Regulation on Pilotage and Towage Services
The Regulation on Pilotage and Towage Services (“Regulation”) was published in the Official Gazette dated 31 December 2018 and numbered 30642 (bis 4) and entered into force as of the same date. The Regulation introduces a two-level permit mechanism for pilotage and towage organisations, namely operations licences and service permits, and regulates the conditions thereof. This Newsletter provides a general framework of such requirements, conditions and consequences for the failure thereof, as well as other restrictive provisions of the Regulation.
Article 5 of the Regulation requires all organizations to obtain a suitable operations license in order to provide pilotage and towage services on behalf of the General Directorate of Maritime and Inland Waters Regulation (“Administration”). Operations licenses to provide pilotage and towage services shall be issued by the Administration under the categories of A, B and C. Organizations under the category A operations licenses are entitled to provide services in all service areas, having the category B operations license in category B and C service areas, and having the category C operations license in category C service areas, only.
The Administration is to determine such categories and, within one month following the publication of the Regulation, is to announce the service areas. As per Article 9/2 of the Regulation, pilotage and towage organizations shall have 30 (thirty) calendar days to make an application to obtain an operations license in order to provide pilotage or towage services following such announcement. Operations licenses are to be renewed every five years.
Requirements to Obtain Operations License
Articles 7 to 9 of the Regulation list the required information and documents to be submitted when applying for an operations license, as well as the qualifications that an organization must have. It is mandatory for such an organization to be established as a capital company, and to include in its articles of association that it shall engage in pilotage and/or towage services. All of the employees to work in pilotage and/or towage services are required to be Turkish citizens, and to be permanent employees of the relevant organization. All sea vessels to be used for the provision of pilotage and/or towage services must fulfil the conditions for being deemed as a Turkish vessel as per Article 940 of the Turkish Commercial Code, and to satisfy the requirements of Cabotage Law No. 815.
In addition to such corporate qualifications, the Regulation introduces various financial, technical and administrative competence conditions, separately, for each category of pilotage and towage operations licenses, regarding, among other things, the number of captains, as well as other persons to be employed, the number of sea vessels to be owned, and their dimensions, quality management systems to be implemented, and minimum capital.
The required documents include, among other things, a list of machinery and equipment to be used, as well as the method of acquisition thereof, documents evidencing that the organisation does not have any tax or social security debts, a list of those authorized to represent the organisation, as well as their signature circulars, and the competence certificates of the harbour pilots. The Administration is also required to issue a compliance report on the minimum technical qualifications upon on-site auditing and inspections. The Administration is entitled to introduce additional conditions.
Pursuant to Article 10 of the Regulation, all organizations are required to obtain a service permit in order to provide pilotage and towage services on behalf of the Administration within a service area. An organization must have an operations license as a prerequisite to obtaining a service permit.
According to Article 11/2 of the Regulation, within a service area, only one pilotage organization shall be granted with a service permit, and such organization cannot provide towage services within the same service area. On the other hand, Article 6/2 provides that the Administration may grant a service permit to, at maximum, (i) 3 towage organizations in category A service areas, (ii) 2 in category B service areas, and (iii) 1 in category C service areas.
Another limitation is included under Article 6/10 of the Regulation, according to which an organization may be authorized at a maximum of two services areas for its operations license, and at a maximum in three service areas, in total.
Terms of the service permits of pilotage and towage organizations are twenty, fifteen and ten years for category A, category B and category C service areas, respectively.
Public institutions and organizations, as well as organizations that have a concession right as a consequence of a privatization process, are exempt from the requirement to obtain a service permit as per Article 6/9 of the Regulation. In the event that such organizations do not actually provide pilotage and towage services by not making the necessary investments and/or do not prefer to do so, they are allowed to procure such services from an organization that has a suitable operations license, with the prior approval of the Administration.
Requirements to Obtain Service Permit
For the determination of the organizations to be granted with service permits, the Administration shall take into consideration various factors, such as the geographical, economic, strategic and security characteristics of the service area, characteristics of the shore facilities, as well as the zoning plan status, public interest, competence of the organizations in terms of employees, equipment and financial condition, number of harbour pilots or tugboats, and regional and corporate service experience of the organizations. The Administration shall also require from the organizations who apply for a service permit to provide a bid bond and the organizations whose applications have been accepted to provide a performance guarantee, both in the form of an unconditional bank letter of guarantee for an indefinite period of time, as described under Article 14 of the Regulation. The Administration is entitled to introduce additional conditions.
Other Restrictive and Punitive Provisions
The Regulation, through Articles 16 and 17, introduces several restrictive measures for towage and/or pilotage organizations, some of which are listed, below:
- Service permits, as well as operations licenses, cannot be transferred.
- Share transfers that will cause a change in the shareholding structure of the authorized pilotage and/or towage organizations, as well as of their shareholders, shall be notified to the Administrative for obtaining approval. The transferees are required to possess the conditions required as per the Regulation. In the event of a share transfer without obtaining the approval of the Administration, the service permit of the subject organization shall be cancelled.
- In the event of transfer of the port facilities, if the pilotage and/or towage services were being provided by the company who transferred the port facilities, the service permit shall be deemed cancelled without any notification. The company who acquired the port facilities is required to apply for a service permit within one month following the acquisition.
- Company owners, shareholders or those authorized to manage the company, as well as their first-degree family members in a pilotage and towage organization, cannot take office in another pilotage and towage organization, and cannot engage in operational business and transactions related to such sector.
Article 19 of the Regulation includes punitive provisions. Accordingly, certain administrative fines varying between TRY 100,000 to TRY 1,000,000 shall apply for the breach of certain listed provisions of the Regulation, subject to revaluation each year. In the event of repetition of the same breach with one year following the application of the first administrative fine, two times the amount of the first fine shall apply. In the event of a third breach within such year, the service permit of the relevant organization shall be cancelled.
The owners and shareholders of the organizations whose service permits have been cancelled, as well as their first-degree family members, cannot apply for an authorization certificate for a period of two years for the same or different service area, either using the same name, or through the change of name or trade name, or through the establishment of a new company. The Regulation also includes several other sanctions relating to harbour pilots, performance bonds, and the authorities of the Fault Determination and Evaluation Commission, which is to be established pursuant to the Regulation.
The Regulation introduces a two-level permit mechanism for pilotage and towage organisations, namely, operations licences and service permits, and requires several conditions and qualifications to be met in terms of corporate structure, as well as financial, technical and administrative competence. An operations license is a prerequisite to obtain a service permit. One of the most important provisions of the Regulation is that only one pilotage organization shall be granted with a service permit within a specific service area, and such organization cannot provide towage services within the same service area. Public institutions and organizations, as well as organizations that have a concession right as a consequence of a privatization process, are exempt from the requirement to obtain a service permit, and such persons are allowed to procure such services from an organization that has a suitable operations license, with the prior approval of the Administration. The Regulation provides for share transfer restrictions, and imposes administrative fines and other restrictive measures that are applicable for certain breaches under the Regulation.