Introduction

According to Section 11 of the Fairway Dues Act, the amount of fairway dues will be reduced if a ship is not fully loaded according to the particular loading capacity utilisation rate, which is calculated by comparing the combined total of cargo imported into and exported out of Finland.

According to the legislature, reducing fairway dues as a result of reduced loading capacity is based on established practice and is therefore necessary to include in the act. However, the established practice is not explained anywhere and Section 11 has therefore been subject to considerable interpretation. For example, there was some dispute over whether transit cargo (ie, cargo on a ship from outside Finland which is not unloaded in Finland) should be ignored or taken into consideration only once when calculating the loading capacity utilisation rate. This was clarified in 2014 when Section 11 stipulated that transit cargo is added to both imported and exported cargo. Section 11 now states as follows:

  • The fairway dues for a cargo ship are reduced by 75% if the ship's loading capacity utilisation rate is 15% or less, and by 50% if the loading capacity utilisation rate is more than 15% but not higher than 30%.
  • The loading capacity utilisation rate is calculated by comparing the figure showing the combined total of cargo imported to and exported from Finland, as indicated in metric tonnes, with a figure that is 90% of the ship's deadweight. When the ship's utilisation rate is calculated, the ship's cargo in transit is added to both the imported and exported cargo (1214/2014).

It has also unclear whether Section 11 applies if there is no cargo onboard at all. On October 25 2016 the Supreme Administrative Court rendered the precedent (KHO:2016:159) that a ship with no cargo onboard is entitled to the loading capacity reduction.

Facts

A company had chartered a barge in Finland to transport a cargo from Poland to Norway. Thus, the barge had no cargo when it sailed from Finland to Poland and when it sailed back from Norway to Finland. On July 18 2013, when the barge returned to Finland, Customs charged fairway dues without granting any reduction. On July 29 2013 Customs also denied the company's claim to a reduction as per Section 11 because the barge had not carried any cargo.

The company appealed to the Helsinki Administrative Court. The court overruled the Customs decision on October 7 2014 by stating that as the loading capacity reduction is intended to apply when a vessel's loading capacity is only partially in use, the loading capacity reduction can be granted also in this case.

Customs was granted leave to appeal to the Supreme Administrative Court. Customs claimed that empty vessels also use Finnish territorial water but do not meet the special requirements of Section 11 entitling the vessels to the loading capacity reduction. Customs stated that actually carrying cargo is essential to the charging basis. The company argued that it would be absurd if only partially loaded ships were entitled to a reduction, not ships carrying no cargo at all.

Decision

The Supreme Administrative Court decided by a 3-2 vote to agree with the Helsinki Administrative Court that the reduction would be granted where a ship returns from Finland without carrying any cargo. The court referred to the wording of Section 11, which states that the fairway dues for a cargo ship are reduced by 75% if the ship's loading capacity utilisation rate is 15% or less.

Two members of the Supreme Administrative Court would have accepted the Customs appeal, because applying Section 11 requires that a ship be partially loaded and thus the reduction cannot be granted when the ship carries no cargo.

Comment

The Supreme Administrative Court decision is sensible. However, speculation remains as to whether the most correct interpretation would have been that the Fairway Dues Act should not be applied to a cargo ship carrying no cargo for freight as, according to Section 1 of the act, "fairway dues are payable to the government for ships engaged in merchant shipping in Finnish territorial waters".

For further information on this topic please contact Matti Komonen at HPP Attorneys Ltd by telephone (+358 9 474 2207) or email (matti.komonen@hpplaw.fi). The HPP Attorneys Ltd website can be accessed at www.hpplaw.fi.

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