The Adverse Effects of the

Turkish Restrictive Measureson

Cyprus and EU Maritime Transport and the Free Trade

1

1987 Turkey introduced restrictive measures to the Cyprus flag vessels calling at Turkish ports

1997 Turkey’s restrictive measures were extended to all ships, irrespective of flag, which had indirect or even negligible connection with Cyprus

Turkish Restrictive Measures

2

Turkish Restrictive Measures

• selective and discriminatory

• affect shipping engaged in international trade

• freedom of navigation

• freedom of transit

• freedom of access to ports and harbors

• equality of treatment

• violate all commercial principles in shipping [Council Regulation (EEC) No 4055/86 and No. 4058/86]

3

The EC–Turkey Association and Customs Union(1963 Ankara Agreement and its 1970 Additional Protocol and Decision No.1/95 of the EC-Turkey Association Council) Article 5 of Decision No 1/95:

Quantitative restrictions and measures having equivalent effect are prohibited. According to the case-law of the European Court of Justice, measures placing restrictions on means of transport constitute measures of equivalent effect to quantitative restrictions on imports.

Article 58 of the 1970 Additional Protocol: The arrangements applied by Turkey in respect of the Community in the fields covered by the Protocol (freedom to provide services and transport are covered, respectively, by Articles 41 and 42 of the Protocol), shall not give rise to any discrimination between Member States, their nationals and their companies or firms.

The EU Legal Dimension

4

The EC–Turkey Association and Customs Union(1963 Ankara Agreement and its 1970 Additional Protocol and Decision No.1/95 of the EC-Turkey Association Council) Article 7 of the 1963 Ankara Agreement:

Contracting Parties must take all appropriate measures to ensure the fulfillment of the obligations arising from the Agreement and must refrain from any measures liable to jeopardize the attainment of the objectives of the Agreement

Article 9 of the 1963 Ankara Agreement:Prohibits any discrimination on grounds of nationality

Article 41 of the 1970 Additional Protocol: The Contacting Parties must refrain from introducing between themselves any new restrictions on the freedom of establishment and the freedom to provide services.

The EU Legal Dimension

5

Declaration by the European Community and its Member States adopted on 21 September 2005, following the Declaration made by Turkey upon signature on 29 July 2005 of the Ankara Agreement Protocol

Paragraph 3 of the Declaration provides: “The European Community and its Member States expect full, non-discriminatory implementation of the Additional Protocol, and the removal of all obstacles to the free movement of goods, including restrictions on means of transport. Turkey must apply the Protocol fully to all EU Member States. The EU will monitor this closely and evaluate full implementation in 2006. The European Community and its Member States stress that the opening of negotiations on the relevant chapters depends on Turkey’s implementation of its contractual obligations to all Member States. Failure to implement its obligation in full will affect the overall progress in the negotiations…….” .

The Negotiating Framework for Turkey adopted by the EU on 3 October 2005 makes specific reference to “The fulfillment of Turkey's obligations under the Association Agreement and its Additional Protocol extending the Association Agreement to all new EU Member States, in particular those pertaining to the EU-Turkey customs union”.

The EU Legal Dimension

6

The General Affairs and External Relations Council’s (GAERC) Conclusions of December 11, 2006 (endorsed by the European Council on 14/15 December).

“The Council recalls the declaration of the European Community and its Member States of 21 September 2005 and notes that Turkey has not fulfilled its obligation of full non-discriminatory implementation of the Additional Protocol to the Association Agreement”.

“The Council agrees that the Member States within the Intergovernmental Conference will not decide on opening chapters covering policy areas relevant to Turkey’s restrictions as regards the Republic of Cyprus until the Commission verifies that Turkey has fulfilled its commitments related to the Additional Protocol”.

In parallel, “The Council agrees that the Member States within the Intergovernmental Conference will not decide on provisionally closing chapters until the Commission verifies that Turkey has fulfilled its commitments related to the Additional Protocol”.

The EU Legal Dimension

7

Turkey’s restrictions to Cyprus and consequently to EU shipping appears every year in the European Commission’s Report on Turkey’s Progress towards accession.

The 2010 Progress Report on Turkey, presented by the European Commission on 9 November 2010, states that “ ‘Transport Policy’ is one of the eight chapters covered by the conclusions on Turkey adopted by the Council (General Affairs and External Relations) on 11 December 2006 and endorsed by the European Council on 14/15 December 2006. As long as restrictions remain in place on the free movement of goods carried by vessels registered in Cyprus or where the last port of call was in Cyprus, Turkey will not be in a position to implement fully the Acquis relating to this chapter” (Chapter 14 on Transport Policy).

The EU Legal Dimension

8

The actual direct annual costs for the economy of the Republic of Cyprus,

based on 2008 data, were estimated at 138.5 million EUROS

representing around 1.3% of the GDP

3 important sectors of the national economy of the Republic of Cyprus were adversely

affected:

• The Register of Cyprus ships

• The Cyprus ports industry

• The Cyprus ship management sector

Economic Consequences

National Dimension

9

The Register of Cyprus ships

Annual loss of earnings of 3.5 million EUROS

No. of Ships %

Gross Tonnage%

Government Revenue

%

Average growth 1977-1987

6,62 22,09 15,70

Average growth 1988-1997

3,57 4,05 6,57

Average growth1998-2009

-3,50 -1,44 1,35

Average Growth of the Cyprus fleet

Economic Consequences

National Dimension

10

The Cyprus Ports Industry

Annual loss of earnings of 100 million EUROS

• The shipping lines (mainly of EU interests) which were using the ports of the Republic of Cyprus as their transshipment hub for the Eastern Mediterranean region, were obliged to abandon Cyprus and use other neighboring non Community ports for such operations.

• Certain shipping lines which have been serving the Cyprus trade for many years, were compelled to change their schedules accordingly. In the late 1990s, major lines abandoned Limassol in favor of non Community ports.

Economic Consequences

National Dimension

11

The Cyprus Ports Industry

Economic Consequences

National Dimension

0.000

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

TOTAL TEUs IN TRANSIT

Series1 205.345273.406272.734221.499228.462298.370245.747234.678420.973256.700 49.510 64.027 68.973 41.132 23.287 27.602 48.774 49.065 59.200 34.383 57.613 33.4221988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

12

The Cyprus Shipmanagement Sector

Annual loss of earnings of 35 million EUROS

Total fleet managed from Cyprus represents:- 25% in terms of vessels- 25% in terms of gross tonnageof the world third-party ship management market

Ships managed by a ship management company located in Cyprus can either be arrested or delayed when calling Turkish ports, resulting in substantial financial losses for the ship managers and/or shipowners.

The Turkish restrictive measures seriously affect private and public interests of the EU, including EU shipowners and EU shipmanagers based in Cyprus, as well as sea-trade between the EU and Turkey.

Economic Consequences

National Dimension

13

Cyprus flag vessels represent 12% of the EU fleet

24%

76%

Nationality of Ownership of the Cyprus Fleet

These ships are not allowed to trade in Turkey

Economic Consequences

EU Dimension

14

No. of vessels

Gross Tonnage (millions)

CY flag vessels 1000 20

EU flag vessels managed from Cyprus 400 9

Non-EU flag vessels managed from Cyprus (90% involve EU interests)

1400 25

Total 2800 54

Economic Consequences

EU Dimension

15

These ships are not allowed to trade in Turkey

1400 EU flag vessels of around 29 million Gross Tonnage

i.e. 16% of the EU fleet are not allowed to trade in Turkey

EU Merchant Fleet 2009

CY flag vessels12% EU flag vessels

managed from Cyprus

4%

Rest of EU flag vessels84%

Economic Consequences

EU Dimension

16

1400 Non-EU flag vessels of around 25 million Gross Tonnage

managed from Cyprus (out of which 90% involve EU interests)

are not allowed to trade in Turkey

Non-EU Merchant Fleet Managed from Cyprus (GT)

EU Interests90%

Non-EU Interests

10%

Economic Consequences

EU Dimension

17

Since Cyprus accession to the EU, a number of incidents of the application of the Turkish restrictive measures against Cyprus shipping have been reported.

Turkey applies these restrictive measures to non Cypriot flag vessels which have an indirect or even negligible connection with Cyprus.

Most of the incidents involve EU actors and most of them have strong Community interests (i.e. EU beneficial owners, ship-managers and charterers of the affected vessels).The following 9 indicative incidents have been extensively reported to the EU institutions by the Republic of Cyprus and the whole issue of Turkey’s restrictions to Cyprus and consequently to EU shipping has appeared in the European Commission’s Reports on Turkey’s Progress towards accession for the past 11 consecutive years.

Incidents of the application of the Turkish Restrictive Measures

since Cyprus accession to the EU

18

Vessel FlagRegistered Owners - Managers - Cargo information - Charterers

Port of destination /date of

call

CAPE BIRD Marshall Islands

Owners: Cape Bird Shipping Company Limited MI – Company of German interestsManagers: Columbia Shipmanagement Ltd CyprusChartered by: Pepsol Petroleo S.A (RYTTSA) SpainCarrying unleaded gasoline.

Mersin 12/07/2004

HAPPY BRIDE

Isle of Man

Owners: Highland Shipping S.A. of Panama Managers: Hanseatic Shipping Co. Ltd, CyprusCharterers: Unigas International B.V.,Netherlands Carrying Vinyl Chloride Monomer (4,008.974 tons)

Aliaga 27/08/2004

ATLANTIC CLIPPER

Antigua &

Barbuda

Vessel previously under the Cyprus flag. Sold to foreign buyers and deleted from the Cyprus Register of Ships on 25 August 2004

Istanbul01/09/2004

SEYCHELLES

PRIDE

Seychelles

Owners: Seychelles Petroleum Company Limited – Company of German interests Managers: Columbia Shipmanagement Ltd CyprusCharterers : J&S Service and Inv. Ltd Cyprus Carrying Aviation fuel (5633 mt JET A1) for the account of Exxon Mobil

Ceyhan: 18/09/2004

Incidents of the application of the Turkish Restrictive Measures

since Cyprus accession to the EU

19

Vessel FlagRegistered Owners - Managers - Cargo information - Charterers

Port of destination /date of

call

TRINITY SIERRA

CyprusOwners: Thesarco Shipping Co S.A. of Piraeus Carrying 26 000 tons of wheat from the port of Kerch, Ukraine to Barcelona, Spain

Bosporus Straits:

27/08/2004

HANS SCHOLL.

LiberiaOwners: Lohmann Shipping Ltd Liberia-German CoManagers: Chemtrans Overseas (Cyprus) Ltdchartered by: Maersk Copenhagen and sub chartered to B.P. Oil International, Carrying cargo of 27.000 metric tons of unleaded gasoline.

Dortyol08/08/2005

ABLE F Cyprus Vessel loaded at Gioia Tauro, Italy carrying cargo for Mersin, Turkey

Mersin: 22/02/2006

PONTOPOROS

Greek Carrying iron from the port of Liverpool, UK to the port of Karabiga, Turkey. Denied access to the port due to the fact that the vessel was previously flying the flag of the Republic of Cyprus

Karabiga:03/05/2006

GANYMEDES Cyprus Sailing Yacht owned by: Northshield Shipping Co. Ltd. CyprusShareholders: Mr Anthony John WATTS and Mrs Margaret Alice Robertson WATTS, both being British nationals

Gocek: 29/06/2006

Incidents of the application of the Turkish Restrictive Measures

since Cyprus accession to the EU

20

Negative Effects on EU Policies and

Objectives Hinders the development of the EU objectives such as the “Motorways of

the Seas” and “Short Sea Shipping”

Hinders free trade between EU ports and Turkey

Weakens the negotiating position of Cyprus and consequently of the EU in international maritime organisations and other fora

Interests of EU shipowners owning Cyprus flag vessels (76.5% of the Cyprus fleet) are seriously prejudiced

Interests of EU Shipowners – charterers operating vessels managed from Cyprus are seriously affected

Reduces the competitiveness of the Cyprus and EU fleet vis-à-vis vessels registered in third countries trading with Turkey

Incites EU shipowners /charterers trading with Turkey to relocate and reflag their vessels in third countries

Aggravates the competition problem faced by the European fleet from vessels registered in third countries

21

Thank you!

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