Seaports have to be cautious that any support which they obtain from a European Union Member State does not constitute State aid.
Equally, executives of shipping companies need to ensure that deals which they conclude with ports do not involve State aid. Otherwise, the beneficiaries will have to repay the aid to the Member State in question with interest.
Some State aid provided by ports is lawful and causes no difficulty (although it may require approval by the European Commission) but other assistance could be illegal State aid. The challenge facing ports and shipping companies is to distinguish, with the benefit of specialist State aid law advice, between lawful and unlawful State aid.
The Port of Antwerp is managed by the Antwerp Port Authority (a public authority). It is fully-owned by the city of Antwerp. The Authority makes land available to companies to operate in the port area on the basis of concession agreements.
On 15 January 2016, the European Commission announced that it has opened an in-depth State aid investigation into the retroactive variation of concession agreements between terminal operators PSA Antwerp and Antwerp Gateway and the Antwerp Port Authority.
In 2004, the Antwerp Port Authority concluded with PSA Antwerp NV and Antwerp Gateway NV concession contracts for the provision of services related to the transhipment of containers in the Port of Antwerp. The concession contracts were concluded for a period of 42 years, i.e. until 2046. The Commission stated that Antwerp Port Authority is a public authority and therefore the reduction in compensation that it granted to PSA Antwerp NV and Antwerp Gateway NV is a public intervention.
The European Commission has announced that it intends to investigate whether the Antwerp Port Authority provided unauthorised State aid to the operators by revising down minimum tonnage requirements to reduce contractual penalties due from the two parties.
The heart of the case was described by the European Commission in the following two paragraphs of its press release:
“The concession agreements for PSA Antwerp NV and Antwerp Gateway NV (i.e., two container terminal operators in the Port of Antwerp) contained a requirement that a minimum amount of containers must be handled in the port every year (i.e., minimum tonnage requirements). Between 2009 and 2012, PSA Antwerp NV and Antwerp Gateway NV did not reach these minimum tonnage requirements. Under the agreements, they were obliged to pay compensation to the Authority. However, instead of collecting the compensation due from the two companies, in March 2013, the Antwerp Port Authority retroactively revised the minimum tonnage requirements downwards. This significantly reduced the amount of compensation to be paid by PSA Antwerp and Antwerp Gateway (by around 80%).
Under EU State aid rules, public interventions in favour of companies can be considered free of State aid when they are made on terms that a private operator would have accepted under market conditions (the market economy investor principle - MEIP). If this principle is not respected, the public interventions involve State aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union, because they confer an economic advantage on the beneficiary that its competitors do not have.”
Interestingly, there were complaints from a competitor, the Commission has opened an in-depth investigation to examine whether a private investor would have accepted the reduction in its compensation in a similar manner, such that no State aid issue arises. However, if the Commission finds that the Antwerp Port Authority has not acted on market terms, the Commission will then investigate whether the variation of the agreements was compatible with the State aid rules.
It is too early to say how the case will unfold but, in the interim, it is important for executives of ports and shipping companies to be cautious not only about agreements but also changes to those plans because retrospective changes can cause State aid law issues.
The Commission’s announcement is available on the European Commission's website.