AGCM calls the Government with proposals on competition in Italian ports. Will the Government respond?

The Italian Antitrust Authority (“AGCM”) has – as usual – prepared and sent to the Government, last March, its annual report containing proposals for competition reform for the purposes of the Annual Law for the Market and Competition for the year 2021 (“Report”) [1].

The Report also deals with aspects relating to the port sector: so, we will analyse below the proposals formulated by AGCM with reference to our industry.

AGCM, in analysing the current competitive situation of the Italian ports, first of all highlights how “the realisation of investments aimed at increasing the competitiveness of national ports, especially in terms of achieving adequate levels of efficiency of the infrastructures, and dynamic competition processes may be partly limited by certain rules and/or regulations in force”.

In particular, the report identifies three macro-issues which, according to AGCM, require the intervention of the legislators: 1) the issuance of a Regulation for the granting of maritime State concessions (“Regulation”); 2) the prohibition of double concessions provided for in Article 18, paragraph 7, of Law No. 84/1994 and 3) the right to self-handling of port operations.

We shall briefly look at what AGCM has written and comment on each of the three macro-issues mentioned above, all with the necessary premise that the issues raised by AGCM are not at all new, but rather have given rise over the years - and in particular in recent times – to a heated debate among the various market stakeholders.

1) Regulations for the granting of maritime State concessions.

AGCM notes that the famous ministerial decree that should have been issued pursuant to Article 18, paragraph 1, of Law No. 84/1994 has not yet been adopted. This has caused over the years - and still causes today - uncertainty in the criteria for assigning concessions.

According to AGCM, it is necessary to predetermine the procedures for assigning concessions on the basis of objective criteria, in order to limit excessive discretion on the part of the competent authorities, thereby ensuring compliance with the EU principles of transparency, publicity and non-discrimination.

AGCM also believes that “the instrument of revocation of concessions should be strengthened if the concession holders do not comply with the conditions defined in the concession contract, in order to stimulate the efficiency of the concession holders and increase the contestability of assets”.

The issuance of a Regulation that identifies certain, clear, transparent and non-discriminatory criteria for the granting of port State concessions, as well as for the definition of their duration and methods of revocation - as we have said - was already provided for by Law No. 84 of 28 January 1994. However, after 26 years, such a Regulation has still not been issued.

Undoubtedly, the issuing of such a Regulation is quite desirable, since it would guarantee – in addition to compliance with the EU principles of transparency, publicity and non-discrimination – greater protection and certainty in the relations between the grantor and aspiring concessionaires.

It would also enable aspiring concessionaires to “play by the same rules” in all Italian ports. Indeed, at present, since there is no Regulation establishing criteria valid for all, each Port System Authority is free to adopt its own rules to identify the “most deserving” competitor. Unfortunately, these rules do not always identify certain, clear, transparent and non-discriminatory criteria.

With regard to the strengthening of the revocation instrument (but perhaps AGCM meant to refer to forfeiture), we note that the intention seems to be to give a boost to the procedures for verifying the fulfilment of the commitments undertaken by concessionaires (primarily through their business plans) when applying for and obtaining the concession.

It cannot be denied that the verification of the actual fulfilment - by the concessionaire - of its commitments is essential to detect inefficiencies in the use of state-owned areas. Indeed, given the limited nature of state-owned areas, it is in the general public interest that concessions be entrusted to subjects capable of guaranteeing their profitable and efficient use. All this, of course, without forgetting that concessions are in any case contracts, under which both parties are bound to comply with their respective commitments (i.e. not only the concessionaire, but also the grantor, for instance in terms of carrying out the interventions provided for in the concession deed, on which the concessionaire may have legitimately relied in drawing up its business plan).

2) Article 18, paragraph 7, of Law No. 84/1994 - prohibition of double concessions.

In our Shipping & Transport Bulletin [2] we have already dealt with this important issue several times.

First of all, we wish to underline - as already highlighted above - that the rule provided for by Article 18, paragraph 7, of Law No. 84/1994 was introduced in our system to avoid monopoly situations and/or abuse of dominant position.

In its report, AGCM makes a proposal that we consider “singular”, that is to apply the prohibition referred to in Article 18, paragraph 7, of Law No. 84/1994 only to smaller ports, considering that no situations of abuse of dominant position can occur in larger ports.

In particular, AGCM proposes “with a view to the development and growth of the port sector, that paragraph 7 of Article 18 of Law No 84 of 28 January 1994 should be reformulated, providing for the application of the prohibition of multiple concessions for the same activity only to smaller ports, within which it is easier to create situations of market power, and/or for those types of activity where competitive dynamics are limited to a single port”.

As a matter of fact, in our opinion, experience (including recent events) shows that AGCM’s statement does not reflect the reality of the facts. Regardless of the size of a port, it is clear that the space within a single port is limited, as is the number of operators who can access it. Abolishing the prohibition on double concessions would therefore risk creating dominant positions that could lead to abuse of the same.

It should also be pointed out that over the years, Article 18, paragraph 7, of Law No. 84/1994 has always been construed in such a way as to ensure that Port System Authorities acted in “compliance with the principles of competition, freedom of establishment, guarantee of development, enhancement of entrepreneurial activities and protection of investments” [3].

Furthermore, this is a rule which, according to case law [4], could be “managed” by Port System Authorities with a view to ensuring competition within a port (given that competition is precisely the “asset” that such rule wants to guarantee), but in the context of a scenario always aiming at “the increase of traffic and productivity of the port”, as provided for by Article 18, Paragraph 6, of Law No. 84/1994.

It is worth pointing out, in this respect, that Article 18, paragraph 7, of Law No. 84/1994 aims to guarantee competition, first and foremost, in the interest of port users (shipowners in the first place), who must have the possibility of choosing between different service offers within each port of call.

In our view, the repeal of the provision and/or the limitation of its applicability only to smaller ports could be risky, since it could lead to abuses of dominant positions. Absurdly, one could argue that the interest in creating a dominant position is more pressing for a terminal operator in large ports than in smaller ones. This theory has been supported by the recent events occurred in one of the largest Italian ports.

Finally, we would like to urge a concrete application of the rule. Indeed, in recent years we have seen a paradox whereby this rule has been overlooked (or rather ignored) in some ports and applied quite rigidly in others. However, the existence of the rule allows the protection of competition in ports and can be a harbinger of intervention by AGCM. Therefore, we believe that when it comes to issues such as those under consideration, we cannot remain in a state of perpetual waiting and only act de iure condendo but, on the contrary, we must act de iure condito.

3) Restrictions on self-handling in port operations.

Another very delicate subject on which AGCM intervenes is that of self-handling. The delicacy of the subject derives from its implications from an employment and therefore social point of view.

AGCM “in order to enhance the competitive constraint exercisable by self-handling, proposes the repeal of the rule in paragraph 4bis of Article 16 of Law No. 84 of 28 January 1994, in order to strengthen the competitive dynamics of the market in the exercise of port activities, in order to increase the attractiveness, also internationally, of the port sector in Italy”.

AGCM’s proposal to repeal paragraph 4-bis of Article 16 of Law No. 84/1994 [5], recently introduced by Article 199-bis of the so-called “Relaunch Decree” appears indeed worthy of consideration by the legislator.

Indeed, the provision introduced by the so-called “Relaunch Decree”, does not allow de facto the effective and full exercise of the right of self-handling. Said provision establishes that - only “if it is not possible to satisfy the demand for carrying out port operations” either through companies authorized pursuant to Article 16 of Law No. 84/1994 or through the use of companies pursuant to Article 17 of the same law - the ship is authorized to carry out operations under the self-handling regime provided that, inter alia, “the consideration has been paid and a suitable security deposit has been provided”.

It should be noted that the right to self-handling has been considered by case law as a “subjective right, perfect, exercisable and protectable erga omnes, attributing powers and faculties freely exercisable by private individuals” [6].

So, paragraph 4-bis of Article 16 of Law No. 84/1994 would appear to be in open contrast not only with the law [7] and case law [8], but also with Regulation 2017/352. The latter, by reaffirming the EU principles of transparency, provides that access to the port services market must be guaranteed in a fair and non-discriminatory manner to all interested parties.

So, the repeal of paragraph 4-bis of Article 16 of Law No. 84/1994, will prevent the legal reserve attributed to port undertakings from undermining in practice the right to self-handling.

Moreover, it is important to point out that the possible maintenance of the limitation on self-handling could lead users to prefer non-Italian ports where such limitations do not exist and where competition in port operations is instead guaranteed.

It should also be mentioned that Article 8 of Ministerial Decree No. 585/1995 already provides for a series of requirements that a maritime carrier or shipping company or charterer must meet in order to obtain the authorisation to carry out self-handling port operations. Accordingly, the safety of self-handling operations is already guaranteed by the existence of those requirements. Therefore, there would be no objective reason to justify said restriction.

Finally, we wish to make a general comment on the method. We believe that the legislator – before considering any regulatory change in one or all of the above-mentioned macro-issues  – should involve all stakeholders in an open and transparent debate, in order to hear the voice and understand the real needs of all industry operators in the interest of the industry as a whole.

Lastly, at the time of publishing this article, the annual law on the market and competition for the year 2021 has not yet been adopted. We will closely monitor the adoption of this law, as in light of the above AGCM proposals, there could be important consequences for the Italian port world.

This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Ekaterina Aksenova.

[1]https://www.agcm.it/dotcmsCustom/getDominoAttach?urlStr=192.168.14.10:8080/C12563290035806C/0/914911A1 FF8A4336C12586A1004C2060/$File/AS1730.pdf

[2] See Shipping and Transport Bulletin - December 2017 - January 2018: “Back again to the prohibition on controlling two terminals in a port under Article 18, paragraph 7, of the Italian Port Law”.

[3] See TAR Liguria, Second Division, 24 May 2012, no. 747.

[4] See Order of the Court of Genoa of 18 September 2009.

[5] Paragraph 4-bis of Article 16 of Law no. 84/1994 states that “Where it is not possible to satisfy the demand for carrying out port operations either through the companies authorised under paragraph 3 of this Article or through recourse to the company or agency for the provision of temporary port work referred to, respectively, in paragraphs 2 and 5 of Article 17, the ship shall be authorised to carry out operations on a self-handling basis provided that: (a) it is equipped with appropriate mechanical means;(b) it is adequately staffed, in addition to the personnel on the ship’s safety and operational roster, and is exclusively dedicated to carrying out these operations; (c) the consideration has been paid and an appropriate security deposit  has been provided”.

[6] Council of State, Second Division, Opinion of 30 August 1996, in Dir. mar., 1998, p. 1127.

[7] In particular, Article 9 of Law No. 287 of 10 October 1990, according to which “The reservation by law to the State or to a public body of the monopoly on a market, as well as the reservation by law to an undertaking entrusted with the management of the activity of providing goods or services to the public in return for payment, does not result in third parties being prohibited from producing such goods or services for their own use, or for the use of the parent company and its subsidiaries. Self-handling is not allowed in cases where, according to the provisions providing for the reservation, it appears that the reservation is established for reasons of public order, public security and national defence, as well as, subject to a concession, with regard to the telecommunications sector”.

[8]Among others: Council of State, Second Division, Opinion of 30 August 1996, in Dir. mar., 1998, p. 1127.