Privatization of Maritime Domain to Be Allowed?

By , 16 Feb 2017, 13:17 PM Business
Privatization of Maritime Domain to Be Allowed? Source: Port of Rijeka

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New legislative changes to affect Croatia’s coastal areas.

The government plans to amend the Law on Maritime Domain in order to allow private commercialization of maritime domains and port areas. One of the possibilities is that investors, such as those in port infrastructure, would be able to become owners of land in maritime domain. According to current regulations, maritime domain includes areas of interest for the Republic of Croatia, it has special protection under the constitution, and there are no ownership or property rights within it. That could change, if the government implements its plans, reports Novi List on February 16, 2017.

The government’s intention to amend the Law on Maritime Domain has been revealed by the Ministry of Sea, Transport and Infrastructure which published a paper on strategic environmental impact study for the National Development Plan for Ports of Special Economic Interest for Croatia until 2030. It includes six ports: Rijeka, Zadar, Šibenik, Split, Ploče and Dubrovnik.

As part of the study, one of the proposals is to amend the Law on Maritime Domain because the “main characteristic of the maritime domain is that within it there are no ownership or property rights”. Due to such law, says the paper, the overall economic exploitation of ports must be based on a system of concessions. The result is that investments in port infrastructure in Croatia are always investments made by public institutions or are supported by government guarantees.

Given that “private companies are not allowed to have ownership over land or properties built on the land in maritime domain”, the problem is that “private companies cannot get funding for their investments, especially in the case of large investments, because banks cannot claim mortgage on investments, since maritime domain does not allow ownership”.

“Currently, the Law on Maritime Domain prevents private investments in port infrastructure which are carried out without government guarantees. Given that the government currently has a limited budget, private investments in port infrastructure can no longer be accompanied by state guarantees. In order for Croatian port sector to became viable for private investments in infrastructure, it will be necessary to revise the Law on Maritime Domain”, the paper says, noting that this does not mean that it is necessary to abolish the system of maritime domain, but that it needs to be better adapted.

The paper points out that one of the solutions could be for such land to be owned by the state, which would enable each concession project to be a public-private partnership project. This means that the state, as owner of the land in the maritime domain, would substitute bank guarantees with mortgages, and would later, if a private investor is not able to repay the loan, buy back the land and infrastructure located in the maritime domain.

Asked about changes to the maritime domain and whether the government would enable ownership to investors who want to invest in port infrastructure, the Ministry of Sea, Transport and Infrastructure did not comment. It will be interesting to see, if the government really decides to amend the law, reaction from MOST, HDZ’s coalition partner, which constantly insists on constitutional protection of property and infrastructure.

So far, maritime domain is protected by law. The law clearly states that “on maritime domain, it is not possible to acquire property or other ownership rights of any kind”. If the government proceeds with the changes, that would mean that it would be possible to acquire ownership in the maritime domain, or at least take out a mortgage. In that case, the question is how the constitutional protection will apply to the maritime domain. The constitution lists the items that have special protection of the state, but the same article adds that “the law will determine how they may be used and exploited”.

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