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On 8 June 2012 the Ukrainian Parliament passed a law "On
the Seaports of Ukraine" (the
"Law"), the intent of which is to
re-organise the Ukrainian port industry and allow private
investment in port infrastructure, including the privatisation of
existing assets.
The Law, long-awaited by the national port industry,
establishes the basis of governmental regulation and defines new
procedures for building, expanding and closing seaports in Ukraine,
as well as the procedure for performing any economic activity on
the ports' territory.
The key changes that are introduced by the Law are:
real estate property, moorings and land plots within a seaport
territory are capable of being owned by private individuals or
companies and existing port infrastructure/companies can be
privatised following a set procedure;
the State is able to enter into lease or concession agreements
over moorings, land plots and any other port infrastructure for a
term not exceeding 49 years;
seaports became a point of border crossing, with Ukrainian
customs and sanitary/ecological check points for people and
property entering Ukraine from the sea;
a new state-run body with outposts in each Ukrainian seaport,
the Administration of Seaports of Ukraine (the
"Administration"), is in charge of
supervising the functioning, maintenance and use of seaports and
their infrastructure, including safety standards (but has no right
to prevent or interfere with the activities of any business
entities legally operating in the seaport).
The privatisation of seaport infrastructure is the most
significant change. Under the Law any new infrastructure built
through private investment will become the property of the private
investor(s). This extends to privately financed moorings built
before the Law came into effect.
Most of the existing assets open to privatisation are subject to
a compulsory tendering process. "Strategic" port
infrastructure is to remain State-owned and is not subject to lease
or concession agreements with private investors, who are only
allowed to enter into contracts for construction/reconstruction,
repair or modernization work.
Unfortunately the Law does not define what such
"strategic" assets are and further legislation will have
to specify exactly what assets will be subject to privatisation.
This is likely to stretch the timescale by which existing assets
will be tendered.
The Law also provides for the creation of "free economic
zones" within the territory of seaports, which could offer
significant tax, monetary and customs advantages to
investors/owners.
Even if the privatisation process of existing assets may suffer
delays, the Law is a very promising opportunity for investors and
may open the door to a more efficient and trade-friendly port
industry, bringing immediate benefits to all those who are
currently funding new built infrastructure due for completion after
the official coming into force of the Law.
This article was written for Law-Now, CMS Cameron
McKenna's free online information service. To register for
Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance
only. The information and opinions expressed in all Law-Now
articles are not necessarily comprehensive and do not purport to
give professional or legal advice. All Law-Now information relates
to circumstances prevailing at the date of its original publication
and may not have been updated to reflect subsequent
developments.
The original publication date for this article was
08/06/2012.
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