Commission communication C(2004) 43 — Community guidelines on State aid to maritime transport
Date: 2004-01-17
Institutions: European Commission
Subjects: State aid, maritime transport

17.1.2004

EN

Official Journal of the European Union

C 13/3

Commission communication C(2004) 43 — Community guidelines on State aid to maritime
transport

(2004/C 13/03)

1. INTRODUCTION

for

the Community economy. 90 % of all

The White Paper ‘European transport policy for 2010: time to
decide’ stresses the vital
importance of maritime transport
trade
services
between the Community and the rest of the world is trans-
ported by sea. Short sea shipping accounts for 69 % of the
volume of goods transported between the Member States
(this percentage is 41 % if domestic transport is included).
Community maritime
related activities
remains one of the most important in the world.

transport and its

The shipping companies of the Member States still manage
today. The accession of
about a third of
Cyprus and Malta (1)
increase still further the
Union's share of shipping, as the shipping registers of these
for about 10 % of world
two countries currently account
tonnage.

the world fleet
in 2004 will

Since the 1970s the European fleet has been faced with
competition from vessels registered in third countries which
do not take much care to observe social and safety rules in
force at international level.

European measures,

The lack of competitiveness of Community-flagged vessels was
recognised at the end of the 1980s and,
in the absence of
States
harmonised
adopted different arrangements for aiding maritime transport.
The strategies adopted and the budgets allocated to support
measures differ
in
reflection of the attitude of those States to public aid or the
importance they attach to the maritime sector.

from one Member State to the other

several Member

In addition, to encourage the re-registering of vessels, Member
States have relaxed rules concerning crews, notably through the
creation of second registers.

Second registers comprise, firstly, ‘offshore registers’ belonging
to territories which have a greater or lesser autonomy in
relation to the Member State, and secondly,
‘international
registers’, attached directly to the State which created them.

In spite of the efforts made, a large part of the Community
fleet continues to be registered under
third
third countries
countries. This is because the registers of
which apply open registration policies — some of which are

the flags of

called ‘flags of convenience’ — have continued and are still
continuing to enjoy a significant competitive edge over the
registers of Member States.

Aid to the shipping industry since 1989

In the light of the differences between the aid systems adopted
by Member States faced with more intense competition from
non-Community flagged vessels,
in 1989 the Commission
defined its first guidelines on this subject to ensure a certain
convergence between the actions of the Member States. This
method nevertheless proved to be ineffective and the decline of
Community fleets continued. The guidelines were accordingly
reviewed,
leading to a 1997 communication defining new
Guidelines on State aid to maritime transport (2).

The major development in recent years concerning support
measures from the Member States for maritime transport is
the widespread extension in Europe of
rate tonnage
taxation systems (‘tonnage tax’). Tonnage tax entered into
force very early in Greece and was progressively extended to
the Netherlands (1996), to Norway (1996), to Germany (1999),
to the United Kingdom (2000), to Denmark, to Spain and to
Finland (2002) and to Ireland (2002). Belgium and France also
decided to adopt it in 2002, while the Italian Government is
envisaging this possibility.

flat

Results of measures proposed by Member States and
approved by the Commission compared with the general
objectives of the 1997 revised Guidelines

(a) Trends of
fleet)

the Community-flagged fleet (competitiveness of

the

According to the replies provided by the Member States
mid-2002 to the Commission's questionnaire and to the
most recent statistical data (3), Member States which have
introduced aid measures, particularly in the form of tax
relief, have obtained re-registration under the national flag
of a significant volume of tonnage in all the registers taken
together. In percentage terms, the fleet as entered in the
registers of the Member States increased as follows: the
number of vessels by 0,4 % on average per year, tonnage
by 1,5 % and container ships by 12,4 %. Even if, in the case
of the first registers, the number of units entered declined
practically everywhere in the period 1989 to 2001, these
figures can be viewed as a reversal of the trend, observed
up to 1997, of abandoning Community flags.

(2) Community guidelines on State aid to maritime transport (97/C

(1) The sixth and the fifth world registers of ships in terms of tonnage
respectively (vessels of more than 300 gt. Source: ISL 2001).

205/05) (OJ C 205, 5.7.1997, p. 5).

(3) ISL, Shipping Statistics 2001.

C 13/4

EN

Official Journal of the European Union

17.1.2004

During the same period, however, the share of Member
State registers in total world tonnage fell slightly. While
world shipping increased, the growth of the Community-
managed fleet
third-country flags was
faster than that of the fleet registered under the flags of
the Member States.

registered under

(b) Employment trends

According to the most recent estimates, the number of
seafarers on board Community-flagged vessels fell
from
188 000 in 1996 to approximately 180 000 in 2001 (1).
The total number of Community nationals employed on
board vessels flying Community flags is currently about
120 000, a figure which is 40 % lower
than that of
1985, while the number of nationals of third countries
employed on board Community vessels has gone up from
29 000 in 1983 to approximately 60 000 today. When
assessing the drop in the total number of seafarers, the
following factors must be taken into account:

— first, productivity per vessel has continued to increase.
it possible to
if not higher volume than that

Accordingly, a smaller crew makes
transport an equal
carried in the past,

— secondly, the Community-flagged fleet was renewed in
the period 1997 to 2001. The average age of vessels
went down from 22,9 years to 17,2 years. 35 % of the
fleet in service on 1 January 2001 had been built in the
period 1996 to 2000. New vessels, of more advanced
technology, need better trained but smaller crews.

Notable differences between the Member States in the
employment rate of Community seafarers are nevertheless
apparent. However, nothing in these figures indicates a
reversal of
the trend whereby the Community-flagged
fleet depends more and more on third-country seafarers.
This trend was pointed out by the Commission in 2001
in its Communication on the training and recruitment of
seafarers (2).

investments on land in maritime-related industries (3) and
on the contribution of maritime transport to the economy
of the Community as a whole and to jobs in general.

The significance of shipping and the whole maritime cluster
varies considerably with the countries under consideration.
However, the importance of the European maritime cluster
and its direct economic impact can be clearly illustrated by
the following figures: 1,550 million direct employees, a
turnover of EUR 160 billion in 1997 (about 2 % of GDP
in the Community) (4). Data on Denmark (3 % of the GDP
generated by the maritime cluster), Greece (2,3 %) and the
Netherlands (2 %) can be taken as a valid example.

In this context, therefore, it is not insignificant to note that
the fleet managed by European operators based in the
Community has stayed at a level of around 34 % of
world tonnage, while the latter increased by 10 % during
the period. Given the mobility of the maritime industry and
the facilities offered by third countries, one may conclude
transport may
that
contribute to avoiding widespread displacement of allied
industries.

support measures

for maritime

To sum up, it can be affirmed that, where measures in line
with the 1997 Guidelines have been adopted, the structural
decline of the Community registers and the Community's
fleet has been halted and the objectives
set by the
Commission have been attained, at least in part.

The share of open registers in world tonnage continued,
however, to increase during the period, rising from 43 % in
1996 to 54 % in 2001, and nothing indicates any
significant reversal of
the trend whereby the fleet had,
and is continuing to have, increasing recourse to seafarers
from third countries. The campaign undertaken in recent
it must be better targeted.
years must be pursued but
Measures
in
particular be the subject of more active monitoring.

to promote Community seafarers must

The results of the measures taken by the Member States
and authorised by the Commission will have to be system-
atically analysed.

(c) Contribution to economic activity as a whole

Maritime industries are inextricably linked with maritime
transport. This association is a strong argument in favour
of positive measures whose aim is to maintain a fleet
Since maritime
dependent on Community
transport is one of the links in the chain of transport in
general and in the chain of
the maritime industries in
particular, measures
seeking to maintain the competi-
tiveness of the European fleet also have repercussions on

shipping.

(1) Total combined number of Community and non-Community

seafarers.

(2) Communication from the Commission on the

training and
recruitment of seafarers of 6 April 2001, COM(2001) 188 final.

exceptional,

As a consequence, and even though as a matter of principle
operating aid should be
temporary, and
degressive, the Commission estimates that State aid to the
justified and that the
European shipping industry is still
approach followed by the 1997 Guidelines was correct.
This communication is therefore based on the same basic
approach.

(3) These activities include port services,

logistics, the construction,
repair, maintenance,
inspection and classification of vessels, ship
management and brokerage, banking activities and international
financial services, insurance, advice and professional services.
(4) Study undertaken by the European Commission, DG Enterprise

(published in the Europa internet site).

17.1.2004

EN

Official Journal of the European Union

C 13/5

2. SCOPE AND GENERAL OBJECTIVES OF THE REVISED
STATE AID GUIDELINES

This communication — replacing the 1997 Guidelines — aims
at setting the parameters within which State aid to maritime
transport will be approved, pursuant to Community State aid
rules and procedures, by the Commission under Article 87(3)(c)
and/or Article 86(2) of the Treaty.

if

they could directly or

access to the infrastructure for the benefit of all operators
the Commission may examine such
concerned. However,
investments
indirectly benefit
particular shipowners. Finally, the Commission has established
the principle that no State aid is involved where public auth-
orities contribute to a company on a basis that would be
acceptable to a private investor operating under normal
market-economy conditions.

Aid schemes should not be conducted at the expense of other
Member States' economies and must be shown not to risk
distortion of competition between Member States
to an
extent contrary to the common interest. State aid must
always be restricted to what
is necessary to achieve its
purpose and be granted in a transparent manner. The cumu-
lative effect of all aid granted by State authorities (including
national, regional and local levels) must always be taken into
account.

2.2. General objectives of revised State aid guidelines

The Commission has stressed that increased transparency of
State aid is necessary so that not only national authorities in
the broad sense but also companies and individuals are aware
of their rights and obligations. These Guidelines are intended to
contribute to this and to clarify what State aid schemes may be
the Community maritime
introduced in order
interest, with the aim of:

to support

These Guidelines are applicable to ‘maritime transport’ activities
as defined in Regulation (EEC) No 4055/86 (1) and in Regu-
lation (EEC) No 3577/92 (2), that is to say, to the ‘transport of
goods and persons by sea’. They also, in specific parts, relate to
towage and dredging.

2.1. Scope of revised State aid guidelines

These Guidelines cover any aid granted by Member States or
through State resources in favour of maritime transport. This
includes any financial advantage, conferred in any form what-
funded by public authorities (whether at national,
soever,
regional, provincial, departmental or local
level). For these
purposes, ‘public authorities’ may include public undertakings
and State-controlled banks. Arrangements whereby the State
guarantees loans or other funding by commercial banks may
also fall within the definition of aid. The Guidelines draw no
distinction between types of beneficiary in terms of their legal
structure (whether companies, partnerships or individuals), nor
between public or private ownership, and any reference to
companies shall be taken to include all other types of legal
entity.

These guidelines do not cover aid to shipbuilding (within the
meaning of Council Regulation (EC) No 1540/98 (3) or any
subsequent instrument). Investments in infrastructure are not
normally considered to involve State aid within the meaning of
Article 87(1) of the Treaty if the State provides free and equal

(1) Council Regulation (EEC) No 4055/86 of 22 December 1986
applying the principle of freedom to provide services to maritime
transport between Member States and between Member States and
third countries (OJ L 378, 31.12.1986, p. 1).

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

— improving a safe, efficient, secure and environment friendly

maritime transport,

— encouraging the flagging or re-flagging to Member States'

registers,

— contributing to the consolidation of the maritime cluster
established in the Member States while maintaining an
overall competitive fleet on world markets,

— maintaining and improving maritime know-how and
for European

protecting and promoting employment
seafarers, and

— contributing to the promotion of new services in the field
sea shipping following the White Paper on

short

of
Community transport policy.

State aid may generally be granted only in respect of ships
In certain exceptional
entered in Member States' registers.
cases, however, aid may be granted in respect of ships
entered in registers under point (3) of the Annex, provided
that:

— they

comply with the

and
Community law,
including those relating to security,
safety, environmental performance and on-board working
conditions,

international

standards

(3) OJ L 202, 18.7.1998, p. 1.

— they are operated from the Community,

C 13/6

EN

Official Journal of the European Union

17.1.2004

— their shipowner is established in the Community and the
the register

Member State concerned demonstrates that
contributes directly to the objectives mentioned above.

operated. The tonnage tax will be payable irrespective of the
company's actual profits or losses.

Additionally, flag-neutral aid measures may be approved in
certain exceptional cases where a benefit to the Community
is clearly demonstrated.

3. FISCAL AND SOCIAL MEASURES TO IMPROVE
COMPETITIVENESS

3.1. Fiscal treatment of shipowning companies

sector,

such activities

in the on-shore maritime

Such measures have been shown to safeguard high quality
employment
such as
management directly related to shipping and also in associated
In view of the
activities (insurance, brokerage and finance).
importance of
the
Community and in support of the objectives stated earlier,
these types of
incentive can generally be endorsed.
Further, safeguarding quality employment and stimulating a
competitive shipping industry established in a Member State
through fiscal incentives, taken together with other initiatives
on training and enhancement of safety, will facilitate the devel-
opment of Community shipping in the global market.

economy of

to the

fiscal

shipping
Many third countries have developed significant
registers, sometimes supported by an efficient
international
services infrastructure, attracting shipowners through a fiscal
climate which is considerably milder than within Member
States. The low-tax environment has resulted in there being
an incentive for companies not only to flag out their vessels
but also to consider corporate relocation.
should be
emphasised that there are no effective international rules at
present to curb such tax competition and few administrative,
legal or technical barriers to moving a ship's registration from
the creation of
a Member State's register.
conditions
of
flags
convenience seems the best way forward.

competition with

In this context,

allowing

fairer

It

The question of
fiscal competition between Member States
should be addressed. At this stage, there is no evidence of
schemes distorting competition in trade between Member
States to an extent contrary to the common interest. In fact,
there appears to be an increasing degree of convergence in
to shipping aid. Flagging out
Member States' approaches
Fiscal
rare phenomenon.
between Member States
competition is mainly an issue between Member States on
the one hand and third countries on the other, since the cost
savings available to shipowners through third country registers
are considerable in comparison to the options available within
the Community.

is

a

to improve
including,

this reason, many Member States have taken special
For
shipowning
fiscal
measures
companies,
for instance, accelerated depreciation
on investment in ships or the right to reserve profits made
on the sale of ships for a number of years on a tax-free
basis, provided that these profits are reinvested in ships.

climate

the

for

These tax relief measures which apply in a special way to
shipping are considered to be State aid. Equally, the system
of replacing the normal corporate tax system by a tonnage
‘Tonnage tax’ means that the shipowner
tax is a State aid.
tax linked directly to the tonnage
pays an amount of

The Commission is aware that the income of shipowners today
is often obtained from the operation of ships under different
flags — for instance, when making use of chartered vessels
foreign flags or by making use of partner vessels
under
within alliances.
It is also recognised that the incentive for
expatriation of management and ancillary activities would
financial
continue if
benefit
and
accounting separately for Community flag earnings and other
earnings. This would be the case,
the
non-Community flag earnings were liable either to the full
rate of corporate taxation in a Member State or to a low
rate of tax overseas if overseas management could be demon-
strated.

the shipowner obtained a significant

from maintaining

establishments

for example,

different

if

the Member

The objective of State aid within the common maritime
the
transport policy is to promote the competitiveness of
Community fleets in the global shipping market. Consequently,
tax relief schemes should, as a rule, require a link with a
Community flag. However, they may also, exceptionally, be
approved where they apply to the entire fleet operated by a
shipowner established within a Member State's territory liable
to corporate tax, provided that it is demonstrated that the
strategic and commercial management of all ships concerned
is actually carried out from within the territory and that this
activity contributes substantially to economic activity and
employment within the Community. The evidence furnished
by
this
economic link should include details of vessels owned and
operated under Community registers, Community nationals
employed on ships and in land-based activities and investments
the aid must be
It must be stressed that
in fixed assets.
the strategic and
necessary to promote the repatriation of
concerned in the
commercial management of all
Community and,
the
schemes must be liable to corporate tax in the Community.
In addition,
the Commission would request any available
evidence to show that all vessels operated by companies bene-
fiting from these measures comply with the relevant inter-
national and Community safety standards,
including those
relating to onboard working conditions.

concerned to demonstrate

the beneficiaries of

in addition,

ships

State

that

17.1.2004

EN

Official Journal of the European Union

C 13/7

it should not be
As was argued in the above paragraph,
forgotten that, as a matter of principle,
tax relief schemes
require a link with the flag of one of the Member States.
Before aid is exceptionally granted (or confirmed) to fleets
which also comprise vessels flying other flags, Member States
should ensure that beneficiary companies commit themselves
to increasing or at least maintaining under the flag of one of
the Member States the share of tonnage that they will be
such flags when this Communication
operating under
ship
becomes applicable. Whenever a company controls
operating companies within the meaning of
the Seventh
Council Directive 83/349/EEC (1)
(Article 1), the abovemen-
tioned tonnage share requirement will have to apply to the
parent company and subsidiary companies taken together on
to
a consolidated basis. Should a company (or group)
respect that requirement, the relevant Member State should
not grant
to additional
non-Community flagged vessels operated by that company,
tonnage
unless the Community-flagged share of
eligible for tax relief in that Member State has not decreased
on average during the reporting period referred to in the next
paragraph. The Member State must inform the Commission of
the application of
the derogation. The Community-tonnage
share requirement set out in this paragraph does not apply
to undertakings operating at
tonnage
under a Community flag.

tax relief with respect

least 60 % of

the global

further

their

fail

In all cases, where fiscal schemes have been approved on the
above exceptional basis and in order to allow the Member State
concerned to prepare, every three years, the report required
under Chapter 12 (‘Final Remarks’), recipients must provide
the Member State concerned with proof that all the conditions
for the derogation from the flag link have been fulfilled during
the period. Furthermore, evidence must be provided that, in the
case of the beneficiary fleet, the tonnage share requirement laid
down in the previous paragraph has been observed and that
each vessel of that fleet complies with the relevant international
and Community standards, including those relating to security,
safety, environmental performance and on-board working
conditions. Should recipients fail to provide such evidence,
they will not be allowed to continue to benefit from the tax
scheme.

It is also of interest to stipulate that whereas Community-based
shipping companies are the natural recipients of the above tax
schemes, certain ship management companies established in
the Community may also qualify under the same provisions.
Ship management companies are entities providing different
kind of services to shipowners, such as technical survey,
crew recruiting and training, crew management, and vessel
In some cases ship managers are assigned both
operation.
technical and crewing management of vessels.
In this case
they act as classic ‘shipowners’ as far as transport operations
are concerned. Moreover, as in the case of
the shipping
industry,
this sector is experiencing strong and increasing
it
competition at an international
seems appropriate to extend the possibility of tax relief to
that category of ship managers.

level. For these reasons,

(1) OJ L 193, 18.7.1983, p. 1.

Ship management companies may qualify for aid only in
respect of vessels for which they have been assigned the
entire crew and technical management. In particular, in order
to be eligible, ship managers have to assume from the owner
the full responsibility for the vessel's operation, as well as take
over from the owner all the duties and responsibilities imposed
by the ISM Code (2). Should ship managers also provide other
specialised services, even related to vessel operation, separate
accounting for such activities, which do not qualify for the tax
relief schemes, should be ensured. The requirement regarding
Member States' flag share described above also applies to ship
management companies (3).

These guidelines apply only to maritime transport. The
Commission can accept
the towing at sea of other
vessels, oil platforms, etc. falls under that definition.

that

The Commission has, however, become aware that in certain
cases Member States allow tugboats which are designed for
work at sea to benefit from aid even though they are not
active at sea, or rarely so. Thus it is useful to state in these
guidelines which line the Commission has taken and will take
on this point.

‘Towage’ is covered by the scope of the Guidelines only if more
than 50 % of the towage activity effectively carried out by a tug
during a given year constitutes ‘maritime transport’. Waiting
time may be proportionally assimilated to that part of total
activity effectively carried out by a tug which constitutes
‘maritime transport’.
towage
activities which are carried out inter alia in ports, or which
consist in assisting a self-propelled vessel to reach port do
not constitute ‘maritime transport’ for the purposes of this
communication. No derogation from the flag link is possible
in the case of towage.

It should be emphasised that

Similarly in the case of dredging, the experience gained during
the recent years suggests that some points should be made.

fiscal

arrangements

transport. However,

in principle, not eligible for aid to
‘Dredging’ activities are,
maritime
for
companies (such as tonnage tax) may be applied to those
dredgers whose activity consists in ‘maritime transport’ —
that is, the transport at deep sea of extracted materials — for
more than 50 % of their annual operational time and only in
respect of such transport activities. Eligible dredgers are only
those registered in a Member State (no derogation from the flag
link is possible).
separate accounting for
maritime transport activities is required (4).

In such cases,

(2) ‘ISM Code’, International Management Code for the Safe Operation
of Ships and for Pollution Prevention, adopted by the International
Maritime Organization (IMO) by resolution A.741(18).

(3) The Commission will examine the effects of these provisions on
this

implementation of

three years of

ship management after
communication.

(4) The ships used by these operators also extract or dredge materials
which they carry afterwards. Extraction or dredging as such do not
qualify for State aid to maritime transport.

C 13/8

EN

Official Journal of the European Union

17.1.2004

Finally, the method of assessing tonnage tax systems notified
up to now has consisted of the following steps: a virtual profit
for shipowners has been calculated by applying a notional
profit rate to their tonnage; national corporate tax has been
applied to the amount so determined. The resulting amount is
the ‘tonnage tax’ to be paid.

— Community/EEA citizens, in the case of seafarers working
(including ro-ro ferries (1)) providing
the
services between ports of

on board vessels
scheduled passenger
Community,

The notional profit rates provided for by Member States have
been homogeneous up to now. However, since corporate tax
rates may vary significantly across the Community, the tonnage
taxes to be paid for the same tonnage might be very uneven in
the different Member States.
In order to keep the present
equitable balance, the Commission will only approve schemes
giving rise to a tax-load for the same tonnage fairly in line with
the schemes already approved.

the

fiscal

the shipping sector and employment

In all cases, the benefits of schemes must facilitate the devel-
opment of
in the
Community interest. Consequently,
advantages
mentioned above must be restricted to shipping activities;
hence, in cases where a shipowning company is also engaged
in other commercial activities, transparent accounting will be
required in order to prevent
into non-shipping
activities. This approach would help Community shipping to
be competitive, with tax liabilities comparable to levels
applying elsewhere in the world, but would preserve a
Member State's normal
tax levels for other activities and
personal remuneration of shareholders and directors.

‘spill-over’

3.2. Labour-related costs

sector

should,

As was mentioned earlier, maritime transport is a sector experi-
encing fierce international competition. Support measures for
therefore, aim primarily at
the maritime
reducing fiscal and other
costs and burdens borne by
Community shipowners and Community seafarers towards
in line with world norms. They should directly
levels
stimulate the development of
the sector and employment,
rather than provide general financial assistance.

— all

seafarers

liable to taxation and/or

social

security

contributions in a Member State, in all other cases.

The previous 1997 Guidelines allowed such reductions for all
seafarers working on board vessels registered in a Member
State and subject to tax and or social security contributions
in a Member State. However, since then it has become clear
that pressure by international
competition on European
shipowners is very strong in the case of international freight
transport, while it is lighter in the case of intra-Community
scheduled passenger transport. Boosting the competitiveness of
European shipping industry is therefore a prior objective of aid
in the former case. Preventing Member States from granting tax
relief to all seafarers in this case would have very negative
competitiveness of European shipowners,
effects on the
which could be encouraged to flag-out. At the same time it
has been noticed that employment of European citizens is
significant,
in intra-
in percentage terms and in numbers,
Community scheduled passenger
transport. Protection of
employment in the Community is therefore a priority for aid
in this case. For internal fiscal reasons some Member States
prefer not to apply reduced rates as mentioned above, but
instead may reimburse shipowners — partially or wholly —
for the costs arising from these levies. Such an approach may
generally be considered equivalent to the reduced-rate system
as described above, provided that there is a clear link to these
levies, no element of overcompensation, and that the system is
transparent and not open to abuse.

the maritime part of

transport of materials), aid in favour of

towage and dredging activities
For
(maritime
the
employment of Community seafarers may be granted by
analogy to the rules contained in this point, but only if the
aid relates to Community seafarers working on board seagoing,
self-propelled tugs and dredgers, registered in a Member State,
carrying out maritime transport at sea for at least 50 % of their
operational time (2).

In keeping with these objectives,
the following action on
employment costs should be allowed for Community shipping:

— reduced rates of contributions for the social protection of
Community seafarers employed on board ships registered in
a Member State,

— reduced rates of income tax for Community seafarers on

board ships registered in a Member State.

For the purposes of this point, ‘Community seafarers’ is defined
as:

Finally, it should be recalled that aid to employment is covered
by the block exemption provided for by Commission Regu-
lation (EC) No 2204/2002 of 12 December 2002 on the
application of Articles 87 and 88 of the EC Treaty to State
aid for employment (3), which also applies
to maritime
transport.

(1) See Article 2, point (a), of Council Directive 1999/35/EC of 29
April 1999 on a system of mandatory surveys for
the safe
operation of regular ro-ro ferry and high-speed passenger craft
services (OJ L 138, 1.6.1999, p. 1).

(2) Thus dredging activities carried out, inter alia, mainly in ports will
not qualify for aid in favour of employment of Community
seafarers.

(3) OJ L 337, 13.12.2002, p. 3.

17.1.2004

EN

Official Journal of the European Union

C 13/9

4. CREW RELIEF

7. TRAINING

Aid for crew relief tends to reduce the costs of employing
Community seafarers, especially those on ships operating in
distant waters. Aid, which is subject to the ceiling (as set out
in Chapter 11), may, therefore, be granted in the form of
payment or reimbursement of
the costs of repatriation of
Community seafarers working on board ships entered in
Member States' registers.

It should be recalled, firstly, that aid to training is covered by
the block exemption provided for by Commission Regulation
(EC) No 68/2001 of 12 January 2001 on the application of
Articles 87 and 88 of the EC Treaty to training aid (1), which
also applies to maritime transport.

5. INVESTMENT AID

Subsidies for fleet renewal are not common in other transport
modes such as road haulage and aviation. Since they tend to
distort competition,
to
approve such schemes, except where they form part of a
structural reform leading to reductions in overall fleet capacity.

the Commission has been reluctant

Investment must comply with Regulation (EC) No 1540/98 or
any other Community legislation that may replace it.

Within the framework of these guidelines, other investment aid
may, however, be permitted, in line with the Community safe
seas policy,
in certain restricted circumstances to improve
equipment on board vessels entered in a Member State's
registers or to promote the use of safe and clean ships. Thus
aid may be permitted which provides incentives to upgrade
Community-registered ships to standards which exceed the
mandatory safety and environmental standards laid down in
and anticipating agreed higher
international
environmental
standards,
controls.
applicable
Such aid must
Community provisions on shipbuilding.

comply with the

conventions

enhancing

thereby

safety

and

Since shipping is essentially very mobile, regional aid for
maritime companies in disadvantaged regions, which often
take the form of investment aid to companies investing in
the regions, may only be permitted where it is clear that the
benefits will accrue to the region over a reasonable time
period. This would, for example, be the case of investment
related to the construction of dedicated warehouses or to the
purchase of fixed transhipment equipment. Investment aid for
maritime companies in disadvantaged regions may then only
be permitted where it also complies with the regional aid rules
(see Chapter 6).

Moreover, many training schemes followed by seafarers and
supported by the State are not considered to be State aid
because they are of a general nature (whether vocational or
academic). These are, therefore, not subject to notification and
examination by the Commission.

If a scheme is to be regarded as including State aid, notification
is, however, required. This may be the case if, for example, a
particular scheme is specifically related to on-board training
and the benefit of State financial support is received by the
training organisation, the cadet, seafarer or shipowner. The
Commission takes a favourable attitude towards aid, granted
on a non-discriminatory basis, to training carried out on board
ships registered in a Member State. Exceptionally, training on
board other vessels may be supported where justified by
objective criteria, such as the lack of available places on
vessels in a Member State's register.

Where financial contributions are paid for on-board training,
the trainee may not, in principle, be an active member of the
crew but must be supernumerary. This provision is to ensure
that net wage subsidies cannot be paid for seafarers occupied
in normal crewing activities.

Similarly, to safeguard and develop maritime expertise in the
the Community
Community and the competitive edge of
maritime industries,
further extensive research and devel-
opment efforts are necessary, with a focus on quality, produc-
tivity, safety and environmental protection. For such projects,
State support may also be authorised within the limits set by
the Treaty.

Aid aimed at enhancing and updating Community officers'
skills may be allowed during their whole career. The aid may
consist of a contribution to the cost of the training and/or
compensation for the wage paid to the officer during the
training period. The schemes must, however, be designed in
a way which prevents the aid for training from being directly
or indirectly diverted into a subsidy to officers' wages.

6. REGIONAL AID ON THE BASIS OF ARTICLE 87(3)(a)
AND (c)

In the context of regional aid schemes, the Commission will
apply the general rules set out in its communications or other
provisions on national regional aid or future amendments
thereto.

Aid aimed at professional retraining of high-sea fishermen
willing to work as seafarers may also be allowed.

(1) OJ L 10, 13.1.2001, p. 20.

C 13/10

EN

Official Journal of the European Union

17.1.2004

8. RESTRUCTURING AID

that

Although the Community guidelines on restructuring and
rescuing firms in difficulty (1) apply to transport only to the
extent
the sector is taken into
account, the Commission will apply those guidelines or any
other Community instrument replacing them in considering
restructuring aid for maritime companies.

the specific nature of

States, the definition of Short Sea Shipping such as provided
by the 1999 communication should, for the purposes of this
communication, be restricted to transport between ports in the
territory of the Member States.

The Commission recognises that launching short-sea shipping
services may
financial
difficulties which the Member States may wish to attenuate
in order to ensure the promotion of such services.

accompanied

substantial

by

be

9. PUBLIC SERVICE OBLIGATIONS AND CONTRACTS

In the field of maritime cabotage, public service obligations
(PSOs) may be imposed or public service contracts (PSCs)
may be concluded for the services indicated in Article 4 of
Regulation (EEC) No 3577/92. For those services, PSOs and
PSCs as well as their compensation must fulfil the conditions
of
that provision and the Treaty rules and procedures
governing State aid, as interpreted by the Court of Justice.

The Commission accepts that
if an international
transport
imperative public transport
service is necessary to meet
needs, PSOs may be imposed or PSCs may be concluded,
provided that any compensation is subject
to the above-
mentioned Treaty rules and procedures.

The duration of public service contracts should be limited to a
reasonable and not overlong period, normally in the order of
six years, since contracts for significantly longer periods could
entail the danger of creating a (private) monopoly.

10. AID TO SHORT SEA SHIPPING

There is no legal definition of ‘Short Sea Shipping’. However,
the communication from the Commission on the development
of Short Sea Shipping in Europe of 29 June 1999 (2) has
provided a working definition of Short Sea Shipping, to be
understood as ‘the movement of cargo and passenger by sea
between ports situated in geographical Europe or between
those ports and ports situated in non European countries
having a coastline on the enclosed seas bordering Europe’ (3).
In this communication the Commission underscored the role of
this transport mode to promote sustainable and safe mobility,
to strengthen cohesion within the Community and to improve
transport efficiency as part of an intermodal approach. The
Commission also recognises that the promotion of short-sea
shipping must be carried out at all levels, whether Community,
national or regional.

When such is the case, the Commission will be able to approve
aid of this kind, on condition that it is intended for shipowners
within the meaning of Article 1 of Regulation (EEC) No
4055/86 in respect of ships flying the flag of one of the
Member States. Aid of this kind will have to be notified and
to fulfil the following conditions:

— the aid must not exceed three years in duration and its
purpose must be to finance a shipping service connecting
ports situated in the territory of the Member States,

— the service must be of such a kind as to permit transport
(of cargo essentially) by road to be carried out wholly or
partly by sea, without diverting maritime transport in a way
which is contrary to the common interest,

— the aid must be directed at implementing a detailed project
with a pre-established environmental impact, concerning a
new route or the upgrading of services on an existing one,
associating several shipowners if necessary, with no more
than one project financed per line and with no renewal,
extension or repetition of the project in question,

— the purpose of the aid must be to cover, either up to 30 %
of the operational costs of the service in question (4), or to
finance the purchase of
to
supply the planned service, up to a level of 10 % in such
investment,

trans-shipment equipment

— the aid to implement a project must be granted on the basis
of transparent criteria applied in a non-discriminatory way
to shipowners established in the Community. The aid
should normally be granted for a project selected by the
authorities of the Member State through a tender procedure
in compliance with applicable Community rules,

Since aid to Short Sea Shipping aims
intermodal chain and to decongest

to improve the
roads in the Member

(1) OJ C 288, 9.10.1999, p. 2.
(2) Communication from the Commission to the European Parliament,
the Economic and Social Committee and the
the Council,
Committee of Regions,
‘The development of Short Sea Shipping
in Europe: a dynamic alternative in a sustainable transport chain
— Second two-yearly report’, COM(1999) 317 final.

(3) Communication, p. 2.

— the service which is the subject of the project must be of a
kind to be commercially viable after the period in which it
is eligible for public funding,

(4) In case of Community financing or eligibility under different aid
schemes, the ceiling of 30 % applies to the combined total of
aid/financial support. It should be noticed that the aid intensity is
the same as that provided for modal shift actions within the Marco
Polo Community initiative: cf. Article 5(2) of Regulation (EC) No
1382/2003 (OJ L 196, 2.8.2003, p. 1).

17.1.2004

EN

Official Journal of the European Union

C 13/11

— such aid must not be cumulated with public service

compensation (obligations or contracts).

number of jobs saved or created, is to be presented in such
proposals.

11. CEILING

As was explained above, certain Member States support their
maritime sectors through tax reduction whilst other Member
States prefer to make direct payments — for instance, by
providing reimbursement of seafarers' income tax. In view of
the current lack of harmonisation between the fiscal systems of
the Member States, it is felt that the two alternatives should
remain possible. Obviously,
in
some instances, be combined. However, this risks causing a
cumulation of aid to levels which are disproportionate to the
objectives of the Community common interest and could lead
to a subsidy race between Member States.

those two approaches may,

A reduction to zero of taxation and social charges for seafarers
and a reduction of corporate taxation of shipping activities
such as is described in point 3.1 (penultimate paragraph)
is
the maximum level of aid which may be permitted. To avoid
distortion of competition, other systems of aid may not
than this. Moreover, although
provide any greater benefit
each aid scheme notified by a Member State will be
examined on its own merits,
it is considered that the total
amount of aid granted under Chapters 3 to 6 should not
taxes and social contributions
exceed the total amount of
collected from shipping activities and seafarers.

12. FINAL REMARKS

The Commission will continue to monitor regularly and closely
the market conditions for shipping. Should the latter change,
and should consequently the need for State aid be reduced or
overcome, the Commission will take the necessary measures in
good time.

All new proposals for measures notified to the Commission
must include a calendar indicating, for the next six years, the
expected quantified effects for each objective of point 2.2. In
particular, the expected macro-economic return on the corre-
sponding maritime cluster, together with an estimation of the

For all the aid schemes — whether existing or new — falling
within the scope of this Communication, Member States are to
communicate to the Commission an assessment of their effects
during their sixth year of implementation.

When aid has been approved and granted to a beneficiary,
under the derogation from the flag link referred to in point
3.1, the relevant Member State must report to the Commission
every three years starting from the date when the grant was
granted. In its report, the Member State will quantify the effects
produced and compare the results with the expected effects.
The reporting requirements set out in this communication will
enter into force upon its publication.

Furthermore, should it prove necessary, for example following
the Member State concerned must
a justified complaint,
provide the Commission with evidence that
the assistance
granted to the respective beneficiary under an agreed scheme
has been limited to the strict definition therein and has also
produced the effects expected.

13. APPROPRIATE MEASURES

These guidelines will apply from the date of their publication
in the Official Journal of the European Union. In accordance with
Article 88(1) of the Treaty,
the Commission proposes that
Member States amend their existing aid schemes relating to
State aid covered by these guidelines so as to comply with
them by 30 June 2005 at
the latest. Member States are
invited to confirm that they accept these proposals for appro-
priate measures in writing by 30 June 2004 at the latest.

Should a Member State fail to confirm its acceptance in writing
by that date, the Commission will apply Article 19(2) of Regu-
lation (EC) No 659/1999 and,
initiate the
proceedings referred to in that provision.

if necessary,

These guidelines will be reviewed within seven years of their
date of application.

C 13/12

EN

Official Journal of the European Union

17.1.2004

ANNEX

DEFINITION OF MEMBER STATES' REGISTERS

‘Member States' registers’ should be understood as meaning registers governed by the law of a Member State applying to
their territories forming part of the European Community.

1. All the first registers of Member States are Member States' registers.

2. In addition, the following registers, located in Member States and subject to their laws, are Member States' registers:

— the Danish International Register of Shipping (DIS),

— the German International Shipping Register (ISR),

— the Italian International Shipping Register,

— the Madeira International Ship Register (MAR),

— the Canary Islands register.

3. Other registers are not considered to be Member States' registers even if they serve in practice as a first alternative for
shipowners based in that Member State. This is because they are located in and subject to the law of territories where
the Treaty does not, in whole or in substantial part, apply. Hence, the following registers are not Member States'
registers:

— the Kerguelen register (the Treaty does not apply to this territory),

— the Dutch Antilles' register (this territory is associated with the Community; and only Part IV of the Treaty

applies to it; it is responsible for its own fiscal regime),

— the registers of:

— Isle of Man (only specific parts of the Treaty apply to the Isle — see Article 299(6)(c) of the Treaty; the Isle

of Man parliament has sole right to legislate on fiscal matters),

— Bermuda and Cayman (they are part of the territories associated to the Community, and only Part IV of the

Treaty applies to them; they enjoy a fiscal autonomy).

4. In the case of Gibraltar, the Treaty applies fully and the Gibraltar register is, for the purposes of these Guidelines,

considered to be a Member State's register.