Probe Into Legal Problems Of PPP Project Introducing Asset Securitization Financing Mode In China

In 2015, the State Council and related ministries and commissions issued a series of policy documents in an intensive way, to vigorously promote the Public- Private Partnership, “PPP” for short. Local governments follow up actively to promote various types of PPP projects of infrastructure and public service. Therefore, 2015 is also called as “the first year of PPP”. However, PPP projects have large investment, long term and low yield rate, and most existing financing means are limited in bank load. In November 2014, China Securities Regulatory Commission issued “Administrative Provisions for Asset Securitization Business of Subsidiary Corporation of Security Companies and Fund Management Companies”, which starts the era of enterprise asset securitization filing system; it is clearly stipulated that the basic asset of asset securitization can be real estate properties such as infrastructure and commercial real estate or real estate right to earnings. Therefore, the asset securitization of PPP project is supported by corresponding policies. In most operational PPP projects, project companies have the right to collect charges to users during the operation period of the projects by concession agreement(which is temporarily called as “PPP project right to earnings” in this article by the author), which can generate continuous and stable cash flow in the future, to meet the requirement to cash flow of securitization basic asset; besides, the introduction of asset securitization is beneficial for the expansion of the financing channel of PPP projects, the increase of capital mobility, the improvement of social capital participation degree, therefore, it has strong compatibility with PPP model on practice layer.However, because of the particularity of PPP projects, and the imperfection of laws and regulations related to asset securitization in our country, there are inevitably some legal problems and disputes during the process of the combination of the two parties, mainly including: in the fee-for-service projects for users, if the right to earnings of PPP project companies generated based on concession operation can be separated from concession right to become the basic assets of asset securitization in an independent way; what is the legal attribute of this right to earnings; if it can be transferred; if it can be sold actually if it is securitized; the effect of bankruptcy isolation. Therefore, based on the local practice of combination between PPP project and asset securitization, this article points out the legal risk point by typical case analysis; in combination of the theories discussion on true sale and bankruptcy isolation in asset securitization at home and abroad, it starts from the legal attribute of the right to earnings enjoyed by concession operation by PPP project company, to explore the eligibility as the basic asset of asset securitization, and analyzes the bankruptcy isolation effect, on which basis to further propose the legal advice of perfecting the asset securitization of PPP project right to earnings in our country. It is expected to provide reference for the PPP project securitization practice and the perfection of legislation in the future.This article is divided into four chapters. In Chapter One, the author analyzes the compatibility between PPP and asset securitization on the basis of the narration of the concepts and basic theories of the two, and analyzes the existing legal risks by taking the example of the securitization of the charge right to earnings of “Guan-shen earnings” special project, which is a typical BOT project.According to the problems proposed in Chapter One, Chapter Two gives detailed analysis on the eligibility of PPP project right to earnings as basic asset from two layers of independence and transfer of basic asset in asset securitization. Firstly, it starts from the theoretical discussion on legal attribute of real estate right to earnings, in combination of the relationship with concession operation, to discuss on the legal property of PPP project right to earnings, and locate it as “the future credit-right”. Secondly, in view that the existing civil lay system is not involved in the provisions about future credit-right, the author further develops the comparative analysis on future credit-right transfer, to discuss on the transfer and the efficiency of the future credit-right.On the basis of Chapter Two, as well as the systems related to the existing asset securitization in our country, in combination of “true sale” theoretical standard and the analysis on the transfer efficiency of PPP project right to earnings as the future credit-right, Chapter Three furthers reviews on the securities bankruptcy isolation effect, and points out the factors including unclear legal subject status of “special plan” under existing enterprise asset securitization model in our country, the lack of legal standard of true sale and the legislation vacancy of future credit-right have serious influence on the bankruptcy isolation effect of PPP project securitization.Finally, aiming at existing problems and the discussion on the first three parts, the author proposes suggestion for perfection on civil and commercial law layer and asset securitization self system layer, and thinks that it is necessary to conduct the following provisions to the future credit-right: clarify that the trust model is commonly applicable to asset securitization; use the “safe harbor” system in Bankruptcy Law of the U.S. and adopt the form of special legislation to define the standard of true sale to ensure the preferable combination between PPP and asset securitization.