Government Investment and Financing Legal Observation (III). The exercise of the right of the government party to terminate the PPP contract -- take a government franchise agreement as an example.

In October 2007, a solid waste company and the Jinan Environmental Protection Bureau signed the "Jinan City Medical Waste Centralized Disposal Project Franchise Agreement", and obtained the exclusive franchise for the centralized disposal of all medical waste in Jinan, with a concession period of 25 years. Due to the continuous increase in the amount of medical waste treatment, a solid waste company proposed in 2014 to designate the southeast corner of the Jinan Municipal Domestic Waste Treatment Center as a new site, and the Jinan Environmental Protection Bureau required it to build a new centralized disposal facility in the first half of 2015. Put into use. However, in the process of specific site selection of the project, due to the non-cooperation of nearby villagers, the environmental impact assessment of the project cannot be completed and the follow-up cannot be promoted. On August 10, 2015, the Municipal Environmental Protection Bureau issued a preparatory notice, pointing out that a solid waste company was facing the problem that the hazardous waste business license and the temporary fixed-point planning of the existing disposal site were about to expire, and required the company to take substantive measures, otherwise it would terminate the franchise agreement. On September 11, 2015, the Jinan municipal government agreed to terminate the franchise agreement of a solid waste company in accordance with the procedure in the form of minutes of the meeting. On September 15, 2015, the Environmental Protection Bureau issued a notice to a solid waste company to terminate the franchise agreement.

A solid waste company refused to accept, successively filed administrative reconsideration and administrative litigation, requesting the cancellation of the notice of termination of the franchise agreement, and the municipal government and the Municipal Environmental Protection Bureau to compensate for the corresponding losses.

The first-instance judgment of the Jinan Intermediate People's Court: the 1. rejected the plaintiff's request to revoke the defendant's Municipal Environmental Protection Bureau's ''Notice'' for the recovery of the franchise; the 2. defendant's Municipal Environmental Protection Bureau will withdraw the franchise within 30 days from the effective date of this judgment. The right to make a compensation decision for the losses caused to the plaintiff; the 3. rejected the plaintiff's other claims. After the second instance of the Shandong Provincial Higher People's Court and the retrial of the Supreme People's Court, the first instance judgment was upheld.

Judging from the content stated in the judgment document of the case, the Jinan medical waste centralized disposal project has inherent problems such as "temporary land" and "site selection" from the beginning. The construction land of the centralized disposal site for medical waste involved in the case is "temporary land", and the problem of construction land for the project has not been properly solved until the incident, and a solid waste company has repeatedly written to the environmental protection department on this issue. finally, it will be "temporarily solved" by extending the temporary transition period of land use twice ". Regarding the location of the permanent land for the project, the Jinan City Planning Bureau and other departments agreed to the new site proposed by a solid waste company. However, in the specific site selection process, the villagers in the surrounding villages did not cooperate, resulting in the project environmental impact assessment The work cannot be completed and the follow-up cannot be promoted. A solid waste company has written to the Environmental Protection Bureau several times, requesting to be coordinated and resolved. Due to the inability to complete a series of project construction procedures such as environmental assessment and site selection, the Environmental Protection Bureau terminated the franchise agreement on the grounds that "the hazardous waste business license and the temporary fixed-point planning of existing disposal sites expire.

PPP projects are mainly applicable to infrastructure, public utilities and public services, and are closely related to the public interest, and the construction and operation process of the project is highly concerned by the public. Especially for public utility projects such as garbage treatment, sewage treatment, waste disposal, incineration and power generation, the acceptance and cooperation of the surrounding public to the project directly affects the smooth development of the project. This requires that the development of PPP projects must do a good job in preliminary planning and site selection, obtain project land in accordance with the law, and reserve space for long-term project bidding and expansion, and at the same time do a good job in information disclosure, communication, and benefit compensation to avoid project construction Public resistance in the process ensures the continuous and stable development of the project within the entire life cycle of more than ten years.

At the same time, in the project contract, it is clearly agreed to handle the project construction procedures, deal with the public boycott of the responsibility of the main body and risk sharing, to avoid the actual occurrence of the later, but also for the occurrence of disputes to define the responsibilities of the parties to pre-set the corresponding contract basis.

The legal nature of PPP project contract is still inconclusive in the theoretical circle, mainly the nature of private law (general civil and commercial contracts), the nature of public law (administrative agreements) and the mixed nature of public and private (both civil and commercial contracts and administrative agreements). However, no matter how it is characterized, the nature of its "agreement" cannot be denied. Once the agreement is signed, it cannot be changed and terminated at will without legal reasons or legal procedures.

After the PPP contract comes into effect, the project contract can be terminated based on the express breach of contract, the achievement of termination conditions, force majeure, serious breach of contract and other reasons stipulated in the Contract Law, and both parties can exercise the right of termination. However, PPP contract is not an ordinary civil contract formed entirely on the basis of private law autonomy, because one party is the administrative organ, the contract involves the administrative authority of the administrative organ, the purpose of the contract is for the public interest and other factors, PPP contract termination is different from the general civil and commercial contract. The second paragraph of Article 105 of the "Administrative Procedure Regulations of Shandong Province" stipulates: "In the course of the performance of an administrative contract, if a major situation that seriously damages the national interest or the public interest occurs, the administrative agency has the right to modify or terminate the contract". Therefore, compared with the general civil and commercial contract, the termination of PPP contract has a certain particularity, the government in order to protect the public interest in the specific circumstances of the right to unilaterally terminate the PPP contract.

According to the decision of the people's court in the above-mentioned case, the judgment of the government party to unilaterally terminate the PPP contract should be considered from the following three aspects:

1, the main body, whether there is a unilateral release of the "authority"

In the above-mentioned case, the court found that according to the franchise agreement involved in the case, the municipal government is the authorized subject of the Jinan medical waste centralized disposal franchise, and the Municipal Environmental Protection Bureau has been authorized by the municipal government to sign an agreement on behalf of the municipal government, grant the franchise, and have the right to terminate the agreement and receive the franchise. Therefore, the Municipal Environmental Protection Bureau has the authority to grant and recover the franchise in accordance with the law. Moreover, the decision of the Municipal Environmental Protection Bureau to withdraw the franchise has been approved by the municipal government, and its authority and responsibilities have been confirmed by the municipal government.

Therefore, the government party to terminate the PPP contract subject needs to have the subject qualification stipulated in the contract, that is, "in accordance with the contract" has the period of termination of the contract.

2, the entity, whether to meet the unilateral release of the "conditions"

In the above-mentioned case, the people's court determined that the new project could not pass the environmental impact assessment due to the non-cooperation of the villagers near the site selection, and that a solid waste company could not fulfill the obligations of rebuilding, expanding and rebuilding the facilities, equipment and pollution prevention facilities for centralized disposal of medical waste as agreed in the agreement. As the centralized disposal of medical waste involves social and public interests, after the temporary fixed-point planning of the existing disposal site expires, it is unable to build new centralized disposal facilities, unable to perform the obligation of centralized disposal of medical waste stipulated in the Agreement, endangering the social and public interests, resulting in the failure to realize the purpose of the contract. According to the relevant provisions of the the People's Republic of China Contract Law and the Administrative Procedure Regulations of Shandong Province, "During the performance of administrative contracts, there are major circumstances that seriously damage the national or public interests, the administrative organ has the right to change or terminate the contract", and the conditions for the recovery of the franchise have been fulfilled.

It can be seen that the government needs to unilaterally terminate the contract in accordance with the law due to the public interest, and the following two conditions must be met: first, the contract has a clear agreement on the relevant obligations.

3. Procedurally, whether the "procedure" for unilateral termination is carried out in accordance with the law"

According to the provisions of Article 51 of the Measures for the Administration of Franchising of Infrastructure and Public Utilities, if a franchisee considers that a specific administrative act made by an administrative organ infringes upon its legitimate rights and interests, it shall have the right to state and defend itself, and may file an administrative reconsideration or administrative lawsuit in accordance with the law. In the above case, before taking back the franchise right, the Municipal Environmental Protection Bureau has served a preliminary notice of termination to a solid waste company, requiring it to submit a written reply and take substantive measures, which should be regarded as a protection of its right to know and statement. Accordingly, it is not improper to find that the procedure for making the alleged act was lawful.

Therefore, when the government unilaterally terminates the PPP project contract, it should give the social capital party the right to state and defend itself, fulfill the necessary obligation to inform, and avoid constituting a procedural violation. In addition, according to Article 38 of the measures for the Administration of Infrastructure and Public Utilities Franchise: "during the franchise period, due to serious breach of contract or force majeure by one party to the franchise agreement, the franchisee is unable to continue to perform the obligations agreed in the agreement, or if there is an early termination of the agreement as agreed in the franchise agreement, the agreement may be terminated in advance after consultation with the creditors." Although the court in the above-mentioned case did not support the solid waste company's claim that the Environmental Protection Bureau did not reach an agreement with its creditors on the grounds that a solid waste company did not provide evidence, we believe that "consensus with creditors" is one of the procedures that the government should perform unilaterally to terminate the PPP contract. On the one hand, it is because the "Infrastructure and Public Utilities Franchise Management Measures" has clear provisions on this, on the other hand, almost all require a large amount of financing, after the termination of the contract need to properly project follow-up funding needs, creditor interests protection and other issues.

Article 3 of the measures for the Administration of Infrastructure and Public Utilities franchising stipulates: "the term" infrastructure and public utilities franchising "as mentioned in these measures refers to the fact that the government authorizes legal persons or other organizations the People's Republic of China at home and abroad by means of competition in accordance with the law, clarify their rights and obligations and risk sharing through agreements, and stipulate that they will invest in the construction and operation of infrastructure and public utilities within a certain period and scope and obtain profits. Provide public goods or public services." The "Agreement" involved in the case is an agreement between the Municipal Environmental Protection Bureau and a solid waste company on the franchise of the centralized disposal project of medical waste. It has the content of rights and obligations in administrative law. It is an administrative agreement and is subject to the adjustment of this method. Article 14 of the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Administrative Litigation Law" stipulates: "The people's court examines whether the administrative agency has performed in accordance with the law, performed the agreement in accordance with the agreement, or unilaterally changed or terminated the agreement is legal. While applying administrative laws and regulations, civil laws and regulations that do not violate the mandatory provisions of the Administrative Law and the Administrative Litigation Law may be applied." The the People's Republic of China Contract Law, as a civil legal norm for regulating contractual relations, can be applied by reference to administrative agreements. Article 8 of this Law stipulates that contracts established in accordance with the law shall be protected by law. The people's court determined that the meaning of the "Agreement" involved in the case was true and did not violate the prohibitive provisions of laws and administrative regulations. It should be determined to be legal and valid, and both parties should perform corresponding obligations in accordance with the agreement.

Based on this, although the PPP contract has public law factors, even if the dispute over the right of rescission is resolved through administrative litigation, the realization of the purpose of the contract mainly stems from the "agreement" between the parties, and the civil and commercial legal norms such as contract law and the general principles of civil law can still be applied.

The above-mentioned case as a government franchise agreement dispute, through the way of administrative litigation, the reason is that China's administrative procedure law on the government franchise agreement dispute resolution way has clear provisions. According to Article 12 of the new Administrative Litigation Law revised in November 2014 and Article 11 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Administrative Litigation Law implemented on May 1, 2015, disputes over government franchise agreements fall within the scope of administrative litigation.

Before the above-mentioned new Administrative Litigation Law, the franchise agreement to whether a civil and commercial dispute or an administrative dispute is still inconclusive, judicial practice is also inconsistent, some as a civil and commercial dispute submitted to arbitration, some government parties take the initiative to propose is a civil lawsuit. The new Administrative Procedure Law and the judicial interpretation have solved this problem, making it clear that the franchise agreement dispute belongs to the administrative agreement dispute, and the administrative lawsuit should be brought.

Accordingly, if the franchise part of the PPP project is separate from the other parts and is a separate franchise agreement, the dispute over the separate franchise agreement should be submitted to administrative proceedings.

In the case of Hong Kong Stall Industrial (Group) Co., Ltd. suing Taizhou Municipal People's government for investment promotion agreement ((2017) Supreme Law Bank No. 99), the Supreme People's court held that "civil agreement and administrative agreement, civil litigation and administrative litigation generally only have the function of legal division of labor and jurisdiction guidance. The trial of administrative agreement cases should not only apply administrative legal norms, but also apply civil legal norms that do not violate the mandatory provisions of administrative law and administrative procedure law. In practice, civil agreements may be referred to the administrative tribunal, and administrative agreements may also be referred to the civil tribunal. To distinguish between civil agreements and administrative agreements, civil litigation and administrative litigation, more consideration should be given to the convenience of trial, the effectiveness of dispute resolution, the authority of judgment results, and the consistency of judgment standards between higher and lower courts. Litigation is more conducive to the supervision of administrative power and the maintenance of public interests."

Based on the public interest and agreement of PPP contract, the agreement on civil rights and obligations and the agreement on administrative rights and obligations are often intertwined and difficult to completely separate. The content of PPP contracts often involves construction, finance, land and other administrative management fields, and a number of administrative management functions. To review PPP contracts, it is necessary to consider whether it is true voluntary and consensus between the parties, and it should also consider administration. Specific legal regulations in the field, the binding force of the agreement on local governments and their functional departments, and the application of the principle of relativity of contracts. Compared with the civil procedure, the administrative procedure is more conducive to a comprehensive review of the legality and contract of the provisions of the administrative legal norms in the agreement. If social capital, as the plaintiff, has the right to choose in accordance with the law on issues such as the claim, the type of action and the subject matter of the action, it has the right to sue for all or part of the PPP contract. If the dispute does not involve the content of the government franchise, it is not necessary to choose to resolve the dispute through civil litigation. Moreover, if the remedy of civil litigation is excluded, when the social capital party defaults, the government cannot claim rights through civil litigation, and it is not conducive to the government's protection of rights and interests in accordance with the law.

In the above-mentioned case, a solid waste company applied for an order to compensate for its losses. Because the accused administrative act was not confirmed to be illegal, the request for administrative compensation lacked a basis and the people's court did not support it. However, the court found that from the perspective of the rationality and legitimacy of the administrative act, if the accused administrative act does cause actual losses to a solid waste company, it should be compensated accordingly, and the Municipal Environmental Protection Bureau ruled that the act of recovering the franchise right should be a solid waste. The company made a compensation decision for the losses caused.

The Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Administrative Litigation Law stipulates in the third paragraph of Article 15: "If the defendant unilaterally changes or terminates the agreement due to public interest or other legal reasons, causing losses to the plaintiff, the defendant shall be judged to compensate." Article 38 of the Measures for the Administration of Franchising of Infrastructure and Public Utilities stipulates that if the franchise agreement is terminated early, the government shall take back the franchise project and give the original franchisee corresponding compensation according to the actual situation and the agreement. Therefore, when the government unilaterally exercises the right to terminate the PPP contract, it should comprehensively consider the actual situation of the project and give the social capital party corresponding compensation from the rationality of the government's behavior. Accordingly, the PPP contract is reminded to make a clear agreement on compensation for early termination of the contract under various circumstances, which will not only serve as the basis for compensation when the government unilaterally terminates the contract in the future, but also provide a clear operational basis for specific compensation standards and methods.