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Appendix K Portugal Case Study

K1. Ferry Legislation and Licensing

Domestic Ferry Services

K1.1 The only national passenger ferry services operated in Portugal are in the Azores and Madeira. In Madeira, the services link the two main ports of Funchal and Porto Santo. The following table shows the number of passengers in the ports of Madeira in 2002 and 2003, while Table K2 shows the number of ships entering the ports of Madeira, classified by type of ship, in 2002 and 2003.

Table K1 Passenger Ferry Transport In Madeira

Table K2 Number Of Ships Entering Ports Of Madeira

K1.2 In the Azores, passenger transport is operated by Açorline linking the five main islands amongst themselves (but not with the continent), operating only in summer.

K1.3 As far as freight is concerned, which is by far the most representative form of ferry transport in Portugal, ferry transport is available between the continent and the islands, as well as to other countries.

Regulator

K1.4 The CNPTM (Conselho Nacional dos Portos e dos Transportes Maritimos), National Council for Ports and Sea Transport, is part of the Ministry for Public Works, Transport and Communications. Other relevant ( e.g. water transport) organisations linked to the ministry include:

• Aveiro Port Administration
• Lisboa Port Administration
• Sines Port Administration
• Setúbal Port Administration
• Douro and Leixões Port Administration
• Commission for Emergency Planning on Sea Transport
• Port and Sea Transport Institute
• Tejo River Transport Company

Operators

K1.5 The Madeira Express is the provider of weekly container services between mainland Portugal and Madeira Island, on the following schedule:

K1.6 The Açores Expresso provides weekly container services between mainland Portugal and the Azores Islands.

K1.7 The Inter Regiões offers a fortnightly container service between the Azores and Madeira Islands.

K1.8 The África Express runs the following international services: International Madeira, International Açores and África Spot.

K1.9 Transinsular offers the following services (combining Africa Expresso and other European short-sea operations):

• North of Europe/Portugal/Canárias/Cape Verde/Banjul/Guinea-Bissau
• North of Europe/Funchal
• North of Europe/Açores
• Mediterranean/Cape Verde/Banjul/Guinea-Bissau

K1.10 The Auto Expresso runs the weekly Açores/Madeira car service, departing every Friday and arriving in Funchal (Madeira) and Ponta Delgada (Azores) on the following Monday.

Transinsular
K1.11 Following the closure of the former public companies CTM (Companhia de Transportes Maritimos) and CNN (Companhia Nacional de Navegação), the Portuguese Government set up (by Decree Law 336/84 on the 18 ^th October 1984) Transinsular in the 1980s. Transinsular provided regular services on the domestic market of Azores and Madeira, and held an important share of the shipping market between Portugal and Azores/Madeira.

K1.12 In 1986 Transinsular had already secured an important share of the shipping market between Portugal and its Autonomous Regions of Azores and Madeira, and succeeded also in establishing several mid term contracts with bulk shippers to the islands.

K1.13 On the 6 ^th of July 1987, through a Public Sales Offer, the State sold 30% of its share of the capital stock. During the second quarter of 1988, two new lines to Africa, originating in the Mediterranean and Northern Europe, with destinations to Guinea-Bissau and Cape Verde, were established. In September of the same year, the short-sea trade between Portugal and North Europe also began.

K1.14 In 1988 Transinsular made several investments in various companies: Operlis (port operations - Lisbon), OPM (port operations - Funchal), OPDL (port operations - Ponta Delgada), T&M (maritime agents - Lisbon) and TMI (maritime freight forwarders - Lisbon).

K1.15 On the 6 ^th August 1990, a Public Offer took place where 99.28% of the shares of Transinsular passed to private hands, with TIGEST owning more than 75% of the company. Following the change of shareholders, the company underwent major changes with the aim of achieving a competitive structure. These changes led to the constitution in 1992 of S&C-Ship management and Crewing in order to improve the fleet's performance.

K1.16 During the last quarter of 1991, Transinsular reshuffled its Africa Expresso line, linking the North Continent and Portugal to Mauritania, Guinea-Bissau and Cape Verde. The capacity was increased with a second container vessel.

K1.17 As a result of Transinsular's Medium Term Investment plan approved in 1993, the company received two new building container vessels, in 1994 and 1995, and in 1996 a second-hand vessel to be converted into a cement carrier. Transinsular also holds shares of a small group of 10 associated companies, among them some in Cape Verde, Guinea-Bissau and Mozambique.

K1.18 On April 1999 the Group ETE (Empresa de Tráfego e Estiva) took control over the company by buying the majority of shares (99.6%). This operation marked the end of the negotiations with the former share holder, CMB - Compagnie Maritime Belge N.V, who had owned Transinsular since 1993.

K1.19 Transinsular, the biggest Portuguese shipping company on the liner market, with a fleet of 8 vessels and a total sales of 15 billion escudos, is again part of a Portuguese Group.

Legislation

K1.20 The Portuguese legislation on sea cabotage (which includes ferry services) is the Decree Law No 194/98 of 10 ^th July 1998, amended by Decree Law No 331/99 of 20 ^th August 1999.

K1.21 The current legislation on cabotage is found in Decree Law 368/93 (28 ^th October), which applies the principle of a gradual liberalisation in ferry service provision and sea transport in general, in the EU member states. It states different regimes for continental cabotage and insular cabotage, allowing the latter the possibility of being declared of public interest. This piece of legislation needed to be updated to allow service providers from other member states to enter the national market, which was undertaken by Law 194/98 and took effect in 1999.

K1.22 The International Registry of Madeira Ships ( MAR) was created by Decree Law 96/89 (28 ^th March), but the ships registered were not allowed to transport passengers and freight between national ports. Decree Law 31/97 (28 ^th January) allowed these ships to undertake the continental transport of freight and passengers (between ports on the continent), but not between ports on the continent and the islands.

K1.23 The progressive liberalisation of the sector has promoted free sea transport service provision amongst the EU member states. Decree law 331/99 opens free access for ships registered with MAR (passengers and freight) to national (continental and insular) as well as European cabotage, provided:

• The companies or entities are nationals of an EU member state, established in a member state and complying with the legislation applicable to that state, and are dedicated to shipping activities; and
• The companies or entities from outside the EU are controlled by EU companies, and the ships are registered in a member state and comply with the relevant legislation.

K1.24 The Technical Commission of MAR must keep the IMP informed about the ships registered and allowed to undertake national cabotage services, as well as the beginning and end of the service provision period.

Vessel Safety

K1.25 In general terms, the country which carries the ship flag (where the ship is registered) determines and monitors safety. In Portugal, the Instituto Maritimo-Portuario ( IMP, the Maritime Port institute) is responsible for inspecting national cabotage ships registered with MAR:

• At the beginning of the national operations, to ensure that minimum requirements are met for certification purposes; and
• In terms of vessel safety, according to the terms of the law and applicable international conventions, whenever appropriate during the operation period.

K1.26 The minimum number of crew members to secure vessel safety is determined by Resolution A481 ( XVII) from IMO.

Licensing

K1.27 There are basic conditions that need to be met in order for an operator to operate ferry services in Portugal. There is no contract between the public offices (state) and the prospective operators (only between operators and exporters). All ferry (freight - containers) services between the continent and Azores and Madeira are fully liberalised, operating on a commercial basis and without Government subsidies. Operators need to ask authorisation to run specific service routes, and are required to:

• Determine the frequency (and regularity/continuity) of the services on offer, with the minimum of weekly services for continental transport. For Azores services, the itinerary must include a fortnightly stop at at least five different islands. Operators could also be obliged to undertake a monthly stop at all islands, or provide intra-island services, if it is found that the islands are not regularly and sufficiently supplied;
• Demonstrate that they are able to run the services;
• Run services and itineraries with the scheduled regularity, for at least one year (minimum concession period);
• Charge the same pre-defined freight costs between the continent and each of the islands (for Madeira and Azores);
• Comply with EU legislation; and
• Utilise exclusively crew formed by Portuguese nationals or from a European member state (provided the captain or second in charge has a reasonable domain of the Portuguese language).

K1.28 Crew members must have suitable training and certification as determined by Convention STCW 1978, as amended in 1995 and in Directive 98/35/ EC (25th May). They must benefit from the appropriate labour conditions, including a minimum wage.

K1.29 The authorisation can be withdrawn if services are suspended for over 15 days, for reasons attributed to the operator. Fines are applicable to different types of offences.

K1.30 The regional governments ( i.e. the Regional Government of Azores and the Regional Government of Madeira), through the local Regional Transport Secretariat, award licenses to local insular ferry services. They are autonomous to take their own decisions related to concession of contracts. The National Port Authority is not sure whether there are contracts between the regional governments and operators, but in any event these local passenger services correspond to a very small percentage of the ferry services in Portugal.

K1.31 Both national and EU ships are allowed to provide cabotage (both continental and insular, and freight as well as passengers) services in Portugal. If they do not comply with the requirements (as described above), they need a special authorisation from the general-director of the National Council for Ports and Sea Transport.

K1.32 If operators wish to modify their services ( e.g. change frequency or route), they are free to do so, as long as they continue to comply with minimum frequencies, as stated in Article 6 ^th. They need, in any event, to communicate any alterations they intend to undertake.

K2. Lifeline Services

Definition of lifeline services/ PSO

K2.1 Public Service Obligations ( PSOs) apply to freight routes between the mainland and Madeira and Azores. The obligations are on cargo only (since these services are freight only), and are tendered on the basis of an authorisation system (as described above). In fact, the rules in Article 6 ^th applicable to general freight and container traffic have been understood as actual PSOs, although they do not result in any contract with operators. Any operator can operate on the PSO routes as long as minimum conditions are met.

K2.2 The insular passenger transport services (in Azores and Madeira) have also been declared as "public services". As such, they might be subject to a contract between operators and the regional governments to regulate the frequency and regularity of services in the islands, in order to ensure supplies.

K2.3 There are limited PSO routes and they are not very competitive.

Market Structure

K2.4 There are basic rules. The market is liberalised and operators are free to ask for permission to run services (as long as they comply with the basic rules). There are only 5 service operators and there is no competition as the market is not profitable and operators have avoided entering markets already filled.

K3. PSO/ PSC Services: How Are They Operated

K3.1 Commercial services, similar to current services, had been in operation since before the PSO protection was introduced.

K3.2 The minimum requirements of the PSO are set by the National Council for Ports and Sea Transport.

K3.3 Regular operators are obliged to inform the position of their vessels relative to the itinerary, according to article 10 ^th of the law. If there is failure to meet service levels, the operator will be penalised, according to articles 15 ^th, 16 ^th and subsequent.

K3.4 Price restrictions apply to the services. The freight costs should be the same for all islands as a measure of social inclusion.

K3.5 The following table summarises the freight vehicles operated by Transinsular (the biggest Portuguese shipping company).

Table K3 Transinsular Freight Vessels

K4. PSO/ PSC Services: Financial/ Commercial Support

K4.1 There is no financial support to the operators by the government. Services are run purely on a commercial basis, with no subsidies.

K4.2 Vessels registered with MAR cannot benefit from any financial support which is exclusively reserved to the remainder of the national fleet. Portuguese ships which have received investment incentives cannot transfer their registration to MAR, before satisfying the commitments with the Portuguese government.

K4.3 Though completely liberalised, PSO routes are not very competitive. Services on PSO routes do not overlap. Each operator runs a specific route.

K4.4 Port services are provided to vessels stopping at ports on a commercial basis, and in accordance with the regulations of each port.

K5. PSO Services: The Contract and Tendering Process

K5.1 There is no contract covering PSO services in Portugal. As such, no tendering procedure is required.

K5.2 There is no appropriate information to support the analyses of risks involved in ferry operations in Portugal.

K6. EU Maritime Cabotage Rules

K6.1 The current Portuguese maritime legislation was introduced in 1998, following a previous piece of legislation, which was adapted in the context of the liberalisation of the sea cabotage sector. The principle of liberalisation was established in article 6th of regulation 3577/92.

K6.2 An infringement procedure was started against Portuguese decree-law No 194/98 of 10 July 1998 on maritime cabotage. On 26 July 2001, the Commission sent a reasoned opinion to the Portuguese authorities inviting them to amend the text to bring it into line with Council Regulation ( EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within member states (maritime cabotage).

K6.3 However, as the Portuguese authorities have committed themselves to revising the text in question, the Commission has not as yet decided to submit the matter to the Court of Justice.

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