Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Annex 2

ACCESS TO PORT SERVICES BRIEFING PAPER

  1.  Hutchison Ports (UK) Limited ("HPUK") is a member of Hutchison Port Holdings Group ("HPH"). HPH is a subsidiary company of Hutchison Whampoa Limited based in Hong Kong. The HPUK group is the largest employer in the UK port industry and owns three ports in the United Kingdom—the Port of Felixstowe, Harwich International Port and Thamesport. HPUK is a member of the United Kingdom Major Ports Group (UKMPG), and through UKMPG, the European Sea Ports Organisation (ESPO) and the Federation of European Private Port Operators (FEPORT).

  2.  The proposed European Directive on Access to Port Services was published on 14 February 2001.

  3.  The salient points of the Directive can be summarised as follows:

    (i)  It covers the provision of pilotage, towage, mooring and cargo handling services.

    (ii)  Providers of services should have access to the market.

    (iii)  The highest number of service providers possible be allowed in each port, for cargo handling this should be at least two for each category of cargo.

    (iv)  The number of providers can only be limited due to lack of space or, in the case of mooring/pilotage/towage, for reasons of maritime traffic-related safety.

    (v)  Port users must be able to "self-handle".

    (vi)  Any service provider must have the right to employ personnel of his own choice.

    (vii)  Where the managing body of the port also wishes to be a service provider, a third party must be appointed to grant the authorisations.

    (viii)  Authorisations will be limited in time.

    (ix)  Transitional measures will apply to existing operations.

  4.  The Commission issued its Green Paper on Sea Ports and Maritime Infrastructure on 10 December 1997.[10] The European Parliament delivered a Resolution on the Commission's Green Paper on 13 January 1999.[11] The Parliament made it clear that it did not see the need for a legislative framework to ensure market access for port services.

  5.  HPUK fully supports fair and open competition but believes that the proposed Directive particularly as it relates to cargo handling, is ill conceived. The extension of the Directive to include cargo handling (it was originally intended to include only the technical-nautical services of pilotage, towage and mooring) was made after only a very perfunctory consultation and without, it would appear, a clear appreciation of either the industry or the consequences.

  6.  The European port industry is diverse and this diversity is recognised by the Commission as a strength.[12] The UK is unusual within the EU in that virtually all major ports are in private hands. It also has many more ports than in the majority of member states. The application of the Directive in a blanket way to all ports is contrary to the principle of equality and would indirectly discriminate against UK ports.


  7.  The Directive fails the proportionality test. The cost to shipping lines of handling a container in a UK port is circa $100 (£68). This compares with an average of approximately $134 (£91) in North Europe, $200 (£135) on the East Coast of North America, $260 (£176) on the West Coast of North American, and $360 (£243) in Japan.[13] Cargo handling charges in Europe are not consistent with a market to which access is denied. To the extent that there is any concern regarding competition within the industry then the European Treaty already contains provisions designed to deal with anti-competitive practices or abuse of dominant position.

  8.  There may be problems with port efficiency and access in certain member states but there has been only one such complaint in the UK, which on investigation proved to be unfounded. No case has been made for a Europe-wide Directive. The subsidiarity principle should apply.

  9.  Notwithstanding the fact, acknowledged by the European Parliament, that there is no need for a Directive, there are many shortcomings with it as drafted. This Paper does not provide a full critique but major problems include:

    (i)  The rationale for the Directive, and the implicit assumption that each port constitutes a distinct market, does not reflect the structure and competitive nature of the port industry, particularly in the UK, which is characterised by a large number of ports and the competition between ports rather than within ports.

    (ii)  The market for most cargo handling services (eg deep sea containers) usually covers a number of ports although for certain categories of cargo (eg dry bulk) in ports covering a very large area the market may be only part of the port.

    (iii)  It takes no account of the extended hinterlands of many ports. The definition of "port system" assumes each port serves only a single city or conurbation.

    (iv)  Owners of, and investors in, private ports have a reasonable and legitimate expectation as to the lasting nature of their property rights and the possibility of continuing to derive economic benefits from the exercise of those rights.

    (v)  The transitional arrangements will deny rights to operators of legitimately acquired terminals/ports. Operations acquired in accordance with accepted practices at the time should be exempt.

    (vi)  The European Commission states that it does not wish to harmonise port structures but the Directive imposes the "landlord" model on all substantial ports.

    (vii)  Relatively small ports handling a number of cargo categories would be obliged to appoint multiple cargo handling service providers.

  10.  If the Directive eventually becomes law in a format similar to the published proposal, there will be a number of very serious consequences to no obvious benefit:

    (i)  It will encourage greater use of poorly trained or casual staff and a consequential reduction in safety standards.

    (ii)  UK port operators have made huge investment in the facilities at their ports: if they were to be deprived of the use of these facilities they would look to the Government/Commission for substantial compensation.

    (iii)  The Proposal will jeopardise investment in much needed new facilities in the UK. Restrictions on concession length and size could make future investment unattractive.

    (iv)  The requirement for "the highest number of service providers possible" removes the benefits of economies of scale and will result in less efficient operations with higher operating costs and port prices thus discouraging short sea shipping.

    (v)  Contrary to UK Government policy the loss of economies of scale will also result in less efficient use being made of existing infrastructure with consequential negative environmental implications through the need to expand existing facilities to compensate.

    (vi)  It will impose an unnecessary and onerous regulatory burden upon an efficient and otherwise liberalised industry.

  11.  A number of meetings have been held with politicians and officials in the UK and with the European Commission at which the concerns of the UK industry have been raised. These include the following:

    21 March 2001—John Prescott, Deputy Prime Minister (joint meeting with T&GWU)

    8 January 2001—DETR Ports Division (UKMPG)

    17 October 2001—Loyola de Palacio/Wolfgang Elsner DG TREN (UKMPG)

    2 October 2000—John Prescott, Deputy Prime Minister (briefed in Harwich by HPUK on the occasion of the Stena Britannica naming ceremony)

    15 September 2000—Wolfgang Elsner DG TREN (UKMPG)

    1 August 2000—Keith Hill MP, Minister, DETR (UKMPG)

  In addition ESPO and FEPORT have both been in regular contact, and held meetings, with the European Commission.

  12.  The Directive seeks to increase choice and efficiency in European ports. In reality it will have the opposite effect by discouraging investment in new facilities and removing vital economies of scale from existing port operators.


10   COM 97/678. Back

11   OJ C 104 14/04/1999. Back

12   Commission press release IP/01/203 14 February 2001. Back

13   Source: Federation of European Private Port Operators (Feport)/Ocean Shipping Consultants. Back


 
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