Sector:

Transport; rapid bus transport system

Name of Agreement:

Concession contract for the Operation of the Feeder Bus Lines for the Transmilenio System No. 061/2000.

Type of Agreement:

Concession contract

Region (if known):

South America

Year of Agreement/ Draft:

2000

Principal Author(s) (firm and contact person):

Empresa de Transporte del Tercer Milenio (Transmilenio S.A.)

http://www.transmilenio.gov.co

Annotated by:

Omar A. Martínez (Spanish); Sara Sigrist (English)

Circumstances where this contract may be appropriate:

The sample contract in this website is the template used as part of the bidding documents for the Feeder Bus Line System of Transmilenio System’s Phase I. The version of the contract that was actually signed contains slight modifications in Clauses 33, 34 and 35, indicated as part of the annotations to the sample contract. 

The Transmilenio system is comprised of dedicated lanes for the exclusive use of the system’s buses, with boarding stations along the length of the lanes. Passengers may access the system directly or through a feeder bus system, which operates in routes that are not necessarily exclusive of the system but also shared with the general public.

Other important attributes of the system is a collection mechanism for the sale of tickets (also accomplished through a concessionaire arrangement) and a trust fund through which the funds generated by the collection mechanism are distributed among Transmilenio S.A. and the various concessionaires of the system, in accordance with each of their respective concession contracts.

Transmilenio S.A. distributes the licenses or concession for the operation of the system and the collections mechanism. Transmilenio S.A. is a public entity with shares that coordinates the entire system and is in charge of is management, organization and planning.

Phase II of the Transmilenio system was developed two years after Phase I, with a pro forma contract slightly different than this one but which also maintains the same legal structure and components of Phase I. Phase III is currently under development. It is expected that the Transmilenio system will be the main axis of an integrated multi-modal transportation system, which may also include a metro train system.

Circumstances where this contract may be appropriate:

This contract is appropriate for public-private partnerships for mass transport bus systems with the use of exclusive main lanes and infrastructure and shared feeder routes. (Rapid bus transit system).

The feeder bus line system presented and analyzed here is only part of the system. The operation of the main and exclusive lines has also been assigned through concessions, whose contracts are analyzed separately here.

Drafted for common law/ civil law jurisdiction:

Civil Law

Main Features:

Objective: the objective of this contract is to select a company to offer public automotive terrestrial mass transport service in the city of Bogota and its suburbs, specifically in the area surrounding “Cabecera Calle 80” of the Transmilenio System, through a fleet of 65 vehicles.

Compensation of the Licensee:The Licensee receives as compensation the fee per passenger indicated as part of its proposal or bid.  This fee may increase in accordance with the established schedules for collective bus service in the city of Bogota.  The tariff changes will take effect the month following the announcement of increases to the collective bus service schedules.

Term:  four (4) years.

Possible additional provisions that it might be appropriate to include:

Clause 20, concerning income and economic aspects of the contract, does not directly address these issues but rather refers to the Economic Framework of the System found in Chapter 3, Volume 2 of the Terms of Reference for the Feeder Bus system (Capítulo 3 del Volumen 2 de los Términos de Referencia para el Sistema de Alimentación (Licitación 003 de 2000).  It would be more effective if all of the “economic aspects” of the operation and enforcement of the agreement were included in this agreement so that the Terms of Reference include only the rules for presenting bids and selecting the Licensee.

Provisions that may not be advisable to replicate/ may need further thought:

The heading of “Considerations” refers to the procurement process in Colombia. This entire section may be removed or adapted to local law.

It may be useful to further develop Clause 7 (Normal Operation Stage) to define the minimum time elapsed between notice by the Licensor and the time when the Licensee must begin normal operation. Further, it would be advisable to define the maximum time that the Licensor has to give notice to begin normal operations.

Clause 26 (Penalties) could specify the maximum amount of penalties per week and or maximum amount of penalties in total before an event of default takes place.

Clause 27 (Liquidation and Payment of Penalties) could require revision and adaptation because some jurisdictions do not allow a party to declare default without a judicial decree (a civil law concept known as “pacto comisorio” or” lex comisoria”).

In Clause 35 (Insurance of Vehicles) it is essential to define precisely the scope of insurance required by this policy in particular, so as not to overlap, since Clause 33 includes coverage for liability derived from contracts or torts from the provision of transport services.

It is recommended that Clause 51 (Mediation and Arbitration) be revised in accordance to the local jurisdiction to define the composition of the arbitration panel, how members of such panel would be selected, the place of the arbitration and what rules would govern the arbitration procedures. Another option is to substitute this clause for the standard language of arbitration under ICSID, UNCITRAL or ICC.

The following clauses should be adapted to the local jurisdiction since they deal with Colombian law or circumstances particular to the city of Bogota, which may not necessarily be the same in other places:

• Clause 2 (Nature of the Contract). Should be adapted to reflect the law of the respective country.
• Clause 8 (Currency). Should be adapted to reflect the law of the respective country.
• Clause 11 (Tax Framework) Should be adapted to reflect the law of the respective country. 
• Clause 12 (Legal Framework). Should be adapted to reflect the law of the respective country. 
• Clause 13 (Responsibilities of the Licensee). Some headings should be adapted to reflect the law of the respective country (see particular examples in the annotations of the sample form contract).
• Clause 23 (Force Majeure and Impossibility). Should be adapted to reflect the law of the respective country.
• Clause 28 (Penalties). Should be adapted to reflect the law of the respective country.
• Clause 33 (Contractual and Tort Damages). Should be adapted to reflect the law of the respective country.
• Clause 36 (Early Termination) Should be adapted to reflect the law of the respective country.
• Clause 42 (Procedures for Early Termination). Some headings should be adapted to reflect the law of the respective country or deleted (see particular examples in the annotations of the sample form contract).
• Clause 43 (Liquidation by Mutual Agreement). Some headings should be adapted to reflect the law of the respective country or deleted (see particular examples in the annotations of the sample form contract).
• Clause 45 (Unilateral Termination). Should be adapted to reflect the law of the respective country or deleted.
• Clause 46 (Unilateral Changes). Should be adapted to reflect the law of the respective country or deleted.
• Clause 47 (Unilateral Interpretation). Should be adapted to reflect the law of the respective country or deleted.
• Clause 48 (Termination of the Contract). Should be adapted to reflect the law of the respective country or deleted.
• Clause 49 (Subject to Colombian Law and Renouncement of Diplomatic Privilege). Should be adapted to reflect the law of the respective country.
• Clause 52 (“Amigable Componedor”). The equivalent of Conflict Resolution. Should be adapted to reflect the law of the respective country
• Clause 55 (Inability and Incompatibility). Should be adapted to reflect the law of the respective country

Provisions of wider general use:

In Chapter 8 (Clauses 21 et al.), the contract describes the risk allocation of the deal.  These clauses on risk allocation can be very useful in the interpretation of the contract, once it is implemented in practice. It is an interesting way to describe the deal in very clear, black and white terms.  Nonetheless, it is important to ensure consistency amongst this clause and all others in the contract so that there is no conflict between this general clause and those outlining specific obligations.

Clause 41 requires continuity of services even in case of early termination of the contract. It is important to include this kind of clauses to protect the interest of end-users.

Experience Since Coming Into Force (including any amendments)/ if draft form, whether it has been applied:

This particular agreement was due to end on 2004. No modifications were made to the terms of this template once signed. This template, however, was slightly modified in Clauses 33-35 prior to signature. The Transmilenio system will soon complete ten years of uninterrupted service, and has been deemed a significant improvement to the public transport system of Bogota.  It has been used as a model, not only in other cities in Colombia, but around the world. To date, no defaults have been reported, nor have there been material lawsuits or significant disagreements amongst the parties. There have not been significant problems in implementation.

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