In Norway, Hurtigruten has an ongoing series of law suits against many of the ports it is calling at for allegedly overcharging port fees. According to the Norwegian Ministry of Transport and Communications and the Norwegian Coastal Administration (NCA), Norwegian ports have misinterpreted official fee regulations.
“We started the process in 2012,” said Stein Lillebo, project manager for Hurtigruten. “After the new port act of 2009 came into effect in 2012, Geiranger (Stranda Port Authority) increased their annual port fees fivefold from approximately NOK 400,000 to more than NOK 2,000,000. That case ended in the Supreme Court, where we won.”
Explained Lillebo: “The port act was passed to lower port costs and make the ports more efficient. Instead our port costs went up more than 40 percent exceeding NOK 100 million in 2015. Ports’ revenues are split in two, according to the new regulations. They are entitled to collect a limited fee for using the municipality’s sea area, the so-called approach fee, which is not to exceed the actual costs of certain tasks, mostly safety related. After we won, that fee was reduced by 90 percent in Geiranger. The other source of income is for specific services, like use of the pier, bunkering water, shore power and terminal facilities. These are to be market based and subject to negotiation for frequent users, but the ports have not been willing to negotiate. On the contrary, they all practice common pricing that is consistently unfavorable for Hurtigruten.”
Lillebo said that the court found that Geiranger overcharged Hurtigruten and others by padding the cost basis for the approach fee.
Earlier this month Kristiansund was ordered by the ministry to repay more than $2 million in excess fees. Last year, Bodo was ordered to repay more than 50 percent of their fees charged since 2012, but they appealed and won their case. Hurtigruten has appealed to the Supreme Court.
Hurtigruten, which operates 24/7 year-round, calls at each port twice a day, northbound and southbound, and is charged a minimum 24-hour pier fee for each call, although the ships typically stay in port from as little as 30 minutes to a few hours. Thus, the company pays for 48 hours every day at the publicly-owned ports.
“We see the enforcement of this principle and refusing to negotiate as abuse of the authority public ports have been given,” said Lillebo. “We find the cooperation among the ports to maintain the same unreasonable pricing as a form of illegal price fixing. We are providing a coastal service, the ports know that and are abusing their authority to maximize revenues from one user - Hurtigruten.
“We need predictability in our cost structure and have asked to renegotiate for long-term agreements, but the ports have not taken us up on it on the advice of the Norwegian Ports Association.
“Our argument is that the ports are acting in an anti-competitive fashion against Hurtigruten, with the aim of keeping prices high. Port fees are a significant cost factor for us. And the fees that we pay represent more than 50 percent of the total pier fees of many of the ports we call at.”
Following the new port act and the increased fees, Hurtigruten hired KPMG to review the fees and charging practices of the ports. What they found, according to Lillebo, was that out of 34 ports, 29 were interpreting the new regulations incorrectly and many of them were overcharging.
KPMG also found that some ports added sales and marketing and other unrelated costs to the cost basis for port fees, which were outside the fee definition of the NCA.
The potential recovery of excess fees, if Hurtigruten succeeds, could, according to sources, amount to more than NOK 100 million, in addition to future savings on reduced port costs.
“What is most important for us is getting the ports to practice a fair and reasonable fee structure based on the system introduced by the new Norwegian port act,” said Lillebo. “If we succeed, this is likely to lead to a cost reduction for Hurtigruten, but also for other port users. We have to bring the substantial price increases we have seen over the past few years to an end.”