Transport Sector (Critical Firms) Bill introduced to provide for new designated entities regime targeting key firms in air, sea and land transport sectors in Singapore

16 April 2024

On 3 April 2024, the Ministry of Transport (“MOT”) introduced the Transport Sector (Critical Firms) Bill (“Bill”) in Parliament. The Bill seeks to enhance the resilience of Singapore’s key firms in the air, land and sea transport sectors and safeguard their provision of essential transport services in Singapore. The Bill does so by amending the following sectoral legislation:

Bus Services Industry Act 2015
Civil Aviation Authority of Singapore Act 2009
Maritime and Port Authority of Singapore Act 1996
Rapid Transit Systems Act 1995

MOT and its statutory boards, the Civil Aviation Authority of Singapore (CAAS), the Maritime and Port Authority of Singapore (MPA), and the Land Transport Authority (LTA) (collectively, “Authority”), have reviewed the existing sectoral legislation to strengthen the resilience of key transport firms through this Bill.

The Bill complements the Significant Investments Review Act 2024 (“SIRA”) which came into force on 28 March 2024 to provide for a new investment management regime to regulate significant investments, be it local or foreign, into entities that are critical to Singapore’s national security interests. Similar to SIRA, the Bill provides for the control of designated entities providing essential transport services in Singapore (“designated operating entity”) and their equity interest holders (“designated equity interest holder”) (collectively, “designated entities”).

Set out below are the key features of the Bill as highlighted in MOT’s press release:

New designated entities regime: The Bill will introduce a new designated entities regime where key entities involved in the provision of essential transport services in Singapore can be designated by the relevant Authority under its respective sectoral legislation as either (i) a designated operating entity, or (ii) a designated equity interest holder if the relevant Authority considers that the designation is necessary in the public interest. Designated entities must comply with a targeted set of controls over ownership, management appointments, and will be required to notify the respective sectoral statutory boards of changes in key operational and resourcing arrangements.

The designated entities will not be concurrently designated under SIRA.

Ownership controls: Buyers into designated entities must notify the relevant Authority after becoming a 5% controller, and obtain the relevant Authority’s approval before becoming a 25%, 50% or 75% controller, or an indirect controller. A person acquiring as a going concern any part of a designated operating entity’s business relating to the provision of essential transport services in Singapore, as well as the designated operating entity, must also obtain the relevant Authority’s approval. Sellers must seek the relevant Authority’s approval before ceasing to be a 25%, 50% or 75% controller. Designated entities also need to notify the Authority of the abovementioned changes in ownership and control after becoming aware of the events.
Controls over management appointments: Designated entities must comply with approval requirements for the appointment or removal (where applicable) of the chief executive officer and the chairperson of the board. A designated operating entity that is also a licensee under the relevant Authority must seek approval for the appointment or removal (where applicable) of the directors of the board, in addition to the chief executive officer and the chairperson of the board.
Operations and resourcing controls: Designated entities must comply with notification requirements with regard to events that could materially impede or impair the provision of essential transport services in Singapore. Such events include the institution of any civil or criminal proceedings against a designated operating entity. There will be further guidance through advisory guidelines on these notification requirements after the changes in the Bill come into force. In the extreme scenario where the designated operating entity becomes unable to provide essential transport services safely and reliably, they may also be issued with a special administration order by the Minister for Transport.
Remedial directions: Remedial directions may be issued under specific circumstances. For example, if prior approval was not sought or conditions of approval were not complied with, the Authority may direct the transfer or disposal of equity interest in designated entities, or the removal of key appointment holders.
Appeals: Parties may appeal to the Minister for Transport regarding decisions by the relevant Authority on designation and applications for approval on ownership or management appointments.

Practical comment

The Bill is an anticipated roll-out of the sectors that are considered critical to Singapore’s national security interests. A significant number of countries including most of Europe have been adopting such regimes, especially in the last three years. SIRA and the Bill adopt largely an entity-based approach (where it designates the entities to be regulated) rather than a sector-based approach which is more common globally. Other countries have expressly focused on sectors of national security interest such as defence and sensitive technology, e.g. high-end semiconductors, data infrastructure and artificial intelligence.

Reference materials

The following materials are available on the Parliament website www.parliament.gov.sg and MOT website www.mot.gov.sg: