General

Key ports

Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the primary purpose of the ports?

Port facilities in China are grouped into five regions based on their geographical locations:

  • Bohai-rim Region - Dalian, Qinhuangdao, Tianjin, Qingdao and Rizhao;
  • Yangtze River Delta Group - Shanghai, Ningbo and Lianyungang;
  • South East Region - Xiamen, Fuzhou;
  • Pearl River Delta Group - Shenzhen, Guangzhou, Shantou and Zhuhai; and
  • South West Region - Haikou, Zhanjiang and Fangcheng Port.

These ports are classified into nine logistics networks based on the types of cargo:

  • coal;
  • crude oil;
  • iron ore;
  • container;
  • grain;
  • automotive;
  • roll-on, roll-off (ro-ro);
  • liquefied natural gas; and
  • passenger terminals.

According to the Ministry of Transport, the top 10 ports in China by cargo throughput in the first half of 2019 were:

  • Ningbo-Zhoushan;
  • Shanghai;
  • Tangshan;
  • Guangzhou;
  • Qingdao;
  • Suzhou;
  • Tianjin;
  • Rizhao ;
  • Yantai; and
  • Dalian.

The top 10 ports in China by container throughput in the first half of 2019 were:

  • Shanghai;
  • Ningbo-Zhoushan;
  • Shenzhen;
  • Guangzhou;
  • Qingdao;
  • Tianjin;
  • Xiamen;
  • Dalian;
  • Suzhou; and
  • Yingkou.

The primary purposes of the ports are to provide import and export, domestic trade and transhipment services.

Reform and port models

Describe any port reform that has been undertaken over the past few decades and the principal port model or models in your jurisdiction.

Since the 1980s, the port industry in China has undergone significant reforms. Before the 1980s, ports in China were centrally owned and administered by the Ministry of Transport. After 1984, all major ports were transferred to a ‘dual administration’ system. In this system, the Ministry of Transport and the local governments were jointly responsible for the administration of ports. The Ministry of Transport retained the macro-controlling power of formulating port laws, regulations, policies and development plans at the national level, while local governments, through their designated port authorities, assumed the functions of port regulations, policies, planning, construction and operations in their respective municipalities.

In the early 2000s, another reform was implemented resulting in the decentralisation of the port industry in China. Following a mandate from the State Council in 2001, 38 major ports under dual administration were transferred to the corresponding local governments. The previous port authorities were split into two arms: administration and commercial. The administrative functions were transferred to the local port administration bureaus established by the relevant local governments, and the local port corporations retained business and assets of their predecessors and assumed responsibilities for port operations. Since decentralisation, the Ministry of Transport still deals with regulation and planning matters that are of national and regional significance, while individual local port administration bureaus carry out the implementation of port planning and regulation enforcement.

In March 2002, public terminals were included into the encouraged category under the Foreign Investment Industry Catalogue, and from 1 April 2002, the requirement on a Chinese party having a controlling interest was abolished.

In January 2004, the PRC Port Law was official published, filling the gap in the Chinese legal system on the administration and regulation of ports in China.

The public-private joint venture model has become the dominant model for involving the private sector in the construction and operation of ports in China. Under this model, the local state-owned port corporation enters into a joint venture with the private investors (either local Chinese or foreign companies) to jointly develop, construct and manage a specific port project. Such a public-private partnership (PPP) model is unique to China, as governments in other jurisdictions usually sell, license or lease the development or operating rights to the private sector for a fixed duration rather than entering into an operational joint venture with the private sector.

As the market further matures, a number of local port corporations went public by reorganising their terminal assets and listing them on the stock exchanges. As of 2019, there are six Chinese port corporations listed on the Hong Kong stock exchange and 27 Chinese port corporations listed on the Shanghai or Shenzhen stock exchanges. Some of these port corporations are dual listed in both Hong Kong and mainland China.

State development policy

Is there an overall state policy for the development of ports in your jurisdiction?

Port development is highly regulated in China. The Ministry of Transport in Beijing is responsible for the overall port planning at the national level, and the local governments are responsible for the planning and implementation of ports in their respective municipalities. The most recent overall plan for port development in China is set out in the National Plan for Coastal Port Layout issued by the Ministry of Transport on 16 August 2006. Under this plan, port facilities in China are grouped into five regions and nine logistics networks (see question 1).

In addition, the Ministry of Transport issues a development plan for the transportation industry every five years (the Five Year Plan). In the 13th Five Year Plan (2016-2020), the focus areas are coordination of traffic and transportation, safety and emergency response, transportation services, construction and maintenance, exchange of information and data, environmental protection and energy saving.

Green ports

What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?

China has eight of the world’s 50 busiest container ports. These ports serve as the engines of China’s economic growth, but they also bring heavy pollution to the cities.

In recent years, the Chinese government has taken a number of major steps to control shipping pollution.

The 12th Five Year Plan (2011-2015) and the 13th Five Year Plan (2016-2020) set a number of national targets for reducing energy consumption and carbon dioxide emissions, as well as further recommendations for green transportation development.

Since the National People’s Congress passed a number of amendments to China’s Air Pollution Prevention and Control Law (Law on Air Pollution) in August 2015, the Ministry of Transport has taken various steps to tackle shipping emissions.

Shortly after the amended Law on Air Pollution, the Ministry of Transport published the Specialised Action Plan for Ship and Port Pollution Prevention and Control (2015-2020), a Five Year Plan that aims to reduce sulphur and nitrogen oxide emissions by up to 65 per cent in some of China’s major ports. The action plan includes specific goals and timetables for:

  • setting up emission control zones (ECZs) around key port regions;
  • promotion of shore power use for ships at berth;
  • replacement of container trucks with liquid natural gas (LNG) powered trucks;
  • development of LNG bunkering stations; and
  • research and development of LNG-powered vessels.

Following the Specialised Action Plan, a new regulation was implemented that designated the Pearl River Delta, Yangtze River Delta and Bohai-rim Water as domestic ECZs. From 1 January 2017, ships berthing at the key ports in ECZs must use fuel with sulphur content not exceeding 0.5 per cent. This will gradually be increased to all ports within ECZs from 2018 and then all areas within ECZs from 2019.

The Ministry of Transport also published the Port Shore Power Plan on 20 July 2017, targeting the construction of 317 berths with shore power supply across all the major ports and specifying the number of such berths to be constructed at each port.

Further, the Green Port Development Proposal (2018-2020) Consultation Paper was published recently, where a Green Port Grading Pilot Scheme was introduced as an incentive for the major ports to commit to green port development. Port operators may apply for green port development to the provincial administration of transport. The criteria for the assessment of green ports are consistent with the goals set out in the Five Year Plan and other relevant laws, including resource consumption, emissions and waste, remediation of the contaminated area and landscaping, green modes of transportation and environmental management. As a result of the ‘Green Port’ proposal, major ports such as Ningbo and Tianjin recently committed to the initiatives. The Yantian Port was recently recognised as the Best Green Container Terminal by the Asian Freight, Logistics and Supply Chain (AFLAS) Awards.

Legislative framework and regulation

Development framework

Is there a legislative framework for port development or operations in your jurisdiction?

There is a comprehensive legislative framework in China governing the planning, development, management and operation of ports in China. Key legislation includes:

  • the PRC Law on Ports;
  • the Administration Provisions on Port Operation and Management;
  • the Administration Provisions on Ports Planning; and
  • the Administrative Regulations on Port Construction.

Important legislative provisions are also contained in PRC laws and regulations on:

  • project approval;
  • government registrations and approvals;
  • foreign investment;
  • land use rights;
  • sea area use rights;
  • coastline use rights;
  • environmental protection; and
  • sea environment protection.
Regulatory authorities

Is there a regulatory authority for each port or for all ports in your jurisdiction?

Yes, the Ministry of Transport in Beijing is responsible for port planning and regulations that are of national and regional significance.

The local port administration bureaus are in charge of port planning and regulations of local nature.

The local port corporations exercise commercial functions and are responsible for the construction and operation of local port facilities.

What are the key competences and powers of the port regulatory authority in your jurisdiction?

The key competencies and powers of the Ministry of Transport include:

  • planning;
  • formulating policies, guidelines and legislation;
  • managing marine safety and security;
  • providing emergency responses; and
  • providing industry opinions on infrastructure investment project approvals at the national and regional levels.

The local port administration bureaus are primarily responsible for:

  • overall planning;
  • formulation of policies, guidelines and legislation;
  • administration of coastline, land and water areas; and
  • provision of emergency response at the local level.

The local port corporations are responsible for the commercial construction and operation of local port facilities.

Harbourmasters

How is a harbourmaster for a port in your jurisdiction appointed?

There is no harbourmaster for ports in China. The duties of a harbourmaster are carried out by the local port administration bureaus.

Competition

Are ports in your jurisdiction subject to specific national competition rules?

The PRC Anti-Monopoly Law and its implementation regulations are the main national competition rules in China. Other relevant laws and regulations include the PRC Pricing Law and the PRC Anti-Unfair Competition Law.

Tariffs

Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your jurisdictions and how are tariffs collected?

Since 2015, the Chinese government has introduced a number of measures to simplify the tariff system. This includes streamlining 45 types of port charges into 18 and the consolidation of 35 items of stevedoring service charges into one.

Pursuant to the 2017 Measures for Collection and Calculation of Tariffs, the current tariffs system is as follows:

  • government-fixed tariffs, including port dues and port security fees;
  • government-guided tariffs, including pilotage, towage, berth and barge tariffs. Tariffs collected by relevant service providers cannot exceed the cap set for government-guided tariffs; and
  • market-driven tariffs, including stevedoring fees, storage and depot station charges, are included in the lump sum charge for port operations. These are set by operators based on market demand.

Separately, port construction fees will be collected by port operators or shipping agents on behalf of local port authorities from cargo owners.

However it should be noted that, in view of the “trade war” between China and the US, additional tariffs are being introduced against US imports, which may potentially impact ports and terminals users.

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?

The Chinese currency, the yuan, is not a freely convertible currency. All transactions taking place in China must be made in yuan, including the payment and collection of tariffs and other port-related charges. For inward or outward foreign currency transactions, approval from the State Administration of Foreign Exchange (SAFE) (or its local delegate banks) will need to be obtained.

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?

Local governments in China are responsible for ensuring that the construction of roads and rails and the provision of utilities are compatible with the master port planning in their respective localities. They usually carry out these obligations through their relevant subsidiaries or subcontract some of the obligations to private subcontractors.

Joint ventures

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?

Joint ventures between local state-owned port corporations and one or more private companies are the predominant model for Chinese or foreign private port operators to participate in the development and operation of port facilities in China. There is no legal requirement that state-owned port corporations must hold a majority shareholding in such joint ventures. However, private port investors often decide to allow a majority shareholding to local port corporations to take advantage of the port corporations’ political influence and local connections.

Foreign participation

Are there restrictions on foreign participation in port projects?

Foreign investors are permitted to participate in the development, construction and operation of port facilities in China, subject to a number of criteria and approvals. These include the willingness of a local port corporation to enter into a joint venture with the particular foreign investor, filing with the State Administration for Market Regulation or its local branch, filing with the Ministry of Commerce or its local branch on foreign participation, and project approval from the National Development and Reform Commission or its local branch. The establishment and operation of the joint venture company must also comply with the requirements under the relevant PRC laws and regulations, the main ones being the PRC Company Law, the Sino-foreign Equity Joint Venture Law and their implementation regulations.

Public procurement and PPP

Legislation

Is the legislation governing procurement and PPP general or specific?

The overarching legislative instruments governing procurement in the PRC are the Government Procurement Law (2003) and its corresponding implementation regulations. Procurement of goods, services and engineering projects by government bodies that are within the centralised procurement catalogue or exceed the prescribed thresholds need to follow the procedures set out in these legislative instruments. These include observing the budget, giving priority to domestic suppliers and providers and following a competitive tender process.

For construction works involving large infrastructure or government-funded projects, a responsible entity must also follow the procedures set out in the PRC Tender Law, which requires a tender to take place by way of a public tender or invitation to tender.

In addition, for marine construction projects, the requirements set out in the Administrative Measures for Tender of Water Transport Construction Projects (2012) must be followed, with the Ministry of Transport and its provincial bureaus being the responsible government departments in charge.

In the past few years, the Chinese government has issued the Administrative Measures for Concessions for Infrastructure Facilities and Public Utilities Projects (June 2015) and the Guiding Rules for Implementing Public-Private Partnership Projects in Traditional Infrastructure Fields (October 2016). These measures set out certain concession models (such as build-operate-transfer (BOT), build-own-operate-transfer (BOOT) and build-transfer) that may be adopted by a government for the construction and operation of infrastructure facilities and public utilities, and the approval requirements and procedures for the implementation of these models. The Guidelines on Common PPP Agreement were issued by the government setting out guidelines for basic provisions required for a PPP agreement.

Proposal consideration

May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?

In China, port construction and operation projects are led by local port corporations. Reputable, qualified and suitable private investors are invited to participate in a port project in the form of a joint venture. A private port investor must demonstrate to the relevant local port corporation that it is the most suitable joint venture partner for the particular project before being invited to the negotiation table (see question 17).

Joint venture and concession criteria

What criteria are considered when awarding port concessions and port joint venture agreements?

The criteria often used by a local port corporation in awarding a port joint venture agreement to a private investor include:

  • previous international port construction, management and operation experience;
  • financial capability, reputation and creditworthiness; and
  • the ability to increase throughput and access to the customer base.

Political connections and local relationships are also important.

Model agreement

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 joint venture agreement used for port projects in China. However, most port joint venture transactions follow a similar format. Common transaction documents for a public-private joint venture include:

  • a joint venture agreement, which sets out the terms and conditions governing the rights and obligations of each participant;
  • the articles of association setting out the management and corporate governance of the joint venture;
  • a lease agreement for the lease of any port facilities to the joint venture; and
  • an asset transfer agreement for the transfer of any port assets to the joint venture.

The terms of these transaction documents are negotiated between the relevant local port corporation and the private investors.

Approval

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?

For a joint venture involving foreign participants, the main government approvals and registrations include approval from or record-filing with the National Development and Reform Commission, the Ministry of Commerce, the State-owned Asset Supervision and Administration Commission, the State Administration of Foreign Exchange and the State Administration for Market Regulation, or their respective local branches.

No specific law is required to be passed for the implementation of a port public-private joint venture agreement in China.

Projects

On what basis are port projects in your jurisdiction typically implemented?

Port privatisation in China is typically implemented on a partial BOT basis. Local port corporations usually take responsibility for the construction of both the infrastructure facilities (such as the breakwaters, navigational aids, approach channels, quay walls, wharves and container yards) and the superstructure, and then transfer them to the joint venture company for management and operation for the duration of the joint venture term. Sometimes, the joint venture companies are also given the right to construct the superstructure. At the end of the joint venture term, the land, the infrastructure facilities and all fixtures attached to the land are transferred back to the government. The movable assets are distributed to the joint venture partners in proportion to their equity ratios after settling all outstanding liabilities of the company.

Term length

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?

The maximum term for port public-private joint venture agreements in China is 50 years. The average term is between 30 and 50 years.

On what basis can the term be extended?

The term can be extended subject to agreement from the local port corporations and filing with relevant government authorities.

Fee structure

What fee structures are used in your jurisdiction? Are they subject to indexation?

A private port investor will be required to make a capital contribution (usually in cash) in proportion to the ratio of its equity interest in the joint venture company. The cash capital contributions will then be used to pay the local port corporation for the value of the port facilities built, leased or transferred by the local port corporation and to the government for the right to use the land, sea area and coastline. The value of these facilities and rights must be determined by a qualified valuation institute and approved by the State-owned Asset Supervision and Administration Commission (or its local delegate).

Exclusivity

Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?

The local port corporations usually do not grant any exclusivity to private port investors. Sometimes they may agree to give private port investors the first right of refusal to participate in future port projects within the specified geographic region.

Other incentives

Does the government or the port authority provide any other incentives to investors in ports?

Prior to 2011, foreign-invested terminal operating companies were entitled to a five-year income tax exemption and five-year 50 per cent tax reduction preferential tax treatments from their first income-generating year. Foreign-invested enterprises were also entitled to a value added tax refund for procurement of domestic-manufactured equipment within their total investment amount. These incentives were modified with the unified tax treatments for foreign-invested and domestic enterprises.

Since 2011, all companies in China, including domestic and foreign-invested enterprises, have been subject to the same company tax rate of 25 per cent. Currently, the Chinese government provides industry-oriented or geographically focused tax incentives. These tax incentives aim to direct investments into those industries and projects encouraged and supported by the state. While foreign-invested port projects are still encouraged by the state, they are of a lower priority compared to high-tech or energy conservation projects.

Port development and construction

Approval

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?

There are a number of government approvals that must be obtained before construction works are permitted to commence at a relevant port. The main approvals are:

  • pre-project approvals, including approvals for:
    • the commencement of the preliminary works;
    • the project location;
    • environment protection;
    • sea environmental protection;
    • the use of land, sea area and coastline;
    • safety; and
    • energy saving;
  • project approval, including feasibility study report for government projects; and
  • approval for the design and construction works.

The time that it takes to obtain these approvals varies, depending on:

  • government policies;
  • overall port planning; and
  • the relationship between the local port corporation and the government (at central and local levels); and
  • the demand and supply for port capacity at the relevant time.
Port construction

Does the government or relevant port authority typically undertake any part of the port construction?

The local government and its relevant departments are responsible for the construction of public facilities such as road and rail within the framework set out in the overall port planning. The relevant local port corporation usually undertakes the construction of the port infrastructure (eg, dredging, land reclamation, quay walls and wharves). The superstructure is usually undertaken by the local port corporation, but sometimes also by the joint venture operating company.

Does the port operator have to adhere to any specific construction standards, and may it engage any contractor it wishes?

The construction of port facilities must adhere to the requirements set out in the PRC Construction Law, the Administrative Regulations on Construction of Ports and other relevant laws, regulations and industry standards.

Contractors may be engaged to carry out certain aspects of the construction works, but these contractors must satisfy the required qualifications, skill and capital requirements.

What remedies are available for delays and defects in the construction of the port?

The responsible construction companies or contractors are required to give warranties on the quality of the construction works during a specified or agreed warranty period. They will be required to rectify any defect and pay for any damages caused. In some cases, fines will be imposed and the responsible company or contractor may be ordered to suspend its business, or have its qualification downgraded or revoked.

Port operations

Approval

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?

Once the construction works have been completed, inspected and accepted, the main government approvals and registrations required for a port operator to commence operation at a relevant port are:

  • filing with the Ministry of Commerce or its local branch (for any foreign investment in the project);
  • approval from the State-owned Asset Supervision and Administration Bureau or its local branch (for transactions involving state-owned assets);
  • foreign exchange approval;
  • filing with State Administration for Market Regulation (or its local branch);
  • filing with the tax bureau; and
  • issuance of the port-operating permit.

The time that it takes to obtain these approvals and registrations varies, depending on the speed of negotiations between the local port corporation and the joint venture partners, government policies, and the demand and supply for port capacity at the time. With the record-filing regime replacing the examination and approval regime for foreign investments in 2016, the governmental approval process has been significantly reduced. It is now possible to complete all government filings within two months if a project has support from the local port authority.

Typical services

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?

A joint venture port-operating company typically provides loading and unloading, storage, transhipment and warehousing services.

The local port administration bureau generally provides pilotage, towage, berthing, vessel shifting and other relevant administrative services through the relevant subsidiaries, and charges for such services based on statutory rates set out in the relevant port charge regulations.

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?

Local port corporations are generally reluctant to give any commitments in relation to access to hinterland. In situations where a local port corporation leases or transfers the completed port facilities to a joint venture company for operation, the local port corporation may sometimes agree to guarantee that the port is connected to paved and well-maintained roads and railways at the time of the lease or transfer.

Suspension

How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?

The requirements on port operations are set out in the PRC Administration Regulations for Port Operation and other relevant PRC laws and regulations. A port operator is required to apply for a port-operating permit by submitting an application together with relevant supporting documents to the local port administration bureau. The port administration bureau will only issue the port-operating permit if it is satisfied that the port operator satisfies all of the requirements.

The local port administration bureau also conducts inspection from time to time, including interviewing employees and inspecting and photocopying relevant information.

A port-operating permit may be suspended or revoked if a port operator ceases to satisfy any of the conditions set out in the regulations or the permit conditions, including refusal to give priority to emergency response or failure to comply with the safety requirements.

Port access and control

In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?

The local port administration bureaus may access the port area to conduct an inspection of port operations from time to time, and may suspend or revoke a port-operating permit if the operations fail to satisfy the conditions set out in the relevant regulations or permit conditions. The local port administration bureau does not usually take over port operations. If there is any concern, it is likely to raise the issues and discuss them with the relevant local port corporation, which is also a shareholder of the joint venture operating company.

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?

See question 33.

Transferrable assets

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?

All land in China is owned by the state. A port operator only has the right to use the land for the duration of the land use right certificate. At the end of the joint venture term (which often coincides with the expiration of the land use right certificate), the land and all improvements and fixtures on the land will be returned back to the government free of charge. All remaining movable assets will be distributed between the shareholders of the joint venture company in proportion with their shareholding ratios after settling outstanding liabilities.

Miscellaneous

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?

A separate port-operating company is usually set up for each phase of the port construction and operation project. This port-operating company must be incorporated in China.

Transferring ownership interests

Are ownership interests in the port operator freely transferable?

Transfer of direct ownership interest in a port-operating company is subject to the right of first refusal of the other joint venture parties, and filing with relevant Chinese government authorities. Whether a party has any right to transfer an indirect ownership interest in the port-operating company will depend on whether there is any change of control restriction in the joint venture contract.

Granting security

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?

It is highly unusual for a shareholder of a port-operating company to grant security interest over its equity interest in the joint venture company. This is because it is difficult for a secured party to enforce the security interest when any transfer of equity interest in the joint venture company is subject to the right of first refusal of the other joint venture parties and, traditionally, approval of the relevant Chinese government authorities. A private port investor often makes a cash contribution to the joint venture company and funds this cash contribution through internal cash flow or financing at the parent company level.

The local port administration bureaus are in charge of local port planning and regulatory matters. They do not get involved with the operational matters of a joint venture company and do not enter into any direct agreement with the project financing banks.

Agreement variation and termination

In what circumstances may agreements to construct or operate a port facility be varied or terminated?

A joint venture contract for the construction and operation of a port facility may only be varied by written agreement between the joint venture parties and filing with relevant Chinese government authorities.

A joint venture contract may be terminated early on the grounds set out in the joint venture contract or pursuant to relevant Chinese laws and regulations. These include:

  • a prolonged event of force majeure;
  • breach by a joint venture party;
  • unprofitable operation (subject to materiality or otherwise agreed threshold);
  • nationalisation of the operating company’s substantial assets; or
  • a change in China’s foreign exchange law preventing the remittance of profit distribution by a foreign investor.
Contractual breach

What remedies are available to a government or port authority for contractual breach by a port operator?

A breach of contract by a private investor will entitle the local port corporation and other joint venture parties to claim for damages, enforce the compulsory acquisition clause, terminate the joint venture early or exercise other remedies available under the contract or PRC law.

Governing law

Must all port PPP agreements be governed by the laws of your jurisdiction?

A port joint venture agreement is required to be governed by Chinese law.

Disputes

How are disputes between the government or port authority and the port operator customarily settled?

A dispute between a local port corporation and a foreign port investor is often settled through arbitration. If there is a ‘foreign element’ the arbitration can be seated outside China, for example, in Hong Kong or Singapore, in which case the arbitrations will often be conducted under the rules of the Hong Kong International Arbitration Centre, the Singapore International Arbitration Centre or the ICC. The China International Economic and Trade Arbitration Commission (CIETAC) also administers overseas arbitrations. If there is no foreign element, Chinese law requires disputes to be resolved by arbitration seated in China or by Chinese courts. Dispute resolution by arbitration is generally preferred over Chinese courts and the Chinese arbitral institutions, including CIETAC, generally have comprehensive procedural rules that are comparable to many overseas institutions.

Updates and trends

Key developments of the past year

Are there any other current developments or emerging trends that should be noted?

Key developments of the past year44 Are there any other current developments or emerging trends that should be noted?
  • Port Facility Security Rules (2019 Amendment) issued by Ministry of Transport. These Rules have been amended in three important respects: First, the Rules now provide for the port facility security certificate to be issued by the provincial transportation (port) department. Second, the Rules provide for more information to be given in the port system security management information report. Third, measures have been introduced by the Rules, which are designed to strengthen the Ministry of Transport’s regulations on the supervision and inspection of the performance of provincial-level transportation (port) departments.
  • Provisions on the Administration of Port Operations (2019 Amendment) issued by Ministry of Transport. The Provisions have been amended in three important respects. First, licensing requirements for operating a port tally business have been amended to introduce a record-filing system and certain provisions of the port tally business licensing conditions and licensing procedures have been removed. Second, the Provisions now require supervision during and after the period of port operation. Third, port tally service standards and norms have been updated. The Ministry of Transport is currently formulating service specifications for the port tally industry. It has invited opinions from the industry and plans to issue it this year to further improve the quality of port tally services.

The government has recently invited public consultation on the following proposals:

  • Revising and Issuing Measures for Collection of Port Charges;
  • Issuing the Work Plan for Optimising Port Business Environment to Enhance Cross-border Trade Facilitation;
  • Issuing Strict Control of the Use of the Coastline Resources of the Yangtze River Trunk Line;
  • Issuing Guidelines for Port Safety Production Risk Identification and Control;
  • Issuing Port Security Facility Catalogue and Classification Code;
  • Issuing Code for the Design of Safety Facilities for Dangerous Goods Port Construction Projects; and
  • Issuing the Guide for Large-scale Mechanical Port Typhoon Safety Work.