No more termination
RSPP and the business assess negatively the bill allowing for termination of lease agreements covering the seaports’ federal property in case of tenants’ incompliance with the instructions of the ad hoc authorities and court decisions. “The scope of negative consequences will be colossal,” say the market players.
Russian Union of Industrialists and Entrepreneurs (RSPP) has sent a negative feedback (a copy has been obtained by IAA PortNews) on the draft law “On Introduction of Amendments into Article 31 of the Federal Law “On Seaports in the Russian Federation and on Amending Certain Legislative Acts of the Russian Federation”.
The bill amends Part 9 of Article 31 of the Law and provides for a possibility to terminate lease agreements covering the seaports’ federal property in case of repeated failure by the tenant to comply with the instructions of the ad hoc authorities and court decisions.
The bill has been drafted in pursuance of instructions of RF President dated March 31, 2018, which was caused mainly by the problems with the coal handling at non-dedicated sea terminals of the Far Eastern Basin that received wide public response at that time.
In May 2019, FSUE Rosmorport running the berths in most seaports of Russia tried to obtain a court order on termination of the lease agreement for berths by Nakhodka Commercial Sea Port JSC “due to nonfulfillment of obligations to comply with environmental legislation of the Russian Federation”. The courts, however, dismissed the claim having supported the defendant’s position after it promised to equip the terminals with the necessary equipment. From that time, the companies began active introduction of the best available technologies to reduce dust. With the beginning of the pandemic, some terminals involved in coal handling reoriented their work to handling of containers.
The key idea of the disputable bill is that the lessor (primarily FSUE Rosmorport) gets the right for extrajudicial termination of contracts.
RSPP believes that the measures proposed by the draft law may lead to a number of negative consequences, particularly for terminals not involved in handling of dusty cargo.
Actually, termination of a lease agreement with a tenant does not at all guarantee that the new one will comply with environmental laws. Besides, all facilities in a seaport are normally linked with each other and exclusion of any participants from the production process can halt the activities of several enterprises or the entire port, hence the risk of destabilization of the entire port infrastructure and logistics. At the same time, the objects withdrawn from the lease will also be limited in use due to their encumbrance with the interconnected objects of the tenant.
The possibility of extrajudicial termination of lease agreements creates uncertainty, since "the absence of criteria for making such a decision widens the limits of administrative discretion for officials - representatives of the lessor and legal uncertainty for tenants," RSPP says.
Moreover, the draft law does not cover cases when a stevedore cannot comply with the requirements and decisions due to circumstances beyond its control. “Fulfillment of some requirements and instructions of regulatory authorities may, for reasons beyond the control of the person being inspected, take a long period of time (more than a year) to collect and prepare the necessary documentation and perform all necessary administrative procedures, which does not exclude re-issuing of more orders on the same violation,” says RSPP.
Termination of contracts can also lead to losses for the state, both due to the termination of the tenant's activities and due to the need cover the lessor’s losses under the investment agreements.
“It seems that the desired effect in such a situation will be brought by preventive measures aimed at developing and applying standards for the use of advanced dust suppression technologies in the process of coal loading/unloading to reduce (eliminate) the negative impact on the environment and human health. Punitive measures related to the deprivation of stevedores of the right to use the state property in seaports in case of failure to comply with the instructions of the control and supervisory authorities and decisions of the courts will not bring the environmental effect,” summarize the review authors.
Representatives of stevedoring companies polled by IAA PortNews also view the bill negatively.
One of the coal terminals which asked not to be identified said that the proposed measures would not only create a real threat of bankruptcy, elimination of numerous jobs, reduction of revenues to the state budget, but also create high corruption risks.
The stevedore also referred to the new measures as discriminatory.
National Transport Company (NTC) comprising a number of bulk terminals in different sea basins has called the measures proposed by the bill "dangerous for the port industry and for the entire investment climate of the country as a whole." According to the company, the business has already invested enormous resources in fitting the terminals with the equipment necessary to protect the environment, so the punitive measures are inappropriate.
NTC considers the existing legal framework to be sufficient.
“The scope of negative consequences will be colossal,” says NTC reflecting the arguments of the RSPP and the stevedores interviewed by PortNews.
Indeed, in our opinion, the draft law, the work on which began after environmental scandals five years ago, is not up to date. Since then, stevedoring companies, ad hoc ministries and departments have performed great work aimed at improving the handling methods. Moreover, in view of the eastward pivot of logistics, it seems inappropriate to introduce new regulations that can destabilize the infrastructure operation. Thу worst offenders should be treated in the framework of the existing legislation.
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