COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a Regulation of the European Parliament and of the Council

establishing a framework on the market access to port services and the financial transparency of ports

Table of Contents

1........... Procedural issues and consultation of interested parties. 1

1.1........ Organisation and timing. 1

1.2........ Consultation of stakeholders and external expertise. 1

1.3........ Revision by the Impact Asssessment Board. 2

2........... General Context 3

2.1........ Key figures. 3

2.2........ Functioning of the port: a chain of services. 4

2.3........ Policy context 5

2.4........ Diversity of ports in the EU.. 7

3........... Problem definition. 8

3.1........ Description of the main problem.. 8

3.1.1..... Structural performance gap in ports and impacts on the hinterland and congestions. 8

3.1.2..... Need to adapt to transport and logistics changes. 11

3.2........ Underlying drivers of the problem.. 12

3.2.1..... Suboptimal port services and operations in some TEN-T seaports. 13

3.2.2..... Port governance frameworks not attractive enough for investments 18

3.2.3..... Linking the problem to its drivers and root causes. 23

3.3........ Who is affected by the problem?. 23

3.4........ Application of EU horizontal instruments. 24

3.5........ How would the problem evolve, all things being equal 25

3.6........ Does the EU have the right to act?. 27

3.6.1..... Legal basis. 27

3.6.2..... Subsidiarity. 27

3.6.3..... Proportionality. 28

4........... Objectives. 29

4.1........ General objective. 29

4.2........ Specific objectives 29

4.3........ Operational objectives 29

4.4........ Linking the problem and objectives. 30

5........... Policy options. 31

5.1........ Discarded policy measures. 31

5.2........ List of considered policy measures. 32

5.2.1..... Measures to ensure optimal port services and operation in all TEN-T seaports. 32

5.2.2..... Measures to enable a more attractive investment climate. 35

5.3........ Policy Packages. 36

5.3.1..... Overview of measures proposed in the policy packages. 37

5.3.2..... Policy Package 1: “Horizontal Instruments and Transparency”. 37

5.3.3..... Policy Package 2: “Regulated competition”. 38

5.3.4..... Policy Package 2a: “Reinforced regulated competition and port autonomy”. 38

5.3.5..... Policy Package 3: “Full competition and port autonomy”. 39

5.3.6..... Stakeholders view on policy packages. 39

6........... Analysis of impacts. 39

6.1........ Economic impacts. 40

6.1.1..... Direct and indirect transport costs. 40

6.1.2..... Investments. 42

6.1.3..... Administrative burden. 43

6.1.4..... SMEs. 44

6.1.5..... Impact on transport and multimodality. 45

6.1.6..... International competitiveness. 46

6.2........ Environmental impacts. 46

6.3........ Social impacts. 47

6.4........ Mapping of impacts per stakeholder 49

6.5........ Summary of the economic, environmental and social impacts. 50

7........... Comparing the options. 52

7.1........ Effectiveness. 52

7.2........ Efficiency. 53

7.3........ Coherence. 54

7.4........ Summary on the comparison of policy packages. 54

8........... Conclusion: preferred option. 55

9........... Monitoring and evaluation. 56

Annexes

Annex I Schematic overview of policy package PP2a

Annex II General Context: main features of the EU Port System

Annex III Eurostat Port Statistics 2012

Annex IV 2007 Ports Policy Communication – Ex-Post evaluation

Annex V Conclusions of the public consultation, June-December 2012

Annex VI Relative performance of TEN-T core ports

Annex VII Modelling of impacts: main assumptions

Annex VIII Matrix maritime traffic / port throughputs 2005 / 2030

Annex IX Administrative costs

Annex X Port labour issues

Annex XI Ports in the new TEN-T Strategy / Connecting Europe Facility

Annex XII References

Annex XIII Glossary

For the purpose of this report, port services refer to one or several of the eight following categories: - Pilotage - Towage - Mooring - Dredging - Bunkering - Cargo handling - Passenger services - Waste reception facilities

1. Procedural issues and consultation of interested parties

Lead DG: Directorate General for Mobility & Transport (DG MOVE)

Agenda planning: 2013/MOVE/0161

This initiative forms part of the Single Market Act II[1] (Oct. 2012) and contributes to the development of fully integrated networks to drive new growth. It was announced in the White Paper on Transport of 2011[2]. The initiative supplements and is closely related to the proposal for a regulation on Guidelines for the development of the trans-European transport network (TEN-T)[3] and the financial instrument "Connecting Europe Facility (CEF)[4]" (Oct. 2011).

1.1. Organisation and timing

The preparatory work started after the adoption of the Transport White Paper. DG MOVE established a formal impact assessment steering group (IASG) in April 2012 in which the following directorates-general actively participated: SG, COMP, ECFIN, EMPL, EUSTAT, JRC, MARE, MARKT and REGIO. The IASG held five meetings, the last one on 6 February 2013. Participants were invited to different public consultation events.

1.2. Consultation of stakeholders and external expertise

Due to the nature of the file (inter alia, issues related to performance of ports, port technical services, hinterland connectivity, governance structures, port infrastructure charges, funding of port investments or public service obligations in ports), DG MOVE decided to carry out a comprehensive targeted sectoral public consultation and not a full public consultation.

For that purpose, DG MOVE has kept an informal dialogue with the national administrations in charge of the ports' policy (Ministries of Transport). It held meetings with the main industry associations in the port sector, inter alia: port authorities (ESPO), private terminal operators (FEPORT), inland ports (EFIP), ship-owners (ECSA), pilots (EMPA), tug owners and operators (ETA), mooring operators (EBA), ship's agents (ECASBA), shippers (ESC), dredgers (EuDA) and logistic operators (CLECAT). DG MOVE also held meetings with the two main Unions of port workers, the International Dockers Council (IDC) and the dock workers' section of the European Transport Workers Federation (ETF). A sectoral dialogue committee could not be consulted, as this is still in the process of being set up.

The preparatory work was supported by an economic study on the quality and efficiency of European ports (PwC). The work took account of extensive research on transport economics, ports and logistics and involved several discussions with industry and research experts.

Stakeholders were consulted extensively through two targeted on-line surveys and an open stakeholders' two-day conference in Brussels (25-26 Sept. 2012)[5].

Some stakeholders, namely the two main Unions of port workers, considered that the questionnaire designed by PwC for the on-line surveys was not appropriate, pointing out that the questionnaire did not allow them to express their views and that some questions were leading and even prejudged the responses. Instead of participating in the survey, IDC and ETF sent their positions in written to DG MOVE[6].

A final targeted[7] public hearing, presenting the key problems and discussing policy options and their possible impacts was held on 18 January 2013. IDC and ETF were invited and participated actively both in the ports policy conference and in the public hearing.

The main results[8] of the consultation process (2012-2013) can be summarised as follows:

1) All stakeholders stressed the need for a stable and fair level playing field both for inter-ports (competition between ports) and intra-port (competition between providers of a same port service within a port) competition in the EU. The need for legal certainty and a business friendly environment with as less administrative burden as possible is a priority for all stakeholders, such as Member States, port authorities, terminal operators or the shipping sector, logistic operators and cargo interests.

2) There is a major concern about unfair competition between ports linked to public funding practices of port infrastructures. Member States and port authorities request a tight control of state aid.

3) A significant part of the users of port services, shipping companies and export-import industries, consider that port services in many EU ports are not satisfactory in terms of price, quality and administrative burden. In the ports of the core TEN-T network, around half of the users surveyed (shipping lines) consider that there are specific challenges in terms of price or quality with cargo handling (48% complain), pilotage (54% complain) and towage (49% complain). A smaller percentage ranging from 17% to 25% sees similar problems for other services such as mooring, bunkering, dredging, passenger services or waste management.

4) 30% of European port authorities do not consider that the current situation is satisfactory. However, the majority of them oppose the introduction of EU procedures limiting the capacities of public authorities to grant contracts and permissions to operators of port services through direct award. Applying EU concession rules to certain contracts granted in ports is highly controversial in certain Member States.

5) Port workers' trade unions extremely oppose any EU provision touching on the existing port labour regimes in certain Member States, in particular in Mediterranean Member States. Representatives of pilotage services argue that pilotage, although provided against remuneration, is not an economic service and should be excluded from competitive pressure.

6) Most stakeholders agree that the EU port system has to evolve and adapt to significant challenges in terms of scarce funding resources, competitiveness vis-à-vis ports in neighbouring third countries and other world regions, creation of added value and jobs as well as coping with environmental impacts. They all agree on the importance to secure and, if possible, increase, EU funding expenditure for supporting ports and maritime transport.

1.3. Revision by the Impact Asssessment Board

A first version of this impact assessment report was submitted on 20 February 2013 to the Impact Assessment Board and discussed at a meeting convened on 20 March 2013.

This impact assessment report was comprehensively revised in the light of the opinion provided by the Impact Assessment Board on 22 March 2013. The main changes in this new version of the report concern: (1) a more precise description of the mains problem, i.e. differences in port performance, links with hinterland congestion issues and internal market restrictions, (2) a clarification of the scope for application of horizontal instruments, i.a. EU internal market and transport policy acquis and competition rules, in the port sector, (3) more detailed data regarding the baseline scenario and future port capacity constraints assumptions, (4) a more detailed subsidiarity analysis, (5) a more fine-tuned presentation of objectives, (6) a more precise description of the links with the European Semester exercice and Structural Funds, as well as (7) further precisions on the impacts of the possible policy options on direct and indirect costs, maritime traffic impacts and possible distribution across different regions.

In addition, Annex II provides now an overview of recent and on-going port reforms and re-organisations in Member States; Annex V has been revised for better presenting the reactions of stakeholders to the questions of the on-line surveys; Annex VII has been revised with an extended presentation of the balance of demand and supply model for European ports up to 2030, and a more detailed description of the methodology underlying the assessment of impacts. Finally, Annex III contains the more recent and comprehensive statistics on shipping ports provided by Eurostat in March 2013.

2. General Context[9]

2.1. Key figures

Over 1.200 commercial seaports operate along some 70.000 kilometres of the Union’s coasts. The proposal for TEN-T guidelines identified 319 TEN-T ports, of which 83 are recognised as core network ports[10]. Europe is one of the most dense port regions worldwide. In 2011, around 3.7 billion tonnes of cargo (more than 60 000 port calls of merchant ships) transited through European ports. Bulk traffic represented 70% of it, containers 18% and Ro-Ro traffic 7%, the rest being other general cargo. Figure 1 provides an overview of the main container ports and their logistical gateway function.

Ports play a crucial role for the external trade of the EU. They handle, in volume, 74% of the goods exported or imported to the EU and from the rest of the world. They ensure the security of supply of the EU in energy and other basic commodities. As the main trade bloc in the world, the EU is highly dependent on the maritime transport system.

In terms of intra-EU trade, ports handle about 37 % of the total internal market exchanges of goods (in ton km). Short sea shipping represents 60% of the tons handled in EU ports. The latter are key nodal points of the EU intermodal transport chains using short sea shipping as an alternative to saturated land transport routes or as a way to link peripheral or island areas. Figures[11] suggest that short sea freight flows in the EU have remained stagnant over the last decade.

In terms of passengers transport, ports service regional and local traffic to link peripheral and island areas. EU ports handled almost 385 million maritime passengers in 2011. This marked the third successive annual decline in passenger numbers, down 2 % compared with 2009. However, ports face growth for specialised traffic related to cruise ships (+7.1% since 2010).

Port costs account for a significant fraction of the total costs associated with the logistics chain. Handling cargo, port dues and port nautical services may make 40%-60% of the total door-to-door logistic costs for typical short sea shipping. However, for deep-sea shipping in modern ports, using capital-intensive cargo-handling equipment and advanced IT systems, port costs can account for less than 4-5% of the total logistic costs[12].

Figure 1: Container ports and their logistical gateway function (Notteboom, 2010)

Port activities contribute directly to employment, inward investment and GDP growth (up to 3% in the Netherlands). 2,200 port operators currently employ around 110,000 port dockers. A much larger labour force serves the port industry covering maintenance and operation of maritime infrastructures, ship operations and services, land transport, logistics activities, cargo services (e.g. freight forwarding and customs broking) etc.. Ports represent 1.5 million direct jobs[13]. When adding indirect jobs, they represent a total of 3 million jobs in the 22 maritime Member States (Notteboom, 2010).

2.2. Functioning of the port: a chain of services[14]

A port is a gateway through which goods and passengers are transferred between ships and the shore. While the port as a whole can be seen as a link in a logistics chain, the port product is itself a chain of consecutive links[15]. The functioning of a port requires a number of services, such as: provision of transport infrastructure, technical-nautical services (pilotage, towage, and mooring), operational infrastructure & equipment, cargo handling & passenger handling, waste reception facilities and ancillary (or general) services[16].

The total EU port cost to the shipping industry is estimated at around €11-17 billion in 2010 (PwC, 2013). An indicative repartition of the relative weight of the different costs items of the total port operation costs is presented in the table 1[17].

Table 1: Indicative relative weight of port operation costs[18]

|| % of total costs

Port dues (provision of general infrastructure) || 5%-10%

Vessel technical services (pilotage, towage, mooring) Of which Pilotage || 10% - 15% 5%-6%

Berthing costs || 5%-15%

Cargo handling operators || 45%-60%

Waste reception || 1%-5%%

Others || 5%-10%

2.3. Policy context

In contrast with other transport sectors, with exception to port waste reception facilities[19], there is no EU legislation in the European port sector, be it on the access to the port services market, financial transparency or infrastructure charging[20]. The first step taken by the Commission to move towards a coherent ports policy was made in 1997, with the publication of a Green paper on that subject. In 2001, the Commission proposed a directive on market access to port services. This proposal was rejected by the European Parliament (EP) in 2003. In 2004, the Commission adopted a second proposal which was subsequently turned down and eventually withdrawn.

In 2007[21] the Commission came forward with a Communication on ports policy, announcing "soft" measures in the form of guidelines (state aids, environment), best practices (benchmarking, indicators) and close cooperation and dialogue with stakeholders. The problems identified at the time related to (a) threats on port performance and hinterland connections, (b) expanding capacity while respecting the environment, (c) modernisation of ports, (d) absence of clarity, for investors, operators and users and (e) issues on work in ports. An ex-post assessment of the progress achieved since 2007 is summarised below[22]:

1) The problems last identified in 2007 remain largely unsolved in spite of the adoption of a few of the envisaged measures. The main development has been the adoption of the proposal for the new TEN-T Guidelines and Connecting Europe Facility, both of which foresee substantial funding support for ports. The Commission also issued non-binding guidelines on the application of the birds and natural habitat directives in port areas.[23]

2) As of 2011, in the context of the European Semester exercise, the Commission has included reforms in the port sector as a part of the Country Specific Recommendations addressed to the Member States. In the cases of Greece, Ireland and Portugal, measures involving important port reforms have been undertaken in the context of the Economic Adjustment Programmes.

3) Although initially envisaged by the 2007 Communication, the Commission does not intend anymore to adopt specific guidelines for state aid to ports. The main reason is that the case law from the Court of Justice has recently evolved and clarified certain issues (the case T-443/08 "Leipzig-Halle"), in particular that public financing of the construction of (airport) infrastructure constitutes state aid. The only exception concerns certain activities that are part of the exercise of public powers (security, police etc.). This judgement requires careful reflections for all sectors with heavy infrastructures such as the port sector. Moreover, the Commission will come forward with a modernisation of its state aid rules for all economic sectors by the end of 2013.

4) Contrary to expectations, the development of intra-EU maritime transport connections supporting internal market exchanges has stagnated. Inter-modality objectives have been largely missed.

5) In 2011, the Commission adopted a proposal for a Directive on Concessions[24]. This proposal applies to concession contracts granted in ports. Though, as there are other forms of awarding contracts in ports (like for instance land leases or authorisations) in parallel and as alternatives to concessions, this will lead to a situation where not all port service contracts would be subject to the same legal regime and European framework.

A Court of Auditors report (2012)[25] has shown that investments in port facilities create limited European value added if they are not connected as multimodal nodes to the national and regional transport network. Therefore, the CEF and the cohesion policy will give priority to projects concerning port access and hinterland connections to ensure that TEN-T ports, are developed as multimodal nodes which can clearly demonstrate, by performing a thorough cost benefit analysis, that they are desirable from the economic and financial point of view.[26]

As far as the different Member States are concerned, several of them have in the past years[27] reviewed their port policy. For example, Germany (2003), Finland (2010), France (2008) and Spain (2004) have undertaken reforms of their respective port sectors, including their port labour market. Moreover, in the context of the structural adjustments required by the Conditional Assistance Programme to Member States in financial difficulties, a radical reform of the ports regulatory regimes has been required in Greece, Portugal and Ireland[28]. Some other Member States however, have not significantly changed their national ports framework.

The differences in degree, scope and eventual impact of the policy developments at national level involve a risk of further fragmentation of the Internal Market, with Member States adopting dissimilar approaches on market access conditions, transparency of public funding and charging policies or administrative requirements[29].

TEN-T, CEF and Structural Funds support to ports

Ports and connections of ports with the hinterland (motorways, railways and inland navigation channels) are key transport infrastructures for economic development. Over the years, in the context of the TEN-T and of the Structural Funds, the EU has provided constant and substantial funding for the completion, renewal and maintenance of those infrastructures in all maritime regions of the EU. As stated above, the EU funding effort supporting those infrastructures will continue in the years to come. The precise amounts to be allocated will depend on the final decision on the multiannual financial perspectives and of the assessment made by the Commission of the proposals submitted by Member States under the different EU funding instruments. As recalled by the Court of Auditors, it is of extreme importance that the EU effort sustaining ports delivers good returns in terms of performance and overall contribution to the objectives of the European Transport Policy.

Under this policy context, the Commission has emphasised in 2011 and 2012, in its White Paper on Transport and in the Single Market Act II the need to review its ports policy.

2.4. Diversity of ports in the EU[30]

European ports have historically developed in their own diverse ways, even when located in the same country[31]. Large gateway ports, hub ports transhipping goods from large to smaller vessels, medium-sized and smaller ports each have specific characteristics in terms of hinterland markets served, commodities handled and locational qualities.

On a geographical basis, one usually distinguishes the maritime coastlines of the continent (Baltic, North Sea, Atlantic, Mediterranean, and Black Sea) or ranges of neighbouring, competing ports (e.g. Hamburg-Le Havre range). 20% of the EU cargo handling takes place in the ports of Rotterdam, Antwerp and Hamburg. The nine largest ports of the Mediterranean account for 20% of the total.

The port governance structure also differs. In a significant number of ports, the government both owns the land, the infrastructure and the equipment, and runs the entire operation of all the services provided in the port. At the other end of the spectrum, in a number of ports, the landlord is a private owner and private interests provide the services. The dominant structure for port governance in Europe follows the landlord model, with public ownership of the land and infrastructure. Typically, port authorities finance large, long-term infrastructure investments from public funds. At the same time, many of them organise the provision of port services and act as referees on intra-port competition matters.

Table 2: Ownership of port authorities (ESPO, European Port Governance report 2010)[32]

|| Hanse || New Hanse || Anglo-Saxon || Latin || New Latin

Publicly owned ports || 96.0% || 84.1% || 47.1% || 75.0% || 90.6%

National Authority || 6.5% || 71.3% || 35.3% || 64.4% || 87.3%

Region || 2.5% || 0.0% || 0.0% || 7.9% || 0.0%

Province || 4.3% || 0.0% || 0.0% || 2.7% || 0.0%

Municipality || 82.7% || 12.8% || 11.8% || 0.0% || 3.3%

Privately owned ports || 4.0% || 0.0% || 8.8% || 0.7% || 0.0%

Other || 0.0% || 15.9% || 44.1% || 24.3% || 9.4%

Total || 100.0% || 100.0% || 100.0% || 100.0% || 100.0%

Table 2 provides an overview of the ownership structure in the different regions. The ESPO 2010 European Port Governance report concludes that "the Hanseatic and Latin governance traditions of municipal and state influence are clearly confirmed (the ‘other’ category for Latin port authorities includes Italian port authorities which are de facto controlled by the state). Port authorities in Anglo-Saxon countries are either owned by the state (Irish ports), municipalities, and financial suitors or take the form of trust ports (UK ports). State ownership dominates for port authorities in the new regions."

It should be noted that, under all different models of port ownership (public, private or mixed regimes), there are cases of excellent, well performing ports and cases of ports were problems of performance and long term decline have been reported. The TFEU rules are neutral in respect of forms of ownership of ports in the Member States and this impact assessment does not draw any conclusions in that regard.

3. Problem definition

3.1. Description of the main problem

The main problem is the structural performance gap in some TEN-T seaports. The problem is exacerbated by the need to adapt ports to new transport and logistics requirements at a moment of scarce public funding. This creates risks of congestion and puts at risk an efficient, interconnected and sustainable TEN-T and therefore the functioning of the internal market.

When adopting the proposal for new TEN-T guidelines and the CEF, the Commission set ambitious goals to develop an efficient, interconnected and sustainable TEN-T. But without tackling the port-related problems, achieving these goals could be at risk. Seaports are the TEN-T interface between land and sea and their performance determines to a large extent the fluidity of both land traffic (in their broad hinterland areas) and of short sea traffic (in the maritime exchanges and redistribution of cargoes to other EU ports). Structural weaknesses on performance in certain ports lead to congestion problems and undermine the achievement of a sustainable transport system[33].

3.1.1. Structural performance gap in ports and impact on the hinterland and congestions

Differences in ports performance is a normal market feature resulting from a variety factors including specialisation and strengthening of competitive advantages. From the perspective of the EU transport system, it could be expected that, over the years, the trend for all EU ports is to improve progressively performance, i.e. their capacity to adapt to the economic development requirements of the regions they serve (hinterlands). In recent years, while some EU ports have improved their performance by international standards, other EU ports have lagged behind, to the extent that some Member States have expressed concern about the structural decline of their port systems.

In the context of the European semester exercise[34], the need for improving the contribution of ports to economic recovery and growth, both in terms of performance and modernisation are part of the country-specific recommendations addressed to a number of Member States[35].

EU Ports are part of a network industry. A chain is only as strong as its weakest point. The fact that some TEN-T seaports have a low performance reduces the transport choices. This in turn accentuates the polarization of flows to hubs where the hinterland is congested. It also means a lost opportunity to develop SSS as alternative to saturated land transport routes and to better link peripheral and island areas. Overall it means a suboptimal functioning of the TEN-T.

The relative performance of TEN-T ports by international standards has been examined by PwC by means of a model based on data from the World Economic Forum, market shares per cargo categories and a proxy variable for measuring inter-port rivalry. Under the assumptions of the model a “well-performing” port is one that is located in a country where functioning of ports obtains a high rating in terms of users' appreciation and which achieves a high market share in circumstances where there is a high degree of inter-port rivalry.

The model has been applied to a representative sample of 115 TEN-T ports for the purpose of obtaining useful insight on port services performance, while recognising that there can be other factors, such as physical geography (e.g. distance from the sea, location of rivers) affecting performance. A detailed presentation of the model is given in Annex VII[36].

The results show a mixed picture: five ports are performing in the top category (25% of the relative ranking); 23 ports perform well (a relative score between 75%-50%); 51 ports perform moderate (between 50%-25%) and 36 ports have a relative low performance (lower than 25%). Figure 2 shows this distribution.[37]

Figure 2: performance distribution of EU ports (sample of 115 ports) (PwC, 2013)

While some ports seem underperforming and underutilised, other high performing ports have had or will have to face capacity and connectivity problems related to the need to rapidly evacuate from the port huge volumes of cargoes (containers trades, but also roll-on roll-off traffics).

It should be noted that other models examining the relative performance of EU ports exists[38] and that different research sources, including those of the World Economic Forum or the OECD referred to above consistently show significant differences of performance in EU ports

Congestion in the port hinterlands has a high external cost in the densely populated areas along the major TEN-T hubs. The cost of road congestion is estimated to 1-2% of the EU GDP, i.e. EUR 122-245 billion[39] and congestion is on average significantly higher in the broad hinterland of the major EU hubs (e.g. Benelux).

Congestion in ports is more difficult to appreciate. Port congestion already occurred in 2004, the year considered as the peak of globalisation in terms of trade (see table 3). For some trades, door-to-door logistic cost for European industries rose by 10% in 2004 because of such port congestion[40]. Although the congestion issue has been put on hold during the recession, the baseline scenario indicates that intra-port congestion will come back sooner or later in certain maritime ranges, due to the growth of traffic (see section 3.4).

Table 3: North European Containers Deep Sea Ports Utilisation 2004 (Drewry Shipping Consultants & CLECAT)[41]

Port || Capacity Utilisation

Le Havre || 89.6%

Antwerp || 92.9%

Rotterdam || 92.5%

Bremerhaven || 95.5%

Hamburg || 93.2%

Southampton || 99.3%

Felixstowe || 77.1%

Total average || 86.6%

Major hubs ports have developed strategies to improve their rail and inland waterway hinterland connections, in line with the ideas of the TEN-T policy. For example, the port of Rotterdam is developing a rail and inland shipping programme for addressing the major road transport connectivity challenge posed by the expected growth[42]:

"Where currently about 6.8 million TEU travel to and from Rotterdam across the European continent - mainly by truck - expectations are that this will increase to 20 million TEU by 2035. By that time, the Port of Rotterdam Authority will bind customers to move 45 % of their hinterland transport from the Maasvlakte by inland shipping and 20 % by rail. In the current modal split, these percentages are respectively 39 % and 13.5 %"

A complementary strategy is to provide cargo streams with attractive multiple alternative routes in the same catchment area, which requires that all the ports on these alternative routes offer comparable performance levels. The performance gaps between ports also undermine the development of short sea shipping, be it "hub and spoke" operations[43], Ro-Ro or other forms of short sea shipping (SSS). By avoiding additional cargo transport in the usually saturated hinterland of the major European hubs, SSS contributes to sustainable transport. However, SSS requires performing ports at the two ends.

SSS has a greater transport capacity than road haulage which considerably reduces the costs per cargo. Though, several factors affect the competitive edge of SSS. The two most commonly accepted are the complexity of administrative formalities (including customs procedures) which are different to what applies to the competing intra EU road transport,[44] and the low efficiency of ports.

From an EU-wide perspective, poor performance of certain ports penalises short sea shipping and multimodal transport solutions in ports. It also aggravates road transport congestion problems in other ports and puts strain on long-haul road corridors in the EU (crossings of EU and non-EU land locked regions).

Hence, at several occasions, EU Member States have stressed[45] the necessity of more flexible and efficient port services allowing shipping services to offer frequent sailings at any time, as well as guaranteeing high-speed operations throughout the logistical chain and a quick turn-around time for ships in the port:

Extract from Council Conclusion 11-12 December 2006 on Short Sea Shipping (SSS)

· Promotion should, in particular, continue urging market players to integrate Short Sea Shipping more tightly into the whole transport logistics supply chain, inter alia by developing ports, as strategic nodes, and links to the hinterland, and services;

· Ports, as efficient and seamless nodal points for transhipment between the land and the sea, should further enhance and improve their services for Short Sea Shipping; work towards ensuring high-quality services and unrestricted and efficient access to ports from sea and from the hinterland should continue;

3.1.2. Need to adapt to transport and logistics changes

The performance problem referred to above is compounded by the fact that new transport and logistics requirements have emerged to which ports need to adapt. The changes potentially make a part of the existing port capacity obsolete or require an infrastructure upgrade. In the discussion about the nature and extent of the problem, stakeholders identified a number of trends and signals of change that are appearing today and that are expected to become increasingly significant in the future. Those trends and signals of change (see also section 3.4) are:

· Increased size and complexity of the fleet, in particular ultra-large container ships, but also new types of Ro-Ro ferries and gas-carriers. The bigger ships pose a challenge of high peak capacity when delivering more cargo/boxes or (dis)embarking a high number of passengers in a single visit. For instance the new ship “Marco-Polo” owned by CMA in operation since November 2012 has a capacity of 16,000 containers and a length of 396 m. Maersk has ordered 20 ships for 2015 with a capacity of 18,000 containers. This is the equivalent of a theoretical loaded train of 280 km (distance between Rotterdam and Dusseldorf).

· Deployment of bigger vessels for short sea shipping and feeder services, with new needs in terms of energy efficiency, alternative bunkering fuels and environmental performance (LNG, cold ironing[46]).

· Trends in logistics and distribution systems that attract more value added services within a port's area (relevant to the rules for competition within the port and for charging schemes).

· Significant changes in the energy trades, with a shift from oil and oil refined products towards gas; need for significant gasification facilities in ports; potential volumes of dry biomass and CO2 transport and storage; shore-side electricity supply.

These changes place intense pressure in terms of infrastructure and investments: extension of berth, quay, deepening of basins and canals, reconfiguration to enable manoeuvring of larger ships. They require new facilities and operational procedures: cranes, new passenger terminals etc. However, public funding has become scarcer as a result of the economic crisis; hence the need to focus public funds on the most efficient port investment projects. Moreover since as a result of the recession, the return on investments of private funding may be lower than expected[47], ports may appear as a less attractive venue for financial firms.

Lastly, port capacity should ideally be available where it is needed, including in response to changes in inland distribution and ship call patterns that may occur. Therefore, capacity needs to be available at a wide range of locations for matching evolving demand needs, possibly with fluctuations of traffic between ports, creating occasional surplus and shortages in capacities.

3.2. Underlying drivers of the problem

Three main underlying drivers of the problem have been identified: 1) port services and operations in some TEN-T seaports are suboptimal; 2) the current port governance framework in some TEN-T seaports does not provide enough incentives to attract investments and 3) inadequate connections with the hinterland, notably by rail and inland waterways. Problem driver (3) is already addressed by the above mentioned TEN-T and CEF proposals, and by the new cohesion policy (better planning of interventions by cohesion and structural funds). Therefore, it is not further analysed in this report. Other potential problem drivers such as persisting credit restrictions, curtailing private investments, leading to a technological standstill in the coming years, either go beyond the immediate regulatory intervention scope of the EU or are already covered by other EU initiatives not related to transport. They are therefore not further considered in this impact assessment.

Therefore, the section below presents evidence for the remaining underlying drivers 1) and 2). It does not imply that those drivers are present or have the same extent in every port. Nevertheless, each of them can be illustrated with concrete cases. The root causes of each of these drivers developed below are linked to typical regulatory and market failures which explains that self-regulation cannot provide a solution.

3.2.1. Suboptimal port services and operations in some TEN-T seaports

Ports provide a chain of services. Suboptimal port services prevent the chain from operating in an efficient way. They prevent the network as a whole from functioning efficiently and to cope with the expected changes in transport demand. Port capability and efficiency can greatly influence the decision for locating a plant or distribution centre, and often determine whether a local producer can compete globally or regionally with other producers. The challenge is for ports to relate to the needs of their customers and assist them in improving their competitive positions by providing cost-efficient port services and by contributing to the sustainable development of the transport chain.

On the basis of discussions with stakeholders, evidence collected through the business surveys (opinions of users of port services) and academic research, the instances of suboptimal port services can be attributed to three main root causes: (1) weak competitive pressure in the port services market resulting from market access restrictions (2) market abuses by port service providers with special or exclusive rights and (3) administrative burden due to lack of coordination within ports.

Table 4 below gives a stakeholder's appreciation of the price and quality of the port services. Although the results only reflect perceptions and do not yield general conclusion applicable to all ports, they clearly point out a degree of dissatisfaction in certain seaports.

Table 4: problems identified by stakeholders per type of services in EU ports (PwC, 2013)

3.2.1.1. Root cause 1: Weak competitive pressure in the port services market resulting from market access restrictions

Competitive pressure means that port operators have to make a constant effort to satisfy users' needs. Such competition helps to facilitate specialisation because competitors are competing under the same conditions. Specialisation in turn helps to improve cost efficiencies. However, the extent of this intra-port competition can be limited by market access restrictions:

Market access restrictions

National legislation, regulatory authorities or port authorities may limit de jure or de facto the possibilities of market entry. It can be linked to reasons of lack of space limiting the number of operators (e.g. terminals) or because certain activities are considered to be public services (imposing safety requirements e.g. pilotage). It can also be linked to state monopolies, historical contracts with incumbent operators, and/or existence of restricted professions.

Examples known[48] from complaints or reports from stakeholders include:

· Monopolistic rights with a long standing history, notably for technical-nautical services (pilotage, boatmen and towage). In some Member States the providers of those services fall under the category of regulated professions with long standing exclusive rights. The possibility to create new SMEs and jobs for those services (or for innovative services closely related) is seriously restricted or does not exist at all.

· Discretionary decisions of a public authority to grant or deny access to the port to a provider of port services or to impose disproportionate requirements. In certain Member States, market access often follows a “close door” negotiation: interested parties do not have even notice of the market opportunity. Appeals and complaints against such unilateral decisions are costly, take very long and often rejected because the local legislation authorises such decisions by port authorities.

· Denial of fair access to land in the port, assignation of a less favoured part of the port or lack of legal certainty on the authorisation granted by the port authority, i.e. possibility to impose unilateral changes or revoking access decisions without appeal procedures.

Table 5 gives a broad indication of the presence of legal/regulatory market access restrictions for different ports services in EU ports. The 2012-2013 survey indicates de jure restrictions in 32% of the cases (for bunkering) and 85% (pilots). They also vary across Member States and even within Member State.

Table 5: Share of respondents indicating limitations to competitions by law/regulation (PwC, 2013)

Degree of competition in the market

Table 6 presents the share of ports where more than one operator provides a particular service. Figures are broken down by type of service. Intra-port competition is low in pilotage (only 12%) and not frequent for other technical-nautical services. By contrast, services indicated with a higher competitive pressure are bunkering (54%) and passenger services (48%). On cargo handling, although some market access restrictions were indicated (table 5), services are often provided in a competitive environment (64% of responding ports – table 6), and inter-port competition also often applies in this case. Annex II gives examples of the number of operators in key major ports.

Competition for the market

In the 2012 PwC Survey, port authorities were asked to describe the awarding process for the operation of main terminals and for port services: it was reported that the same port can have several different procedures in place to award contracts (e.g. for different terminals, operational areas, port services). Especially in the event where different awarding procedures are used for terminal awarding or service contracts, this puts the level-playing field into question and presents a possible distortion of competition. It is to be noted that, in certain Member States, port land rental or lease contracts can be granted by public authorities to commercial operators without following public procurement or concession rules.

Table 6: Presence of more than one operator per type of service (PwC, 2013)

Stakeholders' point of view

Port authorities, port services providers and terminal operators recognise that market entry barriers exist. However, they reckon that for a number of services it may be justified and that in any case the lifting of these barriers is a matter for national competence. By contrast, shipping lines do not agree and consider that the freedom of service principle should be introduced.

3.2.1.2. Root cause 2: Market abuses by port service providers in monopolistic or oligopolistic positions

A wide range of potential abuses of market power can occur in ports as a result of the many instances of market access restrictions described in the previous section and notably the exclusive rights or special rights granted by the State or the port authorities. A notorious abuse is the obligation to pay for pilotage services when entering the port even if the service is not needed and/or effectively provided.

Market abuses can also stem from de facto monopolistic or oligopolistic positions facilitated and /or reinforced by various degrees of integration between infrastructure providers and port users[49] and the difficulty to have access to facilities which are essential to provide port services[50].

Some examples of market power abuse practices[51] are, inter alia:

· Excessive pricing to users, i.e. charging a price which is excessive because it has no reasonable relation to the economic value of the product supplied (ECJ definition)

· Refusal to supply, i.e. refusing access to the port to an operator involved in commercial passenger or freight shipping.

· Favourable treatment to incumbent operators, including subsidies: incumbent operators can receive particularly advantageous conditions, for example lower fees for port land lease contracts, obtain the best locations in the port or receive public subsidies for supporting their commercial activities.

In practice, this has led to complaints and even court proceedings by the national competition authorities or the Commission. There is substantive case law in terms of Commission Decisions' and Court of Justice judgements' on market abuses. Some examples:

· Italy: cargo-handling monopoly, Port of Genova[52]

· France: refusal of access to LNG Terminals, Port of Fos[53]

· Germany: refusal to supply, Port of Puttgarden[54]

· Sweden: excessive pricing, Port of Helsingborg[55]

· Portugal: Tug services cartel, Port of Setubal[56]

However, in many other cases, abuses linked to the exclusive or special rights of port operators cannot be easily legally challenged. Complaints are costly and time consuming for the potential complainants, in particular SMEs. Moreover, in absence of secondary EU legislation implementing the principle of freedom to provide services in the port sector cannot be used to avoid abuses of monopolistic practices.

Stakeholders' point of view

Stakeholders recognise that, in some EU ports, market abuses by regulators, policy-makers or port authorities can occur. On one hand, port authorities and incumbent terminal operators consider that port service providers must keep a discretionary power in the management of the service, including the definition of price. In their view, competition authorities are already now well placed to intervene. On the other hand, port service users and would-be new entrants highlight that in absence of EU legislation, abuses cannot be easily challenged.

3.2.1.3. Root cause 3: Users face excessive administrative burden due to lack of adequate coordination

The main causes of excessive administrative burden in ports that are usually mentioned are:

· the effect of cumulative regulation (international/EU, national and local sources) touching on different aspects of the port activity;

· lack of harmonisation of interfaces and between ports and ships and a lack of regulatory harmonisation at EU level;

· conflicting goals: e.g. trade facilitation vs. law enforcement, port revenue collection vs. available human resources, etc. and

· a lack of coordination between different administrations and poor interaction between the public and private sector agents within ports.

Below an illustration[57] of the excessive administrative burden:

“The survey demonstrates that as many as 150 separate actions may be needed to get a ship into a port, perform cargo operations and sail to the next port, many of which must be carried out in the very short timeframe allowed by the vessel’s schedule. Any delay in the progress of the port call, compliance with statutory requirements or arranging the delivery or collection of the cargo can have a significant effect on the cost of the call (and thus on the overall voyage) and on the vessel’s subsequent employment. There is very little consistency in the way these functions are handled – at the international, regional and even local level”.

The Commission will tackle issues related to the further simplification of customs procedures for intra-EU freight traffic in EU ports by means of the upcoming initiative on "Blue Belt"[58]. The Commission is also working on issues related to the inter-connection and/or inter-operability of port IT systems in the context of the so-called "e-maritime" initiative[59].

However, those initiatives do not touch on the issue of lack of coordination of different activities that are part of the same chain of services within the port. Some EU ports make pro-active efforts to facilitate users' needs in terms of administrative simplification, introducing quality standards and customer care departments. However, the PwC Survey reveals that while good practices exist (e.g. DK, NL, UK) there is serious lack of coordination between different administrations in too many EU ports (see table 7).

To tackle similar issues in airports, EU legislation[60] has introduced the requirement of giving users the possibility to exchange information and ideas and allow the concerns of interested parties to be raised and taken into account by the airport authorities on important decisions such as charging. Such committees provide customer orientation and a flexible coordination instrument by means of which port authorities and administrations listen to the users and users can interact to combine their activities to provide a better service to final users. Costs resulting from unnecessary administrative burden in ports are extremely difficult to estimate. The following table summarises the overall views resulting from the business survey (opinions of users) carried out in the context of the public consultation>

Table 7: Users views on coordination of administrative requirements in EU ports (PwC, 2013)

|| North Sea || Atlantic || Baltic Sea || West Med || East Med || Black Sea

Shippers / Freight forwarders || + + + || || + + || + + || + || +

Shipping Companies || + + + || + || + || + + || + || +

Other logistic operators || + + + || + + || + || + + || + || +

+ + + : “Users friendly”, i.e. good coordination, transparent procedures, customers consultation structures + + : Lack of coordination, relatively transparent procedures, occasional consultation + : Lack of coordination, uncertainty of results (time required), no consultation

Stakeholders' point of view

Stakeholders (users of port services and certain port authorities) largely agree on the three causes of administrative burden. They estimate that the administrative complexity can be effectively addressed by improving the coordination of services and procedures inside the port.

3.2.2. Port governance frameworks not attractive enough for investments in all TEN-T seaports

In order not to put at risk a more efficient, interconnected and sustainable TEN-T and cope with the expected traffic changes, ports need optimised port services (driver 1), but also new investments (driver 2). To attract these investments, the right governance frameworks must be in place, which does not seem to be the case for all ports.

According to projections carried out[61], the port infrastructure required to meet future demand would require 12% of total infrastructure investments (from € 150 to € 200 billion) until 2030. There are regional variations, e.g. the Baltic region shows a need for start-up investments, whilst the North Sea and Mediterranean regions require strong investments in modernisation schemes. For the period 2015-2030, the overall funding needs for maritime transport infrastructures could easily exceed € 100 billion just to maintain current capacity levels. European Port Authorities have expressed very serious concerns about the investment gap that looms in the coming years as a result of the difficult state of public funding in the Member States, the reductions of the funds allocated for transport infrastructures in the EU financial perspectives 2014-2020[62] and the consequences of the economic crisis on private funding availability.

The current context of scarce public funding imposes a higher selectivity in granting public funds to port investments[63]. It will demand more than ever a careful scrutiny to avoid waste of scarce resources and distortions of competition between ports arising from public subsidies (see report of the Court of Auditors – Annexe II).

The fact that current port governance frameworks do not provide enough incentives to attract investments in all TEN-T seaports can be explained by several "root causes": 1) inadequate infrastructure planning and poor strategic planning and ex-ante cost benefit analysis procedures (this cause is highlighted in the report of the European Court of Auditors 2013[64]), 2) market access restrictions which may deter investors (see root cause 1 above), 3) unclear financial relations between public authorities, port authorities and port services providers and 4) weak autonomy of ports to define infrastructure charges and non-transparent link with costs. The last two root causes are further explained below.

3.2.2.1. Root cause 4: Unclear financial relations between public authorities, port authorities and providers of port services

Transparency is a necessary precondition to attract investments, even if not sufficient[65]. Transparency, together with non-discrimination and a level playing field, is one of the key policy requirements for a sound and stable investment environment offering a lower degree of uncertainties on profit returns for all. Transparent information on how port authorities use public funds is a critical determinant in the investment decision of port services providers by contributing to a better predictability. It is especially important for small and medium sized enterprises that tend to face particular challenges to entering the market.

In many occasions, the Commission and others have expressed the view that the current level of transparency in the port sector is inadequate to trace flows and uses of public funding within port entities, which are, at the same time, engaged in both port management and commercial activities within ports. The financial transparency problem appears at two different levels:

- The flow of public funding from the national, regional or local authority to the managing body of the ports: i.e. how much public funding is received;

- The use of that funding by the managing body of the port: i.e. allocation of public funds to support both statutory "public authority" functions and provision of port services, i.e. possible cross-subsidization of incumbent port service providers

Use of subsidies to ensure the viability of incumbent port service providers means a de facto market barrier for new entrants and investors. For instance cross-subsidies can artificially decrease the incumbent’s costs and allow the incumbent to undercut the newcomer’s prices.

More in general, the ability to absorb losses and cross-subsidize operations within the port impacts the balance and intensity of competition: it discourages new entrants, who have to over-invest to be present in the market, reduces the competitive pressure to improve efficiency of incumbent operators and leads to distortions in the allocation of investment resources[66].

A Commission study on the public funding of European ports[67] concluded that, in absence of reporting and accounting obligations, it is not possible to ascertain both the volume of funds granted to ports and the use of those funds in the port for public functions and commercial operations. The problem was largely confirmed by a 2011 study carried out by the European Parliament[68].

Although Directive 2006/111/EC[69] on the transparency of financial relations between Member States and public undertakings already imposes minimum requirements in terms of transparency, it only applies to undertakings with an annual turnover higher than €40 million. According to the PwC 2013 survey, only 36% of ports analysed exceed this threshold. Even on the core network, the survey indicates that only half of them would fall in the scope of the Directive. Further analysis indicates that while 79% of TEN-T ports are involved in at least one port service, a significant share has no separate account which could allow possible distortive state aids to be identified or traced. As such, addressing the existence of state aid and its compatibility with the EU state aid rules is rather complicated. See table 8.

Table 8: TEN-T Ports accounting practices, Source DG MOVE based on PwC Survey (2013) & ESPO (2010)

Port Accounting Practice || % of ports

Ports applying the Financial Transparency Directive (€ 40 million turn-over)* || Less than 50%[70]

Ports not keeping separate accounts from the Public Administration || Around 20%

Ports not keeping accounts according to accounting standards || More than 40%

Ports not required to audit accounting by external experts || More than 40%

Ports not publishing annual accounts || More than 40%

Port Authorities involved in the provision of port commercial services || More than 95%

Ports not applying internal analytical accounting to activities and services || More than 40%

Stakeholders’ point of view

Several stakeholders, including most port authorities, point to the lack of financial transparency. It gives rise to suspicion and recrimination between ports, be it justified or not, about unfair competition between ports encouraged by Member States public funding practices.

3.2.2.2. Root cause 5: Weak autonomy of ports to define infrastructure charges and non-transparent link with costs

Efficient pricing is a prerequisite for making efficient infrastructure investments (Winston, 1991).

While public ports should aim to maximize user welfare, given the growth in demand, they may need to evaluate their pricing approach in order to reduce the financial burden and consider the competition with private ports.

This section highlight that current infrastructure charges cannot always be set autonomously by port authorities and that they rarely reflect real costs in an efficient way. Similarly, port dues do not always send the correct price signals which incentivise users to take into account their external costs[71].

Autonomy of port authorities in setting port infrastructure charges

There is broad academic transport research[72] suggesting that port authorities should be allowed to have autonomy in terms of obtaining revenues from their activity as port managers in order to use those resources in a more pro-active management approach. Port dues form the most important source of operating income (see table 9). A wide autonomy for setting general port dues help port authorities to design optimised pricing policies which accommodate both their own commercial and investment strategies.

In a survey carried out on behalf of the Commission in 2011, it was found that 34% of ports have no responsibility for setting ship and port infrastructure charges. This for example because port charges can be 1) unilaterally imposed by public authorities independently of the use of infrastructure, 2) retributions, or simply prices, i.e. charges for commercial ports. Only 48% set and approve the charges in a full autonomous manner ("Study of the public funding of port infrastructure", NEA, 2011). Moreover, the indicative relative weight of the port dues in the total port operation cost ranges from 5 to 10% (see table 1).

Table 9: Average operating incoming profile of European port authorities (ESPO Fact Finding report, 2011)

Income source || Average %

Income from general port dues || 49%

Income from land lease or similar || 25%

Income from services || 16%

Other income || 10%

Efficient pricing of port infrastructure

The principles of port public infrastructure pricing have been extensively discussed in transportation economics[73]. Pricing strategies, such as lowering charges (port dues or terminal handling charges or both) in order to compete against other ports, can be used to boost port’s competitive positions. Ultimately the pricing scheme should correspond to market conditions and to counter competition, stimulate market growth and improve profitability (Yap et al., 2011). There is no fundamental difference between investments in port infrastructure and other capital-intensive investments in industrial complexes. Therefore, there should be no reason for adopting a completely different approach to port investments, and consequently no reason why direct users should not bear the costs of such investments. Moreover, the introduction of market principles in infrastructure pricing would be the most effective remedy to avoid the risk of creating wasteful overcapacity and possible distortions of trade flows (except in the case of pricing maritime access and protection infrastructure).

An illustrative case: In January 2013, German port operator, Eurogate, has confirmed that it is pushing ahead with legal action against harbour dues at Wilhelmshaven’s JadeWeserPort, the port authority of Germany's newest container terminal at the country's only deep sea water port. Eurogate, complaints JadeWeserPort authority’s decision to grant allegedly up to a 70% rebate on dues for the first 18 months, followed by a 50% rebate for the following six years to Eurogate competitors. See: http://www.portfinanceinternational.com/categories/regulation-policy/item/663-eurogate-confirms-legal-battle-at-wilhelmshaven,-germany-s-newest-port

There is no uniform model, even within Member States. The most frequently used criteria in TEN-T ports for establishing port charges are (a) the type, size (gross tonnage) and/or cargo capacity of the vessel, (b) the type and volume of cargo and (c) the time in port. Other criteria are judged to be "rather complex, un-transparent and archaic"[74].

The evidence collected suggests that in many ports, the criteria used to establish charges and rebates or discounts on those charges is seen to be based on arbitrary decisions[75]. The PwC survey shows that, in many cases, port charges appear to be fixed and altered with rebates depending on market developments, according to variations in charges in competing ports. This has occasioned many debates[76] on allegedly covert subsidising, predatory pricing and possible distortion of competition between neighbouring ports and/or operators in those ports.

Lack of incentives rewarding environmental efforts[77]

The past years have seen increasing concerns on the environmental impact of maritime transport, in particular air pollution[78]. Ships that call at ports are a major source of air pollutants such as CO2, SO2 and NOx. The health effects impacting the residents surrounding major ports (respiratory diseases, cardiovascular diseases, lung cancer and premature mortality) and distorting the natural ecosystem are well documented[79]. Traffic growth means that those external costs risk increase unless there is significant change in ships’ fuels and propulsion technologies. An EU and international regulatory approach has been implemented as regards the sulphur content of fuel, the waste management[80] and more recently the provision of LNG fuel in core ports[81]. However, economic incentives, including by means of differentiated port dues, can be used to reward compliance with standards/practices not binding yet or to encourage innovative cleaner solutions.

In a voluntary manner, some European ports have set up such rewarding schemes. Discounts on port charges of up to 10% can be granted based on participation in the Environmental Ship Index scheme[82] (Belgium, France, Germany and the Netherlands), of 20% based on the Green Award certificate[83] (Latvia, Lithuania, the Netherlands and Portugal), or 50% though rebates linked to NOx/SOx emissions or via levying a sulphur fee (Sweden).

With few exceptions, such practices are limited to a number of ports. Some stakeholders put forward that, in absence of a common framework, port charges variations resulting from those schemes can entail discrimination and/or unfair commercial practices between ports. It was also argued that the environmental rebates are usually too small and that there is a lack of consistent application at regional level. As a result, environmental differentiation is more seen as part of the port marketing strategy than an effective tool to influence the fleet composition.

By contrast, port charging encouraging short sea shipping, with rebates exceeding 50% in certain ports (notably transhipment operations for which the market is highly volatile)[84] seems to be widely used in large parts. They contribute to attract a high level of feeder services which provide the fine distribution within the region. Although contributing to the White Paper objective to develop shorts-sea shipping, those schemes - which are based on the origin and the destination of the vessels - may raise legal uncertainties as to their compatibility with the TFEU, notably Article 18 which prohibits any discrimination on ground of the nationality and therefore possibly on ground of the origin or the destination of the vessel.

Stakeholders' point of view

Stakeholders, both users and providers of port services agree that greater financial autonomy of port authorities could contribute to better use of resources and more performing, customers' oriented ports.

3.2.3. Linking the problem to its drivers and root causes

Table 10: Links between the main problem, its drivers and root causes

General problem: Structural performance gaps in some TEN-T seaports; need to modernise ports to new transport and logistics requirements at a moment of scarce public funding. || Root causes

Driver 1: Sub-optimal port services and operations in some TEN-T seaports || Root cause 1: Weak competitive pressure in the port services market resulting from market access restrictions

Root cause 2: Market abuses by port service providers with exclusive or special rights

Root cause 3: Users face excessive administrative burden due to a lack of coordination within ports

Driver 2: Port governance frameworks not attractive enough for investments in all TEN-T seaports || Root cause 4: Unclear financial relations between public authorities, port authorities and providers of port services

Root cause 5: Weak autonomy of port authorities to define infrastructure charges and non-transparent link with costs

3.3. Who is affected by the problem?

Table 11: Affected parties and their key interests

Stakeholder || Description || Key interests

Port Authorities || Public or private bodies that own and/or manage the ports || Developing the port in the context of a national, regional or local policy and/or maintaining profitability of the ports. A level playing field for inter-ports competition

Port dependent businesses & operators || Business and operators dependent on access to the port, e.g. terminal operators, stevedoring pools || Maintaining profitability and employment; legal certainty and a fair level playing field for intra-port competition

Port workers || Human resources of port authorities and port dependent business and operators || Pay and employment conditions, health and safety in the workplace, training and professional careers

Shipping sector || Shipping companies providing EU and international seaborne trade & maritime passenger services || Cost-efficient and reliable port services (cargo-handling, technical nautical services, port environmental services, passenger services)

Sector regulators || National, regional and local bodies regulating ports || Ensuring an efficient, effective and practical management framework that balances a wide range of stakeholder needs

Freight forwarders and shipping agents || Agents and logistic companies organising or facilitating freight trade exchanges intra-EU and with world markets || Availability, cost, quality and reliability of ports services

Maritime passengers || Citizens travelling by sea (ferry crossings, cruise-ships) || Availability, cost, quality and reliability of ports services

EU industries || Businesses depending on maritime transportation for their supply needs and for their exports, covering a very broad range of industrial sectors || Availability, cost, quality and reliability of ports services

Final consumer || Citizens benefiting from the choice, availability and prices of goods delivered by sea-borne trade || Availability, cost, quality and reliability of ports services

Tax payers || Citizens indirectly providing public funding to ports || Sound use of resources, economic and social returns, opportunity costs

3.4. Application of EU horizontal instruments (Internal market and competition rules)

Over the years, the Commission has received complaints about abusive restrictions imposed to port operators by the national authorities (port regulatory regimes) and abuses of dominant position by incumbent operators. In a number of cases, the Commission has carried out an investigation to examine compliance of regulatory regimes with the EU Internal market, transport and Competition rules (acquis in the transport sector). However, in absence of EU port legislation implementing the freedom to provide services; those complaints could not be systematically followed up. This lack of reaction could have led interested parties to desist from presenting new cases to the Commission.

Moreover, throughout the consultation process a distinct aversion by port users to declare distortions and abuses was noted. Users fear that in the future they would be discriminated and have to suffer delays and lower quality of service. Ports are full of situations of “delicate balance”, whereby problems are settled by some sort of “ad-hoc facilitation” and rarely become public. Complaints in cases of abuse require long litigation, often impossible for SMEs for which the procedure is too long and costly. Big companies with bargaining power can enter into bilateral agreements with port authorities, without concerns about possible anti-trust limitations.

The application of competition rules in the port sector was examined by the OECD in 2011[85]. The OECD report shows that many of the national competition authorities recognise the need for sector specific rules to provide legal certainty to all operators, reduce the scope for abuses, pursue complaints and redress situations more effectively.

In 2012, the Commission introduced a proposal regarding the granting of concessions by public authorities in the EU. The proposal will cover concession contracts used in the port sector. The adoption of the proposal by the European Parliament and Council and its possible impact in the sector has been taken into account in the baseline scenario (section 3.5) and in the analysis of options (section 6).

Finally, it should be noted that, in the current situation, there are a number of instruments, such as the Directive on Financial Transparency of public undertakings that just do not apply to a significant number of TEN-T ports. Similarly, the Commission's strategy on the internalisation of external costs foresees sector-specific instruments on infrastructure charging to be developed but no common EU horizontal rules. In respect of State Aid, the Commission has announced its intention to provide clarifications on the notion of State aid in the context of public financing of infrastructures. There are no sector-specific guidelines explaining the Commission's approach to the enforcement of State Aid rules in the port sector.

3.5. How would the problem evolve, all things being equal

This section analyses future developments until 2030 in a scenario that assumes a status quo of existing policies and already planned policy reforms. The status quo involves progressive changes both at EU level and in individual Member States, resulting inter alia, from past reforms at national level and possible further reforms resulting from the Country Specific Recommendations (European Semester exercise), the impact of the Directive on Concessions in ports (entry into force year 2015) or foreseen modernisation of State aid rules. However, the status quo assumes that those possible reforms will not lead to the establishment of a level playing field for all TEN-T ports in respect of the problems identified in sections 3.1 to 3.3.

The assessment carried out demonstrates that all things being equal, the expected transport growth and changes in shipping logistics, combined with the persisting gap in the performance of ports observed today, would cause capacity problems and aggravate the un-balanced use of the network, thereby threatening the good functioning of the internal transport market.

According to the traffic projections updated by IHS-Fairplay in 2010[86] and by PwC (2013)[87], the overall volumes handled in EU27 ports will grow from 3.6 billion tonnes in 2011 to 5.8 billion tonnes in 2030 in a low growth scenario[88]. EU ports would therefore have to handle 2.2 billion tonnes more than today, which exceeds the capacity resulting from all the port expansion projects known at this stage in the EU. These results are consistent with research[89].

Table 12: EU 2030 port traffic by region of loading/unloading (PWC (2013)

Region || Container || Dry Bulk || Liquid Bulk || RoRo || Other Cargo || Total

UK/Ireland || 125.74 || 155.43 || 297.49 || 137.46 || 35.26 || 751.39

Nordic || 50.53 || 187.66 || 240.30 || 122.01 || 81.87 || 682.37

South Baltic || 19.91 || 158.09 || 88.92 || 17.68 || 39.39 || 323.98

Hamburg-France || 595.58 || 434.53 || 571.20 || 186.83 || 138.26 || 1,926.40

Iberia || 217.28 || 176.38 || 213.45 || 38.34 || 50.98 || 696.44

Italy/Malta || 179.00 || 112.67 || 261.87 || 80.05 || 64.24 || 697.83

Balkan/Aegean || 120.80 || 156.28 || 122.21 || 50.50 || 128.72 || 578.51

Black Sea || 8.22 || 69.73 || 28.90 || 1.53 || 37.81 || 146.19

Total || 1,317.06 || 1,450.77 || 1,824.34 || 634.40 || 576.53 || 5,803.11

Port Traffic in the container sector will be higher than in the bulk sectors. When taking container capacity evolution as a proxy for considering congestion risks in EU ports, it appears that, by 2030, container traffic growth will exceed 85% i.e. 3.2% year on year growth. On this basis it is plausible that capacity in EU container terminals will reach 145-155 million TEU based on existing planned developments. The changing requirements of shipping companies will also dictate that some existing capacity becomes obsolete. With demand at 149 million TEU in 2030 and capacity also reaching 145-155 million TEU, it can be demonstrated that the supply/demand utilisation rate will reach the congestion threshold of 80% before 2030, and by 2030 the utilisation rate will exceed 95% in some regions.

Uncertainty in forecasting vs. market trends

Those projections must be taken with caution because of the multiple underlying assumptions (see Annex VII for the detailed modelling assumptions). New developments related, for example, to the introduction of new or raising trade barriers would have a direct negative impact on sea-borne transport and ports' activity in the EU. Conversely, further world trade liberalisation would entail much higher figures on demand for port services. The baseline scenario assumes that the current state of affairs will prevail: it does not consider sensitive analysis about possible trade agreements

Nevertheless, it can reasonably be concluded, in consistency with other studies and common experts’ opinion, notably the “Logistic Performance Index” (LPI) elaborated by the World Bank[90], that the trends featuring the main problem (see section 3.1) will be aggravated:

Firstly, there is a threat of port congestion in a number of areas, in particular the North Sea and Baltic Sea regions in the horizon 2020-2030. The congestion in their hinterland will cause longer delays at the access links to a number of major ports. Those delays will paradoxically increase the marginal transport costs of reaching the performing port regions. They will have a knock-on effect on higher fuel costs and road transport externalities while increasing the transport cost for and to peripheral countries[91].

Secondly, the current geographical polarisation of the EU trade flows to a limited number of major ports will be accentuated, in spite of their hinterlands already being largely saturated.

Thirdly, the congestion in the ports reaching their limit in several geographical areas and the low performance in others will undermine the shift of road freight transport to maritime links which need uncongested and performing ports at both ends. This will put at risk the broader goal of the Transport White Paper on shifting 30% of long distance road freight transport to other modes such as rail or waterborne transport by 2030.

Fourthly, achieving the goals of the proposed EU legislation[92] on LNG (deployment of alternative fuels infrastructure, adopted in 2013) will put additional investment pressure[93] in the TEN-T Core network ports. Moreover, this framework could be a missed opportunity for the economic development of certain areas. Shortcomings on ports performance have effects on prices and supply of goods,[94] particularly when the port in question is the source of a significant share of global supply. As such, this could affect the competitiveness of European industries.

3.6. Does the EU have the right to act?

3.6.1. Legal basis

The right to act for the EU in the field of transport is set out in the Treaty on the functioning of the European Union (TFEU). According to Article 4 TFEU, the EU has shared competence with the Member States in the area of transport (Title VI TFEU). Article 58 TFEU stipulates that the freedom to provide services in the field of transport shall be governed by the provisions of the Title relating to transport. In this respect, article 100 TFEU states that the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may lay down appropriate provisions for sea transport[95].

As far as public service obligations (PSOs) are concerned, Article 14 and Protocol 26 of the Treaty confirm the place occupied by services of general economic interest in the shared values of the Union. Article 106(2) of the Treaty lays down that undertakings entrusted with the operation of services of general economic interest are subject to the rules contained in the Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. In this respect, the initiative presented will not go further than allowed by the Treaty and will not impinge upon Member States' right to define PSOs.

At present, the Treaty, case law of the Court of Justice and secondary multi-sectorial rules create an EU legal framework applicable to ports, even if there is no EU transport specific legislation regarding ports. Under these circumstances it is reasonable to presume that sector specific measures adequately implementing the Treaty principles in the sector and providing a more comprehensive and legally certain framework are of genuine common interest.

3.6.2. Subsidiarity

Article 5 TFEU states that, every Union action should respect the principles of subsidiarity:

Necessity test

The legitimate rights of Member States to take actions which reflect their local, regional or national specificities, must not unduly restrict the proper functioning of the internal transport market. In the port sector, a level playing field for the provision of port services is necessary taking account that (2010 statistics) only 10% of the seaborne trade in the EU is national (trade within a member state), compared to 26% and 63% for respectively intra-EU trade (trade between member states) and extra-EU trade (trade with third countries). Moreover, the main TEN-T ports play a role that goes largely beyond national borders: 61% of the freight (tonnes) handled in EU ports has its origin or destination in another Member State[96].

It is therefore necessary to provide rules at Union level in order to ensure the functioning of the internal transport market, an efficient and sustainable use of the TEN-T and its financial instruments (CEF, Cohesion Fund). The past has proven that action at national or lower level - even when the Commission has provided guidance in the form of recommendations (cf. 2007 EU Ports Policy Communication) - has not been sufficient to tackle the identified problem. Market access restrictions and market abuses continue to exist in several European ports. Similar conclusions can be drawn for the transparency in financial relations between public authorities, port authorities and port service providers, and the autonomous setting of transparent and efficient port infrastructure charges. Also in relation to excessive administrative burden due to a lack of coordination within ports, not all Member States have managed to tackle this issue.

EU added value test

With regard to the European added value test, it is clear that the proposed action can be better achieved at Union level than at national level. The port sector is heavily exposed to international competitive pressure. Therefore, Member States have always been reluctant to induce structural changes in the functioning of their ports' system, as to avoid undesirable reactions of the maritime industry prompt to move assets at short notice. By acting at the EU level, this risk can be mitigated. Moreover, the EU has the possibility to act for achieving a true internal market for transport and an efficient TEN-T, implementing a level-playing field for ports and port services which cannot be better achieved at national level. Implementing adequately the Single Market rules in the sector would ensure fair allocation of funding resources and an open business environment promoting a dynamic of modernisation and performance based healthy competition between ports and between ports service providers.

Wide-ranging academic studies confirm that since the 1990s EU economic integration has involved a growing inter-dependence of European regions from sea-ports in distant hinterlands (see, e.g. Notteboom, 2012). The multiplication of pan-EU corridors brings about a change in the relationship between ports and their local hinterland. The inland penetration strategy is part of maritime gateways’ objective of increasing their cargo base. On the other hand, interior regions are recognizing that it is in their interest to establish efficient links to as many gateways as possible[97]. This strategy not only prevents these regions from becoming captive to one specific gateway, it also improves the location qualities of these interior economic centres. Hence, the linking up to more gateways implies more routing options and flexibility for shippers and logistics service providers who want to set up business in the region.

Other considerations on subsidiarity

Finally, a parallel can be drawn with other transport modes. The port sector is the only transport sector for which there is almost no EU legislation on issues such as the access to the market, financial transparency, infrastructure charging and coordination issues. For example, in the case of aviation and the railway sector such a European framework does already exist, and the need for EU action was recognised as being in line with the subsidiarity principle. Therefore, although the specific nature of the maritime sector and its long-lasting history and culture is recognised, because of effects of scale and the international dimension of the sector, the proposed initiative is in line with the subsidiarity principle.

Measures in the different policy packages

The measures in the different policy packages have been chosen in line with the subsidiarity principle. Section 5.2 examines those subsidiarity aspects for each set of policy measures.

3.6.3. Proportionality

The initiative is focused on TEN-T seaports only. This will ensure proportionality insofar as the TEN-T seaports deal with 90% of the traffic[98] and by definition are essential for the international and intra-European trade exchanges, the functioning of the whole transport network and therefore for the European internal market and the cohesion within the EU. The scope has not been further limited to the core ports in order not to risk creating distortions of competition between core ports and non-core TEN-T ports. As explained in the problem definition, an efficient functioning of the network requires contribution from all TEN-T ports.

4. Objectives

4.1. General objective

The general objective is to improve the performance of the TEN-T seaports in order to contribute to the goal of a more efficient, interconnected and sustainable functioning of the TEN-T.

Ports must be efficient gateways and help develop short sea shipping as part of intermodal routes, hence contributing to sustainable transport, one of the key goals of the Transport White Paper and contribute to the EU 2020 strategy for a resource efficient growth to stimulate growth of trade and cargo.

4.2. Specific objectives (SO)

SO1. Modernise port services and operations in all TEN-T seaports: by better optimising port services and operations, a number of TEN-T ports could handle or attract more cargo and passengers with the existing infrastructure.

SO2. Optimise port governance frameworks as to enable a more attractive investment climate: a greater financial transparency and autonomy of ports will create a level playing field, encourage more efficient charging, and eventually attract efficient investments.

4.3. Operational objectives (OO)

OOs linked to modernisation of port services and operations (SO1)

OO1. Clarify and facilitate access to the port services market: to reduce access restrictions for the port services market while avoiding the current legal uncertainties stemming from horizontal rules from the Treaty and on public procurement

OO2. Prevent market abuse by port service providers with exclusive or special rights: to ensure that services which enjoy exclusive or special rights are provided in a cost-efficient manner while continuing to fulfil their role and possible their mission of public service, notably in the field of safety, security and environment

OO3. To ensure the consultation of port users on the main decisions which affect the functioning of the port in all (100%) TEN-T ports by the end of the implementation date of the initiative: to facilitate trade for shippers, logistic operators and cargo-owners, reducing the time and money required for using the port. The coordination effort should also benefit operators established in the port, facilitating synergies and avoiding duplication of efforts for serving the same customers.

OOs linked to creation of framework conditions which attract investments in ports (SO2)

OO4. To ensure the transparency in the financial relations between public authorities, port authorities and port service providers in all (100%) TEN-T ports by the end of the implementation date of the initiative: to achieve a financial transparency between public authority functions and commercial operations so that the ports and service providers do not hold unfair competitive advantages

OO5. To ensure that all (100%) TEN-T port authorities are free to autonomously set their port infrastructure charges by the end of the implementation date of the initiative, with the possibility of environmental modulation of the charges: to achieve a more efficient use of infrastructure and more economic rationality in the planning, investment, maintenance, and operation of port infrastructures, while enabling environmental price signals

The operational objectives defined above are specific and realistic. However, no concrete measurable and time-dependent targets can be set for the first two operational objectives in reason of their nature as catalysers for a more competitive maritime transport market. Moreover, its effectiveness heavily depends on the specific approach taken by the most directly concerned stakeholders. An example is the definition of public service obligations taking account of the particular circumstances of the port. Furthermore, the degree of market access will depend on the timing of new contracts that will become operational.

It is also not possible to quantify the potential for market abuse reduction for a certain time period, as the comparison with the current situation is difficult and because future action on market abuses will heavily depend on the effectiveness of the regulatory authorities.

More measurable targets such as an increase of short sea shipping have not been retained, as these are considered to be impacts of the measures (see 6.1.5) and not as true operational objectives. The progress towards the operational objectives will be monitored according to the monitoring indicators (chapter 9).

4.4. Linking the problem and objectives

Table 13: links between the problem and objectives

General problem: Structural performance gaps in some TEN-T seaports; need to modernise ports to new transport and logistics requirements at a moment of scarce public funding. || General objective: Improve the performance of the TEN-T seaports in order to contribute to the goal of a more efficient, interconnected and sustainable functioning of the TEN-T

Driver 1: Sub-optimal port services and operations in some TEN-T seaports || Specific objective 1: Ensure optimal port services and operation in all TEN-T seaports

Root cause 1: Weak competitive pressure in the port services market resulting from market access restrictions || Operational objective 1: Clarify and facilitate access to the port services market

Root cause 2: Market abuses by port service providers with exclusive or special rights || Operational objective 2: Prevent market abuse by port service providers with exclusive or special rights

Root cause 3: Users face excessive administrative burden due to a lack of coordination within ports || Operational objective 3: To ensure the consultation of port users on the main decisions which affect the functioning of the port

Driver 2: Port governance frameworks not attractive enough for investments in all TEN-T seaports || Specific objective 2: Optimise port governance frameworks as to enable a more attractive investment climate

Root cause 4: Unclear financial relations between public authorities, ports and providers of port services || Operational objective 4: To ensure the transparency in the financial relations between public authorities, port authorities and port service providers

Root cause 5: Weak autonomy of port authorities to define infrastructure charges and non-transparent link with costs || Operational objective 5: To ensure that TEN-T port authorities have a degree of autonomy to set port infrastructure charges with the possibility of environmental modulation of the charges

5. Policy options

The stakeholder consultation, the stakeholder meetings, independent research and own analysis allowed the Commission to identify a set of individual measures having the potential to address the root causes of the problem identified in section 3. The following process was applied for establishing the policy packages that will be analysed in later parts of the present report:

· Identify the policy measures which can be discarded on the basis of a first preliminary assessment

· Identify a list of retained policy measures addressing the problems and respective root causes in full

· Combine retained measures into policy packages constituting viable and coherent policy alternatives for achieving the objectives.

5.1. Discarded policy measures

The Commission services have identified several policy measures. Some measures were favoured by some stakeholders, yet contested by other stakeholders and in some cases contradicted by independent research. Based on a first preliminary assessment, the Commission services have therefore decided to discard some of these measures:

Reform of the port labour market

In the context of the public consultation, the main trade unions of port workers have made clear their frontal opposition to any EU action in this area as it could, according to them, create social dumping, put at risk jobs and salaries and impact negatively on working conditions. Important social tensions exist and in the current climate the Commission considers that such tensions can best be addressed through the social dialogue. The Commission has already initiated the necessary steps and a formal European Social Dialogue Committee (SDC) will start in the first months of 2013. Issues related to exclusive port/dock labour regimes and practices in some Member States should be discussed, as appropriate, in the context of this SDC. In full respect of the TFEU rules[99], the working method, priority of the discussions and possible agreements of the SDC will be discussed with due regard for the autonomy of the social partners.

The Commission will actively support the social partners, notably through the presentation of the fact finding study on the EU Port Labour Regimes[100], which includes a detailed overview of the situation in ports in each of the 22 EU maritime Member States. Progress in this field will be monitored in the context of the implementation report referred to in Section 9 of this report.

In these circumstances, legislating in this area before leaving the possibility to the Social Dialogue to address it would be inopportune (see also Annex X).

Generalisation of the self-handling

“Self-handling” entails companies employing personnel of their own choice to handle their cargo. The public consultation shows that self-handling is much less an issue for port users. It may remain an attractive option only for very specific segments like cars and other Ro-Ro traffic and special or heavy-lift cargo. In the context of the consultation, the trade unions have vigorously reacted against the Commission’s alleged intention of permitting self-handling in all ports. In practice “self-handling” is allowed in ports in several Member States[101]. In other Member States, it is not allowed (in Belgium, France, Spain or Portugal among others). In quantitative terms, ship´ “self-handling” practices are of marginal importance for (most) TEN-T ports[102]. Excluding handling of specialised cargoes (heavy lift) and of vehicles, self-handling practices would affect less than 0.01% of the operations. Obliging Member States to allow self-handling has therefore been discarded as it could be a disproportionate measure given the potentially strong opposition from stakeholders.

Prohibition of exclusive rights to operate port services, or of in-house services

Protocol n°26 attached to the TFEU on Services of General Interest emphasises the wide discretionary power left to Member States to define, organise and manage Services of General Economic Interest. Moreover according to Article 345 TFEU, the Treaties shall in no way prejudice the rules in Member States governing the system of property ownership. Measures impinging on these rights would be illegal and disproportionate.

5.2. List of considered policy measures

The stakeholders' consultation, the targeted hearings, independent research and own analysis have allowed the Commission services to identify a broad set of individual measures having the potential to address the root causes of the problem and objectives explained above. Those measures can be seen as "market enablers", i.e. basic requirements enabling healthy competition in an open economic model. All the proposed measures exist and apply since long time in other transport sectors covered bu EU legislation – and are a normal practice in many other economic sectors.

Intervention logic

The intervention logic is that, by providing a level playing field built on those measures, market dynamics would progressively adress the main problem and its root causes. Moreover, the intervention logic assumes the parallel implementation of other EU instruments like the TEN-T and CEF, the support of the Structural Funds for the development of ports, the concessions, directive, the effective enforcement of competition law or the progress achieved on port issues through the Social Dialogue process (cf. base line scenario presented in section 3.5).

The tables below provides a mapping between the retained policy measures and the different root causes identified earlier in this impact assessment.

5.2.1. Measures to ensure optimal port services and operation in all TEN-T seaports

Table 14: Root cause 1: Weak competitive pressure in the port services market resulting from market access restrictions

Measures || Description

1. Freedom to provide services (no restrictions on market access) for "normal services", i-e services other than those linked to Public Services or space constraints || The freedom to provide services applies and relates to the free entry of any service provider established in the EU. Operators would be authorised on the basis of transparent and non-discriminatory criteria. These criteria would be determined, published and made accessible to all by the Member States.

2.Obligation of public tendering for new contracts in the case of public service obligations or space constraints (except for small contracts[103]) || Member States and the port authorities would be allowed to impose restrictions to the freedom to provide services on the grounds of objective reason of space constraint*** or public service obligations**. But in such cases, the Member State or the port authority would need to enter into a contractual arrangement with a port service provider to be selected by means of a transparent public tendering procedure[104] (except for small contracts)*. * The maximum duration of the contracts would have to be linked to the expected economic lifetime of investments. ** Public service obligations would be accepted only for reasons related to safety, security, accessibility and/or availability. *** The lack of space refers to the fact that ports are confined to a limited geographical area and the fact that for certain services it is physically impossible or otherwise disadvantageous to users to entrust more than a limited number of operators. In such a case, the market must be subject to access regulation.

3. Explain in a Commission's Communication how existing Treaty rules apply to port services || In contrast with other measures relying o