Motion to Approve
That the draft Regulations laid before the House on 19 December 2018 be approved.
Relevant document: 14th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
My Lords, the draft regulations that we are considering will be made under the European Union (Withdrawal) Act and will be needed in the event of no deal, in which case UK ships will continue to have access to member state ports and the ability to travel between member states. This access is based on OECD common shipping principles.
The regulations we are considering today revoke EU legislation on market access and cabotage that would otherwise be retained in UK law by the EU withdrawal Act. For the most part, this legislation would be redundant. It would have no effect after we leave the EU. For example, Council Regulation 4058/86 is about anti-competitive measures by non-EU countries. It allows member states to ask the European Commission to co-ordinate retaliatory action against such countries. This remedy will not be available to the UK when we are no longer a member state, so it is clearly inappropriate to retain it.
There are some instances where the regulations will revoke legislation that would otherwise retain on the UK statute book statutory rights for EU member states in UK waters that would not necessarily be reciprocated. EU Regulation 3577/92 gives rights to member states to provide maritime cabotage within another member state. Cabotage in this context is the operation of ships between two ports, or trips to and from an offshore site within a single member state. If we do not revoke the regulation, it will be retained by UK law. This would mean that member states would continue to have statutory cabotage rights in UK waters. However, UK vessels would no longer have such rights across EU waters; their rights would be at the discretion of each member state.
The UK has no intention of restricting cabotage by EU vessels in UK waters. By removing the statutory rights provided in the regulation, we are simply putting EU vessels on the same footing as vessels from other countries: that is, they will continue to be able to operate cabotage, but without an express statutory right.
Noble Lords may be aware that the regulations were originally laid under the negative procedure. I want to address briefly the points made by the Secondary Legislation Scrutiny Committee in recommending that the SI be upgraded. The committee thought that the Explanatory Memorandum should provide more information on the effects of the instruments. Following the committee’s review, the department has re-laid the Explanatory Memorandum and responded to its comments. The EM explained that the instrument will not have any practical effect on ship owners.
Most of the legislation being revoked would have no effect. On cabotage between UK ports, vessels would continue to be able to provide the same services as now. The only difference would be the guaranteed statutory rights.
There is no reason to believe that the regulations will have any effect on service provision. As mentioned previously, the UK has no intention of restricting this. We believe that an open approach promotes competition, leading to better and more efficient services. However, the UK does not intend for member state cabotage rights to continue to be expressly guaranteed in UK legislation where others’ are not.
The changes in these regulations are appropriate to ensure that the UK statute book on exit day does not contain regulations which are redundant or provide for non-reciprocated rights. I beg to move.
Amendment to the Motion
Leave out from “that” to the end and insert “this House declines to approve the draft Regulations because they were not subject to public consultation”.
The amendment in the name of my noble friend Lord Adonis is not being moved because he is not here. He asked me to say that he unavoidably could not be in the House between 6.30 pm and 8 pm and therefore anticipated that he would not be able to move his amendment, as has proved to be the case.
My Lords, I am grateful to the Minister for her explanation. She referred to the comments made by the Joint Committee on SIs. I agree with its criticism, as there are issues to be addressed in the clarity of the Explanatory Memorandum.
The Government claim that this SI will not have an impact on shipping operators. Nevertheless, whatever reassurances the Minister has sought to give us today, it removes cabotage rights. The Government’s defence is that the measure will put EU operators on the same basis as those from other countries—indeed, the Minister has just repeated that—but we are working to the lowest common denominator in these matters and one can never be sure.
Looking at such SIs always brings up some interesting piece of history. The history point from this one is that we will no longer be a member of the Rhine convention. Our membership of it goes back to the signing of the Treaty of Versailles, and the convention goes back even further, to the Congress of Vienna of 1815—so we are looking at something that we have been a member of for 100 years, while the convention itself is more than 200 years old. The problem we face is that we renounced our membership while we were members of the EU and we are members of it now only through our membership of the EU. It is interesting to think about the purpose of the Rhine convention. As the world’s oldest international organisation, the commission’s intention was remarkably modern; namely, to increase European prosperity by guaranteeing a high level of security for navigation of the Rhine. I do not think that the Government are suggesting that we rejoin the Rhine convention in our own right. I seek clarity from the Minister that this is the case.
The SI removes those EU regulations designed to prevent unfair practices, either between member states or between a member and a third country, and to enshrine rights to maritime cabotage. In a nutshell, the SI removes the right to cabotage for the remaining EU states which wish to operate in the UK because the Government fear that we will not be given reciprocal rights within the EU 27. At what stage are negotiations with the remaining 27 countries on cabotage? Is it a matter of ongoing consultation, or has it been shelved for the moment?
Once again, consultation has been very limited. My concern is that this SI relates to devolved issues. Do the Welsh and Scottish Governments remain satisfied? I cannot quite understand the amendment referred to in paragraph 6.12 of the Explanatory Memorandum—I am sure that it is my deficiency. I have read it a couple of times and it is not clear to me what amendment is referred to in relation to the Welsh and Scottish Governments.
The Government say that UK ships undertake relatively little cabotage in EU waters. I am happy to accept that, but can the Minister give us some clarity on the value of such cabotage, the volume of it and the percentage of ships undertaking it so that we can get some handle on the level of activity concerned?
The Government seem to have a nonsensical position on this issue. They say that they do not want to restrict cabotage but are acting to delete guaranteed rights. It is another example of an inconsistent approach in these SIs. Some of them simply smooth it over—it will be the same system after a no-deal Brexit as there was before; we are going to tolerate what may be an inconsistency between the attitude of the EU 27 and our approach to transport issues. However, in this SI, because we might not get cabotage rights in Europe, we will take them away from EU countries operating in the UK. The SI takes away basic international maritime rights and it does not set out with any clarity what the Government intend to replace them with.
I once again thank the Minister for explaining the purpose and objectives of this SI. As the Explanatory Memorandum points out, it deals with the legislation related to market access and regulation for maritime transport services. The EU law in question dealing with market access is Council Regulation (EEC) 3577/92 and that relating to anti-competitive practices is Council Regulation (EEC) 4058/86.
I have one or two questions arising from the Explanatory Memorandum. I noted with interest the comments made by one of the SLSC sub-committees and by the ESIC. The view of the sub-committee was that the impact of these regulations was not clearly explained in the Explanatory Memorandum. The ESIC suggested that a number of points were being raised that might relate to questions of particular commercial and economic importance that should perhaps be debated.
My first question relates to paragraph 7.4, which refers to two Council regulations which are,
“designed to provide remedies to member States in the event that other countries take anti-competitive measures. When the UK ceases to be a member State, the remedies specified in these Regulations will no longer be available to the UK. The Regulations will, therefore, be redundant. Instead, UK competition law will apply, so far as relevant”.
How relevant will our competition law be in a situation of other countries taking anti-competitive measures, and how effective will it be compared with the Council regulations that cover this issue but which are going to become redundant? It would be helpful if the Minister could comment on that point.
The noble Baroness, Lady Randerson, has already referred to cabotage, where we are removing a statutory right in relation to ship owners from other EU countries. At the moment, we do not know what the situation will be for UK ship owners in relation to cabotage within the EU. The noble Baroness has already asked whether this issue is being pursued vigorously or whether it appears to have been put on the back burner. I too await with interest the answer to that point. The Explanatory Memorandum refers to the fact that we do permit ship owners in other countries to have cabotage rights, and that, in reality, we do not intend to take these away. Is the Minister able to say how many EU states are likely to continue to give us the reciprocal rights which we presumably have at present? It may turn out to be all of them bar one or two, which will not give it to us for obvious geographical reasons. It would be helpful if the Minister could say something about what is likely to happen with EU states in relation to UK ship owners on this issue.
Paragraph 7.7 says:
“Council Regulation (EC) 789/2004 on the transfer of cargo and passenger ships between registers within the Community sets out a reciprocal regime to ensure ships may be easily transferred between registers of member States provided they comply with certain safety and environmental standards”.
It goes on to say that:
“This regime will not include the UK when it leaves the EU, so the Regulation is revoked”.
Bearing in mind the comment, which I referred to earlier, made by one of the sub-committees which looked at this instrument about the impact of these regulations not being clearly explained in the EM, will the Minister explain what the impact will be on our shipping industry in relation to the revoking of Council Regulation 789/2004 on the transfer of cargo and passenger ships between registers? Will it have any significant impact at all?
Paragraph 7.8 refers to Council Regulations 3921/91 and 1356/96 on,
“the rules that apply to the provision of inland waterway transport services in and between member States. These rules will not be relevant to the UK when we are no longer a member State”.
Once again, what is the impact of this on the UK? It would be helpful if the Minister was able to comment on that point.
I will ask the inevitable question on the consultation outcome. Going by paragraph 10.1, it does not look as though there was too much consultation, since it says:
“The Department consulted stakeholders informally on EU exit maritime issues including those related to market access”.
Were the trade unions representing crew, including officers, involved in this informal consultation? Why was it decided that the consultation should be done informally? Was that a reflection of the Government’s view about the lack of importance of this issue, or did they have reason to believe that those they were seeking to consult would not have very much to say on it anyway? Over what period did the informal consultation take place? A more formal consultation is usually over a specific period of time. I am not sure what the reference to informal consultation means in terms of the period of time over which it took place. The paragraph says that the informal consultation,
“confirmed the view that market access generally was not a significant concern for stakeholders because the industry is regulated internationally and it is not generally in states’ interests to restrict shipping access to their ports”.
I apologise for my ignorance in this regard, but does international regulation provide that cabotage services must be allowed?
I thank noble Lords for their consideration of these regulations. The noble Baroness, Lady Randerson, and the noble Lord, Lord Rosser, both mentioned the SLSC comments. I agree that the Explanatory Memorandum could have been clearer. I thank the SLSC for its work on this, and other SIs. We took its considerations on board and re-laid the Explanatory Memorandum.
The noble Baroness taught me a bit more history on the Rhine regulation than I knew already. The rules for operating on the Rhine are set through the Rhine convention. We are not planning to rejoin as a country; UK companies could still trade on the Rhine but they would need to ensure that they met the conditions in that convention as well as the relevant EU legislation.
We have consulted with the Welsh and Scottish Governments on Council Regulation 3577/92, which is on public service contracts in respect of island cabotage services. Financial assistance is devolved to the Welsh and Scottish Governments, to differing degrees, so they had a potential interest in this, and Ministers in both devolved Governments have given their consent. It is particularly important for Scotland, where they provide key services between the Highlands and Islands. The Scottish Government are satisfied that they will be able to continue procuring island services through the contracts, so they are content with it.
I attempted to set out in my opening speech why we have taken this approach. Leaving the European Union will mean, obviously, that we are no longer a member state and UK ships will lose their automatic right to cabotage. This SI removes the reciprocal statutory right for EU ships to practise cabotage. Instead, EU member states will be treated as all other countries are. We, the UK, operate a liberal cabotage regime for maritime, which we think is the best way to promote better and efficient services and perhaps—going back to what the Rhine convention originally wanted to do—to promote prosperity across Europe. In practice, all countries’ ships in the UK are permitted to carry out cabotage, so EU ships will be able to do the same. As I said, we have no intention to restrict cabotage.
Of course, this SI deals only with the UK side of legislation and does not cover EU action, and the way to ensure that UK ships can practise cabotage in the EU is to agree a deal. The future agreement, should we reach a deal, notes that the parties,
“should also make appropriate arrangements on market access for international maritime transport services”,
and EU trade deals always include provisions on maritime transport. It is a Commission competence, so we are not able to have bilateral conversations with separate member states, but EU trade deals usually have a separate chapter or part of a services chapter, and we expect that the same would apply in a future UK-EU agreement.
The noble Lord, Lord Rosser, asked about the effect on UK industry—which, as I say, is not part of the SSI, but it is certainly a valid question. Future UK shipping on EU cabotage will depend on a future agreement. If we leave without a deal, the impact on the UK of losing automatic access is estimated to be less than £10 million a year—although that is still £10 million a year—through losing our statutory rights.
The noble Lord asked about the different member states, and he was quite right to point out that it depends on the member state. International law does not require cabotage to be allowed within a state, so that is a matter for negotiation, if member states have not already set out their views. Some EU countries—Belgium, Denmark, Ireland and the Netherlands—do not have cabotage laws, or at least significant cabotage laws, and we would expect activity to continue. However, some EU countries have restrictive cabotage laws: Bulgaria, Croatia, Finland, France, Germany, Greece, Italy, Poland, Portugal, Spain and Sweden. It is worth noting that many of those states already restrict cabotage, despite the EU regulations, so this would not just be a matter of just switching it off—some restrictions are already in place. The EU technical notice on Brexit and maritime transport specifies which countries would allow that, and obviously we meet regularly with ship owners on this. I repeat that we do not want to see the loss of cabotage rights. It is one of the implications of not being a member state any more, which is another reason why we are working to achieve a deal.
The noble Lord, Lord Rosser, asked about anti-competitive action. We will rely on our own competitive competition legislation; the Competition and Markets Authority will take a greater role in enforcing such legislation, and we will be able to take action on trade remedies, if necessary under WTO rules. However, as I said, the maritime sector is global and liberalised, and that is reflected in the principles of the OECD, which most countries sign up to.
We have rarely seen action taken; on anti-dumping legislation, for example, there has been only one incidence in 1987. The Commission has been more interested in overpricing than underpricing, so it has looked at prohibiting liner conference cartels in the container trade and regulating the alliances which have succeeded them. Generally speaking, therefore, this has not been a significant issue. Of course, if the EU takes action in this case, it will cover European shipping, and if a ship is not going to the EU, it is unlikely to come to the UK. However, as I said, we have our own competition legislation in place.
The noble Lord, Lord Rosser, also asked about the effect of Regulation 789/2004 on the transfer of cargo and passengers. We believe that the application will have no effect; we are aware of no instance where the regulation has been used.
The noble Lord also asked about inland waterways. The UK will continue to have a similarly liberal regime in relation to the limited market for cabotage on inland waterways. For geographical reasons, obviously there is no international trade on inland waterways within Great Britain, and it is extremely limited in scope for Northern Ireland and the Republic. There is also very little interest from UK shipping in EU inland waterways.
No formal consultation was done on this instrument, simply because, for the most part, the regulations revoke redundant legislation and do not make any changes that affect the operation of businesses or impose any additional costs. The department has discussed the instrument with shipping industry representatives through the Chamber of Shipping, especially in relation to the proposals to revoke the cabotage regulation. The industry is concerned to avoid those restrictions, which is what we are doing. I am pleased again to set on the record that the Government have no plans to introduce such restrictions.
Officials have also discussed the regulations with the National Union of Rail, Maritime and Transport Workers, and especially the implications of the revocation of the cabotage regulation on Scottish inland services; we do not believe that that revocation has any consequence for such services. Ministers and officials meet regularly and frequently with many maritime stakeholders: for example, the Secretary of State met the Chamber of Shipping earlier this month to discuss Brexit. The RMT is one of the organisations we have regular engagement with; the Maritime Minister Nusrat Ghani met the RMT at the end of last year and will meet the union again in the next few weeks, and the chief executive of the MCA also met the RMT last week.
Therefore, while this SI does not have a direct effect, because it changes very little, obviously the alternative side of it is the effect it will have on UK shipping, and whether it has cabotage rights within the EU. While that is not related to this SI, of course we are discussing it on a regular basis, which is why we are keen to ensure that we achieve a deal that allows us continued access to cabotage within the EU, in the same way as EU member states will continue to have access to cabotage in the UK, even if not on a statutory rights basis; they will have the same access as all third country shipping companies do, and we have no plans to restrict that further.
I hope that I have managed to address the points raised, but, if not, I will provide answers in writing. The aim of this SI is to ensure that legislation continues to work effectively from day one in the event of no deal, and that redundant, inappropriate or unreciprocated provisions are duly removed.
House adjourned at 7.57 pm.