The Armenian government has opened for public discussion a draft decision that would change the rules for terminating agreements on the free use of state property. The proposed amendment applies to cases where the user is carrying out a business investment project and the contract has been signed for more than five years.
The draft was prepared by the State Property Management Committee of the Ministry of Territorial Administration and Infrastructure. According to the government’s rationale, the current framework allows such a contract to be terminated unilaterally with six months’ notice to the other party, creating risks for investors.
Under the existing rules, a contract for the free use of state property may be terminated by a government decision, by mutual agreement of the parties, or at the request of one of the parties. In the latter case, the other party must be notified six months in advance.
The government says this mechanism creates problems when a user makes substantial investments to improve state property. An investor may plan on using the property for the full contractual term, but if the contract is terminated unilaterally, the investor may be unable to achieve the expected return from those investments.
The authors of the draft say such uncertainty can disrupt the normal course of an investor’s operations and cause financial losses. For that reason, they propose an exception for contracts signed for more than five years when they are tied to a business investment project.
If approved, such contracts could be terminated only by a government decision or by agreement of the parties. Any mutual agreement would have to be formalized through a notary.
The draft also states that its adoption is not expected to change revenues or expenditures of the state or municipal budgets.
