First-step analysis: port operations in Japan - Lexology

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Port operations

Approval

What government approvals are required in your jurisdiction for a port operator to commence operations following construction? How long does it typically take to obtain approvals?

Although it is determined on a case-by-case basis, there may be instances where a permit or notification based on the landscape regulations is required. Regarding the use of land inside the projects, it is often necessary to secure a use right based on a lease agreement with a local authority. It usually takes some time to obtain permits, licences and approvals from, or execute a lease agreement with, the local authority.

Typical services

What services does a port operator and what services does the port authority typically provide in your jurisdiction? Do the port authorities typically charge the port operator for any services?

In private finance initiatives (PFIs), the services provided by the private company differ depending on the projects implemented. For example, in the case of a container terminal facility maintenance and operation business, the services are intended to provide maintenance of the equipment necessary for handling cargo and operation services for the entire terminal facility.

At international passenger ship base ports, the private company will operate passenger acceptance promotion facilities and provide services to the users of these facilities. Construction and maintenance of quays, dredging, works related to wharf land, etc, are led by, and are the responsibility of, the national and local governments, port administrators and others; accordingly, a private company usually does not bear such costs. As for public–private partnership (PPP) projects at ports designated as international passenger ship base formation ports, the port authority must grant a priority to use mooring facilities to a private company that builds and operates a passenger acceptance promotion facility and the port authority typically charges a facility usage charge to this private company.

Access to hinterland

Does the government or relevant port authority typically give any commitments in relation to access to the hinterland? To what extent does it require the operator to finance development of access routes or interconnections?

In PFIs, for example, access roads to terminals and other facilities should be maintained by the local government unless the scope of work for the private company expressly includes such work. It is common for the private company to be able to use the access road; if the fee is specified in the ordinance for the use of access roads, the fee shall be paid by the private company. The same applies to international passenger ship base ports.

Suspension

How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?

In PFI projects, based on the clauses of the business contract, the standards of the service provided by the private company are reviewed and assessed on a regular basis in accordance with the requirements written in the standards. If the results of such a review and assessment process are below the required level, the service consideration paid by the local government to the private business will be reduced. If the required level continues not to be met, the local government may terminate the business contract and the PFI project.

Similarly, in the case of international passenger ship base ports, conformity with the required standards is monitored in accordance with the agreement for PPPs and promotion of international passenger ship acceptance. If the required level continues not to be met, the port administrator will be able to cancel the agreement.

Port access and control

In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?

Although it is determined on a case-by-case basis, in the event of an emergency, for example, the use of mooring facilities will be suspended and necessary measures will be taken to resolve the emergency, such as terminating the use of the terminal facilities.

Failure to operate and maintain

What remedies are available to the port authority or government against a port operator that fails to operate and maintain the port as agreed?

In the case of PFI projects, for instance, business contracts may set out that local authorities reduce or retain payments for services paid to private companies. It is also common to set out penalties and damages in business contracts. Furthermore, in some cases, the local government may exercise its right to terminate the project. The same applies to international passenger hub ports.

Further, in ports that form international passenger hubs, the agreement for PPP and promotion of international passenger ship acceptance may specify the option for the port administrator to purchase an acceptance promotion facility upon the termination of the agreement.

Transferrable assets

What assets must port operators transfer to the relevant port authority on termination of a concession? Must port authorities pay any compensation for transferred assets?

In the case of PFI projects, ownership of the facilities is often transferred to the local government upon delivery after completion of the facilities and, regardless of termination of a PFI project, the local government will remain the owner of the facility. Thus, the ownership of the facility is not expected to be transferred upon the termination of the PFI project. In the case of an international passenger ship-based port, the port administrator can purchase an acceptance promotion facility by exercising the option to purchase it. In such a case, the port administrator generally pays compensation for the transferred assets, typically at market price.

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