 55/12.

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