The Act Pertaining to the Establishment of Civil Development Projects of Roads and Transportation Sector through Participation of Banks and Other Financial and Monetary Sources of the Country
Single article- The Ministry of Roads and Transportation has been authorized to assign the provision of financial sources and implementation of civil development plans and projects in Roads and Transportation Sector to company(ies) that are specifically established for this purpose with participation of state banks, companies, institutes and natural persons that according to the article of association and relevant laws are allowed to invest and participate in such activities ; as well as other financial and monetary sources.
In turn, the Ministry of Roads and Transportation is obliged to transfer the utilization benefits of the projects and plans subject of this law to the relevant company until depreciation of the project expenses by maintaining government’s ownership for a certain period which will be passed by the Council of Ministers.
Note 1- Establishment, maintenance and utilization of the projects and plans subject of this law will be exclusively in accordance with the criteria and specification which are determined by the Ministry of Roads and Transportation. The mentioned Ministry will carry out direct supervision on the execution of the aforementioned criteria and specification.
Note 2- The quality of supervision over projects and plans execution, utilization, rental rate of buildings, rating utilization services and the procedure of collection will be in accordance with the regulations of a by-law which will be passed by the Council of Minister within two months from the effective date of this law at the proposals of the Ministry of Roads and Transportation, Ministry of Budget and Planning, Ministry of Economic Affairs and Finance and the Central Bank of the Islamic Republic of Iran.
Note 3- The cost price (including direct and overhead expenses), as well as the execution and maintenance costs of the projects and plans subject of this law will be depreciated maximum within the period of transferring utilization benefits and will be included in the expenditures acceptable by tax assessor of the relevant company in its tax return for the amount which has been confirmed by the selected auditor of the Ministry of Economic Affairs and Finance.
If for force majeure, the projects and plans operations are suspended, the financial sources which had been spent will be compensated by the government.
Note 4-Implementation of above-mentioned plans and projects does not conflict with other duties of the government in the execution of development plans and projects for public benefits and the provisions of this law are exercised in cases when there is another parallel roads or there are other developed roads to serve as an alternative for the users in taking them and/or choose the road with paying the duty [pay toll] amount.
The present law consisting a single article and four para has been passed by the Islamic Legislative Assembly in its Session of Sunday, November 15, 1987 and was enforced by the Guardian Council on October 31, 1987.
Single article-The following text has been added to the Establishment of Civil Development Projects of Roads and Transportation Sector through Participation of Banks and Other Financial and Monetary Sources of the Country, passed on November 15, 1987 as para 5.
Para 5- During utilization of freeways, if the annual revenue earned by utilization services is less than eighty percent (85%) of the annual revenue predicted in the cost- income report appendix to the contract, the difference to eighty five percent (85%), maximum up to twenty five percent (25%) of the anticipated revenue will be paid to the investor from the earning of freeways.
The present law consisting a single article has been passed by the Islamic Legislative Assembly in its Session of Wednesday, February 28, 2001 and was enforced by the Guardian Council on March 7, 2001.
Resolution of the Council of Ministers
In the Name of God
Ministry of Roads and Urban Development - Ministry of Economic Affairs and Finance
State Management and Planning
The Council of Ministers in its session dated April 5, 2015 on the proposal number 45853/100/02 dated November 23, 2014 of the Ministry of the Roads and Urban Development and on the strength of principal one hundred thirty eight of the Islamic Republic of Iran Constitution, passed the By-law on Implementing the Act Pertaining to the Establishment Civil Development Projects of Roads and Transportation Sector through participations of banks, and other financial and monetary Sources of Iran and subsequent amendments as follows:
By-law on Implementing the Act Pertaining to the Establishment of Civil Development Projects of Roads and Transportation Sector through Participations of State Banks, and other Financial and Monetary Sources
Article 1- In the present by-law, the terms carry the following meanings:
- Law: The Law pertaining to the Civil Development of Roads and Transportation Sector through Participation of State Banks and other Financial and Monetary Sources – passed in 1987 and subsequent amendments
- Ministry: Ministry of Roads and Urban Development
- Development plan: A series of operations and specific services that are provided based on technical- economic justification studies within a certain period and by a certain credit to realize the objectives pursued in the State development plans for all branches of transportation in infrastructure, fleet, maintenance and utilization in fixed investment containing the associated unfixed expenditures during the study and implementation. Each civil development plan might consist of several development projects.
- Company party to the contract: A company which is established (as joint venture or transfer) to finance and implement the development plan or project in accordance with the contents of this by-law.
- Financial sources: The cash capital of company’s stockholders, the facilities/credits received from or undertaken by the banks or investment institutes, funds raised by selling the project stocks or selling securities and other financial tools.
- Utilization benefits: To collect the earnings of the entire facilities and services which are resulted through full implementation of the development plan or project in [IR] Rials currency.
- Duration of participation or transfer: The sum of duration of project construction or civil project and the utilization period
- Construction period: The duration of planning, design, land acquiring, implementation, temporary delivery, removing defects and trial utilization commencement.
- Utilization period: The duration of participation or transferring utilization benefits from utilization commencement to full depreciation of the project expenses or clearance with the party to participation
- Memo of understanding: A document which is drawn up by the Ministry and the company investors before the establishment of company and concluding the contract.
- Contract: A contract[agreement] entered into between the Ministry and the company party to the contract (participation or transfer) for financing purposes and implementation of development plan or project
- Participation package: A complex containing projects in transportation sector, auxiliary installations and other profitability plans that have been defined as beyond city territories on the adjacent lands of concerned project and will be included in template of investment agreement of parties to the contract.
Article 2- In exercising the authorities vested through the law in assigning plan or project, the Ministry proceeds and acts as follows:
- First method: Financing, implementing, utilization and transfer
- Second method: Financing, implementing, leasing and transfer
Note- In the contracts that are performed in method “B”, the development plan or project will be put under control of the Ministry in Hire-Purchase term
Article 3- In the contract, the entire duties and authorizations of the project executive and utilizing party, as per the case, will be undertaken and put under responsibility of the party to the contract until [project] full completion.
Article 4- The duties and authorizations of project executive in articles 2 and 3 will be managed and exercised by the executive system exactly according to the duties and authorizations which are carried out in development projects through the development budget funds.
Article 5- On any of the plan and projects included in the participation or transfer plan, regardless of the party which has made the studies- whether it was the Ministry or the party to the contract- following topics must be studied and technical documents and papers shall be approved by the Ministry or its representative:
- Study on creation
- Feasibility studies
- Risk taking studies
- Environmental studies
- Economic justification studies
- Technical studies on first stage
- Technical studies on second stage
- Timing plan, level zero
- Land acquiring plan
- Machineries, facilities and special materials supply plan
- Financial plans including balance sheet of income and expenditure, capital depreciation and investment return, liquidity flow in development and utilization [processes]
- Executive structure
- Utilization system and leveling the service and maintenance
Note- The description of services and template of presetting the studies in this article will be notified based on the instructions approved by the Ministry of Roads and Urban Development.
Article 6- The assessment of earning anticipated by participation shall in minimum contain the information on [IR] Rials assessment of the quantities related to following items during participation period or transfer of utilization benefits based on the growth rate proportion to each title and based on the results of economic justification studies of the plan or project:
- Earning by sale of services
- Earnings by the duties received in the place
- Earrings by using the lands located in the territory of plan or project
- Revenue of auxiliary installations beyond the territory of plan or project
- Revenue of long-term lease of the plan or project to the Ministry
- Revenue of advertisements including advertisement boards
- Revenue of investments in adjacent lands of the plan or project which have been predicted in the participation package, or transfer by following the relevant regulations.
Article 7- The income generating factors, the base price and the growth rate of each factors shall be presented in the economic justification and financing program documents and shall receive the Ministry’s approval by observing the relevant regulations.
Article 8- The contract should be prepared as a single collection including the agreement letter and the relevant appendixes that in minimum contain the below-mentioned items , to serve as criteria of action by the parties to the participation after bearing the signature of legal signatures:
- Agreement based on approved format
- General terms
- Private terms
- Summary of technical and engineering studies which has been performed until concluding participation or transfer contract
- The executive location map of the plan or project
- Certificate of confirming the environmental assessment studies by Environment Protection Organization in projects that are subject of such evaluation in accordance with the law
- Final document on risk-taking studies
- List of the required insurance policies by appointing the beneficiary and introducing the person responsible to receive them
- Balance of Income-expenditure
- Cost estimation as per description in article 5
- The revenue estimation as per description in articles 6 and 7
- The executive organization of design and construction
- Utilization executive organization
- List of binding circulars in design, manufacturing, utilization, rent and transfer
- Other permits and necessary confirmations at the Ministry’s discretion.
Article 9- The participation or transfer applicant(s) present their offers in two forms:
- In case of availability of documents and papers subject of article 8, the offer (form) worksheet is completed and presented by examining them.
- Document and papers subject of article 7 are prepared by the applicant(s) and the worksheet (form) is completed and presented after Ministry’s approval.
Note: In case B and in case of exchanging the participation or transfer contact, the expenses incurred by the participation party in preparing the mentioned documents and papers will be registered as acceptable expenses.
Article 10- The Ministry, after studying and ascertaining the potential of participation or transfer applicant(s) in the development plan or project subject of application will notify the applicants in writing on the Ministry’s principal agreement for concluding participation or transfer contract.
Article 11- The participation or transfer applicant(s) for concluding participation or transfer contract and in acquiring the permit for transferring the benefits and advantages of the utilized party from the development plan or project subject of application, shall take actions for establishing the company within two months from the date of receiving the principal intention.
Article 12- Companies that will be established in executing article 11 will be in joint stock category.
Article 13- The purpose and object of activities of the company’s party to the contract as per the case will be restricted to followings:
- Financing, execution, utilization and transfer
- Financing, implementation, lease and transfer of a plan or a project
Article 14- The duration of the companies’ party to the contact is limited and is a function of construction and utilization period to full depreciation and clearance of the development plan or project expenditures subject of participation or transfer
Article 15- The capital of the company party to the contract shall be equivalent to thirty percent of total assessment stipulated in the technical studies of the development plan or project.
Article 16- The company party to the contract is allowed to while finance the plan or project subject of contract, implement them directly by observing the relevant laws and regulations and/or assign them to relevant manufacturing companies.
Article 17- Companies that are appointed to performing planning, design, supervision, quality management and as such services by participation party in accordance with contents of article 16 shall hold reliable certificate of qualification by relevant authorities which are accepted by the Ministry.
Article 18- any translation in the share of the parties of the contract shall be by getting the write confirmation and acceptance of the ministry.
Article 19- The auditing of the companies party to the contract during participation or transfer will be the duty of the selected auditor, approved by the Ministry of Economic Affairs and Finance.
Article 20- The Ministry will be authorized to conclude contract after receiving the company registration certificate (party to the contract) and receiving the resolution of the Council of Ministers.
Article 21- In all construction and installation operations contracts of development plans and projects subject of the law, the regulations of the contract, general terms of the contract passed by the Second Development Plan Ratification Council, and the ratified subsequent amendments and changes, the circulars and procedures issued during Fifth Development Plan will be used by virtue of article 23 of State Planning and Budget Act , its subsequent addendums and changes as well as the resolutions of the Minister of Roads and Urban Development.
Article 22- The application and exercise of the process mentioned above includes the contract signed by the Ministry and the party to the contract and/or contracts that are concluded by the party to the participation and the developer in implementing the participation or transfer contract for the purpose of establishment, maintenance and improvement [optimization] of the plan or project subject of participation or transfer.
Article 23- In the contract conclusion, the entire authorizations as follows:
- Stipulated in article 6 of the contract under the topic of supervision in execution
- Stipulated in articles 4 and 5 of general terms of the contract under the topic of “supervision body” and “resident supervisors”
- Mentioned in other terms of contract, general terms of the contract and subsequent addendums as specified in article 22 of this by-law on technical supervision, supervision body and resident supervisor will be organized and exercised exclusively by and through the Ministry as the legal substitute and representative of the party to participation [contract].
Article 24- The Ministry has exclusive responsibility and duty in exercising the law on appointing consultant engineers, controlling the supervisory body personnel, approval of the drawings and changes in technical specifications in the framework of laws and regulations.
Note- The expenses in appointing the consultant engineers, controlling supervisory body staff, approval of drawings and repairs in technical specifications will be funded from the development fund credit of the Ministry.
Article 25- In enforcing the law, the entire obligations and authorizations of the employer, subject of clause A and its note in article 28 of the general terms of the contract will be entrusted to and will be the responsibility of the Ministry.
Article 26- On the development plans and projects which are included in the category of the approved development plans, prior to concluding the contract and to acquire the ownership, the Ministry is obliged to fully provide the arrangements in clause A and its note in article 28 of general terms of the contract from development budget fund [credits] to be assured those subjects would cause no delay or stop in executive operations during establishment period for the party to the contract.
Article 27- For the development plans and projects subject of clause B, article 13, the arrangements in clause A and its note stipulated in article 28 of general terms of the contract will be performed through the Ministry in the expense of the company party to the contract. Those expenses will be reflected in the expenditures of the plan or project subject of participation or transfer.
Article 28-The temporary or final delivery of the plans or projects subject of the law will be entrusted to a commission consisting of the representative of the participation contract signatory as appointed by the Ministry, the representative of the company party to the contract, representative of the supervision, contractor’s representative (if it is legally independent from the company party to the contract) and representative of the utilization part (as per the case, Road Maintenance and Transport Organization , Islamic republic of Iran railways, Iran Ports and Maritime Organization, Iranian airports holding company or Deputy of Rural Roads). This commission is a substitute of the commission subject of article 39 on general terms of the contract.
Article 29- During the utilization period, the issues related to the performance and procurement of services which must be provided in order to maintain the entire structures and buildings in initial state according to the drawings and specification of the development plan or project, as named in the temporary delivery minutes and the executive (construction) documents will be classified under the topic of “development plan or project maintenance” and will be considered the duty and responsibility of the company party to the contract. the costs and expenses of performing those affair will be included in the costs and expenses of the development plan or project subject of participation or transfer.
Article 30- During the utilization, the subjects related to re-construction of any operations within the construction period which have been already predicted in the development plan or project will be classified under the topic of “improvement” and shall be under the responsibility and duty of the company party to the contract; the costs and expenses of performing such affairs are included in the costs of the development plans or projects subject of participation or transfer.
Note- Due to possible difference between actual costs of improvement and the amounts predicted in initial financial balance sheet (appendix to the contract), the financial balance sheet shall be modified with the improvement expenses and the report of changes must be signed by the parties to the contract.
Article 31- The party to the contract shall be responsible for administrative- structural organization in collecting the utilization benefits of development plan or project subject of participation or transfer during the utilization period and the costs and expenses of this task will be reflected as a part of development plan or project expenses subject of participation or transfer.
Article 32- After approving the report of defects removal, meeting the formalities of temporary delivery and issuance of trial utilization permit, the company party to the contract will be allowed to start utilizing the benefits of the plan or project subject of participation or transfer.
Note- Issuance of trial utilization permit is the duty of commission subject of article 28.
Article 33- On the subject of putting the auxiliary buildings of the development plan or project under possession of a third person through lease contract, the rental must not be less than the rental rate which is determined by the Ministry. In execution of this order, the Ministry shall observe the rental rate of similar buildings through inquiry one month before commencement of quarterly period of utilization, prepare the table of minimum rental rate of the buildings of development plan or project by practicing twenty percent reduction coefficient and notify it to the company party to the contract.
Article 34- The Ministry will set and specify the rate of utilization services through executing the development plan or project which have been determined based on articles 6 and 7 and has been used as the basis in estimating the anticipated income of participation in the income-expenses studies of the development plan or project as well as the duration of transferring the benefits and any changes in that respect.
Note- The duties of vehicles traffic in freeways and other charges receivable from the plans and projects in category of participation or transfer, subject of this law and by-law, will be implemented and received by the approval of the Minister of Roads and Urban Development, notification of the Ministry based on articles7 and 8, as well as by observing the relevant laws and regulations.
Article 35- In collecting the [IR] Rials currency revenue of development plan or project execution services, the company, party to the contract shall follow the rates to be determined as per article 34 precisely.
Article 36- The company party to the contract shall prepare the procedure of receiving the Rials currency income of development plan or project service execution in after concluding the contract and within six months prior to commencement of utilization period.
Article 37- Study, adjustment, final development and approving the collection procedures fall under the authority of a commission, consisting of the delegates of the Ministry of Roads and Urban Development, Ministry of Economic Affairs and Finance; and State Management and Planning Organization, per case and is hosted by the Ministry.
Article 38- The commission in article 37 shall determine and approve the executive procedures and arrangement for collecting the revenue of services earned from development plan or project subject of study, within three months from its establishment date.
Article 39- The executive method in the collection procedures as approved by the commission of article 37 will be binding for both parties and must be carefully followed by and supervised in the matter of collecting Rials currency earnings of services subject of executing the development plan or projects.
Article 40- The commission in article 37 has exclusive authorization in making any changes or modification of executive procedures in collecting Rials currency revenues.
Article 41- In utilizing the development plans or project, the company party to the contract shall carefully follow the standards, instructions and regulations published by the Ministry in utilizing the plan or project; and/or those directly notified to the company party to the contract.
Note 1- The Company as the party to the contract shall observe the technical standards and contents of the instruction and regulations issued by the Ministry in securing the level of service provisions based on the appendixes to the contract.
Note 2- In case of assigning the plan or project based on clauses A and B in article 2, the company, party to the contract will be responsible for compensating damages to natural persons or legal entities caused by its negligence in observing the contents of note 1 of this article.
Article 42- In case of accidents during utilization process, the company, party to the contract in the course of utilization will be obliged to provide the first aid services and vehicles for transferring the injured and the wounded to the first clinic that has been supplied by the party to the contract, proportion to the demands of the development plan or project; and provide those services to the development plan or project subject of participation as well as the victims free of charge.
Article 43- To facilitate supervision during utilization period, the Ministry should prepare a minimum supervision plan for current practice as well as a plan on the utilization method per case for each development plan or project and notify it to the company party to the contract one month before utilization commencement.
Article 44- The company, party to the contract is obliged to procure necessary facilities for good performance of current and scheduled supervision plans of the Ministry in supervising the performance of utilization party.
Article 45- The company party to the contract is obliged to remit five percent of the utilization benefits of implementing the development plan or project (gross income) at the end of company to a specific account which will be opened by the Ministry for this purpose at the treasury office to serve as the utilization performance guaranty for the next year.
Article 46- The company party to the contract is obliged to calculate the utilization obligation performance guaranty of the first year of utilization by calculating five percent coefficient based on the revenue of first year as included in the income-expenses reports of the development plan or project and remit that amount to the account mentioned in article 45 upon signing the minutes of temporary delivery. The bank receipt will be appendix to the temporary delivery minutes.
Article 47- If the company party to the contract shows negligence in fulfilling the obligations it has undertaken for utilization period according to the contract and/or act in a way that causes damages to the development plan or project subject of participation or transfer and/or cause disorders or security issues in the utilization practice, the Ministry will send a written notice and after fifteen days from expiry date in the warning , it [the Ministry] will perform those obligations in any manner it deems necessary and will deduct its cost plus fifteen percent damage compensation from the utilization performance securities of the party to the contract, subject of article 45. The Ministry shall notify the invoice of expenses imposed to it within one month after the occurrence of those expenditures.
Article 48- If due to the negligence of the party to the contract, the establishment period exceeds the deadline in the contract, not only no interest will be accounted for the party to the contract’s capital, but also, the interest of the Ministry’s capital will be calculated (equal to the interest rate which has been passed for the party to the contract) and will be deducted from the profit of the party to the contract as damage to the government. If due to the above-mentioned delays and/or withdrawal of the party to the contract, the project is stopped, no interest will be calculated for the party to the contract from the suspension date of operations and the Ministry will be authorized to limit the contract and assign the project completion to other investment applicants. In such cases, after the completion of the project, it will be put under control of the new investor for his capital return and profit and after full return of capital, the project will be delivered to the initial investor for due utilization.
Article 49- If the costs of the plan are not depreciated in expiry date of transferring the utilization benefit, the duration of transferring utilization benefit will be increased until full depreciation of project expenses.
Note- At the request of the company party to the contract and upon agreement of the Minister of Roads and Urban Development, the Ministry will be entrusted with utilizing projects in the same manner as practiced in the cases when the expenses have not been depreciated and an amount equivalent to un depreciated expenses will be paid to the party to the contract from the reviews of plans or projects and/or other sources related to the Ministry of Roads and Urban Development through drawing up and exchanging appendix to the contract.
Article 50- The auditor appointed by the Ministry of Economic Affairs and Finance will be the authority in recognizing full depreciation of the development plan or projects expenses subject of participation or transfer.
Article 51- After full depreciation of the expenses development projects or plans, subject of participation or transfer, the object of contract will be terminated and the Ministry will be obliged to transfer utilization of services resulted from development plan or projects subject of participation or transfer directly.
Article 52- In organizing the party to participation, the Ministry will be allowed to take measures in performing the standards and obligation related to the establishment of [participation] public joint stock companies by applicants, after receiving permit of the Council of Ministers in each case.
Article 53- For the purpose of lowering the investment risk taking and encourage investors to participate, the Ministry will be authorized to take compensative measures during or after termination of participation or transfer period as specified in the contract for the remedy of absence of capital return, based on the contents of contract.
Article 54- For each one of the transportation alternatives, the Ministry will open a centralized account before treasury to take action for receiving accessibility right and taking action to pay the installments in principal and profit depreciation of the capital of the companies party to the contract, the utilization expenses, maintenance, development, remedy and probable actions in article 53, by considering the priorities; and/or to require the companies party to the contract to keep the accounts during establishment and utilization in accordance with accounting standards and a uniform procedure and format which is delivered to them by the Ministry; and, to submit their interim, six-month and annual financial and audited statements to the Ministry within two months from expiry of fiscal period.
Article 55- Companies party to the contract are not allowed to perform transactions and registry items irrelevant to the scope of object of company (establishment and utilization of the plan or project subject of participation or transfer contract) during the period of contract. It is prohibited to use the funds and credits of the company for other consumption rather than establishment, maintenance and utilization of the plan or project.
Article 56- For the purpose of proper management of changes in contents of contract and solve disputes (if any) in interpreting the contents of the contract (agreement and all its appendixes), the object of arbitration and its performance will be reflected in the contract.
Article 57- For the information of beneficiaries on the process of contract, the Ministry is obliged to prepare and release annual report on the project or plan function.
Article 58- The contract is an integrated collection articulated by independent parts and arrival into any stage requires the confidence and documentation of fulfillment of previous stage. To guaranty the fulfillment of the agreements, specific damage compensation must be defined per part, section and for each party to the contract and the collection manner of compensation must be specified in the contract as well.
Article 59- This by-law replaces the executive by-law on the Act, pertaining to the Implementation of Civil Development Projects of Roads and Transportation Sector through Participation of Banks and other State Monetary and Financial Institutes, subject of resolution number H92T/4506 dated May 14, 1988 and its subsequent amendments.
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