For example, there is a concession contract between the French and British governments and two private companies for the Channel Tunnel. British Channel Tunnel Group Limited and France-Manche S.A. operate the Channel Tunnel, often referred to as “Chunnel” under this agreement. The tunnel connects the two countries and allows the transport of passengers and goods between them. It is 31.5 miles long, with 23.5 miles under the English Channel. The underwater tunnel is therefore the longest in the world and an important part of the public infrastructure. A common area for concession agreements between governments and private companies involves the right to use certain parts of public infrastructure, such as railways.B. Rights can be granted to individual companies – which creates exclusive rights – or to several organizations. As part of the agreement, the government may have construction and maintenance rules as well as current operational standards. Concession contracts are, at best, a form of outsourcing that allows all parties to benefit from comparative advantages.
Often, a country or company has resources that lack the knowledge or capital to use them effectively. By externalizing the development or exploitation of these resources to others, it is possible to earn more than they could alone. For example, a country could lack the capital and technical capacity to exploit offshore oil reserves. A concession contract with an oil multinational can generate revenue and jobs for that country. Concession agreements, also known as concession agreements, cover different sectors and are available in many sizes. These include mining concessions worth hundreds of millions of dollars, as well as small food and beverage concessions at a local cinema. Regardless of the type of concession, the concessionaire must normally pay the party granting the concession fees. These fees and the rules that allow them to change are usually described in great detail in the contract. The terms of a concession contract depend largely on his wishes. For example, a contract to operate a food concession in a popular stadium may not be very incentive for the concessionaire.
On the other hand, a government that wants to attract mining companies to an impoverished area can offer considerable incentives. These incentives could include tax benefits and a lower licensing rate. Concession contracts can also be used for risk management. Suppose a country invests a significant amount in the production of a single product. This country will then have a high idiosyncratic risk related to the price of this raw material. For example, the governments of Brazil and Mexico have invested heavily in state-owned oil companies. The value of their assets and income fell significantly when the price of oil fell in 2020. Countries that grant concessions may lose revenue from concession fees, but they do not risk as much capital.
A concession contract is a contract that gives an enterprise the right to carry on a particular activity under the jurisdiction of one government or on the ownership of another enterprise under certain conditions. Concession contracts often involve contracts between the non-state owner of a facility and a concessionaire or concessionaire. The agreement confers on the concessionaire the exclusive rights to operate its activities in the installation for a specified period of time and under certain conditions. . . .