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Portsmouth (UK) under investigation

The European Commission has started an illegal state aids investigation regarding the municipally-owned Port of Portsmouth (UK)'s support for its stevedoring arm, MMD Shipping
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Following a complaint by a UK competitor, the European Commission has opened an in-depth investigation to assess several financing measures by Portsmouth City Council for the benefit of MMD Shipping Service Ltd, a wholly-owned subidiary of the Council since 2008.

The measures under investigation include:

  • annual revenue grants to cover trading losses of MMD provided by the Council as of 2009
  • a long-term financing facility by the Council
  • an acquisition of two Gottwald mobile harbour cranes by the Council and their subsequent long-term lease to MMD
  • a security for a bank overdraft facility by the Council

The investigation aims at establishing whether these measures provided MMD with an unfair advantage over its competitors, in breach of EU state aid rules. The Commission has already concluded that the terms of the original acquisition of MMD by PCC in 2008 were in line with market conditions and as such did not involve state aid.

Earlier this year Maersk started a new lo-lo service to Europe from Colombia to Europe, with reefer banana shipments for Fyffes being the anchor cargo and Portsmouth as the first inbound port.

The port stated subsequently that it was investing in more reefer plugs and reviewing its MHC crane line-up, possibly replacing three of the five in its fleet so that all of them would be able to handle loaded containers anywhere on the Maersk ships. 

The Council originally acquired MMD to stop it going out of business. It had no choice since without the business rates, pilotage fees, etc it was getting from MMD the port itself could have become financially unviable. However, there have been frequent complaints from Council Tax payers about MMD having to be bailed out.

Three years ago three MMD personnel were indicted for fraud and one received a gaol sentence.

The Commission's investigation comes at another difficult time. In August MMD workers staged a 3-day strike in a dispute over contracts, as the Council seeks to turn the company around. 

However, even if the Commission fast-tracks its inquiry, it will overlap with Brexit negotiations as the UK is now widely expected to invoke Article 51 of the Treaty of Lisbon during Q1 next year. The Commission's judgement will likely be made before Brexit negotiations (no more than two years) are concluded, but only the UK government can enforce it in any case.

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