New EU guidelines encourage shippers to fly European flags

Brussels – The European Commission yesterday unveiled the new guidelines on state aid to maritime transport. The aim of the new legal framework is to retain as many ships as possible under the flag of EU member states and to encourage ships flying flags of convenience to join the shipping registers of EU member states. The new framework retains most of the provisions of the existing framework, which dates from 1997, especially those regarding favorable taxation, encouraging ships to join the EU members’ shipping registers. The aim of the changes is to encourage employment of EU nationals in a way that does not provide an unfair advantage to one member state over another. Thus, the Commission allows each member state to provide tax breaks to passenger shipping firms that employ EU nationals. It also allows the state to take over part of the firms’ social security contributions in order to help contain costs. Tax breaks are also allowed for oceangoing shipping and, in that case, irrespective of the crew’s nationality. The Commission also provides, in its own words, «a still flexible but more effective ‘flag-link’ principle for tax arrangements.» The flag-link is the requirement that ships fly the flag of a member state in order to qualify for state aid. Even though tax arrangements, such as tonnage taxes, may continue to be «flag-neutral,» shipping companies operating less than 60 percent of their tonnage under an EU flag will have to maintain under an EU flag at least the same tonnage they have when the new regulations go into force. Otherwise, they will not be able to benefit from the measure for any non EU-flagged vessel added to their fleet. Member states may vary from this rule only if their EU tonnage is not decreasing. Moreover, they will have to provide the Commission with regular reports to this effect, as well as with proof of keeping in line with the other requirements for varying from the flag-link principle. Concerning short-haul shipping, the Commission said that «(state) aid may be granted for the launching phase of new services and must be of a kind to permit transport (of cargo essentially) by road to be carried out wholly or partly by sea. They must be limited in time (3 years maximum). Recipients have to be selected in a transparent and non-discriminatory manner.» Finally, in a decision of special importance to Greece, the Commission allows member states to subsidize unprofitable routes to islands, provided that there are less than 100,000 arrivals annually. Moreover, the states are not obligated to call a tender to choose a company to provide that service; a simple invitation for expression of interest is sufficient. «The duration of public service contracts should be limited to a reasonable and not overlong period, normally in the order of six years, since contracts for significantly longer periods could entail the danger of creating a (private) monopoly,» the Commission says. It is the third time since 1989 that the Commission has published guidelines on maritime transport designed to increase the number of ships registered under EU flags. As a result, it said: «The fleet logged in the registers of the member states increased on average by 0.4 percent per year in the number of ships, and by 1.5 percent in tonnage… In spite of this, the (EU) share of the world tonnage has slightly decreased.»