The Legal Problems Of Highway PPP Financing Model And Their Countermeasures In China

As the development of highway is one of the important symbols of measuring the modernization of the national economy, it is very important for the highway to have a stability and sustainable funding source. By the reasonable combination of public welfare of the highway products and its profitability, also satisfying the demand of the public property and the profit of social capital in highway product, the highway PPP financing mode can achieve the double harvest in economic benefits and social benefits. In the course of highway financing in our country, in addition to the expected economic benefit, what the investors pay more attention to is the clear legal norms and the justice of law applicable, which makes the investment prospects anticipatable.In the highway PPP financing mode, the choice of the ideal partner by the way of bidding and tendering has its limitation on flexibility. According to Chinese existing laws and regulations, the highway PPP project partner selection which can only be used is the public tender. It is very difficult for the tender to form the best project which will meet the specific requirements and criteria of the PPP project at the beginning of the tender process. At the same time, it is very difficult for the bidder to finish the final bid documents without modification in accordance with the requirements of the tender. There is no sufficient condition in time and space for the tenderee and the bidder to seek a solution to the complex matter, and the demand for the whole innovation scheme to solve the complex issues has not been satisfied.The highway franchise agreement should be recognized as a public law contract of the administrative contract. There are five different characteristics between the highway franchise agreement and the civil contract in the category of private law, such as the difference in main body, the difference of purpose, the difference of legal status, the difference of content, the difference of procedure, and so on. As a part of the national infrastructure, the highway should be built by the financial investment of state and local finance. The reason for countries to choose the public-private cooperation in building highways, is that the highway construction need huge investment and long construction period. The state and local financial investment alone can not full meet social demand for highway products. When the contradictions in the supply and demand increase, in order to provide more highway products, improve travel conditions for the public, the cooperation between the government and the social capital has been put on the agenda.The "government guarantee" in the franchise agreement of the highway PPP financing mode is different from the guarantee law and other legal provisions. First, the legal guarantee refers to the assumpsit between the creditor and the third people beyond the relationship of the creditor’s rights and obligations. When the debtor does not fulfill their obligations, the third people should fulfill their obligations or liabilities in accordance with the agreement. Second, even in the franchise agreement, the representative of the government is the composition of its departments or its authorized institutions, and the franchise agreement in the government guarantee is still not a legal sense of assurance. Finally, the highway PPP financing model franchise agreement in the "government guarantee" is not accessory contract. In fact, the guarantee of the government in PPP highway franchise agreements, in essence, is the terms of the contract as the rights and obligations of the parties to sign, and the obligations in the franchise agreement agreed to fulfill, not a legal responsibility of liability for guarantee.In the highway PPP financing model, affected by the particularity of government, as one of the contract subjects, and the low legal ranks for the PPP model, the franchise agreement and dispute resolution are still controversial. To emphasize the importance of judicial justice after the legal disputes happening, we chose the experience of California No.91 freeway franchise agreement dispute resolution as a case to study. From the court mediation results of the California 91 freeway, it is very important to respect the original intent of the contract. The court did not favour the government, which was a party to the contract, but made an Impartial judgment according to the contract and intent of the legal norms. The results of judicial application, not only embodies the spirit that the subject of contract is protected by law, but also sends the social capital investors to have certain pre judgment when they perform the contract and legal disputes occur. Those will greatly increase the interest and confidence of investors to invest.In addition, from the legal perspective, we comparative study the PPP financing model with the asset securitization financing model in highway construction. Through the legal analysis on whether involving the government franchise, the government commitment, the controversy in dispute solving mechanism, the legal liability bore by the government in the financing process, the control degree of financing project by the investor, and so on, we found that:first, it is not suitable to choose PPP financing mode for the highway project which is related to the national economy and national security; second, because the social capital is profit driven, there will have a certain negative impact on the highway PPP financing model; third, because of the commitment on the part of the government, it also has negative effects, such as non competitive commitment, in a certain extent, on the detriment of public interest.Finally, aiming at the particularity of the development of highway PPP financing model, with its shortcomings, we put forward relevant suggestions from the perspective of law.As mentioned above, we made a series of legal analysis and research on the highway PPP financing model in our country, and made clear and definite the advantages and disadvantages and its effect from legal perspective. This will make the highway financing process more smooth, and has a very important theoretical and practical significance to the highway construction in our country.