Financing projects on maritime domain Zoran Tasić DEDICATO CONSULTING

Specifics of financing projects on maritime domain Maritime domain (Article 3-6 MDSPA): public domain of particular interest for the RC sea shore, ports, marinas, etc. buildings and other objects attached to maritime domain no property rights (including mortgages) allowed commercial use

Concession Globally sensitive political, economic and legal issue OECD: Concession is “a grant to a private firm of the right to operate a defined infrastructure service and to receive revenues deriving from it. The concessionaire takes possession of the relevant assets (but ownership usually remains with the government) and uses them to provide the relevant product or service according to the terms of the contract. “

Finance institutions’ requirements Consolidated and transparent system of public procurement applicable to concessions; No frequent changes in law that can jeopardise financing of projects; Conformity of concession laws and regulations with other relevant laws in the country; Freedom of contract; Financial ability and guarantee of the concession grantor to meet its contractual obligations.

Dispute resolution Concessions Act, Article 49: Either arbitration in Croatia, Croatian law to apply or Commercial court in the place of the concession grantor

Cont’ EBRD’s comparative analysis of concession laws and regulations in its countries of operation

Project Finance Large projects on maritime domain such as port infrastructure and marinas. High level of capital Stakeholders: banks, contractors, investors, project managers, suppliers, public sector, etc. Repayment of financing from the project revenue secured on the project assets and stakeholders’ contractual rights and obligations

Cont’ (IPFA): „ Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project”. 

Cont’ Banks’ focus is on specific rights generating income from the project. No or limited recourse. Bank’s active control of the project granted by the project documentation.

Cont’ various project contracts parties’ rights and obligations assignments direct agreements step-in right

Duties of the concession grantor to guarantee the concessionaire free access to maritime domain and commercial use; to make sure that the concessionaire can freely enjoy its contractual and statutory rights and performs its obligations; to maintain relevant legislation in force and to avoid changing concession laws and regulations without concessionaire’s prior consent; to perform its duties punctually (issuing necessary approvals, consents, etc.); to assist the concessionaire in obtaining necessary approvals and consents from authorities;

Cont’ to secure concessionaire’s access to electricity, gas and water; not to withdraw its decisions or any legal document made for the purpose of the concession and the project; not to intervene into day-to-day business of the concessionaire unless specifically agreed;

Cont’ not to change legal regime of the maritime domain under concession; no competition; not to negotiate transfer of the concession to third parties before the concession is finally terminated; not to introduce any legal qualifications applicable to the concessionaire’s shareholding or management;

Cont’ no new fiscal burdens applicable to dividends payable to concessionaire’s shareholders or tariffs and fees; to avoid any actions that might jeopardise development of the project; to compensate concessionaire for any damages caused by grantor’s breach of any of the above obligations.

Securities Pledge over/transfer of concession; Assignment of all concessionaire’s rights and benefit from marina or port berths contracts construction contract for a marina or port project insurances supply, maintenance, operation and all other contracts related to the project in excess of a threshold; together with all notices and FINA registration certificates.

Cont’ Direct agreements between bank, concessionaire and -concession grantor -contractor -operation and maintenance project managers -suppliers Article 47(3) of the Concessions Act

Cont’ Pledge of shares in the concessionaire Pledge over concessionaire’s bank accounts Article 41 and 42 of the Concessions Act

Payment instruments Bill of exchange Debenture

Purpose of the securities Step-in Taking control over the project Sale/transfer of the project

Mortgage Whether a conditio sine qua non for financing the projects on maritime domain? Legal system that gives protection to both contract parties and offers effective resolution of disputes (including international arbitration).

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