Supreme Administrative Court on reduced fairway dues when carrying empty containers

Introduction
Facts
Comment

Introduction

According to Section 1 of the Fairway Dues Act, "Fairway dues are payable to the government for ships engaged in merchant shipping in Finnish territorial waters". According to Section 2 of the act, 'merchant shipping' means operations carried out by ships for commercial purposes.

The amount of fairway dues will be reduced if a ship is not fully loaded according to the particular loading capacity utilisation rate, which is calculated by comparing the combined total of cargo imported into and exported out of Finland. According to Section 11 of the act, dues for a cargo ship are reduced by:

• 75% if the ship's loading capacity utilisation rate is 15% or less; and
• 50% if the loading capacity utilisation rate is more than 15% but not higher than 30%.

The loading capacity utilisation rate is calculated by comparing the figure showing the combined total of cargo imported into and exported out of Finland, as indicated in metric tonnes, with a figure that is 90% of the ship's deadweight. When the ship's utilisation rate is calculated, the ship's cargo in transit is added to both the imported and exported cargo.

According to the legislature, reducing fairway dues as a result of reduced loading capacity are based on established practice and must therefore be included in the act. However, the established practice is not explained anywhere and Section 11 has been subject to considerable interpretation.

It is unclear whether Section 11 applies to the carriage of empty containers for free. On March 23 2017 the Supreme Administrative Court rendered a decision stating that a ship carrying a shipping company's empty containers is entitled to the loading capacity reduction, while, on the other hand, a ship carrying empty containers that are not owned by shipowners or charterers is regarded as carrying cargo, irrespective of whether the carriage is remunerative.

Facts

On July 2013 a container ship unloaded cargo containers at the port of Kotka. The ship was also carrying the shipping company's empty containers as transit cargo from Kronstadt to Hamburg. Customs charged fairway dues without granting any reduction and denied the shipowners' claim for a 50% reduction as per Section 11 because the transit cargo was to be taken into account when calculating the loading capacity utilisation rate.

However, in 2006 the Board of Customs issued application instructions on the carriage of empty containers and other transportation platforms. Various shipping interests, such as the Finnish Shipowners Association and the Finnish Shipbrokers' Association, were informed about the application instructions. According to the instructions, carrying empty containers and similar transport platforms free of charge is not regarded as merchant shipping in the meaning of Sections 1 and 2 of the act. Similarly, such empty containers and other transport platforms are not regarded as cargo in the meaning of Section 11.

The shipping company appealed to the Helsinki Administrative Court on several grounds. The court overruled the customs decision by referring to Section 6 of the Administrative Procedure Act (434/2003), which states that the acts of the authority will protect legitimate expectations according to law.

The court held that the requirement of trust in Section 6 of the Administrative Procedure Act means justified expectations towards the acts of the authority. As the shipping company had a justified reason to trust the Board of Customs instructions, the customs decision was wrong and will be reviewed.

The Supreme Administrative Court granted Customs leave to appeal but did not revise the Helsinki Administrative Court decision. The Supreme Administrative Court first considered whether empty containers owned by those other than shipowners or charterers should be regarded as cargo in the meaning of Section 11 of the Fairway Dues Act, because 'cargo' is not defined in the act. The Supreme Administrative Court held that such empty containers must be regarded as cargo even though their carriage takes place free of charge.

Second, the Supreme Administrative Court considered the effect of the customs instructions in this matter. Customs claimed that the Helsinki Administrative Court misinterpreted the instructions and that they were not comprehensive. The Supreme Administrative Court disagreed and held that the requirement of trust in Section 6 of the Administrative Procedure Act requires that the case be decided for the shipping company.

Comment

Shipping companies are trying to optimise their container usage due to the constant need for export containers in Finland. It is necessary that carrying empty containers to fill this shortage not be encumbered with a strict interpretation of law.

For further information on this topic please contact Matti Komonen at HPP Attorneys Ltd by telephone (+358 9 474 2207) or email (matti.komonen@hpp.fi). The HPP Attorneys Ltd website can be accessed at www.hpp.fi.