Fondul Proprietatea, which owns major energy and general shares in the Romanian economy, is seriously concerned by the renewed steps to approve the draft law amending the Government Ordinance no. 22/1999 on ports administration, which was re-examined and approved through an emergency procedure by the Senate on 15 May, despite being declared unconstitutional in its entirety by the Constitutional Court on 28 February 2017, the Fund announced.
”If implemented, the law would be very damaging for all of Romania’s port administrations and the Romanian state budget, leading to tens of millions of euros in lost revenues for Constanta Port alone.”
According to provisions in the draft law, the level of rent for port’s land and infrastructure leased to operators who refuse to sign rental contracts should be fixed for a 10-year period at the level currently paid based on contracts for the so-called utilization of ports domain (“UDP”), which for example in Constanta Port varies between 0.22 RON and 0.36 RON per square meter per month.
Most of these contracts were concluded some 10-15 years ago, without any public tender, in un-transparent circumstances and the rents have remained largely unchanged ever since. By comparison, land available for logistic and industrial purposes in areas with significantly less attractive access to infrastructure around major cities in Romania are rented at levels several times those to be paid in Constanta Port if the law entered into force.
“Freezing the rents at the current minimum levels for the next 10 years will result in lost revenues of tens of millions of euros for Constanta Port alone, while also representing a dangerous precedent where a law is directly setting prices in contracts between two legal entities. This money could be put to better use through investments in Romania’s ports rather than creating unfair benefits for private operators.” says Greg Konieczny, Fondul Proprietatea CEO and Portfolio Manager.
Also, this law will lead to a slowdown in the development of the ports. This is because many of the current operators – who do not have the willingness or financial strength to invest in new facilities or refurbish the existing ones – will have less incentive to give up the land they currently occupy at very low rents in very attractive parts of the ports to other operators with the means to develop them faster.
Moreover, in the form declared unconstitutional by the Constitutional Court, the law establishes a Supervisory Body, set up under the authority of the Competition Council, which would be responsible for approving all tariffs charged by Romania’s ports and also resolve all disputes between port administrations and port operators. This would lead to the shifting of decision making power from port administrations and courts of law to this newly created body, whose responsibilities and attributions are not however clearly specified in the draft law.
Granting by law the right to issue binding decisions without determining what type of decisions may be taken by the Supervisory Board or the procedure for challenging them may lead to the issuance of unclear regulations or to the exceeding of the legislative framework of such an institution. The Supervisory Body would both make decisions and have the competence to judge over all the complaints against the same decisions, thus enjoying discretionary powers.
Overall, the draft law is unfairly biased towards privately-owned port operators, granting them excessive rights such as the provision of an obligation for port administrations to negotiate the framework agreement with employers and professional associations or the control of port administrations by so-called “external experts” from the employers’ and professional associations.
All these steps would bring uncertainty and open the door to abuse as regards ports administration. Fondul Proprietatea requires the Chamber of Deputies to reject the law, considering the negative impact it will have on the Romanian state budget and assets and its consequences on port administrations who would be denied the right to charge rents and other tariffs according to free market rules, FP also said.
