The stowage conflict from an EU-perspective

19/02/17

Recent turmoil in the stowage sector has reminded us of some unique features of its regulation, which are rather surprising from an EU-law perspective. This is a sector which has evolved for many years ignoring Internal Market rules, and whose mandatory adjustment to such rules should give the recently appointed Minister for Public Works many a headache.

On 11 December 2014 the EU Court of Justice (ECJ) held that Spain had infringed Article 49 of the TFUE (freedom of establishment) by forcing stowage companies operating in ports of a general interest to (i) buy shares in the local company administering stowage services (Sociedad Anónima de Gestión de Estibadores Portuarios, SAGEP); and (ii) preferably hire personnel from such SAGEP.

It all started in 2011, when the Commission requested that Spain explain the legal framework of stowage pursuant to the State Ports Act (Ley de Puertos del Estado; Articles 142 et seq.). The explanations being unsatisfactory, the Commission brought Spain before the ECJ, pleading that, while such legal framework did not discriminate between Spanish workers and other EU nationals, it did restrict freedom of establishment. Companies from other Member States had to adapt their workforce and recruitment policies just to be able to offer freight management services at Spanish ports.

Spain’s defence was that it had to regulate stowage to (i) protect dockers by warranting their training and safety; and (ii) ensure continued and regular provision of high-quality services. The ECJ acknowledged that these objectives are legitimate but held that Spanish law on ports goes beyond what is required to attain them: it is disproportionate to exclude an entire sector from free market rules. However, that judgment, as usual in infringement cases, merely stated the breach and summoned Spain to implement any necessary changes within a reasonable period of time.

In July last, the Commission took Spain to court again for not having made any changes. This time, it asked the ECJ to find a breach of the first judgment and to impose a fine on Spain for every new day of continued infringement. To date, Spain is still not complying. However, there are harbingers of imminent Government action because the ECJ’s second judgment might be round the corner and could impose a daily penalty of 134,107.20 euros, plus 27,522 euros for every day passed since the first judgment.

The stowage sector is up in arms, and a compromise seems hard to figure out. Without touching on the sensitive issue of what pay levels might be fair to dockers, whose job is undoubtedly dangerous, it is clear that current Spanish legislation is incompatible with a market economy.

The Government has announced a new Regulation this week. We shall see what changes there are to be. Yet the day seems near when stowage will integrate the EU market just like any other activity… Meanwhile, as its very own contribution to the festive atmosphere, the Spanish competition authority CNMC has only just started formal proceedings to fine trade unions and five stowage operators at Spain’s largest port, Vigo.