SINGAPORE: A Bill has been passed by parliament on Wednesday (May 8) to designate and subject essential companies in the air, sea and land transport sectors to greater regulatory controls.
These include allowing relevant authorities to have oversight of who owns and manages these firms. Authorities will also have additional powers under the new law to step in during extreme scenarios where a designated entity cannot provide its transport services safely and reliably.
These changes aim to enhance the resilience of essential transport services in Singapore, said Transport Minister Chee Hong Tat as he tabled the Transport Sector (Critical Firms) Bill for a second reading.
They also seek to guard against the risk of “malicious actors” gaining control and exerting undue influence over key entities, and ensure that commercial decisions taken by these entities do not jeopardise the provision of essential transport services in Singapore, he told the House.
The Bill will amend four Acts: the Bus Services Industry Act 2015, the Civil Aviation Authority of Singapore Act 2009, the Maritime and Port Authority of Singapore Act 1996, and the Rapid Transit Systems Act 1995.
Under the changes, the entities will be designated by the relevant authority - namely the Civil Aviation Authority of Singapore, Maritime and Port Authority and Land Transport Authority.
Mr Chee stressed that the new law is not intended to apply to every entity providing a transport service.
Instead, it will take a “targeted approach” by designating those that are involved in the provision of essential transport services in Singapore. The Bill defines essential transport services as public bus and rail services, airport ground handling and passenger and cargo air services, as well as port and marine services and facilities.
Designated entities will also be “strategically important” within the sector, such as how their services are not readily replaceable due to significant market share or expertise, he said.
There will be two types of designated entities: A “designated operating entity” if they directly provide essential transport services in Singapore, or a “designated equity interest holder” if they hold equity interest in the former.
The designation process will be initiated after the Bill is passed and the law is brought into force, said the minister, adding that relevant firms will be designated by the end of the year.
The new law will subject the designated entities to controls in three areas: Ownership, management appointments, and in their operations and resourcing.
Under new proposed ownership controls, buyers will need to notify the authorities within seven days of becoming a 5 per cent controller of an entity. Approval is needed for other controlling thresholds - 25, 50 and 75 per cent - or if buyers gain indirect control over a designated entity.
Sellers are also required to seek approval when they lower their controlling interest in an entity below the thresholds of 25 per cent, 50 per cent and 75 per cent.
Designated entities must notify the authorities within seven days of becoming aware of these changes in ownership and control.
Also proposed in the law are management appointment controls, with new approval requirements for designated entities to appoint the chief executive officer and the chairperson of the board.
For a designated operating entity that is also a licensee under the relevant authority, approval will be required for the appointment of the directors of the board, in addition to the chief executive officer and the chairperson.
Under proposed operations and resourcing controls, the designated entities will be required to notify the relevant authority of events that could impede or impair the provision of essential transport services in Singapore.
In an “extreme scenario” where the designated operating entity becomes unable to provide essential transport services safely and reliably, the relevant authority will be given “step-in powers via a Special Administration Order” to ensure service continuity.
Mr Chee noted that such step-in powers “will be exercised as a last resort to deal with extreme scenarios”.
“For example, this could include when a designated operating entity becomes insolvent and unable to pay its debts, and this in turn jeopardises the continued provision of essential transport services.”
He added that the government “will not interfere in the commercial operations and affairs of the entities in the normal course of business”.
“If we need to use the proposed step-in powers, we will exercise them judiciously and only for the period which they are required for,” said the minister.
Other than these three aspects of enhanced control, designated entities may also be issued remedial directions under certain circumstances. One example is when prior approval was not sought or conditions of approval were not complied with.
“These remedial directions could include directing the disposal of equity interest and removal of key appointment holders if prior approval was not sought or if conditions of approval were breached,” Mr Chee said.
The proposed law will also allow parties to appeal over decisions made by the relevant Authority to the Minister for Transport. These can be decisions regarding designation and applications for approval on ownership or management appointments.
The new law aims to enhance the resilience of essential transport services in Singapore, and protect it against possible future disruptions, said Mr Chee.
“For example, we cannot rule out the risk of malicious actors gaining control and adversely influencing our key transport entities, jeopardising the provision of essential transport services in Singapore,” he said.
Currently, there are sector-specific laws in place – such as legislative restrictions on foreign ownership and licensing regimes where investors must seek approval from relevant regulators – to manage entities in regulated sectors like telecommunications, banking and utilities.
The Significant Investments Review Act was also passed in January to allow authorities to scrutinise significant investments into entities that are critical to Singapore’s national security interests.
The Transport Ministry has said its new law will complement the Significant Investments Review Act (SIRA), meaning that entities designated under its sectoral legislation will not be designated under the Significant Investments Review Act at the same time.
Mr Chee explained the difference between the proposed law and SIRA. He said that SIRA is designed to complement sectoral legislation and safeguards, but where possible, the preference is for sector leads to enforce controls over the entities under their purview.
“We do not intend for entities adequately regulated under sectoral legislation, including critical transport firms covered under MOT’s sectoral acts, to be vaccinated under SIRA.”
Member of Parliament (MP) Ang Wei Neng (PAP-West Coast) asked why point-to-point platform service providers like Grab are not regulated under the new proposed law.
He asked: “Disruptions to such platform services could have far-reaching implications for those who rely on this means of transport for their daily commute … Did MOT consider designating such platform providers as designated entities?”
Mr Chee said that there are no plans to include the point-to-point sector as part of this law, as the sector is still evolving, and plays a complementary role to public transport.
“We have an ongoing review of the (point-to point) industry structure and regulatory framework and a decision can be taken after the review is completed,” said Mr Chee.
MP Saktiandi Supaat (PAP-Bishan–Toa Payoh) questioned the criteria for which firms would be identified as a designated entity, while MP Louis Ng (PAP-Nee Soon) asked for the number of designated entities under the Bill.
Mr Chee said that since only critical transport services are expected to be covered under the Bill, only a “small number of firms” are expected to be designated under each sector.
Various criteria that will be taken into consideration for designation will include whether the entity is involved in the provision of essential transport services and whether it is “strategically important in the sector”, said Mr Chee.
An entity may also be considered strategically important if it has significant market share or specialised expertise in the industry. These entities are thus unlikely to be smaller companies with lower market share in the industry.
In addition, designated entities may include firms owned by the government or Temasek holdings, and it could also include firms owned by other shareholders.
Several MPs, such as Ms Poh Li San (PAP-Sembawang) and Mr Don Wee (PAP-Chua Chu Kang), questioned if the increased regulatory oversight could affect the transport industry’s competitiveness, growth and attractiveness to local and international investors.
Disagreeing, Mr Chee said the Bill will “not adversely impact” the transport industry by creating significant compliance costs and regulatory burden, as well as affect day-to-day operations of the designated entities.
The minister added that many of the proposed regulatory controls are not new and that they can already be found in existing sectoral regulations or licensing criteria.
“What this Bill seeks to do is to consolidate some of these existing controls under a common legislative framework and extend it to other entities including some non-licensees,” Mr Chee told the House.
Questions were also raised about the circumstances under which the Special Administration Order, which extends a relevant authority with “step-in powers”, will be put in place.
Mr Chee reiterated that the government will be judicious in exercising these powers and that the order will “only be activated as a last resort” in “extreme” scenarios.
Noting that such a concept is not new, he added that this is similar to the step-in arrangements for critical firms in other sectors such as power and water.
“When an order is issued, the minister will appoint a person who may be the respective authorities, operators or other third parties with the requisite competencies to manage the affairs, business and property of the designated entity,” he told the House.
“The main objective is to ensure that the entity can continue to provide the essential services.”
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These include allowing relevant authorities to have oversight of who owns and manages these firms. Authorities will also have additional powers under the new law to step in during extreme scenarios where a designated entity cannot provide its transport services safely and reliably.
These changes aim to enhance the resilience of essential transport services in Singapore, said Transport Minister Chee Hong Tat as he tabled the Transport Sector (Critical Firms) Bill for a second reading.
They also seek to guard against the risk of “malicious actors” gaining control and exerting undue influence over key entities, and ensure that commercial decisions taken by these entities do not jeopardise the provision of essential transport services in Singapore, he told the House.
WHAT WILL BE DESIGNATED?
The Bill will amend four Acts: the Bus Services Industry Act 2015, the Civil Aviation Authority of Singapore Act 2009, the Maritime and Port Authority of Singapore Act 1996, and the Rapid Transit Systems Act 1995.
Under the changes, the entities will be designated by the relevant authority - namely the Civil Aviation Authority of Singapore, Maritime and Port Authority and Land Transport Authority.
Mr Chee stressed that the new law is not intended to apply to every entity providing a transport service.
Instead, it will take a “targeted approach” by designating those that are involved in the provision of essential transport services in Singapore. The Bill defines essential transport services as public bus and rail services, airport ground handling and passenger and cargo air services, as well as port and marine services and facilities.
Designated entities will also be “strategically important” within the sector, such as how their services are not readily replaceable due to significant market share or expertise, he said.
There will be two types of designated entities: A “designated operating entity” if they directly provide essential transport services in Singapore, or a “designated equity interest holder” if they hold equity interest in the former.
The designation process will be initiated after the Bill is passed and the law is brought into force, said the minister, adding that relevant firms will be designated by the end of the year.
Related:
WHAT ARE THE CHANGES?
The new law will subject the designated entities to controls in three areas: Ownership, management appointments, and in their operations and resourcing.
Under new proposed ownership controls, buyers will need to notify the authorities within seven days of becoming a 5 per cent controller of an entity. Approval is needed for other controlling thresholds - 25, 50 and 75 per cent - or if buyers gain indirect control over a designated entity.
Sellers are also required to seek approval when they lower their controlling interest in an entity below the thresholds of 25 per cent, 50 per cent and 75 per cent.
Designated entities must notify the authorities within seven days of becoming aware of these changes in ownership and control.
Also proposed in the law are management appointment controls, with new approval requirements for designated entities to appoint the chief executive officer and the chairperson of the board.
For a designated operating entity that is also a licensee under the relevant authority, approval will be required for the appointment of the directors of the board, in addition to the chief executive officer and the chairperson.
Under proposed operations and resourcing controls, the designated entities will be required to notify the relevant authority of events that could impede or impair the provision of essential transport services in Singapore.
In an “extreme scenario” where the designated operating entity becomes unable to provide essential transport services safely and reliably, the relevant authority will be given “step-in powers via a Special Administration Order” to ensure service continuity.
Mr Chee noted that such step-in powers “will be exercised as a last resort to deal with extreme scenarios”.
“For example, this could include when a designated operating entity becomes insolvent and unable to pay its debts, and this in turn jeopardises the continued provision of essential transport services.”
He added that the government “will not interfere in the commercial operations and affairs of the entities in the normal course of business”.
“If we need to use the proposed step-in powers, we will exercise them judiciously and only for the period which they are required for,” said the minister.
Other than these three aspects of enhanced control, designated entities may also be issued remedial directions under certain circumstances. One example is when prior approval was not sought or conditions of approval were not complied with.
“These remedial directions could include directing the disposal of equity interest and removal of key appointment holders if prior approval was not sought or if conditions of approval were breached,” Mr Chee said.
The proposed law will also allow parties to appeal over decisions made by the relevant Authority to the Minister for Transport. These can be decisions regarding designation and applications for approval on ownership or management appointments.
WHY HAS THIS BEEN MADE INTO LAW?
The new law aims to enhance the resilience of essential transport services in Singapore, and protect it against possible future disruptions, said Mr Chee.
“For example, we cannot rule out the risk of malicious actors gaining control and adversely influencing our key transport entities, jeopardising the provision of essential transport services in Singapore,” he said.
Currently, there are sector-specific laws in place – such as legislative restrictions on foreign ownership and licensing regimes where investors must seek approval from relevant regulators – to manage entities in regulated sectors like telecommunications, banking and utilities.
The Significant Investments Review Act was also passed in January to allow authorities to scrutinise significant investments into entities that are critical to Singapore’s national security interests.
The Transport Ministry has said its new law will complement the Significant Investments Review Act (SIRA), meaning that entities designated under its sectoral legislation will not be designated under the Significant Investments Review Act at the same time.
Mr Chee explained the difference between the proposed law and SIRA. He said that SIRA is designed to complement sectoral legislation and safeguards, but where possible, the preference is for sector leads to enforce controls over the entities under their purview.
“We do not intend for entities adequately regulated under sectoral legislation, including critical transport firms covered under MOT’s sectoral acts, to be vaccinated under SIRA.”
Related:
WHAT QUESTIONS WERE ASKED?
Member of Parliament (MP) Ang Wei Neng (PAP-West Coast) asked why point-to-point platform service providers like Grab are not regulated under the new proposed law.
He asked: “Disruptions to such platform services could have far-reaching implications for those who rely on this means of transport for their daily commute … Did MOT consider designating such platform providers as designated entities?”
Mr Chee said that there are no plans to include the point-to-point sector as part of this law, as the sector is still evolving, and plays a complementary role to public transport.
“We have an ongoing review of the (point-to point) industry structure and regulatory framework and a decision can be taken after the review is completed,” said Mr Chee.
MP Saktiandi Supaat (PAP-Bishan–Toa Payoh) questioned the criteria for which firms would be identified as a designated entity, while MP Louis Ng (PAP-Nee Soon) asked for the number of designated entities under the Bill.
Mr Chee said that since only critical transport services are expected to be covered under the Bill, only a “small number of firms” are expected to be designated under each sector.
Various criteria that will be taken into consideration for designation will include whether the entity is involved in the provision of essential transport services and whether it is “strategically important in the sector”, said Mr Chee.
An entity may also be considered strategically important if it has significant market share or specialised expertise in the industry. These entities are thus unlikely to be smaller companies with lower market share in the industry.
In addition, designated entities may include firms owned by the government or Temasek holdings, and it could also include firms owned by other shareholders.
Several MPs, such as Ms Poh Li San (PAP-Sembawang) and Mr Don Wee (PAP-Chua Chu Kang), questioned if the increased regulatory oversight could affect the transport industry’s competitiveness, growth and attractiveness to local and international investors.
Disagreeing, Mr Chee said the Bill will “not adversely impact” the transport industry by creating significant compliance costs and regulatory burden, as well as affect day-to-day operations of the designated entities.
The minister added that many of the proposed regulatory controls are not new and that they can already be found in existing sectoral regulations or licensing criteria.
“What this Bill seeks to do is to consolidate some of these existing controls under a common legislative framework and extend it to other entities including some non-licensees,” Mr Chee told the House.
Questions were also raised about the circumstances under which the Special Administration Order, which extends a relevant authority with “step-in powers”, will be put in place.
Mr Chee reiterated that the government will be judicious in exercising these powers and that the order will “only be activated as a last resort” in “extreme” scenarios.
Noting that such a concept is not new, he added that this is similar to the step-in arrangements for critical firms in other sectors such as power and water.
“When an order is issued, the minister will appoint a person who may be the respective authorities, operators or other third parties with the requisite competencies to manage the affairs, business and property of the designated entity,” he told the House.
“The main objective is to ensure that the entity can continue to provide the essential services.”
Continue reading...