On 8 June 2012 the Ukrainian Parliament passed a law "On the Seaports of Ukraine" (the "Law"), the intent of which is to re-organise the Ukrainian port industry and allow private investment in port infrastructure, including the privatisation of existing assets.

The Law, long-awaited by the national port industry, establishes the basis of governmental regulation and defines new procedures for building, expanding and closing seaports in Ukraine, as well as the procedure for performing any economic activity on the ports' territory.

The key changes that are introduced by the Law are:

  • real estate property, moorings and land plots within a seaport territory are capable of being owned by private individuals or companies and existing port infrastructure/companies can be privatised following a set procedure;
  • the State is able to enter into lease or concession agreements over moorings, land plots and any other port infrastructure for a term not exceeding 49 years;
  • seaports became a point of border crossing, with Ukrainian customs and sanitary/ecological check points for people and property entering Ukraine from the sea;
  • a new state-run body with outposts in each Ukrainian seaport, the Administration of Seaports of Ukraine (the "Administration"), is in charge of supervising the functioning, maintenance and use of seaports and their infrastructure, including safety standards (but has no right to prevent or interfere with the activities of any business entities legally operating in the seaport).

The privatisation of seaport infrastructure is the most significant change. Under the Law any new infrastructure built through private investment will become the property of the private investor(s). This extends to privately financed moorings built before the Law came into effect.

Most of the existing assets open to privatisation are subject to a compulsory tendering process. "Strategic" port infrastructure is to remain State-owned and is not subject to lease or concession agreements with private investors, who are only allowed to enter into contracts for construction/reconstruction, repair or modernization work.

Unfortunately the Law does not define what such "strategic" assets are and further legislation will have to specify exactly what assets will be subject to privatisation. This is likely to stretch the timescale by which existing assets will be tendered.

The Law also provides for the creation of "free economic zones" within the territory of seaports, which could offer significant tax, monetary and customs advantages to investors/owners.

Even if the privatisation process of existing assets may suffer delays, the Law is a very promising opportunity for investors and may open the door to a more efficient and trade-friendly port industry, bringing immediate benefits to all those who are currently funding new built infrastructure due for completion after the official coming into force of the Law.

Further reading

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/06/2012.