1 IBA Dublin 2012 Legislation and regulation related to the - - PowerPoint PPT Presentation

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IBA Dublin 2012

Legislation and regulation related to the

• peration of public and private ports

3 October 2012 contribution by Marieke G. van den Dool

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General

Contractual arrangements for development and operation of large and medium sized ports in the Netherlands

• retreatment of government from port
• perations
• enterprise-based ports services

→ more flexibility and efficiency → better response to consumer’s demands

• landlord port model is dominant

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Landlord port model

• landlord port authority is a separate legal

entity with capacity to conclude contracts, enforce standards and make rules and regulations

• Rotterdam: landlord port authority is a public

limited company

• port operations → carried out by private

companies on the basis of granted concessions

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• Design Build Finance Maintain- contract

(“DBFM”-contract”) used by Dutch government

• Integrated contract → design, realization and

maintenance commissioned to contractor

• Commissioning party is usually the Dutch

government

• Financing shifted to contractor in exchange for

financial compensation (regular payments)

• Long running period
• Contractor is usually a consortium of companies

(in order to spread risks, join forces)

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• Commissioning party → output specifications
• Contractor →

freedom in execution of the contract → financial compensation is incentive for good performance

• Contrary to Build Operate Transfer-contract

(“BOT-contract”) no transfer of legal title to the

• bject to contractor

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• Special Purpose Vehicle (“SPV”) as

incorporation of the consortium

• SPV concludes contract with commissioning

party

• Usually a private company with limited liability
• Financing by banks, equity capital and by loans

from the government

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• Transfer of legal title no prerequisite to attract

financing in the Netherlands

• Banks → requirement security rights, “step-in

rights” (for which a three-party contract has to be concluded)

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• DBFM- contract → many risks are identified

prior to conclusion of the contract

• Dealt with in the contract (allocation of risks)

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Realization of public works and transport infrastructure projects such as ports in the Netherlands

• Disadvantages of allocation of risks:

→ SPV has limited funds and needs to pass risks to contractor → contractor requires compensation (more costs) → potential conflict of interests (contractor = shareholder in SPV) → more expensive for government since some risks may never materialize

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Concession of T erminals

• Concession on port services to private parties

is common practice

• Grant by government or port authority to

private parties for specific port services

• Control on organization and structure of supply

side

• Optimization of scarce resources as land

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Concession

• Concession contract concluded between

private terminal operator and landlord port authority ( for example)

• Long term lease for defined period of time
• Legal title rests with landlord port authority

→ Receipt of concession fees charged on a costs-covering basis. Future upgrading and expansion.

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The Second Maasvlakte or Maasvlakte II (expansion of Rotterdam dockland area through land reclamation)

• Start in 1997
• Shortage of space in port of Rotterdam as

“gateway to Europe”

• Respect for nature and environment and

quality of living in Rhine Estuary

• Expansion of port combined with expansion of

recreational areas and nature

• Project was only agreed with by the two Houses
• f Parliament in October/November 2006 after

several administrative appeals

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The Second Maasvlakte or Maasvlakte II

• T

endency: involvement of more market forces in development of public works

• Port of Rotterdam authority → major risk taker
• Revenues from concession contracts and port

dues

• Design, Build, Maintain contract used for

realization

• Finance entirely arranged for by Port of

Rotterdam authority

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Some facts about the Second Maasvlakte or Maasvlakte II

• T
• tal construction costs around EUR 2.9 billion
• Financed by EUR 2 billion loans from banks and

EUR 700 million loans from the Dutch government and equity

• Loan from Dutch government also bears interest

and is meant to be refunded from the revenues

• Comprises 1730 acres (700 ha) of port areas and

about 7 miles (11 km) of total length of hard and soft defenses plus more than 1300 acres of harbor basin, quay walls and infrastructure

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The Second Maasvlakte or Maasvlakte II – January 2009

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The Second Maasvlakte or Maasvlakte II – July 2012

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The Second Maasvlakte or Maasvlakte II

• Output specifications → contains a design

based on a system-oriented approach

• Shifting of more responsibility to contractor in

early stage of project and involvement of market sector in design, construction and maintenance

• Transparency → no wasting of public funds,

avoidance of corruption

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The Second Maasvlakte or Maasvlakte II

• Roles and tasks of parties involved identified at

beginning of the project

• T

enders for construction and maintenance → before permits were issued, time efficient

• T

enders for concession → before starting construction, test of financial feasibility

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The Second Maasvlakte or Maasvlakte II

• Programme of Requirement → contains

problem statements and requirements set by Port of Rotterdam authority

• Optimization of activities of contractors within

this scope

• Contractor → joint venture between Boskalis

and Van Oord (two major Dutch dredging companies)

• Incentive for contractor to investigate and

execute cost-saving scenarios

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The Second Maasvlakte or Maasvlakte II

• Large extent of flexibility in the contract
• Flexible design → can easily be adapted to

market circumstances (example: terminals are currently meant for containers, but can be transformed to receive

• ther cargo)

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The Second Maasvlakte or Maasvlakte II

• Concession process → innovative for Dutch

market

• Open interaction between private parties

interested and Port of Rotterdam authority , simultaneous negotiations, high transparency

• Contractual details were specified in advance
• Sustainability → important criterion

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The Second Maasvlakte or Maasvlakte II

• Volume criterion for pre-qualification of

candidates at least 2 mio TEU/year measured

• ver past year → to attract only main players

in terminal and shipping industry

• First: expression of interest- document
• Next phase

→ Non-disclosure agreements → disclosure of more detailed information and award criteria by Port of Rotterdam authority

• Pre-bid sessions

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The Second Maasvlakte or Maasvlakte II

• Environmental management system for

terminals → important weighing factor

• Aim to reduce road transport in favour of

transport by rail and inland waterways

• Other factors of interest:

− financial feasibility − competitiveness and positioning in market − technical solutions

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The Second Maasvlakte or Maasvlakte II

• Concession is important port development tool

→ once granted control reduces

• Port of Rotterdam authority designed its own its
• wn process
• Beneficial competitive pressure, both for

conclusion of DBM-contract as well as concession contracts

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Pros and cons of privatization

• More competition, flexibility, compliance with

consumer’s demands

• Downsides:

− Risk of monopoly of private parties (for instance for linesman-and pilotage services in Port of Rotterdam) leading to higher rates failing any competitive pressure − Problem for the government how to supervise that rules and regulations are being complied with by private parties (example: environmental and safety-rules)

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Supervision – example of failure: Odfjell tank storage terminal

• August 2012: temporarily closing down of this

terminal

• Immediate cause: failure of reporting a butane

leak to environmental supervisory body (DCMR) by the terminal

• However, several violations of fire safety of the

terminal were already reported in the past, but no appropriate action was taken

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Supervision – example of failure: Odfjell tank storage terminal

• DCMR → governmental Supervisor (for

chemical industry)

• Inspections of premises brought to light many

violations of safety regulations

• Odfjell was not penalized, but was granted

“grace periods” by DCMR

• DCMR → reluctant to take action because of

negative economic effects of closing down a terminal and reaction of provincial and municipal governments

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Supervision – example of failure: Odfjell tank storage terminal

• ISO-certificates issued by Lloyd’s Register

Quality Assurance, a private company accredited by the Dutch Accreditation Council (founded on governmental initiative), as requirement for insurance coverage

• DCMR claims to have relied on these

certificates issued despite reported violations

• f safety regulations by Odfjell
• Is public interest still being served by

privatized supervision?

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Private Sector – General T erms and Conditions

• Freedom of contract: private parties intend to

apply standard general terms and conditions to a contract

• Hardly any room to negotiate for ship-owners /

managers/charterers

• General terms and conditions contain

limitation- and exclusion of liability-clauses

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Private Sector – General T erms and Conditions

• Article 8 Rotterdam Stevedoring Conditions

(RSC):

• “The stevedore is not liable for damage nor for

the event which causes such damage, unless and in sofar as it is satisfactorily proven these are the result of actual fault or privity or gross negligence of the stevedore or someone for whom is responsible and, in the latter case, the stevedore has not exercised due diligence in the choice and the supervision of the person(s) involved.”

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Private Sector – General T erms and Conditions

• Article 9 RSC excludes liability in the event of
• ccurrence of certain circumstances:
• “the unavoidable result of the method of

working, if neither the principal nor the carrier nor other interested parties timely objected in writing concerning such method of working or

• f the speed required necessitated this method
• f working in the opinion of the stevedore”.

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Private Sector – General T erms and Conditions

• Another example: T
• wage Conditions 1951
• Article 6: exclusion of liability for negligence or

fault at the part of the towing company for any and all damages

• except for damages to the tugs itself caused by

inherent vice or fault or negligence by the crew and for damages to third party-vessels in the event of a collision provided that it can be proven that the towed vessel did not contribute to the collision.

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Private Sector – General T erms and Conditions

• Exclusion of liability for wilful misconduct or

gross negligence sometimes regarded as void(able) by Dutch courts

• On the ground of violation of “public

morality/public order” (art. 3:40 Dutch Civil Code) or following from the “limiting effect of the principles of reasonableness and fairness” (art. 6:248 Dutch Civil Code).

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Private Sector – General T erms and Conditions

• When is an exclusion void(able)?
• Exclusion for own intent or gross negligence or
• f the management/leadership of a company

always void (on grounds of public morality/order of article 3:40 Dutch Civil Code)

• Exclusion for intent or gross negligence of

personal or persons for whom the stevedoring company is responsible in principle allowed according to Supreme Court Matatag / De Schelde (NJ 1995, 389)

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Private Sector – General T erms and Conditions

• According to Supreme Court Saladin/HBU (NJ

1960, 46) such an exclusion is still not accepted in certain circumstances (“limiting effect of the principles of reasonableness and fairness” of article 6:248 Dutch Civil Code).

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Private Sector – General T erms and Conditions

Relevant circumstances of Saladin/HBU decision:

• the degree of culpability, also in connection with

the nature and gravity of the interests at stake;

• the nature and further content of the contract in

which the clause is included;

• the social position and the relative position of the

parties;

• the manner in which the clause came into

existence;

• the extent to which the other party was aware of

the clause’s purpose.

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Private Sector – General T erms and Conditions

• New VRTO conditions (Rotterdam T

erminal Operator Association) in 2009.

• Press Release mentions that T

erminal Operators “nowadays accept responsibility for their activities”.

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Private Sector – General T erms and Conditions

• In Article 6.1 liability is accepted for a broad

range of events, such as : “any damage to or loss of goods that the Work refers to, from the moment of physical receipt until the moment of physical delivery by the Terminal Operator”

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Private Sector – General T erms and Conditions

• At first sight only a limited exclusion of liability:
• “The Terminal Operator does not accept

liability for the damage or loss stated if the Terminal Operator is able to prove that such damage or loss was not caused by negligence

• n the part of the Terminal Operator or people
• r parties for whom the Terminal Operator is

responsible within the scope of the Work.”

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Private Sector – General T erms and Conditions

• Article 6.1 VRTO Conditions however also

states:

• “The Terminal Operator does not accept

liability whatsoever for the damage or loss stated if the Terminal Operator is able to prove that such damage or loss was caused by gross negligence or wilful intent on the part of people

• r parties for whom the Terminal Operator is

responsible within the scope of the Work.”

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Private Sector – General T erms and Conditions

• An exclusion which may in certain situations

not be upheld by courts according to Supreme Court Saladin/ HBU criteria.

• Some stevedores explicitly exclude the

applicability of the VRTO Conditions in their GT&C’s as the VRTO conditions presented itself as replacing the RSC.

• RSC or similar GT&C’s are still applied by many

stevedoring companies.

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