CONSTRUCTION OF THE “PROKOP” RAILWAY STATION BUILDING (2019)
The public invitation for collecting letters of interest for the joint construction of the building of the railway station “Belgrade Center” (Prokop), parking and accompanying commercial contents was announced by the Republic Directorate for the Property of the Republic of Serbia on July 16, 2019, on its website, with the deadline for submission of bids until August 30, 2019. With this invitation, all interested domestic and foreign legal entities were invited to send written offers for the mentioned joint construction. After the construction, the railway station building and the associated parking lot would be the exclusive property of the Republic of Serbia, while the private partner would acquire ownership of all commercial facilities.
Based on the data available only through texts published in the media, but not on the websites of the competent state bodies and institutions (no decision on the selection of a private partner has been published, nor a contract concluded with him), it is clear that the competent state bodies in this case decided to avoid the application of the Law on Public-Private Partnerships and Concessions, as well as the Law on Public Procurement, and to obtain (obviously) a well-known private partner, established only a few months before the announcement of the public call, a call that did not require fulfillment of any concrete and clear conditions for such an expensive and complex project. However, unlike the cases we wrote about earlier and to which special laws were applied that excluded the application of the Law on Public Procurement,[1] in this case the procedure that was applied was completely unknown to the public.
Namely, according to the text of the public invitation, the analysis of received bids was done by a mixed working group formed by the Government of the Republic of Serbia and consisting of representatives of various institutions (Ministry of Finance, Ministry of Construction, Republic Property Directorate, City of Belgrade, State Attorney’s Office, “Railway Infrastructure Of Serbia” and the company for construction of the Belgrade railway junction “Beogradčvor”). As stated in that invitation, after the analysis of the received offers, the competent authorities of the Republic of Serbia were supposed to initiate the appropriate procedure for the selection of the partner for the joint construction of the station building, parking lot and accompanying facilities. It is not stated, however, which “appropriate procedure” should have been initiated, and from everything that followed, it is obvious that they had no specific procedure in mind. Also, the invitation itself did not provide any specific conditions for participation and selection of partners-bidders, but only vague parameters such as “appropriate references, framework business plan for a 10 years period, conceptual design, planned construction financing method, planned construction completion date… ”. The only criterion for the selection of the most favorable bidder was the amount of offered investments and the time of completion of works. Also, the invitation did not contain provisions of any regulation that would serve as the legal basis for its publication.
After the announcement of the public invitation, numerous articles appeared in the media in 2019 stating that the potential partner of the state of Serbia in the construction of Prokop would be the company “Railway City Belgrade”, which was the only one to submit a letter of interest, and that the Serbian Government agreed to start the negotiations with it. In an article published on January 21, 2021 in the daily newspaper Politika it was stated that the construction of the capital’s main station building would begin in the fall of the same year, and that the first phase, which involves the completion of this most important facility on “Prokop”, should be completed by the end of 2022. In the text it was clearly stated that this information was also confirmed by the company “Railway City Belgrade”, which was founded in April 2019 by the Cypriot company “Railway City” LTD with an initial capital contribution of 5,900.20 dinars (cca. Eur 50). In the middle of 2020 the Property Directorate and this company concluded a contract, which was not publicly available and which we also learned about from the media. The private financier of that project is allegedly the company “PSP Farman” from Belgrade, through its “daughter company” – the mentioned company “Railway City”. The project refers to the construction of facilities on the station slab whose total area is close to 75,000 m2, of which the station building accounts for about 5,700 m2.
Given the above, at the time the public invitation was published, the legal basis for conducting this unnamed procedure was not known, and there was also no basis for concluding such an agreement with a private partner: therefore this contract in its current form remains unacceptable for such legal work. The joint construction project, where the state provides land and enables construction on already built facilities and on all plots owned by the Republic of Serbia, and the private partner obtains all the documentation necessary for issuing a construction and use permit and finances the construction of a railway station, parking and commercial facilities, could have been realized exclusively through the procedure of public-private partnership (PPP) in accordance with the Law on Public-Private Partnership and Concessions. According to that law, PPP implies long-term cooperation between the public and private sector in order to provide financing, construction, reconstruction, management or maintenance of infrastructure and other facilities of public importance, or services of public importance. The project proposal of the public body is approved by the Commission for Public-Private Partnership and only after that approval can the procedure of selecting a private partner be initiated, according to the Law on Public Procurement, or according to a special procedure prescribed by the Law on Public-Private Partnership and Concessions (if the project includes concession elements). It is more than obvious that in this case this obligatory procedure was not carried out, so the question arises on what basis the Republic of Serbia concluded the disputed contract with the newly established company, without any special rules and conditions for participation in the procedure.
In its response to public criticism that during the election of a private partner it bypassed the application of the law that regulates it, the Republic Directorate for the Property of Serbia told Portal B92Net that every part of this project is public and transparent and confirmed by relevant decisions of the Government of Serbia. The Property Directorate also referred to several provisions of the Law on Planning and Construction and of the Law on Public Property, trying to justify the reasons why this project is not being implemented through the procedure of selecting a private partner regulated by the Law on Public-Private Partnerships and Concessions. However, one of the provisions of Article 100 of the Law on Planning and Construction, referred to by the Property Directorate, prescribes that the owner of publicly owned construction land (in this case the Republic of Serbia) may conclude a contract with a natural or legal person for joint construction of one or more facilities only for the purpose of realizing a public-private partnership according to the procedure regulated by the Law on Public-Private Partnership. No other provision of that law mentions a joint construction agreement that the owner of publicly owned construction land could conclude with a private partner. On the other hand, Article 15 of the Law on Public Property (to which the Republic Directorate also refers) provides for the possibility of joint investment when it comes to public property, but that investment must be in accordance with the law, and the only legal provision that allows it is the just mentioned Article 100 of the Law on Planning and Construction, which stipulates that this is possible only for the purpose of implementing a public-private partnership project to which the Law on Public-Private Partnership and Concessions applies. Therefore, the selection of a private partner for the purpose of concluding this contract on joint construction must be carried out exclusively by applying the provisions of the Law on Public-Private Partnership and Concessions and the strict, formal procedure regulated by that law.
[1] See the case study “Pojate–Preljina highway” available at https://cpes.org.rs/construction-of-the-section-of-the-pojate-preljina-highway-moravski-koridor-2019/?lang=en