Kiri

Monique Negenman Unit F/3 State aid Post and other services [email protected] 03.11.2020 Our ref. 1-3-11/2823 Subject:SA.53469 State aid in favour of maritime transport (question regarding international maritime transport and bunkering vessels) Dear Ms Negenman, As you know on 1 July 2020 legislative amendments allowing to grant state aid to vessels above 500 GT used for international carriage of goods by sea, on the basis of the European Commission decision “SA.53469 State aid in favour of maritime transport”, entered into force in Estonia. I would like to thank you again for the excellent cooperation and support you kindly provided in preparation and submission of the state aid notification. By now, we have received number of request from shipping companies that have become interested in the Estonian state aid scheme to bring their (cargo) vessels under the Estonian flag if they prove to be eligible for state aid. It has to be underlined, that the maritime industry in Estonia is making efforts to adopt a greener approach and use more sustainable energy solutions, for example to use shore-based electricity, building new LNG passenger ships or LNG bunkering ships. Thus facilitating the replacement of fossil fuels with environmentally friendly energy sources that help to reduce greenhouse gas emissions. Estonia is eager to contribute to achieving the aim of promoting environment friendly maritime transport as defined in the Community guidelines on state aid to maritime transport. An Estonian ship owner building a new LNG bunkering tanker, which will be used for refuelling LNG driven ships, has contacted the Estonian Maritime Administration. This ship owner is seeking further clarity regarding the new state aid scheme in force in Estonia and thus they have not yet decided on the flag state for that particular vessel. In this regard to would like first to evaluate their business risks and they wish to be sure that when they apply for state aid, they will be considered eligible, thus having no risk, or minimising the risk, of being obligated to repay the state aid. In this regard, we are contacting you in order to seek further clarity concerning the interpretation of the state aid application procedure for implementing the legislative amendments that entered into force on 1 July 2020 and which are based on the European Commission state aid decision. Therefore, we would like to know whether an LNG bunkering tanker could benefit from a state aid scheme when carrying LNG from abroad (international maritime transport) and further supplying this LNG to other vessels in the Estonian territorial sea or ports. The nature of such supply voyages within the territorial waters of Estonia is to provide bunkering services by delivery the LNG from bunkering tanker to refuel other LNG vessels. It is important to underline that in Estonia, there are no LNG terminals or any other possibilities of storing a full shipload of LNG cargo. Valge 4 / 11413 Tallinn Estonia / +372 620 5500 / [email protected] / www.veeteedeamet.ee Registry Code 70002414 Furthermore, this ship owner intends to supply this LNG also internationally, e.g. in Finnish territorial waters or ports, where LNG bunkering STS service is currently unavailable, i.e. the vessel is engaged in broader international maritime transport. Therefore, there is a need for clarity regarding the applicability of the state aid scheme, as both the ship owner and the seafarers want to be ensured whether the seafarers are eligible for benefitting from the state aid scheme, or whether the choice of the Estonian flag would mean that the ordinary tax regime is applicable to them. If the latter is the case, the ship owner may decide to opt against the Estonian flag and choose another flag state, even within the EU, where the tax regime would be more favourable. This question came up because the prerequisite for application of the Estonian state aid scheme is that more than 50% of the voyages must take place internationally. This condition derives from the Estonian Income Tax Law and was reflected also in the state aid decision. More specifically, this criteria for considering carriage of passengers and goods by sea as international are also stated in the Estonian Income Tax Act: Carriage of goods and passengers by sea shall be deemed international if more than 50% of the voyages take place: 1) between an Estonian port and a foreign port; 2) between an Estonian port and an installation outside of the territorial sea of Estonia; 3) between the ports in a foreign country or foreign countries; 4) between a foreign port and a facility located off the shore. In order to keep account of international voyages and implement the Income Tax Act, the Estonian Maritime Administration has worked out a solution that is based on the existing information systems for port calls and, more precisely, on EMDE (Electronic Maritime Information System) and SafeSeaNet (EU vessel traffic monitoring and information system). In addition, we are currently drafting a procedure for granting state aid, i.e. rules that describe more specifically conditions for granting state aid based on entries in the information system for port calls. It should be noted that at the beginning of 2021, amendments to the Ports Act will enter into force, defining bunker supply as a port service. Thus, the voyages undertaken to supply fuel for vessels bunkering after it has been transported from abroad to Estonia will qualify as provision of a port service and not as a port call between 2 Estonian ports within the meaning of Estonian law and thus also in the information systems for registering port calls. Thus, we are of the opinion that such voyages between Estonian ports should not count as local voyages but provision of port services. Therefore, it should not affect of granting state aid to shipping companies if the vessel is also engaged in international maritime transport. This was further stated in the DG COMP Maritime Guidelines technical meeting with the Member States in Brussels on 13 June 2018, as vessels which are involved in Maritime Transport activities may benefit from the maritime transport state aid (based on Commission communication C(2004) 43 — Community guidelines on State aid to maritime transport). Consequently, we could not see there any conflict with the state aid rules when applying state aid to bunkering vessels which are engaged in international carriage of goods by sea but at the same time undertake subsequent supply voyages to distribute the cargo within the Estonian ports. Even, if the total number of voyages performed to supply LNG from the LNG bunkering tanker to other vessels in Estonian ports is higher than the number of voyages made to foreign ports during the calculation period. This viewpoint is based on the interpretation that transporting LNG from a foreign port to Estonia qualifies as international maritime transport. The subsequent voyages between Estonian ports to refuel other LNG driven vessels are considered as a port service or supply of LNG as part of subsequent voyages upon the international maritime transport. This means that these subsequent voyages within Estonia should not be included in the calculation for this particular vessel as voyages within Estonia, which are taken into account when calculating the ‘more than 50%’ of international transport needed for state aid. Since this particular bunker tanker can transport LNG in quantity enough for refuelling up to 15 ships, there may arise a situation in which up to 15 subsequent voyages are needed between Estonian ports to distribute this LNG in parts in order to be able to discharge it all. We believe that if this LNG vessel refuels other ships in Estonian ports as a port service, the provision of this service in Estonia by an LNG bunkering 2 tanker should not be included in the calculation of the 50% + 1 rate of international maritime transport needed for state aid. However, taking into account the voyage during which this LNG bunkering tanker transports LNG from a foreign country, as well as the subsequent voyages for discharging the LNG in Estonian ports, we are of the opinion that in calculating the required ratio (50% + 1) of international maritime transport (international carriage of goods by sea) for granting state aid, the LNG cargo distribution voyages between Estonian ports by this vessel shall not be included. In our view, this above situation is different from a situation in which a vessel transports goods mainly from one Estonian port to another Estonian port. Herewith we are asking whether you concur with our interpretation. Furthermore, we would like to know as to whether any other EU Member State, when granting state aid, also adheres to the requirement of more than 50% of the voyages made by a vessel having to be international, or if they are first and foremost guided by the Commission guidelines that say that the vessel must in general be engaged in activities relating to maritime transport. We would like to thank you in advance and hope to receive your guidance in earliest convenience. Kind regards, Marek Rauk Acting Director General Estonian Maritime Administration CC: Mr Federich Romby, [email protected] Margit Markus Moossen 620 5534, [email protected] 3