APM Terminals Poti opposes recent amendments to Maritime Code

On 4 April, 2022 the Georgian Parliament started an unannounced and expedited procedure to initiate amendments to the Maritime Code of Georgia. These amendments propose a change in the current legal order applicable to the port in Poti – from APM Terminals Poti (JSC Poti Sea Port Corporation – PSPC) being a single port administrator responsible for the safety of navigation and provision of port services, as well as having the right to manage all port assets and infrastructure within its boundaries, to becoming one of the port units which are located in Poti’s port.

 The proposed change will impact some of the rights of the company, without taking into account the company’s ongoing obligations. The Draft Law has raised specific concerns from APM Terminals Poti (JSC Poti Sea Port Corporation – PSPC) and hereby requests the Parliament of Georgia to take into consideration the interests of the company, suspend consideration of the Draft Law and recall it. The proposed Draft Law contradicts the State’s obligation undertaken under the Privatization Agreements (by and between the State and ) and disregards the State’s commitments under the Bilateral Investment Treaty concluded between Georgia and the Kingdom of the Netherlands. It introduces new regulations with respect to the entry channel and controls how port dues should be charged to users, and how expenses related to maintenance of the projected depth of the entry channel should be distributed among port units. In addition, it establishes the authority of the LEPL Maritime Transport Agency of the Ministry of Economy and Sustainable Development of Georgia to maintain the projected depth of the Poti Sea Port entry channel and to collect the fees. However, it does not take into account costs related to the maintenance of hydraulic structures such as the breakwater, which is an essential infrastructure for the maintenance of the entry channel to all facilities within the port of Poti, and is owned by PSPC.

“Poti Sea Port is Georgia’s largest port and the main European gateway for international trade in Georgia, Armenia, and Azerbaijan, and is ideally located to become a hub for Central Asia trade. APM Terminals has made significant investments in upgrading outdated port infrastructure, equipment, and service facilities since 2011 and continues to carry out investments up to now. We are working hard on the development and realization of a logistics corridor to connect Central Asia to the world through the port of Poti as we aspire to become a main gateway and deliver world-class services to our customers while continuously contributing to the prosperity oflocal communities and the Georgian economy. We therefore believe the initiators of the Draft Law need to reconsider the planned amendments so as not to jeopardize the investment climate of the country.” – Keld Mosgaard Christensen, Managing Director of APM Terminals Poti says. In addition, the mentioned Draft Law contradicts the competition law of Georgia and the State’s obligation not to distort competition and interferes with the Right to Property and Freedom of Entrepreneurship guaranteed by the constitution of Georgia and international instruments. The interested and relevant parties were not given an opportunity to provide input nor to participate in the drafting process. In addition, there has been no impact assessment conducted, and no external experts were involved in the drafting process. 2 Classification: Internal While the stated intent of the initiative is to balance the interests of the business operators, in fact it fails to provide fair and equitable treatment to APM Terminals as an investor. The Draft Law significantly limits the income for PSPC, which was guaranteed under the Privatization Agreement, yet it retains the significant financial obligations to keep the breakwater and other related infrastructure up to standard for the benefit of all port users and operators. While presenting the initiative as balancing the power of the investors equally to support the fair and equitable treatment, the Draft Law in fact distorts the situation, putting at risk the currently existing safe and effective operational set-up, in addition to creating a significant imbalance between the rights and obligations guaranteed by the above-mentioned principal agreement. APM Terminals Poti considers that the principle of Legal Certainty is not followed, which will jeopardize the investment climate and sustainable economic development in the country. It is noteworthy that currently, APM Terminals Poti ensures, and has always committed to, free and equal access to the premises of the port; most importantly, after APM Terminals came into management, over the years, annual port closure days have been decreased from 120 to 20, which is a clear sign of constant care and advancing the port facility as was stated in the privatization agreement. About the company: JSC Poti Sea Port Corporation – PSPC is a Georgian-based legal entity with 100% participation in its equity interest by APM Terminals B.V. APM Terminals is an A.P. Moller – Maersk company with its headquarters in The Hague, The Netherlands, operating 75 port and terminal facilities in 42 countries on five continents. It has operated Poti Sea Port through its subsidiary PSPC since 2011. APM Terminals Poti continues to be recognized as a key market player in the Caucasus region and central Asia and a significant contributor to the economies in Georgia’s respective local communities. The company’s contribution to the community is significant. It is one of the largest employers in the country and an enabler of job creation.

About Privatization of PSPC: PSPC was privatized as a commercial entity operating Poti Sea Port. The privatization agreements explicitly envisage that the subject matter of the agreement was the privatization of the entity operating Poti Sea Port within its land and water areas. It is not disputed that the State has exclusive sovereign rights in its water territory, therefore the State owns the water territory. However, within the privatization of Poti Sea Port, the State transferred to PSPC/APM Terminals the right and related obligations to operate/administer Poti Sea Port, including within the water area of Poti Sea Port (the exact geographical coordinates are determined under the law).

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