Unofficial translation :

Prepared by Toru Mihara
General Manager Project Engineering Dept.
Mitsui Global Strategic Studies Institute

Law relating to promotion of realization of public facilities by using private

Note:

Following translation is unofficial and does not count for specific legal consideration in view of Japanese administrative code. Some words in original legal text are employed under special meaning under administrative codes. For some portion, English translation is unable to reflect legal nuances involved. Readers of this paper should be aware that this English translation should not be used in determining or interpreting rights and obligations arising from the original legal text and advised to seek for expert legal counsels on Japanese administrative laws, if such is required

(Purpose)

Article 1:

This Law has the purpose of realizing social infrastructures efficiently and effectively by legally arranging means for promoting construction, maintenance, management and operation (including planning thereof) of Public Facilities by using private’s funds, managerial as well as technical ability, thereby contributing to healthy development of national economy.

(Definition)

Article 2:

1 ) Under the present Law, the word ‘Public Facilities’ is understood to mean the following:

1. Public facilities like Road, Railway, Port, Airport, Park, Drinking, Sewage, Industrial Water systems etc

2. Facilities for public usage like public office buildings, apartments for public officers etc.

3. Publicly managed housings, educational and cultural facilities, waste treatment facilities, hospital facilities, social & welfare facilities, parking, facilities having public interests like underground town

4. Information and telecommunication facilities, energy supply facilities, new energy facilities, recycling facilities(except waste treatment facilities), tourist facilities and research facilities

5.Any other facilities which are similar to each of above listed facilities, specifically defined under the government ordinance.

2) Under the present Law, the word ‘Specified Undertaking’ is understood to mean, businesses related to realization of public facilities (construction, maintenance, management or operation of public facilities or planning thereof), including redevelopment undertaking like city area redevelopment, land area adjustment etc) which shall be implemented effectively and efficiently by using private funds, managerial and technical ability.

3) Under the present Law, the word ‘Administrator of Public Facilities’ is understood to represent one of the followings:

1 Minister who is in charge as administrator of public facilities or Minister who has statutory powers to control the Specified Undertakings

2 Heads of Local Autonomous Governments[1] who are legally Administrators of Public Facilities or who intend to implement the Specified Undertakings

3 Chartered Corporation[2] or other Public Corporation who shall realize Public Facilities (including cooperatives intending to realize city area redevelopment undertaking or land adjustment undertaking etc.)

4) Under the present Law, the word ‘Selected Undertaking’ is understood to mean the Specified Undertakings selected in accordance with the provisions of Article 6

5) Under the present Law, the word ‘Selected Enterprise’ is understood to mean an entity, chosen to conduct the Selected Undertaking in accordance with Section 1 of Article 7

(Fundamental Philosophy)

Article 3:

1 The undertaking of realization of the Public Facilities, for those which are appropriate to let private enterprise assume such by reasons like allocating expenditures by income generated by the relevant undertaking shall be delegated, to the extent possible, to private enterprise, bearing well in mind of appropriate sharing of roles between the State, Local Autonomous Government and private enterprise as well as efficient usage of public financial funds.

2 The Specified Undertaking shall be conducted taking into consideration of clearly defined allocation of roles between the State, Local Autonomous Government and private enterprise, securing returns, bearing well in mind to supply to national citizen, economical and better services, by means of limiting involvement of the State at its maximum and let technology, managerial resources, ingenuity and innovative ideas proposed by private enterprise be exercised to the fullest extent possible.

(Fundamental Policy)

Article 4:

1 The Prime Minister, based on the fundamental philosophy, shall have to determine a Fundamental Policy [3] (herein after referred to as the Fundamental Policy) with respect to the implementation of the Specified Undertaking.

2 The Fundamental Policy shall define, with respect to the implementation of the Specified Undertaking, the matters (for those Specified Undertakings implemented by Local Autonomous Government, the matters which are necessary for promotion of the Specified Undertakings) which are listed herein below:

1) Fundamental matters with respect to selection of the Specified Undertakings including those proposed by private enterprises.

2) Fundamental matters with respect to invitation to bid and selection of private enterprise.

3) Fundamental matters with respect to securing appropriate and firm implementation of the undertaking such as precision of responsibility of private enterprise

4) Fundamental matters with respect to legal, regulatory and taxation measures as well as public financial and monetary support.

5) Any other fundamental matters with respect to implementation of the Specified Undertakings.

3 The Fundamental Policy shall have to be determined, bearing well in mind of the followings:

1) With respect to the selection of the Specified Undertaking, to secure public interest, while envisaging efficient usage of public funds by minimizing funds necessary for the undertaking and respecting independence of private enterprise.

2) With respect to the selection of private enterprise, to consider transparency of procedures to be taken like conducting selection based on open competition and to respect ingenuity and innovative ideas by private enterprise.

3) With respect to public financial support by the State, a policy based on current laws and regulations or alike shall become the basis of such.

4 The Prime Minister, when intending to determine the Fundamental Policy, shall have to consult beforehand to the Heads of relevant administrative organs[4] and also to let PFI Promotion Committee [5]deliberate such.

5 The Prime Minister, when the Fundamental Policy is established, shall make such public as soon as possible and deliver such to the Heads of the relevant administrative organs.

6 The preceding two (2) paragraphs shall apply in case of any amendments to the Fundamental Policy.

(Implementation Policy)

Article 5:

1 The Administrator of Public Facilities, when intending to select the Specified Undertaking described in the ensuing Article and to select private enterprise in accordance with Section 1 of the Article 7, shall have to establish a policy for implementation of the undertaking based on the Fundamental Policy (herein after referred to as the ‘Implementation Policy’).

2 The Implementation Policy shall have to define concretely the matters listed herein below:

1) Matters relating to selection of the Specified Undertaking

2) Matters relating to tender and selection of private enterprise

3) Matters relating to securing appropriate and firm implementation of the undertaking such as precision of responsibility assumed by private enterprise etc.

4) Matters relating to siting, scale and layout of Public Facilities.

5) Matters relating to the case where dispute occurs with respect to interpretation of business plan or agreement referred to in Section 1 of Article 10.

6) Matters relating to measures when it becomes difficult to continue the undertaking

7) Matters relating to measures on legal, regulatory and taxation regimes and public financial supports.

8) Any other matters relating to the implementation of the Specified Undertaking.

3 The Administrator of Public Facilities, once the Implementation Policy has been established, shall have to make such public as soon as possible.

7 The preceding provisions shall apply to amendment of the Implementation Policy.

( Selection of the Specified Undertaking )

Article 6:

The Administrator of Public Facilities, can select the Specified Undertaking which is acknowledged to be appropriate to be implemented, based on the Fundamental Policy and the Implementation Policy.

( Selection of private enterprise )

Article 7:

1 The Administrator of Public Facilities, when he selects the Specified Undertaking based on the preceding paragraph, shall have to select private enterprise who shall conduct the said Specified Undertaking by means of public tender etc.

2 The private enterprise selected based on the preceding paragraph can conduct realization of Public Facilities among those that should normally be conducted by the Administrator of Public Facilities and within confines that are defined and allowed in business plan or agreements defined in Section 1 of Article 10

(Objective Evaluation)

Article 8:

The Administrator of Public Facilities, when conducting selection of the Specified Undertaking described in the Article 6 or selection of private enterprise described in Section 1 of the preceding paragraph, shall have to conduct objective evaluation( including evaluation relating to effectiveness and efficiency of the concerned Specified Undertaking ) and that result shall have to be announced publicly.

( Resolution of parliament by Local Autonomous Government)

Article 9:

Local Autonomous Government shall have to seek for resolution by local parliament in advance when concluding an agreement with respect to the Specified Undertaking which falls under standards of categories and amount fixed under the government ordinance.[6]

(Implementation of the Selected Undertaking)

Article 10:

1 The Selected Undertaking shall be implemented in accordance with business plan or agreement which shall be established by the Administrator of Public Facilities and Selected Enterprise or business plan established by the Selected Enterprise (which may include a case where this is prepared by the Administrator of Public Facilities).

2 If the Selected Enterprise falls a juridical entity where the State or Local Autonomous Government has contributed its capital (including those entities to whom such entity has invested), allocation of responsibility between such entity and the Administrator of Public Facilities shall have to be clearly written within the aforementioned business plan or agreement, while putting a special consideration not to make unclear responsibility to be assumed by such Selected Enterprise.

(Obligation of State)

Article 11:

Whenever the State bears obligations[7] with respect to the Selected Undertaking, time limit for expenditures caused by action to assume such obligations shall be thirty(30) years after the concerned fiscal year.

(Free of charge Usage of State property etc)

Article 12:

1 The State, whenever it judges to be necessary, can let the Selected Enterprise utilize state property (State property as defined in Section 1, Article 2 of the State Property Law Law Number 73 of 23 rd Year of Showa) by free or charge or under prices lower than that of market during the term, for which such property is utilized.

2Local Autonomous Government, whenever it judges to be necessary, can let the Selected Enterprise utilize public property (public property as defined in Section 1, Article 238 of Law on Local Governance Law Number 67 of 22 nd Year of Showa-) by free of charge or under prices lower than that of market during the term, for which such property is utilized.

(Interest free loan)

Article 13:

1 The State, within the limit of its budget[8], can grant an interest free loan to the Selected Enterprise for funding of the undertaking among those which it judges to have extremely important public interest.

2The State, while conducting interest free loan in accordance with the preceding paragraph, can profit to utilize functions of evaluation or of funding by governmentally owned financing institutions like Development Bank of Japan or of Finance Corporation for Promotion of Development of Okinawa.

(Consideration for securing funds and local government bond)

Article 14:

The State or Local Autonomous Government shall exercise its efforts for special consideration for securing or recommending funds necessary for implementing the Selected Undertaking or for local government bonds within the confines of laws and regulations.

(Consideration with respect to acquisition of land)

Article 15:

With respect to land to be utilized for the Selected Undertaking, an appropriate consideration be made for disposition such as appropriation under the Land Appropriation Law( Law Number 219 of 26 th Year of Showa) or other approvals based on other laws and regulations so that the Selected Enterprise can smoothly acquire such or utilize such.

(Support etc..)

Article 16:

1 The State or Local Autonomous Government shall take measures necessary for legal, regulatory and taxation regimes in order to promote implementation of the Specified Undertaking, based on the Fundamental Policy and the Implementation Policy and conduct financial support necessary toward the Selected Enterprise.

2 The measures and supports described in the preceding paragraph, shall have to be the ones which are flexible in accordance with characteristics and siting of facilities to be realized and which takes into consideration of enabling Local Autonomous Government to demonstrate sufficiently its autonomy.

(Deregulation)

Article 17:

The State or Local Autonomous Government shall have to promote rapidly abolishment or relaxation of regulations which may impede smooth demonstration, usage of private technology or sufficient fulfillment of private’s ingenuity and innovative ideas in order to promote implementation of the Specified Undertaking.

(Cooperation)

Article 18:

The State, Local Autonomous Government and private enterprise shall cooperate one another by arranging cooperative system etc. in order to promote smooth implementation of the Specified Undertaking .

(Enlightening activities, technical support etc..)

Article 19;

The State and Local Autonomous Government shall conduct diffusion of knowledge, distribution of information etc with respect to the implementation of the Specified Undertaking and promote enlightening activities in order to obtain understanding, consents and cooperation of national citizen.

(Usage of mortgaged real estate)

Article 20:

When Selected Enterprise acquires real estate for implementing the Specified Undertaking and when such real estate was an object of mortgage, and if losses occur to an enterprise having had security right over such real estate or to an enterprise having had submitted such real estate as security or to an enterprise having had property right over such real estate, the concerned enterprise can appropriate the corresponding losses to asset section of its balance sheet as deferred assets at settlement term of the corresponding fiscal year. When this is adopted, depreciation shall be conducted by an amount which is more than evenly split figures at each settlement term within ten(10) years after the corresponding settlement term.

2 When provisions described in the preceding paragraph are to be applied, application of provisions of Section 1 of Article 290 and Section 3 5) of Article 293 of commercial codes,(including those cases where these provisions be applied similarly under other laws ), especially a part reading ‘Section 2 of Article 286 and section 3 of Article 286’ within Section 1, subsection 4 of Article 290 and Section 3, subsection 3 of Article 293 ‘ is to be replaced by ’Section 2 of Article 286, Section 3 of Article 286 and Section 1 of Article 20 relating to Law on Promotion of Realization of Public Facilities by Utilizing Private’s Fund‘. .

(PFI Promotion Committee)

Article 21:

1 The PFI Promotion Committee shall be established within the Prime Minister’s Office ( herein after referred to as the Promotion Committee). [9]

2 The Promotion Committee shall investigate and deliberate matters which fall into its competency under the present Law, as well as status of establishing Implementation Policy, selection of Specified Undertaking, objective evaluation of Specified Undertaking, implementation status of realization of Public Facilities by State using private funds.

3 Private enterprise etc. can present to the Promotion Committee their views on realization of Public Facilities by State using private funds.

4 The Promotion Committee, if it considers to be necessary in case of the preceding two sections, can present its views to the Prime Minister or to Heads of relevant administrative organs, in order to promote and realize overall coordination of realization of Public Facilities by State using private funds.

5 The Prime Minister or Heads of relevant administrative organs shall have to respond to the Promotion Committee measures taken based on views submitted in accordance with the preceding paragraph.

6 The Promotion Committee, when it judges to be necessary in order to perform its assigned functions, can request cooperation necessary like submission of data and materials, request for views, explanation etc.. from the Heads of relevant administrative organs, Heads of Local Autonomous Governments or from relevant entities.

(Organization of the Promotion Committee)

Article 22:

1 The Promotion Committee is comprised of nine(9) members, nominated by the Prime Minister among men of learning and experience.

2 Whenever it is required to deliberate and investigate expert matters, expert members can be installed within the Promotion Committee.

3 The Promotion Committee can install sectional sub-committees whenever such is required.

4 The matters necessary for organization and management of the Promotion Committee other than those described in the preceding 3 sections shall be determined by government ordinance.

(Delegation to government ordinance)

Article 23:

The matters which are necessary for implementation of the present Law, other than those described in the present Law, shall be determined by government ordinance.

Article 1:

The present Law will come into force on the date determined by government ordinance within three (3) months counting from its promulgation. [10]

Article 2:

The Government shall review implementation status of the Specified Undertaking based on the present Law (including abolishment or relaxation of regulations which may impede usage of private technology and fulfillment of private’s ingenuity and innovative ideas) within five (5) years after its coming into force and shall take measures which are necessary based on such review results.

Article 3:

The Government shall review selection ways of private enterprise who will implement the Specified Undertaking, bearing in well mind of review relating to amelioration of bidding system of Public Facilities, and shall take measures which are necessary based on such review results.

- Other administrative articles will follow but omitted due to pure administrative nature -

[1] Literally translated as local governing body, meaning prefecture, city, town and other legally defined local governments defined under Law on Local Governance.

[2] Those entities established under specific laws whose capital are contributed by public funds.

[3] Fundamental Policy here may better be understood to mean a sort of Implementation Decree to the Law, enacted by Prime Minister. This has been realized by Prime Minister’s Office Notice number 11 dated March 13 th 2000.

[4] This means relevant Ministries involved, heads being Ministers.

[5] See Article 21 for definition and roles under the Law.

[6] Fixed by Government Ordinance Number 279 dated September 22,1999.

[7] Readers should be aware that the word obligation here do not reflect correct Japanese nuance. Not direct obligations but a sort of commitment to take into consideration while annual budgeting process by Diet

[8] If not budgeted, no possibility. This in reality shall be scrutinized during budgeting process and it is not so easy to materialize this support option, limited to rare important case.

[9] Installed under Government Ordinance Number 280 dated September 22 nd 1999. Prime Minister’s office reorganized as Government Cabinet Office commencing from January 2001

[10] Fixed by Government Ordinance Number 278 dated September 22 nd 1999