1. 22nd International Scientific Conference on Economic and Social Development –
Legal Challenges of Modern World Split, Croatia, June, 2017
ROUND TABLE DISCUSSION
CURRENT LEGAL CHALLENGES OF SUSTAINABLE DEVELOPMENT OF THE ADRIATIC PORTS OF NAUTICAL TOURISM
Valorisation of Legitimate Investments in the Ports of Nautical Tourism – a Condition for Sustainable Development
Assist. Prof. Iva Tuhtan Grgić
University of Rijeka, Faculty of Law

2. This presentation is a result of the author’s research under the installation research project no. 3061: Developing a Modern Legal and Insurance Regime for Croatian Marinas - Enhancing Competitiveness, Safety, Security and Marine Environmental Standards The project is financed by the Croatian Science Foundation

3. Constitution of the Republic of Croatia
Art. 49/4: The rights acquired through the investment of capital shall not be infringed by law or any other legal act. Art. 52/1: The sea, seashore, islands, waters, air space, mineral resources, and other natural assets, as well as land, forests, flora and fauna, other components of the natural environment, real estate and items of particular cultural, historical, economic or ecological significance which are specified by law to be of interest to the Republic of Croatia shall enjoy its special protection. Art. 52/1: The manner in which any assets of interest to the Republic of Croatia may be used and exploited by holders of rights thereto and by their owners, as well as compensation for any restrictions as may be imposed thereon, shall be regulated by law.

4. Legal status of maritime domain
Act on Ownership and other Real Rights, Art.3/2-3
sea and the seashore are common goods and they do not have capacity of being subject matter of the right of ownership and other real rights
res extra commertium
Republic of Croatia takes care, administers and is responsible for common goods, unless a particular piece of legislation provides otherwise
Maritime Domain and Seaports Act, Art. 3/1 and 5/2 MDSPA
Maritime domain is a common good of interest for the Republic of Croatia; it is under its special protection and is used under the conditions and in the way regulated by this Act.
Right of ownership or any other property right can not be acquired on maritime domain on any basis.

5. Investments in the nautical ports
a) nautical ports built before 1991
b) nautical ports built after 1991
a) building of the nautical port
b) investments done in order to fulfil special technical, environmental or security standards prescribed by law
c) extraordinary investments
d) commercial viability investments - for raising the standard of services
e) routine maintenance

6. Outstanding issues of nautical ports built before 1991:
legal separation of buildings and socially-owned land parcel achieved by the establishment of different para-real rights on the buildings – so called 'right to use'
maritime domain was res extra commertium, 'socially owned in common use'
users of maritime domain had 'right to use' BUT, was that the same right??
buildings were kept in records of assets
investments in constructions and maintenance done in accordance with the physical plans and based on the valid building permits

7. Outstanding issues of nautical ports built before 1991:
After 1991 – long process of transformation
A) social ownership turned into the civil ownership - the right to use the building turned into the right of ownership on the building, and the owner of the building became the owner of the land parcel
B) socially-owned enterprises turned into trading companies with determined owner (joint stock company or limited liability company)
Process of transformation in ports of nautical tourism (mostly after 1995)
the value of the social capital was estimated and entered into the company's share capital (uneven practice – value of buildings and structures, sometimes maritime domain (land) and structures, sometimes investments)
in some ports registration of ownership on the maritime domain was carried out in land registers
PRIVATISATION company's shares were sold

8. Outstanding issues of nautical ports build before 1991:
What is actually share capital in those companies?
What is going to happened after the termination of concession contract?
value of buildings, maritime domain and investments entered into share capital will have to be erased from the records of assets
share capital will have to be reduced
value of stocks and shares will fall
withdrawal of shares or reduction of the nominal value of the shares
liquidation?

9. Outstanding issues of existing nautical ports:
× valorisation of legitimate investments after the termination of concession
superstructure and infrastructure built on the maritime domain becomes (remains) a part of maritime domain without right to compensation for the increased value of the maritime domain nor to the priority concession
established business, brand
In the new concession granting procedure old concessionaire is in the same position as all potential concessionaires.
BUT new ports built in accordance with MDSPA: all potential concessionaires have to present feasibility study that contains the amount of investments and the mode of depreciation

10. Exception no. 1: Extension of the concession (Art. 22 MDSPA)
Exceptionally, at the request of the concessionaire,
county government can, with consent of the Government of the Republic of Croatia, extend concession period to total of 30 years
the Government of the Republic of Croatia can extend concession period to total of 60 years for the concession
and, following that, can change other conditions specified in the concession-granting decision and in concession contract, but only in the following cases:
if new investments justify this economically,
in case of a force majeure. 

11. Exception no. 2: ACI - Nautical tourism ports
Nautical tourism port is the port that serves for the reception and berthing of vessels, equipped to provide services to the port users and vessels. It forms a unified complex in a business, constructional and functional sense. Art. 10/1/2 of the Regulation on Classification of the Seaports Open for Public Traffic and Special Purpose Ports (2004) Port in the system – at least 5 ports of the same type and category operating in at least five counties under the same standard of business. (Art. 10/1/7) Special purpose ports of interest to the republic of Croatia are … ports in the system. Competent authority for concession granting procedure is GOVERNMENT OF THE REPUBLIC OF CROATIA.

12. Exception no. 2: ACI - Nautical tourism ports
Decision of the Government of the Republic of Croatia to revise county's decisions on concession for commercial exploitation of special purpose ports – nautical tourism ports Pula, Rab, Šimuni, Žut, Skradin, Trogir, Milna, Vrboska, Palmižana and Korčula. (2007)
based on the Art. 22 MDSPA and the Art. 10/1/7 of the Regulation (ports in the system)
concessions are extended until 2030.

13. Possible solutions?
introducing the procedure for the renewal of the concession?
introducing the right to priority concession?
contesting decision on concession granting and requiring a longer duration of concession?
introducing the right to compensation for the increased value of the maritime domain?
institute of unjust enrichment?
analogy with right to build?

14. Renewal of concession?
Art. 12 of the Directive 2006/123/EC on the services in the internal market
Art. 11 of the Croatian Act on the Services
Where number of authorisations is limited because of the scarcity of available natural resources or technical capacity, Member States shall apply:
a selection procedure to potential candidates which provides full guaranties of impartiality and transparency including adequate publicity about the launch, conduct and completion of the procedure
authorisation shall be granted for an appropriate limited period and may not be opened to automatic renewal
may not confer any advantage on the provider whose authorisation has just expired (or is about to expire)
not applicable

15. Right to priority concession?
contrary to EU law and national law (Art. 12 of the Directive 2006/123/EC on the services in the internal market and Art. 11 of the Croatian Act on the Services) BUT maybe as the transitional measure …the duration of the authorisation granted should be fixed in such a way that it does not restrict or limit free competition beyond what is necessary in order to enable the provider to recoup the cost of investment and to make a fair return on the capital invested. (p. 62)

16. Right to priority concession?
Ports built before 1991:
already have priority concessions
Question: could concessionaire reasonably be expected to take to recoup the investments made in operating the works and services together with a return on invested capital taking into account the investments required to achieve the specific contractual objectives.
if the investment return is not achieved because of wrong estimation of the concession period in the decision on concession, decision could be contested requiring a longer duration of concession

17. Right to compensation for the increased value of the maritime domain?
Ports built before 1991:
problem: the legislator allowed the entrance of the estimated investments into company's share capital
legitimate expectations
should the Republic of Croatia pay for the share capital which will have to be erased from the records of assets?
made in operating works and services.

18. Right to compensation for the increased value of the maritime domain?
Ports built after 1991:
public tender
feasibility study
the main feature of a concession is transfer to the concessionaire of an operating risk of economic nature involving the possibility that he will not recoup the investments
de lege lata – not applicable

19. Institute of unjust enrichment?
Judgement Pž 1558/08-5 of the High Commercial Court of November 25th 2008
the Court held that the claimant does not have right to compensation for investments done on maritime domain, because the increased value of the maritime domain does not constitute the assets of the Republic of Croatia due to the legal status of maritime domain as res extra commertium
Ruling Revt 73/ of the Supreme Court of Republic of Croatia of the March 2nd 2010
Supreme Court held that the term ‘assets’ has to be interpreted not in a sense of ownership, but wider, as any benefit or increase in assets, and the Republic of Croatia, even though is not the owner of the maritime domain, benefits from its increased value
the Court opened the door to the application of the institute of unjust enrichment for the investments done on the maritime domain

20. Institute of unjust enrichment?
Civil Obligations Act
Where a portion of assets of a person is transferred in any manner to the assets of another person and such a transfer is not based on a legal transaction, decision of a court or another competent authority or law, the acquirer shall return that portion of assets, or if this is not possible, compensate for the value of the benefit conferred.
Transfer of assets shall also imply benefit conferred by the performed act.
not applicable in cases where investments are carried out in accordance with the concession contract

21. Analogy with right to build?
Art. 295 Act on Ownership and other Real Rights prescribes legal consequences following the cessation of the right to build:
establishment of the legal unity of a land and a building
rules used to evaluate relations after termination of the usufruct shall apply accordingly to the relations between the landowner and the person whose right to build terminated
owner’s obligation to reimburse the party who lost the right to build for value of the building in real estate transactions which has augmented the value of his real estate

22. Analogy with right to build?
Usufruct, Art. 207 AOR
If the usufructuary makes improvements without coming to an agreement with the owner, he is authorised to separate and take for himself what he added, if that is possible without damaging the property in question; he may claim reimbursement for such improvements only if he would be entitled to such reimbursement as an administrator without an order.
BUT, provisions are not ius cogens

23. Analogy with right to build?
Lex specialis:
Law on administration and disposal of the assets owned by the Republic of Croatia
Ordinance on the establishment of the right to build and servitudes on the immovable owned by the Republic of Croatia
after the cessation of the right to build on the assets owned by the Republic of Croatia, the Republic of Croatia does not have the obligation to reimburse the market value of the building to the person whose right to build terminated

24. Valorisation of Investments as a Condition for Sustainable Development?
one of the most valuable recourses of the Republic of Croatia
foundation for economic development – should attract investments
legal framework should be encouraging and stimulating for concessionaire’s investments throughout the concession period
sustainable development is not all just about the environment; it is about finding better ways of doing things, both for the future and the present 

25. THANK YOU FOR YOUR ATTENTION!