Market access to port services and financial transparency of ports
This short overview summarises the proposed EU Regulation and the UK response to it.
Transport is a competence shared between the EU and Member States. Two sets of proposals by the Commission related to access to ports and transparency of port charges were both rejected by the European Parliament, in 2003 and 2006. In May 2013 the Commission published a new proposal (COM 2013/0296 final) on market access to port services and financial transparency of ports (the PSR).
The Commission’s stated intention with the PSR is to improve the efficiency and competitiveness of EU ports and to contribute towards their ability to cope with anticipated increased demand. It wants to do this by strengthening market access for port services, in effect encouraging competition; ensuring financial transparency; and improving port coordination and consultation.
The PSR will apply to all 319 ports in the TEN-T network. Of these, a total of 43 are located in the UK. According to the Commission, the PSR is intended to address:
- Market opening:to guarantee the freedom to provide services in any of the 319 TEN-T ports; introduce transparent procedures for hiring service providers; and increasing competition to ensure more reliable, better quality services;
- Transparency:giving port authorities more autonomy, in particular over setting charges and allocating resources; increasing transparency over the use of public funds; and requiring detailed accounting by ports authorities to national and EU monitoring authorities;
- Inter-modality:introducing a process for checking ports are connected to other transport infrastructure, making ports into transport hubs with connections to rail, river and road networks; supporting an increase in short-distance maritime transport to 8%; and creating a significant number of new jobs; and
- Social dialogue:taking a non-legislative approach to the social component with a view to promoting discussion; setting up a social dialogue committee for ports to provide a facility where employees and employers can meet and discuss problems relating to port labourers’ working conditions.
The PSR has been amended since it was initially published, with the UK securing what it believes are some ‘significant’ compromises. The amended version of the PSR is available here.
What are ‘port services’?In order to use a port, a range of intermediary services is often required, which can be provided by the port itself or by independent intermediary parties. These are what is meant by the term ‘port services’. There are essentially three: pilotage, towage and cargo-handling/stevedoring.
How do UK port operations compare to other countries?The UK faces the same challenges as other European ports, largely driven by ever larger container vessels.
However, UK ports have a different operating model compared to most Continental ports: they are largely privately owned and manage operations. They decide if they provide services themselves or sub-contract them.
UK ports do not receive subsidy (links to ports are a slightly different issue) and because they are largely privately owned they make their own commercial decisions; they generally fund their own investment and expansion plans (in this they are not dissimilar to most airports). These commercial decisions include those about the provision of ‘port services’, which can be provided by the port company or by a third party. Decisions as to whether to sub-contact these services are commercial ones taken by the port company.
That is not to say that the UK does not have concerns with some of the current features of the system. For example, there have been concerns from the UK competition authorities about the degree of ‘vertical integration’ between port owners and port service providers.
How will the PSR affect UK ports?In the UK, there is no independent sector regulator for ports, and there is no statutory framework for setting the level of port access charges. The main governing legislation, the Harbours Act 1964, covers charges relating to certain ports and port activities. Section 31 of the Act specifies that customers can appeal to the Secretary of State for Transport against ship, passenger or goods dues, and section 27 states that all other charges relating to port activities must be reasonable, with a few specified exceptions. Therefore, there is a form of regulation of the ports sector in the UK, meaning that the incremental impact of the proposed regulations will be significantly reduced. It is worth noting that the existing provisions are relatively ‘light-touch’ and are based on an appeal to the Secretary of State.
Ownership of UK ports is mixed, with many ports in private sector ownership. Fifteen of the UK’s 20 largest ports are privately owned and around two-thirds of traffic transits through private sector ports. Conversely, public ownership is more common in continental Europe and the financial transparency requirements might reduce the scope for direct support of ports by their respective governments.
The UK port industry is very much opposed to the PSR. The UK Major Ports Group and the British Ports Association have set out four ‘red lines’: ensuring the autonomy of private ports; encouraging – and not hindering – investment; transparency and a level playing field for state aid; and social provisions.
What is the UK Government’s view?The proposal was first published in May 2013, and at that point the UK Government took the view that, if adopted in that form, the legislation could be harmful to the UK’s already competitive, largely privately-owned ports sector and that problems with specific ports markets in individual countries would be best left to those countries to resolve.
At Transport Council in October 2014 a General Approach was agreed by Ministers – the UK abstained on the vote. The Government believes that the revised PSR is an improvement on the original draft as the scope has been reduced (dredging, cargo handling and passenger services are excluded from the market access provisions); there are more areas of national discretion; there is a ‘competitive market exemption’ which the UK can apply for, to exclude UK ports from some of the regulatory measures; it imposes less bureaucracy and provides better financial transparency where continental EU ports receive public funding.
Where do things do from here?The Transport Committee of the European Parliament (EP) is due to vote on amendments in January 2016, with a Plenary vote scheduled for June. Unless the EP votes the Proposal down, the likely next step will be ‘trialogue’ negotiations (where the Council and the EP have to agree a text with the Commission) in the first half of 2016.
Progress on the Regulation can be tracked using the Procedure File.
Further readingEuropean Scrutiny Committee report HC 219-xiv, October 2014
OECD, Policy Roundtable: Competition in Ports and Port Services 2011