COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 13.03.1996 
COM(96) 81 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
TOWARDS A NEW 
MARITIME STRATEGY 

TOWARDS A NEW MARITIME STRATEGY 
Contents 
EXECUTIVE SUMMARY 1 
A. EC SHIPPING AND POLICY 5 
I. EC Shipping in a Global Market 5 
II. Need for EC Shipping 6 
III. Developments in EC Ownership, Flag and Employment 6 
IV. Some Further Trends in Global Shipping 7 
V. The EC Policy so far; Efforts and Successes 8 
VI. Results 11 
B. A POLICY FOR THE FUTURE " 11 
I. The Approach: Applying Global Standards and Enhancing 
the Competitiveness of the EC Shipping Sector 11 
1. The response of the EC to globalisation of shipping 11 
2. Policy choices for a future shipping policy 12 
II. Safety and Fair Competition 13 
1. Safety: an integral part of fair competition 13 
2. Registers: a crucial tool to ensure safe and fair competition . . 14 
a. Defining and enforcing flag State obligations 14 
b. Member States registers 15 
c. Off shore Member States registers 18 
3. Eliminating dangerous shipping 18 
4. Fostering a spirit of quality in shipping 19 
5. Higher EC standards in certain circumstances 19 
III. Maintaining Open Markets 20 
1. Basic approach 20 
2. Regulation 4058/86 21 
3. Competition rules 21 
a. Acting against market access barriers 21 
b. International competition standards 22 
c. Application of competition rules in EC trades 22 
4. Unfair market behaviour 23 
IV. A Policy for Competitiveness 24 
1. Training and employment 24 
2. Research and development 26 
3. State aid to shipping 28 
a. Approaches to State aid 29 
b. Action on employment and corproate costs 31 
c. Aid within general frameworks 32 
d. The criterion of measurable benefit 32 
V. Measures for Related Sectors 33 
CONCLUSION 34 
I C\ 
Annex A: EC SHIPPING IN A GLOBAL MARKETPLACE 
I. The Shipping Market and Environment . . 1 
1. Bulk and liner shipping 1 
2. Registers 1 
3. Global competition and mobility of assets 2 
II. Need for EC Shipping 3 
1. Economic independence 3 
2. Military needs 4 
3. Contribution to broader economy 4 
III. Developments in EC Ownership, Flag and Employment 5 
1. Evolution of EC Ownership 5 
a. The facts 5 
b. Policy conclusions 5 
2. Flagging out 6 
a. The facts 6 
b. Policy conclusions 8 
3. Recent labour supply developments 10 
a. Difficulties in assessing impact of 
employment trend 10 
b. Shortage of qualified seafarers 10 
IV. Some Further Trends in Global Shipping 11 
1. Further globalisation 11 
2. Investment patterns 12 
3. The problem of ageing ships 12 
4. Enlargement of the Community 13 
V. Opportunities for EC Shipping 13 
Annex A-1: Cost comparison EC registers/other registers 14 
Annex A-2: Controlling interests of Member States in world fleet 16 
Annex A-3: Flagging out trends from Member States flags 18 
Annex A-4: Employment trends under EC flags 19 
Annex B: EFFORTS AND SUCCESSES SO FAR 
I. Analysis of EC Policy So Far 1 
1. Community maritime policy 1 
a. The 1986 package 1 
b. Proposals to keep ships under EC flags and 
to create the single market 2 
c. The common policy on safe seas 3 
d. External relations 5 
e. Relations with IMO and ILO 5 
f. Short sea shipping 6 
g. Competition rules 7 
2. The Member States 8 
II. Results 9 
) b 
Executive Summary 
This document introduces a new approach of the Commission to maritime strategy. It has 
been prepared to re-assess Community maritime policy and to set further goals towards 
establishing a common maritime purpose. Not all aspects of maritime policy will be 
examined in the same detail. The maritime safety policy of the Community is already 
established. The external maritime relations policy of the Community is also well on its 
way. Of course, more remains to be done in both areas. But a common answer to the 
problems of the competitiveness of EC shipping has not yet been found. Therefore, the 
document will focus on this question. The document will not cover port and shipbuilding 
matters. A general overview and policy approach concerning the status and future of all 
the maritime industries of Europe is found in the parallel Commission Communication 
"Shaping Europe's Maritime Future - A Contribution to the Competitiveness of Europe's 
Maritime Industries"1. 
Since the first Commission Communication "Progress towards a common transport policy -
Maritime transport" of 1985, new shipping industries have developed quickly in many 
countries, particularly in East Asia. Many of the traditional shipping nations have seen 
their shipowners take advantage of the international capital and labour markets, as well 
as the increasing variety of ship registers now in place. In a highly competitive market, 
shipping under EC flags and seafaring employment have been constantly shrinking. While 
this trend predates the mid-eighties, its effects on the EC maritime industry have been a 
cause of common concern only since that time. 
The Commission is aware of the need to make the Community fit for global competition 
and has proposed an approach, principally in its Communications on Industrial Policy of 
1990 and 1994 and the White Paper on Growth, Competitiveness and Employment of 
1993. The Essen Council of December 1 994 also stressed the need to promote vocational 
training. It furthermore pointed to the impact of tax and social security rules on the 
maintenance and creation of employment opportunities. 
In parallel to these developments, the Maritime Industries Forum (MIF) was created in 
1992 on the initiative of the Commission. This forum brings together parties from all 
segments of maritime industry and administrations to discuss common problems and 
approaches in the closely interconnected European maritime industries. Much useful work 
has been done in fostering synergies and launching new ideas and initiatives. The 
Commission Communication on Short Sea Shipping of July 1995 made use of valuable 
input from the MIF. 
Given these developments and, at the same time, continuing concern about the continuing 
decline of EC shipping, it is time to re-assess the common shipping policy of the 
Community. This re-assessment should concern both possible new policy initiatives to be 
pursued through the Community's legislative institutions and the exercise by the 
Commission of powers falling within its sphere of competence. This Communication 
should serve this purpose. 
1 Com (96) 84, 13 March 1996. 
European Commission - Towards a New Maritime Strategy 
CL 
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The Commission has been assisted in formulating this Document by a Core Group of 1 2 
individuals with wide ranging experience of the world of shipping. A Report of Proceedings 
of the Group is available upon request from the Commission.2 Part A of this 
Communication outlines the global shipping environment and the future of EC shipping in 
it, with more detailed information given in Annex A. Part A continues with a brief review 
of policy responses by Member States and the Community to the problems facing EC 
shipping, and their results, with further details in Annex B. The main part of the 
Communication, Part B, is devoted to proposing an outline for a future maritime policy for 
the EC, with the emphasis on measures to enhance the competitiveness of the EC fleet 
and the maintenance and creation of high quality maritime employment. 
In summary, to implement the future maritime strategy: 
1. On safety, the Commission proposes: 
to pursue a policy based upon a convergent application of internationally 
agreed rules. To the largest extent possible, this policy should be applied to 
all flags. This is the case, for instance, of those non-binding resolutions of 
IMO which will be made compulsory through EC legislation. These binding 
requirements should be enforced also on ships flying the flag of non-EC 
States when trading to or from EC ports. These ships should not receive a 
more favourable treatment than EC-flagged ships. 
a joint effort by Community and Member States in the IMO to agree on a 
worldwide basis on certain conditions for flag administrations and their ship 
registers; 
a Community legal instrument, most likely a directive, laying down certain 
principles for Member States shipping registers; such an instrument should 
also ensure that the rules of the Treaty, particularly on freedom of 
establishment and competition, are respected; accordingly, ownership and, 
possibly, manning conditions will have to be scrutinized; 
to strengthen port State control through operational links with other third 
countries; 
to promote self-regulatory codes of behaviour in shipping; 
to encourage operators to achieve high quality standards (eg. fiscal 
incentives, differential port charges); 
to consider legislative action on financial sanctions for cargo owners who 
knowingly or negligently use sub-standard shipping; 
to examine the question of mandatory third party liability coverage in 
shipping as a condition for entry into EC ports; 
2 European Commission, DG VII/D/2, rue de la Loi 200, B-1049 Brussels. 
European Commission - Towards a New Maritime Strategy 
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to consider legislative action to support any agreement made between 
carriers and unions on terms and conditions of work on-board ferries 
providing regular services to and from EC ports; 
2. On maintaining open markets, the Commission proposes: 
to continue to secure free access and fair competitive conditions throughout 
the global shipping marketjpreferably through a multilateral approach; 
to forge international agreement on the application of competition principles 
in maritime transport; 
to review the maritime trade defence instruments of the Community; 
These and other measures will be considered in more detail in a forthcoming 
Communication on external maritime relations. 
3. On securing the competitiveness of the EC shipping sector, the Commission 
proposes: 
common action of Community and Member States to promote maritime 
training programmes and to attract young people to the profession, to 
safeguard maritime expertise in the Community, and to promote high quality 
EC employment in line with the requirements of the new STCW convention 
to meet current an<$ future EC and worldwide demand for qualified seafarers; 
the improved monitoring of compliance with ILO requirements by all flags 
through port State control; 
to foster maritime R&D within the current and future Community Framework 
Programmes, both targetted at high technology in safety and environmental 
protection and at human resources; 
4. On State aid, the Commission 
continues to monitor aid to the maritime sector in accordance with the 
Treaty and relevant aid frameworks; 
will issue revised State aid guidelines on shipping which may include a 
revision of the cost gap method and a new approach towards an aid practice 
benefitting Community shipowners; 
has started a research project on the economic impact of shipping in various 
Member States and will discuss the use of these and other economic 
methods in evaluating support schemes with all interested parties. 
European Commission - Towards a New Maritime Strategy 
After formally informing the Parliament and the Council, the Commission will 
withdraw: 
the Proposal for a Council Regulation establishing a Community Ship 
Register (Euros) of 1989/1991; 
the Proposal for a Regulation on a common definition of a Community 
shipowner of 1989/1991. However, appropriate definitions in individual 
instruments, for example when considering the beneficiaries of Regulation 
4057/86, the Regulation concerning unfair pricing in maritime transport, and 
in the determination of beneficiaries of State aid, should be provided. 
European Commission - Towards a New Maritime Strategy 
A. EC SHIPPING AND POLICY 
I. EC Shipping in a Global Market 
The international character of the shipping industry 
Maritime transport is an international industry to which there are relatively few entry 
barriers. In principle, any operator can, regardless of its nationality and the location of its 
company seat, provide international shipping services. The provision of services between 
two destinations neither of which is the country of registration of the ship (cross-trading) 
is common. 
More than other transport modes, shipping has, therefore, tended to be subject to 
international and universal, rather than unilateral, regulation, especially on liability, 
international safety and labour rules. 
Bulk and liner shipping 
Shipping falls into two main categories: bulk and liner shipping. The balance of Member 
States' interests between the two differs and there are important differences in their cost 
structures. Relatively, liner shipping bears high network costs and, therefore, tends to be 
more capital intensive while bulk shipping is more labour intensive and, therefore, sensitive 
to labour costs. 
Registers 
Ships are bound to a national jurisdiction by the flag which is given to a ship entered in a 
register. The same national administrative, civil and criminal law provisions, including 
fiscal and labour requirements, thus generally apply to a ship entered in a traditional 
register as apply to on-shore industries. National registers have traditionally required the 
crew or an important part of it to be EC nationals. Progressively, EC Member States have, 
variously, relaxed requirements, devised alternative registers or supported their registers 
with State aid, while shipowners have sought less onerous registers if they considered 
their competitiveness threatened. 
Open registers 
Some states have set out to attract international shipping to their registers. Liberia, 
Panama, Cyprus, the Bahamas and Malta are the most important examples of this. A 
growing number of countries offer these "open" registers and registrations in them 
continue to increase. Open registers normally accept owners of any nationality and imply 
low corporate tax liabilities and few requirements with respect to nationality of the crew. 
If a state with an open register can also offer a good maritime service infrastructure (ie. 
good communications, ancillary service industry such as insurance, legal services, finance 
and credit facilities, swift diplomatic protection and an independent judiciary), shipping 
companies may consider not only registering their ships there, but also transferring some 
of their shipping activities and even their headquarters. This will have important 
consequences for economic activity and employment also on shore. 
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Flagging out 
The extent to which a change of flag may also lead to relocation of a whole company 
depends greatly on the amount of on-shore investment already made by the shipping 
company. The less the investment, the easier it will be for a company to relocate. This 
makes bulk shipping more likely to relocate than liner shipping. 
For EC shipowners and operators, moving a vessel to an open register can be a significant 
factor in terms of international competitiveness, with possible labour and fiscal cost 
savings often exceeding US$1 million per annum. 
II. Need for EC Shipping 
Conventionally, the need for EC shipping is affirmed by pointing to economic and military 
independence. The EC, it is said, should not depend too heavily on maritime services 
provided by its actual or potential competitors as these may, in specific circumstances, act 
in support of their long-term commercial or strategic interests. A third important 
consideration is the contribution that shipping makes to the broader economy through its 
relationship with a wide range of maritime industries. 
III. Developments in EC Ownership, Flag and Employment 
EC ownership 
In 1994, the fleet owned or controlled by EC interests, including vessels flying a foreign 
flag, was 34% (in dwt) of the world fleet, down from 38% in 1985. There has been no 
reduction in the EC share in global ownership since 1990. In assessing the importance of 
the ownership trends improvements in ship productivity, new worldwide trade patterns and 
the emergence of new shipping nations in the Far East should be taken into account. There 
does not seem to be a strong need for a policy fostering EC ownership. 
EC-flagged shipping 
In 1970, 32% of the world tonnage remained under the flags of EC Member States. In 
1994, this figure has decreased to 14%. Shipowners cite cost savings as a main reason 
for flagging out. The trend of flagging out indicates a growing loss of competitiveness 
under EC flags. Indeed, EC owners have a high percentage share of ships in open registers. 
Policy conclusions 
While flagging out does not always lead to a loss of seaboard employment, on-shore 
activities and relocation of a company, it may be very difficult to re-attract maritime 
business once the infrastructure and the human resources have been lost entirely. 
Having ships under EC flags contributes to ensuring that safety standards can be closely 
monitored through flag State control. Flagging out therefore lessens the flag State control 
power of EC Member States. 
Flagging out from EC flags has contributed to job losses of EC seafarers (51% of job 
losses); fleet reduction (27%) and reductions in the number of crew per vessel (22%) have 
also played a significant role in this process. 
European Commission - Towards a New Maritime Strategy 
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Recent labour supply developments 
While it is difficult at this stage to assess the problems related to the general employment 
of EC seafarers, a more specific problem has arisen in recent years: the shortage of better 
qualified seafarers worldwide. Already today, certain EC Member States signal that the 
number of new recruits to the seafaring profession covers only about 25% of the 
estimated replacement need. The new STCW (Standards of Training, Certification and 
Watchkeeping for Seafarers) requirements could accentuate the worldwide shortage. 
Policy must find a response to this predicted shortage to: 
ensure safe navigation of ships; 
preserve maritime know-how for industry; 
enforce safety policy by maritime administrations; 
continue education of young seafarers. 
IV. Some Further Trends in Global Shipping 
Recent years have brought, through the liberalisation of world trade and decentralised 
production methods, a continuous increase in global trade and, with it, growing demand 
for shipping services. 
Liner growth 
Liner shipping has grown on average at a rate of 6.5% per annum in the last 10 years, and 
it is projected that it will continue to grow at the same rate for the next decade. The 
globalisation of production is leading to demand for global transport services. To respond 
to this demand, trade alliances between shipping companies are being created. This trend 
is also leading to increasing concentration in the market. 
Bulk prospects 
For bulk shipping, trade growth is always difficult to predict, because demand depends on 
volatile factors such as seasonality of trade, yield of food crops, etc. It is estimated that 
the main features of this sector, namely its cyclical nature and its unpredictability, will not 
change fundamentally in the longer term. 
Specialised services 
European operators offer experience and sophistication of many years' standing in liner and 
cruise shipping, off shore supply, heavy load and other specialized shipping. This may be 
linked with sophisticated shipbuilding and new trade opportunities (including, for example, 
routes permitted since the opening up of the former USSR, which may require ships with 
special hull construction because of icy conditions). 
Investment patterns 
The openness of European markets has attracted foreign investment. Today, some 
efficient short sea and feeder operators in intra-European trades are non-European-owned. 
At the same time, it is recognised that many European operators possess useful experience 
in short sea shipping, which is an important potential growth area for shipping services. 
European shipowners are also taking advantage of the opportunities in cross-trading and 
are beginning to set up transport networks in other continents. However, investment 
opportunities for EC shipping companies are limited where the provision of domestic 
European Commission - Towards a New Maritime Strategy 
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services is not open to foreign operators or there is discrimination in ports vis-a-vis non-
national operators. 
Problem of ageing ships 
Heavy worldwide subsidization of shipbuilding has contributed to oversupply in ships and 
the resulting overcapacity in bulk shipping markets, with consequently depressed freight 
rates. Shipping is thus producing relatively low returns on equity and investment, which 
has led to extending the useful life of ships and, in general, an ageing of the fleets and 
sometimes reduced maintenance efforts with related safety problems. While older ships 
can be maintained to high standards, statistics show that overall casualty risks rise with 
the age of the ship. 
Enlargement of the Community 
Recent accessions have brought a substantial addition of tonnage under the control of EC 
owners. The future may bring further tonnage to the Community, as Cyprus and Malta are 
envisaging accession. Given the strong maritime interests involved, it is important at this 
juncture to develop a coherent policy for the future. 
V. The EC Policy so far: Efforts and Successes 
General approach 
The Commission has to date,applied a Community maritime policy consisting of action on 
external relations, maritime safety and the competitiveness of EC shipping. While this has 
succeeded in opening up markets, particularly in Europe, and giving the consumer a wide 
choice of competitive shipping services, it has not led to the creation of employment for 
EC seafarers. 
The 1986 package 
The 1986 package of legislation on shipping was based on an open market, non-
protectionist philosophy to foster a competitive EC fleet and to further employment; at the 
same time, it provided measures to counter unfair competition.3 Overall, the Community 
decided that all intra-European trades except cabotage within Member States should be 
open and that there should be no further requirement than establishment or registration in 
the Community to benefit from shipping opportunities within the EC. This policy was not 
conditioned on any similar commitment to open markets from the Community's main 
trading partners. 
3 The 1986 package, O.J. No. L 378, 31 December 1986, consists of four regulations: 
Reg. 4055/86 applying the principle of freedom to provide maritime transport 
between Member States and between Member States and third countries; 
Reg. 4056/86 laying down detailed rules for the application of Articles 85 and 86 
of the Treaty to maritime transport; 
Reg. 4057/86 on unfair pricing practices in maritime transport; 
Reg. 4058/86 concerning coordinated action to safeguard free access to cargoes 
in ocean trades. 
European Commission - Towards a New Maritime Strategy 
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External relations 
In terms of the Community's external relations policy in maritime transport, the 
Commission has sought to secure free access and fair competitive conditions throughout 
the global market, including further liberalisation and rolling back existing restrictions. The 
Community is also striving within the GATS framework for multilateral liberalisation of 
maritime transport services. However, some important restrictions remain and the danger 
of new restrictions is still present. 
The common policy on safe seas 
The Communication on a Common Policy on Safe Seas was adopted by the Commission 
in February 1993.4 This policy has been fully endorsed by the Council and by the European 
Parliament. 
In less than three years, several implementing measures have been finally adopted and 
bind Member States administrations as well as the private sector to effective compliance 
from 1996 on. 
Proposals to keep ships under EC flags and create the single market 
The Commission has proposed a number of measures with the aim of enhancing the 
competitiveness of EC fleets. In 1 989, this included5 a dual-purpose measure to alleviate 
the financial burden of flying an EC flag and at the same time safeguard EC employment: 
the Euros Register. However, the proposal did not find the necessary support in Council 
and has not, therefore, been adopted. The package also included a proposal to liberalise 
domestic trades, adopted as Regulation 3577/92,6 and a proposed definition of the notion 
of Community shipowner. The latter has not been adopted, and the Edinburgh Council of 
1992 asked the Commission to review it. 
Also in 1989, the Commission issued guidelines for the assessment of State aid to the 
shipping sector.7 The Community's common interest was defined in terms of maintaining 
ships under Community flags, modernisation of fleets and. maintaining employment for EC 
seafarers. Consequently, the Commission decided that it could authorise State aid to 
bridge the cost gap between operating under an EC flag and under a flag of convenience, 
provided it was also in line with the Commission's general State aid principles. 
4 A Common Policy on Safe Seas, C0M(93)66 final, 24 February 1993. 
5 A Future for the Community Shipping Industry: Measures to Improve the Operating 
Conditions of Community Shipping, COM (89) 266 final, 3 August 1989. 
6 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), O.J. L No. 364, 12 December 1992, p. 7. 
7 SEC (89) 921 final. 
European Commission - Towards a New Maritime Strategy 
10 
Short sea shipping 
The Commission has recently adopted a Communication on short sea shipping8, including 
an action .programme with proposals for initiatives which can most appropriately be 
undertaken at Community level as well as recommendations addressed to Member States, 
their regional and local authorities, ports and the maritime industries themselves. 
Competition rules 
The Commission has also pursued an active policy to enforce competition in the liner 
trades to and from the Community. 
The Member States - State aid 
As the competition from non-EC flags became keener, many Member States offered 
various kinds of aid to shipping. Different Member States adopted different strategies and 
provided different budgets for their support measures. This in part reflected their general 
attitude towards State aid or their assessment of the relative importance of the shipping 
sector for their economy and society. Consequently, some concentrated on incentives to 
investment in modern ships, others on encouraging employment of EC seafarers, some on 
tax reliefs or on capital injections to support restructuring. None of these individual 
approaches has comprehensively solved the competitiveness problem of EC shipping. 
The Member States - registers 
As flagging out and loss of employment continued despite State aid, some Member States 
decided to create specific registers for ships flying their flag in international trade to 
alleviate competitive disadvantages. Irrespective of their denomination, these registers 
were created to exclude ships flying the flag of the Member State from certain costs 
inherent in the fiscal and labour regime of the first register. 
In many Member States with such registers, the majority of ships in international trade are 
registered in the alternative register: for example, in Denmark, 92% of the total tonnage 
operating in international trades is registered in the Danish International Ship Register 
('DIS'); the figure for the German International Ship Register ('ISR') is 76%; in Finland, 
50% of the fleet is on the List of Merchant Vessels in International Trade. The first 
register often has thus become of secondary regulatory importance for international 
shipping and the alternative regime becomes the real standard. 
The success of Member States' combinations of alternative registers and aid schemes has 
been mixed. Some Member States' registers have been successful in reversing or at least 
slowing the flagging out trend. In certain Member States, national government action has 
not stemmed the overall decline of the flag fleet. 
8 "The Development of Short Sea Shipping in Europe: Prospects and Challenges", COM (95) 
317 final, 5 July 1995. 
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VI. Results 
The maritime policy thus far has succeeded in opening up markets, particularly in Europe, 
and giving the consumer a wide choice of shipping services. The application of EC 
competition rules to all market participants regardless of flag has furthered consumer 
interests and ensures fair treatment of all liner shipping companies. The newly introduced 
safety policy will enable the Community to ensure that safety and environmental standards 
are effectively applied, thereby also ensuring fairer conditions for competition. The 
liberalised international shipping environment has, however, not led to the creation of more 
employment for EC seafarers. 
The measures taken by the EC and the Member States to increase the competitiveness of 
EC flags have thus far not been able to reverse the flagging out and loss of employment 
in most cases, although some alternative registers seem to show promising features. 
B. A POLICY FOR THE FUTURE 
I. The Approach: Applying Global Standards and Enhancing the Competitiveness of 
the EC Shipping Sector 
1. The response of the EC to globalisation of shipping 
Three conclusions can be drawn from the analysis of the development of shipping and 
policy responses of the Community and Member States. 
Firstj both in terms of quantity and quality, the EC shipping industry is one of the 
most important shipping sectors worldwide. EC Member States' shipping 
companies control a third of the world fleet and about 40% of the EC's trade is 
carried on ships owned or controlled by EC interests. This is evidence that European 
maritime know-how is very competitive in itself. However, it seems that the 
regulatory framework has not yet been developed everywhere in the Community 
to foster this competitiveness. 
Second, shipping capital and shipping labour have become so internationally mobile 
that national policies can no longer alone deal adequately with regulatory problems. 
Third, policy responses within the EC which are out of touch with current 
worldwide trends and standards will lead to further exits of capital and labour from 
European flags. 
Globalisation is a central problem of policy making to maintain or improve the 
competitiveness of EC industry. The White Paper of the Commission on Growth, 
Competitiveness and Employment of 1993 and the Communication on the Competitiveness 
of Europe of 19949 also focus on this issue. 
9 European Commission, An Industrial Competitiveness Policy for the European Union, Bulletin 
of the European Union, Supplement 3/94. 
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In line with these policies, the Commission proposes to improve the competitiveness of 
the EC shipping sector through a global open market policy, with particular emphasis on 
multilateralism and worldwide competition rules. Further, measures to foster high quality 
employment and high technology in the sector are being presented. They are backed up 
by considering some further steps with regards to the State aid practice of the 
Commission. Not directly targetted at improving competitiveness, but much more at 
preserving human life and the environment are the new policies on safety proposed in this 
paper. However, it is the conviction of the Commission that the strict enforcement of a 
safety policy based on internationally agreed standards will lead to a marked improvement 
of the competitive situation of ships under EC registers with stringent safety enforcement. 
It will also contribute to new job opportunities for qualified EC personnel. Thus, the effect 
of a stringent safety policy on competitiveness is of great importance. 
2. Policy choices for a future shipping policy 
In considering the optimum maritime policy for the future, the Commission has analysed 
the likely outcome of applying different strategies. Sectoral measures to encourage 
employment in shipping, which lead to an increase in costs without a corresponding 
increase in productivity, will inevitably fail, leading to further flagging out. Measures which 
restrict inward investment into EC shipping and related industries may limit the ability of 
EC industry to stay competitive. 
Taking the draw-backs and advantages of the various approaches into account, the 
Commission considers a two-fold strategy: 
action to ensure safety and fair competition in international open markets 
(sections II and III below); 
a Community framework for enhancing the competitiveness of the shipping 
sector (section IV below). 
For this Community shipping policy to be successful, the various interests at play must be 
reconciled. Four main participants are involved, to a varying degree, in any decision-making 
process concerning shipping policy: the Member States, shipowners and their financial 
backers, labour, and users. 
As stated above, Member States have different maritime traditions. Some have a 
tradition of State-owned fleets or strong links between industry and Government, 
others have adopted an essentially laissez-faire approach to shipping. Member 
States also have varying interests in types of transport, depending on geography, 
trade ties and historical development. For some States, the development of short 
sea shipping is a priority; others may focus on fostering their deep sea shipping, 
where their shipping companies are heavily involved in cross-trading. A Community 
policy must be aware of these different priorities and take them into account. 
Shipowners will in the first place look at their own balance sheets and prospects. 
They will not keep a flag for reasons of national security, pride, or for job creation 
if this damages their commercial position. A policy to keep shipping under EC flags 
must therefore be economically viable. It must create conditions to keep or attract 
shipowners to EC flags. 
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EC labour will want to maintain living standards while having job security and a 
safe working environment. Investment in human skills and resources such as 
continuing training and education is also being demanded by employees to secure 
their future. EC labour is not likely to accept a lowering of wages and social 
standards in order to increase the competitiveness of EC shipping. Competitiveness 
is not an end in itself. It should lead to a better life for citizens of the Union. 
Users are primarily interested in efficient and reliable transport systems rather than 
maritime strategy, job creation and competitiveness. The market price they pay 
should reflect the full costs of maritime transport, regardless of the flag of the ship 
they are using. Safety and quality of ships should be viewed as essential elements 
in the negotiation and conclusion of contracts between users and providers in 
maritime transport. 
In addition, ancillary industries which depend on shipping activities for their own 
survival and growth will want to ensure that shipping flourishes. They will have a 
preference for ships which require and use their products or services. 
II. Safety and Fair Competition 
The Commission proposes to develop and enforce international rules on safety and 
environmental protection, both through flag State quality and control and through port 
State action. 
1. Safety: an integral part of fair competition 
Shipping is a largely free market, allowing considerable scope for ship operators to 
determine their vessels' operating policy, including the level of expenditure on 
safety/pollution prevention, related maintenance costs and the degree of compliance with 
internationally agreed rules. This is possible because the-diligence of the different bodies 
in charge of ensuring or monitoring compliance (flag State and port State authorities, 
classification societies, charterers and marine insurers, maritime labour unions) varies 
greatly. The net effect is that not only safety and environmental protection standards, but 
also operating costs vary considerably, from "blue chip" shipowners with a long-term 
strategic view towards the crewing and technical management of their fleet, to 
unscrupulous owners who disregard even the basic requirements of safe and pollution-free 
vessel operation. Surveys carried out by the OECD show compliance with international 
standards leads to 10 - 50% higher costs than a substandard operation. Good practice 
turns out to be 80 - 100% more expensive than substandard maintenance. Finally, 
maintaining a ship at maximum safety levels will require 300% more expenditure at 
maximum.10 
The European shipping policy response to this should aim at eradicating these unfair 
competitive conditions, at least in all types of trade to or from the ports of the EC, 
10 Thus, while a substandard owner would spend, according to the OECD model calculation, 
about US-$ 3,100 per day for maintenance for a five year old product tanker of 40,000 
dwt, "good practice" would require US-$ 4,850/day, and "excellent practice" US-$ 
9,500/day. Thus, annual cost savings from substandard operations could amount to US-$1 
million or more per ship. 
European Commission - Towards a New Maritime Strategy 
- 14 -
independently of the flag of the ship, and also, to the extent possible, in all other trades. 
2. Registers: a crucial tool to ensure safe and fair competition 
The crucial instrument to put this policy into practice is the regime governing the 
conditions for entry to a ship register and the administration of the register itself. 
Consequently, criteria for effective and sound registers must be developed. General flag 
State obligations must be adopted and enforced at world level. For this to be effective, it 
is imperative to ensure that a flag State is able to respond to its international obligations. 
In parallel, the Community should ensure the quality and effectiveness of its registers. 
Such action should not only be related to Member State shipping registers within the 
Community. The problem of off shore registers must be scrutinized, too. 
a. Defining and enforcing flag State obligations at world level 
There is broad consensus within IMO, ILO and the EC that there is a compelling case for 
all flag States to demonstrate that they can carry out and indeed that they are carrying out 
their supervisory responsibility effectively. Non-compliance leads not only to unsafe 
shipping but also to unfair and thus unacceptable competition. Therefore flag States have 
to live up to their obligations and make transparent the work of their administrations with 
regard to how they implement and comply with IMO and ILO conventions and rules. 
Today, some flag States are happy to compete for shipping and collect the registration 
fees, but they fail to enforce safety and environmental standards under their flags. Such 
States should not be in the business of offering ship register services. If States are not 
prepared to apply IMO/ILO rules, they should be discouraged from competing with those 
who are. 
To translate this statement into effective action, the European Community and its Member 
States should pursue their policy based upon a convergent application of internationally 
agreed rules. To the largest extent possible, this policy should be applied to all flags. This 
includes, for instance, those non-binding IMO resolutions which should be made 
compulsory through EC legislation. These binding requirements should be enforced also on 
ships flying the flag of non-EC States when trading to or from EC ports. These ships 
should not receive a more favourable treatment than EC-flagged ships. 
In this context, Member States would have to apply relevant EC legislation to companies 
or organisations operating in or with the Member State or to all ships trading from and to 
EC ports irrespective of their flag. It is worth considering the option of having a 
multinational team of EC experts to assist Member States with this task. This may 
contribute to ensuring that EC legislation is implemented in a fair and uniform way. 
Further, the EC and its Member States should strive, with the support of other committed 
nations, for the adoption of criteria for the establishment and operation of flag State 
administrations and registers. Criteria for operating registers should include the following: 
entry of a ship on to a register should require a full ship inspection to ensure 
compliance with all standards (except where the vessel is transferred from 
another register and there is a formal agreement of mutual recognition with 
the former flag State); 
the flag State should possess the necessary machinery to ensure that 
seafarers employed on vessels flying its flag have appropriate and valid 
European Commission - Towards a New Maritime Strategy 
- 15 -
certificates of competence; 
the register should always be administered by sufficient numbers of well-
trained personnel, including surveyors, able in practice to monitor effectively 
all the ships in the register; 
non-State organizations entrusted with flag State control responsibilities 
should have appropriate qualifications; the flag State should possess fully 
independent audit and quality assurance systems to monitor the services of 
the recognized organisations; 
the fee structure should provide sufficient income to ensure proper 
enforcement of standards; 
a duty to conduct a transparent investigation of all major incidents involving 
ships flying the flag of the State. 
These criteria should be incorporated into binding international instruments. Different legal 
options are available. The Community and the Member States should take the initiative and 
consider the following options in the appropriate IMO bodies: 
revision of Part 1 of SOLAS (Safety of Life at Sea Convention); 
adoption of an IMO Assembly Resolution providing detailed interpretations 
of SOLAS Part 1, Regulations 1 - 20, possibly in the form of a mandatory 
Code for flag States; 
use of UNCLOS (United Nations Convention on the Law of the Sea) to 
improve flag State compliance. 
The Commission considers that the combination of the second and third points could be 
effective both in terms of legally binding content and timeliness. The EC could complement 
this policy initiative by contributing actively to assisting (financially and technically) 
countries outside the EC to upgrade their flag administrations in cases where a clear policy 
commitment is made by the government to strive for the above described objectives. In 
this respect, it is worth considering whether the multinational team of EC experts 
mentioned above11 could assess the work of non-EC flag State administrations, so that 
such financial and technical assistance, as appropriate, could be used to improve their 
performance. 
b. Member States registers 
The Commission considers that in parallel with the efforts made in international fora at 
adopting register conditions, the Community should consider defining common criteria for 
registers and lay these down in a Community legal instrument. These conditions should 
ensure safety, environmental protection and good working conditions on ships under EC 
flags. They should, however, also be conducive to eliminating distortions of competition 
which can result from varying registration conditions and flag State enforcement. 
11 See above, p. 14. 
European Commission - Towards a New Maritime Strategy 
- 16 -
Such a proposal will not introduce an EC ship register modelled on Euros. While Euros was 
supposed to be a voluntary parallel register, this exercise would strive to set basic 
conditions for all Member States registers, irrespective of their denomination as second, 
alternative or first register. Further, mandatory levels of State aid would not be stipulated. 
Since the Commission does not expect the proposal for an EC ship register to be adopted 
under the present circumstances, it will, after informing the Council and the Parliament 
accordingly, withdraw the proposal. 
Effective government monitoring: The first condition for shipping registers in the 
Community should be effective Government monitoring. Member States should comply 
with the criteria concerning flag state control agreed on IMO/ILO level.12 All Member States 
Governments must be able to fulfil the obligations flowing from internationally and 
European agreed standards on safety, environment, working, and living conditions. 
Transparent liability requirements for owners and managers: To facilitate effective flag 
State monitoring and to avoid unfair competition, all Member States registers should 
provide for mechanisms to ensure the financial, administrative, civil and criminal liability 
of owners and managers of ships. Managers and owners of vessels should not be allowed 
to avoid full disclosure of their corporate or personal identity and to escape from their 
obligations and responsibilities incurred by shipping operations, for instance by avoiding 
liability through complex corporate structures. 
Crew nationality requirements: The 1986 UN Ship Registration Convention foresees 
as one of two alternative registration requirements the "satisfactory" manning by nationals 
of the flag State,13 or by persons domiciled or resident in the State.14 Further, Member 
States view minimum nationality requirements for ships entered into their register, 
especially in the case of the captain and officers, as necessary for military, civil and 
administrative reasons. Nationality requirements may seem positive for EC employment. 
On the other hand, if this guarantee for employment leads to costs that threaten 
competitiveness, shipping companies will opt for a flag which leaves complete freedom of 
manning. 
At this stage, and taking into account the results of the discussions on the Euros proposal, 
the Commission considers that employment of EC seafarers should be stimulated primarily 
through framework measures improving the employment opportunities of these seafarers, 
both through training and education and certain fiscal and social security alleviations. There 
is an overall advantage in terms of the safe and efficient operation of ships in employing 
See above, p. 14 et seq. 
13 The other being ownership, see below. Art. 7 of the Convention states that the minimum 
registration conditions are met if a State complies either with ownership or with manning 
requirements. It may, however, comply with both. 
14 This Convention is not yet in force and has not been ratified by any Member State. In 
September 1986, the Comission proposed a Council decision concerning the ratification of 
this Convention (Com (86) 523 final, 25 September 1986). However, due to subsequent 
international developments, the Council has not dealt further with this matter. 
European Commission - Towards a New Maritime Strategy 
- 17 -
EC seafarers even if they are more expensive. There is an overall advantage, too, for the 
EC as a whole in maintaining the maximum number of EC seafarers both for EC shipping 
and for related industries. However, a fixed regulatory minimum on EC level may not be 
an optimal solution for safeguarding employment and, as the discussions on Euros showed, 
does not appear to be an achievable solution in the present circumstances. If a fixed 
regulatory EC employment level is to be considered at all, it should be discussed not for 
shipping in general, but for different shipping sub-sectors. 
"Community shipowners" or worldwide access: The question also arises of whether a 
minimum control or ownership criterion should also be part of an exercise to align 
registration conditions within the Community. The 1 986 UN Ship Registration Convention 
states that States should, inter alia, provide for ownership requirements for ships flying 
their flag. These requirements must be sufficient to permit the flag State to exercise 
effectively its jurisdiction and control over ships flying its flag. The 1989/1 991 Community 
Shipowner Regulation proposal of the Commission foresaw, broadly speaking, a 50% 
requirement in shares or board representation by EC nationals for a company to be 
considered a Community shipowner. 
In answering the question, there are both legal and economic considerations to be borne 
in mind. 
If such a requirement were to be introduced as a condition for registration 
throughout the Community, one should take into account that once a company 
fulfils the establishment criteria of a given Member State and becomes a company 
in that State, it has the right under the EC Treaty to establishment in any other 
Member State. It thus normally has access to that Member State's register. This 
principle has been explicitly recognized in the Factortame judgment of the European 
Court of Justice.15 
Shipping is becoming increasingly capital intensive, and the need to attract non-EC 
capital into the EC may therefore grow. Rules limiting foreign control of EC shipping 
companies, such as minimum EC capital or board majority requirements, may stifle 
inward investment. States may therefore want to waive any such requirement 
concerning companies owning or operating the ships registered. This possibility 
already exists and is considered by some as a useful response to the increasing 
mobility of capital, labour and investment. 
However, some see dangers in policies not based on adequate standards and their 
enforcement by the State concerned or resulting in registration of vessels wholly 
owned or manned by third country nationals. In effect, such an open register could 
become a flag of convenience and yet benefit from all the rights conferred by the 
EC Treaty and legislation. 
Once adequate Community rules are in place to ensure that all EC registers meet certain 
criteria concerning obligations imposed on shipowners and their enforcement, the question 
of granting access to those registers and flying the flag of a Member State could be 
15 77?e Queen v. Secretary of State for Transport, ex parte: Factortame Ltd. et al, 1 991 (ECR) 
3905. 
European Commission - Towards a New Maritime Strategy 
- 18 -
approached in a different light. 'Open' Community registers would seek to attract good 
tonnage to EC flags by fostering high quality shipping and through providing a sufficiently 
supportive package; they would not, however, give sub-standard operators the opportunity 
to gain unfair advantages from Community status: flag State control would be rigorously 
enforced and State support schemes would be linked to specific criteria. In this context, 
it seems that flag State control can be exercised by appropriate provisions on the 
identification and liability of owners and managers, without necessarily restricting 
registration to nationals. 
To sum up: in defining common critieria for ship registration within the Community, the 
objective should be to ensure that the EC flags are as attractive as possible without 
compromising standards or Government monitoring. Wider use of EC registers would, by 
attracting vessels, capital and economic activity, create jobs for Community citizens as 
seafarers and in ancillary industries. The Community would further increase its flag State 
control and also its influence in world maritime matters. 
Based on these considerations, the Commission will, after informing the Council and 
Parliament accordingly, withdraw its 1989 proposal for a Council regulation defining the 
notion of Community shipowner. However, appropriate definitions of the notion of 
Community shipowner will be provided in individual instruments, for example when 
considering the beneficiaries of Regulation 4057/86, the Regulation concerning unfair 
pricing in maritime transport, and in the determination of beneficiaries of State aid. 
c. Off shore Member States registers 
Shipping registers have also been established on territories of Member States outside the 
Community. Such registers are not conducive to improving maritime safety if there is no 
appropriate means to apply international and EC safety legislation to ships in such 
registers. It is important that flag State responsibilities of Member States include ensuring 
compliance with all EC safety legislation for all ships under the flag, regardless of whether 
the register is established within or outside the territory of the Community. 
3. Eliminating dangerous shipping 
Enforcement action is necessary to improve safety and fair competition in maritime 
transport. As regards trade to or from EC ports, several fundamental measures have 
already been adopted, including those on port State control, classification societies and 
seafarers' qualifications and on-board communication. Specific attention should be paid 
to the targeting criteria in these pieces of legislation, which require focusing on black-listed 
flags or certain types of ships. Qualified and well trained inspectors are essential for a 
coherent and effective implementation of EC port State control. The Commission is 
therefore developing in co-operation with the Member States appropriate initiatives to 
improve the training and the efficiency of the inspectors. This aims to ensure that the 
international conventions related to safety, pollution prevention and working conditions on 
board of vessels are effectively applied on all ships sailing to EC ports. Strict application 
of these provisions is fundamental to avoid penalising highly professional shipowners. 
Enforcement of compliance cannot always be limited to delay or detention of ships. 
Financial sanctions, adequate to be an effective deterrent, should be an integral part of the 
national implementing legislation. A close monitoring of the implementation of the EC port 
State control instrument remains a priority for the Community, so that the effectiveness 
of the instrument can be constantly improved. 
European Commission - Towards a New Maritime Strategy 
- 19 -
To extend the benefits of this strategy, direct operational links should be established 
between the EC and other countries actually committed to similar policies, in particular 
Australia, Canada, and the United States. Technical assistance to other administrations, 
for example, in the Mediterranean basin and in Latin America, should be made more 
systematic to help them move rapidly towards the same level of efficiency. 
4. Fostering a spirit of quality in shipping 
Policy should not only strive to eradicate environmentally dangerous and unfairly 
competing shipping by prohibitive action. Mechanisms must be developped to foster 
shipping which not only meets the minimum standards imposed by IMO/ILO, but which 
aims to supply a high quality transport product and reward such a product in the market 
place. 
Daily behaviour and commitment of shipowners is crucial for the effective achievement of 
"safe and clean seas" policies. Voluntary industrial codes of behaviour - above the 
standards of the International Safe Management (ISM) Code and adequately monitored -
should be promoted within the industry to ensure the full compliance with the 
responsibility of operating only safe, environmentally-friendly and high quality ships. In 
certain types of trades the cargo owners and chartering industries have already expressed 
a firm commitment to cooperate to establish and implement such policy. Vetting 
programmes of the oil and chemical industry, though yet in their infancy, should be seen 
by the shipping world not just as a desirable point of arrival, but rather the basis for a more 
far reaching safety policy which is based on a safe ship as the a-priori of any chartering 
/ shipping transaction (a self regulatory code of behaviour). Port State control 
administrations, classification societies and participants of vetting systems should 
cooperate to make class, statutory and port State control information accessible to each 
other and to market participants. 
The Commission will also consider what action might be taken to encourage ship operators 
to respect standards that are above the minima fixed at world or Community level. Fiscal 
and financial benefits granted by Member States for operators striving to achieve high 
quality standards may be considered along with differential port charges based on objective 
environmental and safety standards observed in practice by different operators. 
In addition, the Commission will investigate to what extent cargo owners should be subject 
to financial and economic sanctions when they knowingly or negligently charter or use 
unseaworthy or uninsured or under-insured ships. Uninsured or under-insured shipping not 
only encourages sub-standard operators, it also contributes to unfair competition. 
Furthermore, for many shipping services, third party liability is not internationally regulated. 
The Commission believes that the question of mandatory coverage of third party liability, 
such-as that provided by P&l Clubs, with a high ceiling as condition to port entry, should 
be fully examined. 
5. Higher EC standards in certain circumstances 
In certain specific and justified cases (eg. for the protection of EC citizens and the 
environment), the EC could set its own intra-European safety and working standards for 
geographically limited operations, such as ferry services operating to or from a European 
port, whatever their flag, as a condition to providing such services. 
European Commission - Towards a New Maritime Strategy 
- 20-
This approach has already been adopted in the regulation on the ISM Code for ferry 
services. It could be followed up whenever appropriate, for example, if, in spite of 
technical evidence, IMO failed to adopt safety measures to the high level appropriate or 
desirable for operation of these vessels from or to EC ports. The Community should 
consider legislative action to support any agreement made between the major operators 
and labour organisations on terms and conditions of work on-board ferries providing regular 
services to and from EC ports. This might set standards on working hours, rest periods, 
technical standards, operational conditions, crew nationality or wages. The same 
considerations could be applied to other vessels providing sensitive services on specific 
routes to and from Community ports. 
III. Maintaining Open Markets 
1. Basic approach 
The Commission will present a Communication on external relations in maritime transport, 
detailing its policy and proposals for action. The following is a broad outline of the 
Commission's basic approach in this area. 
In pursuit of the objective of securing free access and fair competitive conditions 
throughout the global shipping market, the Community generally favours a multilateral 
approach. At the conclusion of the General Agreement on Trades in Services (GATS), a 
Negotiating Group on Maritime Transport Services (NGMTS) has been created to achieve 
multilateral agreement on the liberalisation of maritime transport services and the removal 
of trade barriers, which had not been agreed upon in GATS. The deadline of negotiations 
is fixed for mid-1 996. The negotiations cover international shipping, auxiliary services and 
access to, and use of, port facilities. National treatment16 in these areas should be granted. 
Binding commitments should be made by as many countries as possible. The Most 
Favoured Nation (MFN)17 principle should be applied to its fullest extent. Specific 
derogations from the MFN principle should be phased out. Whilst it has not yet been 
possible to reach a multilateral agreement liberalising the provision of maritime transport 
services, the Commission is of the opinion that a failure to achieve a positive outcome in 
these negotiations would risk legitimising unacceptable restrictions on maritime transport. 
The Commission proposes to ensure that the EC uses its full political and economic weight 
to further fairer and more open markets through adopting a coordinated approach and 
stance, using, as appropriate, its trading and political, as well as shipping, power. This is 
why the Commission will propose to the Council to grant it a mandate to engage in 
shipping negotiations with certain third countries. 
Another main target for a future external relations policy is ensuring coherence of action 
of the Community and of the Member States in their relations with third countries and the 
16 National treatment: treatment shall be no less favourable than the one accorded by a 
country to its own like services and service suppliers. 
17 Treatment of other NGMTS members shall be no less favourable than the treatment a 
country accords to like services and service suppliers of any other country. 
European Commission - Towards a New Maritime Strategy 
- 21 -
harmonious achievement of Community objectives in discussions or negotiations in 
international organizations. 
In the context of creating open markets and fair competition, the Commission considers 
that transparency for State aid schemes is important. Within the Community, the 
Commission can enforce the principles of fair competition through its powers granted by 
the Treaty. An attempt to achieve more transparency of subsidies worldwide is certainly 
to be welcomed; however, such a worldwide stock-taking may be more difficult to 
execute. One possibility to develop greater transparency may, as a first step, be to build 
on the initiative taken within OECD to draw up a full inventory of State aid given by its 
member countries. Moreover, the GATS also includes a general provision on subsidies, 
which is applicable to maritime transport, and which foresees the development of 
subsidies' disciplines in further negotiations to be engaged soon. 
2. Regulation 4058/86 on coordinated action to safeguard free access to 
cargoes in ocean trades 
While the Commission proposes a negotiated approach to a further liberalisation of world 
shipping markets, it will also make use, when appropriate, of Regulation 4058/86. 
Regulation 4058/86 provides initially for a diplomatic approach to opening markets to EC 
shipping companies, where access is restricted by Government measures. It does not 
provide the Commission with the authority to initiate procedures. It permits the Member 
States separately, or as a group, to take measures. The Regulation has only been invoked 
once, in relation to the West-African trades. However, the possibility provided by the 
Regulation to take counter-measures has been of particular value to the Commission in its 
discussions with a number of countries when seeking to secure market access and non­
discriminatory treatment for Community shipowners. There is a widespread view that 
Regulation 4058/86 needs reviewing in the light of developments and experience gained 
since 1986. 
3. Competition Rules 
Safeguarding free and fair competition both in liner and bulk shipping is an essential 
requirement of EC transport policy. Shipping is a service industry, implying that it should 
always provide the best services at the lowest price to shippers and passengers. 
Competition rules have a crucial part to play in maintaining free and fair competition in 
shipping markets. The Commission applies them in order to ensure the existence of 
effective competition in the liner shipping trades serving the Union and the provision of 
high quality, low-cost services to shippers. 
a. Acting against market access barriers through agreements 
Distortion in competitive conditions results not only from Government measures, which 
should be addressed within the context of external relations, but also from anti-competitive 
practices between private enterprises. Governments may abandon certain trade restrictions 
vis-a-vis third country enterprises. They may then, however, turn a blind eye to 
anti-competitive agreements between enterprises to foreclose markets or discriminate 
against non-nationals. If the parties to such agreements cover an important segment of 
the market, the result of such practices is the same as Government measures in place to 
European Commission - Towards a New Maritime Strategy 
- 22 -
protect national industries against foreign competition.18 Undertakings which are 
individually or collectively in a dominant position (as is the case with many liner shipping 
conferences) may abuse that dominant position by taking measures to foreclose the market 
or eliminate competition.19 It has thus rightly been stated that the only way to open 
markets definitively is the worldwide agreement to apply general competition law principles 
to market behaviour by public and private companies. 
b. International competition standards 
As shipping is an intrinsically international industry, it is important to have by and large 
similar rules between countries governing competitive behaviour in these markets. 
Agreement on a set of international competition standards, as recently proposed in a study 
on behalf of the European Commission,20 should therefore play a central role in order to 
keep and maintain open markets and fair competition. Abuses of dominant positions are 
forbidden under the EC Treaty and should not be allowed internationally. Neither the 
maritime transport nor the port service sector should be exceptions. Agreements which 
restrict competition in the maritime transport sector should be seen in principle as being 
unlawful and be prohibited unless shippers obtain a fair share of the benefits and the 
restrictions of competition are indispensable to achieve those benefits. A prime example 
of a type of agreement which, in the view of the Commission, does not meet this 
standard, is capacity non-utilisation.21 International competition standards should also deal 
with the impact of growing oligopolisation in liner shipping on the competitive environment 
in this market. 
The Commission encourages other nations to cooperate in the development of international 
standards of fair competition, outlawed practices and forbidden abuses for maritime and 
port services. Such an exercise could rely on the World Trade Organisation, which is 
already working in this field, or bilateral agreements between the EC and third countries 
as the appropriate framework. 
c. Application of competition rules in EC trades 
The Commission believes that applying EC competition rules to shipping, and at the same 
time respecting the specifics of the maritime sector, has already enhanced the productivity 
of operators. Enhanced productivity and a customer-oriented approach to the provision of 
maritime services should further increase opportunities for operators to provide shippers 
with high quality services at low prices. This may lead to improved freight rates for certain 
advanced services, reflecting a normal commercial pricing strategy. Such a development 
is to be welcomed also from a transport policy point of view. Higher returns can lead to 
better safety management and replacement or scrapping of ships than is currently the 
case. 
18 
19 See, for maritime transport, the Commission decision Shipowners' Committees, O. J. 1 992 
No. L 134/1. 
Commission decision CEWAL, O.J. 1993 No. L 34/20. 
20 Immenga/Jenny/Petersmann, 'Competition Policy in the New Trade Order: Strengthening 
International Cooperation and Rules', COM (95) 359 fin., 12 July 1995. 
21 See Commission Decision TAA, O.J. 1994 No. L 376/1; Art. 4 of Commission Regulation 
870/95. 
European Commission - Towards a New Maritime Strategy 
- 23 -
The maritime activities of traditional liner conferences are authorised under EC competition 
rules because, in general, they are believed to bring an appropriate degree of stability to 
maritime transport. However, inefficiencies may have been engendered by conferences 
with all operators charging the price determined by the conference, sometimes at the 
expense of the more innovative operator who could not charge the premium price for a 
premium service. Conversely, in conferences, the more cost-efficient operator is not 
allowed to charge a lower price to its customer, as it is bound by the common tariff. 
Furthermore, it is possible that trade-lane based conference rules hinder the provision of 
global services by consortia. Application of competition rules is also important in light of 
the cyclical overcapacity which appears to be a recurrent feature of liner shipping markets. 
Especially with regard to liner shipping, the possibility of increasing freight rates or 
managing capacity in times of low capacity utilization may tend to foster uneconomic 
investment decisions, the consequences of which would ultimately be borne by the 
transport user. 
4. Unfair market behaviour 
Last, a framework to maintain fair competition in international markets should also rely on 
instruments directed against unfair behaviour of single market participants. Regulation 
4057/86 is an instrument to combat unfair pricing practices in liner shipping. It has only 
been used formally once,22 but there is every reason to think that it has proved useful by 
acting as a deterrent for contemplated unfair behaviour in other cases. 
However, it is widely felt that the Regulation has a number of deficiencies. Firstly, it can 
also protect shipping companies which the Community has no interest in protecting. This 
is because the Regulation defines a Community shipowner as a company established in the 
EC. It does not, therefore, require any substantial link with or economic involvement in 
Community industry, such as EC employment, investment, or flag. From this, it follows 
that attempts may be made to circumvent the Regulation by establishing a company in a 
Member State. 
Secondly, in the context of globalisation and the increasing sophistication and capital 
intensity of liner shipping, it is questionable whether a liner shipping operator, even if 
government-sponsored, would now risk an aggressive entry into one trade by heavy 
underbidding. The pattern of entry into markets observed in the last few years is one of 
cooperation through vessel sharing or slot charter agreements. One could therefore argue 
that Regulation 4057/86 in its present concept is outdated, at least for the larger liner 
trades. 
For these reasons, the Commission considers that Regulation 4057/86 should be 
thoroughly reviewed. This review should also take into account progress in the on-going 
negotiations of liberalisation of trade in services. In the meantime, the Commission will 
apply the law as it stands, notwithstanding the above-mentioned difficulties. 
22 Hyundai Merchant Marine, Council Regulation (EEC) No. 15/89, O. J. No. L 4, 6 January 
1989, p. 1. 
European Commission - Towards a New Maritime Strategy 
24 
IV. A Policy for Competitiveness 
This section introduces measures to further training and employment, launch Research and 
Development (R&D) initiatives for the shipping sector and, finally, a possible revision 
concerning the policy on State aid. 
1. Training and employment 
It has been mentioned above why it is crucial for the EC to maintain and enhance the 
supply of EC seafarers. Accordingly, the Commission proposes the following policy lines. 
According to the BIMCO/ISF study of 1 995,23 there is a problem concerning the supply of 
officers and specialist ratings which is likely to worsen in the future. Parallel to this, the 
increasing average age of the European seafaring workforce has raised concern as has the 
relatively high wastage rate. For some EC countries, the number of cadets is only one 
quarter of the recruits demanded to ensure a sufficient future supply for the maritime 
industries. A possible shortage has implications not only for the safe operation of ships but 
for the whole range of associated industries. The liner shipping industry is increasingly 
developing employees' expertise for use in different parts of the intermodal transport 
chain. For example, the liner shipping career may thus now involve employment for 
several years on a ship, before work in logistics, then in marketing. Fostering training and 
employment will therefore be of benefit to seaboard and on-shore activities. 
The Commission is concerned about the impact of the current trend on the maritime 
education infrastructure in the EC. If there is a lack of students, training facilities may have 
to close down. The consequences are not only further job losses for teachers and 
personnel, but also the loss of knowledge and research capability which these institutes 
provide. 
The Commission has commissioned a study dealing with issues of training and 
employment in Member States, covering worldwide trends in seaborne employment and 
steps taken by Member States for promoting maritime training programmes and sea 
careers and possible measures to attract young people to the profession. The study will 
analyse, in particular: 
market developments (new trades and shipping routes at both international and 
intra-Community levels), the environmental and regulatory climate and market 
opportunities, including the use of new technologies; 
legislation and control measures (impact of STCW 1995, implementation of Port 
State Control); 
quality and mobility of manpower (transferability of manpower eg. from tankers and 
bulk carriers to ro-ro vessels) and 
manning policies (in different countries, company policies, etc). 
The Commission has set up a steering committee to oversee the study which includes 
trade union and employer representatives. The Commission intends to present the 
23 BIMCO (The Baltic and International Maritime CouncilJ/ASF (International Shipping 
Federation): 1 995 Manpower Update, The World-wide Demand for and Supply of Seafarers. 
European Commission - Towards a New Maritime Strategy 
- 25 -
recommendations of the study, which is expected to be finalised by May 1996, to the 
European Parliament, the Council, the Economic and Social Committee and the Committee 
of the Regions. It will also discuss the recommendations with the Joint Committee on 
Maritime Transport.24 
The Commission will examine the degree to which Member States have taken advantage 
of EC funds for education, training and retraining. This will concern, in particular, the 
European Social Fund which provides various options for EC financial support for maritime 
training. It also underpins key EC programmes such as 'LEONARDO' which places 
particular emphasis on training in connection with new industrial changes and innovations 
requring trans-national co-operation. 'LEONARDO' provides financial support for three 
types of measures: transnational pilot projects; transnational placement and exchange 
programmes; and the development of knowledge in the area of vocational training through 
surveys and analyses. 
In line with the relevant Treaty provisions and, where appropriate, with existing financial 
instruments, the Commission will encourage training schemes and incentives to 
employment by Member States, in particular the following: 
the absorption of training costs within national education and training systems; 
direct assistance to seafarers during training, in particular, grants to pursuing higher 
or additional qualifications, also in view of related on-shore activities; 
financial support by Member States for shipping companies which provide on board 
training facilities for cadets. 
adoption of a modular framework of certification in line with the Revised 
International Convention on Training (STCW 1995), whereby each module 
represents the standard of competence required to perform a specific function on 
board a ship; 
facilitating and increasing access to maritime employment by citizens of Member 
States by increasing awareness and understanding of national education and 
training systems; this should promote effective implementation of Directives 
89/48/EC and 92/51 /EC on the general system for the recognition of diplomas and 
certificates in the EC; the ongoing concerted action on METHAR (Maritime 
Education and Training Harmonization) under the 4th R&D Framework Programme 
will play an important role in this context; 
24 The Joint Committee on Maritime Transport was created by the Commission in July 1987 
to assist it in the formulation and implementation of EC policy to improve and harmonize 
living and working conditions, and to improve the Community's economic and competitive 
position, in this sector. The members of the Joint Committee, who are appointed from the 
European Community Shipowners' Associations (ECSA) and the European Committee of 
Transport Workers' Unions (CTWUEC), fulfil this role by issuing opinions on EC policy and 
preparing studies and other joint initiatives. 
European Commission - Towards a New Maritime Strategy 
26-
promoting exchange and the setting up of education networks and ventures 
between European maritime training institutes; this should encourage the exchange 
of information and coordinate action to enhance the efficiency of maritime 
education and training and bring it in line with the new requirements set up by new 
international conventions and codes such as STCW and ISM. In this context, the 
Commission is examining the creation of a network of EC training maritime 
institutes. This question has been considered under the 4th Framework R&D 
Programme in order to encourage the exchange of information and coordinate 
action with a view to rationalising maritime education and making it more efficient. 
The recently set up NEPTUNE network should contribute to this exchange. 
The Commission is also considering further actions, such as organising a conference on 
the future of seafaring in the European Union, at which, among other things, the possibility 
of a European-wide maritime approach for the future of the training requirements and 
employment perspectives would be discussed. 
Concerning legislative action, the Commission is preparing proposals for Council Directives 
on the adaptation of Directive 94/58 on the minimum level of training of seafarers in the 
light of the recently adopted revised STCW 1995 convention and to introduce common 
criteria for the recognition of certificates by the EC issued by third countries based on the 
IMO standards. The Commission attaches great importance to improving and upgrading, 
at world level, the quality and qualifications of seafarers. It has the intention to contribute 
to the IMO efforts to ensure the proper implementation of internationally agreed training 
standards. The Commission has agreed to assist IMO in organising a series of regional 
seminars to explain the requirements of the revised STCW 1995 and highlight the 
obligations to be fulfilled by contracting parties under the new regime. 
Further, the Commission will, in conformity with STCW requirements on recognition of 
certificates, undertake a study of the maritime education and training systems of a number 
of major labour supplying countries and make appropriate recommendations. 
Regarding long term actions to safeguard the existing maritime expertise in the EC and the 
competitiveness of EC maritime industries, extensive research and development efforts are 
necessary, with a focus on quality, productivity, safety and environment protection. Under 
the on-going 4th Framework R&D Programme, a number of projects are being financed, 
such as enhancing simulation techniques to improve human performance as well as 
improving and co-ordinating maritime education and training systems in Europe (METHAR). 
The Commission will examine this question further with Member States in preparing the 
5th Framework Programme. 
2. Research and development 
The contribution that the Fourth EC Research and Development Framework Programme 
(1 994 - 1 998) can make to the competitiveness of EC shipping is important. The transport 
part of the Programme dedicates 19% or some 50 million ECU of its resources to R&D in 
waterborne transport. This budget covers R&D aiming at the competitiveness and 
efficiency of the shipping sector, the improvement of maritime safety and the protection 
of the environment as well as addressing the impact of human factors on the safety and 
efficiency of the maritime transport system. 
European Commission - Towards a New Maritime Strategy 
- 27 -
In particular, the research actions support the development of new logistical concepts (e.g. 
in relation to short sea shipping and ports) and technological tools (e.g. fast waterborne 
transport systems, vessel traffic management and information systems and integrated ship 
control systems). Research is also addressing specific human element-related issues such 
as improved simulation procedures for training, European requirements for the 
implementation of ISM (International Safety Management Code) and STCW as well as 
communication in a multi-cultural environment. 
To co-ordinate these projects and those developed in the Member States, five concerted 
actions ~ (1) short sea shipping, (2) vessel traffic management and information systems, 
(3) maritime education and training, (4) casualty investigation and (5) inland navigation — 
were taken, involving over 150 experts from Member States and European industries. A 
common European state of the art and a common view on further research requirements 
were achieved. 
Several other R&D programmes of the Fourth Framework Programme contribute to more 
efficient and safer shipping: in the Marine Science and Technology (MAST) Programme, 
R&D is undertaken to predict sea states, currents, ice thickness and ice motion, etc. in 
view of operational forecasting. In the Environment and Climate Programme, research 
activities include remote sensing from space for the detection of oil pollution and mapping 
of sea ice. 
It is expected that the R&D actions currently being developed under the 4th Framework 
Programme and those under consideration for the future 5th Framework Programme will 
favour a better integration of maritime transport into the transport chain. Activities include: 
integrated waterborne logistics (eg. short sea shipping and port information 
networks) 
the implementation of "quality operations" with a view to enhanced safety 
and environmental-friendliness (eg. safety in coastal waters, electronic 
charts display and information systems, integrated ship control); 
an improved role for the human resources both in terms of waterborne 
operations and of job satisfaction and opportunities. 
A Commission Task Force "Maritime Systems of the Future" has been given the role of 
promoting the co-ordination of all Community research programmes that relate to the 
maritime sector. The Task Force brings together representatives from all European 
Community research programmes relevant to the maritime industry. It has the key 
objective of ensuring the most cost effective exploitation of research and development 
programmes. The Task Force will also encourage the co-ordination of national research 
programmes in Member States in order to improve the competitiveness of the European 
maritime sector. It is already co-ordinating the exploitation of resources in the 4th R&D 
Framework Programme and will make recommendations for the 5th R&D Framework 
Programme; it is further monitoring the MARIS G-7 initiative.25 
25 For a full description of the brief of the Task Force see Commission, Green Paper on 
Innovation, COM 95(688) final, 20 December 1995. 
European Commission - Towards a New Maritime Strategy 
28 -
MARIS is a framework concerning the potential benefits of the information technologies 
for a broad range of maritime activities. It has been inaugurated by the G-7 Conference on 
the Information Society in February 1995 and has now been extended to non-G-7 EC 
Member States. This project is promoting interconnectivity and interoperability, and all 
maritime industries around the world are invited to take part in this initiative. 
Summing up, the R&D support of the Community is expected to generate a favourable 
environment for an increased competitiveness of maritime transport. It also contributes to 
safer and more efficient equipments and newbuildings and a better use of human resources 
at sea. 
3. State Aid to Shipping 
The Commission believes that the approach outlined above for safety, international open 
markets and fair competition will help reduce distortion of competition. Efforts in training 
and employment policy and in research and development will enhance the competitiveness 
of the EC shipping sector. 
However, support measures may nevertheless be required for the present to maintain and 
develop the Community's shipping industries26. In principle, of course, state aid as defined 
in Article 92(1) of the Treaty is incompatible with the common market. However the 
Commission continues to believe that the importance of maintaining and developing the 
shipping sector for economic and employment reasons as well as the particular nature of 
the international competition which it faces can justify the application of the derogation 
provided in Article 92(3)(c). 
In 1989 the Commission established guidelines27 defining the conditions under which state 
aids to shipping may be considered compatible with the common market. The 
Commission believes that it is important to maintain guidelines for this sector but has 
concluded that the current guidelines need to be revised. This revision will take into 
account developments in the international competition which EC operators face as well as 
the global trend towards liberalisation of trade in goods and services. 
Community shipowners can face a significant operating cost handicap compared with 
competing non-Community operators, sometimes as a result of non-commercial advantages 
enjoyed by the latter. Unlike in most other sectors and to a much greater extent even than 
for most other modes of transport, this is true even in trades within the Community. The 
cost gap is the result of employment-related charges and fiscal costs under EC flags, which 
may be significantly higher than those achievable by operation under other registers. 
Support measures should aim primarily at reducing such fiscal and other costs and burdens 
borne by vessels under EC flags (under conditions which directly stimulate the 
development of the sector and employment) rather than at providing general financial 
The section is not concerned with aid to shipbuilding, which is governed by a different set 
of Community and international rules, nor with aid to fishing vessels, to which special rules 
also apply. 
27 SEC (89) 921 final. 
European Commission - Towards a New Maritime Strategy 
- 29-
assistance. They should also cover support to training and employment as well as R&D 
incentives. 
The Commission has sole competence to monitor State aid and to enforce the Treaty rules 
in this sector. Nevertheless, in the interest of transparency, it proposes to sound out the 
views of all parties concerned on the issues raised. The Commission will then draft revised 
guidelines. This will take into account reactions to this paper, the jurisprudence of the 
Court of Justice28 and the results of the exercise under way to draw up an inventory of all 
State aid in favour of shipping currently in force in the Community. 
a. Approaches to State aid 
Different national priorities: EC Governments have different national priorities and 
perceptions of the need and best means to support their shipping industry. Some have 
vigorously sought to maintain their flag fleets, some have preferred a more laissez-faire 
approach. Some have strong interest in deep-sea shipping, others have fleets more 
specialised in short sea services. Some other Member States have emphasised other 
transport or industrial priorities. 
These different priorities have determined the structure of support measures given by 
national governments. They include special fiscal regimes (tonnage tax, exemption or 
reductions in corporate and seafarers' income taxes, social security liabilities and other 
charges), generous accounting provisions to reduce taxation (roll-over relief, special 
depreciation schemes), aid to bridge the cost gap (allowing ships to be brought under EC 
flags), capital injections linked with restructuring, and special ship registers. 
Community approach to support measures: Because of these differences in national 
priorities, harmonisation through a Community instrument, even to the limited degree 
proposed in Euros, has not proved acceptable. This calls into question whether a single 
legislative act is indeed the solution. 
The alternative is an approach to State aid that accommodates certain differences in the 
priorities and approaches of the Member States while ensuring that competitive distortions 
are kept to a minimum. Policy could foster the conditions for competitive EC maritime 
industries to thrive, fully recognising the strengths and weaknesses of the different 
components and so ensure that the Community remains a strong player in global maritime 
affairs. 
The Commission's role is to set the parameters with which State aid can be approved. As 
noted earlier, the Commission plans to revise the 1989 guidelines regarding aid to 
companies operating ships registered in the Community and it sets out below a number 
of issues and options to be considered. Guiding the Commission's approach will be a 
number of basic principles: aid measures should serve the common interest, they should 
be transparent, and they should not introduce unacceptable distortions of competition. 
The EC Treaty provides that State aid can only be accepted under particular conditions. 
The Commission will therefore see to it that any aid measure for the maritime sector fits 
within the general industrial and aid policy of the Community as well as with its transport 
28 E.g. Siemens v. Commission, Case T-459/93, 8 June 1995. 
European Commission - Towards a New Maritime Strategy 
- 30-
policy. The Commission must always consider the common interest of the Community in 
assessing proposals to grant aid. Aid schemes should not be at the expense of other 
Member States' economies and must be shown not to risk unacceptable distortion of 
competition between Member States or between modes of transport.29 They must be 
shown, too, to be capable of promoting the development of the sector. State aid must be 
restricted to what is necessary to achieve its purpose. State aid must also be granted in 
a transparent manner and generally be applied degressively. 
The Community's approach could be based on the principles of non-discrimination and 
economic link. 
Non-discrimination and economic link: The Commission seeks to ensure that nationals 
and companies of all Member States have full access to the facilities, products and 
services found in one Member State without discrimination. In the case of establishment 
by entry in shipping registers, this principle has been applied since the Factortame 
judgment of the Court of Justice in 1 99130. In addition, State aid may not discriminate on 
grounds of nationality between companies established in a Member State. 
Member States should ensure that aid is focused on entities which contribute to 
sustainable economic activity in the Community. Traditionally, State aid has been linked 
first and foremost with flag. But, flying the flag may not, by itself, ensure this result (eg. 
if no ownership or manning requirements are attached). Other factors may ensure that 
beneficial shipping activity continues in the EC even if ships flying the flags of third 
countries are involved. 
One option might be to subject the acceptability of State aid to the condition that 
beneficiaries show genuine involvement in the Community economy. In addition to being 
liable for taxation in the Community, this might be done, for example, by having 
substantial management and operational functions there, employing at least a minimum 
number of EC seafarers, investing and employing EC personnel on-shore or being 
established in the Community. Control as such of a shipping company may not be enough 
on its own to show the genuine involvement, but may be important in conjunction with 
other elements. Such companies could be defined as Community shipowners for the 
purposes of support schemes and a suitable definition incorporated in revised State aid 
guidelines. 
Some argue that the criterion of an economic link is more relevant than the flag link and 
should replace it; others believe that the two criteria should be cumulative. If the first 
option were to be followed, measures would be needed to ensure that there was no 
resultant distortion of competition between EC and non-EC flagged vessels. 
29 On competition between modes see Commission, Fair and Efficient Pricing in Transport, 
Com (95) 691 final, 20 December 1995; on the competition between shipping and other 
modes of transport see Commission, The development of short sea shipping in Europe. 
30 The Queen v. Secretary of State for Transport, ex parte: Factortame Ltd. eta/, 1991 (ECR) 
3905. 
European Commission - Towards a New Maritime Strategy 
31 
b. Action on employment and corporate costs 
In the 1989 guidelines, the Commission accepted that Member States' flag fleets faced 
a difficult competitive position because of advantages available to operators flying flags 
of third countries, including flags of convenience. These lead to differences in operating 
costs. A method was devised to ensure that the global impact of state aids would not 
exceed a ceiling to be defined on the basis of the cost handicap which ships operated 
under the flag of low-salary Member States meet on world markets. The calculation was 
based on the hypothetical operating cost of vessels under Portuguese and Cypriot flags, 
as nominally the cheapest EC flag and a flag of convenience. Once weighted to reflect the 
composition of the national flag fleet in terms of vessel types, this resulted in a single 
national ceiling for annual operating aid, applicable to all types of vessel. The national 
ceilings of the different Member States were, however, not identical. 
This method, however, is now being reviewed. The cost gap, which is principally the 
result of crew-related costs and company fiscal treatment, differs greatly in the world 
market according to the type and size of vessel, the technology available on-board and 
efficiency. Most importantly, with many EC registers offering certain flexibility in choice 
of manning nationality, it does not take into account the actual EC component of a crew 
and its cost. 
For these reasons, an alternative method could consist in allowing Member States to base 
aid proposals on real costs for a real vessel, operated by a shipowner established there: 
that is to say, the actual additional cost incurred by a shipowner as a result of his decision 
to use high quality EC seafarers in his crew and/or to continue to manage shipping 
activities from the EC. 
A new method, based on extensive research of crewing practice for typical vessels 
operated by EC owners and the resultant costs, as well as the corporate tax regime which 
applies, is being considered to allow the vessel-related operating cost gap to be calculated 
for each particular vessel or shipping operator reflecting the actual number of EC seafarers 
and officers employed on board and the flag of the vessel. This may involve alleviation of 
fiscal burdens, without removing the interest of the shipowner to negotiate an appropriate 
salary package with potential crew members and their labour representatives. This 
approach should allow Member States to bring employment-related costs to levels in line 
with world norms which often mean exemption from tax and social security liabilities for 
seafarers. 
However, this approach should not contradict the objective of cohesion: 
wages will not be affected so that seafarers requiring a lower level of 
remuneration will still be in a competitively advantageous position (the cost 
reduction will apply only to related liabilities, normally paid to the State); 
in terms of company tax, it would have to be shown that differences in 
company tax regimes between Member States would not have diversionary 
effects. 
In the future, the Commission intends progressively to reduce the level of aid which it will 
approve, when the world economic and political situation allow. 
European Commission - Towards a New Maritime Strategy 
- 32 -
As to corporate costs, it has been explained above that progressive délocalisation can be 
a problem. Policy might, therefore, be targeted not only on the ship and its various cost 
factors, but on the conditions of doing shipping business in the EC and the fiscal 
environment. Keeping and attracting strategic management of shipping in the EC is 
essential to securing a strong European flag fleet. State aid in the form of tax breaks, 
capable of achieving the objectives of keeping EC seafarers employed and securing 
necessary investment in the sector, might be considered to ensure that EC operators are 
not disadvantaged to the extent that they find themselves under commercial pressure to 
move out of the EC, provided they do not unacceptably distort competition within the EC. 
On the other hand, shipping companies which, although controlled by European interests, 
do not employ EC seafarers on board, do not show any commercial investment in Europe 
nor pay corporation, tonnage or registration taxes to EC countries, do not face cost gaps 
because of the EC fiscal and social systems and should not, therefore, benefit from State 
aid. 
c. Aid within general frameworks 
In line with the relevant provisions of the Treaty, the Commission could give a derogation 
from the general prohibition of State aids for training aid schemes and incentives to further 
EC employment by Member States, as described above, as well as those already contained 
in the 1989 guidelines. The Commission is ready to consider whether there are other types 
of aid linked to the recruitment, training and retention of seafarers which ought to be 
permitted under any revised guidelines. Schemes which go beyond general measures, but 
which do constitute State aid within the meaning of the Treaty, such as financial support 
to shipping companies which provide on board facilities for cadets could be acceptable 
according to the State aid rules of the Treaty.31 
In order to safeguard the existing maritime expertise in the EC and the competitive edge 
of the EC maritime industries, further extensive research and development efforts are 
necessary, with a focus on quality, productivity, safety and environmental protection. For 
such projects, State support may also be authorised within the limits set by the Treaty.32 
d. 777e criterion of measurable benefit 
Recently, it has been argued that support bringing benefit to Community shipping and more 
broadly to the Community's maritime industries might be measured in terms of higher 
added value and sustainable employment. 
Various economic models to measure the impact of support schemes exist. One such 
research method, the economic impact study, has been developed to assess the 
importance of a sector to a national economy. It operates on the following premises: 
31 Commission, Framework for Employment Aid, O.J. 1995 No. C 334/14. 
32 Commission, Framework for Aid to Research and Development, O.J. 1996 No. C 45/5; see 
also Framework for Environment Aid, O.J. 1994 No. C 72/3. 
European Commission - Towards a New Maritime Strategy 
- 33-
it accepts that considerable value is added on shore (eg. by processing, 
warehousing, distribution, international services), not only in shipping33; 
to measure this impact, it assesses the direct and indirect effects of a 
specified approach through an input/output analysis. This analysis presents 
linkages between a particular sector and the rest of the economy. 
an economic impact analysis can also forecast possible effects on State 
revenue flows and on economic activity and employment in shipping and 
related sectors, if a given support policy is followed. 
However, an input/output analysis cannot provide all the factors to assess the merits of 
support schemes. It provides some insights into the importance of the shipping sector. But 
it can neither assess the impact of such a scheme on the size of the EC fleet nor does it 
take into account that the money for the support scheme needs to be transfered from 
other possible usage. These opportunity costs, including their indirect effects, need to be 
subtracted from the benefits. Therefore, additional analysis is needed both to assess the 
degree to which a support scheme is likely to change the location pattern of shipping and 
to quantify the opportunity costs of the support scheme. 
So far, the economic impact study method has only been applied, as regards shipping, by 
one Member State. In order to obtain a clearer picture of its value for the Community, the 
Commission has engaged in a research project to quantify the economic impact of the 
maritime sector in some representative Member States and to calculate the relation 
between added value, employment and Government revenue flows. Although these 
studies will not be completed until 1998, the Commission intends to initiate discussions 
in the coming months with Member States' experts and other interested parties on the 
methodology and on the implications of this approach for the European Union as a whole. 
V. Measures for Related Sectors 
It has been emphasised throughout this document that shipping is closely linked with other 
maritime industries, and the Communication of the Commission "Shaping Europe's 
Maritime Future - A Contribution to the Competitiveness of Europe's Maritime Industries" 
underscores this argument. This fact, among others, adds to the importance for the EC to 
keep its fleets. Since shipping is one link in both the maritime industries cluster and the 
overall transport chain, measures to keep the Community attractive for maritime industries 
must not relate to shipping alone, nor must measures supporting shipping be purely 
sectoral and at the expense of other sectors. 
Detailed consideration of related maritime sectors is beyond the scope of this document. 
The Maritime Industries Forum has done extensive and valuable work on the interrelation 
of the maritime industries, and the Commission fully subscribes to its efforts. In addition, 
the Commission would stress the need for improvements in port efficiency, the accelerated 
33 For example, applied in the Netherlands, this method assessed value added at 70% land-
based to 30% sea-going. 
European Commission - Towards a New Maritime Strategy 
-34-
integration of shipping into the Trans-European Networks and the intermodal transport 
chain34 and the maintenance of a strong and competitive European shipbuilding industry. 
CONCLUSION 
The Commission considers that the combination of legisative, administrative and political 
initiatives deatiled in this Communication will ensure that EC interests in high quality and 
fairly priced shipping services are supported. The Commission would value the views of 
the other European institutions, the Member States and other interested parties on its 
proposals, in particular those concerning employment, shipping registers and the policy for 
competitiveness. On other aspects of the policy, such as R&D, safety measures and the 
development of short sea shipping, the Institutions have already endorsed the 
Commission's policy but further input is welcomed. On the question of State aid, the 
Commission has sole competence to determine whether a specific national measure is in 
the common interest of the Community and, therefore, compatible with EC law. 
Nevertheless, the Commission would encourage interested parties to comment on the 
various possible approaches outlined; this might help the Commission to draft revised 
guidelines which reflect the world situation (eg. developments in GATS), general 
Commission policy (limiting State aid as far as possible and progresively phasing it out) and 
Court jurisprudence. On external relations policy, a detailed Communication will follow, 
but the views of the Institutions, the Member States and other interested parties on the 
outline approach proposed might be useful. 
To structure the debate on the new approach to maritime strategy, the Commission would 
welcome views and comments, preferably by September 1996. 
34 See the Communication on Short Sea Shipping in Europe. 
European Commission - Towards a New Maritime Strategy 
ANNEX A 
EC SHIPPING IN A GLOBAL MARKET PLACE 
I. The Shipping Market and Environment 
Maritime transport is an international industry to which there are relatively few regulatory 
barriers to entry. As the globalisation of industry spreads, it is to be expected that the 
volume of shipping will grow still further. New markets will create new trade flows which 
will require transport facilities. Given the proportion of trade carried by sea, this will 
encourage further interest in the shipping market. 
1. Bulk and liner shipping 
When considering the key features of the industry, cargo shipping can usefully De divided 
into two main categories: bulk and liner shipping. Besides these, passenger shipping, which 
consists today of cruise and passenger ferries services, is also important. 
Bulk transport is generally organised in a free market environment, although some 
countries still have important cargo reservation schemes. It does not, as a rule, require 
extensive inland and logistics investment. 
Liner shipping is traditionally organised in maritime conferences, which adopt common or 
uniform tariffs and conditions of carriage. However, there are also liner shipping 
companies which are not part of these arrangements and set prices independently, or by 
reference to the tariff of the conference with which they compete. 
Bulk and liner have important differences in their cost structures. Liner shipping bears 
higher infrastructure and network costs and has a higher proportion of costs on land; it 
thus tends to be more capital intensive than bulk shipping. Thus, bulk shipping is more 
sensitive to relative seaboard labour costs than liner shipping. 
Both types of cargo shipping are intrinsically international in nature. More than other 
transport modes, shipping has, therefore, tended to be subject to international and 
universal, rather than unilateral, regulation, especially on liability, international safety and 
labour rules. 
Further, both bulk and liner services can be divided according to their trade areas: short 
sea and deep sea. Short sea services include ferry and feeder services as links in the 
intermodal chain. Within the short sea trades of the Community, bulk shipping is also of 
importance. 
2. Registers 
Ships are bound to a national jurisdiction by the flag which is given to a ship entered in a 
register. A State's administrative, civil and criminal law provisions will thus apply to the 
ship. The same fiscal and labour requirements apply to shipping under traditional registers 
as apply to on-shore industries, so that shipping companies pay taxes and make social 
security contributions on the same basis as other industries. National EC first registers 
have traditionally required the crew or an important part of it to be EC nationals. Some 
registers allow exemptions or reductions concerning income tax and social security or 
alleviation in respect of crew nationality requirements. 
3^ 
Direct taxes in the Community have not been harmonised and tax rates differ widely. The 
scope of application of taxes also differs with respect to shipping, with alleviation given 
by some Member States in different instances. Consequently, the corporate tax effectively 
paid by shipping companies in different Member States varies considerably. 
In some instances, States have set out to attract international shipping to their registers. 
Liberia, Panama, Cyprus, the Bahamas and Malta are the most important examples of this. 
These "open" registers accept any nationality of owner and will in general have few 
requirements with respect to nationality of the labour force.1 Shipowners, therefore, have 
unrestricted access to the international labour market. Offering open register facilities is 
source of revenue for countries. The largest open registers, Panama, Liberia, and Cyprus, 
apply corporate tax rates of zero and are estimated to produce annual incomes of US$ 10-
20 million. They are run as commercial undertakings. 
For EC shipowners and operators, the cost savings that can be achieved by changing to 
an open register can be significant: eg. for a 2,700 TEU containership, crew costs may be 
US$ 1,144,000 per year more under the German flag than under Panama registration. 
Similarly, the owner of a Suezmax 140,000 dwt tanker might save US$ 958,000 tax per 
year if he flags his ship out from Italy to Panama. A more extensive cost comparison is 
found in Annex A-1. It is clear from these data that EC shipping companies may suffer an 
important disadvantage because they face higher labour and fiscal costs than some of 
their international competitors. 
If a country with an open register also possesses a good maritime service infrastructure, 
ie. good communications, ancillary service industry such as insurance, legal services, 
finance and credit facilities, swift diplomatic protection and an independent judiciary, 
shipping companies may consider not only registering their ships there, but also 
transferring some of their activities and even the headquarters. The extent to which a 
change of flag may also lead to a relocation of a whole company, with consequences for 
economic activrty and employment also on shore, depends greatly on the amount of on­
shore investment. The less there is fixed on-shore investment, the easier it will be for a 
company to relocate. This makes bulk shipping a more plausible target for total relocation 
than liner shipping. 
The decision whether to relocate is influenced not only by operational costs, but also by 
the effect of corporate tax on profits in a given country. 
3. Global competition and mobility of assets 
Compared with other modes of transport, shipping is generally free of regulatory market 
access barriers. In principle, any operator can, regardless of its nationality and the location 
of its company seat, provide international shipping services. In practice, though, important 
restrictions remain and the danger of new restrictions is still present. The provision of 
services between two destinations neither of which is the country of registration of the 
ship (cross-trading) is common. 
According to estimates from the European Community Shipowners' Associations (ECSA), 
Denmark, the Netherlands, and the UK have important cross-trading interests in liner 
Thus, Cyprus requires that 15% of the crew of a vessel registered in Cyprus must be 
Cypriots; however, this requirement is subject to waiver. 
1<* 
- 3 -
shipping, while Greece, Belgium and Germany are heavily involved in world-wide bulk 
cross-trading. 
Global competition immediately highlights any competitive disadvantage, whether 
business-related or regulatory in nature. A shipping company may therefore seek to 
overcome costly or burdensome regulatory disadvantages by flagging out. This will, in 
principle, not entail any retaliatory regulatory disadvantages for it, as international trades 
are to a large extent free of any access barriers relating to nationality. 
II. Need for EC Shipping 
Conventionally, the need for EC shipping is affirmed by pointing to economic and military 
independence. The EC, it is said, should not depend too heavily on maritime services 
provided by its economic competitors as these may, in specific circumstances, act in 
support of their long-term commercial interests.2 This might have a detrimental influence 
on EC trade. In times of military crisis, the EC Member States should be able to rely on a 
merchant fleet reserve for defence needs. 
A third important consideration is the contribution that shipping makes to the broader 
economy through its relationship with a wide range of maritime industries. ' 
1. Economic independence 
The prime need of European trade is for efficient and safe maritime transport. This is 
provided by EC and non-EC shipping companies. A wide range of cost-effective services 
is essential to maintain the competitiveness of European industries and Europe's economic 
independence as a whole. The maintenance of open, competitive shipping markets and 
the vigorous application of flag-blind competition rules are the best way of securing this 
result. 
Indeed, aggressive pursuit of the objective of maintaining shipping independence at the 
expense of non-Community operators could rebound if it were to lead to protection for 
inefficient European operators. It could also encourage imitation by other countries which 
risks damaging cross-trading, in which several EC Member States have important interests. 
If one follows the argument that a Community fleet is necessary for economic 
independence, this may be guaranteed by EC control of shipping. As it does not 
necessarily require EC flagged vessels, the goal of economic independence would not in 
itself call for measures supporting EC flag shipping and EC employment. Nevertheless, the 
issue of economic independence merits continuous vigilance as to the genuine openness 
of world shipping markets. It may be prejudiced, as may shipper choice, if markets are 
closed, for example, through unfair pricing, long-term arrangements within closely 
vertically integrated organisations or cargo restrictions, formal or informal. 
See European Commission, Maritime Transport Report, Sec (94) 933 final, 8 June 1994. 
3? 
2. Military needs 
In case of military need, Member States may want to ensure readily available naval 
capacity. For this, it will not only need the appropriate ships, but also qualified national 
seafaring personnel who are available for military activities. However, a strategic ship 
reserve will depend on the military priorities of a given country, its geographic location and 
its geopolitical commitments and may relate to specific ship types. Questions of naval 
defence cooperation are for the time being addressed in NATO, and the WEU is following 
these developments closely. Although defence considerations clearly underlie the concern 
in a number of Member States about the decline in EC flagged vessels and in the 
availability of EC seafarers, it seems that the question of a naval ship reserve is outside 
the direct scope of Community industrial and maritime policy.3 
3. Contribution to broader economy 
An important argument for maintaining an EC flag fleet in the first place, and an EC-
controlled fleet in the second place, is the contribution EC shipping makes to the overall 
health of the EC economy. Thus, for example, it has been calculated that for every 100 
ECU of added value created in the shipping sector itself, 35 ECU of value is added in the 
supplying industries in the Netherlands. About 44% of this added value flows back to the 
public authorities, in form of taxes and social security contributions. Investment on-shore 
is an important aspect of maritime activity. By providing high quality and cost effective 
products and services, related sectors contribute substantially to the long term prospects 
of the EC shipping sector. 
The specific shipping-related activities ashore which generate added value vary in 
importance from Member State to Member State and include port handling, stevedoring, 
logistics, ship inspection and classification, ship management and broking, international 
banking and financial services, underwriting and insurance business, consultancy and 
professional services. 
EC shipowners currently order approximately 50% of their newbuildings in EC shipyards. 
Thus, while foreign shipowners also contribute to the EC shipbuilding order book, a steady 
source of orders from EC-based shipping allows these industries to plan ahead. 
EC shipping personnel provide vital know-how not only for the safe operation of ships, but 
also to related sectors. Many maritime industries have traditionally relied on seafaring 
skills and experience. The jobs they provide outnumber the jobs on sea. For example, in 
Germany, at the end of 1993, there were 16,000 jobs on board, 44,000" in shipbuilding 
and 70,000 in ship supply industries. For the UK, it is estimated that maritime related 
industries provide 416,500 jobs, of which 80,000 are directly related to merchant 
shipping. Seafarers, after some years at sea, will often use their experience and knowledge 
in subsequent employment on-shore. For example, officers and able seamen may be 
employed after their seafaring life in a wide range of related occupations such as logistics 
services, marketing, managing fleet operations, and in related business and administration. 
In relation to industrial policy, the Commission has adopted a Communication "The 
Challenges facing the European Defense Related Industry, a contribution for action at 
European level" (Com (96) 10 final, 24 January 1996). 
18 
-5 
They can also contribute to continuing maritime education in the EC4 as well as to the 
enforcement of national and international standards. 
III. Developments in EC Ownership, Flag, and Employment 
1. Evolution of EC ownership 
a. The facts 
In 1994, EC interests retained a total of 34% (in dwt) of the world fleet. This is down 
from 38% in 1985. However, between 1985 and 1994, the aggregate EC controlled fleet 
grew in total terms (dwt) by 1 2%. There has been no reduction in the EC share in global 
ownership since 1 990. Greece is the largest shipowning nation in the world in total terms, 
controlling 18% of the world fleet. In container shipping, German ownership is world 
leader with 13% control in this sector.5 
b. Policy conclusions 
In assessing the relative decline in ownership, the following factors should be taken into 
account: 
generally speaking, productivity of ships has been improving". Thus, the same or 
even more cargo can be carried today with less tonnage than in the past; 
the loss of control since the early 1 960s, when the EC controlled half of the world 
fleet, is largely based on a readjustment to the post-colonial era and the emergence 
of new shipping nations in the Far East, which have built up fleets along with their 
trade. Indeed, world trade patterns have changed considerably: it is estimated that 
in the year 2000, intra-Asian trade will account for 48% of all cargo carried on the 
main shipping routes, up from 36% in 1987. Conversely, the traditionally dominant 
trade between the US, Europe and Japan has diminished in relative terms. It may 
be considered natural that a large proportion of the vessels carrying the Pacific rim 
trade is owned by Asian interests. 
The EC controlled fleet deploys more capacity in the home trades of the EC than 
the controlled fleet of other major trading nations in their respective home trades. 
According to NUMAST, the following professions rely on seafaring expertise: harbour 
administration and control/port operations, marine pilotage, marine engineering, ship 
inspection and surveying, coastguards, marine equipment industry, marine law and 
insurance, nautical colleges, ship management, shipbrokers. 
Further information on the controlling interest of Member States in the world fleet can be 
found in Annex A-2. 
Ie! 
-6-
Owned/Controlled Fleet as Percentage of Total Supply Serving Home Trade (1993) 
Controlled Vessels 
40% 
30% 
20% 
10% 
0% -^ #$! 
mi > 
bJ ** Controlled DWT 
50% 
40% 
30% 
20% 
10% 4 
0% -
UJ V) < z 
Soupce: LMIS 
NIE's: Newly Industrialised Economies (Hong Kong, South Korea, Taiwan) 
The loss of control in total terms over the past decades seems thus to follow a normal 
path in the light of worldwide trade patterns and division of labour, and there does not 
seem to be a strong need for a specific policy fostering EC ownership. 
2. Flagging out 
a. The facts 
The main reason for flagging out is overall cost savings, with crew costs, tax and fiscal 
costs being cited most often. The extent of this trend can be seen from the following 
figures: 
40% 
30% 
20% 
10% 
0% Percentage of World Tonnage (DWT) under EC Flags 
32% 
29% 
1970 1980 
Source: LMIS (1995); DG VII 1985 1994 
Id 
Today, 56% of the EC tonnage is flagged out. Further factual information concerning the 
flagging out trend from EC flags can be found in Annex A-3. 
It is noticeable that the extent of flagging out is related to the type of shipping operation. 
Flagging Out of EC Fleets 
0% 10% 20% 30% 40% 50% 60% 70% 80% 
Percentage of EC owned Vessels Flagged Out 
Source: LMIS (1995) 
Flagging out indicates a growing loss of competitiveness under EC flags. Indeed, EC 
owners have a high percentage share of ships in open registers. 
120000000 
100000000 
80000000 
60000000 
40000000 
20000000 EC Owned DWT in Open Registries 
Source: LMIS 1 J 
-+-•—,—,_j—,—1.1—i—)_ • non-EU owned DWT 
• EU Owned DWT in Register 
<0 O (0 (O 
'= 5 E — 
S >- c S 
-J O « «5 > S < < 
HI 
However, similar problems appear to confront major Asian carriers as they have also 
flagged out: e. g., 65% of Japan's NYK vessels fly a foreign flag. Further, in assessing 
the gravity of flagging out, one should bear in mind that the EC flag fleet still deploys more 
capacity in the EC's home trade than the flag fleet of other major trading nations in their 
respective home trades. 
Own Flag Fleet as Percentage of Total Supply Serving Home Trade (1993) 
Own Flag Vessels Own Flag DWT 
''~Ë-t 
,ra. w$ 'iSs •'*' 20% 
15% 
10% 
5% j 
0% 20% 
15% 
10% 
5% 
0% 
o < z < •„ 2 a < 
" £ < S UJ o a. 
< o z -» 
Source: LMIS 
* NIE's: Newly Industrialised Economies (Hong Kong, South Korea, Taiwan) 
b. Policy conclusions 
Nevertheless, there are several reasons why the EC should be concerned about flagging 
out. 
Flagging out ships may often constitute a means of avoiding a regime which is seen as too 
burdensome by economic operators. To secure, for example, the reduction in corporate tax 
offered by low tax non-EC countries, a company must often establish effective 
management of its flagged-out ships outside the Community. Once it has done so, the 
delocalised management develops its own momentum and the "raison d'être" of the 
European management starts to erode. Over time, the whole management may move off­
shore giving further impetus to the use of non-EC flags and indeed whatever facilities are 
on offer in the global market place. Flagging out does not always lead to loss of seaboard 
employment, on-shore activities or relocation of a company, but it may be very difficult to 
re-attract maritime business once the infrastructure and the human resources begin to 
move away. 
As explained further below, having ships under EC flags contributes to ensuring that safety 
standards can be closely monitored through flag State control. It has been shown that, in 
some instances, the safety record of ships flagged out from EC registers is worse than for 
ships in those registers. If all relevant EC legislation is properly enforced, flying an EC flag 
should be synonymous with operating a safe ship. Flagging out lessens the control power 
of EC Member States over standards. 
Flagging out from EC flags has also contributed to job losses for EC seafarers. 
m 
400000 Loss of Employment for EC seafarers 
1994 
Source: DG VII; LMIS; European Shipowners' Associations (ECSA) 
Not all of the job losses, however, are the result of flagging out: reduction in the number 
of vessels, coupled with the development of larger vessels, and rationalisation have also 
played their part. 
Flagging out 
51% Main Reasons for EC Crew Losses 
Fleet reduction 
27% 
Source: Mercer/LMIS (1995) Reduced number 
of crew/vessel 
22% 
V3 
- 10-
3. Recent labour supply developments 
a. Difficulties in assessing impact of gross employment trend 
As stated above, flagging out is responsible for roughly half of the job losses in the last 
decade to EC seafarers. But before drawing any policy conclusions from this fact, the 
following has to be taken into account. 
The figures may overestimate the actual employment loss for EC nationals, as they do not 
provide any information on the employment of EC nationals on ships under a foreign flag. 
Additionally, they do not provide any information on the rank of seafarers. The loss is 
likely to be less pronounced for officers than for ratings, as evidence suggests that on a 
flagged out ship the owners will retain at least officers of their own nationality. In some 
instances, the flagging out does not affect the crew nationality at all.6 
However, even if EC seafarers are retained on board flagged out vessels, working 
conditions, pay and benefits, such as sickness and accident insurance, are often worsened. 
EC seafarers who keep their jobs when vessels are flagged out may, therefore, experience 
these negative consequences and some loss of morale. 
Conversely, operators may seek to reduce costs on EC flagged vessels by employing non-
nationals. Estimates from national shipowners' associations suggest that while, in 1983, 
14% of seafarers on EC flagged vessels were non-nationals, the proportion had risen to 
35% in 1994 while total employment fell nearly a third. Information is not readily available 
on how many of these non-nationals came from outside the EC, nor on the rank or position 
there were appointed to. 
In this connection, it should be noted that job losses due to manning of ships with low-
cost labour may lead to cost savings in the transport business. When this leads to lower 
freight rates, it makes traded products cheaper and therefore increases growth and 
employment in the economy as a whole. 
b. Shortage of qualified seafarers 
While it is thus difficult at this stage to assess the problems in terms of the gross 
employment of EC seafarers, a more specific problem has arisen in recent years, to which 
a policy response is urgently needed: the shortage of better qualified seafarers worldwide. 
As stated above, the number of seafarers from EC countries has consistently fallen during 
the last two decades. While this tendency has in the past been qualified as a problem 
affecting OECD countries only, a worldwide shortage of officers and specialist ratings is 
now envisaged. Already today, certain EC Member States signal that the number of new 
recruits to the seafaring profession only covers about 25% of the estimated replacement 
needs. Even for these recruits, it is suggested that there are not sufficient places on board 
EC flag vessels for them to gain the requisite experience. 
6 Further information on employment trends under EC Member States flags can be found in 
Annex A-4. 
Towards a New Maritime Strategy 
Annex A 
HH 
-11 -
The new STCW (Standards of Training, Certification and Watchkeeping for Seafarers) 
requirements, while leading to higher levels of competence, could accentuate the 
worldwide shortage of skilled seafarers. 
The reasons why policy must find a response to this predicted shortage, are four-fold. 
First, to ensure safe navigation of ships. 
Second, to preserve the maritime know-how in the Community which is needed in 
ancillary industry. 
Third, for the enforcement of the safety policy of the Community, by maritime 
administration; 
Fourth, for continuing education of young seafarers. 
In this context, the loss of qualified employment in shipping is assuming a new dimension; 
it cannot be judged only numerically and should not therefore be considered of minor 
importance by comparison with even larger job losses in other European sectors as a 
consequence of increased international competition. Lack of availability of highly trained 
and well qualified EC seafarers may jeopardize the effectiveness of the ambitious 
Community efforts to implement and enhance maritime safety and pollution prevention and 
may gravely affect the European maritime industries as a whole. But this problem may turn 
out to be a great opportunity for the EC to become a supplier of high quality personnel to 
shipping worldwide. 
IV. Some Further Trends in Global Shipping 
1. Further globalisation 
Recent years have brought, through the liberalisation of world trade and decentralised 
production methods, a continual increase in global trade and with it growing demand for 
shipping services. In line with this development, the globalisation of the shipping industry 
has continued unabated. Registration in open registers continues to increase, and there is 
a growing number of countries offering these registers. 
Liner shipping has grown on average at a rate of 6.5% per annum in the last 10 years, and 
it is projected that it will continue to grow at the same rate for the next decade. The 
globalisation of production is leading to demand for global transport services. To respond 
to this demand, trade alliances between shipping companies are being created. These 
alliances or consortia can meet customer demand for global transport coverage, while the 
traditional conference system, based on geographically restricted trade routes, cannot. This 
trend is also leading to increasing concentration of market power in the hands of a small 
number of operators and the emergence of very large maritime logistics companies. 
With globalisation of industry, door-to-door transport networks will tend to become more 
and more important for manufacturers and shippers. There is therefore a tendency towards 
developing increasingly customised services which encourage individual client-provider 
relationships. All these developments are tending to replace the traditional self-regulation 
between groups of users, the shippers' councils, and groups of providers, the conferences. 
Towards a New Maritime Strategy 
Annex A 
^ 
- 12 -
For bulk shipping, trade growth is always difficult to predict, because demand depends on 
volatile factors such as seasonality of trade, yield of food crops, etc. It is estimated that 
the main features of this sector, namely its cyclical nature and its unpredictability, will not 
change fundamentally in the longer term. 
2. Investment patterns 
The openness of European markets has attracted foreign investment. Today, some 
efficient short sea and feeder operators in intra-European trades are non-European-owned. 
For example, the US company Sea-Land is heavily involved in European short sea traffic. 
The Japanese shipping company NYK is said to have invested US-$ 350 million into its EC 
transport network. Other Japanese shipping companies have bought EC shipping 
companies or have created shipping joint ventures with EC companies for intra-EC 
services. At the same time, European shipowners are taking advantage of the opportunities 
in cross trading and are beginning to set up transport networks in other continents. 
However, investment opportunities for EC shipping companies are limited where the 
provision of domestic services is not open to foreign operators or there is discrimination 
in ports vis-a-vis non-national operators. 
3. The problem of ageing ships 
Heavy worldwide subsidization of shipbuilding has contributed to oversupply in ships and 
the resulting structural overcapacity in bulk shipping markets, with consequently depressed 
freight rates. This cause of oversupply should, however, diminish, provided the major 
OECD shipbuilding nations, accounting for about 80% of world shipbuilding, abolish 
subsidies to shipbuilding from 15 July 1996, as agreed. The conclusion of the OECD 
Shipbuilding Agreement banning all forms of competitive distortion will broaden the scope 
of shipowners choice regardless of non market criteria. 
The depressed rates and the increasing competitive pressure has contributed to lower 
returns for many shipowners. Shipping has thus been lagging behind other industries in 
terms of return on equity and investment. This has led to extending the useful life of ships 
and, in general, an ageing of the fleets and sometimes reduced maintenance efforts with 
consequent safety problems. 
Average ship age7 1985 1994 
EC-flagged 1 6 years 21 years 
World 14 years 17 years 
While older ships can be maintained to high standards, statistics show that overall casualty 
risks rise with age of ship. For example, studies of tankers and bulkers show that the risk 
for 20 year old ships is more than twice the risk for 10 year old ships. 
Statistics refer to vessels over 100 GRT in respect of liquid bulk, dry bulk, general cargo, 
container, Ro/Ro, and other dry cargo categories. 
Towards a New Maritime Strategy 
Annex A 
HCf 
- 13-
4. Enlargement of the Community 
Recent accessions have brought a substantial addition of tonnage under the control of EC 
owners. Sweden ranks 14th as a shipowning nation, Finland 34th, and Austria 68th. The 
future may bring further tonnage to the Community, as Cyprus and Malta are envisaging 
accession. Accession could thus boost the maritime importance of the Community and 
considerably increase its flag State control and its say in world maritime matters. To 
anticipate this trend and develop a coherent maritime policy framework, especially 
concerning registers and maritime safety, which takes account of these possible future 
accessions, is thus gaining in urgency. 
V. Opportunities for EC Shipping 
As already noted, EC shipping faces many challenges, but it is still well placed to take 
advantage of the opportunities arising both from the general increase in demand for 
shipping services and from increasing specialisation. EC liner companies are in aggregate 
as profitable as non-EC liner shipping companies. Globalisation of trade and production will 
demand an increasingly individualised transport product, which in turn will require qualified 
expertise and specialized personnel. An EC approach fostering training and development 
of skills can contribute to meeting these demands. There is recent evidence that owners 
are seeking EC seafarers as specialized professional expertise is required to maintain 
expensive assets and performance according to stringent safety regulation and increasing 
customer demands. Another important possible growth area is short sea shipping.8 
Traditionally, many European operators possess experience in this field which can be used 
both in Europe and outside. Further, in cruise shipping, off shore supply, heavy load and 
other specialized shipping, European operators offer experience and sophistication of many 
years' standing. 
Sophisticated shipbuilding can help F_C shipping explore the new trade opportunities 
(including, for example, routes permitted since the opening up of the former USSR, which 
may require ships with special hull construction because of icy conditions). The need for 
new types of vessel should create export potential for specialised ships and systems and 
also provide new employment opportunities for trained personnel on-board. 
See European Commission, The Development of Short Sea Shipping in Europe: Prospects 
and Challenges, COM (95) 317 final. 
Towards a New Maritime Strategy 
Annex A 
^> 
Corporate Tax Gap for Ten Vessel Types 
Tankers 
Suezmax(140 000dwt) 
Product tanker (40 000 dwt) 
Cape Size (150 000 dwt) 
Panamax (65 000 dwt) 
Handy-size (28 000 dwt)) 
Container 
Large (4 000 TEU) 
Line-Haul (2 700 TEU) 
Deepsea Feeder (1 500 TEU) 
General Cargo 
Breakbulk(15 000dwt) 
Ro-Ro (6 000 dwt) EU Flags 
mi Lower cost 
Open Registry 
(non ITF) Annual Cost 
Difference (in 'Û00 $)1 
B 
Italy 
Italy Greece 
Greece Panama 
Panama 958.2 
494.4 107.1 
38.8 
Italy 
Italy 
UK Greece 
Greece 
Greece Panama 
Cyprus 
Panama 709.1 
439.3 
202.8 119.5 
58.8 
27.2 
Neth. 
Germany 
Germany Denmark 
France 
Greece Panama 
Panama 
Panama 782.1 
372 
253.3 752.8 
460.6 
29.3 
Germany 
Italy Greece 
Greece Cyprus 
Panama 168.1 
308.9 16.3 
4.6 
Against lower-cost Open Registry 
Source: Mercer Management Consulting/LMIS 
m x 
Crew Cost Differences for Ten Vessel Types 
Tankers 
Suezmax(140 000dwt) 
Product tanker (40 000 dwt) 
Bulkôrs 
Cape Size (150 000 dwt) 
Panamax (65 000 dwt) 
Handy-size (28 000 dwt)) 
Container 
Large (4 000 TEU) 
Line - Haul (2 700 TEU) 
Deepsea Feeder (1 500 TEU) 
General Cargo 
Breakbulk(15 000dwt) 
Ro-Ro (6 000 dwt) EU Flags 
m m Lower cost 
Open Registry 
(non ITF) Annual Cost 
Difference (in '000 $) 
B Cpstlndex^ 
m 
Italy 
Italy Greece 
Greece Panama 
Panama 1228 
1192 185 
179 368% 
370% 140% 
141% 
Italy 
Italy 
UK Greece 
Greece 
Greece Panama 
Cyprus 
Panama 865 
794 
472 155 
149 
144 313% 
304% 
227% 138% 
137% 
139% 
Neth. 
Germany 
Germany Denmark 
France 
Greece Panama 
Panama 
Panama 630 
1144 
1144 380 
1124 
91 279% 
433% 
433% 208% 
427% 
126% 
Germany 
Italy Greece 
Greece Cyprus 
Panama 1221 
587 88 
82 383% 
265% 122% 
123% I 
Against lower-cost Open Registry 
Source: Mercer/LMIS (1995) 
m x 
25% T 
20% 
15% 
10% 
5% 
0% - 16 -
Controlling Interest of Certain Member States 
in Specific Ship Types as Percentage of World Fleet 
(in DWT, 1994) ANNEX 2 
Dry bulk 
mua , ! 
Denmark Germany Italy UK Greece 
7% 
6% 
5% 
4% 
3% 
2% 
1% 
0% Ro-Ro 
o o 
Container 
14% 
12% 
10% 
8% 
6% 
4% 
2% 
0% H ' •-••••• 1 • 1 • ' 1 ' * 1— 
Italy Netherlands France Greece Denmark UK Germany 
n> 
Source: LMIS 
- 17 -
Controlling. Interest of Certain Member States 
in Specific Ship Types as Percentage of World Fleet (in DWT, 1994) ANNEX 2 
14% T 
12% 
10% 
8% 
6% 
4% 
2% 
0% Specialised Dry1 
o 
Lrfestock, barge, heavy cargo, nuclear fuel O 
10% T 
9% 
8% 
7% 
6% 
5% 4 
4% 
3% 
2% 
1% 
0% General Cargo 
Denmark Netherlands Germany UK Greece 
Total 
18% -, 
16% --
14% 
12% 4 
10% 
8% 
6% 
4% 
2% 
0% mR 
France Italy _, 1-, i H 
Sweden Denmark Germany UK Greece 
n 
Source: LMIS 
3> 
Z 
m x I 
CO 
I 
Source: LMIS Vessel Database (1995) 
- 19 -
Nationals on board EC Flag vessels ANNEX A 
U.K. 
Sweden 
Spain 
Portugal 
Netherlands 
Italy 
Ireland 
Greece 
Germany 
France fe 
Finland i Data for 1994 hot available 
•..jitJitUuiMi^lilMlrl^J 
mm 
^^WM^M^^T" 
Denmark \^>»^^^^>^^^^^^^>^ 
Belgium p^] D1983 
H1992 
D1994 
5000 10000 15000 20000 25000 30000 35000 40000 
Non-national seafarers on board EC Flagged vessels 
U.K. % 
Sweden 
Spain 
Portugal 
Netherlands 
Italy 
Ireland 
Greece 
Germany 
France 
Finland 
Denmark 
Belgium 1 
1 
' . ,,M • . "' "' 'I 
none 
no data avai 
no data avai able 
able 
1 
J 
none 
1 
l23 
i .. i , . . 1 •> 1 
1 
i | 
1 
V.MMMM^^^ 
1 1 1 1 1 
1 
^ 
none 
.,.-.,,...,..•.•.,,., 
F^ 
i 
<mxnmxxnxmùxxiz\i.. 
^W 
:-::•::•: •:•:•:! 1 D1983 
E3 1992 
D1994 
1000 2000 3000 4000 5000 6000 7000 8000 9000 
Source: ECSA 0 
ANNEX B 
EFFORTS AND SUCCESSES SO FAR 
I. Analysis of EC Policy so Far 
The Commission has, for some years, applied a Community maritime policy consisting of 
a combination of actions concerning external relations, competitiveness of EC shipping and 
maritime safety. Progress in opening markets and eliminating substandard shipping 
through stringent application of safety regulations should lead to a better competitive 
position for EC flagged shipping. It does not, however, mean that temporary support 
measures for the EC flag fleet become immediately unnecessary. 
While the impact of these policies was felt more strongly in deep-sea shipping, the 
Commission has recently proposed action to develop short sea shipping. Further, since 
1987, the Commission has conducted an active competition policy with regard to liner 
shipping. 
1. Community maritime policy 
The European Court of Justice gave two judgments which provided the impetus to develop 
a Community maritime policy. First, in 1974, it stated that the general rules of the Treaty 
applied to maritime and air transport on the same basis as the other modes of transport.1 
Then, in 1985, it ruled that the Council had failed to fulfil its obligations because it had not 
enacted legislation for the freedom to provide services in the transport sector pursuant to 
Art. 75 of the Treaty.2 In the same year, the Commission proposed a common maritime 
policy.3 
a. The 1986 package 
The ensuing 1986 package was based on an open market, non-protectionist philosophy 
to foster a competitive EC fleet and to further employment; at the same time, it provided 
measures to counter unfair competition.4 Overall, the Community decided that all intra-
European trades except cabotage should be open and that there should be no further 
requirement than establishment in the Community to benefit from shipping opportunities 
within the EC. This policy was not conditioned upon any similar commitment to open 
markets from the Community's main trading partners. 
1 French Seamen's Case, 1974 (ECR) 359. 
2 Parliament v. Council, 1985 (ECR) 1513. 
3 'Progress towards a common transport policy - maritime transport', Bulletin of the European 
Communities, supplement 5/85. 
4 The 1986 package, O.J. No. L 378, 31 December 1986, consists of four regulations: 
Reg. 4055/86 applying the principle of freedom to provide maritime transport 
between Member States and between Member States and third countries; 
Reg. 4056/86 laying down detailed rules for the application of Articles 85 and 86 
of the Treaty to maritime transport; 
Reg. 4057/86 on unfair pricing practices in maritime transport; 
Reg. 4058/86 concerning coordinated action to safeguard free access to cargoes 
in ocean trades. 
European Commission - Towards a New Maritime Strategy - Annex B 
(ft 
- 2 -
b. Proposals to keep ships under EC flags and create the single market 
In 1989, the Commission proposed further measures to develop the common shipping 
policy.5 As in 1 985, it pointed to further loss of employment and competitiveness of the 
EC fleet and specifically identified high labour and fiscal costs under EC flags as a main 
reason for flagging out. Consequently, the Commission proposed a dual-purpose measure 
to alleviate the financial burden of flying an EC flag and at the same time safeguard EC 
employment: the Euros Register. The amended proposal of 1991, based on one of the 
proposals of the European Parliament, foresaw that all Community shipowners with ships 
registered in Euros and meeting the mandatory minimum of EC seafarers would be entitled 
to reimbursement of seafarers' income tax. The proposal thus specified a form of State aid 
as compatible with the common market. Member States shrank away from the mandatory 
nature of this Community measure. The issue of mandatory crewing requirements also 
remained a large stumbling block throughout the discussion. The Council has therefore not 
been able to accept this proposal, although the Commission has tried different formulae 
to forge agreement. 
The package of 1989 also included a proposal to liberalise domestic trades, adopted as 
Regulation 3577/92,6 and a proposed definition of the notion of Community shipowner. 
This developed criteria based on majority ownership and majority voting rights by EC 
interests which were deemed necessary for a shipping company to be considered a 
Community shipowner for the purposes of all relevant Community instruments (e. g. 
cabotage, registration in Euros, carriage of food aid).7 The proposal has not yet been 
adopted, and the Edinburgh Council of 1992 asked the Commission to review it. 
Also in 1989, the Commission issued guidelines for the assessment of State aid to the 
shipping sector.8 The Commission decided that it could authorise, as in the Community 
interest, State aid measures to 
maintain ships under Community flags, modernise fleets and 
maintain employment of EC seafarers. 
State aid could bridge the cost gap between operating under an EC flag and under a flag 
of convenience, but it also had to fulfil certain other conditions to be allowed: 
5 'A future for the Community shipping industry: measures to improve the operating 
conditions of Community shipping', COM (89) 266 final, 3 August 1989. 
6 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), O.J. L No. 364, 12 December 1992, p. 7. 
7 See COM 89(266) final; COM 91(54) final. 
8 SEC (89) 921 final. 
-European Commission - Towards a New Maritime Strategy - Annex B 
ff 
3-
it should be in line with the Commission's general State aid principles; 
it should not lead to maintenance or increase of capacity in sectors with 
overcapacity. 
In 1991, the Commission issued a Communication on the challenges to the maritime 
industries9. This Communication was based on the application of the new industrial policy 
approach of. 1990 and put shipping, shipbuilding, supply industries, fisheries, etc, in their 
industrial context. Again, this Communication pointed to the loss of ships and employment 
in EC fleets. This Communication led to the formation of the Maritime Industries Forum and 
is followed-up by a new Communication entitled "Shaping Europe's Maritime Future". 
c. 777e common policy on safe seas 
The Communication on a Common Policy on Safe Seas was adopted by the Commission 
in February 1993.10 This policy has been fully endorsed by the Council and by the 
European Parliament. It is based on: 
securing the convergent application of international safety standards in 
European waters; 
strengthening the role of the port State in inspecting ships of all flags; 
fostering an adequate and technologically advanced maritime safety 
infrastructure; 
supporting international organisations in their primary role in international 
standard-setting; 
In less than three years several implementing measures have been finally adopted, and 
bind Member States administrations as well as the private to effective compliance from 
1996 on. They establish a set of basic rules to be respected by all suppliers of maritime 
transport services. In essence, their aim is to prevent market participants from reducing 
safety of operations to improve their competitive position. Provided they are uniformly and 
rigorously applied and enforced in all Member States, the adopted measures could lead to 
a marked improvement in the safety and environmental operation of seagoing vessels. The 
Commission intends to monitor this implementation process and to act promptly to remedy 
non-compliance as an essential element of its future policy in this sector. 
As of January 1 996, the main measures are as follows: 
The responsibilities of the flag state administrations and of the organisations acting on their 
behalf (Directive on Classification Societies 94/57) 
Only those organisations meeting high quality criteria are recognized by the European 
Community and are allowed to carry out safety and environmental inspections on behalf 
of the national administrations. From 1 January 1996 ships certified by non-European 
9 'New challenges for maritime industries', Communication from the Commission to the 
Council, the European Parliament and the Economic and Social Committee; COM (91) 335 
final, 20 September 1991. 
10 A Common Policy on Safe Seas, COM(93)66 final, 24 February 1993. 
European Commission - Towards a New Maritime Strategy - Annex B 
5l* 
recognised organisations shall be targeted, whatever their flag, for priority inspections by 
the authority of the State of the port.11 
777e training and qualifications of seafarers employed on sea-going ships flying the flag of 
a Member State (Directive 94/58) 
Based on the STCW Convention, this directive imposes also effective communication 
requirements on board all vessels entering an EC-port, whatever their flag. In particular on 
oil, chemical and gas tankers one common working language is required for both on board 
and ship-shore communications.12 
Port State Control (Directive 95/21) 
The effective and uniform control of ships entering EC ports, whatever their flag, is the 
corner stone of a policy aimed at drastically reducing substandard shipping from operating 
in European waters. The Directive requires, as of 1 July 1996, the targeting of blacklisted 
flags as well as certain types of potentially dangerous ships, such as ageing bulk carriers 
or oil tankers. Ships with important deficiencies shall be detained until all defects have 
been remedied.13 
Notification obligations (Directive 93/75) 
Since September 1995, shippers and shipowners involved in the carriage of dangerous or 
polluting cargo are subject to notification obligations specified in Directive 93/75. This 
should permit more effective remedial action in case of accidents. To this end Member 
States have to ensure an effective structure to provide at once relevant information if 
requested by another Member State.14 
Segregated ballast tanks (Regulation 2978/94) 
From 1 January 1996 port entities and pilotage services are obliged to charge lower fees 
to tankers with segregated ballast tanks or double hull lower than the ones for tankers 
without segregated ballast of the same gross tonnage. This Regulation is designed to give 
an incentive and to reward shipping companies to use more environmentally friendly 
ships.15 
ISM Code Regulation (Regulation 3051/95) 
As of 1 July 1 996, companies operating Ro-Ro passenger ferries to or from a port of the 
Community are subject to auditing and certification of their Quality and Safety 
Management System covering both their shore based and on board activities.16 
n 
12 
13 O.J. No. L 319, 12 December 1994, p. 20. 
O.J. No. L 319, 12 December 1994, p. 28. 
O.J. No. L 157, 7 July 1995, p. 1. 
14 O.J. No. L 247, 5 October 1993, p. 19. 
15 O.J. No. L 319, 12 December 1994, p. 1. 
16 O.J. No. L 320, 30 December 1995, p. 14. 
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d. Ex te ma I re la tions 
Since the adoption of the 1986 package, the Community's external relations policy in 
maritime transport has been to secure free access and fair competitive conditions 
throughout the global market. In the pursuance of this policy, the Community has pressed 
for further liberalisation as well as rolling back existing restrictions. Thus, the Lomé 
Conventions with the African, Caribbean and Pacific (ACP) countries and the Europe 
Agreements with several East and Central European countries contain provisions securing 
free access to maritime markets. Clauses relating to liberalising shipping markets are also 
included in the Partnership and Cooperation Agreements with a number of former USSR 
countries and Association Agreements with countries from the Mediterranean. 
The 1992 Agreement on the European Economic Area (EEA) provides for the general 
application of the Treaty freedoms to this area. Within this framework, EC maritime 
legislation is largely applicable to the the contracting EFTA States, including Norway. 
Finally, the Community also strives for multilateral liberalisation of maritime transport 
services within the GATS framework. 
Besides such action, the Commission has also enforced the freedom to provide services 
in trades to and from the Community. It has taken action against unilateral cargo 
reservation of Member States and bilateral agreements between Member States and third 
countries which restrict this freedom. 
e. Relations with I MO/ILO 
The Commission is convinced of the necessity to assist the International Maritime 
Organisation (IMO) and the International Labour Organisation (ILO) in their task to set 
international standards for safety and labour roules. The Commission is recommending a 
strong stand by the EC with regard to improving working conditions, safety and training 
standards in IMO and ILO. 
The Commission co-ordinated the positions of Member States at the recent IMO 
Conferences on the Revision of STCW and SOLAS. This contributed to the successful 
outcome of the Conferences.. 
Regarding ILO, the Commission is of the opinion that the separate maritime structure of 
the Organisation put in place from the very beginning of its creation should be preserved. 
The specific characteristics of the maritime industry is recognised worldwide, Over 30 
Conventions and Recommendations dealing with the employment conditions of seafarers 
have been adopted. 
ILO activities devoted to seafarers' problems are becoming increasingly important in the 
light of the globalisation of the market, seafarers' health and safety and higher 
requirements on safety at sea and prevention of maritime pollution. Maritime expertise will 
continue to be needed in the ILO for adopting efficient instruments and upgrading existing 
international maritime labour standards. 
5? 
-6 
The Commission as well as trade union and shipowner organisations expressed concern 
when, for financial reasons, the ILO Governing Body postponed the Maritime Conference 
which was due to be held at the beginning of 1996. The conference will now be held in 
October 1996 and its agenda will include the revision of Convention No. 109.17 
The Commission attaches great importance to the successful revision of this Convention 
and its prompt entry into force. It will have a direct impact on the discussion between the 
EC social partners, represented in the Joint Committee on Maritime Transport, on working 
time in this sector. This subject was excluded from the Directive 93/104 on working time. 
The Commission encouraged the social partners to make recommendations to the 
Commission on how best to ensure that this sector is appropriately covered with regard 
to the protection of health and safety. The Commission will examine with Member States 
the possibility of convincing the Conference to decide on the enforcement of Convention 
No. 109 through port State control. 
f. Short sea shipping 
As mentioned above, the Commission recently adopted a Communication on short sea 
shipping.18 It includes an action programme with proposals for initiatives which can most 
appropriately be undertaken at Community level as well as recommendations addressed 
to Member States, their regional and local authorities, to ports and the maritime industries 
themselves. 
The Communication focuses on three areas: 
The improvement of the quality and efficiency of short sea shipping services 
It emphasises the importance of R&D activities under the Community's 4th 
Framework Programme. Measures such as support for short sea pilot-schemes, the 
implementation and monitoring of the G-7 MARIS project and the promotion of 
more widespread use of Electronic Data Interchange are considered necessary for 
a better integration of short sea shipping into intermodal transport chains. 
77ïe improvement of port infrastructure and port efficiency 
The development of short sea shipping will be one of the main objectives of port 
and port-related projects supported under the trans-European network plan. There 
is also need for transparency in port tariffs and in State aid to ports. Application of 
the competition and State aid rules of the Treaty should lead to improvements in 
efficiency and to the provision of customer-oriented services. 
The preparation of short sea shipping for a wider Europe 
This policy derives from the new economic and political framework of relations 
between the Community and States in adjoining regions, such as the Baltic Sea, the 
Black Sea and the Mediterranean Sea areas. For each of these regions, Waterborne 
Transport Working Groups have already been created on the initiative of the 
18 Wages, Hours of Work and Manning (Sea) Convention (1958). 
"The development of short sea shipping in Europe: prospects and challenges", COM (95) 
317 final. 
European Commission - Towards a New Maritime Strategy - Annex B 
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Commission. The objective is that each of the groups establishes a multi-annual 
work programme. This will provide a context for examination of proposals for 
assistance under the relevant Community programmes. 
The European Parliament, the Council, the Economic and Social Committee and the 
Committee of the Regions have already reacted positively to the action proposed in the 
Short Sea Communication. 
g. Competition rules 
Council Regulation 4056/86 lays down detailed rules for the application by the Commission 
of Articles 85 and 86 of the Treaty to maritime transport services to or from one or more 
Community ports. It grants a block exemption from the cartel prohibition contained in 
Article 85(1 ) to conferences for their traditional liner shipping activities, including the fixing 
of a common or uniform tariff for the provision of maritime transport services. A number 
of conditions and obligations are attached to the group exemption which may be 
withdrawn in the absence of effective competition on the trade in question. The scope of 
the group exemption does not extend to collective inland price fixing by liner shipping 
companies nor does it permit capacity non-utilisation agreements. 
On 8 June 1994, the Commission adopted a Report on the application of EC competition 
rules to liner maritime transport.19 In its Report, the Commission explained that the current 
practice of conferences of fixing common prices for the inland leg of a multimodal 
transport operation was in breach of the EC's competition rules and, in its current form, 
could not benefit from group or individual exemption. 
At the same time as condemning current conference practices of joint inland rate fixing, 
the Commission indicated in its Report a new approach which could pave the way for 
shipping companies to obtain individual exemption for inland cooperation and inland price 
fixing. In the same way as they cooperate on the maritime leg, they should cooperate on 
the land transport in such a way that significant benefits are brought to shippers. They 
should demonstrate that inland price fixing is indispensable to that cooperation and to 
attain the benefits resulting from that cooperation. 
In July 1995, a Committee of Wise Men under the name "Multimodal Group" was given 
the task of examining how the Commission's policy on multimodal transport price fixing 
could best be implemented in order to achieve the objective set out in the Commission's 
Report of 8 June 1 994. The Multimodal Group has presented its preliminary views and 
recommendations to the Commission in the form of an Interim Report and will present a 
Final Report during the course of 1996. 
Moreover, in April 1995, the Commission adopted a second group exemption regulation 
for the liner shipping sector.20 The regulation concerns agreements between liner shipping 
companies to bring about cooperation in the joint operation of a maritime transport 
operation (liner consortia). 
19 See Maritime Transport Report, Sec(94) 933 final, 8 June 1994. 
20 Commission Regulation No. 870/95 of 20 April 1995, O.J. No. L 89, 21 April 1995, p. 7. 
European Commission - Towards a New Maritime Strategy - Annex B 
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2. 777e Member States 
As the competition from non-EC flags became keener, many Member States offered 
various kinds of aid to shipping. Different Member States adopted different strategies and 
provided different budgets for their support measures. This in part reflected their general 
attitude towards State aid or their assessment of the relative importance of the shipping 
sector for their economy and society. Many Member States have long traditions as 
maritime nations which influence their attitudes towards shipping. Further, since the 
Member States have not to date been able to agree on a Community approach, they have 
sought national answers to the problems of their flag fleet. 
As flagging out and loss of employment continued in the late 1 980s despite State aid, 
some Member States decided to create specific registers for ships flying their flag in 
international trade to alleviate competitive disadvantages. Irrespective of their 
denomination, these registers were created to exclude ships flying the flag of the Member 
State from certain costs inherent in the fiscal and labour regime of the first register. 
Currently, the following Member States provide specific registers for their fleets: 
Denmark (the DIS); 
France (especially the Kerguelen Register);21 
. Finland (the List of Merchant Vessels in International Trade); 
Portugal (the MAR); 
Spain (the Canary Island Register); 
Germany's shipping register includes an international section (ISR), and shipowners of 
ships listed in this section may conclude deals with foreign seafarers at home country 
wages, which leads to considerable reduction in labour costs. 
Dutch owners tend to use the Netherlands Antilles register to improve their competitive 
position. The register is administered autonomously and should therefore not be regarded 
as a second or alternative register of the Netherlands. 
The United Kingdom does not possess an alternative register. British and other shipping 
interests can use the registers of various Crown and dependent territories to have access 
to local tax regimes, while still enjoying, through flying the Red Ensign, diplomatic 
protection by the United Kingdom. 
Austria, Belgium, Greece, Ireland, Italy, Luxembourg and Sweden do not for the time being 
have second registers, although Italy is reported to be considering one. 
In many Member States with alternative registers, the majority of ships in international 
trade are registered in the alternative register: for example, in Denmark, 92% of the total 
tonnage operating in international trades is registered in the DIS; the figure for the German 
ISR is 76%; in Finland, 50% of the fleet is on the List of Merchant Vessels in International 
Trade. The first register often has thus become of secondary regulatory importance for 
international shipping and the alternative regime becomes the real standard. 
21 The current Kerguelen register has been declared unlawful by the Conseil d'Etat on 
constitutional grounds in 1995. 
European Commission - Towards a New Maritime Strategy - Annex B 
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II. Results 
The maritime policy thus far has succeeded in opening up markets, particularly in Europe, 
and giving the consumer a wide choice of shipping services. The application of EC 
competition rules to all market participants regardless of flag has furthered consumer 
interests and ensures fair treatment of all liner shipping companies. The newly introduced 
safety policy will enable the Community to ensure that safety and environmental standards 
are effectively applied, thereby also ensuring fairer conditions for competition. The 
liberalised international shipping environment has, however, not led to creation of 
employment for EC seafarers. On the contrary, employment on-board has dropped. While 
the liberalisation measures taken may have resulted in enhanced productivity of the EC 
owned fleet, they have not diminished the pressure to flag out from the more onerous EC 
shipping registers, as the figures mentioned in part A clearly show. 
The success of Member States' alternative registers and aid schemes has been mixed. The 
Danish International Register (DIS) stipulates a nationality requirement only for the captain; 
it has nevertheless, mainly through the exemption from income tax of seafarers' income, 
attracted 80% EC employment on ships listed in this register. Some other Member States' 
registers have been successful in reversing or at least slowing the flagging out trend. Thus, 
since the introduction of the Finnish Alternative Register in 1992, tonnage under Finnish 
flag has risen by 50%. Interestingly, Finland has been able to re-attract bulk tonnage, 
which is a prime target for flagging out. Through the introduction of the ISR in 1989, 
Germany has been able to stabilize tonnage under its flag, as has Sweden through the 
introduction of tax rebates and reduced employers' social security charges. In certain 
Member States, national government action has not stemmed the overall decline of the flag 
fleet. 
In summary, the measures taken by the EC and the Member States to increase the 
competitiveness of EC flags have thus far not been able to reverse the flagging out and 
loss of employment, although some alternative registers seem to show promising features. 
European Commission - Towards a New Maritime Strategy - Annex B 
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COM(96) 81 final 
DOCUMENTS 
EN 07 
Catalogue number : CB-CO-96-119-EN-C 
ISBN 92-78-01699-3 
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