European Commission investigates alleged aid to container terminal operators

The investigation concerns the reduction of minimum tonnage obligations in the commercial agreements between the Antwerp Port Authority and two container operators in the Port.

The investigation is of importance to Trust Ports, local authority-owned ports and to privately owned ports that compete with the Port of Antwerp, the biggest petro-chemical cluster in Europe.

What has happened?

The European Commission has started an in-depth inquiry into whether reductions in the payments made by the terminal operators to the Port of Antwerp amounted to the grant of unlawful State aid to the terminal operators. The payment had to be made when the terminal operators failed to handle the minimum amount of containers in the Port in a year.

The investigation arises from a complaint made by a competitor of the terminal operators. The European Commission will decide whether a private sector port operator would have reduced the amount of the compensation paid by the terminal operators in similar circumstances.

If the reduction in the amount of compensation is not one that any Port would make in similar circumstances, it could amount to the grant of unlawful State aid and the European Commission will then consider whether the grant of the State aid can be authorised. If the aid is not authorised, the Commission will order that the grant of aid ceases and that the unlawful aid is repaid.

What is the background to this?

The Port of Antwerp is managed by the Antwerp Port Authority and owned by the City of Antwerp.

In 2004, the Port Authority concluded concession contracts with PSA Antwerp NV and Antwerp Gateway NV, container terminal operators. The concession contracts permit the container terminal operators to use Deurganck dock in the Port, for the trans-shipment of containers until 2046.

Between 2009 and 2012, PSA Antwerp NV and Antwerp Gateway NV did not handle the agreed minimum amount of containers in the Port. The concession agreements provide that when the terminal operators fail to handle the minimum amount of containers in Deurganck dock, they will make payments to the Port Authority to compensate the Port Authority for the loss of revenue resulting from the reduction in the amount of containers handled in the Port.

However, the Port Authority did not collect the payments due from the companies from 2009 to 2012. In March 2013 the Port Authority retroactively reduced the minimum amount of containers that PSA Antwerp NV and Antwerp Gateway NV were required to handle in the Port. The reduction in the amount of containers to be handled reduced by approximately 80% the compensation to be paid to the Port Authority by the container terminal operators.

What might happen next?

Interested third parties, including competitors of PSA Antwerp NV and Antwerp Gateway NV, will submit to the European Commission comments on the arrangements between the Port Authority and the terminal operators.

While the European Commission carries out its investigation it may order interim measures. These measures may include the suspension of the retroactive reduction in the minimum amount of containers to be handled by the container terminal operators.

The Commission will determine whether the retroactive reduction in compensation payments amounts to the grant of unlawful State aid and may order the cessation of the grant of State aid and the recovery of the aid already granted to the terminal operators.

What does this mean for me?

In the UK, Trust Ports have been in receipt of government grants and local authority-owned ports are operated and maintained through the use of State resources.

Both Trust Ports and local authority-owned ports have been the subject of proposals for privatisation. If Trust Ports and local authority ports are to be operated in an increasingly liberalised port industry, they must ensure that they do not inadvertently grant unlawful State aid to their commercial partners.

As is apparent from the Port of Antwerp case, ports may for apparently good commercial reasons (such as assisting their commercial partners in a recession) alter their contractual arrangements for the benefit of a commercial partner and, indirectly, for the benefit of the port.

However, if State resources are deployed anywhere in the operation of the Port, Trust Ports and local authority-owned ports must consider whether any change in commercial arrangements at the port will amount to the inadvertent grant of unlawful State aid to any of the port’s commercial partners.

The matter is of particular importance in a recession when a port is concerned to maintain the commercial operations at the port and when any favouring of one undertaking by a port is more likely to lead to complaint by a disadvantaged competitor that they are facing unfair competition.

How can Ward Hadaway help?

A simple audit of a port’s operations will identify whether and where State resources (in any form whatsoever) are deployed in the operation of the port.

Having identified areas of potential risk to the port, we can provide you with simple guidance on risk management or, where appropriate, advice that the Port has not granted unlawful State aid in the course of its operations.

We have considerable experience in the negotiation and drafting of both commercial and leasing arrangement for the use of port facilities.

Together with our expertise on State aid issues, we can provide port operators and users with advice on optimal trading arrangements in a port.

For more details on how we can help you, please get in touch.