The Legislative Changes that are Expected in the Maritime Industry in 2016

Albert Einstein said, “You can never solve a problem with the same level of thinking and approach that created the problem.” Projecting his words onto the current situation in Ukrainian seaports, which have had to face new and difficult challenges, it may mean that the success of their further development depends on the efficiency of the legal framework. Mandatory implementation of legislation based on the European Union’s directives alone is not enough for this. It is necessary to take the best international practices in the area of maritime law into account. Several priority areas for Ukraine can be identified.

Development of river transport

The market has long been waiting for adoption of the law of Ukraine “On Inland Water Transport,” which should become a key basis for regulating relations in the area of river transport, similar to the law “On Seaports.” The drafting and introduction of regulations at all levels should follow the main document. This should include amendments related to tariff policy, particularly reduction of the financial burden on ship owners and simplification of the conditions for entry of foreign-flagged ships into ports.

Deregulation in seaports

Part of the work was done in 2015. Adoption of the law of Ukraine “On Simplification of Trading Procedures in Ports” and amendments to the law of Ukraine “On Seaports of Ukraine” regarding the functioning of the Port Community Information System (PCIS), which is necessary for introduction of full electronic workflows among all the participants in the transport and clearance process in all Ukrainian ports, should be its continuation. It is also necessary to amend the law “On Border Control” to allow border guards to conduct random inspections of ships instead of the mandatory boarding of all vessels. The current law is based on the old Schengen Code, to which the relevant amendments were made in 2013.

Introduction of a system for managing risk when containerized cargo is passing through Ukrainian ports requires special attention. It is proposed that the regulatory authorities should finance all forms of control and that the accounts of guilty parties should be charged only if a breach of payment for control work is uncovered or if penalties are levied.

Creation of civilized conditions for investment

Comprehensive development of procedural regulations that ensure clear and transparent procedures for investing in ports is the biggest expectation of businesses. For this purpose, in particular, it is necessary for the parliament to adopt the appropriate law that removes ports from the list of state-owned enterprises that are not subject to privatization. This should be followed by adoption of a Ukrainian Cabinet of Ministers resolution entitled “On Approval of the Procedure for Compensation for Investments in Strategic Port Infrastructure,” as stipulated in Article 27 of the law of Ukraine “On Seaports.” Speaking of a lease agreement as a form of private investment, officials need to give a “green light” and significantly simplify the internal procedure for approving the lease of strategic port assets.

Amendments are expected to be made to the concession law, which everybody has been talking about for so long. A working group set up by the State Property Fund is working on creation of a single law instead of the three industry laws. The specific natures of the various sectors suggest that it should have separate sections. The State Property Fund is promising to present the new draft law to the public and businesses at the beginning of 2016. Simultaneously, the State Property Fund is working on a new methodology for calculating concession fees.

Another issue that has long been waiting for a solution is amendment of the land legislation in relation to development of seaports. The Law on Seaports provides for expansion of the boundaries of seaports with both artificially created land and land allocated for port infrastructure. Currently, no seaport has defined boundaries, let alone creation of new artificial land or allocation of existing land for special purposes. The government needs to pay special attention to this issue next year. Without boundaries, a seaport cannot be considered a valid geographical entity.

Given the unresolved problem of land in seaports, investors are encountering problems involving construction of berths in port waters because construction of such facilities requires the relevant paperwork for land. This problem can be solved by adopting the Amendment to the Law of Ukraine on Urban Planning and the Land Code to allow construction of hydraulic structures without title deeds to land. The draft of this law has already been prepared, it has been approved by businesses, and it has been submitted to parliamentary deputies for initiation. Businesses expect it to be adopted in 2016.

Changes to port charges

Looking at the experiences and realities of Ukraine’s neighbors, businesses operating in Ukrainian ports are insisting that the number and size of port charges in Ukrainian ports should be brought to the levels in other Black Sea ports. The current conditions further exacerbate the situation at a time when the competitiveness of Ukrainian ports is not sufficiently high. Businesses expect a new methodology for calculating port dues next year.

Simplification of the procedure for approving the financial plans of state enterprises

It is necessary to simplify the procedures for approving the financial plans of state enterprises (including the Ukrainian Port Authority, state stevedoring companies, etc.) or amend the corresponding Cabinet of Ministers resolution to allow capital investments to be made without mandatory approval of a financial plan. Despite the fact that the Ukrainian Port Authority’s financial plan for 2016 has unexpectedly been approved this year, this problem remains a pressing issue.

Creation of a maritime administration

Of course, existence of maritime administration in any civilized maritime nation is a foundation – the foundation on which the entire maritime policy of that nation is built. The importance of a maritime administration is confirmed in the United Nations resolutions on Oceans and the Law of the Sea, in which the General Assembly urges flag states without an effective maritime administration and appropriate legal frameworks to establish or enhance the necessary infrastructure, legislative and enforcement capabilities to ensure effective compliance with and implementation and enforcement of their responsibilities under international law. In Ukraine, creation of a maritime administration as a separate organ of the executive branch of government that is financed with revenue from administrative charges or part of it has been under discussion for a long time. However, the main problem here is the lack of a mechanism for returning these administrative charges for financing the maritime administration. Perhaps 2016 will pass under the slogan of adaptation to international maritime conventions and international best practice in ports.