This content is from: Local Insights

Colombia: Proposed Law 285 2017

The magnitude of the December 2016 Odebrecht corruption scandal continues to unfold. The Ruta del Sol, Sector II agreement, one of Colombia's largest toll road projects which was involved in the scandal, has now been terminated by mutual agreement following an order from the Superintendence of Industry and Commerce. Some queries remain unresolved regarding the termination payment under the formula agreed by the parties. In addition to that particular case, lenders now have several concerns as to the consequences of a concession agreement being declared null and void due to kickbacks in the bidding process.

These concerns mainly relate to an insufficient legal framework in which there are conflicts between a special legal provision governing public contracts (article 48 of Law 80, 1993) and a general provision ruling civil relationships (article 1525 of the Civil Code), followed by some inconsistent judicial decisions. This has made apparent the need for a new statute giving lenders (and other stakeholders) certainty as to how and when they will be paid in the event a contract is declared null and void due to bribery issues.

In this context, proposed Law 285 of 2017 addresses some relevant concerns and, inter alia, sets forth that: (i) article 48 of Law 80, 1993 will apply (the special statute takes precedence over the general civil rule) upon a declaration of nullity, or whenever an administrative or judicial authority declares a contract null and void based on an absolute nullity grounds. (This applies only in connection with public-private partnerships subsequent to the enactment of Law 1508, 2012); (ii) when settling the contract, the concessionaire will be compensated for such works that were necessary for the development of the project and benefited the public entity; (iii) the compensation paid to the concessionaire will be validated by the interventor, a judicial assistant or a third-party expert; and, (iv) payments to the concessionaire will be made with the monies deposited in the trust accounts of the project and, if insufficient, in up to five annual installments (which may include an interest rate for deferred payments as defined by the national government), based on budget availability.

While we may be seeing light at the end of the tunnel, the draft bill leaves unresolved questions on a number of different fronts, including: which works will be considered to be necessary for the development of the project and to have benefited the entity?

Carlos Fradique-Méndez
and Natalia Arango Botero

Brigard & Urrutia
Calle 70A # 4 - 41
T: +571 346 20 11
F: +571 310 06 09

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