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Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the primary purpose of the ports?
The key ports in the UK are the ports of:
- Grimsby and Immingham;
- Milford Haven;
- Tees and Hartlepool;
- Felixstowe; and
Immingham, which is the UK’s largest port by tonnage, handling approximately 55 million tonnes each year, including 20 million tonnes of oil and 10 million tonnes of coal, has specialist liquid bulk and coal-handling terminals and roll-on, roll-off (ro-ro) and lift-on, lift-off (lo-lo) facilities.
At Grimsby, more than 500,000 vehicles are handled each year, as both imports and exports, through its dedicated ro-ro berths.
The Port of London handles dry and liquid bulk, as well as cargo from ro-ro and container vessels.
Milford Haven handles liquid bulk including crude and refined oils, liquefied petroleum gas and liquefied natural gas.
Tees and Hartlepool port handles bulk cargo.
Southampton has a container terminal, ro-ro terminal, a major cruise terminal, dry bulk and liquid bulk facilities that are primarily used for crude oil.
Liverpool handles bulk cargo and also ro-ro and container vessels. It is also used as a transhipment port for cargo bound for Ireland and Scotland. A £400 million deep-water terminal known as ‘Liverpool2’ opened at the port in November 2016. The terminal was developed in response to changing trading patterns and shipping industry trend towards the use of ‘mega’ ocean-going container ships (such as post-Panamax ships).
Felixstowe handles container ships and ro-ro traffic.
Dover is a ferry port and handles ro-ro cargo vessels.
Describe any port reform that has been undertaken over the past few decades and the principal port model or models in your jurisdiction.
Port ownership in the UK falls into three categories:
- privately owned ports;
- trust ports; and
- municipal ports owned by local government authorities.
In the past 30 years there has been a move towards the private ownership model, in particular for the larger UK ports. Privatisation of smaller ports has been slower, and most smaller ports adhere to the trust ports and municipal ports models.
Prior to 1983, the ports industry was largely nationalised. In 1983 the state-owned ports operator, the British Transport Docks Board, was privatised under its new name, Associated British Ports, with its shares being offered to the public. Most of the larger state-owned ports were sold in and since 1983. Privately owned ports range from ports owned by international groups (eg, DP World and Hutchison Whampoa) to ports owned by private companies (eg, the Bristol Port Company).
Trust ports are generally run by self-governing independent statutory bodies whose constitutions are instituted by acts of parliament. Such ports, including the Port of London Authority and Belfast Harbour Commissioners, are independent statutory corporations managed by a board of trustees. With exceptions, such as the port of Dover and the port of Milford Haven, most trust ports are small harbours handling predominantly leisure and local fishing vessels. They operate on a quasi-commercial basis, but they do not pay dividends, as they have no shareholders. Any profits they make are retained by the undertaking. In the 1980s and early 1990s, the UK government advocated the privatisation of trust ports, culminating in the Ports Act 1991. However, as mentioned above, privatisation of trust ports has been slow. The UK government published guidance concerning trust ports’ governance - Modernising Trust Ports, with this being withdrawn on 5 March 2018 and replaced by the Ports Good Governance Guidance - and trust ports are subject to several statutory duties, including duties of maintenance.
Finally, some ports continue to be owned and operated by local authorities. On the whole, these ports tend to be small and handle low tonnages, with the exceptions of the oil terminals in Orkney and Shetland, and the port of Portsmouth.
State development policy
Is there an overall state policy for the development of ports in your jurisdiction?
In January 2012, the Department for Transport presented its National Policy Statement for Ports (NPS) to Parliament. This document sets out the framework for decisions taken relating to port development in England and Wales, in particular the UK government’s conclusions on the need for new port infrastructure.
The NPS states that the UK government’s ports policy is to encourage sustainable long-term port development to cater for economic developments in the long term, to allow decisions about when and where new port developments might be made to be taken on the basis of commercial factors by developers operating within a free-market environment, and to ensure that all developments satisfy the relevant legal and environmental obligations, including objectives under the relevant European Directives. In summary, a market-driven policy encouraging competition is the primary basis of policy, as it has been since the 1980s.
What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?
Ports and port development in the UK are subject to UK and EU environmental legislation.
In particular, projects could be subject to the requirement under the European Environmental Impact Assessment Directive (Council Directive 85/337/EEC, as amended) to produce an environmental statement describing the environmental impact of the proposed developments. When the Directive applies, it requires a significant amount of assessment and analysis to be undertaken prior to the project’s commencement. An environmental statement would include an assessment of measures taken to reduce ships’ greenhouse gas emissions, as well as any increase in emissions caused by inland transport generated as a result of the port development. The UK government requires environmental statements to take into account the projected changes in the UK’s climate that will result from climate change. Similarly, formal assessments may be necessary under the UK’s Habitats and Species Regulations.
Further, the Marine and Coastal Access Act 2009 provides a legal mechanism to help ensure clean, healthy, safe, productive and biologically diverse oceans and seas, by putting in place a new system for management and protection of the marine and coastal environments. To this end, the Marine Management Organisation (MMO) was established under the Act, which imposes a series of obligations that require certain projects to be environmentally sustainable and to minimise pollution. In the context of port developments, ‘nationally significant projects’ may require licences from UK government authorities, and parties considering projects should consult the MMO (for projects in England) or the Welsh government (for projects in Wales) to establish whether any licences are required. In particular, this might involve obtaining permits under the ‘environmental permitting’ regime, which covers, among other things, projects with waste disposal and management facilities.
Legislative framework and regulation
Is there a legislative framework for port development or operations in your jurisdiction?
The NPS sets out the broad framework applying to the ports development policy and details the legislation that applies to the development of ports. In particular, the Planning Act 2008, in combination with the Localism Act 2011, states that a party planning to undertake a ‘nationally significant infrastructure project’ (NSIP) must submit its plans to the Planning Inspectorate, which will consider the proposals in light of the relevant legislation and the NPS. Following this review, the Planning Inspectorate will send the proposals to the secretary of state for transport with a recommendation as to whether permission should be granted or refused. In addition, in most cases port developers must obtain a licence from the MMO, pursuant to the Marine and Coastal Access Act 2009.
Each port is overseen by a competent harbour authority (CHA), which is appointed by statute. CHAs are responsible for the management of its port. A CHA’s constitution will depend on how the port is incorporated. For instance, private companies can be the CHA in the case of private ports, while in the case of a trust port the CHA will usually be the port’s board of directors. A CHA’s powers and duties are prescribed by a wide range of general and specific legislation. Some regulations apply to each CHA, including the guidance in the Port Marine Safety Code (which sets out the national standard for every aspect of port marine safety), the Guide to Good Practice on Marine Port Operations, which sits alongside the Port Marine Safety Code, and statutes, such as the Merchant Shipping Acts and its related secondary legislation. Other legislation either devolves powers to the CHA to exercise on a semi-discretionary basis (for example, the Pilotage Act 1987) or is specific to a certain port or ports. This specific legislation normally takes the form of Harbour Revision Orders or Harbour Empowerment Orders, for which CHAs can submit applications. These Orders principally concern either matters of port development or the alteration or reconstitution of the powers held by the relevant CHA.
Is there a regulatory authority for each port or for all ports in your jurisdiction?
There is currently no single national regulatory authority entirely responsible for oversight of the UK’s ports sector and, in the absence of a single regulator, a series of bodies are responsible for regulating and licensing certain aspects of port development and operations (see question 5).
However, the European Parliament has recently adopted a revised European Union Port Services Regulation (PSR) pursuant to which the UK could be required to appoint such a regulator. EU member states are required to implement the legislation by March 2019 and the effect of the PSR on UK ports will largely depend on whatever is agreed to govern the new relationship between the UK and the EU after Brexit.
What are the key competences and powers of the port regulatory authority in your jurisdiction?
The key competences and powers will primarily be determined by the content of the legislation specific to each port’s CHA. In addition, every port or harbour has general competences and powers, mainly related to the general duties to ensure the safety, maintenance and conservation of the port. In addition, there are several pieces of UK government-issued guidance applying to ports, which, while lacking the full power of law, are authoritative guidance on issues such as corporate governance and port management. One such authoritative guidance is the Ports Good Governance Guidance, which is based on the UK Corporate Governance Code and, as mentioned in question 2, replaces the second edition of the Modernising Trust Ports publication and the Opportunities for Ports in Local Authority Ownership publication.
How is a harbourmaster for a port in your jurisdiction appointed?
In the case of specific ports with a partly naval function known as ‘dockyard harbours’ (Portsmouth and Plymouth in England and Wales), harbourmasters (with the title Queen’s Harbour Master) are appointed by a UK government minister pursuant to the Dockyard Ports Regulation Act 1865. Otherwise, CHAs have the power to appoint a harbourmaster, whose primary responsibilities are detailed in the Harbours, Docks and Piers Clauses Act 1847.
Are ports in your jurisdiction subject to specific national competition rules?
Ports in the UK are not subject to specific national competition rules, although they are subject to the general competition rules that apply to the UK market. If implemented into UK law, the new PSR would however provide for greater regulation on the right of authorities to limit free-market access (eg, by the introduction of minimum requirements for service providers, limits on the number of service providers in ports, or public service obligations to safeguard the general interest).
Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your jurisdictions and how are tariffs collected?
Given that the powers of a CHA can vary from port to port, the local acts of parliament applying to a specific port (if any) may empower a CHA to levy a harbour due. The Harbours Act 1964 also governs the imposition of harbour dues by CHAs, as does other legislation such as the Harbours, Docks and Piers Clauses Act 1847.
The tariffs that are imposed on ports and terminal users by port operators are subject to competition laws and rules, in particular in relation to abuse of a dominant market position (see question 9).
The collection of tariffs will depend on the preferred practices of any given CHA or port operator.
Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable by a port operator to the government or port authority? Are any specific currency conditions imposed on port operators more generally?
There are no general provisions that set out the currency applied to any tariffs or fees that are payable by a port operator. However, with the majority of UK ports being privately owned, UK port operators will be subject to taxation in the UK, which will be payable to Her Majesty’s Revenue and Customs in pounds sterling.
Public service obligations
Does the state have any public service obligations in relation to port access or services? Can it satisfy these obligations through a contract with a private party?
The state does not have any public service obligations in relation to port access or services. As noted in questions 3 and 5, the government has set out its policy for the ports industry, which includes guidance in respect of the evaluation of applications for consents to develop port projects, and may impact on any conditions attached to any such consent granted on a case-by-case basis.
Can a state entity enter into a joint venture with a port operator for the development or operation of a port in your jurisdiction? Is the state’s stake in the venture subject to any percentage threshold?
There is no specific legislation in place that would hinder the UK government (or rather a state-owned entity) from entering into a joint venture with a port operator for the development or operation of a port in the UK. However, given the fully privatised system that is implemented in respect of most large ports in the UK, this is not common practice.
Are there restrictions on foreign participation in port projects?
There are no restrictions on foreign participation in port projects in the UK. However, the government may seek to intervene in any projects or matters adversely affecting national interests, including where there is a risk of sanctions (as was the case in the 2015 North Sea gas dispute between the UK government and Mikhail Fridman) and where there may be serious health and safety and environmental risks.
The White Paper on National Security and Investment released in July 2018 anticipates that the government will have the ability to impose conditions on proposed transactions and participations in a variety of projects, as well as the ability to block a proposed transaction or unwind an executed transaction in the event that the transaction in question is deemed to be a national security risk. The White Paper follows the announcement of the government’s intention to reform its powers in September 2016 to protect national security from hostile actors using ownership of, or influence over, businesses and assets to harm the country.
Public procurement and PPP
Is the legislation governing procurement and PPP general or specific?
The government’s new public-private partnership (PPP) framework - Private Finance 2 (PF2), which replaced the Private Finance Initiative (PFI) - was introduced in 2012 and is subject to guidance issued by the UK Treasury. PF2 aims to represent a more efficient approach to PPP that seeks to improve on previous procurement experience. It is not specific to any industry. In the context of procurement, the government has introduced the Public Contracts Regulations 2015, which could apply to aspects of PPP and PF2 transactions. The Regulations were enacted pursuant to EU directives concerning the free movement of goods and services.
In addition, the Treasury’s guidance on procurement has indicated that, under PF2, procurement will increasingly be handled by the central government as opposed to public authorities (eg, local council) directly concerned with the project, as was the case under the previous regime (the PFI).
May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?
Port concessions and joint ventures with the government are not common in the UK. Generally, the NPS provides that where there has been a material change in circumstances which necessitates the review of the NPS, in whole or in part, and it is in the national interest that a case should be decided quickly, the secretary of state for transport has a reserve power to intervene and take the decision, ensuring that proposals for nationally significant infrastructure can be considered without delay. Generally, contracting authorities, that is, state, regional and local authorities, bodies governed by public law and associations formed by one or several of such authorities or bodies are subject to UK public procurement regulations.
Joint venture and concession criteria
What criteria are considered when awarding award port concessions and port joint venture agreements?
The NPS provides the framework for decisions on proposals for new port developments and, for the benefit of planning decision-makers, sets out the approach they should take to proposals, including the main issues that will need to be addressed to ensure that future development is fully sustainable. It also details the need for new port infrastructure and the positive and negative impacts it may bring.
The guidance included in the NPS encompasses:
- economic impacts;
- commercial impacts;
- environmental impact assessment;
- habitats and species regulations assessments;
- criteria for ‘good design’ port infrastructure;
- pollution control and other environmental regulatory regimes;
- climate change mitigation and adaptation;
- common law nuisance and statutory nuisance;
- hazardous substances; and
- health and security considerations.
Other relevant criteria include, among other things:
- biodiversity and geological conservation;
- flood risk;
- traffic and transport impacts;
- waste management;
- water quality and resources;
- air quality and emissions; and
- socio-economic impacts.
Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?
There is no model PPP agreement that is used for port projects.
What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?
See question 5.
On what basis are port projects in your jurisdiction typically implemented?
Port projects in the UK are implemented on a case-by-case basis, and in practice most port projects have been based on fully privatised port models.
Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?
No. As there have been no port PPPs in the UK, one cannot speak of an average concession term.
On what basis can the term be extended?
See question 21.
What fee structures are used in your jurisdiction? Are they subject to indexation?
Given that most port developments in the UK have been based on fully privatised port models, there are no fee structures as such. However, the port projects will be subject to taxation in the usual way.
Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?
Does the government or the port authority provide any other incentives to investors in ports?
We are not aware of the government offering any direct incentives to investors in ports.
Port development and construction
What government approvals are required for a port operator to commence construction at the relevant port? How long does it typically take to obtain approvals?
Under the Planning Act 2008, NSIPs must submit an application to the Planning Inspectorate for development consent. The Planning Inspectorate will then make a report and recommendation on the project to the Secretary of State for Transport. If the decision is to give consent for a project to go ahead, the secretary of state will make a ‘development consent order’. Such developments will be those which will lead to a port having an annual capacity of 500,000 TEU (20ft equivalent units) for container terminals, 250,000 movements for a ro-ro terminal, 5 million metric tons of other traffic for bulk and general cargo terminals, or a weighted equivalent, including all three of such categories. In addition, the secretary of state has the power to determine that certain projects are of national significance even if they fall below the relevant threshold, in which case the plans will be referred to the Planning Inspectorate. Further consents and licences may be required, depending on the nature of the plans, under a variety of legislation and regulations. In particular, MMO consent will be required.
Does the government or relevant port authority typically undertake any part of the port construction?
No. However, the NPS will apply to associated development, such as road and rail links, for which consent is sought alongside that for the principal port development. The NPS sets out that non-ports associated development should be considered on a case-by-case basis, using appropriate assessment methods consistent with the NPS and with applicable official guidance.
Does the port operator have to adhere to any specific construction standards, and may it engage any contractor it wishes?
As noted in question 17, the guidance included in the NPS for planning decision-makers includes the criterion of ‘good design’ for port infrastructure. This criterion sets out that the decision-maker needs to be satisfied that the port infrastructure developments are sustainably designed and, having regard to regulatory and other constraints, are as attractive, durable and adaptable (including taking into account natural hazards such as flooding) as they can be. In so doing, the decision-maker should satisfy itself that the applicant has taken into account both functionality (including fitness for purpose and sustainability) and aesthetics (including its contribution to the quality of the area in which it would be located) as far as possible.
Finally, in considering applications, the decision-maker should also take into account the ultimate purpose of the infrastructure and bear in mind the operational, safety and security requirements that the design has to satisfy.
What remedies are available for delays and defects in the construction of the port?
As any agreements relating to the construction of the port will be entered into between the project applicant or port operator and a third party contractor, any remedies available to the project applicant or port operator will be subject to negotiation between such parties and will vary on a case-by-case basis, depending on factors such as the nature of the works and the bargaining powers of the parties.
What government approvals are required in your jurisdiction for a port operator to commence operations following construction? How long does it typically take to obtain approvals?
See question 26.
What services does a port operator and what services does the port authority typically provide in your jurisdiction? Do the port authorities typically charge the port operator for any services?
In fully privatised ports the owner or operator provides all the services, or grants licences or concessions for third parties to provide them. Trust ports are owned and operated by the same party, providing all services. With municipal ports, typically the port authority will provide services relating to dredging, lighting, safety, navigation and pilotage while the port operator will manage day-to-day matters, such as cargo handling.
Access to hinterland
Does the government or relevant port authority typically give any commitments in relation to access to the hinterland? To what extent does it require the operator to finance development of access routes or interconnections?
See question 27.
How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?
See question 5.
Port access and control
In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?
This will depend on the by-laws of the CHA, any legislation empowering the CHA and the terms and conditions for the operation of the CHA.
Failure to operate and maintain
What remedies are available to the port authority or government against a port operator that fails to operate and maintain the port as agreed?
The UK government’s approach to the ports industry is to intervene only where there is demonstrable ‘market failure’, and this is rare.
What assets must port operators transfer to the relevant port authority on termination of a concession? Must port authorities pay any compensation for transferred assets?
Given the fully privatised model that applies to most port projects in the UK, there are no obligations on port operators to transfer assets to the port authority or government under any concession. Similarly, in the case of trust ports and municipal ports, this is not relevant.
Special purpose vehicles
Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required) to do so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?
As applications for port projects are considered and granted consent on a case-by-case basis, this will depend on the conditions attached to a consent approving any particular project. Generally, there is no nationality requirement. See also question 14.
Transferring ownership interests
Are ownership interests in the port operator freely transferable?
The ability to freely transfer ownership interests in the port operator will depend on the terms included in the constitution of the port operator, together with the terms of any relevant joint venture or shareholders’ agreement relating to the port operator. There are no laws (other than possibly competition rules) restricting the transfer of shares.
Can the port operator grant security over its rights under the PPP agreement to its project financing banks? Does a port authority in your jurisdiction typically agree to enter into direct agreements with the project financing banks and, if so, what are the key terms?
Given the fully privatised nature of most port projects in the UK, the private parties participating in the project can generally offer security over the assets of the project.
Agreement variation and termination
In what circumstances may agreements to construct or operate a port facility be varied or terminated?
This may be achieved in accordance with the terms and conditions agreed by the signatory parties to any such agreements.
What remedies are available to a government or port authority for contractual breach by a port operator?
Given the fully privatised model that applies to most ports in the UK, this question is not relevant.
Must all port PPP agreements be governed by the laws of your jurisdiction?
There are no port PPP agreements in the UK. The laws of the jurisdiction governing the project agreements are a matter for agreement between the parties that are signatories to any such agreements. Generally, we would expect that such agreements would be subject to English law.
How are disputes between the government or port authority and the port operator customarily settled?
The regime for settling disputes will be subject to negotiation and agreement between the parties participating in the project.
Updates and trends
Updates and trends
Updates and trends
A key development - the importance of which is unlikely to diminish in the foreseeable future - is Brexit. The key issue in general and in relation to the UK ports and terminals industry is the uncertainty of the UK’s future relationship with the EU, and the impact it may have on the import and export of goods through UK ports and terminals, particularly the regulatory standards and customs in relation to those imports and exports and the steps that will be taken on both sides of the English Channel to protect and promote interests and relations.