Summary of Regulatory Impact Analysis (RIA) Department/Office: D/Transport, Tourism & Sport Maritime Transport Division Stage: Draft for consultation Title of Legislation: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework on market access to port services and financial transparency of ports. Date: July 2013 Related Publications: 1) Proposed Regulation 2) Executive Summary of Commission Impact Assessment 3) Commission Impact Assessment 4) Commission Communication: Ports - An Engine for Growth Available to view or download at: Through links above or else via: http://ec.europa.eu/transport/modes/maritime/news/ports_en.htm Contact for enquiries: Garret Doocey Email: [email protected] This RIA has been prepared for consultative purposes to illustrate the Irish context to the current proposed EU Regulation and to inform Ireland’s negotiating position on the proposal. The policy option is therefore taken as the published European Commission Regulation proposal [Com 2013/296 or COD 2013/0157]. There were four options considered by the Commission and detailed in its Impact Assessment. These are listed below: PP1) Horizontal Instruments and Transparency; PP2) Regulated Competition; PP2a) Regulated Competition and Port Autonomy; PP3) Full Competition and Port Autonomy. For the purposes of this consultative RIA only Option PP2a is discussed in detail as it is that option which was adopted by the Commission. OPTION PP2a In an Irish Context COSTS BENEFITS IMPACTS PP2a Minor administrative Introduction of formal Relatively minor costs. consultations between port administrative changes authorities and required. users/stakeholders. Regulatory oversight of Ensures ongoing what appears to be competition in the sector. effectively functioning marketplace. 1 SECTION 2: Description of Policy Context and Objectives 2.1 Background to the Proposal 2.1.1 The proposed Regulation is essentially the third attempt to legislate in the area of port services at European level. In 2001 the European Commission (‘the Commission’) proposed a Directive on Market Access to Port Services which was eventually rejected by the European Parliament in 2003 and then withdrawn by the Commission. A second proposed Directive was published in 2004 but that Directive was again rejected by the European Parliament in 2006. 2.1.2 One significant difference between this proposed Regulation and the two previous attempts to legislate in the area, is the fact that it will not apply to cargo-handling and/or passenger services. Those services will instead be addressed through a new Social Dialogue Committee for Ports to be established in June 2013 and through the separate proposal for a Directive on the award of concessions, which will apply to ports. 2.1.3 Since that second rejection in 2006 the Commission engaged in a wide-ranging review of the ports sector and associated services. In 2007 it published a Communication on a European Ports Policy (COM 2007/616) which identified challenges including the need to improve port performance and hinterland connections, to modernise ports while respecting the environment, the lack of transparency in the use of public funding, market access restrictions and issues relating to the organisation of port labour. The Communication recommended a number of horizontal instruments and other nonlegislative measures to tackle these challenges. While a number of measures were initiated, the Commission states that most of the challenges identified in 2007 remain today and must be addressed through a combination of the proposed Regulation and other measures contained within the accompanying Communication (see 2.1.8 below). 2.2 The proposed Regulation 2.2.1 The proposed Regulation will automatically apply to all ports within the TEN-T core and comprehensive networks. Member States are free to apply the Regulation to other ports if they wish. 2.2.2 There are two major ‘themes’ to the proposed Regulation – 1) Modernisation of port services and operations - Clarify and facilitate access to the port services market - Prevent market abuse by designated port service providers - To ensure consultation between ports and port users on the main decisions which affect the functioning of the port in all TEN-T Ports by the implementation date of the initiative. ‘Port services’ covers bunkering, dredging, mooring, port waste reception facilities, pilotage and towage. 2 The core objective in this area is to allow for an open market in providing port services. However, the proposed Regulation does allow for a limitation on the numbers of service providers to be imposed by port authorities through: A) Limiting the number of providers for a particular port service due to constraints on the availability of land within a port or public service obligations. However, in these instances they are obliged to provide a clear definition of the reason to limit access to the market. B) Limiting the number of providers for a particular port service due to Public Service Obligations imposed upon the authority. Any decision to limit the number of port service providers must be published by the port authority at six months in advance giving justification and an opportunity to comment within a reasonable period. If a port authority provides a port service itself the Member State may entrust the decision limiting the number of providers to an authority which is independent from the port authority. If the decision rests with the port authority then the minimum number of providers cannot be less than two. Member States may decide to impose Public Service Obligations in order to ensure: A) Service availability at all times; B) Service availability to all parties; C) Service affordability for certain categories of users. The Member State will designate the ‘competent authority’ to impose such Public Service Obligations in their State; the port authority may be that ‘competent authority’. If the ‘competent authority’ decides to impose Public Service Obligations in all covered ports in the State, it shall inform the Commission. The proposed Regulation also provides for port authorities to set minimum requirements which any port service provider must satisfy in order to operate within the port (e.g. professional qualifications/compliance with maritime safety or environmental requirements), although any such requirement imposed must be transparent, non-discriminatory, objective and relevant to the port service concerned. 2) Creation of framework conditions which attract investments in ports - Ensure transparency in the financial relations between public authorities, port authorities and port service providers in all TEN-T ports by the implementation date of the initiative. 3 - Ensure that all TEN-T port authorities are free to autonomously set their port infrastructure charges by the implementation date of the initiative, with the possibility of environmental modulation of these charges. The proposed Regulation distinguishes between ‘port service charges’ (a charge imposed for provision of one of the defined services) and ‘port infrastructure charges’ (a charge imposed by a port authority for the use of the port). ‘Port infrastructure charges’ may be varied in accordance with commercial practices (e.g. frequent users of the port) or to promote environmentally friendly practices (e.g. use of certain fuels). Any rules regarding such variation must be relevant, objective, transparent and non-discriminatory. The Commission has the power through delegated acts to provide for common classifications of vessels, fuels and types of operations according to which ‘port infrastructure charges’ can vary and to provide for common charging principles for ‘port infrastructure charges’. 2.2.3 The proposed Regulation also requires that port authorities establish a ‘Port Users Advisory Committee’ which must be consulted annually prior to the setting of port infrastructure charges and port service charges. There is also a requirement that port authorities regularly consult other stakeholders such as cargo owners, port service providers, land transport operators, operators of vessels etc. on issues relating to: a) The proper coordination of port services within the port; b) Measures to improve connections with the hinterland (including measures to develop and improve the efficiency of rail and inland waterway connections); c) The efficiency of the administrative procedures within the port (including possible measures to simplify them) 2.2.4 The proposed Regulation requires Member States to ensure an ‘independent supervisory body’ monitors and supervises the application of the Regulation. The body may be an existing body. Where Member States own or control port authorities then the Member State must ensure an ‘effective structural separation between the functions relating to the supervision and monitoring of this Regulation and the activities associated with that ownership or control.’ The body will handle complaints lodged by any party in relation to the proposed Regulation. The Body shall have the right to require port authorities, port service providers and port users to submit information as required to ensure monitoring and supervision of the proposed Regulation. The decision of the Body shall have binding effects without prejudice to judicial review. 2.2.5 Any port service contract (i.e. a contract awarded under restricted market access conditions) concluded before the date of adoption of the proposed Regulation will continue to be valid until their date of expiry, providing the original award of contract was made in an open, transparent and non-discriminatory manner (i.e. through public tender). Other port service contracts will continue to be valid until expiration or the 1 July 2025 whichever is the earlier. 2.2.6 The proposed Regulation shall apply with effect from 1 July 2015 4 2.2.7 The Commission has additionally published a Communication (COM 2013/295) entitled ‘Ports: an engine for growth’. The Communication provides a policy framework for the proposed Regulation and also includes within its eight listed actions a number of non-legislative ‘soft-measures’ designed to support the legislative measures within the Regulation. The legislative and non-legislative measures are designed to: Connect ports to the trans-European network; Modernise port services; Attract investment to ports; Promote the social dialogue; Raise the environmental profile of ports; and Encourage innovation. 2.3 The Irish context 2.3.1 The Regulation will automatically apply to all ports within the TEN-T core and comprehensive networks. In Ireland the core network ports are Dublin Port Company, the Port of Cork Company and Shannon Foynes Port Company while the comprehensive port network is comprised of the Port of Waterford Company and Rosslare Europort. Together these five ports handled 87% of all commercial traffic at Irish ports in 20121. 2.3.2 The Regulation may also apply to Drogheda Port Company and Dún Laoghaire Harbour Company as during negotiations of the revised TEN-T Regulation Ireland proposed that all existing ports in the Greater Dublin Area (Dublin, Dún Laoghaire and Drogheda) be included within the Dublin ‘core’ port. This position was deemed appropriate to provide maximum flexibility as regards any future decisions regarding major port capacity development within the region and mirrors the currently applicable Regional Planning Guidelines for the area. Neither Company would in itself satisfy the qualifying criteria for inclusion within either the ‘core’ or ‘comprehensive’ networks. National Ports Policy designates both ports as ‘Ports of Regional Significance’ and recommends their transfer to appropriate local authority led governance structures. 2.3.3 The core objective of the proposed Regulation in this area is to allow for an open market in providing port services. In terms of the first major ‘theme’ of the proposed Regulation – Modernisation of port services and operations – the Irish ports sector largely satisfies the requirements of the Regulation. The port services market in Ireland is largely open and competitive with primarily private sector providers operating at all ports. 1 CSO (2013), Statistics of Port Traffic 2012 5 Table 1 – Limitations imposed by port companies on number of service providers? Port Bunkering Dredging Mooring Waste Pilotage Towage Dublin None None None None Yes None Cork None None* None None* Yes None Shannon None None None* None* Yes None W/ford None None None Yes Yes None Rosslare None None* None* None N/A N/A 2.3.4 As can be seen in Table 1, the Irish ports do not generally impose formal restrictions on the number of service providers for the covered services (see 2.3.5 below re pilotage as an exception). However, there are a number of ports that have what might be described as an ‘informal’ restriction in place due to space constraints etc. (marked with * in table) and the Port of Waterford Company formally restricts the number of port waste service providers for similar reasons. The proposed Regulation allows for such restrictions but requires the award of any port service contract in such circumstances to be open to all interested parties, non-discriminatory and transparent. All the ports above award such contracts via an open tendering process as regulated by relevant procurement guidelines and legislation. Q1: Will the proposed Regulation’s requirements impact upon how port services are provided in Irish ports? If so, in what way and will that impact be positive, negative or neutral? 2.3.5 Of the six covered services referred to section 2.2.2, only one – pilotage – has an across the board ‘restriction’ in the relevant Irish ports (Rosslare is an exception as pilotage is not required). The Harbours Acts 1996 – 2009 require relevant port companies to provide pilotage within their statutory pilotage district through employing pilots or licensing individuals to act as pilots. The proposed Regulation does however provide for exemptions on the basis of Public Service Obligations. The interplay between this Irish statutory requirement and the proposed Regulation will require examination but as noted in the Commission’s ‘Study on Pilotage Exemption Certificates’2, a statutory obligation to provides pilotage services is common across various Member States and the issue will therefore be a shared one across different countries. 2.3.5 of the ports impose certain minimum requirements at leastthe one Q2: All Does the relevant currentIrish statutory arrangement governing pilotage fitforwithin of the covered services either throughIftheir or through proposed Regulation’s framework? not, own whatspecified changes requirements might be required to ensuring compliance with relevant generally applicable requirements. ensure compliance with the proposed Regulation? 2.3.6 In terms of the second major ‘theme’ of the proposed Regulation, Irish ports again largely comply with the requirements of the Regulation. There are three principles underpinning the proposed Regulation’s actions in this area: 1) Financial transparency between public authorities and port authorities; 2) Autonomy of port authorities to set their own charges for the use of the port; and 2 http://ec.europa.eu/transport/modes/maritime/studies/doc/2012-09-18-pec.pdf 6 3) A requirement that the charges imposed for the provision of those port services for which a limitation on the number of providers has been imposed, or for which the port authority itself provides the service, are set in a transparent and non-discriminatory manner. 2.3.7 Principle 1 above is basically achieved through extending the application of the principles of Commission Directive 2006/111/EC (transparency of financial relations between Member States and public undertakings etc.) to all TEN-T ports through the means of this new Regulation. The Regulation will also require port authorities’ annual accounts reflect any public funds received and where a port authority receives public funds and provides a port service itself, that it shall keep the accounts of each port service activity separate from the accounts of its other activities. 2.3.8 Currently within the Irish commercial ports sector, the Commission Directive 2006/111/EC only applies to Dublin Port Company as that particular Directive’s application is restricted to bodies whose turnover exceeds €40m in the last two applicable financial periods. All of the covered Irish ports are established, operate and financially report on the same statutory basis as Dublin Port Company except for Rosslare Europort, which is effectively a business unit of Iarnród Éireann. It is not expected that the Regulation’s requirements in this area will have any significant impact on Irish ports; however, there may be some implications for Iarnród Éireann / Rosslare Europort. As a general comment on the area of State funding in the sector, National Ports Policy is clear that the commercial ports sector will not receive any Exchequer funding whatsoever and all operations must be funded on a commercial basis. Q3: Are the proposals in respect of the transparency of financial relations between State and port authority likely to impact upon Irish ports? If so, in what way? 2.3.9 In relation to the separate recording of accounts related to port service provision by a port authority, all covered Irish ports bar Rosslare provide pilotage services through employing or licensing pilots. Additionally, Dublin Port Company provides towage services and both Shannon Foynes Port Company and Rosslare Europort provide mooring services. All of the ports record such information in internal management accounts and Shannon Foynes publishes separate pilotage accounts annually and records mooring revenues in the company’s published annual accounts. It is not expected therefore that this requirement will have a significant impact in an Irish context. 2.3.9 The core objective of Principle 2 above is of little relevance to Irish ports as they are solely responsible for the setting of charges relating to the use of their particular port. The sector itself, and port users generally, may however have a view on the proposed power of the Commission to establish common classifications of vessels, fuels and types of operations according to which port charges may vary in the future and also to allow the Commission establish common charging principles. Additionally, the proposed Regulation will require the port authority to inform port users about the structure and criteria used to determine charges imposed in a port which may not be a feature of the current commercial environment. 7 Q4: Are the proposals in respect of charging likely to impact upon Irish ports/shipping? If so, in what way? 2.3.10 Principle 3 above would appear at this stage to have little practical relevance in an Irish context except potentially in the area of pilotage. 2.3.11 Section 2.2.3 refers to the proposed Regulation’s requirements that a formal Port Users’ Advisory Committee be established in ports and additionally that port authorities must consult with various stakeholders on certain matters. Some covered Irish ports do maintain a port users’ committee although only Shannon Foynes reports that it consults its committee as regards charges, others report they have regular informal consultations which customers. This proposal will therefore impact upon how the majority of covered Irish ports operate. Q5: Are the proposals referred to in s2.3.10 and 2.3.11 beneficial or not in an Irish context? Are there alternative options to be considered? 2.3.12 The proposed Regulation requires Member States establish an ‘independent supervisory body’ to monitor and supervise the application of the Regulation. Previous studies in Ireland (High Level Review of the State Commercial Ports in 2003 and the previous Ports Policy Statement 2005) concluded that the costs associated with the establishment of a port sector specific regulator would be prohibitive. However, the scope of the proposed Regulation and the supervisory responsibility would appear in many respects to complement or duplicate existing powers under Competition law. SECTION 3: Identification and Description of Options There were four potential options identified by the Commission and detailed in its Impact Assessment. The descriptions below are taken directly from the Executive Summary of the Commission’s Impact Assessment. 3.1 Option PP1 Horizontal Instruments and Transparency 3.1.1 This option combines the use of horizontal instruments, a soft measure on market access and legally binding provisions on financial transparency, intra-port coordination and port infrastructure access charges. The soft measure is a non-binding Commission Communication which explains the Treaty on the Functioning of the European Union rules on non-discrimination and the future Directive on concession. 3.2 Option PP2 Regulated Competition 3.2.1 This option introduces the freedom to provide services to the provision of port services. This freedom can be limited if necessary, based on objective and transparent reasons related to the lack of space or reasons of public interest. When limiting the freedom, the public or port authority would have to enter into a contractual arrangement 8 with a port service provider via an open tendering procedure, except in duly justified cases. 3.2.2 Transparency is enforced in those cases where public funding is involved in order to be able to track possible distortive state aids and cross subsidies between port services. If the service is provided by an in-house operator or another operator with an exclusive right, a confinement obligation ensures reciprocity in the first case and price regulatory oversight avoid abuses in both cases. The charging for using the port infrastructure is done transparently and based on cost. A port users’ committee helps to orient the port activities more towards the users and clients of the port. 3.3 Option PP2a Regulated Competition and Port Autonomy 3.3.1 This option consists of Option PP2 above with the following variations: An obligation to have recourse to open tendering in the event of space restrictions or public service obligations applies not only to new contracts but also to substantial changes to existing contracts. The regulatory oversight of service providers with exclusive rights applies only to the markets which have not been granted through an open tendering. Each port is given the right to set itself the structure and level of port infrastructure charges provided that the charging policy remains transparent. The initiative also encourages a differentiation according to the environmental performance of ships or fuels. 3.4 Option PP3 Full Competition and Port Autonomy 3.4.1 This builds on Option PP2a by additionally requiring at least two competing and independent operators for each port service where the number fo operators is limited as a result of space constraints. There is also a functional/legal separation. To ensure that the port keeps functioning, the central coordination role of the port authority is strengthened. Preferred Option: Option PP2a Regulated Competition and Port Autonomy The Commission’s preferred option is PP2a as it will generate savings in port cost of the order of €1billion per year across the EU. It will also induce additional short-sea shipping traffic of around 13.3 billion tonne-kilometres (an increase of up to 6.5% on a number of routes). This will lead to increased port activities, which will create direct and indirect port-related jobs. Q6: Is the Commission’s preferred option the most appropriate in a) the Irish context and b) the European context? If not what other options should be followed? SECTION 4: Analysis of Costs, Benefits and Impacts 4.1 This RIA been prepared in order to illustrate the Irish context to the current proposed EU Regulation and to inform Ireland’s negotiating position on the proposal. The policy 9 option under primary consideration is therefore taken as the published European Commission Regulation proposal [Com 2013/296 or COD 2013/0157]. Analysis of the other options considered by the Commission, and referred to in section 3, can be found in their own Impact Assessment. 4.2 Impacts 4.2.1 A preliminary assessment of the proposed Regulation’s impact in the Irish commercial ports sector is that will have little discernible impact in how port services are provided in our ports or on the level of competition that exists in the provision of these services. This is based on Departmental analysis of answers provided by the port companies in response to a short questionnaire circulated in late June 2013 following the publication of the proposed Regulation. As referred in National Ports Policy3, a number of studies completed since corporatization of the sector in the late 1990s have all referred positively to the competitive conditions in the sector. The Competition Authority is currently undertaking a market study of the sector and the conclusions of that study will inform future Government policy on competition in the sector. The views of the Authority will also be sought on the implications of the proposed Regulation. 4.2.2 The principal impacts would therefore appear to relate to changes in administrative practices in certain areas rather than structural changes to the market itself. These administrative changes include the requirement that Government nominate an independent supervisory body to monitor and enforce application of the proposed Regulation. There might also be an impact in the area of pilotage as this a service organized by ports on the basis of a statutory requirement imposed by Government. 4.2.3 The impact on the ports sector would appear to primarily relate to the obligation to establish port users’ advisory committees and associated obligations to consult annually with these committees on port charges. 4.2.4 The principal impact in an Irish context would be the introduction of port sector specific legislative and regulatory oversight of the provision of port services. Q7: Are there any unidentified impacts which require consideration? If so, please detail. 4.3 Costs 4.3.1 The designation of an independent supervisory body to monitor and supervise the application of the Regulation might give rise to some additional administrative cost at a Government level. 4.3.2 Relatively minor administrative costs might arise to port companies (and potentially port service providers and port users) from the formal establishment of a Port Users’ Advisory Committee. As an example, the Commission’s Impact Assessment quotes a 3 See section 2.3.1 of National Ports Policy 10 cost for administrative duties of €250 per day for authorities and €190 per day for private companies4. Based on the Commission’s assumptions as per time commitment there might therefore be an assumed cumulative cost in Ireland of approximately €33,000 per annum in respect of this measure. Of course, such committees are already established in two Irish ports – Shannon Foynes and Port of Waterford – and no additional costs would therefore arise, but the other ports do not currently have established committees and handle relations with port users on a more informal basis. 4.3.3 At this stage it is not expected that the rules regarding financial transparency will impact upon Irish ports, although there might be some implications for Rosslare Europort and how its financial performance is currently recorded within Iarnród Éireann. Q8: Are there any unidentified costs which require consideration? If so, please detail and if possible provide cost estimations. 4.4 Benefits 4.4.1 The tangible national level benefits from the introduction of the proposed Regulation would not appear to be very substantive. However, that it is primarily due to the fact that the Irish commercial ports sector already fulfills the principles that the proposed Regulation espouses and there would not therefore appear to be much national level ‘added-value’ to the proposals. 4.4.2 Port users may benefit from the requirement that all ports establish formal Port Users’ Advisory Committees and consult annually with the committee as regards the rates of port charges. Other stakeholders, such as cargo owners and land transport operators, may benefit from the requirement that port authorities regularly consult on certain matters relating to the port. 4.4.3 Another benefit from the proposed Regulation would be the legislative requirement that the current competitive conditions in the Irish marketplace exist as a basic principle into the future. Q9: Are there any unidentified benefits which require consideration? If so, please detail. SECTION 5: Consultation 5.1 This RIA has been drafted for consultative purposes in order to illustrate the Irish context to the current proposed EU Regulation and to inform Ireland’s negotiating position on the proposal. 5.2 At a European level, the proposed Regulation has been subject to extensive consultation and the Commission organised a number of EU wide consultations which 4 Annex IX of the Commission’s Impact Assessment 11 Irish bodies and organisations participated in and which informed the overall development of the Regulation. 5.3 Upon publication of the proposed Regulation the Department circulated a short questionnaire to the covered Irish ports in order to inform a preliminary assessment of the potential impact of the proposals. Furthermore the Department has been copied with the initial view of the Irish Ports Association as submitted to their European representative body, the European Sea Ports Organisation, and has received a formal position from the Board of Dublin Port Company. 5.4 This draft consultative RIA will be published on the Departmental website and specific notification circulated to the bodies below in order to allow interested stakeholders consider the proposed Regulation and the impacts in Ireland. Table 2 – Notification List Competition Authority ICTU Irish Maritime Development Office Port of Cork Company Irish Exporters Association Shannon Foynes Port Company Irish Ports Association Port of Waterford Company Irish Chamber of Shipping Rosslare Europort Irish Ship Agents’ Association Drogheda Port Company Irish Port Employers’ Association Dublin Port Company Association of Maritime Pilots of Ireland Dún Laoghaire Harbour Company Institute of Chartered Shipbrokers SECTION 6: Enforcement and Compliance 6.1 As referred in section 2.1.7, the proposed Regulation requires Member States to ensure an independent supervisory body to monitor and supervise the application of the Regulation. The body must be legally distinct and independent of any port authority or port service provider. Where Member States own or control port authorities then the Member State must ensure an ‘effective structural separation between the functions relating to the supervision and monitoring of this Regulation and the activities associated with that ownership or control.’ 6.2 The body will handle complaints lodged by any party in relation to the proposed Regulation. The Body shall have the right to require port authorities, port service providers and port users to submit information as required to ensure monitoring and supervision of the proposed Regulation. The decision of the Body shall have binding effects without prejudice to judicial review. Q10: Who in your view would be the most appropriate supervisory body for the purposes of the Regulation? SECTION 7: Review This RIA will be reviewed and updated as required throughout the consultative process. 12 SECTION 8: Publication As detailed in section 5 this RIA will be published on the Departmental website and publication notified to a number of specific bodies. Maritime Transport Division D/Transport, Tourism and Sport July 2013 13
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