The Necessity of Monitoring on Privatization in Line with the Principle of Balancing Triple Interests

دانشنامه حقوق اقتصادی

Volume 27, Issue 18, June 2021, Pages 251-274   

Document Type: Scientific research

DOI: 10.22067/lowecon.2021.39481

Authors

mohsen sadeghi¹; Atefeh Ajori Atask^{* 2}

¹Associate Professor of Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran

²Assistant Professor of Law, Faculty of Literature and Humanities, Birjand University, Birjand, Iran

Abstract

Extended Abstract
Introduction
One of the essential prerequisites for success in privatization is the implementation of principles governing it. Identifying and introducing these principles to the legislator has the benefit of making legislation subject to a specific policy in the country's legal system. In privatization, according to its nature and objectives, the most important principle to be considered is the principle of monitoring. The necessity of monitoring on privatization is obvious, but what this article addresses is its analysis based on the Principle of Balance of Triple Interests; Because for the privatization to be successful, in addition to the benefit of the parties to the contract, the interests of third parties affected by the contract, including workers of the privatized companies, the consumers of the products of these companies, and on a wider scale, the general public must be considered in the assignment contracts. It is clear that the interests of the government as a party to the contract are respected, and the government has more power to secure its interests because it regulates privatization contracts. For a successful privatization, given the widespread impact of the privatization program on interests of the general public, in addition to securing the interests of the parties to the contract, interests of the general public (consumers) must also be considered. In such a way that after the transfer, goods and services are offered to the people with lower costs and superior quality and the private sector does not abuse the situation and, for example, does not create a monopoly in the market and does not distort competition. To realize this basic principle, other principles are governing privatization including the principle of monitoring, which is examined in this article.
 
Theoretical frame work
In addition to monitoring the privatization process, the government should not forget to monitor the management of the non-governmental sector after the privatization and should monitor economic activities and their consequences. Therefore in this study, privatization monitoring is examined in two stages; The first stage is monitoring during privatization, which must be done by an independent entity to ensure its health. Ignoring this rule in the “Law on Implementation of General Policies of Principle (44) of the constitution” had had negative consequences and needs to be reconsidered. Second stage is post-privatization monitoring to ensure the implementation of the provisions of the contract by the assignee, and the desired supply of goods and services to the consumers.
Methodology
This study attempts to answer the main questions of this research based on a descriptive-analytical method and tries to analyze various related statutes and regulations with a comparative study.
Results & Discussion
One of the tools for governments to implement the principle of monitoring is the regulation and drafting of standard assignment contracts, which is also foreseen in Iran's privatization program, but it has shortages that need to be corrected. One of the most important drawbacks is the criteria of assignee competence in the privatization process and how they are achieved are ambiguous in most privatization methods and are not accepted by the monitoring systems, which need to be corrected. Another prerequisite for monitoring the implementation of privatization contracts is the provision of necessary legal guarantees. Requiring the private sector to submit activity reports at specified times after privatization, commitment to expand the firm's activities, commitment to increase the company's capital after a specified period are some of the guarantees that the government must obtain from the private sector. The stipulation of these guarantees in the law regulates the exercise of supervision. However, according to the Principle of Balance of Triple Interests, these guarantees should not be made in such a way that the investment incentives of the private sector are reduced and the sector finds itself faced with heavy and unconventional tasks; For example, the commitment that the private sector is required to retain all employees of the state-owned enterprise and to add some staff to the complex each month is an unusual obligation that is included in privatization contracts and should be reviewed.
Conclusions & Suggestions
In this paper, the basis and mechanism of its application are examined, and suggestions are provided for efficient monitoring during privatization and implementation of privatization contracts:

An independent entity must be assigned in the “Law on Implementation of General Policies of Principle (44) of the constitution” to monitor the privatization process.
The criteria for transferee competence in the privatization process must be clearly defined.        
For drafting privatization contracts, it is also suggested to add a legal expert to the composition of the transfer board members.
The government must obtain appropriate legal guarantees to ensure the implementation of privatization contracts.

 

Keywords

Privatization contracts; Principle of Balance of Triple Interests; Principle of Monitoring; Regulation; Standard Contract

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