The impact of the European Commission's "Ports Package" on the market of port services

20.03.2002

Dariusz Grzegorkiewicz - Chief Strategic Communications Officer of the Port of Gdansk Authority SA, Member of the Executive Committee of the European Sea Ports Organization

The directive on the free accessibility to the market of port services proposed by the European Commission referred to as the "Ports Package" published February 13th, 2001 and modified February 19th, 2002 upon the first reading at the European Parliament has definite relevance to the discussions held in relation to small and medium-sized enterprises operating in the port sector, as it enables precise formation of the provisions of the Treaty on the establishment of the European Community with regard to the free rendition of services by business entities (art. 49 of the Treaty). This target is to be achieved by means of the common transport policy (art. 51 of the Treaty).

In practice this entails the regulation of matters concerning the accessibility to the market of port services for the companies rendering the services related to ports operation, as well as the abolition of the administrative barriers for the qualified operators who intend to supply this sort of services in a particular port.

The implications of this directive can be most effectively presented by means of the following example. As far the actual situation of the Port of Gdansk is concerned, according to the provisions of the Treaty there is no possibility of turning down the offer submitted by a qualified entrepreneur to render port operation services, as the accessibility to the port services market in a particular port can only be limited due to the following facts:

• shortage of undeveloped grounds and available potential,
• navigation safety,
• environmental protection regulations.

Bearing in mind that the Port of Gdansk owns undeveloped investment grounds that have been clearly assigned for the cargo handling purposes as defined in the local spatial planning and development studies there is no sound grounds for the introduction of the administrative limitation on the accessibility to the market of the services whose development has been included in the strategy and the development plans of the port's authority. Furthermore, owing to the fact that there are no such limitations existing in the Port of Gdansk the provisions of the Directive on a free accessibility to the market of the port services do not apply to this port.

On the other hand, should the Port of Gdansk fail to own e.g. undeveloped investment grounds, a decision might be taken to put limitations on the accessibility to the market of the port services. Under these circumstances, however, the application of the following provisions would have to be automatically considered:

• selection of an operating company by means of an open tender or another equivalent procedure conducted by an independent body,
• obligatory issue of a permit to at least two independent operating companies in each cargo group unless specific circumstances occur and as long as there are the entities willing to engage in the rendition of such services,
• limitation on the terms of contracts dependent on the scale and the type of the investment made by an operating company up to the period of 5, 10 and 25 years - representatives of the European Commission remain inclined to extend a maximum term up to 35 years,
• introduction of interim stages for the contracts in force dependent on whether they have been issued in compliance with the provisions of the directive or with the application of other equivalent procedures and on a size of the investment made by an operating company (ranging from 2 up to 25 years),
• possibility of repeated selection of the same operating company upon the expiry of the contact solely on the grounds of an open tender or another equivalent procedure,
• implementation of the principle that the users of the port's facilities can independently perform the cargo handling services by means of their own staff and equipment,
• implementation of the principle that the operating companies may employ their own workers on conditions of community and social criteria established by port authority,
• introduction of the obligatory publication of separate financial reports for each range of business conducted.

I find it worthwhile to take this opportunity to present the official position of the European Sea Ports Organization (ESPO) that represents the authorities of the European ports. It is also worthwhile mentioning that this position remains almost identical to the one taken by the Federation of European Private Port Operators (FEPORT) that represents private businesses.

The ESPO's position identifies a number of 3 issues that fail to be resolved by means of the proposed directive and that appear most difficult to tackle given the range of differences existing among the European ports. These difficulties include:

• lack of necessary recognition of the ports management models other than the "landlord" type models (private ports and the ports involved in the operational activities will be first and foremost subject to the changes enforced by the directive),
• lack of recognition of the fact that there is a number of various markets competing in the field of diversified port services (for pilotage and towing the market can be usually limited to the area of a single port, whereas for the cargo handling services a competing market covers an extended geographical area, on many occasions exciding the borders of a single country),
• shortage of offers that would provide concrete solutions in order to achieve a transparent view in terms of the ports financial procedures and the clear frames for the subsiding of the port infrastructure.

At the same time, ESPO identified a number of 9 other issues that necessitate suitable amendments to a proposed directive. Accordingly, the directive should:

• apply only to these services that are specific for and can only be performed within the range of a seaport (this entails the excluding of e.g. storage services and logistics that can successfully take place outside the port's area),
• refer to each of the seaports servicing the international maritime traffic (this aims at the exclusion of small-sized island ports that provide seasonal tourist services) or, alternatively, each of the ports included in the Trans-European Transportation Network (i.e. those handling over 1.5 million tonnes of cargoes or servicing over 200 000 passengers annually),
• allocate a suitable range of powers to the port authorities so that they remain eligible to issue permits to begin the operational activities to the subjects that comply with the required standards and criteria and wish to render operational services in accordance with the strategy and policy adopted by a port authority (provided that the elimination of an operating company who fails to comply with the above requirements is not to be regarded as a limitation on the accessibility to the market of the port services),
• expand the powers to put limitations on the accessibility to the market of the port services at a particular port (shortage of undeveloped grounds and available potential, safety of navigation and cargo handling, the policy and the economic interests of the port and the region),
• refrain from the introduction of artificial competition through the requirement to possess at least two independent operating companies in each cargo group in a single port,
• recognize port authorities as the principle and sole "competent management entities" as stated in the directive and, should a port authority get involved in the operational activities itself, it is to impose the obligation on the Member States to ensure the implementation of suitable appeal proceedings against a decision made by a port authority,
• allow, in case of limitations on the accessibility, for selection procedures of an operating company equivalent to tenders and for reasonable terms of contacts with operating companies to ensure a suitable time of return on the investment,
• introduce an adequate concept of the rendition of the operational services by the port's users themselves (self-handling) through a clear statement that the port's users are allowed to perform this sort of services to their own benefit provided that they use their own equipment and staff and that it may be necessary to obtain a permission of a port authority,
• allow for a suitable length of time necessary for the implementation of the directive to the legal provisions of each of the EU Member States.

As regards the transparency in terms of the ports financial procedures and clear frameworks for the subsiding of the port infrastructure, ESPO suggests that the Council of Europe should make the following recommendations to the European Commission:

1. prepare the amendments to the existing "Directive on the transparency in the relations between the Member States and public entities and the transparency of financial reports in certain businesses", so that it can be extended to include each of the ports referred to by the provisions of the directive,
2. publish detailed guidelines for the subsidies supporting the ports supra- and infrastructure by means of the public funds, stating, at the same time, which sort of assistance is allowed and which sort of assistance, at each time, is to be submitted for approval to the European Commission.

As a conclusion, it is necessary to indicate that the Directive on a free accessibility to the market of the port services is bound to have a positive impact on the enterprise development and will successfully stimulate the competitiveness of seaports. This, in turn, will undoubtedly result in an increased quality of the rendered services.

On the other hand, however, given an unfavourable financial situation of some of Polish operational companies that entered contracts of lease or operation upon the monopolistic terms and conditions as a result of a collapse of homogeneous port entities - it can be inferred that the port which fail to accept a large number of new operating companies will have to face considerable hardships.

In this view, therefore, the role of port authorities should consist in the stimulation of competitiveness and preparing grounds for Polish operating companies to face new challenges coming in the wake of new conditions and free rendition of services on the common European market.