Introduction
The outbreak of the new coronavirus disease (COVID-19) during 2020 has caused a severe brunt throughout the world, especially in the shipping and maritime industry. This widespread pandemic collapsed all supply chains and forced port closures led by lockdown decisions that restricted the transportation of goods and passengers all over the world.
Many developed countries have implemented highly restrictive preventive measures to combat the spread of the virus; these restrictions caused a halt on their economies and trade with other countries, directly impacting shipping carriers' earnings and port logistics worldwide.
Portugal is not an exception in this global pandemic economic trend. However, in terms of growth and international performance, the Portuguese maritime sector has maintained its steady raise for the past five years thanks to the contribution of the Madeira International Ship Registry (hereinafter referred to as “MAR”).
According to statistical data provided by the Regulator of MAR (Sociedade de Desenvolvimento da Madeira S.A.), the total number of vessels registered in MAR has grown more than 7% between 2019 and 2020, increasing from a total of 680 vessels registered in 2019 to a total of 730 vessels by the end of 2020.
Following this trend and despite the uncertainty of the pandemic's evolution, the number of vessels registered in MAR continued to grow and, in the first semester of 2021, the total number of vessels registered increased from 730 to 786 vessels, corresponding to a healthy growth of 7.67%.
Thanks to MAR's performance and good compliance with the requirements laid down in the international maritime conventions by Portuguese flagged vessels, Portugal continues to progress in the annual assessment carried out by the Paris MOU committee and has once again been included in the White list of low-risk flags. The outcome of this result can be seen in the latest list published by the Paris MOU Committee; in 2020 Portugal ranks 24th, which represents an improvement from 27th in the previous, pre-pandemic year of 2019.
The resilience and capacity to keep growing despite the international scenario in the maritime industry is anchored on a set of measures adopted by the Portuguese Government to boost the competitiveness of the Portuguese maritime sector, enabling international shipping players to look to the Portuguese jurisdiction for a credible and business-friendly alternative for their businesses.
This chapter aims to highlight some of the measures adopted, in particular those of greater legal and/or operational impact on the maritime industry over the last two years.
Measures Adopted
The possibility of using private armed guards onboard Portuguese flagged vessels
The International Maritime Organization (hereinafter referred to as “IMO”) has long introduced special measures to protect the lives and well-being of seafarers, cargo and ships from the threat posed by piracy and armed robbery.
This threat remains today and according to the IMO data, a total of 226 incidents of piracy and armed robbery were attempted or performed in 2020.
In October 2019, Portugal introduced a law (Decree-Law No. 159/2019 of 24 October) that enables shipowners of Portuguese flagged ships to hire private security companies, employing armed personnel to be onboard ships, in order to protect them when operating in areas of high piracy risk.
This Law provides the option to hire security companies based in the European Union or European Economic Area. Companies providing private armed security services to Portuguese registered ships are responsible, through their Security Director, for choosing the Security Team Coordinator and for defining: (i) the anti-piracy plan; (ii) the trip plan; and (iii) the in-land transportation plan regarding arms and ammunitions.
In April 2020, by Circular No. 64, the Portuguese Maritime Administration defined the areas considered high piracy risk in accordance with those already identified by the IMO, such as the Gulf of Guinea, Somalia, the wider Indian Ocean, the wider Atlantic Ocean, West Africa, the Red Sea, among others.
By implementing this new Law and by having the highrisk areas for piracy defined by the Portuguese Maritime Administration, Portugal strategically positions its maritime industry on a par with the premium Flag States that allow the use of armed guards on board.
Amendments to the law applicable to vessels registered in MAR
In 2020, by Law No. 56/2020 of 27 August, the Portuguese Government approved critical amendments to the MAR legal framework.
Despite the lockdown and temporary restrictive measures that conditioned the functioning of public services in general into a slowed down pace of legislative processes, political efforts were put in place to enact substantial changes to the MAR legal regime, with the aim of strengthening MAR's position on an international level.
Among those changes are: (i) the creation of a differentiated ship mortgage regime; (ii) the improvement of the commercial registration of ships and related legal acts; and (iii) the strengthening ability of the Maritime Administration to perform its duties.
With regard to the ship mortgage regime, the new Law consolidates the mortgagee's position. In addition to the flexibility already granted to the parties to select the law applicable to the mortgage, this new Law strengthens the mortgagee's interests by introducing the so-called “mortgagee in possession” concept and therefore granting blocking powers in situations of potential sale or encumbrance of the ship by the owner.
Mortgagees also became entitled to pre-approve the register of vessels on a bareboat basis in MAR, as well as to cancel the bareboat charter-in registration in those cases where the mortgagor fails to comply with its obligations under the mortgage and underlying loan.
As a major step forward into the Information Technology (“IT”) world, the new Law enables the commercial registry of ships to be fully electronic, allowing for the registry applications to be submitted online and proof of registration to be available through digital certificates. Ultimately, the registration process will be paperless with the implementation of a dedicated software for ship registration.
Finally, this legislative amendment also creates a dedicated technical support team to address efficiently the increasing number of ship registrations, by providing assistance to the Portuguese Maritime Authority and the Technical Commission of MAR on performing their legal and operational duties and competences.
Sea Online Desk
The Sea Online Desk (Balcão Eletrónico do Mar – “BMar”) is the web portal that was created through Decree-Law No. 43/2018, of 18 June with a view to digitalise the procedures towards the issuance of the certificates, licenses and other documents required for the proper performance of activities at sea and certification of seafarers and vessels. The pandemic proved this strategic move to the online platform to be of great value which allowed the smooth running of operations regarding ship registration, regardless of all the social restrictions imposed to the population and public services.
The transition of services and resources to online platforms and the recommendation to use digital tools during the pandemic made BMar the tool of excellence for the interaction with the relevant Maritime Authorities, providing access to these services 24 hours a day, seven days a week, for both domestic and foreign customers, resulting in very strong growth in the indicators of use of this platform. The portfolio of electronic outputs generated is quite vast.
BMar provides transparency and ease of access to public services (including services shared between the various official entities), while avoiding travelling, duplication of information/ documents and focusing on IT as an engine for generating environmental and economic benefits.
Currently, all digital certificates issued through BMar comply with the IMO criteria.
Consolidation of the shipping companies' activities and crew benefits within the Madeira International Business Center
The MAR is part of the Madeira International Business Center (hereinafter referred to as “MIBC”), a regime fully approved and integrated within the European Union.
Even though it is not mandatory to incorporate a shipping company in Portugal to register a ship under the Portuguese flag, companies willing to incorporate and develop their maritime activities within the MIBC benefit from a set of incentives provided under this special regime, mainly of a tax nature, as long as they are compliant with the underlying substance requirements.
A new Law was published (Law No. 21/2021 of 20 April) on 20 April 2021 amending article 36-A of the Portuguese Tax Benefits Statute (“TBS”), which extended the term of article 33 of the TBS ensuring that the benefits therein provided are in force up until 31 December 2027. Amongst the extended benefits is the crew exemption from personal income tax in Portugal, a benefit of crucial relevance within shipping activity.
In addition, the Law extended the deadline for the admission of new companies under the MIBC regime until 31 December 2021 and introduced substantial clarifications, namely what constitutes the number of jobs created for the purposes of eligibility for the scheme. In this context, crew members and workers on board ships registered in MAR were duly safeguarded and are considered jobs for the purposes of the regime.
As a result of the above legislative changes and clarifications, the activity of the shipping companies within the MIBC came out stronger in terms of tax and operational incentives.
Rhine Certification
During 2020, the Portuguese flag was sought by European shipowners with vessels belonging to the Rhine Navigation, who were unable to register and operate their vessels under the Portuguese flag.
Portugal did not immediately ensure the implementation of the Council Regulation (EEC) No. 2919/85 of 17 October 1985, laying down the conditions for access to the arrangements under the Revised Convention for the Navigation of the Rhine (hereinafter referred to as “Regulation (EEC) No. 2919/85”).
This became a drawback and made it impossible to register ships belonging to the Rhine Navigation in Portugal (MAR) in the course of 2020.
Regulation (EEC) No. 2919/85 determines the conditions for access to the arrangements under the Revised Convention for the Navigation of the Rhine relating to vessels belonging to the Rhine Navigation, which establishes the Central Commission for the Navigation of the Rhine, its main mission being to promote the development and ensure the safety of navigation on that river.
Portugal is not a party to the Rhine Convention; however, with the adoption of the Additional Protocol 2 to Convention, the Central Commission for the Navigation of the Rhine granted all Member States of the European Union access conditions to the Rhine identical to those of its Contracting States.
By virtue of the said Additional Protocol, only vessels belonging to the Rhine Navigation are authorised to transport merchandise and persons between two points situated on the navigable inland waterways referred to in the first paragraph of article 3 of the Convention, whereas vessels are recognised through a document issued by the competent authority of the relevant State.
Within this context, the Implementing Regulation annexed to Regulation (EEC) No. 2919/85 determines that the Member States of the European Union shall be accorded equal status with the Contracting States of the Convention.
Although Regulation (EEC) No. 2919/85 is mandatory and directly applicable to the Member States, its implementation into the national legal system was necessary.
As of June 2021, the Portuguese Maritime Authority can certify vessels belonging to the Rhine Navigation. By Decree-Law No. 40/2021 of 1 June, Portugal appointed the competent authority for issuing the documents referred to under paragraph 1 of article 2 and paragraph 2 of article 5 of the Implementing Regulation, and established the sanctions applicable in case of a breach of the obligations.
Under this new Decree-Law, vessels flying the Portuguese flag – and complying with the conditions laid down in the Regulation (EEC) No. 2919/85 – shall become certified for navigation in one of the largest waterways in Europe, with a great positive economic impact for Central Europe.
Complementing this improvement, other legislative initiatives covering inland waterways are currently being prepared, particularly the implementation of the Directive 2008/68/EC of the European Parliament and of the Council of 24 September 2008 on the inland transport of dangerous goods (the “Directive”) in what regards inland waterways.
When implementing the Directive back in April 2010, Portugal decided not to apply the provisions on inland waterways in accordance with paragraph 3 of article 1 of the Directive, which permits Member States not to apply Annex III, Section III.1 of the Directive, for one of the following reasons: a) they have no inland waterways; b) their inland waterways are not linked, by inland waterway, to the waterways of other Member States; or c) no dangerous goods are transported on their inland waterways.
Portugal notified the European Commission of its decision not to apply the provisions on transport by inland waterway on the basis of reasons b) and c) above.
Given the proliferation and international recognition of the Portuguese flag abroad, especially in Europe, the absence of a regulatory regime with regard to inland transport of dangerous goods represents a handicap that Portugal is willing to overcome.
It is therefore expected that Portugal will implement the Directive in what regards inland waterways, by enacting a Decree-Law incorporating the relevant text of the European Agreement concerning the International Carriage of Dangerous Goods by Inland Waterways and respective Regulations.
Conclusion
The Portuguese Government is committed to the success and prosperity of the maritime sector.
In spite of the pandemic decelerating the economy, discouraging investment, blocking decision-making processes and causing global uncertainty, Portugal has implemented political, legislative and operational actions with the aim of maintaining the development trend of recent years in the shipping industry.
On 6 May 2021, the Council of Ministers approved the National Strategy for the Sea 2021–2030, a public policy instrument that presents the vision, aspirations, areas of intervention and goals regarding the ocean development model.
The main objectives of the Portuguese Government are to enhance the contribution of the sea to the country's economy and position Portugal as a prevalent maritime nation worldwide.
Portugal will continue to focus on simplifying legislation and adopting strategic procedures to enhance the reputation and competitiveness of its ship registries, while ensuring the technical rigor and proper monitoring of the fleet. MAR is currently ranked as one of the leading European registries; keeping this trend requires full compliance of flag state, port state and coastal state obligations within the IMO.
Originally published by ICLG
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