Ports in the Framework of EU Transport Policy

PORTS IN THE FRAMEWORK OF EU TRANSPORT POLICY Introduction1 This is an earlier and substantially lengthier version of the European Commission’s Green Paper on Ports and Maritime Infrastructure, which I had prepared as a member of Commissioner Neil Kinnock’s wise men group. The Green Paper has often been described as the most influential port policy document ever produced by the EC. The current version does not in any way commit the European Commission and interested readers are advised to refer to the final version of the Green Paper as published by the EC. The present work requires careful and persistent reading so that the reader bypasses the necessary bureaucratic superficiality and identifies my core arguments which, I am happy to say, have not changed to the slightest in the 15 years since its publication. Many of these arguments had been described as ‘politically dangerous’ and, consequently, did not find their way into the Green Paper. I quote one of them in p.7 (emphasis added): …The Commission’s White Paper on the future development of the common transport policy2 laid down a new vision for transport policy, following the principle of sustainable mobility; i.e. a strategy that acknowledges the need for a more balanced transport system that would fulfill its economic and social role while, at the same time, containing its effects on the environment. The overall objective of such an approach, as clearly described by the European Parliament3, is to …promote sustainable, efficient transport systems which meet the economic, social, environmental and safety needs of European citizens; help reduce regional disparities; and enable European business to compete effectively in world markets… Again, the ‘challenge’ is apparent: a more balanced pan-European transport system with the above objectives is in stark contrast with hub-porting; concentration of traffic to selected ports; longer distances; and consequent transport externalities. It is thus increasingly felt that the European Commission needs to depart from its all-pleasing ‘statements’ and make hard-nosed decisions in order to effectuate its cohesion and regional development objectives which are the overarching ones…(unquote). A closing note of caution on my use of the word superficiality: With remarkable consistency, European institutions involved in the maritime sector have been focusing all along on issues such as safety and environmental protection; issues which, among others, have allowed the proliferation of various monopolies in the port sector. I believe this has not happened accidentally. I believe instead that the focus on the ‘secondary’ has diverted attention from the ‘primary’ which comprises the ‘politically sensitive’ issues of port pricing; infrastructure financing; state aids; transparency of port accounts; and, finally, a European ‘port governance’ model. 1 This introduction was written in 2012, i.e. 15 years since the original publication. op. cit. 5 3 Towards a European Wide Transport Policy; A Set of Common Principles. European Parliament, Third PanEuropean Transport Conference, Helsinki, 23-25 June 1997, p.5 (Annex). 2 General European ports, with the overwhelming predominance of those located in the North Sea area, handle approximately 2.5 billion tons of cargo per year. Around 70% of this consists of deepsea traffic and 30% of intra-European trade. In addition, ferries carry more than 100 million passengers each year4, providing essential connections to peripheral countries and islands, and contributing to the development of Europe’s tourism industry. Table 1: Port Traffic and Short Sea Shipping in the EU (million tons) Goods Loaded Intra-EU Total 1985 1990 1992 203.8 517.6 230.3 536.3 241.8 564.8 Goods Unloaded Intra-EU 209.9 233.1 272.2 Total 1,131.4 1,316.1 1,360.9 1,852.4 1,925.7 Total 1,649.0 Source: Erasmus University Rotterdam Profound trends in trade liberalisation and the globalisation of the world economy are having significant impacts on international seaborne transport and ports, with long term effects not easily predictable. These trends have drastically weakened the link between manufacturing and the location of factors of production, and have stimulated a most noticeable shift of manufacturing activities towards countries with a comparative advantage. In their turn too, developments in international transport and communications technologies have been instrumental in shaping manufacturing processes. Containerisation and advances in global supply chain management have revolutionized the trading arrangements of value-added goods and have given manufacturers and shippers more control and choice over the productiontransport-distribution chain. In addition, the increased reliability and accuracy of international transport now allows manufacturing industries to adopt flexible Just-in-Time and Make-to-Order production technologies that inter alia, allow them to cope with the vagaries and unpredictability of the seasonal, business and trade cycles, as well as plan business development in a more efficient and cost effective way. Transport efficiency has become also necessary due to the very same nature of value-added goods whose increasing sophistication requires fast transit times from origin to destination in order to increase traders’ turnover and minimise holding-, pipeline-, and inventory costs. Competition is forcing carriers to continuously strive to lower their unit costs, mainly through the construction of increasingly larger vessels. Shippers, on their side, require frequent services and more port calls, in order to reduce their inventory costs. The combination of larger vessels and frequent services leads to low ship capacity utilisation. To cope with this, carriers integrate horizontally by forming strategic alliances. By means of this, and by dovetailing their networks, they exercise better control on their joint capacities, achieve better 4 According to estimates of the European Community Shipowners’ Associations 2 asset utilisation and lower average costs. At the same time, and in order to differentiate from the homogeneous and highly competitive port-to-port service, carriers also integrate vertically with terminals, warehousing and distribution systems in an effort to offer premium, tailormade, door-to-door solutions. Economies of scale at sea (larger vessels) and horizontal and vertical integration require carriers to limit their ports of call at a few large hubs. However, concentration of cargo in a limited number of mega-ports entails loss of flexibility and competition while, at the same time, it leads to longer land transport distances and to an increase in the use of road transport. Mega ships and hub-porting are thus counterproductive to a policy of shifting freight from road to sea and are, in general, disliked by shippers, who favour less transhipment and goods landing as close to them as possible. Undoubtedly, further trade liberalisation will create new and stronger trade flows and demand for shipping services. The type of shipping that will emerge, however, is not unambiguously foreseen by industry observers. Despite conventional wisdom that wants a continuing increase in ship sizes, a number of external long term trends point to the direction of a possible increase in the market share of smaller ships, targeting more immediate hinterlands. These trends include world-wide port development (making multi-porting economically attractive); regionalisation of trade (involving shorter distances); and diseconomies of scale in major ports. Two additional trends pointing to this direction are the development of transport infrastructure in peripheral Europe, and a future road pricing policy not favouring longdistance haulage. Their effect could be more balanced traffic flows and port development in Europe. Whatever the likely future scenario, one thing remains: Europe’s export competitiveness in a global economy depends increasingly on efficient and cost effective transport and port systems. Furthermore, the substantial emphasis the Union attributes to the development of trans-European transport networks, aiming at closer economic and social integration; creation of employment; growth; and sustainable mobility, charges ports with an additional role and responsibility. Indeed, the development of the Union’s multimodal transport network would be incomplete without including ports; i.e. its interconnection points. The European Union has certain obligations under the Treaties, which have special relevance to the port sector. Firstly, the Treaty of Rome determines the rules governing competition; State aid; freedom to provide services; and the right of establishment. Furthermore, the Maastricht Treaty has laid down the rules governing the development of a Trans-European Transport Network, aimed at serving the objectives of the single market, i.e. to strengthen economic and social cohesion and to link island; landlocked; and peripheral regions of the Union with its more central areas. The Commission, therefore, finds it important to promote the port sector through a number of positive measures and actions aimed at improving its overall performance. These include actions to improve port efficiency; remove harmful obstacles to trade; and promote improvements in port and related infrastructure so that port efficiency reaches higher standards throughout the Community. The Role of Ports in Trans-European Transport Networks The Treaty of the European Union governs the EU’s work in developing the trans-European transport networks. It requires the EU to promote the interconnection and interoperability of national networks -and access to them-, taking into account the need to link island; landlocked; and peripheral regions of the Union with its more central areas. The aim is to 3 enable citizens of the Union, economic operators and regional and local communities to derive full benefit from the internal market. However, interconnection, interoperability and TEN optimisation in general cannot be achieved if ports are not included in the equation as the crucial links of a closed (i.e. total) European transport system. Considering European ports as a whole and as the international interface of the European logistical network is consistent with the approach taken by the Commission in its White Book on the future development of the common transport policy.5 In fact, while taking note of existing inefficiencies and discordances, the White Book provides for a global approach to the problem; it aims at a more balanced modal development of transport, allowing users greater freedom of choice; at a more balanced distribution among regions of benefits resulting from infrastructure development; at improving the efficiency of companies operating in this sector; and at increased safety and attention to the problems of environmental protection. All this, while taking social problems related to the sector’s employment levels into account. In brief, the objectives of including ports in the TENs strategy can be summarized as follows: Encourage growth of inter/intra EU trade and more specifically trade with the Community’s nearest neighbours (EFTA, Central and Eastern Europe, Mediterranean and North Africa); Overcome congestion of the main land-corridors and minimise the external costs of European transport by contributing to the development of combined transport; Improve the accessibility of peripheral regions and strengthen the economic and social cohesion within the Community by enhancing the Community’s internal maritime links, paying particular attention to island and peripheral regions. Connections to neighbouring third countries The Treaty and the TEN Guidelines permit cooperation with neighbouring countries in order to promote projects of mutual interest and ensure the interoperability of networks at a panEuropean level. One of the aims is to connect TENs with networks outside the Union, particularly with Central and Eastern Europe and the Mediterranean area. Given the opportunities and initiatives for increased trade between the EU and neighbouring third countries, it is a desirable objective to seek standards in these ports -particularly those involved in major trade flows with the EU- which are comparable to standards found in the Union. In general, this means continuing the processes of rehabilitation and modernisation; implementing basic standards concerning safety and environmental protection; and, where necessary, improving security, monitoring and registration arrangements for cargo. The EU has also been trying to ensure that the increased trade prospects with the Baltic Sea countries would not be hampered by logistical restrictions in ports. The Union is thus cooperating with these countries in maritime and port projects, and it is actively encouraging cooperation between those countries themselves. A specialised working group meets regularly to monitor progress. Equally, the MEDA programme recently adopted by the EU allows for cooperation and project financing in Mediterranean countries. Practical work has already started with maritime issues being at the forefront of cooperation. Furthermore, in the framework of the Uruguay Round, the Community has been instrumental, at an early stage of the negotiations, in ensuring that talks on the liberalisation of maritime transport services included, as an integral part, rules on the use of ports. 5 The Future Development of the Common Transport Policy: A Global Approach to the Construction of the Community Framework for Sustainable Mobility. COM(92)494 final. 4 The GATS negotiations were suspended without conclusion,6 to be resumed in the year 2000. However, it is now accepted that a liberalised maritime transport régime will have to guarantee national treatment of non-national operators in ports, in particular with regard to the use of port infrastructure; fees and charges; use of facilities; the assignment of berths; as well as the non-discriminatory use of auxiliary services. Although the EU will continue to seek agreement on further liberalisation in the framework of the WTO, it must in the meantime pursue its own interests, where necessary. It may thus prove appropriate to do so bilaterally in contacts with third countries, as was done in the past where bilateral contacts resulted in a number of changes in third countries' port practices. The Nodes of Intermodality Intermodality is an essential component of the European Union’s Common Transport Policy for sustainable mobility. Its objective is to develop a framework for an optimal integration of different modes and utilisation of their capacities, so as to enable an efficient and costeffective use of the transport system through seamless, customer-oriented door-to-door services whilst favouring innovation and competition between transport operators.7 Ports are crucial connecting points in intermodal transport, transferring goods and passengers between maritime and land-based modes of transport. Higher port efficiency thus contributes to the integration of modes in a single system, allowing better use of rail, inland and sea transport; modes that, by their nature, do not always allow door-to-door delivery. Seamless transport systems necessitate open access to (port) infrastructure to all licensed operators. The Commission has proposed the creation of Trans-European Rail Freight Freeways, characterised by open access, and by the removal of a wide range of obstacles to international traffic.8 The idea is being implemented by railway companies, Member States and shippers and the first freeways are expected to become operational before the end of 1997. As the freeways are likely to become an important element in intermodal transport, the Commission will give priority to their development.9 One of the main requirements of intermodality, as well as an objective in the development of the TENs, is that transport modes are physically linked. However, successful intermodality is dependent on a number of equally important factors and difficulties that have to be identified and addressed in the near future. For example, the use of more than one transport modes can result in additional transfer costs, reduced reliability and more complex administrative procedures. The use of modern information systems is crucial in this respect. Such systems are already in use in the larger European ports but are still important missing links in other parts of the Union. The Commission is supporting the development of such systems in the framework of its Research and Development Programme (MARTRANS, BOPCOM). The aim of future projects in this field will be to ensure interoperability and interconnectivity between such systems. There might also be a need to integrate EDI (electronic data interchange), AEI (automatic equipment identification) and a terminal monitoring and guiding systems in one common information system in order to optimise communication between the port and its customers, reduce paper requirements and improve the service and management of ports. 6 The WTO Negotiating Group on Maritime Transport Services suspended its work on 28/6/1996. It nevertheless adopted a so-called peace clause under which countries agree not to apply any measures affecting trade in maritime transport services except in response to measures applied by other countries. The clause covers maritime transport as it was negotiated; it therefore covers access to and use of port and auxiliary services. 7 Intermodality and Intermodal Freight Transport in the European Union; A Systems Approach to Freight Transport. Commission Communication, COM(97)243 final. Brussels, 29.05.97. 8 A Strategy for Revitalising the Community’s Railways. European Commission White Paper, COM(96)421 final, 30.07.96 and COM(96)421/2 final, June 1996. 9 Trans-European Rail Freight Freeways, Commission Communication, COM(97)242 final, 29.05.97. 5 Ports and Development of Short Sea Shipping in Europe The promotion of environmentally friendly modes of transport –Short Sea Shipping (SSS) in particular- and their effective integration in multimodal transport chains and networks is a central objective in the Union’s transport policy. However, despite the increasing turnover of European ports, intra-European maritime traffic has not as yet been able to demonstrate a distinctive increase in the market share of SSS, vis à vis that of the road transport sector. A number of factors can account for this, including terminal costs and turnaround times; lack of appropriate infrastructure; institutional rigidities in ports; adaptability to multimodal transport systems; and lack of information to shippers. In its Communication on Short Sea Shipping10, the Commission set out a framework of initiatives necessary to promote short sea services in Europe, stressing the need for improved port efficiency. An important issue in this respect has been the complexity of documentary and procedural requirements in ports, given that a number of cumbersome procedures and practices still exist, mostly beyond the port’s own control, that impose significant costs on commercial operators and put maritime transport at a disadvantage compared to other modes. The Commission is currently undertaking a fact-finding study to identify requirements in ports that affect maritime trade in Europe and compare them with those prevailing in inland transport. Customs requirements and the efficiency of customs authorities in processing documentation are particularly being addressed. In this context, implementation of EDI is seen as an important tool to improve the flow of information between customs authorities and other parties in the transport chain. If needed, the Commission will recommend actions aimed at the streamlining of procedures in maritime transport. To evaluate the market potential and competitiveness of Short Sea Shipping in certain specific trade corridors, the Commission is considering ways of compiling relevant information; something that will also be to the benefit of ports and maritime industries in general. Action in this area is already being undertaken in the framework of the concerted action on Short Sea Shipping R&D programme, sponsored by the Commission, and it is also the basis of the PACT projects currently underway. Co-operation among all parties in the transport chain is necessary if short sea operators are to be effectively and competitively engaged in door-to-door transport solutions. Notwithstanding commercial considerations, co-operation among ports should be encouraged, particularly in the area of telematics, the streamlining of procedures and the exchange of know-how. For this reason, and in the context of TENs, priority will be given to projects which entail co-operation between two or more ports. Ports should also be encouraged to play an active role in the promotion of Short Sea Shipping and participate actively in maritime roundtables, such as those established under the umbrella of the Maritime Industries Forum. Moreover, as port costs are essential to the development of Short Sea Shipping, port authorities should be encouraged to consider the granting of rebates to vessels according to frequency, volume of cargo, and type of service rendered. In a similar manner, and to the extent possible, charges for port services should be in principle open to negotiation at a local level. However, a factor that could be instrumental in boosting Short Sea Shipping in Europe is a cost-recovery pricing policy in road transport, which would inter alia internalize this mode’s 10 The Development of Short Sea Shipping in Europe: Prospects and Challenges. COM(95)317, 05.06.95. 6 substantial external costs. Such a policy, already suggested by the Commission in its Green Paper Towards a Fair and Efficient Pricing in Transport,11 is expected to make competition among ports and transport systems fairer and more efficient, leading to a more balanced distribution of traffic across Europe. However, the Green Paper takes a cautious approach to road-pricing in peripheral regions, as road haulage there is still a public good and the predominant mode of transport. Therefore, pricing policies aimed at shifting cargo from roads may have adverse effects on those regions’ economic development prospects.12 The EU Regional and Cohesion Policies with Respect to Ports The Commission’s White Paper on the future development of the common transport policy13 laid down a new vision for transport policy, following the principle of sustainable mobility; i.e. a strategy that acknowledges the need for a more balanced transport system that would fulfill its economic and social role while, at the same time, containing its effects on the environment. The overall objective of such an approach, as clearly described by the European Parliament14, is to …promote sustainable, efficient transport systems which meet the economic, social, environmental and safety needs of European citizens; help reduce regional disparities; and enable European business to compete effectively in world markets… Again, the ‘challenge’ is apparent: a more balanced pan-European transport system with the above objectives is in stark contrast with hub-porting; concentration of traffic to selected ports; longer distances; and consequent transport externalities. It is thus increasingly felt that the European Commission needs to depart from its all-pleasing ‘statements’ and make hardnosed decisions in order to effectuate its cohesion and regional development objectives which are the overarching ones. Article 130 of the Treaty discusses the role of networks in promoting harmonious development and in strengthening economic and social cohesion. This is so, as optimisation of TENs is likely to reduce transport costs and the “perception of distance”, at least in the long-run, and thus lead to important locational decisions causing production to relocate to peripheral regions.15 For those reasons, the Treaty provides for the establishment of a Cohesion Fund, to support transport and environmental projects in Member States that qualify. In addition, as all Cohesion Fund countries, and virtually all areas covered by the Structural Fund provisions, are on the periphery of the EU, having substantial coastlines and often many islands, a well-integrated maritime sector would fully contribute to the development of the single market and those further steps envisaged by the Treaty. Ports in these regions have to be adequately prepared to take on the challenge. Otherwise, the economic and social benefits of greater cohesion can be easily withered away by peripheral ports that are generally characterised by lower levels of efficiency, mainly as a result of under-investment. Efficiency improvements will be necessary to ensure that existing and future facilities are used as effectively as possible; to enable ports take their share in the increased traffic of the single market; and to allow ports to play their proper part in a more balanced distribution of traffic. It should be kept in mind that the lack of facilities at one part of the maritime chain can eventually damage the overall efficiency and image of maritime transport. The aim is thus to bring ports at both ends up to the highest possible standards, to the benefit of the overall transport system. 11 Towards Fair and Efficient Pricing in Transport: Policy Options for Internalising the External Costs of Transport in the European Union. COM(95)691, final. 12 see also First Report on Economic and Social Cohesion. European Commission, Luxembourg, 1996 (Preliminary Edition). 13 op. cit. 5 14 Towards a European Wide Transport Policy; A Set of Common Principles. European Parliament, Third PanEuropean Transport Conference, Helsinki, 23-25 June 1997, p.5 (Annex). 15 op. cit. 12 7 The Community has provided considerable support to port development in the form of grants from Community funds, especially through the Cohesion and Structural funds. In the case of Structural Funds, the relevant instrument for ports is the European Regional Development Fund (ERDF). A number of objectives have been established for purposes of fund distribution: Those pertinent to transport infrastructure development are the structural adjustment of less developed regions (Objective I); development of regions affected by industrial decline (Objective 2); and development of rural areas (Objective 5b). The transport related resources of the ERDF are substantial in the current programming period (1994-99), while the Objective 1 areas are the most significant recipients of funds as regards ports. In addition to the ERDF, structural funds are also available to ports in eligible areas under INTERREG II C, which promotes cooperation between and within EU regions. The second major funding instrument of the Community is the Cohesion Fund. In the period 1993-96, a total of 2.1 billion ECU was allocated to the transport sector, 3.4% (74.4 million ECU) of which funded port infrastructure projects. Finally, the European Investment Bank provides loans to finance infrastructure that contributes to regional development; the bulk of its lending activity in the 1991-95 period –i.e. 44 billion ECU- went to the eligible areas (Objectives I, 2 and 5b). Most of the loans from the EIB have been allocated to infrastructure projects, including trans-European Transport Networks. From a transport perspective, these funds should serve such priorities as: better integration of ports into TENs; improving access to port hinterland; and refurbishing the infrastructure inside the port area. Exceptionally, projects may include investment in superstructure and mobile assets (e.g. terminal buildings, cranes), provided these remain an integral part of a larger infrastructure project and they increase the overall benefits of the investment. The Role of Ports in Maritime Safety and the Protection of the Environment Ports are the most obvious points where compliance to international or EC maritime safety regulations can best be checked and uniformly enforced. The Community’s maritime safety policy, aimed at the elimination of sub-standard shipping through the proper enforcement of international legislation, is primarily focused on ships. However, the policy has also a direct impact on ports, as it requires them to co-operate in the implementation or enforcement of the legislation16 and ensure a high level of port services (such as pilotage, mooring and towage) that are intrinsically related to the safety of ships. Equally importantly, the absence of uniform application of safety rules among ports can lead to distortions of competition and this is an important consideration to be taken into account when examining possible new initiatives in the field of maritime safety. In the area of environmental protection, and in addition to the requirements of international Conventions (particularly MARPOL 73/78), a number of non-mandatory Codes and Resolutions have been issued by IMO. The Community has already started to take measures towards the convergent implementation of these international rules and legislation17 and port authorities will have to play an essential role. Environmental impact of port development and operations Infrastructure projects have a negative impact on the environment that has always to be considered through appropriate environmental impact assessments. Ports are often in 16 The uniform enforcement of international rules to all ships operating in Community waters is the purpose of Directive 95/21/EC on Port State Control (PSC). The Directive requests port authorities and pilotage services to co-operate by providing relevant information and assist PSC inspectors in detecting and targeting sub-standard ships for priority inspections. 17 Legislation has been adopted for notification requirements for ships carrying dangerous or polluting goods, (ii) promotion of environmentally friendly oil tankers (SBT Regulation) and (iii) the Commission services are developing a draft Directive on the use of reception facilities in European ports. 8 proximity to populated areas, or areas where particular attention must be given to endangered species. As a result, port development, particularly in densely populated areas, is confronted with special circumstances and constraints. Several Directives are already in place to address this problem and promote environmentally friendly solutions. Among them are Directives on environmental impact assessment and the Wild Birds and Habitats Directive. With assistance from the Commission, the European Seaports Organisation (ESPO) has published a Code of Conduct, providing a quality framework for programming action with respect to the protection of the environment within port areas. FINANCING OF INFRASTRUCTURE AND COST RECOVERY IN PORTS General The administration and financing of ports in Europe -as of course in other parts of the worldprincipally falls under two philosophies: that which sees ports indiscriminately as business undertakings that ought to recover their costs from port users that benefit directly, and the philosophy that sees ports as trade facilitators and growth-poles to regional and national development, and thus as sectors producing a service of general economic interest that ought to be provided by the public sector and principally paid for by the general taxpayer. The arguments for and against each approach abound, often giving ground to intensive debate, while the overall picture is far from being conclusive. Furthermore, certain port infrastructures, such as for example breakwaters and navigational aids, have traditionally been regarded as public goods18, while a number of port services (mainly the nautical-technical ones described below) may carry important public service obligations, due to their relation with the safety of ports. Thus, as regards ownership and organisation, ports may be state-owned, municipal, private or owned and run in some other way; they may be government bodies, have close links with the local public authorities or be autonomous. Whatever the case, however, ports are subject to considerable regulation and supervision by either national or local authorities. The same diversity of norms exists, as a result, with regard to the financing of port infrastructure: this can be wholly funded by the State, the private sector or by a mix of both sources of finance at varying degrees of participation. A distinctive trend, however, has emerged whereby port activities of a predominantly commercial nature –such as cargo handling and the financing of port superstructure- are increasingly becoming the concern of the private sector, while ports tend to restrict themselves to their “landlord” role and be involved in the operation and finance of those facilities and services that are essential for the safe and efficient operation of the port. The “comprehensive” or “service” model of port organisation, where the port authority functions also as port operator and employer of port workers, is increasingly becoming a thing of the past (Figure 1). 18 A public good is one for which: (i) no particular user can be excluded from its use if he is not prepared to share in the costs of its production; (ii) the consumption of user A does not affect that of user B; and (iii) the cost of i production does not vary with use. 9 Figure 1: Port operating systems A Historical Perspective on the Changing Role of Ports In Europe, as in many other parts in the world, ports have traditionally been seen by governments as growth-poles and fulcra of national and regional development.19 As a matter of fact, ports have often been used as instruments of regional planning. Many Member States have done so by steering state investment, through regional policies, towards ports and portrelated infrastructure, in order to stimulate national economic development.20 In this role, ports are expected to generate substantial employment and numerous benefits, for the country as a whole, some of which not necessarily producing tangible financial rewards for the ports concerned. As government policies usually go beyond considerations of short-term financial profitability and towards the maximisation of long-term economic benefit and general welfare, state intervention has often been justified on grounds of these “not solely commercial” objectives of ports. Port capacity and its spatial characteristics are often determined by national priorities aiming at the spatial reorganisation of national economic activity. Investments in port and port-related infrastructure, such as new terminals; docks; deep-water quays; major locks; access channels; etc. are thus still centrally funded in many Member States, considered to be serving the collective benefit of the nation. It is perhaps worth mentioning at this point that, for instance in Japan, apart from the direct financial returns of port operations, port development is appraised on the basis of its contribution to the social and economic development of the region and the nation. Port master plans are thus adjusted to, and included in, the country's regional development plans, while ports are managed and administered by public sector bodies. 19 characteristic examples of this approach can be found in the Maritime Industrial Development Areas (MIDA) of Rotterdam and Antwerp. 20 A classic example of such as policy was the Mezzogiorno in Italy, considered by many as a model of spatial reorganisation of economic development. In the United Kingdom, this task was the responsibility of the National Ports Council, established in 1964 and abolished in 1981. 10 Table 2: Direct and indirect employment in selected ports in the EU (Number of employees) Direct Indirect Total Hamburg 95,100 47,500 142,600 Flemish Ports 22,300 22,500 44,800 Rotterdam 63,000 35,000 98,000 Source: Erasmus University Rotterdam Port Competition However relevant such a national approach to port development may have been in the earlier stages of economic development in Europe –or for some Member States even now– continuing adherence to it nowadays may give rise to legitimate concerns. Indeed, in earlier periods, general cargo traffic was less containerized, regional port competition less of an issue, and ports comprised a lot of labour intensive activities, generating considerable direct and indirect added-value. However, the completion of the internal market and the existence and further development of superior inland transport networks across Europe has significantly intensified competition among ports, particularly competition aimed at attracting unitised transshipment cargo. Especially the latter type of competition, combined with automated labour-saving cargo handling systems, reduces the direct added-value of port activities, while the benefits of port investments and their impacts can be easily dissipated from the country in question to the final consignor/consignee. This issue causes considerable concern to governments contemplating the continuation of public funding of port projects, as it deprives them of the basic rationale of doing so, namely, that the port provides a service of general economic interest. At the same time, disappearing national (captive) hinterlands mean that the pricing, port development and financing decisions of a particular port may have marked effects on its neighbours, nationally and internationally. This raises the relevance and desirability of a more coordinated approach to port development at pan-European level aimed, inter alia, at ensuring that ports compete fairly, on sound economic principles, both for existing and new trade, and at the same time highlighting the crucial role of ports in the optimisation of transEuropean transport networks. However, as ports are nodes in an increasingly door-to-door managed logistics system, competition and the desirability of a more coordinated approach to port development at a panEuropean level21 cannot be ascertained a priori, without due regard to the investments in, and pricing policies of, other modes and infrastructure, particularly those of direct impact on the operation of ports. For example, presently, inter-port competition is affected by road transport pricing policies favouring long-hauls, without internalising the external (social) costs of transport. A user pays policy for road transport, as suggested by the Commission22, could redirect traffic and lead to a different distribution of cargo flows among European ports. Such considerations necessitate a phased, step-by-step, approach to policy, taking into account existing ‘equilibria’. 21 22 e.g. through the identification and funding of projects of common interest. op. cit. 11 11 Identification of Projects of Common Interest and Maps of Ports Among others, the Treaty of the European Union requires the establishment of guidelines which cover objectives and broad lines of measures and which identify “projects of common interest”. The EU may provide support to such projects from the TEN budget line (mainly for feasibility studies) and from the Cohesion Fund (to countries that are eligible). The underlying philosophy of TENs is to provide the framework of an optimized pan-European transport system to be used by Member States as a guide for the development of their infrastructure. Funding for the latter, however, has to be found by Member States themselves, either centrally or through public/private partnerships. The Commission is well aware of the fact that port development in many Member States is driven by demand and the whatever assistance it thus provides in the framework of TENs is by no means meant to superimpose a centrally determined system of port development in Europe, or allocate roles to specific ports. Such assistance is only meant to ensure a “natural” flow of traffic across Europe –to the benefit of the consumer- and to contribute so that the present situation in European transport, largely the result of past investments that were not market driven, does not continue to proliferate road transport congestion. The aim is to promote physical and managerial improvements, so that transfers between land and maritime transport are seamless, and to establish efficient intermodal transport chains which facilitate trade, promote Short Sea Shipping and strengthen economic and social cohesion. Thus, projects enhancing the functionality and optimisation of TENs, as well as ones aiming at diverting traffic from road to sea, and thus remove bottlenecks and provide missing links, could be considered as serving the “common (European) interest”. The same philosophy applies to the requirement for the preparation of a map of ports. The Guidelines for the development of TENs, setting out the priorities of the EU’s transport infrastructure policy, did not, in the first place, include a map of ports. However, the port element is now being revised, following a request from the Parliament and the Council, in order to include a map of ports and a revision of the criteria for identifying projects of common interest. Again, the aim of a map of ports is by no means to allocate roles among ports, but to present port traffic in relation to the served industrial, consumption and population centres. Something like this would undoubtedly demonstrate the significant gains and rewards of extended hinterlands for ports that have achieved a high level of efficiency. This can definitely set an effective example for others to follow (The success of the Port of Rotterdam, not an uncharacteristic one in this respect among North Sea ports, can be evidenced from Table 3). Table 3: Road freight traffic from/to the Port of Rotterdam (selected countries, in 1000 tons, 1995) A DK E GR I Incoming 71 11 52 1 147 Outgoing 117 26 130 18 184 Source: Erasmus University Rotterdam S 35 58 When drawing up a map of ports, special attention should be given to possible distortion of competition between ports. A map of ports should therefore be based on objective criteria. Furthermore, the map must take into account that one of the aims of EU transport policy is to promote Short Sea Shipping and that the maritime element of the network often ensures important links to peripheral areas and islands. This would imply including a wide range of ports in all parts of the Union. Additionally, it is important to ensure that justified port 12 projects, even in smaller ports in remote areas of the Union, not identified in the maps, are not excluded from funding. In the future, the Commission will consider if it would be appropriate to introduce additional criteria for the identification of ports, such as a classification of ports that could add value to the multimodal approach. Financing and Charging of Port Infrastructure The trend towards greater private sector participation in ports can be explained by both actual economic considerations and by a noticeable shift in attitude regarding the function and role of ports. Firstly, the need for projects to be economically viable is seen as a necessary discipline in circumstances where resources for infrastructure development are limited, and when the involvement of the private sector, either on its own or in the form of public-private partnerships, is accepted as a growing and desirable development, recognised also in the TEN Guidelines. Second, the fact that ports –especially container terminals- are used mostly for commercial ends; the often scant diversification of users they serve; and the typically private organisational structures they adopt, differentiates them from the pure public goods to which they had often been likened. 23 Thus, the port industry is increasingly viewed as one moving from a situation where predominantly public capital was used to provide common user facilities, to one where capital is being used to provide terminals which are designed to serve the logistics requirements of more narrowly defined groups of users. Indeed, they may be designed to serve the needs of a few firms or even just one. In such a way, the “general economic interest” argument loses weight, leading to a more commercial, user-pay, attitude towards pricing and infrastructure funding. These pragmatic developments have also led the European Parliament to assert that, while acknowledging that there are different financing arrangements (i.e. public/private, to varying degrees) in individual ports which need to be respected, there is no substantial difference between investments in port infrastructure and other capital intensive investments in industrial complexes. Therefore, there is no reason for adopting a completely different approach to port investments and consequently no justification why the direct users should not bear the costs of such investments.24 As a matter of fact, the European Parliament goes even further to point out that the introduction of market principles in infrastructure works would be the most effective remedy to the risk of creating wasteful overcapacity and possible distortions of trade flows between Member States. The general view of the Commission in the past has been that public investment in port infrastructure, including land and maritime access, does not normally constitute State aid in the meaning of Article 92 of the Treaty, in so far as the infrastructure is accessible to all users on a normal, non-discriminatory basis.25 Such investments have been considered by the Commission as comprising general measures and expenses incurred by the State in the framework of its responsibilities in physical planning that favour the nation by and large. However, European integration and the resulting intensified competition among ports in different Member States do not always allow this view to be unquestionably accepted as a universal truth. This is the more so given that the public funding of port infrastructure and the cost recovery of port services are two different things. Although in certain instances infrastructure can and perhaps should be funded by public money due to a variety of legal, economic and administrative reasons, this does not mean that this investment should be 23 such as defence, education, justice, environmental protection, etc. European Sea Port Policy. European Parliament, Directorate General for Research, Transport Series E-1, 1993. 25 However, also in cases where particular investments may benefit only certain users, exemptions are possible, e.g. for regional development purposes under Article 92.3 of the EC Treaty. 24 13 forgiven and not attempted to be at least partially recovered from users who directly benefit, regardless of how the investment was funded. In this respect, reference can be made to the EC’s position that, as a general rule and in order to avoid distortions of competition and choice within and between modes, … all transport users should pay the full cost, internal and external, of the transport services they consume, even if these costs are in some cases paid by society to assist those in need…This, in addition to the above views of the European Parliament, reaffirms the Commission’s earlier assertion26 that … it would be desirable port charges to reflect the commercial cost of capital invested in infrastructure in order to approximate the competition conditions of ports…Finally, the Commission’s Green Paper on Fair and Efficient Pricing27 maintained that infrastructure charges should (i) be linked as much as possible to actual costs at the level of the individual user; (ii) be recovered in full; and (iii) be transparent. All the above tendencies in Community thinking point to the emergence of a new approach for the pricing of port infrastructure. Broadly speaking, port infrastructure should be priced in such a way as to make investments economically viable and, implicit to this, users should bear the real costs of the port services they consume. Economic viability is, however, to be distinguished from financial viability of private investment, as the former usually entails considerations such as creation of employment; income distribution; regional disparities, etc. Given the diversity of port financing regimes across the Union, as well as the different perceptions as regards the role, functions and the institutional framework of ports, the future development of a consistent set of criteria for the evaluation of the economic viability of port investments would be desirable. Although the application of this principle to the port industry is of particular significance in terms of higher efficiency; rationalisation of investments; and examination of State aid measures, it may at the same time have a number of far-reaching ramifications that have to be carefully studied and monitored. These may include such issues as the effect of the policy on port charges and final consumer prices; ocean freight rates and short-sea-shipping; spatial decisions of companies; re-distribution of existing traffic among ports, etc. In addition, it should also be kept in mind that a great number of European ports are located in less developed and peripheral areas, or in islands. Often, these ports represent the only link to the rest of the Union and constitute the fulcrum of significant economic activity in their region. They may thus be important parameters in the Union’s Cohesion policies and the application of the cost recovery principle in such cases, if at all desirable, could create considerable difficulties. In any case, the interdependence of transport modes and related infrastructure–some of them falling under their own legal regimes and policies- necessitates not only a consistent step-bystep approach to the pricing of port infrastructure – starting from investments within the portbut also to the provision of ample time for ports to adjust. The method of cost recovery, in that case, should be left to Member States, on the basis of the principle of subsidiarity. The effect of this charging regime on two specific types of port infrastructure –maritime access and navigational aids- is of particular interest in this context and it is thus briefly discussed in the following paragraphs. Maritime access A number of European ports, mainly those of the North Sea, are located on river estuaries or they are river ports subject to considerable siltation. The provision of adequate maritime access in these ports requires substantial yearly outlays for dredging, which presently are in 26 27 General Study of State aid in the Port Sector. No VII/103/89. Op. cit. 11 14 most cases publicly funded. However, there is no a priori reason why maritime access should be treated differently from other types of port infrastructure, particularly when approach channels are provided at such water depth that, although open to all, are really meant for a small number of easily identifiable users. Navigational Aids Aids to navigation have traditionally been used in economic theory as the most characteristic examples of a public good.28 Apart from the typical lighthouses, buoys, etc., modern navigational aids in busy seaways and along dangerous or environmentally sensitive coasts include the development of radio-navigation systems (e.g. LORAN-C, GNSS); the physical infrastructure needed to support VTS or VTMIS; and systems of mandatory ship-routing and ship-reporting (e.g. EUROREP Directive). In several cases, the safety of commercial interests of both local and transiting traffic are better served by systems that transcend national boundaries and, ideally, could be developed on a regional basis.29 This is the more so when the importance of several European seaways to world trade, and the increasing sophistication and capital intensity of such systems, would make it unfair to leave the expense of their implementation solely to the coastal states concerned, since all transiting traffic and regional users (e.g. fishing vessels) would eventually benefit. The risk of doing so is that some necessary aids might not be provided, or that states providing them may try to recover costs in a non-optimal way. Obviously, coastal aids to navigation benefit a traffic which, for cost recovery purposes, is “captive” only if systems are viewed on a large regional (e.g. European) basis. The need for the development of a Commission proposal laying down both the principles for a charging system(s), aimed at the recovery of the development and investment costs of such aids, and a mechanism to equitably share the financial burden with users, was clearly identified in the Commission Communication “A common Policy on safe seas” (points 101 to 114). As far as local aids to navigation are concerned, particularly those associated with the approaches to ports, the principal beneficiaries are local port users. The development and implementation of navigational aids in port areas is therefore closely related to investments in or near the port and, to a large extent, they may be regarded as the responsibility of the competent (port) authority. Cost recovery of such infrastructure could thus continue to be dealt with by national or local bodies, viewed either as a charge to be fully met by the competent authority or, as in most Member States, to be included in port dues. At any rate, here too, the “user-pays” principle will have to be considered in the framework of EC legislation. 28 for the definition of a public good, see footnote 18. in the context of the development of a trans-European network of vessel traffic management and information system (VTMIS), the Community has already granted financial support to a number of port or coastal vessel traffic services in the peripheral regions of the Community. In addition, with the European Permanent Traffic Observatory (EPTO) project, a tool has been made available by the Commission to any port or VTS in the Community for the systematic analysis of local traffic conditions in the port area and their improvement. The extension of EPTO to a larger number of ports would greatly enhance its potential positive effects. Finally, the Commission is examining harmonisation measures for VTSs, concentrating on minimum performance requirements for VTS equipment (interfaces between VTS) and harmonised procedures to improve ship-shore communication. 29 15 Application of the State Aid Provisions of the EC Treaty to the Port Sector In the highly competitive environment of an integrated Europe, state-aids can have farreaching ramifications and are increasingly becoming one of the central issues in the industrial and competition policies of the EU. Among others, the issue has also been addressed in the White Book on the future development of the common transport policy30, according to which …the opening up of transport markets to more competition as a result of the 1992 programme means that greater attention has to be paid to subsidies which could unfairly advantage particular operators… Obviously, if a port receives public financial support, in a competitive environment, it might be in a position to offer actual or potential users more favourable conditions than its competitors, thus leading to a situation where the natural flow of trade is distorted. As ports play a vital linking role between land and maritime transport, the effect of such a distortion may be very far-reaching. State aid to ports can take different forms, some of them easily recognizable, some not. State aid is easily recognizable when granted as direct subsidies, such as the offsetting of operating losses, but it may also be indirect, and thus less explicit, when, for example, it takes the form of leasing land areas or provision of government loans, or loan guarantees, under special conditions. Article 92.1 of the EC Treaty provides that aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition, by favouring certain undertakings, or the production of certain goods, is incompatible with the common market in so far as it affects trade between Member States. In order to assess whether a State measure involves aid elements in general, the Commission has established, inter alia, the principle that no State aid is involved when the public sector contributes to a (port) company on a basis that would be acceptable to a private investor operating under normal market economy conditions.31 If the private market investor principle is not applied, the measure may be considered as aid and its compatibility with Article 92.2 or 92.3 of the Treaty has to be examined by the Commission. At first sight, the assessment of aid in the port sector appears to present no particular difficulty as far as social, restructuring, operating and rescue aids are concerned. However, given the widespread practices of State involvement in the sector and the sometimes unclear allocation of responsibilities therein, the assessment of State measures, in the light of the State aid provisions of the Treaty, is not always without problems. A good example of such a problem is the public financing of superstructure, intended to be operated by private companies. In such cases, i.e. when a public (port) authority decides to contract out the operation of public investments to private companies, the process should be based on open and transparent public tendering procedures, with the successful bidder obliged to maintain independent accounts separate from those of the port. This seems to be the current practice in a number of ports. If a cost recovery approach becomes a generally accepted principle, and in the sake of ensuring transparency and fair competition among ports, the market investor principle could eventually be extended to include investments in infrastructure. Inter alia, something like this 30 op. cit. 5, paragraph 351. Commission, Application of Articles 92 and 93 of the EEC Treaty to public authorities’ holdings, Bulletin EC 91984. 31 16 would eliminate the often complex and confusing need to distinguish between public investments in infrastructure and superstructure. Transparency of Port Accounts An effective and fair implementation of the cost recovery approach; the evaluation of State aid measures; and meaningful comparisons among ports undoubtedly require the transparency of port financial accounts. This is the more so when ports include a number of commercial activities, carried out by private operators, that should, according to Community law, be seen as separate undertakings with separate accounts. Currently, however, due to differences in the institutional framework and in the financing and charging regimes in ports and related infrastructure in Europe, the financial relationships between the public sector and the ports are often unclear. The Commission Directive 80/723 on the transparency of financial relations between Member States and public undertakings32 applies in principle also to the port sector. In general, the Directive applies to public undertakings whose turnover is at least 40 MECU during the two financial years preceding that in which public funds are made available. Member States are obliged to provide information at the request of the Commission, notwithstanding the fact that, occasionally, economic activities of an industrial or commercial nature may be integrated into the State administration. PORT SERVICES – MARKET ACCESS AND ORGANISATION General Ports are principally service industries having as their main function the transfer of passengers and cargo from sea to land transport and vice versa. To achieve this, the port provides a miscellany of services and facilities, often distinguished between those pertaining to the ship (such as pilotage, towage and mooring) and those related to cargo (mainly cargohandling and storage). In addition, a number of ancillary services are also provided by the port, facilitating its orderly operation. The latter include communications, port security, firefighting, bunkering, water supply and waste reception facilities. Depending on the organisation, legal status and objectives of a port, port services can be provided either as a comprehensive package, or separately, and on a compulsory or voluntary basis. The efficiency, cost effectiveness and quality of a service are, in general, concepts more difficult to establish and value than in the case of merchandised goods. Port services are no exemption to this. However, their smooth and coordinated functioning remains crucial in determining overall port performance and competitiveness, as well as the efficiency of investments in port infrastructure and superstructure. In several cases, the port services sector still maintains significant rigidities and restrictive practices, often in variance with the economic and structural evolutions sweeping across Europe. It is true that as a result of new technologies, port services require a high level of professional competency in order to avoid accidents in the port area. To this end, and also to prevent possible detrimental effects of liberalisation on the level of safety, the establishment of minimum qualification requirements for pilots, mooring personnel and VTS operators is being examined. However, exclusive rights and legal or de facto monopolies are often 32 Commission Directive 80/723/EEC (OJ L 195 of 29 July 1980), as amended by Directive 85/413/EEC (OJ L 229 of 28 August 1985) in order to cover, inter alia, the transport sector. 17 unconvincingly (let alone unnecessarily) explained on grounds of safety, public service obligations, minimum company size, historical factors and local particularities. Services Related to the Cargo These services consist of stevedoring, i.e. the loading, stowage and discharging of cargo, storage (short term), warehousing (long term – open, closed or refrigerated) and, possibly, cargo-processing, customs clearance, etc. Among all port services, cargo-handling has been the one most profoundly affected by technological development and intensified inter-port competition, the latter mainly as a result of the completion of the internal market. Containerisation and the capital-intensive nature of shipping have increased pressures on ports for further improvements in labour productivity and operational efficiency. In its efforts to adjust to the new demand requirements, the port industry itself has also been progressively transformed into a capital-intensive one, requiring massive investments in sophisticated cargo-handling equipment and commensurate reductions in direct port employment (again, the not untypical example of Rotterdam is shown in Table 4). These developments are shaping new trends in the market, characterised by capital concentration, specialisation and vertical integration. Table 4: General Cargo Productivity at the Port of Rotterdam Cargo Handling General Cargo Employees (x 1000) (million tons) 1985 14 49 1990 11 58 1995 9 71 Source: Erasmus University Rotterdam In the majority of Member States no formal restrictions exist for firms wishing to establish themselves as stevedoring companies in an EU port. However, the particular market structure of the stevedoring industry; the size of required investments; lease contracts; minimum company size; and scarcity of land may pose effective barriers-to-entry to new entrants and offer significant advantages to incumbent operators. In addition, although stevedoring companies are in principle free to apply for port sites, such applications may be subject to different, and often obscure, evaluation criteria, applied by the competent port authorities, such as economic and environmental impact, job creation, etc. At the same time, inflexibility in the supply of port labour has often been contested as not corresponding to the new technological requirements of modern port operations. Several Member States have thus recently introduced legislative reforms aimed at adjusting the structure of the port labour market to technological and structural changes, while at the same time taking into account the associated social problems. Port labour rigidities are mainly attributable to the registration of port workers and the existence of labour pools. In several Member States port work is restricted to registered port workers; a practice encouraged by ILO Dock Work Convention of 1973. The underlying principle behind this practice is to limit casual work and the degradation of social protection standards this sometimes entails, and to ensure that only properly trained and qualified workers are given the responsibility to operate advanced and expensive equipment. 18 However, limitations in the supply of labour can be a hindrance to new investment in the port area and can severely affect port efficiency and competitiveness. Furthermore, in some Member States, registers are kept at unjustifiably high levels, while the relatively protected position of port workers enables them to enjoy salaries and other conditions of employment that are considerably higher than those paid for comparable jobs elsewhere in the economy. Some observers33 argue that this privileged position has finally resulted in a negative attitude of the general public, and other unions, towards port workers. Labour pools exist in a number of EU ports. They have their origin in the past, at times when port work was highly irregular, mainly due to the (then) erratic and unpredictable pattern of ship arrivals. Their aim was to enable port workers share, as equitably as possible, the “peaks and troughs” of port work. Among others, this had helped to de-casualise labour and provide some form of income and employment stability to port workers. Nowadays, pools constitute the bridge between the former labour-oriented type of port organisation, based on casual employment, and the present capital-intensive one where a direct and long-term employment relationship with the operator becomes the rule. Thus, for the industry, pools constitute a practical solution to work irregularity, worth participatory financing by operators in the port. Pools may be founded on a legal provision, imposing the participation or control of public Authorities, or on a voluntary basis following agreements between employers and the workforce. They may take the form of a public or commercial enterprise, State agency or cooperative. Services Related to the Ship In general, public sector involvement in the provision of such services is considerable in most EU ports. The nature of ship-related port services is considered by several Member States to be intrinsically related to the safety of vessels, people, cargo and the port community by and large. Thus, the service is often modeled around the public service concept, enjoying considerable immunity from competition law,34 with dues determined or controlled by the competent national administration. Of all ship-related services, pilotage, towage and mooring are considered to be the most important. Pilotage Pilotage is the act, carried out by a qualified person known as a pilot, of assisting the master of a ship in navigation when entering or leaving a port or an area of confined waters. It is a characteristic example of a compulsory nautical service, particularly for vessels exceeding a certain tonnage or length and for vessels carrying dangerous goods. Exemption certificates for frequently calling masters and vessels (usually ferries) may be issued, albeit on the basis of complex and diversified rules. Exemptions from mandatory- as well as greater use of shore-based pilotage assistance are practices that should be encouraged, particularly in so far as they contribute to the EU’s objective of promoting Short Sea Shipping. Such practices should, however, be adopted as long as they do not jeopardize the safety of navigation or the discharge of entrusted public service obligations, something largely depending on local circumstances. The degree of public sector involvement in the provision of the service varies widely across Europe. In some Member States, the service is entrusted to national- or port authorities and pilots are, in this case, civil servants. In other Member States, pilots are self-employed in 33 see A.S. Harding (1990) Restrictive labour practices in seaports. The World Bank, Washington (WPS 514). The Court has recently held in the “Calì case” (CJEC 18/3/97, aff. C-343/95, Diego Calì & Figli Srl/ Servici ecologici porto di Genova SpA (SPEG), unpublished), that article 86 of the Treaty does not apply to the legal monopoly of anti-pollution control on the ground that this activity is inherent to the essential prerogatives of the State responsible for the protection of the marine environment. 34 19 partnership associations or collectives, which can be financially or operationally autonomous. Even in this case, however, public sector involvement still remains predominant: pilot associations are appointed by the competent Authority who holds the overall control and responsibility for pilots’ licenses, training, tariffs and quality. The regulatory framework that governs the provision of the service affords pilot associations de jure exclusive rights, often associated with public service obligations, and it limits pilot liability in case of accident. Exclusive rights are usually limited to a single port. Towage The service consists of towing or pushing ships with small powerful vessels (tugs) and in particular of assisting ships’ maneuvres in port or in access channels, as well as of providing assistance in mooring, docking, lightening and bunkering operations. Although information at the disposal of the Commission is fragmented and rudimentary, it seems that a significant diversity of organisational structures exists across Europe. Here, too, the service is provided either by the public or private sector, on a voluntary or mandatory basis. Public sector provision may involve the local port authority or licensed operators under exclusive rights. In this case, rates are fixed and controlled by the competent national, local or port authority. Where the service is provided by private operators, no formal restrictions to market access exist and public sector involvement is generally limited to ensuring compliance to safety and environmental standards. Rates are in principle freely negotiated. Mooring Berthing, unberthing and mooring refer to the service of securing the ship at berth by ropes. A similar lack of systematic information exists and the same variety of legal regimes seems to prevail: the service is provided directly by port authorities, by licensed companies or cooperatives operating under exclusive rights, or by a number of private companies. In certain cases, licensed operators are charged legally or contractually with public service obligations, ensuring their participation in emergency situations. The licensing system implies also the involvement of port authorities, and eventually of professional organisations, in the fixing of rates. Port Services under the Rules of the Treaty It appears that in spite of structural and economic evolution and trends towards new organisational forms, the port services sector in Europe continues to adopt (by choice or necessity) institutional rigidities often not conducive to greater port efficiency and competitiveness. By and large, restrictive practices in the sector usually derive from employment conditions, due to historical, political and economic factors, that several Member States have recently undertaken to remedy. According to the principle of neutrality, guaranteed by art. 222 of the EC Treaty, the Commission is neutral with regard to the private or public status of port operators. Moreover, the Commission respects, on the basis of the subsidiarity, the right of Member States to define the regimes of the services provided in their ports according to their particular geographical, administrative, social, technical and historical circumstances. However, and although ports have remained for more than thirty years outside Community action, as a gray-area between sea and land transport, the European Court and the European Commission have repeatedly made it clear that the rules of the Treaty, mainly those pertaining to competition, also apply to ports. This legal tendency is consistent with the European Union’s policy to encourage modernisation and efficiency, taking into account structural developments in worldwide competition and the need of companies to seek out better quality at reasonable prices. 20 The legal context of the application of the rules of the Treaty to the port services sector has recently become clearer on the basis of the principles confirmed by Court jurisprudence and the Commission’s decisions. At a first instance, the Court of Justice has condemned a particular case of a regime of stevedoring services, based on the dual monopoly of port operators and dock work companies, purported to have led to abuse of dominant position. Subsequently, the discriminatory tariffs charged by pilot corporations in a certain port were held to be incompatible with EC competition rules.35 In addition, the Commission has also adopted Decisions applying competition rules to the port sector, condemning port undertakings, acting both as port Authorities and shipping companies, for having refused their competitors access to essential port facilities.36 In enforcing the Treaty rules to the port services sector, the Commission examines each complaint on a case by case basis, giving due regard to the following considerations: In principle, the general rules of the Treaty with respect to competition and discrimination on grounds of nationality also apply to port services, as long as this does not obstruct, in law or in fact, the execution of the assigned tasks. The European Union is particularly sensitive to the issue of safety of maritime transport and well aware of the fact that safety considerations often bring some port services under the ambit of Article 90 of the Treaty, which can restrict market access by legitimizing exclusive rights of public undertakings entrusted with the operation of services of general economic interest, or with public service obligations. In this context, however, the Commission has to examine, on the basis of the principle of proportionality, if the same objectives could not be achieved by less restrictive practices or even without restrictions at all. The challenge, therefore, is to combine safety imperatives with a structure compatible with competitive patterns. This is of particular relevance in cases where a single undertaking is operating both services falling under the scope of Article 90, and ones of purely commercial nature.37 In such a situation, and also in the sake of fair and transparent pricing, port operators should be encouraged to maintain separate accounts. In some ports and under certain conditions of demand, exclusive rights can be justified by the fact that only one operator can economically provide the service. However, when the national system is based on a concession or a license, it would be desirable to effectuate the selection of the supplier(s) on the basis of a transparent, objective and non-discriminatory public tender procedure, granting exploitation rights for a (limited) period that would, inter alia, allow normal recovery of investments. This last point emphasizes the significance of adequate monitoring by the national authorities responsible for the approval or fixing of prices, aimed at ensuring that prices are fair, transparent and reflect the costs incurred in the provision of the service. 35 CJEC 17/5/94, aff. C-18/93, Corsica Ferries Italia Srl/Corpo dei piloti del porto di Genova, [1994] ECR-I1824. Actually the Court is considering a recent preliminary issue concerning the legality of the compulsory provision of mooring services in two ports and of the tariffs applied, alleged not to reflect the real cost (aff. C266/96, Corsica Ferries France S.A./ Ormeggiatori). 36 i.e. Decision 21/12/93, Port de Rødby, 94/119/EC, OJEC L 55/52, 26-2-94; Decision 21/12/93, IV/34.689, Sea Containers/Sealink, OJEC L 15/8, 18-1-94 37 in case 179/90 Merci Convenzionali di Porto di Genova v. Gabrielli [1991] ECR-I-5923, CJEC 10/12/91 the Court explicitly held that the stevedoring services could not qualify as services of general economic interest. 21