Local authorities that manage municipal ports need to consider a wide range of legal issues, writes Lara Moore.
There are approximately 60 ports in England and Wales that are operated by local authorities and subject to local government rules and financing requirements. These local authority-run statutory harbour authorities are known as municipal ports.
As set out in the Government's Municipal Ports Review (Opportunities for Ports in Local Authority Ownership: A REVIEW OF MUNICIPAL PORTS IN ENGLAND AND WALES May 2006), municipal ports are operated for the benefit of stakeholders including the local community and are, in the main a local asset. Additional requirements apply in relation to the management of municipal ports, which may not apply to other local authority assets. For example local authorities must accommodate underlying statutory requirements (both in local government legislation and in any specific local harbours legislation) in their approach to management of municipal ports. In addition, the Municipal Ports Review highlights the general common law and fiduciary duties of statutory harbour authorities, including an obligation to conserve and facilitate the safe use of the port and a duty of care against loss caused by the authority’s negligence.
There are many well run municipal ports in England and Wales. However, the current severe economic pressures local authorities are facing mean that some are looking to limit their spending on harbour assets whilst utilising income from them to cross subsidise other local authority services. Those doing so need to tread carefully if they are to avoid breaching relevant harbour legislation and government guidance.
This article focuses on three of the key aspects:
- Use of harbour funds
- Developing or disposing of harbour land
- Requirement to maintain the harbour infrastructure
Statutory harbour authorities originally obtained their powers under statute and must exercise their statutory harbour powers in accordance with their governing legislation. Each municipal port has slightly different local harbour legislation applying to it. Accordingly a thorough review should be undertaken to ensure a thorough understanding of the relevant provisions. This understanding underpins all aspects of managing and running a municipal port. It is also vital that municipal ports are to achieve compliance with the Port Marine Safety Code ('PMSC') which sets out a national standard for every aspect of port marine safety. Where a local authority manages multiple municipal ports, it must be aware of and comply with the different statutory provisions applying at each port.
Use of harbour funds
A number of municipal ports are required by their statutory harbour legislation to reinvest all harbour funds in the harbour. If this is the case, harbour funds should not be used to cross subsidise other local authority services, even if the harbour is making a surplus. Even where there is no such provision contained in local harbour legislation, the Municipal Ports Review recommends the introduction of ‘assured accounts’ (i.e. protected from having surplus funds or receipts from assets sales transferred to other parts of the local authority not connected with the port) and the making of prudent and adequate provision for capital asset replacement and future development. In addition, municipal ports are required annually to submit accounts for their ports to the Department for Transport, in the format required for businesses submitting accounts to Companies House.
Developing or disposing of harbour land
A statutory harbour authority must exercise its powers in accordance with its statutory purposes. In order to determine its 'purposes' the provisions of the relevant local harbour legislation must be considered. Often the purposes are orientated towards fairly standard port purposes, e.g. conservancy, provision of buildings, vessels, equipment etc. related to the operation of the harbour etc. As such care should be taken before embarking on any new project which is not 'port' orientated. An area which can cause difficulties is where a local authority wishes to build retail or residential accommodation on harbour land.
In addition, local authorities wishing to dispose of harbour land also need to look closely at their relevant statutory harbour powers. Some harbour authorities only have powers to lease rather than to dispose of the freehold of land. There may also be a requirement to only dispose of land which is no longer required for harbour purposes. This requirement can be difficult to meet if the disposal includes areas of quay or other operational land. Therefore, if a local authority wishes to embark upon such a project, its purposes as a statutory harbour authority and any other restrictive provisions contained in harbour legislation would require careful consideration.
Requirement to maintain the harbour infrastructure
In addition to the requirement to comply with the PMSC, statutory harbour authorities are under a common law duty to conserve and facilitate the safe use of the port. This includes a duty to ensure that those who may choose to navigate the port, may do so, without danger to their lives or property. Nearly all municipal ports are also subject to the 'Open Port Duty' to keep the harbour open, upon payment of rates, for the shipping and unshipping of goods and the embarking and landing of passengers.
There may also be additional statutory duties within the relevant local harbour legislation related to maintenance of the harbour, including dredging (sometimes to a certain depth), and a discretion to repair, improve and maintain harbour infrastructure. Any discretion must be exercised reasonably and in good faith for the purpose which the relevant harbour legislation was designed to achieve, which, in the case of virtually all statutory harbour authorities is broadly the provision of port services and facilities to meet the needs of the public.
Therefore a failure to adequately maintain harbour infrastructure is likely to breach local harbour legislation, the PMSC and the common law duty to conserve and facilitate the safe use of the port.
It is important that local authorities only apply their statutory harbour powers in accordance with their statutory harbour legislation and that they comply with their statutory duties. Failure to do so could result in legal challenges (e.g. judicial review proceedings), complaints to the auditor and / or the Department for Transport.
The Government is currently preparing revised good governance guidance to replace current industry guidance, 'Modernising Trust Ports 2'. The intention is that this revised guidance will also include good practice guidance for municipal ports. Therefore when released this new guidance should be read, understood, and implemented by all those responsible for managing and running municipal ports.
In addition, on 3 November 2016, the Department for Transport and the Maritime and Coastguard Agency released an updated version of the PMSC. It is strongly recommended that the duty holder (usually those members of the local authority, both individually and collectively, who are ultimately accountable for marine safety) and all officers involved in marine safety, should familiarise themselves with the updated PMSC and review any implications for their marine operations. The updated PMSC and associated Guide to Good Practice on Port Marine Operations, can be accessed here (https://www.gov.uk/government/publications/port-marine-safety-code).