New Rules for Undertaking Maritime

On 3 December 2016, Egypt’s Supreme Constitutional Court found the decision by the Minister of Transport, determining the consideration for the use of licenses to undertake maritime related logistics services, unconstitutional. As a result, the Minister of Transport – on 15 December 2016 – issued a replacement decision after taking the necessary steps to ensure the constitutionality of the new decision. This replacement decision did not just amend the constitutionality issues, but it also covered the regulations for undertaking such services, introduced new regulations for previously unregulated services and significantly increased the cost of doing maritime related logistics services in Egyptian ports.

Background

Maritime transport in Egypt is primarily regulated by the Law on the Egyptian General Corporation for Maritime Transport (the “Maritime Law”).^[1] The Maritime Law granted the Minister of Transport the power to regulate all maritime related logistics services,^[2] which include shipping agency, loading and unloading, warehouses, container handling, marine supplies, repair and maintenance of ships. The Minister of Transport is also given the power to determine the other services that may be considered as a maritime related logistics service. In addition to setting the conditions for licensing, the Maritime Law also gave the Minister of Transport the right to set the consideration for using those licenses in Egyptian ports. For example, a licensed container handling company is charged a fee for each container it handles within a given port. This right may not, however, be exercised unless an approval from the Cabinet of the Ministers is obtained.

The Constitutional Court’s Decision

Last December, the Constitutional Court issued a ruling (the “Ruling”)^[3] that found the decision of the Minister of Transport setting the consideration for using the license to carry out maritime related logistics services (“Decision 521”)^[4] to be unconstitutional. The Court based its ruling on the grounds that the Minister of Transport did not follow the procedures specified by the legislature in determining the consideration for using the licenses. In particular, the Court specifically required the obtainment of the approval of the cabinet of ministers on the proposed consideration, which the Minister of Transport failed to obtain prior to issuing Decision 521. Accordingly, Decision 521 has become – in its totality – void and a new legislation became required to cover the gap.

The New Decision

On the same day the Ruling was published in the Official Gazette, the Minister of Transport issued a new decision replacing Decision 521 (“Decision 800”).^[5] Decision 800 does not only mend the unconstitutionality of Decision 521, but it also revokes four other related decisions and re-regulates their subject matter. These four decisions regulate (i) the use of the value of the subscriptions to the sailors club,^[6] (ii) the consideration for the use of the lands, open and closed warehouses and similar constructions,^[7] (iii) shipping agency fees including the fees to be paid for passing through the Suez Canal, and most importantly,^[8] (iv) the conditions for licensing the performance of maritime related logistics services in Egyptian ports (“Decision 520”).^[9] Accordingly, Decision 800 is a major decision that regulates all of the above issues in addition to others.

Covered Services

Decision 800 covers a wide range of services. Seven of these services (shipping agency, loading and unloading, warehousing and storage, maritime services, maritime supplies, fuelling, and repair and maintenance of ships) require licensing. This requirement is not new. Licensing requirements and procedures were previously stated in the revoked Decision 520 and they are reinstated in Decision 800 with minor amendments (save for the major ones we discuss below). In addition to those seven main services, Decision 800 regulates 37 other complementary services and professions that require registration with the relevant port authority (as opposed to licensing), such as transfer of goods, diving, sale of food and beverages, maintenance of firefighting equipment, security, etc. These services and professions were previously regulated by each port authority separately. By issuing Decision 800, the conditions, procedures and fees for registration and de-registration are unified across the Egyptian ports. It is worth mentioning that the registration fees vary from EGP 50 for services like guarding and sewing to EGP 15,000 for the more sophisticated services. Registration is open for Egyptian nationals above 18 years of age and Egyptian companies only.

Minimum Capital Requirements

One of the most crucial amendments that this decree introduces is a significant increase in the minimum required capital for all seven services. For example, the minimum required capital for shipping agencies now ranges from EGP 100K to 2M depending on the ship tonnage up from a range of EGP 50K to 750K; the minimum required capital for warehouses and storage services has been increased from EGP 10M to 20M, and that of maritime services and supplies from EGP 50K to 250K. As to loading and unloading companies, Decision 800 has introduced more subcategories under this service based on the type of goods being loaded and offloaded (whether liquid, solid, container) and the location of the service. Most significantly, the minimum required capital for companies specialising in loading and unloading of containers has been increased from EGP 100M to 200M. Licenses to carry out loading and unloading services of all kinds of goods and containers everywhere will no longer be granted as such. Decision 800 introduces instead a license to undertake all loading and unloading services to the exclusion of containers and it set its minimum required capital at EGP 100M. In other words, Decision 800 separated between loading and unloading outside and inside container terminals which was not previously the case. Companies are generally given two years to comply with the new minimum capital requirements.

Guarantees

As a guarantee for the performance of their roles within Egyptian ports, companies undertaking any of the seven abovementioned services are required to provide a guarantee to the Maritime Department at the Ministry of Transport. Previously, this guarantee could be given in the form of a bank cheque or a letter of guarantee. Decision 800 requires that such guarantee is given in the form of a letter of guarantee that is to remain valid during the term of the license. As with the minimum required capital, the values of the letters of guarantee has been increased and introduced for the first time with respect to some services. For example, warehousing and storage companies are now required to provide this guarantee for the first time. In this instance, the value of the letter of guarantee is required to EGP 500K. With respect to shipping agencies, the value of the letter of guarantee previously ranged from EGP 25K-250K depending on the ship tonnage. Now, the range has been increased to EGP 50K-300K. It is, however, to be noted that shipping agents for ships, the tonnage of which falls between 400 and 1000 tons will benefit from this amendment as they will be required to pay EGP 50K instead of EGP 125K. This is due to the increase in the tonnage threshold for the ships falling within the smallest category; it was 400 tons ships and it was increased to 1000 tons. With respect to loading and unloading companies, the value of the required guarantee has been increased from EGP 100-500K to 150-600K.

Fees for Issuing a New License and Renewal and the License Term

Decision 800 introduces a new fee that is required to be paid for issuing and renewing licenses. The value of the fees ranges from EGP 3K for ship repair and maintenance licenses to EGP 300K for maritime services and supplies. A shipping agency license costs EGP 5-50K depending on the ship tonnage and a loading and unloading license costs 100-250K. The term of the licenses has been halved for loading and unloading and warehousing licenses from 10 to 5 years only. As to maritime services and supplies and ship repair and maintenance licenses, their term has also been decreased from 5 to 3 years. The term of the license for shipping agencies and fuelling of ships remained at 5 years. Accordingly, companies are not only required to pay a fee for obtaining a new license or renewing it but the term of the license has also been reduced significantly in many cases.

Consideration for use of Licenses

In addition to the new licensing fees, Decision 800 has dramatically increased the consideration payable by the licensed companies for “utilizing the license”. This consideration is calculated with reference to the number of ships being serviced or cargo tonnage or containers being handled. A full review of the increase in such considerations will be required for licensed companies.

Fees for passing through the Suez Canal

Decision 800 also sets new fees for passing through the Suez Canal. The new fees for all vessels (including touristic vessels) are double the old fees for vessels with tonnage less than 40K tons. As to vessels with a higher tonnage than 40K tons, the rate per each additional 10K tons has been more than tripled rising from USD 75 per 10K tons to USD 250 per 10K tons.

Commentary on the New Regulations

From a purely legal perspective, the issuance of Decision 800 has achieved a number of recommended legal goals. Firstly, it swiftly replaced a decision recently found to be unconstitutional, thereby avoiding the continuance of a legislative gap for a longer period of time. Secondly, Decision 800 unified the provisions of five different decisions related to the same subject matter into one decision; this is a highly needed action particularly with respect to maritime legislations which are numerous and sometimes overlapping and contradictory. Thirdly, it pushed the threshold for doing business in ports in Egypt, an action that will push businesses to consolidate their activities and possibly their existence through mergers and acquisitions.   ^[1] Presidential Decree-Law No. 12/1964 establishing the Egyptian General Corporation for Maritime Transport, Official Gazette, Issue No. 5, 6 January 1964. ^[2] Maritime Law No. 12/1964, Art. 7. ^[3] Constitutional Court Decision in Case No. 304 for the Judicial Year 29 declaring the non-constitutionality of the Minister of Transport’s Decision No. 521/2003 determining the consideration for the use of licenses to undertake maritime related logistics services. ^[4] Ministry of Transport’s Decision No. 521/2003 on the fees for using licenses granted to undertake maritime transport services and maritime related logistics services in Egyptian Ports, Egyptian Gazette, Issue No. 293, 27 December 2003. ^[5] Ministry of Transport’s Decision No. 800/2016 issuing the regulations for undertaking maritime related logistics services and their consideration, Egyptian Gazette, Issue No. 282 (cont.) (b), 15 December 2016. ^[6] Ministry of Transport’s Decision No. 180/2003 on the use of the value of the subscriptions to the sailors’ club, Egyptian Gazette, Issue No. 163, 21 July 2003. ^[7] Ministry of Transport’s Decision No. 73/2003 on the consideration for the use of the lands, open and closed warehouses and similar constructions in Egyptian Ports, Egyptian Gazette, Issue No. 59, 17 March 2003. ^[8] Ministry of Transport’s Decision No. 332/2003 on the shipping agency fees including the fees to be paid for passing through the Suez Canal, Egyptian Gazette, Issue No. 183, 14 August 2003. ^[9] Ministry of Transport’s Decision No. 520/2003 on the conditions for licensing the performance of maritime related logistics services in Egyptian ports, Egyptian Gazette, Issue No. 292, 25 December 2003.