What is a Concession Agreement?

A concession agreement is a contract between two parties where one party grants the other the rights to operate a particular business under certain conditions. In a concession agreement, land, property and other rights are negotiated between the two partied involved in the contract. 

Concession agreements can occur between governments and companies, where such companies are allowed to carry out business operations within the state jurisdiction upon meeting certain criteria. Concession agreements can also occur between two business owners where one party gives the other rights to operate in a facility, given certain conditions.

When is a Concession Agreement Used?

Concession agreements occur mostly between governments of countries and private businesses or corporations. The common concessions between governments and private individuals include the following;

• The right to use a particular region for mining activities by a private mining company.
• Rights given to a private business to use government infrastructures such as water supply, railway, seaports and others for private business.
• A tunnel constructed by the government can also be granted to a private organization under a concession agreement.

Usually, in concession agreements, some of the conditions given when a private business received exclusive rights to use a property include maintenance of the utility, repair when necessary and other remuneration.

Concession agreements are also popular among retail businesses, whereby these businesses use the facility or business location of the other party under certain conditions. Retailers can also reach a concession agreement with local authorities whereby they are given the right to sell their products at federal parks, amusement parks and other open spaces owned by the government. The conditions in a concession agreement can include payment of fees, percentage of revenue made or being liable for the cost of maintaining the facility.