The Lazio Regional Administrative Court on the P.E.C. and the exemption from piloting: pilots score a goal, but the game is still open

In previous articles [1] on piloting we focused on the critical issues that mark its organization, tariff setting mechanisms and any distortions of competition that are likely to arise from the current regulatory and organizational structure of this service.

In this regard, it should be underlined that a recent ruling of the Regional Administrative Court (“TAR”) of Lazio No. 7084/2019 [2] on the subject of the self-handling of piloting services has set out some useful principles for legal operators and the companies concerned, confirming, as a matter of fact, the "historical" boundaries of the institution.

Let us say straight away that pilots have gone ahead, being successful in maintaining the monopoly regime governing the service unaltered. We may say, however, that what is "set" can facilitate the opponent's task: once measures are taken, it is indeed up to those at a disadvantage to prove themselves and reverse the result.

Staying with the metaphor, let's recap the highlights of the "first half" of this match between pilots and... the progress of shipping in the light of competition principles:

• by an application filed in January 2014, a shipping company asked the Harbour Master of Salerno to issue, for its ships, authorization for the self-handling of piloting services in the port of Salerno. In order to prepare the procedure, the aforementioned Harbour Master asked for an opinion in this regard from the Ministry of Infrastructure and Transport;

• by a note dated February 20, 2014 and, subsequently, by a confirmation note dated March 31, 2014, the Ministry of Infrastructure and Transport excluded the admissibility of the self-handling of the piloting service in the Italian legal system, while providing for the possibility to introduce – by administrative means – personal exemption from pilotage by means of a PEC (Pilot Exemption Certificate) granted to individual captains [3];

• the applicant operator alleges that the Ministry’s opinions, making reference to the «legal monopoly» provided for by the Italian legal system for the operation of the pilotage service, are in conflict with Italian maritime law (and especially with Article 86 of the Italian Civil Code, Article 102 of the Italian Navigation Code and Article 14 of Law 84/1994, and in particular, with Article 14.1-ter and the principles of legality and proportionality, including in the part where it is stated that the system of issuing the PEC is not provided for by the Italian legal system and cannot be introduced by administrative measures), with Italian antitrust law (first of all Article 9 of Law 287/1990) and the principles of EU law.

As a preliminary point, it is interesting to point out that the Italian Higher Administrative Court (Consiglio di Stato) determined the jurisdiction of the Lazio Regional Administrative Court on the basis of the effectiveness of the ministerial act, with an ultra-regional scope. In this regard, according to the Supreme Administrative Court, the Ministry of Infrastructure and Transport did not limit itself to excluding the possibility of exempting the applicant's ships from the assistance of pilots in the Salerno port, but rather stated in general terms that the self-handling of pilotage services is currently inadmissible under Italian law. As a result, the direct and exclusive effects arising from the measure challenged by the applicant are not limited to a specific regional area but extend to the entire national territory, insofar as they preclude generaliter, i.e. in whatever port area, the upholding of applications similar to the one in question. In other words, the TAR has not limited itself to ruling the specific case before it, going to the extent of ruling on the methods in which the piloting service is generally carried out in the Italian legal system.

On the merits, the Lazio Regional Administrative Court reiterated that:

• pilotage consists in the assistance provided by an expert (the pilot, a person with specific professional skills [4]) to a ship’s captain in maneuvering in port waters; according to Article 14, paragraph 1-bis, of Law No. 84 of 28 January 1994, said service, like other nautical-technical services (e.g. mooring, towing and inshore services) constitutes a service of general interest the purpose of which is to ensure  safety of navigation and docking, being aimed at satisfying the needs of all those operating in port waters;

• under Article 87 Italian Navigation Code, then, “the establishment of a piloting service may be made compulsory by decree of the President of the Republic in places where this is deemed to be necessary” (now Ministerial decree of the Ministry of Infrastructures and Transport  under Article 14, paragraph 1-bis, of Law 84/1994) and entrusted to a Corporation under Article 86 Italian Navigation Code, according to which “a corporation of pilots shall be set up by decree of the President of the Republic in ports and other places for the access and passage of  vessels, where  there is a  recognized need for a piloting service”;

• from a subjective point of view, therefore, the service is performed by the entity provided for by Article 86 Italian Navigation Code; only if this has not been established, “the port master can authorize other seafarers to carry out pilotage” (Article 96 Italian Navigation Code). The mandatory nature of the service therefore appears to have been established in advance by a general act in the form of the ministerial decree pursuant to Article 14, paragraph 1-bis, Law no. 84/1994 [5];

• from the above regulatory framework, the administrative judge infers that “the general rule of Italian law provides for the mandatory nature, in principle, of pilotage as defined above in Italian ports, in light of the primary needs for safety in navigation, and such service is the object, in each port, of a specific Ministerial Decree of implementation”.

The above assumption leads the Administrative Court to hold that compulsory pilotage cannot be replaced by self-pilotage, which would substantially involve lack of that “otherness” between pilot and the ship’s captain which precisely constitutes the essence of the service – pursuant to Article 92 paragraph 1 Italian Navigation Code: a pilot is, indeed, a skilled professional, distinct from the ship's crew, who “suggests the route and advises the captain in determining the maneuvers to be performed”. The mandatory nature of the service therefore involves an external person, having specific skills and qualification, assisting a ship in maneuvering in port waters.

Furthermore, according to the Court, irrelevant appears the reference to Article 9 Law 287/1990, which provides for the faculty for third parties “to produce such goods or services for one’s own use” (so-called self-production) even when a given service is statutorily reserved for a given person against good and valuable consideration.

Furthermore, paragraph 2 of Article 9 itself prevents self-production in cases where the reserve is established “for reasons of public order, public security and national defense”. In the case at issue, navigation safety reasons would justify the reservation in favor of the piloting Corporation. Furthermore, the above exception is not deemed to be in conflict with European law and the principle of freedom to provide services, as the limitations in question are justified by public safety needs and, therefore, by “general interest purposes”. No infringement of the principles of competition can therefore be found, according to the Administrative Court.

Ball in the middle, then. We'll see whether the initiative of law-makers or – while awaiting for a new law – a revirement of case law, more focused on the need to protect the market and the economic freedom of the operators of the sector, will lead to a draw and eventually to the reversal of the outcome of the game.

This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Franco Rossi.

[1] See Shipping & Transport Bulletin October - November 2018 and December - January 2019, as well as June – July 2019.

[2] Administrative Court of Lazio, Rome, Division III ter, 3 June 2019, No. 7984.

[3] The Pilot Exemption Certificate (PEC) consists of a document issued by the competent authority of a particular State, which grants the total exemption or a partial modification to the conditions of compulsory pilotage service in favor of some types of ships, generally on the basis of elements such as gross tonnage, overall length, frequency of calls in a specific port, knowledge of the language and local regulations.

[4] See Article 102 Italian Reg. Nav. Cod. "Admission to the pilots' guild is based on qualifications and tests”.

[5] In the case of the Port of Salerno, the obligation of pilotage was established at the time with the Minister for Transport of 2 June 1996 where it is foreseen in unequivocal terms - Article 1 - that “pilotage is mandatory for entry and exit of ships, movement within a port”.