Sector:

Transport – ports

Name of Agreement:

Agreement Relating to the Concessioning of a Port between a Port Authority and a Special Purpose Company (the Concessionaire)

Type of Agreement:

Concession Agreement

Region (if known):

 African Continent

Comments by:

Robert Phillips, LEGPS

Purpose and Context:

This agreement is to be read in the context of a decree appointing the Port Authority, a decree covering the grant of concessions and a new decree for the appointment of a regulator.

Circumstances where this contract may be appropriate:

Where the State wishes to improve port services by the introduction of private sector expertise and funding. There seems to be uncertainty as to what assets are to be transferred and whether there will be an assignment or lease of those assets. As this port was reliant on a wider hinterland than the host country there was a need to tie it in to the redevelopment of the railways.

Drafted for common law/ civil law jurisdiction:

Civil law and NOT easily adaptable to a common law jurisdiction

Main Issues:

(a) In addition to the rental under the leases for assets there is an entry fee and a fee based on performance.

(b) There is a concern that performance by the Concessionaire is not only to accord with the terms of the Agreement and laws but also the instructions of the Regulator. Unless the Regulator’s powers were clearly set out in statute or regulation this does lead to an open ended liability.

(c) There are a set of obligations breach of which give rise to a penalty on the Concessionaire. There are another set which gives rise to both a penalty and termination if not  remedied after notice and a third set with a penalty and termination without a remedial period .Penalties double if repetition in a 120 day period.  However provision should be made to address circumstances where a failure to insure may arise as a consequence of there being no market for that type of insurance or the premium levels no longer being available at commercial rates.

(d)  The Concessionaire has to generate port regulations and the like and has to agree a tariff regime with the railway. However the Port Authority does not  secure under the agreement continuing use of the  IT systems (such as might be used to track cargo, complete customs returns and provide relevant  government departments with statistical information) for a period following termination and the Concessionaire has no obligation to use best endeavours to secure the rights for the Port Authority thereafter on the same terms as available to the Concessionaire.  

(e)  An issue for the public sector is that moveable equipment may not transfer to the public sector on termination of the Concession where the Concessionaire is insolvent. Some equipment such as gantry cranes may not be easily and quickly replaceable. While certain of the assets are to be leased by the Port Authority to the Concessionaire there is no similar mechanism to deal with new equipment.

(f) The Concession is for 15 years.

(g) Provision is not made for third parties such as freight forwarders, shipping lines etc to retain their offices or other premises at the port after termination or expiration of the Concession Agreement.. If there is no protection at law then provision should be made for a grant of rights to occupy to those third parties preferably on the basis that they can continue to occupy when the Concession comes to an end so that the business of the port can continue.

(h) There is a bid bond which is replaced by a Rehabilitation Bond which is replaced by a Maintenance and Performance Bond and before Handback a Handback Bond has to be issued. The amount secured under the Bonds other than Bid and Rehabilitation has to be indexed.

(i) Port Authority to hold 33 percent of shares in Concessionaire. Pre-emption rights over remaining shares granted to Port Authority.

(j) Although Concessionaire takes ground condition risk there is a sharing of

·          Volumes for first dredging with Port Authority taking risk over a specified volume;

·          Man made hazards found by Concessionaire in the first year (including munitions).

(k) Marine services are subject to price regulation.

(j) Priority is to be given to local goods and services.

Possible additional provisions that it might be appropriate to include:

Although the agreement was prepared in 1998 the provisions as to records and access to records do not really reflect the position then and now with regard to electronic data.

There must be an issue as to whether the Civil Code gives adequate protection to the Concessionaire bearing in mind that there are a number of “agreements to agree”.

Provisions that may not be advisable to replicate/ may need further thought:

Provisions of wider general use:

Experience Since Coming Into Force (including any amendments) / if draft form, whether it has been applied:

Not known

Tracking Number:

Portconcession1