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EU-flag requirement starts to bite for Greeks as new law kicks in

Hellenic shipowners will henceforth have to make sure the share of their vessels flying European flags does not decline.

For every vessel that Greek shipowners put under one of the usual international registries based in the tropics, they will soon have to register a comparable ship under a European jurisdiction.

That is broadly the upshot of a Greek government directive published a few weeks ago, as part of efforts to harmonise the country’s shipping legislation with European Union rules.

European rules obliging commercial fleets owned or managed out of the continent to put a certain number of their ships under local flags are not new.

They first appeared in the EU maritime guidelines — a text the bloc adopted in 1997 and updated in 2004 — to lay down ground rules for state aid to the shipping industry.

However, this is the first time that the requirement is incorporated into Greek law, following years of tough negotiations with EU authorities that have also led to other tweaks to Greek ship taxation that TradeWinds has already reported on.

The government edict essentially obliges owners or managers operating out of Greece to increase, or at least maintain, the share of their fleets flying European flags.

A flag counts as European if it is governed by one of the EU’s 27 member states, or by Norway, Iceland and Liechtenstein — the three countries that together with the EU form the European Economic Area (EEA).

The legislation obliges authorities to compute annually the share of Europe-flag ships under Greek management — both at aggregate national and individual company level.

Firms whose Europe-flag fleet shares are found to have been shrinking will be asked to make up for the shortfall within a year by putting tonnage under an EU or EEA flag.

If companies continue being in non-compliance, their excess, non-European tonnage will no longer be eligible for the preferential tonnage tax regime that taxes shipowners at rates far below the general corporate rates.

Clarifications are coming

The government circular has caused concerns in Greek shipping circles, with many players claiming to have been caught by surprise.

Others are pointing to a lack of clarity in the legislation.

One ambiguous clause temporarily justifies a rise in the share of non-Europe-flag ships if the increase stems from “unforeseen circumstances significantly affecting uninterrupted maritime activity of the commercial operation of ships under EU and EEA flags”.

Could EU sanctions against a third country, for instance, be interpreted as triggering such an exemption?

Another potential weak point is that Greek authorities will start pushing individual companies to comply only after finding that the share of Europe-flag ships has decreased at aggregate national level.

This sequence may create perverse incentives.

Some owners, for instance, might feel they can continue piling up vessels under the flags of Panama, Liberia, the Marshall Islands or Palau if they expect it will be other peers instead who increase their registrations in Greece, Cyprus, Malta or Madeira.

Knowledgeable observers admitted that the legislation has unclear points and said they will be addressed in a clarification to be published soon.

Asked to comment on the issue, a major Greek owner with years of experience in maritime policy said the new rules will not pose any fundamental challenge to the country’s shipping.

“At first glance it sounds dramatic, but it’s not,” said Panos Laskaridis — a former senior official with the Union of Greek Shipowners and European Community Shipowners’ Associations.

“Some fleets may have to make some adjustments and put some ships, but not many, under some European flag,” he told the Naftemporiki shipping conference last week.

According to United Nations data corroborated by knowledgeable Greek shipping sources, the share of the Greek-controlled fleet under European flags is about 35% of the total.

That is far below an indicative 60% European fleet requirement set out in the EU maritime guidelines.

However, in the Greek legislation, the 60% mark is not meant as a hard target to which the Hellenic fleet has to aspire and eventually rise to. Instead, it serves as a bonus for owners who are already safely above the 60% mark in freeing them from any further EU-flag obligation.

Flying the flag of their home country is often a source of pride for Greek owners.

However, its take-up has been falling in recent decades as it is tied to onerous conditions — mainly minimum Greek manning requirements that oblige owners to hire a crew that is expensive or simply unavailable because of falling seafarer numbers.


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