When can sureties in connection with port state concessions be on first demand?
In this issue we deal with a not-so-much-discussed topic, namely concerning the sureties to be provided by the concessionaire of a state-owned port area to guarantee the performance of all the obligations undertaken by a concession.
Port state concessions in Italy are indeed issued against the submission of an application, accompanied by “a program of activities, backed by suitable guarantees, including sureties, aimed at increasing the traffic and productivity of a port”.
As provided by Article 17 of the Rules implementing the Italian Navigation Code, “a concessionaire must secure the performance of the obligations undertaken by means of a surety, the amount of which shall be determined according to the object and scope of the concession and the number of the fee instalments whose non-payment determines the forfeiture of the concession under Article 47, d) of the Italian Navigation Code”.
Article 17, paragraph 3, provides as follows: “By a concession or license, a concessionaire may be required to accept that the granting authority be, in case of non-performance, entitled to collect the whole or any portion of the surety or deposit, at its sole discretion, or use them to offset any debt or reimburse any expense, even where opting for not enforcing its right to declare the concession forfeited, and the concessionaire shall remain bound to reinstate the surety amount or deposit”.
When examining the applicable statutory provisions, it seems clear that the legislator has conferred upon granting authorities the right to be paid on first demand (at its mere discretion) only insofar as the claim relates to receivables or advances of expenses or reimbursement of expenses, while the surety has a broader scope, concerning the “performance of the obligations undertaken by the concession”.
In reality, in most – if not in all – of the concession deeds currently in place in Italian ports, the relevant sureties provide that authorities be entitled to first-demand payment not only in respect of receivables or advances of expenses, but for any claims connected with breach or non-performance of concessionaires’ obligations.
Moreover, the determination of the surety amount and, therefore, of the maximum guaranteed amount is, in case of state property concessions, nullified by the provision, in the concession, for the obligation to reinstate the surety amount, which de facto involves a concessionaire being bound to provide an unlimited surety.
Such interpretation by the authorities results in the concessionaire being obliged to provide a sort of “omnibus surety”, remaining subject to the full discretion of the granting Authority. An omnibus surety is in fact a personal guarantee which, if entered into, imposes on the guarantor a payment obligation not in respect of a single and specific debt of the concessionaire but, generally, in respect of all present and future debts payable by the concessionaire to the granting authority under the concession.
This not only seems excessively burdensome for a concessionaire but also in breach of the principles governing omnibus sureties.
Indeed, according to a well-established line of precedents of Italian case law, in case of omnibus sureties, in order to avoid indetermination of scope, an obligation is imposed, under penalty of forfeiture, to specify the maximum guaranteed amount, which – as noted above – is thwarted by the obligation to reinstate the surety amount. Furthermore, “the objective criterion on the basis of which the performance required from the debtor in order to be discharged must be subsequently determined, is not specified”, with the consequence that everything is fully remitted to the grantor’s discretion and good faith.
The above might ultimately lead to problems in enforcing the guarantee as well as to systematic difficulty in the sector with finding insurance guarantees, which have always been the most common means used to meet the obligations undertaken.
Moreover, the circumstance that the objective criteria for determining the obligations which a debtor is required to fulfill are not pre-established and that the determination of the maximum guaranteed amount is nullified by the obligation to reinstate the surety amount might even lead to invalidity of the surety due to indetermination of its scope.
It is therefore advisable that the issue at hand is further and more specifically regulated, so as to prevent any practical adverse impact as mentioned above.
This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Ekaterina Aksenova
 Article 18, paragraph 6, a) of Law No. 84/1994.
 Article 17, paragraph 1, Rules implementing the Italian Navigation code: “according to the object and scope of the concession and the number of the fee instalments whose non-payment determines the forfeiture of the concession pursuant to Article 47, d) of the Italian Navigation Code”.
 See Court of Cassation, First Division, 31/01/2017, No. 2492.
 See Court of Bari, Fourth Division, 03/03/2016, No. 1210.
 See Court of Cassation, First Division, 22/04/2009, No. 9627, Court of Rome, 27/05/1985 and Court of Bari, Fourth Division, 10/06/2015, No. 2632.