|
Community guidelines on State aid to maritime transport
(Published in the Official Journal: OJ C 205, 5.07.1997)
(97/C 205/05)
(Text with EEA relevance)
+ Annex
1. INTRODUCTION
1.1. Development of the shipping sector: free market principle
Community maritime policy, as laid down in several communications
to the Council, covers the promotion of EC shipping, external
relations and maritime safety, together with shipbuilding and
maritime technology. The aim has been to ensure freedom of access
to shipping markets across the world for safe and environmentally
friendly ships, preferably registered in EC Member States with
Community nationals employed on board.
This approach has succeeded in opening up markets, particularly
in Europe, and has given the consumer a wide choice of competitive
shipping services, but the proportion of ships entered in Member
States' registers and the number of EC seafarers employed have
both declined significantly, especially over the last decade.
Underpinning the philosophy is legislation at international, Community
and national levels. In particular on safety standards and working
conditions, international conventions and resolutions apply and
the Community actively promotes the raising of world standards
in the appropriate fora, such as, in particular, the International
Maritime Organisation. At the Community level, in 1986, the Council
adopted a basic package of legislation on shipping, based on an
openmarket, nonprotectionist philosophy (1). Broadly speaking,
the Community decided that there should generally be no further
requirement other than establishment in the Community to confer
the right to provide shipping services between the EC and third
countries or between Member States. Thus, for example, Regulation
(EEC) No 4055/86 provides for the freedom to provide services
for all EC established carriers, irrespective of whether they
operate vessels under EC or third country flags.
The exceptions to this open trade philosophy, where trades are
still restricted to vessels registered in Member States and under
Member States' flags are relatively minor (certain cabotage trades
in particular). The registration of a vessel in a Member State
therefore offers few economic advantages; on the contrary, there
may be disadvantages, such as strict manning conditions to be
complied with and Member States' fiscal and social arrangements
for companies and their employees, which means that, in most cases,
it is relatively expensive to operate ECregistered ships with
EC seafarers on board. Further, there are few costs for third
country operators entering the open trades. In addition, while
there are no direct or indirect taxes or duties, such as apply
to most imported goods and services, applicable to shipping services
to ensure some comparability between EC and nonEC operators' costs,
there is direct competition between Communityregistered ships
and third country vessels not only in international trades but
also in most trades within the Community.
Further, the shipping industry is extremely mobile and an onerous
system can easily be avoided through registering vessels in other
countries (giving absolute freedom in manning) and, if necessary,
establishing a nominal level of administration or management outside
the Member State (to avoid its fiscal systems). Further, there
has, in recent years, been a large supply of seafarers available
from lowwage third countries, giving shipowners a lawcost option
when selecting crews. There is also at present cyclical and structural
overcapacity which means that the indusrtry is demandled and that
shippers can drive down freight rates; this, combined with high
fixed costs for shipowners, means that the incentive to cut costs
and possibly corners increases and the pursuit of high quality
in operations may not be commercially attractive. This may then
undermine the longterm interests of the Community in safe, efficient,
environmentally friendly transport.
1.2. Development of the shipping sector: decreasing competitiveness
of EC flags
The European shipping industry faces stiff international competition
and the size of the Communityregistered fleet in total worldwide
maritime transport has been decreasing steadily over the last
three decades. In 1970, 32 % of the world tonnage sailed under
the flags of EC Member States; by 1995 this share had decreased
to 14 %. The share of the major openregistry countries increased
from 19 % to 38 % over the same period. There has also been a
correspondingly steady decrease in the number of EC seafarers
employed on board.
Recognizing the problem of the lack of competitiveness of the
EC flags, the Commission proposed a series of positive measures
in 1989, including a Community ship register (<Euros;)
(2). This was intended to operate in conjunction with Member States'
first national registers and guarantee shipowners State aid in
return for accepting certain obligations as to employment of Community
nationals in the crew. However, in the end, the Council was unable
to accept the Euros approach.
In the absence of a Community measure providing a degree of harmonization,
Member States took initiatives independently in order to preserve
their maritime interests. Important economic considerations, maintaining
employment and knowhow and the strategic value of the fleet have
all been identified as influencing national policy decisions.
It is also recognized that quality must not be prejudiced by costcutting
by shipowners simply in order to survive in the face of lowcost
competition emanating particularly from flags of convenience;
quality must be preserved and improved, both in terms of the technical
standards and the operation of the vessels, which entails a continuing
need for training and employing people with the requisite skills.
Measures were, therefore, progressively introduced to slow down
the trend to flag out, such as relaxing conditions applicable
to national first rgisters, developing second or international
registers or using State aid measures or a combination of these,
but no approach has been wholly successful.
Flagging out of vessels is, however, not the end of the problem.
Where flag State outside the Community offers an attractive international
services infrastructure, flagging out has tended in recent years
to be followed by relocation of ancillary activities (such as
ship management) to countries outside the Community, leading to
an even greater loss of employment, both on board ship and on
shore. A further consequence has been a loss of maritime knowhow.
A perception that there are a limited number of positions available
at sea, a difficult working environment and few opportunities
to develop a career has led to a decrease in the number of students
at maritime training institutes and in the recruitment of young
seafarers, which has compounded the negative effects on board
and on shore.
1.3. State aid guidelines of 1989
In 1989, faced with the increasing use of State aid, the Commission
established guidelines defining the conditions under which State
aid to shipping would be considered compatible with the common
market (3). The two basic objectives defining the Community's
common interest were deemed to be the maintenance of ships under
Community flags and the employment, to the highest possible degree
of Community seafarers. The Commission sought to achieve these
objectives through a Community approach, addressing the problem
of the cost gap between the fleet registered in Member States
and vessels flags of convenience. This was the first attempt to
bring about some convergence between the Member States' actions.
Ceiling
In particular, the Commission accepted that Member States' 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.
The 1989 guidelines, therefore, included the outline of a method
devised to ensure that the global impact of State aid would not
exceed a ceiling to be defined on the basis of the cost handicap
which ships operated under the flag of a lowsalary Member State
met on world markets. The calculation was based on the hypothecial
operating cost of vessels under Portuguese and Cypriot flags,
as representing the cheapest Community first register 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.
1.4. Revision of guidelines
Given the continuing decline in the Community fleets and the increasing
divergence between Member States' policy responses to the perceived
difficulties of the Community shipping sector, the Commission
concluded that the Community's maritime strategy should be reviewed.
The initial results of this review were presented in a communication
(4) in March 1996.
The Commission concluded that further improving safety, access
to international markets and the application of competition rules,
along with efforts to enhance training and encourage employment
and R& D, would enhance the competitiveness of the Community
shipping sector. However, the Commission accepted that support
measures may nevertheless be required for the present to maintain
and develop the Community's shipping sector. The communication
also raised questions about a possible new approach to State aid.
There was general consensus that the maritime State aid guidelines
required revision, to take into account developments in international
competition and the global trend towards liberalization of trade
in goods and services, developments in the maritime sector, experience
of applying the 1989 guidelines, reactions to the communication
on a maritime strategy and the inventory of State aid for shipping,
drawn up in line with the commitments made in the White Paper
on the <Future Development of the Common Transport
Policy; (5).
In terms of general principles, the objectives of promoting a
safe and competitive Community fleet with the employment of the
highest possible number of Community seafarers remain valid. However,
the means of achieving this objective requires aid to be more
closely linked with specific actions rather than an indirect reflection
of hypothetical operating cost differences.
In the matter of the ceiling, the method has proved difficult
to apply so as to take sufficiently into account differences in
the size of vessels, productivity, crewing arrangements and the
economic performance of the operator (ie. profits or losses obtained).
It has, therefore, been concluded that an alternative approach
to limit the intensity of aid schemes and to avoid a subsidies
race is required (see Chapter 10).
The competitive difference between ships registered in the Community
and those registered outside, especially those operated under
flags of convenience, depends primarily on fiscal costs. This
is because the cost of capital is essentially the same worldwide
and equally there is no differential in the technology available.
The fiscal costs (corporate taxation and wagerelated liabilities
in respect of seafarers), however, have been shown by different
studies to be the critical and distortive factor.
In principle, operating aid should be exceptional, temporary and
degressive. In the case of maritime transport, however, the problem
of the competitiveness of the EC fleet on the world market is
a structural one, deriving in large part from external factors.
As the immediate prospects of resolving this cost gap problem
do not appear good, the need for aid measures to allow shipowners
to operate Communityregistered ships competitively in the global
market is not likely to be short term.
In the international context, the Community has pressed for liberalization
of world maritime transport services in discussions under the
WTO framework but important trading partners were unwilling to
accept the proposals tabled and further debate has been postponed
until the next round of comprehensive negotiations on services,
which is due to take place no later than the year 2000. It also
seems unlikely, in the immediate future, that there will be international
agreements on the application of competition rules for maritime
transport, including restriction of national aid schemes.
In the future, the level of aid may be progressively reduced,
provided that the world economic and political situation allows
it. In particular, if the new disciplines that are presently being
negotiated in the framework of GATS relating to the potentially
distortive effects of subsidies on trade in services entered into
force, the current guidelines would be amended accordingly. For
the present, the situation should be monitored through regular
review of aid in the light of the competitiveness of Community
fleets in the world market.
2. SCOPE AND GENERAL OBJECTIVES OF THE REVISED STATE AID GUIDELINES
The Community approach to State aid needs to accommodate differences
in the priorities and approaches of the Member States while ensuring
that competitive distortions are kept to a minimum.
The Commission's role is to set the parameters within which State
aid will be approved. Aid schemes should not be 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 cumulative effect of all aid granted by State authorities
(including national, regional and local levels) must always be
taken into account.
2.1. Scope of revised State aid guidelines
These guidelines cover any aid granted by EC Member States or
through State resources in favour of maritime transport. This
includes any financial advantage conferred in any form whatsoever
funded by public authorities (whether at national, regional, provincial,
departmental or local level). For these purposes, <public
authorities; may also include public undertakings
and Statecontrolled 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 (e.g. 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 the Seventh Directive (6), as extended by Council Regulation
(EC) No 1904/96 (7), or any subsequent instrument including Council
Regulation (EC) No 3094/95 (8) intended to give effect to the
State aid provisions of the OECD agreement respecting normal competitive
conditions in commercial shipbuilding and shiprepair when it enters
into force) or aid for fishing vessels. Investments in infrastructure
are not normally considered to involve State aid within the meaning
of Article 92 (1) of the Treaty, if the State provides free and
equal access to the infrastructure for the benefit of all interested
operators. However, the Commission may examine such investments
if they could directly or indirectly benefit particular shipowners.
Finally, the Commission has established the principle that no
State aid is involved where public authorities contribute to a
company on a basis that would be acceptable to a private investor
operating under normal market economy conditions (9).
These guidelines will apply from the date of their publication
in the Official Journal of the European Communities; however,
they are without prejudice to aid schemes which have already been
authorised prior to the publication. Nonetheless, these latter
schemes will be subject to review under Article 93(1) of the Treaty
and shall be amended where necessary within 18 months after these
guidelines have become applicable.
2.2. General objectives of revised State aid guidelines
The Commission has stressed (10) that increased transparency of
State aid is necessary so that not only national authorities in
the broad sense but also companies and invidivuals are aware of
their rights and obligations. These guidelines are intended to
contribute to this and to clarify what State aid schemes may be
introduced in order to support the Community maritime interest
Since this is considered to be enhancing the competitiveness of
the Community fleets, State aid may generally be granted only
in respect of ships entered in Member States' registers (11).
This policy should:
- safeguard EC employment, (both on board and on shore),
- preserve maritime knowhow in the Community and develop maritime
skills, and
- improve safety.
However, State aid may, in certain exceptional cases, be granted
in respect of ships entered in registers under (3) of Annex, provided
that the Member State concerned establish that the register contributes
directly to the objectives mentioned above.
Additionally, flagneutral aid measures may be approved in certain
exceptional cases where a benefit to the Community is clearly
deemonstrated (see point 3.1 and Chapter 7).
Further objectives of the common transport policy (12) may also
be taken into account, such as the construction of a Community
framework for sustainable mobility and, as part of this, the promotion
of short sea shipping and development of its full potential.
3. FISCAL AND SOCIAL MEASURES TO IMPROVE COMPETITIVENESS
3.1. Fiscal treatment of shipowning companies
In the shipping sector, Member States have responded to the difficulties
caused by the diverse factors affecting international competition
in different ways, reflecting different circumstances. Some have
been able to rely on general measures whilst others have resorted
to State aid. The discussions on the Euros proposal have shown
that the possibility for harmonization in this area is, for the
time being, limited.
Many third countries have developed significant shipping registers,
sometimes supported by an efficient international services infrastructure,
attracting shipowners with a fiscal climate which is considerably
milder than within EC 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.
It 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
a Member State's register. This leaves all Member States having
significant fleets with a common problem: the creation of conditions
which allow fair competition with flags of convenience seems the
best way forward.
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 Member States' approaches to shipping
aid. Flagging out between Member States is a rare phenomenon.
Fiscal competition is mainly an issue between EU 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. Furthermore, profits in shipping, which would be
subject to tax, have been depressed in recent years so that the
differences between effective rates of tax in the Member States
have been marginal considerations. The continual decline of the
fleets registered in Member States, while the proportion of world
shipping under control of EC shipowners has remained relatively
stable over the last decade testifies to this.
In order to counter this tendency, many Member States have taken
special measures to improve the fiscal climate for shipowning
companies, including, 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 taxfree basis, provided
that these profits are reinvested in ships.
These fiscal alleviation measures which apply in a special way
to shipping are considered to be State aid. Equally, the system
used in certain Member States and third countries of replacing
the normal corporate tax system by a tonnage tax is a State aid.
Tonnage tax means that the shipowner pays an amount of tax linked
directly to the tonnage operated. The tonnage tax will be payable
irrespective of the company's actual earnings, or profits or losses
made.
Such measures have been shown to safeguard high quality employment
in the onshore maritime sector, such as management directly related
to shipping and also in associated activities (insurance, brokerage
and finance). In view of the importance of such activities to
the economy of the Community and in support of the earlier stated
objectives, these types of fiscal 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 development of Community
shipping in the global market.
The Commission is aware that the income of shipowners is nowadays
often obtained from the operation of ships under different flags,
for instance, when making use of chartered vessels under foreign
flag or by making use of partner vessels within alliances. It
is also recognized that the incentive for expatriation of management
and ancillary activities would continue if the shipowner obtained
a significant financial benefit from maintaining different establishments
and accounting separately for Community flag earnings and other
earnings. This would be the case, for example, if the nonCommunity
flag earnings were liable either to the full rate of corporate
taxation in a Member State or a low rate of tax overseas if overseas
management could be demonstrated.
The objective of State aid within the common maritime transport
policy is to promote the competitiveness of the EC fleets in the
global shipping market. Consequently, fiscal alleviation 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 company 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 effectively carried out from within
the territory and that this activity contributes substantially
to economic activity and employment within the Community. The
evidence furnished by the Member State concerned to demonstrate
this economic link should include details of vessels owned and
operated under Community registers, EC nationals employed on ships
and in landbased activities and investments in fixed assets. It
must be stressed that the aid must be necessary to promote the
repatriation of the strategic and commercial management of all
ships concerned in the EU and, in addition, that the beneficiaries
of the schemes must be liable to corporate tax in the Community.
Also the Commission would request any available evidence to show,
that all vessels operated by companies benefiting from these measures
comply with the relevant international and Community safety standards,
including those relating to onboard working conditions.
Where fiscal schemes are approved on the above exceptional basis,
the Commission will require the provision of regular reports,
demonstrating the effect of the measure (in conjunction with any
other State aid scheme operating in the Member State) on the Communityregistered
fleet operated from the Member State and on employment of EC seafarers.
The Commission will closely monitor the situation regarding possible
distortion of competition in trade between Member States.
In all cases, the benefits of schemes must facilitate the development
of the shipping sector and employment in support of the Community
interest. Consequently, the fiscal 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 would be required in order to prevent <spill
over; to nonshipping related activities. This
approach would help EC 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.
3.2. Labourrelated costs
In January 1997, the Commission issued a communication on monitoring
of State aid and reduction of labour costs (13), in general covering
all sectors of the economy and concentrating particularly on the
lowerskilled end of the market. This warns of the risks of labour
cost alleviation directed towards specific sectors which can upset
the proper functioning of the internal market and thus be detrimental
to the competitiveness of Community industry and longterm job
creating. In particular, the Commission considers the potentially
negative effects of this approach on sectors with overcapacity
or in crisis (defined as those in which the demand for Community
products is stagnating or falling), sensitive sectors (those where
there is significant intraCommunity trade and competition), and
sectors in international competition.
However, maritime transport presents a special case, as the Commission
accepted in adopting its guidelines on State aid in 1989 and the
communication on reduction of labour costs. In particular, <aid
in the field of social security and seafarers' income taxation,
tending to reduce the burden borne by shipping companies without
reducing the level of social security for the seafarers and resulting
from the operation of ships registered in the Community may be
considered compatible with the common market.; The
Commission considers that this approach remains valid.
Maritime transport is a sector experiencing a certain overcapacity
worldwide and where international competition is fierce. However,
the problem identified in the industrial sectors with overcapacity
or in crisis is that aid can have the effect of transferring difficulties
- and unemployment problems - to EC competitors who do not enjoy
such advantages. In maritime transport, demand for quality is
increasing and there is an estimated growth potential in the market;
further, there is a lack of trained and qualified seafarers worldwide.
It can therefore be concluded that aid supporting employment of,
particularly, skilled Community seafarers should not be discouraged
on this basis. The degree of cooperation between carriers through
conferences and consortia, etc. in liner trades and the proportion
of crosstrading in bulk operations mean that the centre of gravity
in competition is between EC and nonEC carriers. Finally, the
communication suggests that the differentiels between the lowwage
countries and the Member States are very significant and integrating
new production technology, innovation, quality and training can
more durably improve performance in terms of competitiveness and
employment. While this is true for most industrial sectors, it
is largely not the case in maritime transport, for the reasons
outlined in Chapter 1.
Support measures for the maritime sector should, therefore, aim
primarily at reducing fiscal and other costs and burdens borne
by EC shipowners and EC seafarers (i.e. those liable to taxation
and/or social secutiry contributions in a Member State) towards
levels in line with world norms. They should directly stimulate
the development of the sector and employment, rather than provide
general financial assistance.
In line with the objective, therefore, the following action on
employment costs should be allowed for EC shipping:
- reduced rates of contributions for the social protection of
EC seafarers employed on board ships registered in a Member State,
- reduced rates of income tax for EC seafarers on board ships
registered in a Member State.
For this type of aid, a maximum reduction of liabilities to zero
may be permitted, allowing Member States to bring employmentrelated
costs to levels in line with world norms which often entail exemption
from tax and social security liabilities for seafarers. However,
no subsidy on net wages of EC seafarers may be granted, as this
might lead to a distortion of competitive conditions between Member
States. The alleviation of fiscal burdens would not remove the
interest of the shipowner in negotiating an appropriate salary
package with potential crew members and their labour representatives.
Seafarers from Member States with lower wage levels would still,
therefore, have a competitive advantage over those from other
Member States with higher wage expectations. In any event, EC
seafarers will continue to be more expensive than the cheapest
available in the global market. Hence, there is no danger of overcompensation
entailed in this measure.
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 resulting from these levies.
Such an approach may generally be considered as 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 is not open to abuse.
4. CREW RELIEF
A separate measure identified in the Commission's 1989 guidelines
as in the common interest of the Community is aid for crew relief.
This tends to reduce the costs of employing EC seafarers, especially
those on ships operating in distant waters. Although in 1989 the
Commission limited aid of this type to 50 % of the total costs
incurred for these reasons, the development of the new approach
to a ceiling means that it is not necessary to impose a specific
limitation for this type of measure. Aid, which is subject to
the ceiling, may, therefore, be granted in the form of payment
or reimbursement of the costs of repatriation of EC seafarers
working on board ships entered in Member States' registers.
5. INVESTMENT AID
At present, some Member States grant aid for newly built vessels
only, others also for the purchase of certain categories of secondhand
vessels or for conversion or modernization of existing vessels.
These schemes have tended to create or maintain overcapacity,
leading to lower freight rates, thus stimulating EC operators
to cut costs, in many cases by flagging out. Further, the system
has induced shipowners in some instances to make decisions about
buying and selling ships for fiscal rather than commercial reasons.
Subsidies for fleet renewal are not common in other transport
modes (road haulage, aviation). Since they tend to distort competition,
the Commission has been reluctant to approve such schemes, except
where part of a structural reform leading to reductions in overall
fleet capacity.
Following the submission by the Commission of its communication
(14) on shipbuilding, the Council held on 24 April 1997 decided
to extend the Seventh Directive on shipbuilding until 31 December
1998. Therefore, investment for new ships must comply with those
rules or any other Community legislation that may replace them.
Within the framework of the present Guidelines, other investment
aid may however be permitted, in line with the Community safe
seas policy (15), 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, such as providing
incentives to upgrade Communityregistered ships to standards which
exceed the mandatory safety and environmental standards laid down
in international conventions and anticipating agreed higher standards,
thus enhancing safety and environmental controls. Such aid must
comply with the shipbuilding provisions, as referred to in the
second paragraph of point 2.1, when applicable.
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 if the investment related to the construction of dedicated
warehouses or purchase of fixed transhipment equipment. Investment
aid for maritime companies in disadvantaged regions may then only
be permitted where is also complies with the regional aid rules
(see Chapter 6, below).
6. REGIONAL AID ON THE BASIS OF ARTICLE 92 (3) (a) AND (c)
In the context of regional aid schemes, the Commission will apply
the general rules set out in its communications on national regional
aid (16) or future amendments thereto.
7. TRAINING
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.
State aid, notification is, however, required. This may be the
case if, for example, a particular scheme is specifically related
to onboard training and the benefit of State financial support
is received by the training organization, the cadet, seafarer
or the shipowner. State aid to training will be approved, provided
the aid meets the Commission's general criteria (e.g. proportionality,
nondiscrimination and transparency, where appropriate, relating
to training carried out on board ships entered in Community registers).
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 onboard 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
EC and the competitive edge of the EC maritime industries, further
extensive research and development efforts are necessary, with
a focus on quality, productivity, safety and environmental protection.
For such projects, State support may also be authorised within
the limits set by the Treaty (17).
8. RESTRUCTURING AID (INCLUDING PRIVATIZATION)
Although the guidelines on restructuring and rescuing firms in
difficulty (18) apply to transport only to the extent that the
specific nature of the sector is taken into account, the Commission
will apply those guidelines in considering restructuring aid for
maritime companies.
9. PUBLIC SERVICE OBLIGATIONS AND CONTRACTS
Direct aids aiming at covering operating losses are, in general,
not compatible with the common market.
However, subsidization can, in principle, be accepted for public
service obligations (PSO). A PSO is defined as any obligation
imposed upon a carrier to ensure the provision of a service satisfying
fixed standards of continuity, regularity, capacity and pricing,
which standards the carrier would not assume if it were solely
considering its economic interest.
PSOs may be imposed for scheduled services to ports serving peripheral
regions of the Community or thinly served routes considered vital
for the economic development of that region, in cases where the
operation of market forces would not ensure a sufficient service
level.
The Commission's practice in assessing contracts relating to PSOs
is generally to consider that reimbursement of operating losses
incurred as a direct result of fulfilling certain public service
obligations is not State aid within the meaning of Article 92
(1) of the Treaty. Notification is not, therefore, required under
Article 93 (3), provided that the following criteria are met:
- for public service contracts to be consistent with the common
market and not to constitute State aid, the Commission expects
public tenders to be made, as the development and implementation
of schemes must be transparent and allow for the development of
competition,
- adequate publicity must be given to the call for tender and
all requirements concerning the level and frequency of the service,
capacity, prices and standards required, etc. must be specified
in a clear and transparent manner to ensure that all Community
carriers with the right of access to the route (according to Community
law) have had an equal chance to bid,
- the Member State can then award a contract to the successful
bidder (except in exceptional and duly justified cases, whichever
bidder requires the lowest financial compensation) and reimburse
the extra costs incurred by the operator as a result of providing
the service. This should be directly related to the calculated
deficit made by the operator in providing the service. It should
be accounted for separately for each such service so that it can
be verified that there is no overcompensation or crosssubsidy
and that the system cannot be used to support inefficient management
and operating methods. Where a grant is made by the Member State
on this basis and it is limited to reimbursement of extra costs
incurred (together with a reasonable return on capital employed),
the scheme will be considered not to amount to State aid.
The duration of public service contracts should be limited to
a reasonable and not overlong period (normally in the order of
five years), since contracts for significantly longer periods
could entail the danger of creating a (private) monopoly. After
expiration of the contract period, such contracts should be subject
to retendering in accordance with the procedure described above.
Restrictions of access to the route to a single operator may only
be granted if, when the public service contract is awarded according
to the above mentioned procedure, there is no competitor providing,
or having a demonstrated intention to provide, scheduled services
on the route. The terms of any restriction or exclusivity must
in any case be compatible with the provisions of Article 90 of
the EC Treaty.
It must be stressed that if there is evidence that the Member
State has not selected the cheapest offer, or if complaints are
received alleging unfairness in the awarding procedure, the Commission
will request information in order to verify whether the award
includes State aid elements. If aid has been granted in breach
of the procedural requirements of the Treaty, the Commission may
issue an interim order suspending payment of aid and will in appropriate
cases open the procedure under Article 93 (2) of the Treaty.
Although it is considered appropriate for Member States to make
maximum use of the above procedures, exceptions may be justified,
such as in the case of island cabotage involving regular ferry
services. In those instances, measures must be notified and will
continue to be assessed under the general State aid rules. In
its assessment of compatibility with the Treaty, the Commission
will verify whether or not aid may divert significant volumes
of traffic or involve overcompensation, which could allow the
selected carrier to crosssubsidise operations on which other Community
carriers compete.
10. LIMITS TO AID
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 harmonization
between the fiscal systems of the Member States, it is felt that
the two alternatives should remain possible. Obviously, those
two approaches may, in some instances, be combined. However, this
risks cumulation of aid to levels which are disproportionate with
the objectives of the Community common interest and could lead
to a subsidy race between Member States.
A reduction to zero of taxation and social charges for seafarers
and of corporate taxation of shipping activities is the maximum
level of aid which may be permitted. To avoid distortion of competition,
other systems of aid may not provide greater benefit than this.
Consequently, although each aid scheme notified by a Member State
will be examined on its own merits, it is considered that the
total amount of aid in the form of direct payments in the framework
of Chapters 3, 4, 5 and 6 should not exceed the total amount of
taxes and social contributions collected from shipping activities
and seafarers; to do so would, it is considered, affect trading
conditions to an extent contrary to the Treaty provisions, as
the aid would be disproportionate to the objective. This approach
to limiting aid will replace the previous system of an annual
ceiling based on the calculated hypothetical cost gap between
vessels under the cheapest Community flag and a flag of convenience
(see point 1.3).
11. FINAL REMARKS
The implementation of these guidelines presupposes discipline
on the part both of Member State authorities and of the Commission,
particularly in respect of the formal obligations to provide notification
and the time limits to be adhered to. To expedite the examination
of aid measures, Member States must notify the Commission of proposed
aid measures at the draft stage, supplying all the particulars
necessary for their assessment, in accordance with Article 93
(3) of the EC Treaty. The Commission considers that a Member State
has failed to fulfil its obligations to notify where an aid measure
has been put into effect either in accordance with national law
or by giving a financial commitment to potential beneficiaries.
The Commission will use all the measures at its disposal to ensure
that Member States fulfil their obligations under Article 93 (3).
If aid is granted or measures are adopted without observing the
notification requirements, the Commission has the power to apply
the precedent established by the <Boussac;
case (Case C301/87), France v. Commission (19) judgment
of 14 February 1990), by taking an interim decision under Article
93 (2) of the Treaty on the basis of the information available
to it. Further, any aid granted illegally (i.e. without a final
positive decision of the Commission) may be subject to a demand
for recovery from the beneficiary, following the principles established
by the Court in the <Tubemeuse; case
(Case C142/87, Belgium v. Commission (20), judgment of 21 March
1990); recovery of aid must comply with the provisions of domestic
law concerned and interest must be charged from the time the aid
was paid, the interest rate used being the reference rate used
by the Commission in connection with regional aid (21).
The Commission seeks to ensure that nationals and companies of
all Member States have full access to the facilities, products
and services found in one Member State without discrimination.
In the case of establishment by entry in shipping registers, this
principle has been applied since the judgment of the Court of
Justice of 25 July 1991 in Case C221/89, The Queen v. Secretary
of State for Transport, ex parte: Factortame Ltd, et al (22).
Similarly, State aid may not discriminate on grounds of nationality
between companies established in a Member State.
The Commission will closely monitor the effects of aid schemes
to ensure that competition in trade between Member States is not
distorted and that Community objectives are being served.
(1) The 1986 package, OJ No L 378, 31. 12. 1986, pp. 1, 4, 14
and 21, consists of four Regulations:
- Regulation (EEC) No 4055/86 applying the principle of freedom
to provide maritime transport between Member States and between
Member States and third countries, as last amended by Regulation
(EEC) No 3573/90 (OJ No L 353, 17. 12. 1990, p. 16);
- Regulation (EEC) No 4056/86 laying down detailed rules for the
application of Articles 85 and 86 of the Treaty to maritime transport,
as last amended by the Act of Accession of Austria, Finland and
Sweden,
- Regulation (EEC) No 4057/86 on unfair pricing practices in maritime
transport,
- Regulation (EEC) No 4058/86 concerning coordinated action to
safeguard free access to cargoes in ocean trades.
(2) A future for the Community shipping industry - measures to
improve the operating conditions of Community shipping;,
COM(89) 266 final, 3. 8. 1989.
(3) <Financial and fiscal measures concerning
shipping operations with ships registered in the Community;,
SEC(89) 921 final, 3. 8. 1989.
(4) <Towards a new Maritime Strategy;,
COM(96) 81 final, 13. 3. 1996.
(5) <The Future Development of the Common
Transport Policy: a global approach to the construction of a Community
framework for sustainable mobility;, COM(92)
494 final, para 59.
(6) Council Directive 90/684/EEC on aid to shipbuilding, OJ No
L 380, 31. 12. 1990, p. 27, as last amended by Directive 94/73/EC
(OJ No L 351, 31. 12. 1994, p. 10).
(7) OJ No L 251, 3. 10. 1996, p. 5.
(8) OJ No L 332, 30. 12. 1995, p. 1.
(9) Application of Articles 92 and 93 of the EEC Treaty to public
authorities' holdings, Bulletin EEC 9 1984.
(10) XXII Report on Competition Policy, 1992, and <Towards
a New Maritime Strategy;, COM(96) 81 final ,
13. 3. 1996.
(11) See Annex.
(12) Commission White Paper: <The Future Development
of the Common Transport Policy;, COM(92) 494
final.
(13) OJ No C 1, 3. 1. 1997, p. 10.
(14) <Shipbuilding Policy - Options for the
Future. First Reflections;, SEC(97) 567.
(15) <A common policy on Safe Seas;,
COM(93) 66 final.
(16) Communication on the method for the application of Article
92 (3) (a) and (c) to regional aid (OJ No C 212, 12. 8. 1988,
p. 2).
If a scheme is to be considered to include
(17) Framework for Aid to Research and Development (OJ No C 45,
17. 2. 1996, p. 5), and Framework for Environmental Aid (OJ No
C 72, 10. 3. 1994, p. 3).
(18) <Guidelines for restructuring and rescuing
firms in difficulty; (OJ No C 368, 23. 12. 1994,
p. 12).
(19) [1990] ECR I307.
(20). [1990] ECR I959.
(21) Commission Communication to the Member States, letter SG(95)
D/1971 of 22 February 1995.
(22) [1991] ECR I3905.
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 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 to
the Community; only Part IV of the Treaty applies to it. It is
responsible for its own fiscal regime),
- the registers of:
- Hong Kong (the Treaty does not apply to this territory),
- Isle of Man (only specific parts of the Treaty apply to the
Isle - see Article 227 (5) (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; only Part IV of the Treaty applies to them.
They have a fiscal autonomy).
4. In the case of Gibraltar, the Treaty applies fully and, although
the territory is not considered part of the UK, the Gibraltar
register is, for the purposes of these guidelines, considered
to be a Member State's register.
| 
- Piazza Matteotti 1/3 - 16123 Genova - ITALIA
