§ Mr. Richard Ottaway (Croydon, South)I appreciate the chance of this debate and the fact that my hon. Friend the Minister for Transport in London will reply to it. I appreciate that he must be busy trying to sort out the implications of the rail strike. I should also start by declaring my interest, as I am the parliamentary adviser to the Baltic Exchange.
The subject of this debate is most serious. In a nutshell, a British company, which is out there trying to win for Britain, is having the utmost difficulty establishing a ferry service between Spain and Morocco, which I believe is contrary to the treaty of Rome.
The outcome is being watched closely by the City of London, which is the centre of world trade and especially world maritime trade. Its many institutions thrive in that central position and provide valuable invisible exports for this country. They include the Baltic Exchange and all the dry cargo broking that goes with it and the commodity traders who proliferate in London and bankers who proliferate even more. We must come up with a satisfactory response to the problem, because it is essential for London to remain the centre of world trade and for us to be seen to be dealing with the issue fairly.
I mentioned the City's invisible earnings; shipping earns about £3.4 billion for this country, the Baltic Exchange just under £1 billion, and last year Lloyd's Register apparently earned £33 million. The legal profession, which provides services for overseas clients, is believed to have earned more than £100 million and other institutions such as Lloyd's and various management and ship-owning companies must also be considered. The impact of such an issue on all those different types of companies and the confidence that it will engender in the City is tremendous.
Shipping is an international business and it is one of the few businesses in which a genuine free market and free flow of trade still exist. The quid pro quo is that the players in that free market expect fair play and a fair deal when striking bargains.
Cenargo, the British company at the centre of the issue, is one of the success stories of the 1980s. My hon. Friend may recall that it came to prominence in the early 1980s in the aftermath of the Falklands war, when the Ministry of Defence granted it the contract to take all the materials to the Falkland islands to build the new runway.
The company was founded by Mr. Michael Hendry in 1979. While P and O is the largest shipping company in Britain, Cenargo is now the largest private shipping company. It was recently described by Fairplaymagazine as a one-man enterprise zone. It was originally a specialist roll on/roll off ferry company, and runs ferry services in, for example, the Irish sea. Over the years, it has grown into a diversified shipping group, with expertise in ferry management, broking and all aspects of shipping. Today, it runs 16 ships.
The company is run on old-fashioned principles—something which is rather rare in the 1990s. It is the type of company that insists that its superintendents maintain the engine rooms to the highest standard of cleanliness and that its officers wear uniform at meal times in port, and it 774 regards its ships and its staff as its assets. In this rather casual era, we can rightly be proud of a company that faces the future with optimism and sound finance.
As I said, the company has great expertise in running roll on/roll off ferries. Last year it carried out a feasibility study of the prospects of running a ferry service between Spain and Morocco. There are tremendous flows of immigration between north Africa and Spain and across the Mediterranean. Here was a British company which saw the opportunity that that presented and was determined to get out there and exploit it for all that it was worth.
The existing ferry services are run by a Spanish company between Almeria in Spain and Melilla, which is a Spanish enclave—that is the important point—in Morocco. Cenargo was invited by the Moroccan Government to establish a direct ferry service between southern Spain and Nadar in Morocco, some 15 miles down the coast from Melilla. Basically—and this highlights the problem—the Moroccan Government were fed up with arriving in the Spanish enclave and being ripped off by the locals before crossing the border into Morocco.
Cenargo decided to take up that invitation to run the ferry service. It positioned its ship the Rozel and was due to start the service on 26 April this year. As I understand the position, the service is being blocked by the Spanish maritime authorities, who have instructed the local port authority and local officials not to co-operate and to prevent the service from running out of Almeria.
That is a serious matter. Under Community law, Cenargo is quite entitled to operate the service. The regulation authorising it to do so is EC regulation 4055/86, which establishes the principle of freedom of movement for maritime services between member states and third countries. Those of us who have long been frustrated over the issue of cabotage regarded that measure as long overdue. There is now a free market inside Europe, but there is one restricting factor: certain countries are still entitled to have bilateral maritime arrangements, but the relevant article—article 4—is supposed to be phased out by 1 January 1993. The Spanish Government are a party to the agreement, but are not living up to their obligations under it.
Aware of the opportunity that was arising on 1 January this year, Cenargo decided to compete, and positioned its ship the Rozel, which can take about 1,400 passengers and 300 cars, and proposes to do a round trip between Spain and Morocco every day. The service is being run with local partners. In December 1992, the Spanish authorities were formally informed of the planned service. A month later, the Spanish merchant marine replied that the service was prohibited and instructed the port authorities not to co-operate. One can only speculate what that may mean and the real reasons behind it. There is an element of politics, I think. Being one of the newer members of the Community, Spain is perhaps not yet used to the concept of European co-operation and what we have seen is perhaps something of a knee jerking reaction to a successful entrepreneurial move by a British company. Moreover—although it may be inappropriate to say it—they may be blocking the way so that a Spanish company can come along shortly and compete.
Whatever the reason, this relatively small matter has momentous implications for the Community and poses a credibility problem for the Government to which I am sure they will rise. The Government have rightly fiercely 775 opposed protectionism and subsidy. They have spent years telling United Kingdom ship owners that their best hopes lie in free trade. It sometimes seems as though we are the only country which goes along with that principle. I ask my hon. Friend the Minister what the Government intend to do to secure free access to the EC market.
Cenargo's first remedy is through the Spanish courts. I understand that there is a jurisdiction problem and those who have had any experience of Spanish courts will appreciate that there are always serious delays. If the matter went to the Spanish courts, the ferry service certainly would not start in April this year and it is questionable whether it would start in April next year.
The second remedy is to go to the Commission, which Cenargo has done. The Commission appears to have accepted the complaint, but the position is a little unclear. Perhaps my hon. Friend could clarify it when he replies. Again, of course, that remedy is a lengthy process.
The third remedy is the United Kingdom itself. I am aware that the Government have not been idle in the matter and I congratulate the Department on the way in which it has responded to the issue. I am also aware that there have been diplomatic moves. I understand that the Minister in the other place has had a meeting with the Spanish authorities, but there appears to be no sign that they intend to respond to the problem. Perhaps my hon. Friend could clarify that. There is a rumour, which I do not believe, that the Department accepts the Spanish position and recognises the Spanish bilateral agreement. I hope that my hon. Friend will deny that.
The impact of the problem on a small company like Cenargo is quite serious. It believed that it could rely on the EC regulation, but instead it will suffer huge financial losses. As a British company, it is entitled to expect member states to observe European Community law, especially that arising out of the treaty of Rome, as that does.
The problem shows the inadequacy of Spanish law in such cases. My hon. Friend may remember the Factortame case, when the English courts decided that they had power under EC law to stop the Government banning Spanish fishing boats operating in our waters under the British flag. There is a certain irony in the fact that that law is available in this country, but no such remedy is currently available in Spain.
It is a serious matter which will have serious consequences for British shipping. The House needs no reminding that the Government have told the industry many times that there will be no subsidy for British shipping, but the industry and the City are entitled to expect the Government's full-blooded support in such an outrageous situation. I hope that my hon. Friend will take robust action.
§ The Parliamentary Under-Secretary of State for Transport (Mr. Steve Norris)I am grateful to my hon. Friend the Member for Croydon, South (Mr. Ottaway) for giving the House the opportunity to debate this matter. My hon. Friend's interest in shipping matters goes back a long way—indeed, to when he and I first came to the House in 1983. He assiduously represents the interests of the Baltic Exchange and he maintains his interest in shipping matters generally.
776 I agree that the Cenargo International affair raises some important implications not only for the company, but for the whole future of shipping services within the Community. My hon. Friend was right to point out the slight irony that Spain had the closest interest in the Factortame case and the proceedings thereafter, because Spanish vessels were seeking to fish in United Kingdom waters. The British Government tried to take a view on the desirability of that practice in the context of jobs in the British fishing fleet.
Now, we are dealing with an issue which is just as important. I assure my hon. Friend that we take the matter seriously and we will try to resolve it as quickly and as directly as we can.
My hon. Friend set out the problem that Cenargo has encountered in trying to start a new service. I shall reiterate some of the major principles so that we are clear about the ground on which the Government are proceeding. My hon. Friend is right to congratulate Cenargo on the job that it does for Britain. I say that in terms of the earnings that it brings to the United Kingdom and of the standards that it adopts in running its shipping. I commend the company for its standards of safety. As my hon. Friend rightly said, it is much to be commended in a world where safety standards are not always what we would desire. Similarly, it is to be commended for the standard of service that it offers to its customers. Would that all shipping operations in Europe were conducted to the same high standards.
My hon. Friend observed that Cenargo has developed considerable expertise with roll on/roll off ferries. It has been seeking to embark on a new service between Almeria in southern Spain and Nador in Morocco.
I will not go over the background setting out how it came to try to start the service. Suffice it to say that my hon. Friend had the sense of it when he explained that there are two small Spanish enclaves on the north African coast, both surrounded entirely by the state of Morocco. One is Ceuta, which is opposite Gibraltar, and the other is Melilla about 15 miles north of Nador, which is the Moroccan port that Cenargo is seeking to gain entry to.
My hon. Friend is aware that there was a service from Marseilles to Nador. Until recently, on a heavily subsidised basis, it was carrying some of the traffic that the Moroccan authorities wanted to see in the port. I understand also that that service has recently been suspended. It is true that the authorities in Morocco are behind the general idea of the Cenargo service and want it to come to fruition.
My hon. Friend was right to say that EC regulation 4055/86 is the key regulation. It was adopted under the last-but-one United Kingdom presidency of the Community and it liberalised the freedom to provide international shipping services within the Community. My hon. Friend asked one or two questions about the United Kingdom's approach to the regulation and I will take this opportunity to remove any doubt that there may be, either in the minds of the members of the shipping community or in the minds of members of the Spanish Government, about the way in which we view the application of regulation 4055/86.
My hon. Friend was right that the provisions in the regulation were phased in over six years leading up to 1 January 1993. There were various derogations from the directive, which essentially—this is often the case with European legislation—allowed member states to bring 777 their national law into line with treaty obligations. It also allowed them to renegotiate any bilateral arrangements that were covered by the scope of the directive.
It is clear, however, that from 1 January 1993 all Community ship owners gain the right to operate freely between member states and between member states and third countries. That is precisely what Cenargo International is now attempting to do. The Government's view is that it is fully entitled so to do, to take advantage of the freedom that is conveyed to it under regulation 4055/86.
Sadly, the Spanish authorities have so far refused, as my hon. Friend said, to permit Cenargo to commence that service. They point to an agreement on maritime transport entered into in 1979 between Spain and Morocco, which governs ferry services between the two countries. However, as I have just said, regulation 4055 clearly states that previous bilateral agreements between member states and third countries should be discontinued or amended by 1 January 1993. That was precisely to ensure that the new single market rules were in place and working.
We understand that in any event—there is an irony here which will not be lost on my hon. Friend—the Moroccan authorities have waived the provision in the agreement on which the Spanish Government wish to rely. That is an interesting development. If the Moroccan Government insisted on the implementation of the previous bilateral arrangement, the Spanish Government could, presumably at least, point to that as the type of difficulty which they might have in implementing regulation 4055. But the Moroccan Government do not insist on the provisions of the 1979 bilateral agreement.
I make it clear to the House that we are drawn to the inescapable conclusion that the Spanish merchant marine ministry is in contravention of Spain's obligations under the regulation. The British Government wish to protect Cenargo's legitimate interests. The company has acted in the wholly justified belief that it was entitled to start its service from Almeria to Nador later this month. Indeed, it received a great deal of encouragement at a high level from the Moroccan Government. It also had support from the port management in Almeria.
The irony is that the authorities in Almeria recognise that the service would provide a considerable boost. That is where the previous service which operated from Marseilles to Nador is relevant. The demise of that service means that more business is available to the port of Almeria. Almeria is keen to diversify and boost its traffic levels. I understand that the relevant labour unions in Spain have also welcomed Cenargo's proposals. My hon. Friend the Member for Croydon, South may not have been aware of that, but my information is that that is the case.
So, having identified the opportunity provided by EC liberalisation to launch a new service, Cenargo has invested substantial sums of money in the infrastructure of the new operation, as my hon. Friend well knows. It has set up joint venture companies, acquired premises and set up an expensive computer reservations system. It has employed a considerable number of staff. I reiterate that the company is entitled to do that under the terms of the directive, and has been since 1 January.
778 I accept with great regret that the company will incur substantial losses if the service cannot begin on time. My hon. Friend made a point about recovery through the courts. He is a lawyer of some distinction and he will know that ultimately those losses will be recoverable through the courts, certainly on the basis of the legal framework that I have outlined. He made a comment about the speed of process in Spain. He will forgive me if I do not personally add a gloss to that. Suffice it to say that I understand the strength of the argument that he makes.
Recovery of costs through the courts could take far longer than is commercially desirable. In the meantime, Cenargo has left a substantial amount of money dead. The money cannot be used. The company has been frustrated in providing the service.
It is bad enough to look at the impact on Cenargo, but my hon. Friend has done the House a service, because he has highlighted the wider, important issue of principle. This is all about what the liberalisation of shipping services was intended to achieve. The British Government have taken the view that liberalisation is one of the most important achievements of the Community. The Council of Ministers worked hard to create an effective competitive framework within which Community shipping services could develop to the benefit of both the industry and users. A failure to permit Cenargo to start its proposed service would undermine that important policy.
I am sure that Opposition Members would join my hon. Friend and me in asking what is a single market without precisely that sort of liberalisation and without precisely such permission being available to non-national companies to provide such a service within previous national boundaries. My hon. Friend is right to say that the principle of the single market is at issue in this matter.
We are aware of the Spanish concern that Cenargo's proposed service might lead to unwelcome competition to Spanish ferry services on the route to Melilla. As my hon. Friend has said, Melilla has a population of about 8,000. It is a crowded port and it relies on delays for its own survival. Such gives Mellila the vestigial economic sustenance that it requires. If traffic disappeared in favour of a far more direct and sensible route between Almeria and Nador that would cause concern in Melilla.
Liberalisation cannot succeed, however, if member states are allowed to ignore binding Community legislation simply because of inconvenient internal domestic considerations. From time to time, we all have great inconveniences visited on us in the name of the single market. Most hon. Members and most British people see that as one of the prices that we must pay for the opportunities that are gained by membership of that single market. We cannot have a situation in which member states are simply allowed to ignore binding Community obligations.
I hope that my hon. Friend will be aware from my response that we take this matter seriously. I am sure that he will want to know what pressure we have brought to bear on the Spanish to comply with their Community commitments.
On 24 March, my right hon. Friend the Secretary of State for Transport wrote to Señor Matutes, the European Commissioner for Transport to explain why the United Kingdom Government view this matter with such concern. We asked Señor Matutes to use his influence to persuade the Spanish Government to reconsider their policy. Failing a satisfactory and speedy resolution of the matter, my right 779 hon. Friend urged the Commissioner to institute infraction proceedings against Spain under the terms of article 169 of the treaty of Rome. We understand that the Commission has now agreed to initiate those proceedings.
I agree with my hon. Friend that the infraction process takes a great deal of time to complete. A number of steps are built into it, quite properly, at various stages to enable the parties to those proceedings to produce considered responses. I fear that we cannot look to that process to produce a quick result. A finding that Spain is in breach, however, would be of great assistance to Cenargo in the legal proceedings on which it would subsequently embark.
That is not the totality of the representations that Her Majesty's Government have made. My right hon. Friend the Secretary of State has also written to Mr. Borrell, who is his counterpart in the Spanish Government. The letter was delivered by our ambassador in Madrid and, in conveying that letter, our ambassador left the Spanish Government in no doubt about the significance that we attach to the matter. Our letter made it clear that the United Kingdom regards it as being of the highest importance that European Community member states fulfil their obligations to liberalise shipping services, in line with regulation 4055 and it specifically urges Mr. Borrell to intervene to permit Cenargo to proceed. I cannot tell my hon. Friend of the detail of any response to that letter, but I assure him that I will do my best to acquaint him with any subsequent developments on that front.
My hon. Friend referred to the intervention of my 'noble Friend the Minister for Shipping, who addressed the issue with his Spanish counterpart in the margins of the recent Transport Council. He has told me that he left his Spanish counterpart in no doubt whatever about his strength of feeling on the matter and, knowing my noble Friend as we both do, I imagine that there can be little doubt in the mind of the Spanish Government.
Incidentally, quite apart from parliamentary and ministerial colleagues, my officials also take every opportunity to make representations to their opposite numbers during normal contacts over other European Community shipping business. Our embassy in Rabat has been in close touch with senior officials in the Moroccan Ministry of Fisheries and Mercantile Marine and been assured of Morocco's support for Cenargo's proposed operation.
The House will be aware that within Europe there is the Council on Trans-European Networks, which is seeking to develop a network of European through routes, and such routes may be susceptible to funding on a Europewide basis. At a meeting in Brussels, the United Kingdom Government entered a reservation on Spain's suggested additions to the combined transport network to cover rail 780 and sea links at Spanish Mediterranean ports for onward shipment to north Africa. The essence of Her Majesty's Government's arguments on that occasion was that a Community network should obviously include facilities that are open to all European Community operators and not only to home country operators.
It is untenable that the Spanish Government should be trying to include in a European Community network plan routes that are described as part of the trans-European network, but which are to be open only to one national carrier. Her Majesty's Government have made it clear that, in relation to the proposed Thames development, they propose to press that point strongly.
My hon. Friend has done the House a favour in allowing us to air the issue today. I hope that I have reassured him that we view the present situation with as much dismay as he does. My view, and that of my colleagues in the Department, is that Cenargo is fully entitled to expect to mount its new service without obstruction. That is just the kind of operation that Community legislation is designed to facilitate. There is every reason to suppose that it would bring substantial benefits to potential customers and to all those involved in providing the service.
We are disturbed that the problem has arisen. As I said earlier, the success of the Community depends on all member states working together, to agree effective legislation in the first place, and then implement it without discrimination or qualification. There can be no unilateral decision on whether to comply with the obligation that member states have undertaken.
The Government greatly value their relationship with Spain. We believe that the two countries' good relations have brought substantial mutual benefits in the past and can lead to more in the future. But we are concerned that an issue such as the Cenargo affair could throw that relationship off course. We believe that it is highly desirable that our two countries co-operate to the full over the many difficult transport issues that the Community faces. It would be extremely regrettable if that co-operation were to be impaired because of Spain's failure to meet its obligations over Cenargo's proposals.
I am pleased that the Commission has taken the first steps to rectify the situation. But, as I said earlier, infraction proceedings will not supply the quick remedy that Cenargo and its potential customers have a right to expect. My hon. Friend can be assured that the Government will continue to take every opportunity to bring about an early resolution to the problem and that we will continue to do so until the obstacles that Cenargo has encountered are removed.