Labor Toolkit

Legal Tools for Port Reform

General Approach for Drafting a Ports Law

A port authority is usually established by a specific ports law, either as a public or commercial entity (for example, joint stock or limited liability company). The following two examples illustrate some key juridical attributes to be considered.

The ports law in Singapore states:

There is hereby established a body to be known as the Maritime and Port Authority of Singapore, which shall be a body corporate with perpetual concession and a common seal, by that name, be capable of: a) suing and being sued; b) acquiring, holding, and developing or disposing of property, both movable and immovable; and c) doing and suffering such other acts or things as bodies corporate may lawfully do and suffer.

Some countries have opted for a corporatized port authority. To that end, the Polish ports act states:

Joint Stock Companies, administering ports of fundamental importance to the national economy, are established under this Act and operate on the basis of the Commercial Code, unless otherwise provided for by this Act.
Companies mentioned in paragraph one have a public service character.

The Belgian main ports (Antwerp, Ghent, Oostende, and Zeebrugge) are regulated by the Flemish Port Decree, 1999 (Official Gazette No. 99/992). The relevant provisions (Article 4) are:

(i) Port authorities are public entities. They possess the exclusive powers to deal with port issues. These issues cannot be transferred, either in whole or in part.

(ii) Entities participating in port authorities shall have a public character.

(iii) Port authorities are subject to corporate law, unless incompatible with the provisions of this decree or other legal acts.

In Asia and Africa, the institutional structures of many ports were often patterned after their European counterparts. The vast majority were public service ports responsible for all port services. Dockers were employed by the public port authority or port trust. In these countries, new port laws are aimed at converting service ports into landlord ports, requiring the separation of public landlord responsibilities from cargo handling activities (see Box 1). New port laws regulating the tasks and responsibilities of a (public) landlord port authority have been combined recently with the establishment of private operating companies in accordance with the national commercial code.

Some situations require a law to specifically regulate the development and construction of a terminal by a private operator through authorizing the award of a concession contract (see Box 2).

A ports law may be very detailed or merely set forth basic principles of port management and operation. Regardless of the form adopted for the port’s regime, to create a solid basis for clearly delineating port functions and responsibilities, a core set of provisions should be included. These provisions and their key features are described below.


A preface states the objective of the law and some general conditions. The approach adopted is a function of the underlying legal system. For example, some countries use a combination of statute and implementing regulations; others pass a decree that applies a privatization or concession law to a port or ports. The objective might be to create new port authorities or to reform an existing port authority. Also, the preface should indicate whether transfer of rights to private parties (for example, lease, concession, or buildoperate- transfer [BOT]) is permitted. It might be necessary in such instances to make corresponding changes in laws governing public property (for example, in the case of the “Maritime Domain”). Finally, the law should regulate the organizational, financial, and fiscal relations between the related public organs (such as the national government, regional governments, and municipalities) as well as with regulators, such as the maritime administration, the fiscal authority, and the competition commission.

Two approaches have been developed for drafting the preface of a typical port law: a preface stating only the objective of the law (see Box 3 and Box 4), or a preface of general conditions, elaborating on the objective and a number of boundary conditions. In several cases, the definitions used in the law are included in the first section.


The second element of a ports law should comprise definitions of the main terms used in the law. The port business, especially as a specific mix of public and private interests and financiers, will require that the interplay of these interests be balanced and result in well-circumscribed functions. The law should likewise define maritime and port infrastructure, identifying which are under the authority of the state and which are under the authority of a port authority. Sometimes it may be necessary to designate several types of ports, such as “ports of national interest” and “ports of regional interest,” or as in the French Ports Law of 1965, Ports Autonomes and Ports d’Intérêt National, with each exhibiting its own definition.

It is highly advisable to precisely define critical functions, features, and port administration bodies. In the port field, investors and lenders will review definitions of a port law closely to determine if there are ambiguities that may affect security interests or lender rights. Because there is no internationally accepted terminology, the following list is only an illustrative compilation of the most commonly used terms.

Often words used in legal agreements are capitalized to indicate they have been defined.

Aids to navigation: All floating, stationary, and on-shore objects dedicated to assisting sea-going and inland vessels in the safe navigation at sea and in inland waters including buoys, beacons, lighthouses, vessel traffic systems, tidal measuring systems, and fixed objects and markers.

Authorized pilot: A pilot employed or authorized by a competent authority to pilot vessels.

Basic infrastructure: Sea locks, breakwaters, piers, sea walls, and other protective works not directly involved in the transfer of goods; maritime accesses and canals; primary roads to and from the ports; and also railway tracks, pipelines, and buffer zones situated at the borders of the port.

Concession: An agreement entered into by a person with the port authority in which such person becomes entitled and obliged to provide port and marine services in a specified area of a port, or in a port in its entirety, including or excluding the right to construct, alter, and maintain basic and operational infrastructure, superstructure, and equipment, subject to the terms and conditions set out therein.

Concessionaire: Any person who has concluded a concession agreement with the port authority. Dues: Port dues, cargo-related dues, and pilotage dues.

Harbormaster: The harbormaster appointed by law and such harbormaster’s appointees, representatives, deputies, or delegates appointed in accordance with such law.

Marine services and facilities: All services performed in port areas and the approaches thereto, in respect to towage, mooring of vessels, sounding of navigable waters, the lifting of sunken vessels, salvage of vessels, fire fighting aboard vessels, and all related activities as well as the provision of facilities, vessels, and equipment to perform these activities, but not necessarily including pilotage.

Maritime access: Fairways, dredged channels, and other waters providing access to ports, equipped with aids to navigation for commercial sea-going and inland vessels.

Operational infrastructure: Port facilities and constructed works dedicated to commercial handling of sea-going and inland vessels, such as quay walls, piers, jetties, roll-on roll-off facilities, berthing aids, and also secondary connecting roads within the port area, including all appurtenances and components thereof.

Pilot: Any person not belonging to a vessel who has the conduct thereof.

Port authority: Every port undertaking agency established under the subject law.

Port (or seaport): One or more port areas forming an autonomous functional and economic entity, of which the boundaries are established by authority of the relevant government body and whose activities are governed in accordance with national or other relevant law.

Port dues: Dues levied on a vessel for entering, using, and leaving the port.

Port infrastructure: All infrastructure located within the seaport or in the land and sea accesses containing basic infrastructure, operational infrastructure, and superstructure.

Port services and port facilities: Port terminal services and facilities for handling, storage, and transportation of goods on port land and for handling of passengers carried by vessels.

Public license: A license granted under a port act and for the purposes of the act; a public licensee shall be construed as the recipient of a public license and subject to its terms and conditions.

Superstructure: Sheds, silos, warehouses, and housed facilities of all kinds, and all infrastructure and equipment not identified under basic and operational infrastructure.

Vessel: Includes ships, boats, air cushioned vehicles, or floating rigs or platforms used in any form of operations at sea or in port, or any other description of a vessel.

Objectives and Functions of a Port Authority

The third section of a ports law should delineate the objectives and functions of a port authority. Usually, a port authority exercises jurisdiction over a port territory, which should constitute an economic and functional unit. The establishment of a port authority as this legal entity is one of the major elements of a ports law (Box 5). The law provides the legal status for the port authority, which might be a public entity or a corporate entity under the commercial code of the relevant country, such as a joint stock company. The law should also indicate which public entity has the right to establish a port authority in the event that the state is not doing so. This might be a region, province, city, or a combination.

In the case of corporatized or privatized port authorities, linkages will be needed to the mercantile, corporate, or commercial code. Provisions should be included on shareholding, for example, or conforming changes made to commercial or corporate laws.

There is an important point affecting port authorities established as joint stock companies. Generally, port authorities are responsible for operating the entire port. In the event of a landlord port situation, a corporatized or privatized port authority must ensure a level playing field among many terminal operators and other service providers. To avoid conflicts of interest, the law should explicitly regulate the powers and duties of the port authority in relation to private operators with respect to investments and share participation.

Powers and duties of a port authority regarding land management require specific attention in the law. A landlord port authority is responsible for land management and overall port development. Special attention should be paid to the regulation of ownership and use of port land under the law. A port authority may own the land or have a perpetual or time-specific right to use the land. Powers to act as a landlord may need to be specifically elaborated, as well as the limitations of such powers, such as the interdiction of the sale of port land. While the authority is engaged in, or provides for, construction of operational infrastructure, the maintenance of such infrastructure constitutes a duty for the authority. The ports law should specify the exact responsibilities of the port authority and those of the state with respect to investments in basic and operational infrastructure, maritime accesses, port access roads, and rail and waterway infrastructure as well as hinterland connections.

Generally, the objective of a port authority is to efficiently and economically manage the port. In a public landlord port, its objectives should be aligned with the macroeconomic goals of the state and the needs of the region, such as the creation of jobs, strengthening of the economic structure, and so forth (see Box 6).

Fundamental port functions that should be considered in the law include (see also Box 7):

Corporatized Ports—Special Considerations

If a port authority is established as a joint stock company, matters of share issuance and capitalization arise. The ports law should include clauses pertaining to the way this is handled, consistent with the provisions of relevant commercial, mercantile, and securities laws.

One key consideration is whether a government, national or local, intends to exercise direct influence in the port authority via its shareholder’s rights (for example, the nomination of the chairman of the board or the port director). In the event of a corporatized authority, the government or other public body usually owns 100 percent of the shares. In some countries, the shares are divided between a national government, local government, and other public or private shareholders in such a way that the involved public entities retain a majority voting position. In some corporatized situations, voting shares can be allocated to private investors. Once private investors have a majority voting position, the port authority can be considered as being privatized (see Box 8).

In general, due to the (semi) monopoly position of landlord ports and the public interests involved, it is not advisable to allocate shares to private investors. This may cause serious conflicts of interest; private investors mainly seek to increase shareholder value whereas the public sector may take considerations of general interest into account. Also, flotation of all or part of the stock is not considered a viable option for the same reason.

Capitalization can be effected through transfer by law of all relevant properties to the new port authority. These might include all operational infrastructure, related land, and superstructure, including such assets as equipment and other rolling stock. When a landlord port is created together with a new corporatized port authority, one or more separate operating companies with the legal structure of a limited liability company might be set up to take title to the superstructure and equipment. The value of the initial shares could be determined on the basis of their book or market value, whichever is less.

Depending on the port policy of the country concerned, limits can be imposed on the sale of shares. In many cases a government may want to retain the right to determine port policy. This requires the possession of the majority of the voting shares, or of “golden shares.” A clause in the law guaranteeing such majority position should then be considered.

Implementation Problems

Implementing a new ports law presents a wide variety of issues and often results in disagreements among the parties involved. The major issues encountered in implementing new ports laws are described below.

Effects of port reform on the existing work force. Port reform is often triggered by overstaffing at ports and restrictive labor practices. However, the objective of a new ports law is not labor reform, but port reform. Labor reform may be a by-product when a port must rationalize its workforce to improve efficiency and reduce costs. A ports law might set conditions for the transfer of personnel from the existing port authority to the new one. Since port reform is often accompanied by a reduction of the size of the port’s workforce, the ports law may establish and regulate a port workers fund to soften the impact of labor force reductions. The fund can be used for redundancy payments or retraining programs.

Valuation of assets and the capitalization of a new port authority. A valuation should be conservative. Often, ports in the process of reform have to dispose of a large variety of outmoded equipment and poorly maintained port infrastructure and buildings. This obsolescence and maintenance backlog must be fully taken into consideration when assessing the value of the port’s assets. Otherwise, private sector bids in port privatization may reflect significant discounts as the bidders take into account the need to pay for the substantial investments that will be required to modernize and upgrade the infrastructure.

Replacing top management. Ports functioning within the framework of competitive markets require a different management ethic to lead the difficult reform process and steer the new port authority safely through the shoals of competition and other commercial activities.

Creation of a clear definition of the port area. This definition should be established at the outset of reform and not be postponed to a later date (for example, until later decree of a council of ministers). Significant differences of opinion often arise with port cities as to which areas are part of the port and which areas are part of the city. If a decree is required by the ports law, it should be enacted at the same time as the law itself.


How To Use The Toolkit


Framework for Port Reform

The Evolution of Ports in a Competitive World

Alternative Port Management Structures and Ownership Models

Legal Tools for Port Reform

Introduction and Overview

General Approach for Drafting a Ports Law

Port Authority and Terminal Operations

Port Regulations

Port Competition Modalities

Full Concession Agreements

BOTs and Construction

Annex I

Financial Implications of Port Reform

Port Regulation:
Overseeing the Economic Public Interest in Ports

Labor Reform and Related Social Issues

Implementing Port Reform


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