Since the enactment in 1991 of the Public Works Concessions Act, the Government of Chile has implemented through the Ministry of Public Works (the “MOP”) an important and successful program of toll road concessions which has represented total investments by  local and foreign private sector companies in excess of US$ 4.6 billion.

The usual form of long term financing for this kind of infrastructure projects has consisted in the refinancing of short term bridge loans provided by local banks for the construction phase of the project by means of the issuance by the concession holder of bonds insured by a highly rated foreign reinsurer and placed among institutional investors (typically, life insurance companies and pension funds) in the local market.

In structuring the aforesaid financing scheme, until now, the regulations regarding failure of payment of tolls by users and collection procedure have not represented a major concern for bond insurers. And the reason is very simple. All prior projects have contemplated toll plazas with barriers where the users must necessarily stop to pay the toll. This is obviously not the case with the upcoming urban concession free flow toll roads in which the users’ have electronically charged accounts with the concession holders. It then becomes crucial to have an effective legal framework to deter unauthorized use of the roads and enforce toll payment.

Below, we briefly discuss the Chilean legal framework applicable to the unlawful use of the free flow toll roads. The existing framework has been questioned by some entities in the market. However, in general the law appears to contain at least the basic elements to assure the workability of the system and secure the projected revenues. Judge for yourself.   

Legal Compensation of the Concession Holder 

The Public Works Concessions Act establishes the concession holder’s right to collect payment against users that fail to pay the toll before the local police courts. Such users are severely penalized. The court must impose a compensation in favour of the concession holder equivalent to the greater of 40 times the amount of the unpaid tolls plus indexation or two unidades tributaries mensuales [i]. The law also makes the defendant liable for all court costs and minimum attorney fees.

The Traffic Violation

The Traffic Act was amended to treat use of free flow toll roads without the electronic device that allows collection (tag) or other auxiliary system (day pass) as a traffic violation. The Department of Transportation of the MOP created a road sign that alerts drivers of an upcoming free flow toll road and another road sign that indicates that from that point use is strictly reserved for vehicles holding  a tag or day pass. The traffic offense -considered gross by the law- consists in driving a motor vehicle in violation of the road sign.  Offenders are summoned by the local police courts and are subject to a fine of Ch$ 30,600,[ii] for which payment the owner of the vehicle involved in the violation is liable, whether the driver or not. The violation is included in the owner’s driving record (or driver’s driving record, if a person other than the owner is identified as the violator), when applicable.

Local police court proceedings and admissibility of evidence

The competent court to entertain the traffic violation proceeding and toll collection proceeding is the local police court with jurisdiction in the place where violation took place. Service of process made at the address established in the vehicle registration with the National Register of Motor Vehicles (“RNVM”) is deemed valid, even when the owner changed it but failed to update it.[iii] Proceedings before local police courts are one of the shortest and most expeditious in the system.

The electronic equipment and other means used for collection of tolls are legal means for the registration of traffic violations.[iv] Evidence produced by such equipment, such as film, photographs or other forms of reproducing images and sounds, are admissible as evidence in court in both proceedings.

The Register of Unpaid Fines

Every two months, local police court clerks report unpaid fines to the Register of Unpaid Fines[v] (hereinafter, the “Register”), which carries a list of the vehicles involved in violations that resulted in fines that were not paid.

Once a vehicle becomes part of the Register, no Municipality in the country may grant the required annual license unless the fines, adjusted per indexation, and processing fees are also paid. Without the annual license, a vehicle may not be driven in any part of the national territory. Law enforcement officers and inspectors are required by law to withdraw from the street any vehicle without a valid annual license and deliver it to a municipal lot.

A registration in the Register is kept for three years.

The Tag Bailment Contract

The concession holder shall enter into an agreement with the toll road users evidencing bail of the tag and setting forth the rights and obligations of the parties, including, inter alia, the obligation of the users to pay for the use of the road as measured by the electronic devices and the right of the concession holder to deactivate the tag for failure of payment by the user for two consecutive billing periods.

Conclusion

In our view, the legal framework provides an important deterrent to users who might be inclined to use a toll road without bearing a tag or being in possession of a day pass. The burdensome money penalty payable by unauthorized users, the creation of the traffic violation associated with yet another payment, the general absence of procedural and evidentiary issues, the creation of the Register of Unpaid Fines, the restriction to renew the required annual license when having unpaid fines and the concession holders’ contractual authority to deactivate a tag for lack of payment conform a legal structure that properly administered should discard failure of the system on legal grounds. In addition, concession holders and financiers should also bear in mind that Chilean citizens in general have a reasonable degree of civic culture and a tradition for the respect of the law.IJ

By José Manuel Larraín, Francis Lackington and Andrea Sougarret of the Santiago, Chile firm of Baeza, Larraín & Rozas - Abogados

http://www.baezacia.cl

[i] An indexed unit that is monthly adjusted. In May of 2003, two unidades tributarias mensuales were equivalent to approximately US$85.00

[ii] Approximately US$45.00

[iii] Failure to update the address reported to the RNVM is in itself subject to a fine of 3 to 5 unidades tributarias mensuales (US$127.50 to US$212.50)

[iv] The equipment must be authorized and certified by the MOP.

[v] The Register’s management concession was granted to a private entity for a period of 5 years. It is currently in operation.