“The Importance of Being Earnest”: forfeiture of concessions for non-payment of State property concession fees

If on the one hand it is self-evident that a business operator applies for a State property concession with an intent of carrying out a business that is reasonably expected to generate a profit return, it is likewise self-evident that the risk of forfeiture of a concession should by definition be averted.

For this purpose, applicable statutory provisions must be carefully examined. Article 47 of the Italian Navigation Code regulates forfeiture of concessions, setting out numerous cases in which authorities are entitled to declare a concession-holder to lose its rights. More specifically, pursuant to Article 47, letter (d), of the Navigation Code, a Port Authority may declare a concession to have lapsed “by reason of non-payment of State property fee to the extent of the instalments set in the concession to this effect”.

That being said, the need to literally comply with aforementioned Article 47 was recently emphasised by the Italian Consiglio di Stato in judgment No. 1391 of 27 March 2017. As will be explained below, such judgment relates to specific case but the principles set out by the Italian Supreme Administrative Court apply to all concessionaires, thus including all operators of port areas.

In the case at issue, the concessionaire of a maritime State property complex (including a restaurant, an open-air area and other appurtenances) on the seafront of Marina di Carrara failed to pay the concession fee for a whole year and, after the Port Authority issued a decree of forfeiture and denied renewal of the concession, challenged the relevant orders before the competent Regional Administrative Court, applying for their dismissal and assessment of the fee allegedly actually due. The applicant, in his defence, denied non-payment (or rather, denied failure in respect of the whole annual payment) as ground for forfeiture of the concession and underlined that, in any event, the authority had already regularly enforced the guarantee policy, thus holding that forfeiture was unjustified.

On account of non-payment of State property concession fees, the Supreme Administrative Court – confirming the first-instance judgment of the Regional Administrative Court of Tuscany, which rejected the appeal filed by the concessionaire – recognised the lawfulness of the order whereby the Port Authority, pursuant to Article 47 (d), of the Navigation Code, commanded the forfeiture of the maritime concession “by reason of non-payment of State property concession fee to the extent of the instalments set in the concession to this effect, which fee, in the case at issue, had not been paid within thirty days of receipt of the relevant request, as provided for by the concession.

In light of such precedent, it is reasonable to ask oneself whether the order for forfeiture is actually proportionate in respect of non-payment, especially taking into account that it came after the enforcement of the relevant guarantee. It is indeed an everyday occurrence for business operators of the maritime and port sector, to complain about the conduct of port authorities on account of failure to perform agreed maintenance works or upgrade the State property under concession, or due to unequal treatment of competitors, including in terms of calculation of the State property concession fee amount.

On the other hand, even in the event that the validity of such criticisms is blatantly apparent, a concessionaire will in all cases be required to pay the State property concession fee to the extent and under the terms of the concession, though without prejudice to the right to pursue the defence of its rights and interests in any appropriate forum.

So, in a nutshell: a concessionaire might have to come up – and sometimes quite badly – against port authorities. In such cases, a concessionaire might be sorely tempted not to pay the concession fee to them – pending a dispute –. This should, however, in our opinion be avoided. As emerges from the decision briefly described above, the concession fee should indeed still be paid, irrespective of any conflict with the granting authority, as payment of the concession fee is a bone of contention that could turn out to be fatal to the concessionaire.




This article is for information purposes only and is not intended as a professional opinion. 
For further information, please contact Franco Rossi.

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