Public-private partnerships

1. General definition

In Switzerland, PPP is not a legal category codified in a single law. It is a contractual technique whereby a public authority (Confederation, canton, municipality, or public institution) entrusts a private partner with the construction, financing, operation, or maintenance of a public infrastructure or service over a long period of time.

PPPs are based on:

• a contractual distribution of risks
• long-term cooperation
• a partial transfer of tasks to the private sector
• performance-related remuneration

2. Legal structure of a PPP in Switzerland

Partnership Contract (Pure Contractual Model)

Legal Nature

• Administrative contract or private-law contract depending on the authority and canton
• Subject to the Federal Act on Public Procurement (LMP) or cantonal procurement laws
• Often structured like the European “DBFM” model (Design–Build–Finance–Maintain)

Typical Content

• Obligations for design, construction, financing, operation
• Risk transfer (construction, performance, availability)
• Payment mechanisms (availability payments, bonuses/penalties)
• Long-term duration (20–30 years)
• Public oversight and audit clauses

Advantages

• High contractual flexibility.
• Suitable for public buildings, schools, hospitals

Limitations

• Complex drafting
• Democratic oversight required (possible referendums)

2. Legal structure of a PPP in Switzerland

Special Purpose Vehicle (SPV)

Legal Nature

• A joint-stock company (SA) created by private partners
• Holds financing and project risks
• Signs the PPP contract with the public authority

Legal Role

• Isolates project risks from shareholders’ balance sheets
• Supports bank financing (project finance)
• Holds project assets during the contract term

Advantages

• Financial transparency
• Facilitates participation of institutional investors

Limitations

• Heavy structure
• Complex governance (shareholders’ agreements, steering committees)

2. Legal structure of a PPP in Switzerland

Concession (Public Service or Public Domain)

Legal Nature

• Unilateral administrative act or concession contract
• Based on federal or cantonal public law (energy, water, transport, telecom)
• Grants the private operator the right to run a public service or use public domain assets

Characteristics

• Private party finances and operates the service
• Remuneration through user fees (tolls, tariffs)
• Strong public regulation (pricing, quality, safety)
• Long duration (20–40 years)

Advantages

• Ideal for revenue-generating infrastructure
• Well-established tradition in Switzerland (energy, water, cable cars)

Limitations

• Demand risk often borne by the private operator
• Politically sensitive (tariffs, monopolies)

2. Legal structure of a PPP in Switzerland

Mixed Contracts (Procurement + Operation)

Legal Nature

Combination of several instruments:

• construction contract
• operation contract
• maintenance contract
• building lease
• land-use agreement

Characteristics

• Modular structure
• Avoids a full PPP while still transferring certain tasks to the private sector
• Often used for medium-sized projects

Advantages

• High flexibility
• Less politically controversial

Limitations

• Less efficient for large-scale infrastructure
• Risks are less integrated than in a full PPP

3. Swiss legal framework

Absence of federal law on PPPs

Swiss law is fragmented:

• public procurement law (LMP, OMP)
• concession law
• cantonal administrative law
• contract law (contracts)
• public authority law

Specific constraints

• Compliance with the principles of transparency, equal treatment, and competition
• Submission to the LMP or cantonal public procurement legislation
• Obligation to justify the use of PPPs (efficiency, innovation, risk transfer)
• Democratic control: referendums possible depending on the canton

4. Financing a PPP under Swiss law

Private financing

Financing is generally provided by:

• equity from private partners
• bank financing (project finance)
• bonds or private placements
• sometimes institutional funds (pension funds, insurance companies)

Repayment comes from:

• either public payments (rent, availability fees)
• or operating revenues (tolls, tariffs)
• or a combination of both

5. Advantages and limitations of PPPs in Switzerland

Advantages

• Acceleration of infrastructure projects
• Transfer of risks to the private sector
• Technical and managerial innovation
• Predictability of costs over time

Limitations

• Contractual complexity
• Higher private financing costs than public financing costs
• Political sensitivity (fear of privatization)
• Rarity of large-scale PPPs in Switzerland

6. An experienced example: Compangnie Foncière & Industrielle du Nord vaudois

Purpose: to enable all municipalities in the region wishing to acquire industrial land to finance it without exceeding their debt ceiling/limit

• The company was set up by a municipality and a private organization supporting the regional economy with a view to acquiring a 30,000 m² plot of land located in an industrial zone and to enable the development of a transport hub

Legal structure of the transaction:

• The land was acquired by the Company through a notary deed of sale, while the building was acquired by private investors
• At the same time, a surface right in the form of a separate and permanent right was created, allowing the private investors (superficiars) to construct and own a building on land belonging to the Company (superficiant) in return for the payment of an annual fee
• A decision by the Council of State of the Canton of Vaud granting public financial assistance
• A partnership agreement was entered into between the Company and the private investors to ensure the completion of the transaction and determine the terms of the partnership
• A shareholders’ agreement was entered into between the Municipality and the private organization supporting regional economic development

6. An experienced example: Compangnie Foncière & Industrielle du Nord vaudois

Financing of the transaction:

• The Company has initial equity capital
• A bank loan has been granted on market terms
• Non-repayable aid for state support for land management by public authorities
• A loan from the canton of Vaud based on the law on economic development support (LADE loan)
• A federal loan based on the Regional Policy Act (LPR loan)
• Financial expenses and loans amortization are covered by the fee from the building rights granted to private investors

7. Conclusion

Summary:

• PPPs are an essential tool for financing public infrastructure projects in Switzerland
• Swiss legal and financial frameworks encourage private sector involvement, providing benefits but also posing significant challenges

Final Thought:

• A successful PPP requires careful risk management, clear contractual arrangements, and alignment between public and private interests