Univeristy of Rijeka Faculty of Maritime Studies Loris Rak, LL.B. ADRIATIC MARITIME LAW CONFERENCE Portorož, 26 - 28 May 2016 GOVERNANCE AND ORGANIZATION OF SEAPORTS – CROATIAN LEGAL FRAMEWORK Univeristy of Rijeka Faculty of Maritime Studies Loris Rak, LL.B.

CROATIAN LEGAL FRAMEWORK ON SEAPORTS – GENERAL OVERVIEW First major reform on port governance and organization started in 1995 by adopting the Seaports Act, 1995 The reform on port law followed the reform on maritime law (Maritime Code, 1994) The main objectives of new legislation: Application of Transtion of Social Compannies Act,1994, to port companies; Separation of operator and landlord function; The new legal entities were established for landlord functions - port authorities Port authorities assumed port infrastructure and port superstructure from port companies Port companies that were transformed in accordance with Company Act, 1995, were granted with primary concessions for port services

CROATIAN LEGAL FRAMEWORK ON SEAPORTS – GENERAL OVERVIEW (2) In 2003 the Government argued that the maritime domain and seaports should be regulated by single legislation, previously regulated by two separate legal sources (the Maritime Code, 1994, and the Seaports Act, 1995); The new legislation was adopted – the Maritime Domain and Seaports Act, 2003 The new legislation in considered as second reform; however, no significant changes were introduced Since 2003 governance and organization of seaports was generally regulated by governmental and ministerial bylaws adopted in accordance with the Maritime Domain and Seaport Act, 2003

CURRENT MAIN LEGAL SOURCES OF CROATIAN LAW ON PORTS Maritime Domain and Sea ports Act („Official Gazzete” No. 158/03,141/06, 38/09, 23/11) Maritime Code („Official Gazzete“ No. 181/04, 76/07, 61/11, 56/13, 26/15) Government Regulation on the conditions to be met by sea ports (“Official Gazzete” br. 110/04) Government Regulation on classification of ports open to public traffic and ports of special purpose (“Official Gazzete” No. 110/04, 82/07) Ordinance on the criteria for determining the allocation of individual parts of ports open to public traffic county and local importance, methods of payment bond, terms of use and calculation of the maximum amount of compensation and the distribution of income (“Official Gazzete” No. 94/07, 79/08, 114/12, 47/13) Ordinance on the conditions and method of maintaining order in ports and other parts of internal waters and territorial sea of the Republic of Croatia (“Official Gazzete” No. 90/05, 10/08, 155/08, 127/10, 80/12)

CLASSIFICATION OF SEAPORTS Classification of ports in respect of purpose: Ports open to public traffic Ports of specific purpose Classification of ports in respect of significance: Ports open to public traffic: Port of special (international) economic interest for the Republic of Croatia Ports of regional importance Ports of local importance Ports of state importance

ORGANIZATION OF SEAPORTS (2) Seaports are classified in respect of purpose for which they are established and in respect of significance they have for state and regional and local selfgovernement Both criteria for classification determin the governance model of ports In principle, the legislation on ports regulates primarily ports open to public traffic, while port of specific purpose are considered to be insufficiently regulated In principle, there are no significant difference in organization of ports open to public traffic that are differently classified in respect of significance

PORTS OPEN TO PUBLIC TRAFFIC PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) PORTS OPEN TO PUBLIC TRAFFIC Ports open to public traffic of special (international) economic interest for the state are governed by state port authorities State port authorities are established by Govrenmental Decree to govern, develop and maintain port infrastructure and superstructure of ports open to public traffic of special (international) economic interest for the state One port authority is established for every port of special (international) economic interest Central Government retains administrative supervision and inspection directly or through harbourmasters’ offices

PORTS OPEN TO PUBLIC TRAFFIC PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) PORTS OPEN TO PUBLIC TRAFFIC Ports open to public traffic of regional and local interest are governed by county port authorities Couny port authorities are established by regional coucils to govern, develop and maintain port infrastructure and superstructure of ports open to public traffic of both regional and local interest The regional government may establish one or more county port authorities to govern over all or several ports of regional and local interest in its territory Central Government retains administrative supervision and inspection directly or through harbourmasters’ offices

PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) LANDLORD FUNCTIONS Port area of ports open to public traffic is part of maritime domain by law Maritime domain is common domain of interest of the Republic Common domain - no ownership or other property rights are allowed on port area (including booth infrastructure and superstructure) Therefore, port authorities do not own port land and port infrastructure and superstructure, but marely govern it

PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) LANDLORD FUNCTIONS Port authorities govern, develop and maintain port infrastructure and superstructure Port authorities govern all significant cargo handling equipment (by Art. 118.a of Public Domain and Seaports Act, 2003., all harbor cranes that are permanently fixed to the port area in ports open to public traffic until the entry into force of the Act became state property, and management of it is transferred to port authorities) – question of principle superficies solo cedit? Port land can be leased to private operator through the concession Lease contracts – port operator enters into lease of port infrastructure, port superstructure and port handling equipment (i.e. lease contracts as administrative contracts – concession contracts governed by administrative law)

PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) REGULATOR FUNCTIONS Port authorities are entitled to adopt port bylaws that regulate order in the port in accordance with port legislation and ministerial ordinances – limited authority Regulator functions of port authorities are subjected to approval of harbourmaster’s offices Although port authorities do posses regulator functions to adopt port bylaws, they are powerless to enforce them – all enforcement authorities within port area are granted to harbourmaster’s offices Harbourmaster’s offices exercise their role beyond port authorities’ structure Coordination of port authorities and harbourmaster’s offices is limited

PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) OPERATOR FUNCTIONS Port services are provided by private port companies, regardless of ownership Port authorities can provide services of general economic interest and those services of which there is no economic interest of private sector Commercial activates within ports can be preformed only under the terms of concessions (certain exceptions are present) Concessions are dominant legal instrument of port governance and legal framework for port operations by private sector

PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) OPERATOR FUNCTIONS In principle, there are two main types of concessions: Lease contracts – port operator enters into lease of port infrastructure, port superstructure and port handling equipment (i.e. lease contracts as administrative contracts governed by administrative law) Concession contracts – port operators covers investment in port infrastructure and port superstructure and assumes all commercial costs Lease contract type is dominant – “primary concession” - concession sui generis as a result of transformation of social enterprises and their partition into port authorities (public entities) and port operators (companies) in 1995 In practice, both types are present

PORTS OF SPECIFIC PURPOSE PORT GOVERNANCE MODELS – PORTS OPEN TO PUBLIC TRAFFIC (GENERAL OVERVIEW) PORTS OF SPECIFIC PURPOSE Ports of specific purpose are governed by private operators (concessioners) in accordance with the terms of concession contract Both landlord and poerator functions are performed by concessioner Concessioners are allowed to adopt administrative measures required by relevant law on port governance – limited regulator function Central Government retains administrative supervision and inspection directly or through harbourmasters’ offices Types of ports of special purpose: Marinas, Shipyards, Industrial ports Special regulations for military ports

MAIN DISADVATAGES OF CURRENT LEGAL FRAMEWORK Legal status of port superstructure Port superstructure is common domain – no property rights on port superstructure (including real estate mortgages) Insufficient use of valuable asset Insufficient activities of financial sector in port investments – no asset based collaterals Insufficient application of conession contracts – port infrastructure generally financed by public sector (both Government and port authorities) Collision and antinomy of provisions on concessions (procedure and legal remedies are differently regulated by Public Domain and Seaport Act, 2003, and Concessions Act, 2012.) No differences in legal framework for ports of state interest and ports of county and local interest

LEGISLATIVE CHANGES AHEAD Need for legislative changes in port regulations emerged in 2009., after adopting the Concession Act, 2008. Activities taken in 2012. – Government Decree that entrusted Ministry of Maritime Affairs, Transport and Infrastructure to propose new legislation on maritime domain and seaports to harmonize it with Concessions Act, 2008 New Concessions Act, 2012., adopted by Parliament New Directive 2014/23/EU of the European Parliament and the Council on the award of concession contracts – need to make further legislative changes on concessions in order to comply with Directive In 2012. the new Maritime Domain and Seaports Bill published for public debate – withdrawn after many critics In 2015. the new Maritime Domain and Seaports Bill adopted – current status unknown

SEVERAL OPENED ISSUES ON PROPOSED BILL Should maritime domain and seaports be common domain or public domain – (other property rights would be allowed on maritime domain, e.g. mortgages on port superstructure)? Should a property rights legal regime be established on port superstructure during the concession contract - (legal framework provided by the basic law – Ownership and other property rights Act, 1997.) ? Should the ports be fully privatized or not? Should port authorities be abolished? Redefining the role of county port authorities

SEVERAL DE LEGE FERENDA PROPOSALS Aproperty rights legal regime should be established on port superstructure during the concession contract – no changes in other legislative is required – legal framework already provided in it Property right legal regime on port superstructure built on ground of concession contract could mobilize a valuable asset and provide it as collateral for financing investments in port superstructure – exclusion of legal risk for financial sector Port authorities should encourage BOT concessions - amount of public funds in developing the port infrastructure is inadequate for building new infrastructure, which limits port development New legislation should be harmonized with Concession Act, 2012., and adopt results and goals of new Directive on the award of concession contracts

SEVERAL DE LEGE FERENDA PROPOSALS Port authorities should remain legal entities entrusted with landlord functions and act as regulatory body to keep public interest and secure positive competition and free market on port area between port operators Port authorities should be banned form exercising commercial activates if there is interest for them by private sector but retain activities of general economic interest However, county port authorities should provide public service functions, i.e. the service port model should be established in ports of county and local interest – there are more then 59 ports of county interest and 352 ports of local interest – service port model Legal framework of new legislation should provide port authorities with limited enforcement power

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