Opinion of the Economic and Social Committee on:

- the 'Proposal for a Council Regulation (EC) amending Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage)`, and - the 'Proposal for a Council Directive on manning conditions for regular passenger and ferry services operating between Member States` () (1999/C 40/02)

On 9 July 1998 the Council decided to consult the Economic and Social Committee, under Article 84(2) of the Treaty establishing the European Community, on the above-mentioned proposals.

On 28 April 1998 responsibility for preparing the Committee's work on the subject was given to the Section for Transport and Communications; on 14 October 1998 this responsibility passed to the Section for Transport, Energy, Infrastructure and the Information Society, which adopted its opinion on 21 October 1998. The rapporteur was Mr Chagas.

At its 359th plenary session (meeting of 2 December 1998), the Economic and Social Committee adopted the following Opinion by 95 votes in favour, four against and one abstention.

1. Introduction

1.1. The employment outlook for Community seafarers is a matter of great concern in view of the continual replacement of Community crew by cheaper labour from third countries.

1.1.1. 'The European seafarer, an endangered species?` was the theme of an international conference held in Dublin in December 1996 under the auspices of the Commission, evidence that the situation is a matter of considerable concern. Figures quoted by the Commission show that the number of EU nationals employed on Community flagged vessels, which was about 206 000 in 1985, had dropped to only 129 000 in 1995, a fall of 37 %.

1.2. Maritime cabotage, and especially island cabotage, are the last bastions of employment for a large number of Community seafarers, providing a repository for the maritime know-how of these workers. The gradual loss of this know-how in the EU is a matter of considerable concern when seen in the light of the drastic reduction in employment for Community seafarers. In the words of Commissioner Neil Kinnock, 'If competition increases to the point where operators start firing EU seafarers and instead employing third country nationals, who are underpaid and have not even minimum standards of social protection, then it is the maritime sector as a whole that will suffer` ().

1.3. Furthermore, in the State aid guidelines for maritime shipping (), the Commission states that aid policy should:

- safeguard employment in the Community (both at sea and on land),

- preserve the Community's maritime know-how and develop maritime skills,

- improve safety.

1.4. It will only be possible to fully assess the practical implications of liberalizing island cabotage once it has happened, in January 1999. However, the impact, both social and economic, is expected to vary from one Member State to another.

1.4.1. In Northern Europe, island cabotage is practised on a very limited scale or hardly at all, so the impact of liberalization is minimal.

1.4.2. The greatest concentration of maritime cabotage, particularly island cabotage, is found in Southern Europe and the Mediterranean, where it provides employment for seafarers in the Member States concerned.

1.5. Solutions or arrangements should be found which help to prevent distortions of competition between operators of regular cabotage services on the one hand, and between these and other forms of transport on the other. In a climate of fair competition, island maritime transport and short-distance maritime transport would have good development prospects, even in the passenger transport sector.

2. Council Regulation (EEC) No 3577/92 (Maritime Cabotage) and the 2nd Commission Interim Report 1997

2.1. Council Regulation (EEC) No 3577/92 () was the result of long and difficult negotiations over a period of seven years and contains a series of provisions governing the liberalization of certain traffic.

2.2. The most important of these are as follows:

- Article 3(1) - for vessels carrying out mainland cabotage and for cruise liners, all matters relating to manning shall be the responsibility of the flag State (except for ships smaller than 650 Gt);

- Article 3(2) - for vessels carrying out island cabotage, all matters relating to manning shall be the responsibility of the host State;

- Article 3(3) - for cargo vessels over 650 Gt carrying out island cabotage consecutive to a voyage to or from another Member State, all matters relating to manning shall be the responsibility of the flag State (as from 1 January 1999);

- Article 3(4) - the Commission shall submit a report to the Council on the economic and social impact of the liberalization of island cabotage (by 1 January 1997), along with a proposal which may include adjustments to the manning nationality provisions laid down in paragraphs 2 and 3 so that the definitive system shall be approved by the Council in due time and before 1 January 1999;

- Article 4(2) - the circumstances under which Member States may impose 'public service obligations`;

- Article 6 (1-3) - laying down a timetable of derogations from implementation until 1 January 1999 (with a special extension for Greece until 1 January 2004).

2.3. With this set of compromise provisions it was possible to ensure that the fleets of the countries of Southern Europe were able to continue operating in their traditional markets with an exemption which runs until the end of the derogation period. The survival of this sector may depend on how the liberalization process evolves.

2.4. The report referred to in Article 3(4) of Regulation (EEC) No 3577/92 was submitted to the Council on 17 June 1997 ().

2.4.1. Basically, the report advocates complete liberalization of cargo cabotage by the end of the derogation period and proposes revising the current Regulation with regard to the manning conditions imposed by the host State [Article 3(2)], which should be seen as a temporary derogation from the normal flag State rule.

2.4.2. On the subject of regular passenger and ferry services, the Commission allows the host State the option of imposing its own rules on the proportion of Community seafarers in the crew.

3. The Commission proposals

3.1. Proposal for a Council Regulation (EC) amending Council Regulation (EEC) No 3577/92 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage)

3.1.1. The Commission's declared intention is to 'promote the employment of well-trained Community seafarers and, more in general, to foster the further development of maritime know-how in the Community`, these being among the objectives of the common maritime policy. The communication also takes up the conclusions of the 2nd Interim Report of 1997.

3.1.2. At the same time, the Commission intends to ensure conditions of equal competition for operators from different Member States running ships under different flags.

3.1.3. The proposed amendment of Regulation (EEC) No 3577/92 is in response to Article 3(4) of the Regulation and serves to lay down the definitive manning nationality provisions.

3.1.4. The Commission decided to make a distinction between the manning rules for cargo vessels and those for passenger vessels in island cabotage based on the premise that the market for regular passenger services in island cabotage is quite different from the cargo cabotage market. According to the Commission, there is no economic relationship with the international market in the case of regular passenger services in island cabotage, with ships remaining on the same route for many years at a time or even for their entire service lifetime. In addition, regular passenger services are in general far more labour-intensive than cargo services, making them an important source of employment for local seafarers.

3.1.5. The Commission proposes applying the flag State rules, as already agreed for consecutive island cargo and mainland cabotage, to all cargo cabotage with vessels over 650 Gt.

3.1.6. In the case of regular passenger services, the Commission proposes that it should be permissible for host Member States to require that all personnel employed on passenger vessels operating within their territory shall consist of Community nationals, provided that this rule applies equally to vessels operating under their own national flag. If the employment of third country nationals is allowed, they shall be guaranteed the same conditions of employment as those of the flag State.

3.1.6.1. In addition to ships operating regular passenger and ferry services, the Commission also proposes that mixed passenger/cargo ships and scheduled cabotage cruise services be dealt with in the same way.

3.2. Proposal for a Council Directive on manning conditions for regular passenger and ferry services operating between Member States

3.2.1. The Commission notes the danger of a negative spiral of erosion of working conditions for all crew, resulting in considerable loss of employment for Community seafarers, due to the replacement of crews or parts of crews with third-country crew members employed on less favourable conditions. In response to this, the Commission decided to submit a draft directive on manning conditions for regular passenger and ferry services operating between Member States (), the purpose of which is 'to ensure the proper functioning of the internal market and to avoid disruption through social dumping`.

3.2.2. The Commission proposal lays down that third country seafarers must be assured the same conditions of employment as those applicable in the Member State where the ship is registered. If the ship flies the flag of a third country, the rules to be observed are those of the Member State with which the service is most closely connected, in terms of the place in which the service is offered and where the seafarers in question have their residence.

3.2.2.1. The conditions of employment referred to above include maximum work periods and minimum rest periods, minimum annual paid holidays, minimum rates of pay, health and safety at work, protection for pregnant women, equal treatment for men and women and other anti-discriminatory measures.

3.2.3. The Commission also mentions that it paid special attention to checking the compatibility of the proposal with the international obligations of the Community, in particular with UN, OECD and WTO. It found no incompatibility, and points out that similar measures have already been adopted for other workers in European Parliament and Council Directive 96/71/EC (), concerning the posting of workers in the framework of the provision of services.

4. General comments

4.1. Proposal amending Regulation (EEC) No 3577/92

4.1.1. The report published in 1997 and the proposal amending Regulation (EEC) No 3577/92 examined here are intended to meet the requirement of Article 3(4) of the Regulation, i.e. to carry out an analysis of the economic and social impact of the liberalization of island cabotage and to propose adjustments to the manning nationality provisions laid down in Article 3(2) and 3(3).

4.1.2. The Commission report claims that there is no economic justification for a lasting exemption from the flag State rules for cargo vessels of more than 650 Gt engaged in island cabotage, but it does not provide an adequate picture of the present impact and future effects in economic and social terms on island cabotage services.

4.1.3. Some of the points made in the Commission report may be challenged, as follows:

i) The Commission report concludes that the manning conditions laid down by the host State [Article 3(2)] should be seen as a temporary derogation from the normal flag State rules. The analysis given in the report did not reveal any compelling grounds to justify a long-term derogation from the usual flag State conditions.

However, the Committee feels that the provision laid down in Article 3(2) should not be seen as temporary, but rather as a condition which is intrinsic to the particular nature of island cabotage for the transport of cargo.

ii) The Commission report also states that cargo cabotage services are often carried out by vessels which participate for alternating periods in international and domestic trades. The manning conditions for this type of cabotage should therefore not deviate from the accepted practice in international trade, which is that the flag State determines all matters relating to manning.

However, this does not reflect the actual situation in various Member States, particularly with regard to cargo ships engaged in regular island cabotage services.

The growing demands for a regular supply of high-quality goods to island populations make it necessary to set up dedicated services operated by vessels which are designed and built specifically for the transport services they are used for on a continuous basis.

In some Member States, island cabotage operators are bound by public service obligations which impose conditions of regularity, routing and frequency of stops, making it impossible for their ships to be used for other purposes.

In view of this, the observations made in the Commission communication concerning passenger ships in island cabotage (referred to in point 3.2.1) should be extended to cover cargo vessels engaged in similar activity on a continuous basis.

iii) In some Member States, where there is no appreciable maritime passenger transport and island cabotage is limited almost exclusively to cargo traffic, it is these cargo vessels which provide a source of employment for local seafarers.

In the countries of southern Europe, cargo vessels engaged in island cabotage ensure the employment of 30 % of all seafarers employed in cabotage () . Given the fact that these cargo services are less labour-intensive, it follows that the number of vessels in operation is high.

iv) It should also be borne in mind that passenger vessels involved in island cabotage do not carry just passengers, but by their very nature as (Ro-Ro) ferries, also transport goods on trailers and mafis. In view of this, applying different manning rules to passenger vessels (which also transport cargo) from those applied to vessels used exclusively for cargo may lead to distortions of competition, which would be unacceptable within the intended operating environment of island cabotage.

4.1.4. Following submission of the above-mentioned report, some Member States suggested that the provisions of Article 3(2) and (3) should be retained indefinitely without amendment since the imminent liberalization of island cabotage services, from 1 January 1999 onwards, has to be seen as a threat to the jobs of Community seafarers, given that, as mentioned above, such services are the last bastion of employment for these workers.

4.1.5. Although agreeing with this point of view, the Committee feels that, if there is to be an amendment to the regulation, it should be borne in mind that the host State is currently responsible for all matters relating to manning, including the operational manning of the ship, and that this state of affairs should be retained for all regular island cabotage services.

4.1.5.1. The proposed widening of the regulation to include mixed passenger/cargo services and scheduled concise services must, in any event, be retained.

4.2. The proposed directive

4.2.1. In examining the proposed directive, the Committee's discussions revealed three distinct areas of concern, namely the employment and labour aspects, the development of the market at affordable prices and the legal compatibility of the proposal with other legal instruments in force outside the EU, with the possible retaliatory measures that could ensue from third countries.

4.2.2. The Committee agrees with the objectives expressed by the Commission in submitting this draft directive, seeking as it does to protect the employment of Community seafarers and to ensure that all seafarers involved in such services enjoy working conditions in line with the norms applied in the Community in general.

4.2.2.1. The directive is also intended to ensure fair competition conditions for all suppliers of regular passenger ferry services between Member States.

4.2.3. The Commission should ensure that there are no legal incompatibilities between this proposal and the international agreements and instruments binding the Member States and the EU to third countries and international organizations, especially ILO Conventions 87 and 98, in that it would interfere with working agreements between Community employers and non-EU trade unions.

4.2.3.1. Reservations may also arise concerning the application of this directive to intra-European services, beyond the scope of national services, as it implies the EU having extraterritorial jurisdiction over vessels flying the flag of a third country when operating intra-Community services, which may be considered international services.

4.2.4. It is also important to assess the impact which the implementation of such obligations may have on the competitiveness of the sector, especially compared with other modes of transport, not forgetting the social aspects and the comparative advantages, in terms of economics, the environment and safety, of maritime transport.

4.2.5. In addition, by restricting application of the directive to third-country nationals, a situation may arise where Member State nationals are discriminated against because they come under the social and working conditions of the flag state while third-country nationals would be subject to the condition of the host state.

4.2.5.1. Although Directive 96/71/EC does not apply directly to seafarers, the Committee feels that the principles laid down in it should not be ignored, as they are equally applicable to this activity.

4.2.6. It is important to ensure that the introduction of the proposed directive does not serve as a pretext for third countries to take similar measures, in the various maritime transport services, like for instance in the case of cruise services. If this were to happen it would be detrimental to thousands of Community seafarers who are active in those markets and to the Community shipping industry more generally.

5. Conclusions

5.1. Regarding the proposed amendment to the regulation

5.1.1. Bearing in mind the prime importance of the general principles of fostering employment and maritime know-how for Community workers, set out in the Commission communication and in view of the fact that:

i) island cabotage services are the last bastion of employment for Community seafarers;

ii) some of the conclusions of the Commission report which served as the basis for the draft amendment of Regulation (EEC) No 3577/92 do not have the support of a number of Member States;

iii) Article 3(4) of Regulation (EEC) No 3577/92 provides for the Commission to submit a proposal which may include adjustments to the manning nationality provisions, but this option does not constitute an obligation to amend the Regulation;

iv) the provision laid down in Article 3(2) of Regulation (EEC) No 3577/92 is not necessarily a derogation implying the establishment of new set of definitive rules, but rather may be considered as an adjustment to cater for the specific features of regular island cabotage cargo services;

v) the cargo ships used in most, if not all, regular island cabotage services, are engaged exclusively in these operations;

vi) passenger vessels engaged in island cabotage are also used for transporting cargo;

vii) creating distinctions between the manning rules for cargo services and those for passenger services will distort competition;

and lastly,

viii) the provisions of Regulation (EEC) No 3577/92 constitute an intricate compromise which was extremely difficult to reach, requiring a long period of discussions and negotiations, and which may fall apart if any amendment is made to the present text,

the Committee feels that the time is not right to push for amendments to Regulation (EEC) No 3577/92 as this would risk upsetting the balance of interests which allowed the Regulation to be passed.

5.1.2. In view of this, the Committee would suggest one of the following alternatives to the Commission:

- leaving the provisions of Article 3(2) and (3) of Regulation 3577/92 as they stand, with the inclusion of mixed passenger/cargo services and scheduled cruise services already mentioned,

or

- not making any distinctions in manning rules so that Article 3 continues to apply equally to passenger vessels and regularly operating cargo vessels engaged in island cabotage and the applicable rules on manning are those in force in the State where the service is carried out (host State).

5.2. Regarding the proposed directive

5.2.1. The Committee agrees with the Commission's objectives in submitting this draft directive and feels that any such Community provision should take account of and respond to the concerns expressed above regarding employment and labour; the economic aspects; and the legal compatibility of the proposal with other legal instruments and its repercussions upon the international context in which the Community shipping industry operates.

Brussels, 2 December 1998.

The President of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

() OJ C 213, 9.7.1998, p.16-17.

() Commission press release IP/98/387 of 29 April 1998.

() OJ C 205, 5.7.1997, p. 5.

() Council Regulation (EEC) No 3577/92 of 7 December 1992, applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage), OJ L 364, 12.12.1992, p. 7.

() Report from the Commission to the Council on the implementation of Council Regulation (EEC) 3577/92 applying the principle of freedom to provide services to maritime cabotage (1995-1996) and on the economic and social impact of the liberalization of island cabotage COM(97) 296 final.

() At present the number of workers from third countries on such vessels represents 3 % of the total relevant work force.

() OJ L 18, 21.1.1997, p. 1.