COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS - TOWARDS E NEW MARITIME STRATEGY
Date: 1996-03-13
Institutions: European Commission
Subjects: EU policy, competition, competitiveness, maritime transport, shipping policy

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 

A. 

EC SHIPPING  AND  POLICY 

I. 
II. 
III. 
IV. 
V. 
V I. 

EC  Shipping  in  a  Global  Market 
Need  for  EC  Shipping 
Developments  in  EC  Ownership,  Flag  and  Employment 
Some  Further  Trends  in  Global  Shipping 
The  EC  Policy  so  far;  Efforts  and  Successes 
Results 

B. 

A  POLICY  FOR  THE  FUTURE 
I. 

" 

The  Approach:  Applying  Global  Standards  and  Enhancing 
the  Competitiveness  of  the  EC  Shipping  Sector 
1. 
2. 

The  response  of  the  EC to  globalisation  of  shipping 
Policy  choices  for  a future  shipping  policy 

II. 

III. 

IV. 

Safety  and  Fair  Competition 
1. 
2. 

Defining  and  enforcing 
Member  States  registers 
Off  shore  Member  States  registers 

Safety:  an  integral  part  of  fair  competition 
Registers:  a  crucial  tool  to  ensure  safe  and  fair  competition 
a. 
b. 
c. 
Eliminating  dangerous  shipping 
Fostering  a  spirit  of  quality  in  shipping 
Higher  EC  standards  in  certain  circumstances 

flag  State  obligations 

3. 
4. 
5. 

Maintaining  Open  Markets 
1. 
2. 
3. 

Basic  approach 
Regulation  4 0 5 8 / 86 
Competition  rules 
a. 
b. 
c. 
Unfair  market  behaviour 

4. 

Acting  against  market  access  barriers 
International 
Application  of  competition 

competition  standards 

rules  in  EC  trades 

A  Policy  for  Competitiveness 
1. 
2. 
3. 

Training  and  employment 
Research  and  development 
State  aid  to  shipping 
a. 
b. 
c. 
d. 

to  State  aid 

Approaches 
Action  on  employment  and  corproate  costs 
Aid  within  general  frameworks 
The  criterion  of  measurable  benefit 

V. 

Measures  for  Related  Sectors 

CONCLUSION 

I  C\ 

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33 

34 

Annex  A: 

EC  SHIPPING  IN  A  GLOBAL  MARKETPLACE 

I. 

II. 

III. 

The  Shipping  Market  and  Environment 
Bulk  and  liner  shipping 
1. 
Registers 
2. 
Global  competition  and  mobility  of  assets 
3. 

.  . 

Need  for  EC  Shipping 
1. 
2. 
3. 

Economic  independence 
Military  needs 
Contribution  to  broader  economy 

Developments  in  EC  Ownership,  Flag  and  Employment 
1. 

2. 

3. 

The  facts 
Policy  conclusions 

Evolution  of  EC  Ownership 
a. 
b. 
Flagging  out 
a. 
b. 
Recent  labour  supply  developments 
a. 

The  facts 
Policy  conclusions 

in  assessing  impact  of 

Difficulties 
trend 
employment 
Shortage  of  qualified  seafarers 

b. 

IV. 

Some  Further  Trends  in  Global  Shipping 
1. 
2. 
3. 
4. 

Further  globalisation 
Investment  patterns 
The  problem  of  ageing  ships 
Enlargement  of  the  Community 

V. 

Opportunities  for  EC  Shipping 

Annex  A - 1:  Cost  comparison  EC  registers/other  registers 
Annex  A-2:  Controlling  interests  of  Member  States  in  world  fleet 
Annex  A-3:  Flagging  out  trends  from  Member  States  flags 
Annex  A - 4:  Employment  trends  under  EC flags 

Annex  B: 

EFFORTS  AND  SUCCESSES  SO  FAR 

I. 

II. 

Analysis  of  EC  Policy  So  Far 
1. 

to  keep  ships  under  EC  flags  and 
the  single  market 

Community  maritime  policy 
a. 
b. 

The  1986  package 
Proposals 
to  create 
The  common  policy  on  safe  seas 
External  relations 
Relations  with  IMO  and  ILO 
Short  sea  shipping 
rules 
Competition 

c. 
d. 
e. 
f. 
g. 
The  Member  States 

2. 
Results 

)  b 

1 
1 
1 
2 

3 
3 
4 
4 

5 
5 
5 
5 
6 
6 
8 
10 

10 
10 

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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 
w a y.  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  1 9 8 5,  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 
1 9 90  and  1 9 94  and  the  White  Paper  on  Growth,  Competitiveness  and  Employment  of 
1 9 9 3.  The  Essen  Council  of  December  1 9 94  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 
ideas  and  initiatives.  The 
Commission  Communication  on  Short  Sea  Shipping  of  July  1995  made  use  of  valuable 
input  from  the  MIF. 

in  fostering  synergies  and  launching  new 

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 
the 
Commission  of  powers  falling  within  its  sphere  of  competence.  This  Communication 
should  serve  this  purpose. 

the  Community's 

the  exercise  by 

institutions  and 

legislative 

through 

1  Com  (96)  84,  13  March  1996. 

European  Commission  - Towards  a New  Maritime  Strategy 

CL 

-  2 -

request 

the  Group 

is  available  upon 

The  Commission  has  been  assisted  in  formulating  this  Document  by  a  Core  Group  of  1 2 
individuals  w i th  wide  ranging  experience  of  the  world  of  shipping.  A  Report  of  Proceedings 
this 
of 
Communication  outlines  the  global  shipping  environment  and  the  future  of  EC  shipping  in 
it,  w i th  more  detailed  information  given  in  Annex  A.  Part  A  continues  w i th  a  brief  review 
of  policy  responses  by  Member  States  and  the  Community  to  the  problems  facing  EC 
shipping,  and  their  results,  with  further  details 
the 
Communication,  Part  B,  is devoted  to  proposing  an outline  for  a future  maritime  policy  for 
the  EC,  w i th  the  emphasis  on  measures  to  enhance  the  competitiveness  of  the  EC  fleet 
and  the  maintenance  and  creation  of  high  quality  maritime  employment. 

the  Commission.2  Part  A  of 

in  Annex  B.  The  main  part  of 

from 

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  d o wn  certain 
principles  for  Member  States  shipping  registers;  such  an  instrument  should 
the  Treaty,  particularly  on  freedom  of 
also  ensure 
establishment  and  competition,  are respected;  accordingly,  ownership  and, 
possibly,  manning  conditions  will  have  to  be  scrutinized; 

the  rules  of 

that 

to  strengthen  port  State  control  through  operational  links  w i th  other  third 
countries; 

to  promote  self-regulatory  codes  of  behaviour  in  shipping; 

to  encourage  operators 
incentives,  differential  port  charges); 

to  achieve  high  quality  standards 

(eg. 

fiscal 

to  consider  legislative  action  on  financial  sanctions  for  cargo  owners  w ho 
knowingly  or  negligently  use  sub-standard  shipping; 

to  examine  the  question  of  mandatory  third  party 
shipping  as  a  condition  for  entry  into  EC  ports; 

liability  coverage 

in 

2 

European  Commission,  DG VII/D/2,  rue  de la Loi  200,  B-1049  Brussels. 

European  C o m m i s s i on  -  T o w a r ds  a  N ew  Maritime  Strategy 

-3  -

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: 

c o m m on  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  w i th  the  requirements  of  the  new  STCW  convention 
to  meet  current  an<$ future EC and worldwide  demand for  qualified  seafarers; 

the  improved  monitoring  of  compliance  w i th  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  w i th  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  w i th  all  interested  parties. 

European  Commission  - Towards  a New  Maritime  Strategy 

After  formally  informing  the  Parliament  and  the  Council,  the  Commission  will 
w i t h d r a w: 

the  Proposal 
Register  (Euros)  of  1 9 8 9 / 1 9 9 1; 

for  a  Council  Regulation  establishing  a  Community  Ship 

the  Proposal  for  a  Regulation  on  a  common  definition  of  a  Community 
shipowner  of  1 9 8 9 / 1 9 9 1.  However,  appropriate  definitions  in  individual 
instruments,  for  example  when  considering  the  beneficiaries  of  Regulation 
4 0 5 7 / 8 6,  the  Regulation concerning  unfair  pricing  in maritime  transport,  and 
in  the  determination  of  beneficiaries  of  State  aid,  should  be  provided. 

European  Commission  -  T o w a r ds  a  N ew  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  f ew  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 
t wo  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 
international  and  universal,  rather 
international  safety  and  labour  rules. 

than  unilateral,  regulation,  especially  on 

to 
liability, 

shipping 

Bulk  and  liner 
Shipping  falls  into  t wo  main  categories:  bulk  and  liner  shipping.  The  balance  of  Member 
States'  interests  between  the  t wo  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 
w i th  State  aid,  while  shipowners  have  sought  less  onerous  registers  if  they  considered 
their  competitiveness  threatened. 

registers 

Open 
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  f ew  requirements  with  respect  to  nationality  of  the  crew. 

If  a  state  w i th  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,  s w i ft  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. 
important 
consequences  for  economic  activity  and  employment  also  on  shore. 

This  will  have 

European Commission  - Towards  a New  Maritime  Strategy 

-  6 -

Flagging  out 
The  extent  to  w h i ch  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 
important 
consideration  is  the  contribution  that  shipping  makes  to  the  broader  economy  through  its 
relationship  w i th  a  wide  range  of  maritime  industries. 

long-term  commercial  or  strategic 

interests.  A 

their 

third 

III. 

Developments  in  EC  Ownership,  Flag  and  Employment 

EC  ownership 
In  1 9 9 4,  the  fleet  owned  or  controlled  by  EC  interests,  including  vessels  flying  a  foreign 
flag,  was  3 4%  (in  dwt)  of  the  world  fleet,  down  from  3 8%  in  1 9 8 5.  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. 

shipping 

EC-flagged 
In  1 9 7 0,  3 2%  of  the  world  tonnage  remained  under  the  flags  of  EC  Member  States.  In 
1 9 9 4,  this  figure  has  decreased  to  1 4 %.  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. 

conclusions 

Policy 
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  ( 5 1%  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  C o m m i s s i on  -  T o w a r ds  a  New  Maritime  Strategy 

-  7 -

developments 

Recent  labour  supply 
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  2 5%  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,  w i th  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  g r o w th  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. 

services 

Specialised 
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  w i th  sophisticated  shipbuilding  and  new  trade  opportunities  (including,  for  example, 
routes  permitted  since  the  opening  up  of  the  former  USSR,  which  may  require  ships  w i th 
special  hull  construction  because  of  icy  conditions). 

patterns 

Investment 
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 
investment 
are  beginning  to  set  up  transport  networks  in  other  continents.  However, 
opportunities  for  EC  shipping  companies  are  limited  where  the  provision  of  domestic 

European  Commission  - Towards  a New  Maritime  Strategy 

-  8 -

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,  w i th  consequently  depressed  freight 
rates.  Shipping  is  thus  producing  relatively  low  returns  on  equity  and  investment,  w h i ch 
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  w i th 
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 
legislation  on  shipping  was  based  on  an  open  market,  non-
The  1986  package  of 
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  w as  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  -  T o w a r ds  a  New  Maritime  Strategy 

9  -

relations 

the  Community's  external  relations  policy 

External 
the 
In  terms  of 
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. 

in  maritime 

transport, 

The  common  policy  on  safe  seas 
The  Communication  on  a  Common  Policy  on  Safe  Seas  was  adopted  by  the  Commission 
in February  1 9 9 3 .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. 

the  single  market 

to  keep  ships  under  EC  flags  and  create 

Proposals 
The  Commission  has  proposed  a  number  of  measures  w i th  the  aim  of  enhancing  the 
competitiveness  of  EC fleets.  In  1 9 8 9,  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  3 5 7 7 / 9 2 ,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  1 9 8 9,  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  w as  also  in  line  w i th  the  Commission's  general  State  aid  principles. 

4 

5 

6 

7 

A  Common  Policy  on  Safe  Seas,  C 0 M ( 9 3 ) 66  final,  24  February  1993. 

A  Future 
Conditions  of  Community  Shipping,  COM  (89)  266  final,  3  August  1989. 

the  Community  Shipping 

Industry:  Measures  to 

for 

Improve  the  Operating 

Council  Regulation  (EEC)  No.  3 5 7 7 / 92  of  7  December  1992  applying  the  principle  of 
freedom 
(maritime 
cabotage),  O . J.  L  No.  3 6 4,  12  December  1 9 9 2,  p.  7. 

transport  within  Member  States 

to  provide  services 

to  maritime 

SEC  (89)  9 21  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  w i th  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. 

rules 

Competition 
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. 

-  registers 

The  Member  States 
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  w i th  such  registers,  the  majority  of  ships  in international  trade  are 
registered  in  the  alternative  register:  for  example,  in  Denmark,  9 2%  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  7 6 %;  in  Finland, 
5 0%  of  the  fleet  is  on  the  List  of  Merchant  Vessels  in  International  Trade.  The  first 
international 
register  often  has  thus  become  of  secondary  regulatory  importance  for 
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) 
3 17  final,  5  July  1 9 9 5. 

European  Commission  - Towards  a New  Maritime  Strategy 

- 11  -

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  4 0%  of  the  EC's  trade  is 
carried  on  ships  owned  or controlled  by  EC interests. This  is evidence  that  European 
maritime  k n o w - h ow  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  w i th  current 
worldwide  trends  and  standards  will  lead to  further  exits  of  capital  and  labour  from 
European  flags. 

is  a  central  problem  of  policy  making 

Globalisation 
the 
competitiveness  of  EC  industry.  The  White  Paper  of  the  Commission  on  G r o w t h, 
Competitiveness  and Employment  of  1993  and the Communication  on the  Competitiveness 
of  Europe  of  1 9 9 49  also  focus  on  this  issue. 

to  maintain  or 

improve 

9 

European  Commission,  An  Industrial  Competitiveness  Policy for  the  European  Union,  Bulletin 
of  the  European  Union,  Supplement  3/94. 

European  Commission  - Towards  a New  Maritime  Strategy 

-  12 -

In  line  w i th  these  policies,  the  Commission  proposes  to  improve  the  competitiveness  of 
the  EC  shipping  sector  through  a  global  open  market  policy,  w i th  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 
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. 

further  steps  w i th  regards 

the  State  aid  practice  of 

to 

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  w h i ch 
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, 
Commission  considers  a two-fold  strategy: 

the 

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. 

European  C o m m i s s i on  -  T o w a r ds  a  N ew  Maritime  Strategy 

-  13 -

EC  labour  will  w a nt  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  o wn 
survival  and  g r o w th  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 

the 

including 

their  vessels'  operating  policy, 

to 
Shipping  is  a  largely  free  market,  allowing  considerable  scope  for  ship  operators 
determine 
level  of  expenditure  on 
safety/pollution  prevention,  related  maintenance  costs  and the  degree  of  compliance  w i th 
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  w i th  a  long-term 
to 
strategic  view 
unscrupulous  owners  w ho  disregard  even the  basic  requirements  of  safe  and  pollution-free 
vessel  operation.  Surveys  carried  out  by  the  OECD  show  compliance  w i th  international 
standards  leads  to  10  -  5 0%  higher  costs  than  a  substandard  operation.  Good  practice 
turns  out  to  be  80  -  1 0 0%  more  expensive  than  substandard  maintenance.  Finally, 
maintaining  a  ship  at  maximum  safety  levels  will  require  3 0 0%  more  expenditure  at 
maximum.10 

technical  management  of 

the  crewing  and 

towards 

fleet, 

their 

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 , 1 00  per  day  for  maintenance  for  a  five  year  old  product  tanker  of  4 0 , 0 00 
d w t, 
"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  -  T o w a r ds  a  N ew  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 

to  put  this  policy  into  practice  is  the  regime  governing 

for  entry  to  a  ship  register  and  the  administration  of  the  register 

the 
The  crucial  instrument 
conditions 
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  w i th 
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  w i th  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, 
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. 

those  non-binding 

instance, 

IMO 

for 

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 
It  is  worth  considering  the  option  of  having  a 
multinational  team  of  EC  experts  to  assist  Member  States  w i th  this  task.  This  may 
contribute  to  ensuring  that  EC  legislation  is  implemented  in  a fair  and  uniform  w a y. 

flag. 

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  w i th  all  standards  (except  where  the  vessel  is  transferred  from 
another  register  and  there  is  a formal  agreement  of  mutual  recognition  w i th 
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 

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-  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  w i th  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 
enforcement  of  standards; 
a duty  to  conduct  a transparent  investigation  of  all major  incidents  involving 
ships  flying  the  flag  of  the  State. 

fee  structure  should  provide  sufficient 

to  ensure  proper 

income 

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  -  2 0,  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 
the  multinational  team  of  EC  experts 
this  respect, 
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. 

it  is  worth  considering  whether 

b. 

Member  States 

registers 

The  Commission  considers  that  in  parallel  w i th  the  efforts  made  in  international  fora  at 
adopting  register  conditions,  the  Community  should  consider  defining  common  criteria  for 
registers  and  lay  these  d o wn  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 

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Such  a proposal  will  not  introduce  an  EC ship register  modelled  on  Euros. While  Euros  w as 
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,  w i t h d r aw  the  proposal. 

the 
Effective  government  monitoring: 
Community  should  be  effective  Government  monitoring.  Member  States  should  comply 
w i th 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. 

first  condition 

for  shipping 

registers 

The 

in 

liability 

requirements 

for  owners  and  managers: 

Transparent 
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. 

requirements: 

Crew  nationality 
The  1986  UN  Ship  Registration  Convention  foresees 
as one  of t wo  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 
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 
threaten 
competitiveness,  shipping  companies  will  opt  for  a flag  which  leaves  complete  freedom  of 
manning. 

leads  to  costs  that 

for  ships  entered 

for  employment 

into  their 

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. 

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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. 

or  worldwide  access:  The  question  also  arises  of  whether  a 
"Community  shipowners" 
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 9 91  Community 
Shipowner  Regulation  proposal  of  the  Commission  foresaw,  broadly  speaking,  a  5 0% 
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. 

registration 
If  such  a  requirement  were  to  be  introduced  as  a  condition  for 
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) 
3 9 0 5. 

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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 
restricting 
identification  and 
registration  to  nationals. 

liability  of  owners  and  managers,  without  necessarily 

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  w i t h o ut 
compromising  standards  or  Government  monitoring.  Wider  use  of  EC  registers  w o u l d,  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  w h en 
considering  the  beneficiaries  of  Regulation  4 0 5 7 / 8 6,  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 
in  such 
international  and  EC  safety 
registers.  It  is important  that  flag  State  responsibilities  of  Member  States  include  ensuring 
compliance  w i th  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. 

legislation  to  ships 

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  w i th  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. 

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-  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  w h i ch  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. 

the 

industry 

to  ensure 

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 
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  c o m m i t m e nt 
implement  such  policy.  Vetting 
programmes  of  the  oil  and  chemical  industry,  though  yet  in  their  infancy,  should  be  seen 
by  the  shipping  w o r ld  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 
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. 

regulatory  code  of  behaviour). 

full  compliance  w i th 

to  establish  and 

to  cooperate 

transaction 

(a  self 

the 

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, 
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. 

it  also  contributes 

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  o wn  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. 

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-  2 0-

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 9 9 6.  The  negotiations  cover  international  shipping,  auxiliary  services  and 
access t o,  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 
w hy  the  Commission  will  propose  to  the  Council  to  grant  it  a  mandate  to  engage  in 
shipping  negotiations  w i th  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  -  T o w a r ds  a  N ew  Maritime  Strategy 

- 21  -

harmonious  achievement  of  Community  objectives 
international  organizations. 

in  discussions  or  negotiations 

in 

for  State  aid  schemes  is  important.  Within  the  Community, 

In  the  context  of  creating  open  markets  and  fair  competition,  the  Commission  considers 
that  transparency 
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, 
w h i ch 
is  applicable  to  maritime  transport,  and  which  foresees  the  development  of 
subsidies'  disciplines  in  further  negotiations  to  be  engaged  soon. 

2. 

Regulation  4058/86 
cargoes 

in  ocean 

trades 

on  coordinated  action 

to  safeguard 

free  access 

to 

While  the  Commission  proposes  a  negotiated  approach  to  a further  liberalisation  of  world 
shipping  markets,  it  will  also  make  use,  when  appropriate,  of  Regulation  4 0 5 8 / 8 6. 

Regulation  4 0 5 8 / 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  w i th  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  w i th  a  number  of  countries  when  seeking  to  secure  market  access  and  non 
discriminatory  treatment  for  Community  shipowners.  There  is  a  widespread  view  that 
Regulation  4 0 5 8 / 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 
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. 

the  best  services  at  the 

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 
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 

third  country  enterprises.  They  may 

turn  a  blind  eye 

then,  however, 

European  Commission  -  T o w a r ds  a  New  Maritime  Strategy 

-  22 -

industries  against 

foreign  competition.18  Undertakings  w h i ch  are 
protect  national 
individually  or  collectively  in  a dominant  position  (as  is  the  case  w i th  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  w ay  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  b e t w e en  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 
this 
of  a  type  of  agreement  which,  in  the  view  of  the  Commission,  does  not  meet 
standard,  is capacity  non-utilisation.21  International  competition  standards  should  also  deal 
w i th  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,  w h i ch  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 
w i th  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 

20 

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. 

Immenga/Jenny/Petersmann, 
International  Cooperation  and  Rules',  COM  (95)  359  fin.,  12  July  1995. 

'Competition  Policy  in  the  New  Trade  Order:  Strengthening 

21  See Commission  Decision  TAA,  O.J.  1994  No.  L 376/1;  Art.  4  of  Commission  Regulation 

870/95. 

European  C o m m i s s i on  -  T o w a r ds  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 
w i th  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  w i th  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 
4 0 5 7 / 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 
It  does  not,  therefore,  require  any  substantial  link  w i th  or  economic  involvement  in 
EC. 
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  4 0 5 7 / 86  in  its  present  concept  is  outdated,  at  least  for  the  larger  liner 
trades. 

these 

reasons, 

the  Commission  considers 

For 
that  Regulation  4 0 5 7 / 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.  1 5 / 8 9,  O.  J.  No.  L  4,  6  January 

1 9 8 9,  p.  1. 

European  Commission  -  T o w a r ds  a  N ew  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 
transport 
developing  employees'  expertise  for  use  in  different  parts  of  the  intermodal 
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  d o w n.  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. 

training  and 
The  Commission  has  commissioned  a  study  dealing  w i th 
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: 

issues  of 

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  1 9 9 5,  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  w h i ch  includes 
the 
trade  union  and  employer  representatives.  The  Commission 

to  present 

intends 

23  BIMCO 

International  Maritime  CouncilJ/ASF  (International  Shipping 
Federation):  1 995  Manpower  Update, The World-wide  Demand for  and Supply  of  Seafarers. 

(The  Baltic  and 

European  Commission  -  T o w a r ds  a  New  Maritime  Strategy 

-  25  -

recommendations  of  the  study,  which  is  expected  to  be  finalised  by  May  1 9 9 6,  to  the 
European  Parliament,  the  Council, the  Economic  and  Social Committee  and the  Committee 
of  the  Regions.  It  will  also  discuss  the  recommendations  w i th  the  Joint  Committee  on 
Maritime  Transport.24 

The  Commission  w i ll  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'  w h i ch  places 
particular  emphasis  on training  in connection  w i th  new  industrial  changes  and  innovations 
'LEONARDO'  provides  financial  support  for  three 
requring  trans-national  co-operation. 
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  w i th  the  relevant  Treaty  provisions  and,  where  appropriate,  w i th  existing  financial 
instruments, 
to 
employment  by  Member  States,  in  particular  the  following: 

the  Commission  will  encourage 

training  schemes  and 

incentives 

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. 

the  Revised 
adoption  of  a  modular 
International  Convention  on  Training 
(STCW  1995),  whereby  each  module 
represents  the  standard  of  competence  required  to  perform  a  specific  function  on 
board  a  ship; 

framework  of  certification 

line  w i th 

in 

facilitating  and  increasing  access  to  maritime  employment  by  citizens  of  Member 
increasing  awareness  and  understanding  of  national  education  and 
States  by 
training  systems;  this  should  promote  effective 
implementation  of  Directives 
89/48/EC  and  9 2 / 51 /EC  on the  general  system  for  the  recognition  of  diplomas  and 
certificates 
(Maritime 
in  the  EC;  the  ongoing  concerted  action  on  METHAR 
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  -  T o w a r ds  a  N ew  Maritime  Strategy 

2 6-

information  and  coordinate  action  to  enhance 

promoting  exchange  and  the  setting  up  of  education  networks  and  ventures 
between  European maritime  training  institutes; this  should encourage  the  exchange 
of 
the  efficiency  of  maritime 
education  and training  and  bring  it  in line  w i th  the  new  requirements  set  up  by  new 
international  conventions  and  codes  such  as  STCW  and  ISM.  In  this  context,  the 
is  examining  the  creation  of  a  network  of  EC  training  maritime 
Commission 
institutes.  This  question  has  been  considered  under  the  4th  Framework  R&D 
Programme  in  order  to  encourage  the  exchange  of  information  and  coordinate 
action  w i th  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  9 4 / 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,  w i th  a focus  on quality,  productivity,  safety  and environment  protection.  Under 
the  on-going  4 th  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 9 94  -  1 998)  can  make  to  the  competitiveness  of  EC shipping  is important.  The  transport 
part  of  the  Programme  dedicates  1 9%  or  some  50  million  ECU  of  its  resources  to  R&D  in 
transport.  This  budget  covers  R&D  aiming  at  the  competitiveness  and 
waterborne 
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  -  T o w a r ds  a  N ew  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 
the 
implementation  of  ISM  (International  Safety  Management  Code)  and  STCW  as  well  as 
communication  in  a  multi-cultural  environment. 

improved  simulation  procedures 

training,  European 

requirements 

for 

for 

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  4 th  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"  w i th  a view  to  enhanced  safety 
in  coastal  waters,  electronic 
(eg.  safety 
and  environmental-friendliness 
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 
It  has  the  key 
Community  research  programmes  relevant  to  the  maritime 
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  4 th  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 

industry. 

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  -  T o w a r ds  a  N ew  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  w i th  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  w h i ch  state 
aids  to  shipping  may  be  considered  compatible  w i th 
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. 

the  common  market. 

Community  shipowners  can  face  a  significant  operating  cost  handicap  compared  w i th 
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 
the 
borne  by  vessels  under  EC 
development  of  the  sector  and  employment)  rather  than  at  providing  general  financial 

(under  conditions  which  directly  stimulate 

flags 

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  -  T o w a r ds  a  N ew  Maritime  Strategy 

-  2 9-

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. 

to  support  measures: 

Community  approach 
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  w i th  its  transport 

28  E.g.  Siemens  v.  Commission,  Case T-459/93,  8 June  1995. 

European  Commission  -  T o w a r ds  a  N ew  Maritime  Strategy 

-  3 0-

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 
s h o w n,  too,  to  be  capable  of  promoting  the  development  of  the  sector.  State  aid  must  be 
restricted  to  w h at  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. 

link: 

and  economic 

The Commission  seeks to  ensure that  nationals 
Non-discrimination 
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 
Factortame 
by  entry 
judgment  of  the  Court  of  Justice  in  1 9 9 13 0.  In addition,  State  aid  may  not  discriminate  on 
grounds  of  nationality  between  companies  established  in  a  Member  State. 

in  shipping  registers,  this  principle  has  been  applied  since  the 

to 
Member  States  should  ensure  that  aid  is  focused  on  entities  which  contribute 
sustainable  economic  activity  in the  Community.  Traditionally,  State  aid  has  been  linked 
first  and  foremost  w i th  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. 

for 

taxation 

in  the  Community, 

that 
One  option  might  be  to  subject  the  acceptability  of  State  aid  to  the  condition 
In  addition  to  being 
beneficiaries  show  genuine  involvement  in the  Community  economy. 
liable 
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  o wn  to  show  the  genuine  involvement,  but  may  be  important  in  conjunction  w i th 
other  elements.  Such  companies  could  be  defined  as  Community 
for  the 
purposes  of  support  schemes  and  a  suitable  definition  incorporated  in  revised  State  aid 
guidelines. 

shipowners 

Some  argue  that  the  criterion  of  an  economic  link  is  more  relevant  than  the  flag  link  and 
should  replace  it;  others  believe  that  the  t wo  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  -  T o w a r ds  a  N ew  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  w h i ch  ships  operated 
under  the  flag  of  low-salary  Member  States  meet  on  world  markets.  The  calculation  w as 
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,  w i th  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,  w i t h o ut  removing  the  interest  of  the  shipowner  to  negotiate  an  appropriate 
salary  package  w i th  potential  crew  members  and  their  labour  representatives.  This 
approach  should  allow  Member  States  to  bring  employment-related  costs  to  levels  in  line 
w i th  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  w i th  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,  w i th  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 
the 
research  method, 
importance  of  a  sector  to  a  national  economy. 

It  operates  on  the  following  premises: 

impact  study,  has  been  developed 

the  economic 

to  assess 

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  4 5 / 5;  see 

also  Framework  for  Environment  Aid,  O.J.  1994  No.  C  7 2 / 3. 

European  Commission  -  T o w a r ds  a  N ew  Maritime  Strategy 

-  3 3-

it  accepts  that  considerable  value  is  added  on  shore  (eg.  by  processing, 
warehousing,  distribution,  international  services),  not  only  in  shipping3 3; 

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  w h i ch  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  f l o w s.  Although  these 
studies  will  not  be  completed  until  1998,  the  Commission  intends  to  initiate  discussions 
in  the  coming  months  w i th  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 

industries,  and  the  Communication  of 

It  has  been  emphasised  throughout  this  document  that  shipping  is closely  linked  w i th  other 
the  Commission  "Shaping  Europe's 
maritime 
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  7 0%  land-

based  to  3 0%  sea-going. 

European  Commission  - Towards  a New  Maritime  Strategy 

integration  of  shipping  into  the  Trans-European  Networks  and  the  intermodal  transport 
chain34  and  the  maintenance  of  a strong  and  competitive  European  shipbuilding  industry. 

- 3 4-

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 
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 
law. 
Nevertheless,  the  Commission  would  encourage  interested  parties  to  comment  on  the 
various  possible  approaches  outlined;  this  might  help  the  Commission  to  draft  revised 
in  GATS),  general 
guidelines  which 
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. 

the  Community  and,  therefore,  compatible  w i th  EC 

Institutions  have  already  endorsed 

the  world  situation 

(eg.  developments 

interest  of 

reflect 

the 

To  structure  the  debate  on the  new  approach  to  maritime  strategy,  the  Commission  would 
welcome  views  and  comments,  preferably  by  September  1 9 9 6. 

34  See  the  Communication  on  Short  Sea  Shipping  in  Europe. 

European  Commission  - Towards  a New  Maritime  Strategy 

EC  SHIPPING  IN  A  GLOBAL  MARKET  PLACE 

ANNEX  A 

I. 

The  Shipping  Market  and  Environment 

Maritime  transport  is  an  international  industry  to  which  there  are  relatively  f ew  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  f l o ws  w h i ch 
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 t wo  main categories:  bulk  and liner shipping. Besides these, passenger  shipping,  which 
consists  today  of  cruise  and  passenger  ferries  services,  is  also  important. 

Bulk  transport 
countries  still  have  important  cargo  reservation  schemes. 
extensive  inland  and  logistics  investment. 

is  generally  organised  in  a  free  market  environment,  although  some 
It  does  not,  as  a  rule,  require 

Liner  shipping  is  traditionally  organised  in  maritime  conferences,  which  adopt  common  or 
there  are  also  liner  shipping 
uniform  tariffs  and  conditions  of  carriage.  However, 
companies  w h i ch  are  not  part  of  these  arrangements  and  set  prices  independently,  or  by 
reference  to  the  tariff  of  the  conference  w i th  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  w i th  respect  to  shipping,  w i th  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  f ew 
requirements  w i th  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$  1 0-
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 , 1 4 4 , 0 00  per  year  more  under  the  German  flag  than  under  Panama  registration. 
Similarly,  the  owner  of  a Suezmax  1 4 0 , 0 00  d wt  tanker  might  save  US$  9 5 8 , 0 00  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  w i th  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 
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,  w i th  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. 

their  ships 

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  w i th  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  t wo  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. 

immediately  highlights  any  competitive  disadvantage,  whether 
Global  competition 
business-related  or  regulatory  in  nature.  A  shipping  company  may  therefore  seek 
to 
overcome  costly  or  burdensome  regulatory  disadvantages  by  flagging  out.  This  w i l l,  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  w i th  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  w h i ch 
risks damaging  cross-trading, in which  several  EC Member  States  have  important  interests. 

fleet 

follows 

the  argument 

that  a  Community 

for  economic 
If  one 
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 
through  unfair  pricing,  long-term  arrangements  w i t h in  closely 
closed, 
vertically  integrated  organisations  or  cargo  restrictions,  formal  or  informal. 

for  example, 

is  necessary 

See  European  Commission,  Maritime  Transport  Report,  Sec  (94)  9 33  final,  8  June  1 9 9 4. 

3? 

2. 

Military  needs 

In  case  of  military  need,  Member  States  may  w a nt  to  ensure  readily  available  naval 
capacity.  For  this,  it  will  not  only  need  the  appropriate  ships,  but  also  qualified  national 
seafaring  personnel  w ho  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. 

to  broader 

Contribution 

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  4 4%  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  5 0%  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  1 6 , 0 00  jobs  on  board,  44,000" in  shipbuilding 
and  7 0 , 0 00  in  ship  supply  industries.  For  the  UK,  it  is  estimated  that  maritime  related 
industries  provide  4 1 6 , 5 00  jobs,  of  which  8 0 , 0 00  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 

They  can  also  contribute  to  continuing  maritime  education  in  the  EC4  as  well  as  to  the 
enforcement  of  national  and  international  standards. 

-5 

III. 

Developments  in  EC  Ownership,  Flag, and  Employment 

1. 

Evolution  of  EC  ownership 

a. 

The 

facts 

In  1 9 9 4,  EC  interests  retained  a  total  of  3 4%  (in  dwt)  of  the  world  fleet.  This  is  d o wn 
from  3 8%  in  1 9 8 5.  However,  between  1985  and  1 9 9 4,  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 9 9 0.  Greece  is the  largest  shipowning  nation  in the  world  in total  terms, 
controlling  1 8%  of  the  world  fleet.  In  container  shipping,  German  ownership  is  world 
leader  w i th  1 3%  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  w i th  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  w i th  their 
trade.  Indeed, world  trade  patterns  have  changed  considerably:  it  is  estimated  that 
in the  year  2 0 0 0,  intra-Asian  trade  will  account  for  4 8%  of  all cargo  carried  on  the 
main shipping  routes, up from  3 6%  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  o w n ed  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 
law  and 
insurance,  nautical  colleges,  ship  management,  shipbrokers. 

industry,  marine 

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 

Controlled  DWT 

4 0% 

3 0% 

2 0% 

10% 

#$! 

0%  -^ 

mi  > 

bJ 

** 

Soupce: LMIS 

50% 

40% 

30% 

20% 

10%  4 

0%  -

UJ 

V) 

< 

z 

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,  w i th  crew  costs,  tax  and  fiscal 
costs  being  cited  most  often.  The  extent  of  this  trend  can  be  seen  from  the  following 
figures: 

Percentage  of  World  Tonnage  (DWT)  under  EC Flags 

3 2% 

29% 

4 0% 

3 0% 

2 0% 

1 0% 

0% 

1970 

1980 

1985 

1994 

Source:  LMIS  (1995);  DG  VII 

Id 

Today,  5 6%  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  O ut  of  EC  Fleets 

0% 

10% 

20% 

30% 

4 0% 

50% 

6 0% 

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. 

EC Owned  DWT  in  Open  Registries 

120000000 

100000000 

80000000 

60000000 

40000000 

20000000 

<0 
'= 
S 
-J 

O 
5 
>- 
O 

S o u r c e:  LMIS 

•  non-EU  o w n ed  D WT 

•  EU  O w n ed  DWT  in  Register 

- + - • — , — , _ j — , — 1 . 1 — i — )_ 

1 J 

(0 
(O 
E  — 
S 
c 
« 

«5 

> 

S 

< 

< 

HI 

However,  similar  problems  appear  to  confront  major  Asian  carriers  as  they  have  also 
flagged  out:  e.  g .,  6 5%  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 

20% 

15% 

10% 

5% 

0% 

''~Ë-t 

, r a.  w$  'iSs •'*' 

o 
" 

< 
£ 

z 
< 
< 

< 
S 
o 

•„ 
UJ 
z 

Source:  LMIS 

20% 

15% 

10% 

5%  j 

0% 

2 

a 
o 

< 
a. 
-» 

*  NIE's:  Newly  Industrialised  Economies  (Hong  Kong,  South  Korea,  Taiwan) 

b. 

Policy 

conclusions 

Nevertheless,  there  are  several  reasons  w hy  the  EC  should  be  concerned  about  flagging 
out. 

low 

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 
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  o wn  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  w i th  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 

Loss of  Employment  for  EC seafarers 

400000 

Source:  DG VII; LMIS; European  Shipowners'  Associations  (ECSA) 

1994 

Not  all  of  the  job  losses,  however,  are  the  result  of  flagging  out:  reduction  in  the  number 
of  vessels,  coupled  w i th  the  development  of  larger  vessels,  and  rationalisation  have  also 
played  their  part. 

Main  Reasons  for  EC  Crew  Losses 

Fleet  reduction 
2 7% 

Flagging  out 
5 1% 

Source:  Mercer/LMIS  (1995) 

Reduced  number 
of  crew/vessel 
2 2% 

V3 

3. 

Recent  labour  supply 

developments 

-  1 0-

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  o wn  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  w ho  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  1 9 8 3, 
1 4%  of  seafarers  on  EC  flagged  vessels  were  non-nationals,  the  proportion  had  risen  to 
3 5%  in  1 9 94  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  w i th  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  g r o w th  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  w h i ch 
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  t wo  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  2 5%  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. 

T o w a r ds  a  N ew  M a r i t i me  Strategy 
Annex  A 

HH 

- 11  -

The  new  STCW  (Standards  of  Training,  Certification  and  Watchkeeping  for  Seafarers) 
requirements,  while 
the 
leading  to  higher 
worldwide  shortage  of  skilled  seafarers. 

levels  of  competence,  could  accentuate 

The  reasons  w hy  policy  must  find  a  response  to  this  predicted  shortage,  are  four-fold. 

First,  to  ensure  safe  navigation  of  ships. 

Second, 
ancillary  industry. 

to  preserve  the  maritime  know-how  in the  Community  which  is  needed  in 

for  the  enforcement  of  the  safety  policy  of  the  Community,  by  maritime 

Third, 
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  w i th  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  w o r l d w i d e. 

IV. 

Some  Further  Trends  in  Global  Shipping 
1. 

globalisation 

Further 

Recent  years  have  brought,  through  the  liberalisation  of  world  trade  and  decentralised 
production  methods,  a  continual  increase  in  global  trade  and  w i th  it  growing  demand  for 
shipping  services.  In  line  w i th  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. 

W i th  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-$  3 50  million  into  its  EC 
transport  n e t w o r k.  Other  Japanese  shipping  companies  have  bought  EC  shipping 
companies  or  have  created  shipping  joint  ventures  w i th  EC  companies 
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. 

for 

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, w i th consequently  depressed 
freight  rates.  This  cause  of  oversupply  should,  however,  diminish,  provided  the  major 
OECD  shipbuilding  nations,  accounting  for  about  8 0%  of  world  shipbuilding,  abolish 
subsidies  to  shipbuilding  from  15  July  1 9 9 6,  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  w i th 
consequent  safety  problems. 

Average  ship  age7 

EC-flagged 

World 

1985 

1 6  years 

14  years 

1 9 94 

21  years 

17  years 

While  older  ships  can  be maintained  to  high standards, statistics  show  that  overall  casualty 
risks  rise  w i th  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 

-  1 3-

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  3 4 t h,  and  Austria  6 8 t h.  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 
framework,  especially 
anticipate  this  trend  and  develop  a  coherent  maritime  policy 
concerning  registers  and  maritime  safety,  which  takes  account  of  these  possible  future 
accessions,  is  thus  gaining  in  urgency. 

Opportunities  for  EC  Shipping 

V. 
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,  w h i ch  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 
important  possible  g r o w th  area  is  short  sea  shipping.8 
customer  demands.  Another 
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  w i th  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 

EU Flags 

mi 

Lower cost 
Open Registry 
(non ITF) 

Tankers 
Suezmax(140  000dwt) 
Product tanker (40 000 dwt) 

Italy 
Italy 

Greece 
Greece 

Cape Size (150 000 dwt) 
Panamax (65 000 dwt) 
Handy-size (28 000 dwt)) 

Italy 
Italy 
UK 

Greece 
Greece 
Greece 

Container 
Large (4 000 TEU) 
Line-Haul  (2 700 TEU) 
Deepsea Feeder (1 500 TEU) 

Neth. 
Germany 
Germany 

Denmark 
France 
Greece 

General Cargo 
Breakbulk(15  000dwt) 
Ro-Ro (6 000 dwt) 

Germany 
Italy 

Greece 
Greece 

Against  lower-cost  Open Registry 

Panama 
Panama 

Panama 
Cyprus 
Panama 

Panama 
Panama 
Panama 

Cyprus 
Panama 

Annual Cost 
Difference (in 'Û00 $)1 

B 

107.1 
38.8 

119.5 
58.8 
27.2 

752.8 
460.6 
29.3 

958.2 
494.4 

709.1 
439.3 
202.8 

782.1 
372 
253.3 

168.1 
308.9 

16.3 
4.6 

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)) 

EU Flags 

m 

Italy 
Italy 

Italy 
Italy 
UK 

m 

Greece 
Greece 

Greece 
Greece 
Greece 

Container 
Large (4 000 TEU) 
Line - Haul (2 700 TEU) 
Deepsea Feeder (1 500 TEU) 

Neth. 
Germany 
Germany 

Denmark 
France 
Greece 

General Cargo 
Breakbulk(15 000dwt) 
Ro-Ro (6 000 dwt) 

Germany 
Italy 

Greece 
Greece 

Against lower-cost  Open Registry 

Lower cost 
Open Registry 
(non ITF) 

Panama 
Panama 

Panama 
Cyprus 
Panama 

Panama 
Panama 
Panama 

Cyprus 
Panama 

Source: Mercer/LMIS (1995) 

Annual Cost 
Difference (in '000 $) 

Cpstlndex^ 

B 

185 
179 

155 
149 
144 

380 
1124 
91 

368% 
370% 

313% 
304% 
227% 

279% 
433% 
433% 

m 

140% 
141% 

138% 
137% 
139% 

208% 
427% 
126% 

88 
82 

383% 
265% 

122% 
123% 

1228 
1192 

865 
794 
472 

630 
1144 
1144 

1221 
587 

I 

m 
x 

-  16 

-

Controlling  Interest  of  Certain  Member  States 
in  Specific  Ship  Types  as  Percentage  of  World  Fleet 

ANNEX  2 

(in  DWT,  1994) 

Dry  bulk 

m ua 

Denmark 

, 

! 

Germany 

Italy 

UK 

Greece 

Ro-Ro 

o 

o 

Container 

H 

' 

•-••••• 

1 

• 

1 

• 

' 

1 

' 

* 

1— 

Italy 

Netherlands 

France 

Greece 

Denmark 

UK 

Germany 

Source:  LMIS 

n> 

25%  T 

20% 

15% 

10% 

5% 

0% 

7% 

6% 

5% 

4% 

3% 

2% 

1% 

0% 

14% 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

-  17  -

Controlling. Interest  of  Certain  Member  States 
in  Specific  Ship  Types  as  Percentage  of  W o r ld  Fleet  (in  DWT,  1994) 

ANNEX  2 

Specialised  Dry1 

14% T 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

o 

Lrfestock,  barge,  heavy  cargo,  nuclear  fuel 

O 

General  Cargo 

10%  T 

9% 

8% 

7% 

6% 
5% 4 
4% 

3% 

2% 

1% 

0% 

18%  -, 

16%  --

14% 

12%  4 

10% 

8% 

6% 

4% 

Denmark 

Netherlands 

Germany 

UK 

Greece 

Total 

2% 
0%  mR 
France 

_, 

1-, 

i 

H 

Italy 

Sweden 

Denmark 

Germany 

UK 

Greece 

Source:  LMIS 

n 

I 

CO 

I 

3> 
Z 
m 
x 

Source:  LMIS Vessel  Database  (1995) 

-  19  -

ANNEX A 

Nationals  on board  EC Flag  vessels 

U.K. 

Sweden 

Spain 

Portugal 

Data for 1994 hot available 

Netherlands 

•..jitJitUuiMi^lilMlrl^J 

Italy 

Ireland 

Greece 

Germany 

France fe 

^^WM^M^^T" 

Finland 

i 

Denmark 

\^>»^^^^>^^^^^^^>^ 

Belgium  p ^] 

mm 

D1983 

H1992 

D1994 

5000 

10000 

15000 

20000 

25000 

30000 

35000 

40000 

Non-national  seafarers  on board  EC Flagged  vessels 

1 
U.K. % 

'  .  ,,M 

•  .  "' 

"' 

'I 

1 

Sweden 

n o ne 

Spain 

no  data  a v ai 

able 

Portugal 

no  data  a v ai 

able 

Netherlands 

none 

Italy 

Ireland 

l23 

1 

J 

1 

Greece 

V . M M M M ^ ^^ 

i 

.. 

i 

, 

. 

. 

1  •> 

1 

1 

1 

1 

1 

1 

^ 

Germany 

France 

n o ne 

.

,

.

-

.

,

,

.

.

.

,

.

.

•

.

•

.

,

,

., 

Finland 

F^ 

Denmark 

i 
<mxnmxxnxmùxxiz\i.. 

Belgium 

^W 

: - : : • : : •: • : • : • :! 

1 

1 

i | 
1 

1 

D1983 

E3  1992 

D1994 

1000 

2000 

3000 

4000 

5000 

6000 

7000 

8000 

9000 

Source: ECSA 

0 

EFFORTS  AND  SUCCESSES  SO  FAR 

ANNEX  B 

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 
1 9 8 7,  the  Commission  has  conducted  an  active  competition  policy  w i th  regard  to  liner 
shipping. 

1. 

Community  maritime 

policy 

The  European  Court  of  Justice  gave  t wo judgments  which  provided  the  impetus  to  develop 
a Community  maritime  policy.  First,  in  1 9 7 4,  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  1 9 8 5,  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  1 9 86  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 

2 

3 

4 

French  Seamen's  Case,  1 9 74  (ECR)  3 5 9. 

Parliament  v.  Council,  1985  (ECR)  1 5 1 3. 

'Progress  towards  a common  transport  policy  - maritime  transport',  Bulletin  of  the  European 
Communities,  supplement  5/85. 

The  1 9 86  package,  O.J.  No.  L  3 7 8,  31  December  1986,  consists  of  four  regulations: 
Reg.  4 0 5 5 / 86  applying  the  principle  of  freedom  to  provide  maritime 
between  Member  States  and  between  Member  States  and  third  countries; 
Reg.  4 0 5 6 / 86  laying  d o wn  detailed  rules  for  the  application  of  Articles  85  and  86 
of  the  Treaty  to  maritime  transport; 
Reg.  4 0 5 7 / 86  on  unfair  pricing  practices  in  maritime  transport; 
Reg.  4 0 5 8 / 86  concerning  coordinated  action  to  safeguard  free  access  to  cargoes 
in  ocean  trades. 

transport 

European  Commission  -  T o w a r ds  a  N ew  Maritime  Strategy  -  Annex  B 

(ft 

-  2 -

b. 

Proposals  to  keep  ships  under  EC flags  and  create 

the  single  market 

In  1 9 8 9,  the  Commission  proposed  further  measures  to  develop  the  common  shipping 
policy.5  As  in  1 9 8 5,  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  1 9 9 1,  based  on  one  of  the 
proposals  of  the  European  Parliament,  foresaw  that  all  Community  shipowners  w i th  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  w i th  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  1 9 89  also  included  a  proposal  to  liberalise  domestic  trades,  adopted  as 
Regulation  3 5 7 7 / 9 2 ,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  w h i ch  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  1 9 8 9,  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 

6 

7 

8 

future 

improve 
'A 
conditions  of  Community  shipping',  COM  (89)  266  final,  3  August  1989. 

the  Community  shipping 

industry:  measures 

for 

to 

the  operating 

Council  Regulation  (EEC)No.  3 5 7 7 / 92  of  7  December  1992  applying  the  principle  of 
(maritime 
freedom 
cabotage),  O.J.  L  No.  3 6 4,  12  December  1992,  p.  7. 

transport  within  Member  States 

to  provide  services 

to  maritime 

See  COM  8 9 ( 2 6 6)  final;  COM  91(54)  final. 

SEC  (89)  9 21  final. 

-European  C o m m i s s i on  -  T o w a r ds  a  N ew  Maritime  Strategy  -  Annex  B 

ff 

3-

it  should  be  in  line  w i th  the  Commission's  general  State  aid  principles; 
it  should  not  lead  to  maintenance  or  increase  of  capacity  in  sectors  w i th 
overcapacity. 

In  1 9 9 1,  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. 1 9 90  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  1 9 9 3 .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 
infrastructure; 
supporting  international  organisations  in  their  primary  role  in  international 
standard-setting; 

technologically  advanced  maritime  safety 

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  9 9 6,  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 
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 

94/57) 

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  -  T o w a r ds  a  N ew  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 
a  Member  State  (Directive 
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 

94/58) 

the  flag  of 

95/21) 

(Directive 

Port  State  Control 
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  w i th  important  deficiencies  shall  be  detained  until  all  defects  have 
been  remedied.13 

93/75) 

(Directive 

obligations 

Notification 
Since  September  1 9 9 5,  shippers  and  shipowners  involved  in the  carriage  of  dangerous  or 
polluting  cargo  are  subject  to  notification  obligations  specified  in  Directive  9 3 / 7 5.  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 

tanks  (Regulation 

Segregated  ballast 
2978/94) 
From  1 January  1996  port  entities  and  pilotage  services  are  obliged  to  charge  lower  fees 
to  tankers  w i th  segregated  ballast  tanks  or  double  hull  lower  than  the  ones  for  tankers 
w i t h o ut  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 

(Regulation 

ISM  Code  Regulation 
As  of  1 July  1 9 9 6,  companies  operating  Ro-Ro  passenger  ferries  to  or  from  a  port  of  the 
Community  are  subject 
their  Quality  and  Safety 
to  auditing  and  certification  of 
Management  System  covering  both  their  shore  based  and  on  board  activities.16 

3051/95) 

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. 

European  C o m m i s s i on  -  T o w a r ds  a  New  Maritime  Strategy  -  Annex  B 

57 

5-

d. 

Ex te ma I re la  tions 

transport  has  been  to  secure 

Since  the  adoption  of  the  1986  package,  the  Community's  external  relations  policy  in 
maritime 
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  w i th  the  African,  Caribbean  and  Pacific  (ACP)  countries  and  the  Europe 
Agreements  w i th  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  w i th  a  number  of  former  USSR 
countries  and  Association  Agreements  w i th  countries  from  the  Mediterranean. 

The  1 9 92  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  w h i ch  restrict  this  freedom. 

Relations  with  I  MO/ILO 
is  convinced  of  the  necessity 

e. 
International  Maritime 
The  Commission 
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  w i th  regard  to  improving  working  conditions,  safety  and  training 
standards  in  IMO  and  ILO. 

to  assist  the 

The  Commission  co-ordinated 
IMO 
Conferences  on  the  Revision  of  STCW  and  SOLAS.  This  contributed  to  the  successful 
outcome  of  the  Conferences.. 

the  positions  of  Member  States  at 

the  recent 

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. 

the  globalisation  of 

ILO  activities  devoted  to  seafarers'  problems  are  becoming  increasingly  important  in  the 
light  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 
w h e n,  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  1 9 96  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  9 3 / 1 04  on working  time. 
the 
The  Commission  encouraged 
Commission  on  h ow  best  to  ensure  that  this  sector  is  appropriately  covered  w i th  regard 
to  the  protection  of  health  and  safety.  The  Commission  will  examine  w i th  Member  States 
the  possibility  of  convincing  the  Conference  to  decide  on  the  enforcement  of  Convention 
No.  109  through  port  State  control. 

to  make  recommendations 

the  social  partners 

to 

f. 

Short  sea  shipping 

As  mentioned  above,  the  Commission  recently  adopted  a  Communication  on  short  sea 
shipping.18  It  includes  an  action  programme  w i th  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: 

of  the  quality  and  efficiency  of  short  sea  shipping 

The  improvement 
It  emphasises  the  importance  of  R&D  activities  under  the  C o m m u n i t y '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. 

services 

of  port  infrastructure 

77ïe improvement 
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. 

efficiency 

and  port 

The preparation  of  short  sea  shipping 
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 

for  a  wider  Europe 

Wages,  Hours  of  Work  and  Manning  (Sea)  Convention  (1958). 

18 

"The  development  of  short  sea  shipping  in  Europe:  prospects  and  challenges",  COM  (95) 
317  final. 

European  Commission  -  T o w a r ds  a  N ew  Maritime  Strategy  -  Annex  B 

f^ 

- 7-

Commission.  The  objective  is  that  each  of  the  groups  establishes  a  multi-annual 
w o rk  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 4 0 5 6 / 86  lays d o wn 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 
to  the  group  exemption  w h i ch  may  be 
of  conditions  and  obligations  are  attached 
w i t h d r a wn  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  1 9 9 4,  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  f o r m, 
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  w ay  for 
shipping  companies  to  obtain  individual  exemption  for  inland  cooperation  and  inland  price 
fixing.  In  the  same  w ay  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  1 9 9 5,  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  9 9 4.  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  1 9 9 5,  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  -  T o w a r ds  a  New  Maritime  Strategy  -  Annex  B 

Uo 

- 8-

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  w h i ch  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 
their 
to  alleviate  competitive  disadvantages. 
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. 

Irrespective  of 

trade 

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  w i th  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  w i th  alternative  registers,  the  majority  of  ships  in  international 
trade  are  registered  in  the  alternative  register:  for  example,  in  Denmark,  9 2%  of  the  total 
tonnage  operating  in  international  trades  is  registered  in the  DIS; the  figure  for  the  German 
ISR  is  7 6 %;  in  Finland,  5 0%  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  1 9 9 5. 

European  Commission  -  T o w a r ds  a  New  Maritime  Strategy  -  Annex  B 

(ûf 

II. 

Results 

9-

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 
for  competition.  The 
are  effectively  applied,  thereby  also  ensuring  fairer  conditions 
liberalised 
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 
o w n ed  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. 

international  shipping  environment  has,  however,  not 

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  8 0%  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  5 0 %.  Interestingly,  Finland  has  been  able  to  re-attract  bulk  tonnage, 
w h i ch  is  a  prime  target  for  flagging  out.  Through  the  introduction  of  the  ISR  in  1 9 8 9, 
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  -  T o w a r ds  a  N ew  Maritime  Strategy  -  Annex  B 

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COM(96) 81 final 

DOCUMENTS 

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ISBN 92-78-01699-3 

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