EU Archives

Port notice 8/20 – Sulpher Content in Marine Fuels

May 28, 2020 Leave a Comment

The Ports and Yachting Directorate issued Port Notice Number 08/20 of 2020 entitled ‘Sulphur Content in Marine Fuels’, whereby attention was drawn to the provisions of the Quality of Fuels Regulations (S.L. 545.18). These regulations transposed the requirements of various EU directives regulating the quality of marine fuels that must be abided by all ships when calling in Maltese Ports and when traversing within Maltese internal and territorial waters.

The Port notice laid out a number of exemptions to the maximum sulphur (SOx) content to be used in marine fuels, noting that, amongst others, these limits were not applicable to fuels used by: war ships, ships in the process of securing the safety of a ship or saving lives at sea, ships that have been damaged where the owners or master have not acted with intent or recklessly, ships at berth for less than two hours using shore side electricity or ships using approved emission abatement methods. Exempted ships are to notify the Authority and REWS before entering Maltese territorial waters.

By means of the Port Notice, the Authority and REWS also notify its recipients that the trials of ship emission abatement methods may be approved. During these trials the use of marine fuels meeting the maximum SOx content shall not be mandatory subject to a number of conditions, including notifying the European Commission, the Authority and REWS in writing 6 months before the trial begins, having a maximum trial period of 18 months, having a proper waste management systems in place and conducting continuous environmental impact assessments in enclosed ports and harbours . Non-compliance with the conditions can result in enforcement action being taken against the vessel, including detention until such time as any non-compliance has been rectified or resolved.

The full port notice can accessed by clicking here.

by Dr Martina Farrugia, Fenech & Fenech Advocates

Source: Lexology

Future of ship recycling in the European Union

December 4, 2018 Leave a Comment

The EU Regulation on Ship Recycling (1257/2013) – which, with respect to new vessels, will enter into full effect on 31 December 2018 – obliges EU-flagged vessels to conduct dismantling operations in European Commission-approved ship-recycling facilities in accordance with:

the Ship-Specific Ship-Recycling Plan (SSSRP); and
the Inventory of Hazardous Materials.

Before any recycling of the ship, the SSSRP is set to be developed by the operator of the ship-recycling facility in accordance with the provisions of the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships 2009.

Ship owners must furnish all ship-relevant information necessary for the development of the SSSRP, including the Inventory of Hazardous Materials which identifies harmful materials contained in the structure or equipment of the ship, their location and approximate quantities. Each new ship must have such inventory onboard to comply with all relevant International Maritime Organisation Guidelines and provide evidence that the ship complies with the restrictions or prohibitions of hazardous materials.

Surveys
Pursuant to the EU Regulation on Ship Recycling, ships will be subject to several surveys undertaken by a recognised organisation and conducted as follows:

initial survey;
renewal survey;
additional survey; and
final survey.

An inventory certificate (supplemented by the Inventory of Hazardous Materials) will be issued following the successful completion of either the initial or renewal survey. The initial survey of a new ship will be conducted before the ship is put into service, while for existing ships the initial survey will be conducted by 31 December 2020. The surveys will verify that the ship-recycling plan and Inventory of Hazardous Materials complies with the regulation.

When a ship is to be taken out of service or recycled, a final survey will be conducted. Following the successful completion of the final survey, a ready-forrecycling certificate will be issued by the appointed recognised organisation. The certificate will be supplemented by the Inventory of Hazardous Materials and the SSSRP.

If the particulars and condition of the ship are not adequately reflected in the inventory certificate, the operator of the ship-recycling facility may decline to accept the ship for recycling. Further, owners of end-of-life ships destined for recycling are required to minimise the amount of cargo and shipg-enerated waste remaining onboard.

Ships flying third-country flags
The regulation also provides for ships flying the flag of a third country calling at a port or anchorage of a member state. It requires such ships to have onboard an Inventory of Hazardous Materials in compliance with the regulation in the same manner as a member state-flagged ship. Following arrival in a member state, a statement of compliance together with the inventory is to be submitted to the authorities on request and may be detained, dismissed or excluded from ports in the event that it fails to submit the same on request by port authorities.

Comment
Pursuant to the above measures, the regulation aims to mitigate and eventually eliminate the adverse effects of operating, maintaining and recycling EU-flagged ships on human health and the environment.

by Lara Saguna Axiaq and Peter Grima, members of the MMLA and maritime lawyers within the Ship Registration & Finance Department of Fenech & Fenech Advocates

Source: ILO

Is State aid essential to the shipping industry?

September 4, 2018 Leave a Comment

The recent long-awaited European Commission decision on the Maltese Tonnage Tax System has been welcomed by the shipping community, both locally as well as from other member states.

The European Commission rightly concluded that Malta was not abusing the European State Aid guidelines for shipping in an attempt to grow its registered fleet and hence was satisfied that Malta was not taking an unjust competitive advantage with respect to the other member states.

Furthermore, the Maltese Tonnage Tax System was endorsed by the Commission for a period of 10 years – this will create certainty and stability for owners intending to use the flag, giving them the confidence to properly plan ahead.

This article is not intended to be an analysis of Tonnage Tax Rules or how Malta has transposed them into its system. Rather, it addresses a question that has been posed to me a number of times by both colleagues and friends who are not versed in maritime law: Why should the shipping industry be afforded special tax treatment on the income it generates? And why is shipping treated differently than most other industries?

In a nutshell, State aid is granted to the shipping industry in the form of fiscal incentives that are offered to eligible owners and operators of vessels flying the flag of a European member state or operating from an EU jurisdiction. The scope behind this benefit is to attract owners to register, operate and manage their vessels within the European Union and also has the objective of increasing the tonnage registered in the EU.

In 1989, the European Commission published its first set of guidelines on the use of State aid for shipping. The primary objective of this was to create guidance and standard adherence by member states to the rules. The guidelines were also introduced on account of the fact that many owners were flagging out of the EU to jurisdictions which at the time were offering more attractive fiscal incentives and friendly environments to operate from. This legal development did not prove to be successful and there was an ever-growing trend of ship owners who opted for non-EU flags to register their vessels in, as well as non-EU jurisdictions to operate from. This led to the 1997 Communication defining new guidelines on state aid to maritime transport, followed by the 2004 commission communication which was issued, in part, to cater for further ship registries, including the Malta ship registry, which through the accession of such States in the union, were going to increase European tonnage considerably.

These two communications proved to be helpful for those member states wishing to attract shipping to their jurisdiction and were successful in enabling European member states to attract tonnage back to Europe. Historically, Greece was the first to adopt its tonnage tax rules, and others such as the Netherlands, Denmark, France and Spain followed suit.

Managing to attract and keep ship owners within the EU is important for a number of reasons, including that EU standards can be imposed on ships registered in European member states – this ensures, among other things, safer and cleaner seas and better conditions applicable to the seafarers’ rights, giving added value to the owners or operators of vessels, which are seen to confirm and adhere to the best maritime standards. Moreover, more leverage is acquired by member states with substantial tonnage to influence non-EU international players, encouraging them to adopt international conventions putting higher standards into practice. Also, as a consequence, ship management activities could employ a number of skilled and well-paid workers, ensuring the industry generates a substantial amount of income.

Non-EU jurisdictions have proved to be quite successful in attracting tonnage to their shores

Shipping is not like any other industry. Ships and their owners have, to a large degree, no real necessity to operate or flag their vessels in a particular jurisdiction. There are a number of non-EU registries having white list status, meaning that they are flags that enjoy a good reputation. Historically, these non-EU jurisdictions have proved to be quite successful in attracting tonnage to their shores and thus negatively impacting European fleet numbers.

The European Union has recognised this phenomenon and has, through the adaptation of the guidelines and its recent fine-tuning as to how such guidelines should be implemented by EU states, created much needed clarity within the industry. Issues of transparency and checks and balances have also strengthened the system and are intended to reduce any potential abuse.

In principle, aid should be given for income that is generated from pure shipping activities as defined in the guidelines and should not be afforded without some level of scrutiny. In order for the scheme to be effective, each member state adopting it must ensure that abuses are minimised and that the objectives of growth are being achieved.

The European Commission needs to monitor the behaviour of each member state offering this assistance to their shipping industry in order to ensure that there is a level playing field between EU countries and that no member state is gaining unjust competitive advantage on others. It does, however, also need to sensitise itself to the competition that its own member states are facing from third countries. In this respect, one cannot but criticise the undue delay by the Commission in providing its decision on the Maltese tonnage tax rules – a staggering five years.

The European Union and the so-called European Fleet need to be able to compete and attract more owners to their shores. This is critical not only from an economic perspective, but also because a larger fleet can exert more leverage and influence on the manner in which this industry is regulated. This, in turn, will benefit the maritime environment generally. Higher environmental standards, better working conditions and safer vessels are the bi-product of attracting more tonnage towards European shores. Ship owners who have not experienced the EU flag for a while, need to be re-introduced accordingly and understand the many benefits of operating within a European member state or flying the flag of such member state.

The ability of member states to offer State aid to the shipping industry needs to be regarded as an essential tool afforded to it by the European Union which should be exploited and utilised in order to achieve the goals and aspirations set out by the Commission. It is imperative that member states, including Malta, which boasts of being the largest register in Europe, work towards a common objective – the continued growth and influence of the European fleet and the European shipping industry.

by Matthew Attard, Vice-President of the Malta Maritime Law Association and maritime lawyer within the shipping practice at Ganado Advocates.

Souce: Times of Malta

Malta Yachting Industry challenges Notice by EU Commissioner

March 20, 2018 Leave a Comment

The Malta Maritime Law Association, the Malta Maritime Forum, the Yachting Services Trade Section within the Malta Chamber of Commerce, Enterprise and Industry, the Institute of Financial Services Practitioners and the Super Yacht Industry Network Malta denounce the recent Notice sent to Malta by the EU Commissioner in connection with the Maltese VAT rules for pleasure yachts.

In light of the fact that the Maltese system is fully in line with EU law and no similar notice was sent to Member States which apply the same principle under the EU’s VAT Directive the Maltese yachting industry questions why such a notice has been sent at all and why this discriminatory approach is being adopted by the Commissioner.

It is noted that the manner in which Malta has applied the option granted by Article 59a of the European Union’s VAT Directive is exactly the same as that adopted by Italy. Indeed, Malta’s rules on effective use and enjoyment of pleasure yachts within and outside EU territorial waters mirror those adopted by Italy through Circular No 49 of 7 June, 2002 issued by the Agenzia delle Entrate (Italian Revenue authorities).

The actual percentages of deemed use of yachts within EU territorial waters adopted by Malta are identical to those which Italy had drafted in the said Circular. Malta has certainly not re-invented the wheel, but has rather based itself on a similar interpretation given by Italy which the Italian tax authorities confirmed most recently in October 2010 through a “Vademecum del Leasing Nautico” issued with the collaboration of the Italian tax authorities.

Furthermore it is highlighted that France has been recognising since 2005 that it is difficult for lessors of yachts to establish how much a leased yacht is used within EU waters. Article 13 of the Administrative Instruction 3 A-1-05 published by the French tax authorities in Bulletin Officiel des Imports on 24 January, 2005 recognises such difficulty, and then allows yacht lessors to apply a 50% reduction on the total lease amount, irrespective of the category of the yacht. In practice, this means that only 50% of French VAT would be payable as a result of this French rule.

Malta’s system does not exempt yachts from payment of VAT but rather provides guidelines (as allowed for by the EU Directive) regarding deemed use outside and within EU territorial waters such that yachts using such guidelines will always pay VAT at varying degrees.

We believe that both the Italian and French systems do not infringe the EU vat laws. Therefore we cannot understand why Malta’s system should be singled out.

We appeal to the President of the European Commission, Mr Jean Claude Juncker, to intervene in this matter so as to ensure that there is no discrimination against smaller EU States like Malta.

It is also the belief of the local Yachting Industry that it is in the European Union’s collective interest that the Commission protects the European yachting sector in line with the EU’s Integrated Maritime Policy thereby ensuring that Europe does not lose out to competition in the maritime sector by non-EU countries.

Finally, we appeal to all political parties and stakeholders in Malta in a situation where the Maltese system reflects a legitimate application of a principle of EU law which is supported by other EU Member States, to act as a united front in protecting Malta’s yachting industry.

European Commission approves the Maltese tonnage tax system

December 19, 2017 Leave a Comment

The European Commission has conditionally approved under EU State aid rules the Maltese tonnage tax scheme for a period of 10 years. The scheme will ensure a level playing field between Maltese and other European shipping companies, and will encourage ship registration in Europe.

Commissioner Margrethe Vestager, in charge of competition policy, said “Tonnage tax systems are meant to promote the competitiveness of the EU shipping industry in a global market without unduly distorting competition. I am pleased that Malta committed to adapt its tonnage tax system to achieve this. Moreover, by encouraging the registration of ships in the EU, the scheme will enable the European shipping industry to keep up its high social and environmental standards”.

In 2012, the European Commission opened an in-depth investigation into the Maltese tonnage tax scheme to examine its compatibility with EU State aid rules. With today’s decision, the Commission endorses the Maltese scheme, subject to the amendments introduced by Malta.

The Commission’s in-depth investigation found certain features of the original scheme, such as tax exemptions applied to Maltese residents and the broad scope of the scheme extending to vessels not carrying out maritime transport activities, to be in breach of EU State aid rules.

As a result, Malta has committed to introduce a number of changes to its scheme to prevent any discrimination between shipping companies and to avoid undue competition distortions. In particular, Malta agreed to restrict the scope of the scheme to maritime transport and to remove those tax exemptions for shareholders which constitute State aid.

Under the Maltese scheme, a shipping company is taxed on the basis of ship net tonnage (i.e. based on its volume) rather than the actual profits of the company. In particular, tonnage taxation is applied to a shipping company’s:

core revenues from shipping activities, such as cargo and passenger transport; 
certain ancillary revenues that are closely connected to shipping activities (which are, however, capped at a maximum of 50% of a ship’s operating revenues); and 
revenues from towage and dredging subject to certain conditions.

If a shipping company wants to benefit from the scheme, a significant part of its fleet must fly the flag of an European Economic Area (EEA) Member State. In addition, any new entrant to the scheme must have at least 25% of its fleet subject to tonnage tax with an EEA flag.

The Commission assessed the amended measures under EU State aid rules, in particular its Guidelines on State aid to maritime transport. It concluded that the amended Maltese scheme is in line with EU State aid rules, as the tax relief granted is an appropriate instrument to address global competition and will provide the right incentives to maintain maritime jobs within the EU, whilst preserving competition within the EU Single Market.

Background
To address the risk of flagging out and relocating of shipping companies to low-tax countries outside of the EU, the Commission’s 2004 Guidelines on State aid to maritime transport allow Member States to adopt measures that improve the fiscal climate for shipping companies. One of the most important measures is tonnage tax, whereby shipping companies can apply to be taxed based on a notional profit or the tonnage they operate, instead of being taxed under the normal corporate tax system. Only companies that are active in maritime transport are eligible for such measures under the Maritime Guidelines. Shareholders in shipping companies are excluded from preferential tax treatment.

Since 2004, the Commission’s decision-making practice under the Maritime Guidelines has further clarified the eligible transport activities and compatibility conditions to ensure that the main objectives of the Maritime Guidelines are met. The Commission has to ensure that there are no spill-over of the favourable tax treatment of shipping companies into other sectors unrelated to maritime transport and there is no discrimination of other EEA State registries and flags.

The non-confidential version of the decision will be made available under the case number SA.33829 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News

Source: European Commission

Member of the Comité Maritime International

Port notice 8/20 – Sulpher Content in Marine Fuels

Future of ship recycling in the European Union

Is State aid essential to the shipping industry?

Malta Yachting Industry challenges Notice by EU Commissioner

European Commission approves the Maltese tonnage tax system

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