UPDATE ON DECREE NO. 122/2026/ND-CP ON RESOLVING DIFFICULTIES IN TRANSPORT BOT PROJECTS
On 03 April 2026, the Government issued Decree No. 122/2026/ND-CP (“Decree 122”), providing detailed regulations on the resolution of difficulties encountered by Build-Operate-Transfer (BOT) projects in the transport sector. Decree 122 took effect from its signing date (03 April 2026).
In this article, the lawyers of BFSC Law LLC provide an overview of key provisions of Decree 122 for Clients’ reference.
1. BOT Projects Subject to Decree 122
Pursuant to Article 1 of Decree 122, the Decree governs the resolution of difficulties in:
- Road BOT projects with contracts executed before 01 January 2021; and
- Transport BOT projects in the operation and business phase with contracts executed before 01 January 2021,
specifically addressing:
(i) Revenue shortfall handling for road BOT projects under Article 99a of the Law on Public-Private Partnership Investment (“PPP Law”); and
(ii) Conditions for payment and principles for determining compensation costs upon early termination under Point a, Clause 2a, Article 52 of the PPP Law.
For clarity, under Article 2 of Decree 122:
- “Transport BOT project” means a transport infrastructure investment project implemented under a BOT contract;
- “Road BOT project” refers specifically to road infrastructure projects under BOT contracts.
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Handling Revenue Shortfalls in Road BOT Projects
2.1. Provisions under Article 99a of the PPP Law
Under Article 99a of the PPP Law, for road BOT projects signed before 01 January 2021, the State shall share revenue shortfalls with investors and PPP project enterprises based on the difference between projected and actual revenues, provided that:
- The project is affected by changes in planning, policies, or laws, and after applying adjustments (including toll fee and contract duration adjustments), actual revenue over the last three years is below 75% of the financial plan and remains infeasible;
- The project contract does not provide for revenue sharing mechanisms;
- The contracting authority has negotiated adjustments with investors and lenders (including return on equity, loan interest rates, and repayment schedules), but the financial plan remains infeasible;
- The State Audit Office has audited the revenue shortfall and the State’s share.
Revenue shortfall sharing is implemented once and does not require adjustment of the investment policy or project. Competent authorities decide the sharing ratio in a transparent and fair manner without increasing toll fees or extending the contract duration.
2.2. Key Provisions under Decree 122
(a) Determination of Financial Infeasibility
A project is deemed financially infeasible if:
- Toll stations must be reduced due to changes in planning or law; or
- Even after applying adjustments (including maximum fee adjustments and up to 50 years of toll collection), revenues are insufficient to cover taxes, operating costs, maintenance, and debt obligations.
(b) Negotiation Contents
Parties must agree on:
- Reduction in return on equity and loan interest rates;
- Adjustment of repayment plans;
- Updated State contribution ratio and revised financial plan ensuring feasibility.
(c) Revenue Shortfall Sharing Ratio
The State shares revenue shortfalls based on ratio k, which must not exceed 75% of the average revenue shortfall over the last three years.
State contribution is calculated as:
- State capital contribution = k × total investment
Subject to the condition that total State capital does not exceed:
- 50% of total investment (or up to 70% in specific PPP Law cases).
(d) Other Provisions
Decree 122 also regulates:
- Responsibilities of stakeholders in reviewing and adjusting financial plans;
- Procedures for requesting State revenue-sharing support.
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Early Termination Compensation for BOT Projects
3.1. PPP Law Framework
Investors are entitled to compensation in cases of early termination due to:
- Force majeure, policy changes, or public interest;
- National defense or security requirements;
- Serious contractual breaches (depending on responsibility allocation).
3.2. Provisions under Decree 122
(a) Eligible Cases
Compensation applies if:
- The project has been operational for at least 2 years but toll collection is not permitted; or
- Even after financial restructuring and State support, revenues remain insufficient despite a 50-year toll period.
Notably, Decree 122 does not regulate compensation for cases caused by fault of the contracting authority.
(b) Compensation Calculation
Compensation equals:
Total costs – collected revenues
Where total costs include:
- Construction investment (excluding State capital);
- Operation and maintenance costs;
- Taxes and fees;
- Audit costs;
- Loan mobilization costs.
Note: Return on equity is excluded from compensation.
(c) Loan Mobilization Cost
Calculated as:
- Loan amount × rate P (≤ 4%/year)
- Applicable from operation date to termination decision.
3.3. Payment Procedure
Main steps include:
- Investor submits termination request
- Contracting authority reviews within 45 days
- Agreement, contract amendment, and audit
- Payment of compensation
- Project handover and public ownership establishment
Disclaimer
This article reflects the personal views of the authors and is for informational purposes only. It does not constitute legal advice. BFSC Law LLC disclaims all liability for any reliance on this content. Legal matters should be reviewed on a case-by-case basis by qualified legal professionals.
For advisory services on BOT project termination under Decree 122, please contact BFSC Law LLC.
| Lawyer Phan Quang Chung | Email: [email protected] | Legal Assistant Tran Hong Hanh | Email: [email protected] |