Title: Concession Agreement on the Transfer of the Armenian Railway System to the “South-Caucasian Railway” Closed Joint-Stock Company Created by “Russian Railways” Closed Open Joint-Stock Company

Languages: English

Type: Document

Region: Europe and Central Asia

Country: Armenia

Sectors: Transportation

Keywords: Contractual Provisions, Transport, Rail, Concession, Joint Venture


Concession Agreement (PDF) bytes

Document Details:



Transport, Railways

Name of Agreement: 

Draft Model Concession Agreement for Operation and Management of a Railway

Type of Agreement:

Draft Model Concession Agreement for Operation and Management of a Railway

Region (if known):

Central Asia

Year of Agreement/ Draft:


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

International Consulting Group and World Bank staff

Annotated by:

Shalini Soni-Bhagat

Purpose and Context:

The Agreement sets out how railway property may be assigned to the concession, and how specific properties, including land and other properties, can be assigned to the concessionaire for use but not with an ownership interest. The Concession allows for both infrastructure and train operation and for third party access including international traffic. The agreement also spells out how the government functions can be exercised (safety, oversight, financial accounting standards, etc) and describes the relationship of the various government agencies, including the Public Service Regulatory Commission and the Ministry of Transport and Communications, and other units of the government.

Circumstances where this contract may be appropriate:

Concession Agreement for Operation and Management of a Railway

Drafted for common law/ civil law jurisdiction:

Civil Law

Main Features:

The Concession covers the management and operation of a railway and land-usage rights  (Part 1, Clause 1 and Appendix 4). The term “Infrastructure” is defined and therefore in the defintions of Access fee (sic) and Access Regime it may be better to use the defined term.

Oversight mechanism:  There are three elements of oversight: the oversight authority of the Ministry in its role as licensing authority, the oversight of the Regulatory Commission with regard to competition issues, and the oversight mechanism for resolving dispute between Ministry and concessionaire as signatory to the contract.  (Parts 1, 6, 11-13 and Appendix 6 collectively describe the oversight regime for the concession). There is often a debate as to whether safety regulation should be separated from competition regulation but, as in this case, it may be pragmatic to allow for separation having regard to the institutions as they exist.


Term:  An initial concession term for 30 years, extendable for an additional term of 5 to 10 years. Extendable ten years prior to Termination.  (Part 2, Clauses 9, 10)


Concession Fee:  A one time fixed concession fee and an annual fee amounting to 2% of the gross revenue, or an annual fee of 3% if the annual gross revenue exceeds a given amount.  (Part 3, Clause 12)


The base services the Concessionaire is obligated to carry out during the concession period.  (Parts 1, 4, and 5, and Appendices 6 and 7). There is a conflict between Clauses 5 and 7 as one does not permit sub-contracting without consent and the other permits sub-contracting.

Passenger services that the Concessionaire is required to provide and state subsidy.  (Part 5, Clause 5)

The responsibility of the Concessionaire with regard to liability and insurance matters relating to loss or damage to the concession property and third part damage including injury to persons (Part 4, Clause 20). Without access to the schedules and to international treaties and protocols it is by no means clear how Transport Users make claims where one or more Licensed Transporters together with the Concessionaire are involved. However a major concern will be what happens if insurance ceases to be available in the market or ceases, through no fault of the Concessionaire to be available at commercial rates. The agreement is silent on this issue.

The operating license and the Concessionaire requirements impose obligations to adhere to safety standards, norms, environmental program under the Railway Act legislation and international conventions.  (Part 4, Clause 21 and Appendix 5) (Typo in Part 4, clause 21, sub-clauses 1-9 missing)

Retained right by Ministry: The Ministry retains the right to license transporters other than the Concessionaire to operate on the railway infrastructure upon the payment of a cost-based fee equal to the internal access fee computed by the Concessionaire.  (Part 6, Clause 26, Part VII, Clause 31(I))


An annual Network Statement setting forth the access terms and proposed list of access charges is to be prepared and submitted by the Concessionaire. The Ministry is the approving authority for the technical terms and conditions of the Network Statements or proposed changes presented by the Concessionaire. The Regulatory Commission has the financial oversight authority to approve the methodology on access charges calculation and access charges.  (Part 6, Clause 29)

The agreement provides a one (1) year grace period before the publication of the first Network Statement.  (Part 6, Clause 30)

The Concessionaire is responsible for managing, operating and maintaining railway infrastructure granted in the concession agreement.  (Part 7, Clause 31 (2))

The Concessionaire assumes all the management powers and owner’s rights and obligations, excluding the right to sell or use as collateral concession property (Part 7, clause 31 (3)). The form analysed is that attached to a Final Report by the advisory consultants and therefore is not the final form as signed. In the Heads of Terms as part of the report there is a suggestion, at part 4.1, that the rolling stock should be vested in the Concessionaire. As to whether this would be a good idea in other situations depends upon the availability of other rolling stock and the law of property in relation to moveable as well as the law relating to insolvency and the taking of security over moveables. Clearly if the assets are required by the public sector in the event of termination of the concession and particularly on the insolvency of the Concessionaire then another solution will be required.  

No warranty on the physical condition of the concession property (Part 7, Clause 32). However under Clause 3.2 the Government warrants that it has disclosed all known contamination. The agreement is silent as to what happens if the Government has not so disclosed nor what happens about unknown unless the latter is meant to fall within Force Majeure which is by no means clear.

The condition of the property returned at the end of the concession contract period must be in a condition to support operation of the railway.  (Part 7, Clause 35)  

The Concessionaire’s right to land use ends with the termination of the concession, all sub-leases it has entered into must have the same termination date or to be considered invalid although the ability to bridge termination is achieved with the prior written approval of the Minister.  (Part 7, Clause 36)

Ownership and usage right of rolling stock like locomotives, wagons, carriages, sleepers, rail machinery appears to remain with the state although this does not tie in with the consultant’s recommendation..  (Part 8 Clause 41 and Appendix 3)

Disposal and sale of rolling stock by the Concessionaire.  (Part 8 Clause 41) (There seems to be a typo in clause 43(1) instead of cause 46(ii) should be 43 (ii))

Right of first refusal on sale of asserts: The Government has right of first refusal to buy assets in excess of certain amount. (Part 8, Clause 43)

The obligations of the Government and the Concessionaire in relation to the Railway employees as of the Concession date.  Mandatory requirement to employ certain number of key personnel  (Part 9 and Appendix 8). It may be better to impose specific obligations as to training and continuing professional development for staff upon the Concessionaire and to include a provision for reporting on performance.

Accounting and reporting requirements to be fulfilled by Concessionaire  (Part 10, Clauses 48 and 49).

Network Statement requirements by the Concessionaire to incorporate the safety program required for access to the network.  (Part 10, Clause 50)

External audit requirements to be fulfilled by Concessionaire.  (Part 10, Clause 51)

Termination:  Early termination by way of forfeiture, dissolution, winding-up or insolvency of the Concessionaire. (Part 11)


Dispute resolution: Disputes to be settled amicably.  Arbitration as dispute resolution mechanism.  (Part 12)

Force majeure events unforeseen and those that are beyond the reasonable control of either party but do not excuse the non-performing party from using its best efforts to avoid or rectify the event. (Part 13) (Clause 68 and 68 are missing even though referred in the agreement)



Possible additional provisions that it might be appropriate to include:

Time–frame for dispute resolution should be laid down.

Will the Concessionaire be able to attend international meetings dealing with time tabling and the like which will impact upon domestic timetabling?

Who is responsible for upgrades to international border crossings?

Does the Concessionaire have a contractual nexus with other international railways so as to be able to recover payments received by other entities on its behalf?

In the constraints relating to shareholdings it would be better to include all economic rights attached to shares.

Where liquidated damages apply then it may be necessary  under local law to have a provision to allow for an extension of time where the failure to achieve the due date is caused by the public sector as otherwise the whole provision may fail.

If it is intended that Licensed Transporters should be in competition with the Concessionaire then it may be appropriate to constrain the Concessionaire from moving personnel dealing with negotiating third party access to the division dealing with pricing of freight or passenger services within the Concessionaire.

Provisions relating to intellectual property rights should be included and perhaps consideration should be given to the use of computer based operating systems for a period after expiry or earlier termination of the Concession should be given. If an asset condition register would be cost effective then provision should be made for this and if electronically stored then read only access should be given.

Provision should be made for the retention of records and transfer on expiry or earlier termination of the Concession.


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

Arbitration should be conducted based on internationally acceptable rules like the UNCITRAL Arbitration Rules or ICSID Rules

Provisions of wider general use:

Concession term, the Oversight Regime, one year grace period before publication of first Network Statement

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

The model form analysed was attached to the Final Report and therefore the signed form may well contain provisions which are not reflected in the model. Government awarded the concession to modernize and operate the Railway.  In 2008, the 30-year concession agreement was signed, the Concessionaire paid an initial concession fee of $5 million and agreed to pay annually, over 30 years, 2% of the Concessioned Railway revenue on freight transport services; it also agreed to invest about $400 million in railway infrastructure over 30 years and an additional $170 million to upgrade the rolling stock.


Tracking Number:

 Armenian Railway System_concession_agreement


Updated: March 27, 2021