Sea ports оf Ukraine are to be: in concession.

At last all the Sea Ports of Ukraine were included into The List of Concession Objects by the Cabinet of Ministers (the Resolution No.1055 dd. 15^th of October 2012).

Adoption of this Resolution is one of the steps within preparing to the port reform due to the Law on the Sea Ports of Ukraine (adopted on 13^th June 2012, entering into force on 14^th June 2013).

Let me remind that even before the Law on the Sea Ports of Ukraine there had been possibility of transferring ports and port infrastructure in concession. Such possibility had been provided by the Law on Concessions. But until nowadays none of the ports or port objects has been included into the List of Concession Objects which is issued by the Cabinet of Ministers. The concession is impossible in practice without including the object into the List.

So the Resolution No.1055 was both long anticipated and expectable.

Now all 18 Ukrainian ports can be transferred in concession.

And each port can be treated as one integral property complex or as the system of integral property complexes providing the set of services in the operation on sea ports and port infrastructure. It means that the port can be transferred into concession either as an integral object or being divided into parts (integral property complexes) each of them would be enough for complex rendering of port services. Each such part will be transferred into concession as a separate object correspondingly.

Even each small port can be divided nominally in separate complexes providing full cycle of services. But in practice not all the ports are probably to be divided. This Resolution as well as any other regulatory document does not stipulate any certain principles of reasonability for such division. It is obvious that the item on division into complexes and specification of their compound will be solved individually.

The Ministry of Infrastructure will be the concessor.

The Ministry of Infrastructure jointly with the Ministry of Finances and the Ministry of Economy is charged to develop a Resolution on Concession Tender and concession agreements.

The Resolution indicates directly the necessity of transferring obligations of public port (including on the credits received) to the concessionaire. Such obligations are related directly to the assets being transferred into concession. The obligations obviously mean not only monetary debts or obligations on advance paid port services but also obligations of port regarding to the property use (lease, joint activity etc.). Such approach is logical and necessary for providing stability and adherence to port counteragents’ interests. Such approach imposes additional obligations on the concessionaire which shall be taken into account on estimating the concession object and determining concession payments.

In Resolution to realize concession in the port sector there will be a lot to do. But the fact that ports were included into the List of the Concession Objects we may consider as a crucial step.

Arthur Nitsevych

Partner

Chairman of the NI of Ukraine

International Law Offices Interlegal

www.interlegal.com.ua

Arthur Nitsevych

nitsevych@interlegal.com.ua