LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Edijs Brants, Pauls Zeņķis and Kristens Vorslavs, BERG
Overall, the legal and procedural framework for PPPs in Latvia is both detailed and strictly regulated. 8.3 Governing Law Public sector contracts – such as PPPs, concessions, and public procurement agreements – are governed by Latvian law, primarily the Law on Public-Private Partnership and the Public Procurement Law. By con- trast, purely private contracts between project partici- pants, such as construction contracts or shareholder agreements, may be governed by foreign law if the parties agree. Disputes with public entities fall under the jurisdiction of Latvian administrative and civil courts, as Latvian law and public policy prohibit submitting such con- tracts to international arbitration or foreign courts. However, disputes arising from private project con- tracts may be resolved through international arbitra- tion or foreign courts if agreed by the parties. 8.4 Foreign Ownership Foreign entities can acquire real property in Latvia, though some restrictions apply. Under Section 28 of the Law on Land Privatisation in Rural Areas, land may be owned by citizens of EU and EEA countries, Switzerland, and states party to the OECD Capital Liberalisation Code. Foreign companies from these jurisdictions must also meet conditions, such as being a taxpayer in Latvia. Other foreign entities may acquire property but face additional restrictions and proce- dures. Public waters cannot be privatised with land, but sur- face waters, forests, and plants can. Both domestic and foreign lenders may hold mortgages or pledges over Latvian property, subject to conditions under laws such as the Land Register Law. 8.5 Structuring Deals Under the Law on Public-Private Partnership, the pro- ject company (private partner) may be either a special purpose entity established by the winning tenderer or the tenderer itself (a natural or legal person, or an association of such persons). In practice, project com- panies are usually formed as private limited liability companies ( sabiedrība ar ierobežotu atbildību ) or joint stock companies ( akciju sabiedrība ), though a branch
or representative office may sometimes be used to avoid creating a new entity. Key considerations when selecting the legal form include tax obligations (eg, corporate income tax) and governance requirements under the Commercial Law, which also regulates formation, minority protections, and transfer restrictions. Risk allocation between the public partner and the project company must follow the Law on Public-Private Partnership and related Cabinet of Ministers Regulations, while EU law and bilateral investment treaties should also be consid- ered. Foreign investment is generally not subject to notifica- tion requirements, but sector-specific rules apply to areas of national security, including critical infrastruc- ture, agricultural land, and gambling. 8.6 Common Financing Sources and Typical Structures In Latvia, domestic and regional banks are the prima- ry lenders for project financing. Projects are typically funded through senior debt secured by project assets, working capital, and pledges over company shares, bank accounts, receivables, and real estate. Bank-led senior secured loan packages are often combined with financing from Nordic and Baltic banks and support from the EU. This model is commonly used in sectors such as energy (renewables), real estate development, and transport infrastructure – a similar approach was applied in the Ķekava Bypass PPP. Project bonds and other alternative financing sources remain uncommon in Latvia. 8.7 Natural Resources Latvia is rich in natural resources, particularly forests, which cover about 53% of the country. Timber exports are generally restricted and allowed only if they com- ply with EU phytosanitary standards, sanctions-relat- ed restrictions (eg, the prohibition on exporting prod- ucts to Russia or Belarus), customs requirements, and increasingly mandatory sustainability certifications. Similar rules apply to other resources, such as peat and fish. Environmental and climate policies, including the EU Green Deal, also affect the management and export
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