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03 December 2003
The legal framework for the public rail service dates back to 1954. Among other things, Decree-Law 39780/1954 contains a general description of the assets which form part of the public domain and sets out the procedure for their reclassification as assets in the private domain. This procedure was reviewed in 1992 by Decree-Law 269/92 (now repealed), which clarified the terms and conditions for reclassification, providing that such assets could be reclassified only if this would not affect the public service.
In this context, the foreword of the new decree-law acknowledges the need to make the best possible social use of public domain assets, while at the same time achieving two key objectives: (i) the rational management of the public rail service, and (ii) the accumulation of financial resources with the aim of ensuring investment in the renewal and expansion of Portugal's rail infrastructure.
Decree-Law 276/2003 provides for the restructuring of the rail sector and authorizes REFER - the entity which holds the rail concession in Portugal - to apply, within certain limitations, for the reclassification of rail assets that form part of the public domain.
This point is significant because, as a matter of Portuguese law, trade in public domain assets is severely restricted. The Portuguese Civil Code provides that these assets may not be subject to private rights and entitlements; therefore, no deals may be performed in respect thereof insofar as they involve such rights and entitlements.
Article 24 of Decree-law 276/2003 stipulates that rail assets forming part of the public domain may be reclassified by means of a government decision, provided that this will not affect the service for which they are used or that the assets are expendable in this context. The provision thus expands the circumstances in which such assets may be reclassified, as compared to its counterpart previously in force. The relevant assets will then be integrated into the private estate of REFER and may be traded as regular assets as a result thereof.
However, integration of the assets into REFER's private estate is subject to two limitations. First, the assets must be disposed of or used to generate real estate profit. Second, all proceeds resulting from such disposal or use must be invested back into the rail system, in order to update the infrastructure.
The sale or use of the reclassified assets may involve the transfer of title and interest thereof, or any other suitable title.
The new legal framework governing rail assets that form part of the public domain has established new rules and investment possibilities, opening the door for deals involving assets which were formerly off-market. There is now a greater opportunity to conclude transactions such as cross-border leases and sale lease-back structures.
For further information on this topic please contact Pedro Cassiano Santos or Hugo Moredo Santos at Vieira de Almeida & Associados by telephone (+351 21 311 3400) or by fax (+351 21 352 22 39) or by email (email@example.com or firstname.lastname@example.org).
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Pedro Cassiano Santos
Hugo Moredo Santos