On May 16, the Constitutional Court adopted one of the most anticipated decisions by the infrastructure sector, the constitutionality examination of Article 20 of Law 1882 of 2018 . The article, adopted to regulate the termination formula and payments in the event of early termination of PPP contracts due to absolute nullity caused by illegal acts -read corruption-, with retroactive application -specially designed for the case of Ruta del Sol II- was conditionally declared enforceable.
Under the premise of “ corruption does not generate rights “, the Court’s decision sought to protect the financial formula of the contracts, guaranteeing the rights of funders and creditors of the contract in good faith. Thus, the ruling allows investors, lenders and third parties in good faith to receive the acknowledgments that may arise at the end of the contract. The foregoing, except for the recognition of financial costs for early termination (“ break up fees “), which was declared unenforceable.
This is undoubtedly good news for lenders and bona fide third parties, including subcontractors, employees and investment funds, who have the peace of mind that their investments will not be ruined by acts of corruption that occurred before -and for- the conclusion of the corresponding contract. It is also good news for the infrastructure sector, which after months of uncertainty can give the market a measure of security and resume financing of projects in courses that were stand-by, among others, at waiting for this decision.
On the contrary, the Court excluded the possibility of recognizing costs, expenses and investments to contractors who have acted in bad faith, fraudulently in the commission of an illegal act or in an act of corruption and for that reason would have given rise to the nullity of the contract. In other words, partners or members of consortia or temporary unions directly responsible for acts of corruption will not have the right to receive any type of pecuniary benefit. It is worth clarifying that the Court specified that to conclude the bad faith or fraud there must be a ruling disproving the presumption of innocence and declared the retroactive application of the norm to be enforceable.
Despite the positive of the decision, the ruling gives rise to a practical doubt:
Should the settlement of the contract be suspended until a court ruling clears the doubts about the responsibility of the contractor and / or its shareholders or members in the face of the illicit act that gave rise to absolute nullity? < / div>This would be the most reasonable thing, however, there is one drawback: the judicial decision of responsibility could take much longer than the two years during which the state entity and / or the judge have jurisdiction for the settlement of the contract.
Should we then think of alternatives such as a partial or conditional liquidation of the contract or an exceptional term of liquidation and expiration for these cases? We hope that the text of the ruling clarifies this question: the market needs legal certainty.