Professional paper
https://doi.org/10.21857/yvjrdcqrky
FINANCING PROJECTS ON MARITIME DOMAIN
Zoran Tasić
; Dedicato d.o.o., Zagreb, Hrvatska
Abstract
Concessions rise very sensitive political, economic and legal issues in many countries
worldwide. Even defining the term ‘’concession’’ can be a complicated and not very
straightforward exercise. OECD accepted definition of a concession as: “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.’’
Croatian law defines concession generally as a right acquired pursuant to a concession
contract subject to terms set out in the decision on concession (granted by a relevant
authority) and, in respect of maritime domain, more specifically, as a right (of the
Government authority) to exclude a part of maritime domain from the public use, either
partly or completely, and to grant it to individuals or corporations for their commercial
use subject to the relevant area planning. Buildings and other units erected on a maritime
domain form its integral part.
The law makes it clear that no property rights can be created on any part of maritime
domain including buildings and units erected thereon.
Projects developed on maritime domain often include large infrastructure projects,
development of ports and marinas which require substantial financing.
Banks that provide financing to such projects require organised and transparent concession
laws and regulations, freedom of contract, legal protection of all parties involved
(including a possibility of international arbitration).
Projects of that kind are normally financed through project finance scheme which
requires high level of capital and involves a substantial number of participants such as
banks, contractors, investors, project managers, service suppliers, public sector, etc. Project
finance scheme depends entirely on income generated by the project itself which income
is the only source of repayment of financing and on ‘’the availability of reliable
security instruments on the assets and cash flow of the concessionaire in favour of lenders,
including ‘step-in’ rights and the possibility of government financial support or the
guarantee by the contracting authority of proper fulfilment of its obligations.’’
The purpose of having security instruments (including assignment of concessionaire’s
rights under the project contracts) for the concessionaire’s loan obligations, is that in the
event of the concessionaire’s default the bank can ‘’step-in’’ and take full control over the
project (instead of enforcing the securities) and make sure that the project is completed.
That is why the project contracts, including concession contract in the first place, are of
paramount importance for the banks.
Normally, the security instruments on the concessionaire’s assets do not include
mortgage on the project buildings and other units developed on the maritime domain.
Croatian law does not allow for creation of a mortgage on maritime domain. That, however,
is not an obstacle for the banks to provide financing for projects developed on maritime
domain. From project finance banks’ point of view it is not necessary to change the law
in order to allow creation of mortgage on maritime domain. Other security instruments
created in favour of the banks providing project finance, including direct agreements, are
normally sufficient for the banks to control the project.
Keywords
concession; contract; project finance; maritime domain; securities; direct agreements; mortgage
Hrčak ID:
195423
URI
Publication date:
28.2.2018.
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