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In public-private partnerships, BOT is a relatively common form. Due to the long cooperation period, disputes frequently arise during the process. In practice, there is significant controversy over whether BOT agreements fall under civil and commercial agreements or administrative agreements. Some cases classify BOT agreements as civil agreements and apply civil law for adjudication, while others classify them as administrative agreements and apply administrative law for adjudication. This creates significant confusion regarding the choice of litigation procedures when disputes arise. This article will explore the nature of BOT agreements—whether they are civil agreements or administrative agreements—based on relevant regulations, judicial precedents, and the author's practical experience.

I. What is a BOT agreement?

BOT stands for build-operate-transfer. Some viewpoints hold that BOT is essentially a method of infrastructure investment, construction, and operation, where the government and enterprises enter into an agreement. The enterprise invests in and constructs the infrastructure, and the government grants the enterprise a franchise license, allowing it to manage and operate the infrastructure for a certain period and obtain profits. Upon expiration, the infrastructure is transferred to the government free of charge. The agreement reached between the government and the enterprise regarding the aforementioned cooperation model is the BOT agreement.

Provisions related to BOT agreements:

The Notice of the General Office of the State Council Forwarding the Guidelines on Standardizing the Implementation of the New Government-Social Capital Cooperation Mechanism Issued by the National Development and Reform Commission and the Ministry of Finance (State Council Office Letter [2023] No. 115) stipulates in Article 1: "(2) All projects shall adopt the concession model. Government and social capital cooperation shall be implemented entirely through the concession model. Based on the actual circumstances of the project, appropriate specific implementation methods such as Build-Operate-Transfer (BOT), Transfer-Operate-Transfer (TOT), Renovate-Operate-Transfer (ROT), Build-Own-Operate-Transfer (BOOT), Design-Build-Finance -Operate-Transfer (DBFOT) models, and clearly define the ownership of assets during the construction and operation periods in the contract, as well as the rights, responsibilities, and interests of all parties."

The Notice of the General Office of the State Council Forwarding the Opinions of the Ministry of Finance, the National Development and Reform Commission, and the People's Bank of China on Promoting the Government and Social Capital Cooperation Model in the Public Services Sector (State Council Office Document [2015] No. 42) stipulates: "(14) Enhance the scientific nature of decision-making for new projects. Local governments shall, based on local socio-economic development needs and in conjunction with fiscal revenue and expenditure balance conditions, comprehensively evaluate the economic and social benefits of new projects and conduct fiscal affordability assessments to ensure decision-making quality. Based on factors such as the project implementation cycle, pricing mechanisms, investment return levels, risk allocation frameworks, and required government investments, appropriate operational models such as Build-Operate-Transfer (BOT) and Build-Own-Operate (BOO) shall be selected."

The State Council's Guidelines on Promoting International Capacity and Equipment Manufacturing Cooperation (State Council Document [2015] No. 30) stipulates: "(20) Expand cooperation methods. While continuing to leverage traditional engineering contracting advantages, fully utilize China's financial and technological strengths to actively pursue cooperation models such as ‘engineering contracting plus financing’ and ‘engineering contracting plus financing plus operations.’ For eligible projects, encourage the use of BOT, PPP, and other methods to vigorously expand international markets and engage in equipment manufacturing cooperation. Collaborate with eligible countries to form a united front and jointly develop third-party markets. International capacity cooperation should flexibly adopt various methods such as investment, engineering construction, technical cooperation, and technical assistance based on the actual conditions and characteristics of the host country, and collaborate with the host country's government and enterprises."

The Office of the National Development and Reform Commission issued the “Model Franchise Agreement for Government and Social Capital Cooperation Projects (Draft Version for 2024 Trial Implementation)”: "Article 10 Franchise Implementation Methods [Note: Depending on the actual circumstances of the project, concession projects may reasonably adopt specific implementation methods such as Build-Operate-Transfer (BOT), Transfer-Operate-Transfer (TOT), Renovate-Operate-Transfer (ROT), Build-Own-Operate-Transfer (BOOT), or Design-Build-Finance-Operate-Transfer (DBFOT). This article should specify the specific method and briefly describe the project transaction structure arrangements, etc.]"

The BOT cooperation model is typically used for projects with large investment amounts and long operational periods. The operational cycle of a BOT project often spans several decades. This is a convenient approach for governments that require infrastructure development but lack sufficient funds. However, precisely because of the lengthy operational period, and given that actual circumstances are constantly changing and project leaders may also change, disputes during the operational phase following project completion are not uncommon.

II. The Nature of BOT Agreements: Administrative or Civil and Commercial Disputes

Whether a BOT agreement is an administrative agreement or a civil and commercial agreement, and whether disputes arising from the performance of such an agreement constitute administrative disputes or civil and commercial disputes, are subjects of significant controversy. The reasons for this controversy may lie in the fact that BOT agreements contain both provisions where the contracting parties, as equal civil entities, agree on their respective rights and obligations, and provisions regarding administrative permits for franchise operations. Some BOT agreements are even directly titled “Franchise Agreement.” Following the implementation of the “Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Administrative Agreement Cases,” Article 2 stipulates: “Citizens, legal persons, or other organizations may file administrative lawsuits regarding the following administrative agreements, and the people's courts shall accept such cases in accordance with the law: (1) government franchise agreements...” some people directly classify BOT agreements, particularly those titled “Concession Agreements,” as administrative agreements and regard related disputes as administrative disputes. However, Article 28 of the same provisions states: “For disputes arising from administrative agreements entered into after May 1, 2015, the Administrative Litigation Law and these provisions shall apply. For disputes arising from administrative agreements entered into before May 1, 2015, the laws, administrative regulations, and judicial interpretations in effect at the time shall apply.” Therefore, some people also believe that, using May 1, 2015, as the cutoff date, BOT agreements signed prior to that date fall under the category of agreements without explicit legal provisions, and their nature can be chosen as either civil/commercial or administrative.

The author holds a different view on this matter. The author believes that whether a BOT agreement is an administrative agreement or a civil/commercial agreement cannot be determined solely by the agreement's name or the cutoff date, but rather should be judged based on the specific content of the BOT agreement, and the procedural choice should be determined based on the nature of the dispute. From relevant judicial precedents, courts supporting a civil nature review generally adopt a dichotomous approach to franchise agreements, dividing administrative agreements into two parts: administrative management and civil contracts. They then assess the focal point of the dispute to determine whether it falls under the administrative management category or the civil contract category; Courts that support reviewing the agreement as an administrative matter generally do not analyze the specific focal point of the dispute but instead make a determination from a more macro perspective, classifying it as an administrative matter.

To facilitate a clearer understanding, the following are excerpts from relevant case examples:

Support for civil and commercial cases

[Supreme Court Civil Appeal No. 789 (2019)], the Supreme People's Court held: "This case involves a dispute arising from the performance and liquidation of the aforementioned BOT agreement. Although one party to the contract is the Xingyi Municipal Government, the contracting parties, Weilu Company and Chuanjian Company, still enjoy full autonomy of will in the process of contract conclusion, performance, and liquidation, and are not subject to unilateral coercion by administrative actions. The content of the contract reflects the agreement between the contracting parties, as equal civil entities, on the rights and obligations between the two parties, and clearly exhibits the characteristics of a civil and commercial legal relationship. Furthermore, the contract does not merely address administrative approval or administrative licensing matters themselves; the relevant administrative approvals and licenses involved are part of the contract's performance, and this does not affect the determination of the contract's nature. The first-instance court's decision to hear this case as a civil case was appropriate, and this court upholds it."

【(2018) Supreme Court Civil Appeal No. 1319】, the Supreme People's Court held: "The ‘Xinling Highway Project Agreement’ involved in this case is a BOT contract. The basic model of a BOT contract is that an investment entity enters into a contract with the government, under which the investment entity invests in, constructs, and operates the project, and the relevant government department grants an exclusive operating right, enabling the investment entity to recover its investment and obtain returns through the exclusive operation of the project. Although one party to the BOT contract is a government agency, the content of the contract reflects a civil and commercial legal relationship, making it a civil and commercial contract. Disputes arising from the performance of such a contract fall under civil disputes."

【(2015) Min Yi Zhong Zi No. 244】, the Supreme People's Court held: "This case is a typical government concession agreement under the BOT model. The direct purpose of the contract in question is to construct the Xinling Highway from Shangbali in Hui County, Henan Province, to Guanyeping at the provincial border with Shanxi Province. The primary purpose of the development project is to develop and operate the Xinling Highway, establish a toll station on the Xinling Highway, and engage in profit-making activities, rather than providing public services free of charge to the general public. Although one party to the contract is the county government, the counterparty, Xin County Company, still enjoys full autonomy in negotiating and determining the content of the contract and is not subject to unilateral administrative coercion. The contract includes specific rights, obligations, and breach of contract liabilities, all of which reflect the equal and equivalent mutual agreement of both parties. The contract in this case does not merely address administrative approval or administrative licensing matters themselves. The relevant administrative approvals and administrative licenses mentioned in the contract are part of the contract's performance and constitute a component of the contract, and cannot determine the nature of the contract in question. From the perspective of the purpose, responsibilities, parties, actions, and content of the contract in this case, the contract clearly has the nature of a civil and commercial legal relationship and should be characterized as a civil and commercial contract. It does not fall under the circumstances specified in Article 12(11) of the new Administrative Litigation Law or the second paragraph of Article 11 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Administrative Litigation Law of the People's Republic of China (Judicial Interpretation [2015] No. 9). The claim by the county government that the contract in question is an administrative contract and cannot be accepted as a civil case lacks legal basis.

【(2014) Min Er Zhong Zi No. 40】, the Supreme People's Court held: "Regarding the impact of the Transportation Bureau's administrative status on the legal relationship in this case. First, the Transportation Bureau's administrative status does not affect the independence of the dispute in this case. During the performance of the BOT Agreement and the Supplementary Agreement, specific administrative actions by relevant administrative entities were intertwined. In these two distinct legal relationships, the parties overlap: the parties to the civil contract are the administrative entity and the administrative relative in the relevant administrative legal relationship. However, the agreement and the administrative acts involved in its implementation, such as administrative approvals and management matters, are governed by different legal norms. Although these administrative acts may affect the parties' cooperation, they cannot be used to deny the existence and independence of the civil contractual relationship between the parties. ... Second, the administrative status of the Transportation Bureau cannot automatically determine that the dispute in this case is an administrative legal relationship. The actual nature of the disputed legal relationship cannot be determined solely based on the specific status of one party. In this case, whether the dispute is related to the exercise of administrative authority by the administrative entity should be determined by considering the specific content of the dispute and the nature of the targeted behavior.

Support for administrative cases

【(2019) Supreme Court Administrative Appeal No. 14276】, the Supreme People's Court held: "Pursuant to Article 12, Item (11) of the Administrative Litigation Law of the People's Republic of China: 'The people's courts shall accept administrative litigation brought by citizens, legal persons, or other organizations in the following cases: (11) where an administrative agency fails to perform its duties in accordance with the law, fails to perform in accordance with an agreement, or unlawfully amends or terminates government-approved franchise agreements, land and housing expropriation compensation agreements, or other agreements.' “In this case, the district government entered into the ‘Harbin to Hongxing Township Engineering Construction Project BOT Contract Documents’ with Hengtong Company, granting Hengtong Company the exclusive rights to the Harbin-Hongxing Highway (including construction and commercial operation), which constitutes a typical government concession agreement. Disputes arising from the performance or termination of such agreements fall within the jurisdiction of administrative litigation.”

【The Supreme People's Court released the second batch of typical cases involving administrative agreements—the case of a certain international company and Hubei Expressway Company suing the Jingzhou Municipal Government of Hubei Province and the Hubei Provincial Government for terminating the concession agreement and administrative reconsideration】. The Intermediate People's Court of Wuhan City, Hubei Province, ruled at first instance: The agreement in question was granted by the Jingzhou Municipal Government to accelerate the construction of highways in Hubei Province and improve the layout of the highway network, granting the investment and operational rights for the Honghu to Jianli section project to a certain international company through the BOT model. This constitutes the exercise of administrative power through an administrative agreement. During the conclusion and performance of the administrative agreement, not only must the administrative agency adhere to its statutory authority, comply with mandatory provisions of laws and regulations, and fulfill all obligations under the agreement, but the counterparty to the administrative agreement, a certain international company, must also strictly comply with statutory and contractual obligations. Otherwise, the administrative agency has the right to terminate the agreement in accordance with the law and the terms of the agreement."

the Wuhan Intermediate People's Court held: "Article 10 of the relevant Acquisition Framework Agreement provides: 'In the event of any dispute arising from the performance of this agreement, the parties shall resolve it through friendly negotiations. If negotiations fail, the matter shall be submitted to the Wuhan Arbitration Commission at the place where the agreement was signed for arbitration.' However, according to the final judgment (2021) Hubei Administrative Appeal No. 323 issued by the Hubei Provincial Higher People's Court on November 14, 2022, it was held that 'the BOT agreement is a typical administrative agreement, which, as a special type of administrative act, combines the unilateral nature of administrative acts with the contractual nature of agreements.' The Acquisition Framework Agreement in question was derived from the BOT Concession Agreement. The Acquisition Framework Agreement was an administrative agreement voluntarily entered into by Company B and Environmental Company after full consultation, with the approval of the Jiangxia District Government, rather than a civil agreement between equal civil parties."

From the views of the Supreme People's Court and other courts in the aforementioned case, it can be seen that judicial authorities currently have significant divergences regarding the nature of BOT agreements, with even diametrically opposed positions. From the judicial documents supporting the civil nature of BOT agreements, it is evident that courts do not simply classify disputes as administrative cases merely because one party to the concession agreement is a government agency or the agreement involves administrative approval. Instead, they comprehensively assess the nature of the agreement and the case based on the specific terms of the concession agreement, the rights and obligations of the parties, the disputed matters, and the litigation/arbitration claims. Judicial documents supporting the administrative nature of BOT agreements typically directly state that BOT agreements are government concession agreements/administrative agreements without further analysis. Additionally, we have identified cases in recent years where the nature of the BOT agreement was not analyzed in the judicial documents but were directly handled as civil cases. Due to space constraints, these cases are not listed here in detail.

Additionally, on May 21, 2024, the Office of the National Development and Reform Commission issued the “Model Franchise Agreement for Government and Social Capital Cooperation Projects (Draft) (2024 Trial Version).” In the latest model franchise agreement, Article 79, Item 2, “Dispute Resolution Methods,” stipulates: "Except as otherwise provided in this Agreement, if the dispute cannot be resolved through friendly negotiations 【】, the dispute cannot be resolved through friendly negotiations, the parties to this Agreement may, in addition to filing an administrative review in accordance with the law, submit the dispute to the people's court with jurisdiction for litigation in accordance with the law. However, for disputes of a civil or commercial nature arising from the failure of Party A to fulfill its monetary payment obligations under this Agreement or the failure to fulfill such monetary payment obligations in accordance with the agreement, the dispute shall be submitted to 【(***) the people's court with jurisdiction for litigation】/ 【(insert name of arbitration institution) Arbitration Commission in accordance with its then-effective arbitration rules】." It can be seen that this provision clearly distinguishes between civil and commercial disputes in franchise agreements, explicitly stating through the contract template that franchise agreements may include civil and commercial disputes, which should be resolved through civil and commercial means. From the template, although its use is not mandatory, the relevant authorities have made a simple distinction regarding the nature of disputes: disputes involving monetary payment obligations or the failure to fulfill such obligations in accordance with the agreement are civil and commercial disputes; other disputes should be resolved through administrative reconsideration and litigation. Of course, the distinction made in the template is relatively simplistic and cannot cover all disputes, but it provides insight into the relevant authorities' stance on franchise agreements—acknowledging the overlap between administrative and civil/commercial aspects in BOT agreements and the need for separate handling.

In summary, based on the judicial precedents currently available, there are still differing approaches to the nature of BOT agreements. From the judicial precedents observed so far, a simple summary is as follows: cases filed under civil procedures are typically handled as civil cases, and courts reject defenses based on administrative nature; Cases filed under administrative procedures are treated as administrative cases, and the court rejects civil-related defenses. The administrative and civil courts have diametrically opposed views on the nature of similar agreements, which has caused some confusion in analyzing the nature of subsequent cases. The author believes this may be due to the legislation being too general to cover every specific behavior, or because there is still controversy among legislators and judicial authorities on this issue. For this reason, the author has had preliminary discussions with an expert in administrative law from a certain university, who believes that all BOT agreements should be classified as administrative agreements, regardless of their content or the nature of the dispute. However, when communicating with staff from the case filing division of a certain court, it was suggested that claims requiring the government to pay fees in accordance with the agreement should be handled as civil cases. Which of these opinions is more reasonable from a legal perspective cannot be summarized in a few words. When faced with specific issues, it is necessary to analyze and argue the case to choose the most appropriate approach. After analysis and argumentation, the author believes that regardless of whether a BOT agreement is named a concession agreement or contains concession-related content, due to its complexity, it should not be simply classified as an administrative agreement. If it reflects the equality of the contracting parties, the rights are based on contractual agreements, and the project has a profit-making nature, it should be classified as a civil and commercial contract, specifically an “unnamed contract.” From practical experience, disputes arising from BOT agreements can currently be litigated through civil proceedings, and some courts explicitly classify such BOT disputes as civil cases during the filing process. (To be continued...)