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20 May 2015
In recent years there has been a decrease in the number of vessels registered in the Norwegian International Ship Register due to strong competition from other registries. The government-appointed Trading Limit Committee has now proposed significant changes in order to make it more attractive for owners to register their vessels in the Norwegian International Ship Register.
There are two Norwegian ship registries: the Norwegian Ordinary Ship Register (NOR) and the Norwegian International Ship Register (NIS).
Vessels registered in NOR are not subject to trading limits and are consequently allowed to trade in Norwegian coastal waters and on the Norwegian continental shelf. However, NOR-registered vessels are subject to Norwegian pay and working regulations, which increases the operating costs. To some extent the higher costs are compensated by the so-called 'net pay' arrangement, pursuant to which the owners may, in certain circumstances, obtain refunds of some of their crew-related taxes.
Vessels registered in NIS are subject to trading limits which, to a large extent, restrict them from carrying passengers or cargo between Norwegian ports, including oil and gas installations on the Norwegian continental shelf, and from carrying passengers in regular service between Norwegian and overseas ports. NIS vessels are entitled to employ their crew in accordance with the rules of the domicile of the crew. The net pay arrangement does not apply to these vessels. The reason for these restrictions is to protect vessels registered in NOR from competition from those registered in NIS.
Since foreign-registered vessels are not subject to any of these requirements, an increasing number of vessels operating in Norwegian coastal waters and on the Norwegian continental shelf are flying the flag of more cost-favourable jurisdictions.
The Trading Limit Committee has submitted two reports, in September 2014 and January 2015 respectively, recommending changes in the regulations concerning crewing and trading limits in order to attract more ships to the Norwegian registries.
The intention is to:
The committee's recommendations are directed towards four main trades: coastal trade, offshore trade, ferries calling at overseas ports and overseas trade.
The committee has noted that offshore construction vessels are to a larger extent registered in foreign registries compared to other offshore vessels. Therefore, the committee has suggested exempting offshore construction vessels registered in NIS from the trading limits, which would mean that they could operate on the Norwegian continental shelf. Further, it has suggested to increase subsidies related to wages for such vessels to a level similar to the current net pay arrangement for NOR vessels.
To increase the ability of NOR-registered vessels to compete in Norwegian coastal trade with foreign-registered vessels with lower crewing costs, the Trading Limit Committee has recommended that certain limitations in the net pay arrangement for vessels registered in NOR are removed.
Most of the vessels that trade worldwide and call at Norwegian ports are registered in foreign registries. In order to attract these vessels to NIS, the committee has suggested relaxing the trading limits imposed on NIS vessels. It has been suggested that if the substantial part of the trading takes place outside Norwegian coastal waters, vessels registered in NIS will be allowed to carry cargo between Norwegian ports provided that this forms part of a regular or semi-regular service. This would enable vessels in these trades to be crewed with foreign seafarers and still fly the Norwegian flag.
At present, Color Line is the only ferry company which operates Norwegian-flagged vessels in regular service between Norwegian and overseas ports. In order to prevent Color Line from registering its ships in the Danish International Ship Registry, which is the alternative, and moving some of its land-based organisation to Denmark, the committee has suggested allowing passenger vessels registered in NIS to sail regularly between a Norwegian port and a port outside the Nordic countries. This would result in Color Line being able to use foreign seafarers on its service between Oslo and Kiel.
Further, the committee has suggested removing the limit applying to the net pay arrangement for foreign-going ferries if they are registered in NOR, and to increase subsidies related to wages on these vessels to a level similar to the existing net pay arrangement if they are registered in NIS.
Approximately 1,000 Norwegian-controlled vessels are trading worldwide under foreign flags. In order to attract these vessels to the NIS, the committee has suggested the establishment of a special net pay arrangement so that the crewing costs become competitive compared to foreign registries.
Further, the committee has suggested several other changes to the NIS, including:
There appears to be a consensus in business that the suggested changes are most welcome. However, it remains to be seen to what extent the government agrees with the changes proposed by the committee. In this respect, it should be noted that the trading limits for cruise ships registered in NIS have been relaxed in the wake of the proposed changes. This gives further hope that the Norwegian government intends to strengthen the national registries in their competition with foreign ship registries in the future.
For further information on this topic please contact Øyvind Axe, Hågen Hansen or Mattias Grieg at Wikborg Rein by telephone (+47 22 82 75 00), fax (+47 22 82 75 01) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Wikborg Rein website can be accessed at www.wr.no.
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