Merchant Shipping (Marine Equipment) (Amendment etc.) (EU Exit) Regulations 2019 - Motion to Approve

– in the House of Lords at 8:24 pm on 20th February 2019.

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Moved by Baroness Sugg

That the draft Regulations laid before the House on 16 January be approved.

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

My Lords, these regulations will be made under powers in the European Union (Withdrawal) Act, and are needed if we leave the EU without a deal. Marine equipment, as we are discussing today, is the collective term used to describe a ship’s safety and pollution prevention equipment. Examples include lifejackets, fire extinguishers and navigation lights.

Marine equipment is regulated globally by the International Maritime Organization, the IMO, under three international conventions: the International Convention for the Safety of Life at Sea, the International Convention for the Prevention of Pollution from Ships and the International Regulations for Preventing Collisions at Sea. Collectively, these international conventions require flag state administrations, such as the UK, to ensure that marine equipment complies with certain safety requirements regarding design, construction and performance standards; and to issue the relevant certification before equipment is installed on board a ship flying its flag. The flag state in the UK for these purposes is the Maritime and Coastguard Agency, the MCA.

Historically, each EU maritime administration had its own systems and requirements for the approval or conformity assessment of marine equipment. To help the free movement of goods, the EU adopted legislation to harmonise the way in which EU member states implement the IMO conventions. This legislation allows member states to designate conformity assessment bodies on behalf of the EU to issue an EU-wide approval for marine equipment.

Marine equipment approved in accordance with the EU legislation may be installed on any EU-registered ship, and the international obligation of each EU member can be discharged accordingly. The MCA, on behalf of the Secretary of State, has designated 10 conformity bodies for the EU which approve marine equipment in the UK. In the event of no deal, the MCA intends to convert these 10 bodies from EU-notified bodies to UK-approved bodies, to allow for continuity in the method of approval for marine equipment in the UK, and to ensure that the UK continues to meet its international obligation.

The MCA regularly meets with these 10 bodies and has kept them informed of the proposals. The 10 bodies have been supportive to ensure that the UK continues to have a functioning statute book. Similarly, the MCA regularly meets with manufacturers of marine equipment, and has received only positive feedback on the proposed instrument.

The EU directive 2014/90, known as the marine equipment directive, and related legislation established the harmonised EU system, criteria for designating conformity assessment bodies, mechanisms for ensuring the compliance of equipment, and remedial measures for removing risks to the safety of life. The regulations in this case, which this SI is changing, includes the Merchant Shipping (Marine Equipment) Regulations 2016, which implement the 2014 marine equipment directive in UK law. The Act also makes provision in Section 8 for regulations to correct deficiencies in retained EU law arising from the UK’s withdrawal from the EU.

These regulations make the changes needed to the marine equipment regulatory framework to adapt the EU approval system to one that can function effectively as a UK approval system, if we leave without a deal. The regulations retain the status quo as far as possible to avoid market confusion and allow continuity of operations for manufacturers. Specifically, the regulations do not change the design, construction and performance standards applicable to marine equipment; the methods for conformity assessment of marine equipment; the requirements to become a designated conformity assessment body; and the mechanisms for protecting the UK market against fraudulent or unsafe equipment. The regulations will allow UK ships to continue to use marine equipment that has been approved under the EU system. However, the regulations also establish a new approval system. The regulations make changes needed to ensure the UK approval system works, for example by changing references to “member state” and “the Commission” to “the United Kingdom” and “Secretary of State”.

Noble Lords may be aware that, once again, the SLSC recommended that these regulations be upgraded to the affirmative procedure. Again, I am grateful to the committee for its careful consideration of the regulations. The committee noted that in a no-deal situation it is the Government’s long-term aim that UK ships will use the UK approval system only. The committee was concerned about the additional costs for manufacturers that might need to seek an EU approval as well as a UK approval. As we set out in the new Explanatory Memorandum, the regulations before the committee do not place any limit on how long the UK ships can use EU-approved equipment. Therefore, there will be no additional costs for manufacturers as a result of this SI. If anything were to change in the future, the Government would introduce regulations to remove the time limit only after widespread consultation and careful consideration of the costs and benefits.

Photo of Lord Adonis Lord Adonis Labour

The Minister said that there would be no additional costs to manufacturers. But will there be additional costs to ship owners—that is, to the consumers?

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport) 8:30 pm, 20th February 2019

No. There is no time limit in these regulations on how long UK ships can use EU-approved equipment. The regulations allow UK ships to use EU-approved equipment or UK-approved equipment, but there is no time limit on that, so there should be no additional costs. There will be small familiarisation costs, but no significant costs.

The regulations also establish a UK conformity mark for the new UK system. UK ships will carry equipment that bears either the EU wheelmark or the new UK mark. The only significant difference between the UK and EU approval systems is that the EU system requires a manufacturer outside the EU to appoint an authorised representative in the EU; the UK system does not require this. We decided to make this authorised representative requirement voluntary to avoid creating a barrier to the new UK system.

The regulations include transitional provisions to smooth the transition from the EU to the UK approval systems. First, UK conformity assessment bodies that, immediately before exit day, are designated EU-notified bodies will automatically be converted to UK-approved bodies, which will be authorised to carry out conformity assessment activities for the UK. That gives certainty to the 10 UK-based conformity assessment bodies of their status after exit day.

Secondly, any application for conformity assessment lodged with a UK body before exit day for EU approval will be treated as an application for UK approval after exit day. In that way, a manufacturer will not need to make another application for conformity approval if it has not been determined.

Finally, the regulations will revoke Commission Implementing Regulation (EU) 2018/733 because these implementing regulations communicate the IMO technical standards applicable to marine equipment, which are updated annually. The MCA currently replicates these in Merchant Shipping Notice 1874 and will continue to communicate the standards in this way. Accordingly, the implementing regulations will become outdated in a year.

Merchant Shipping Notice 1874, Amendment 3, also provides information pertaining to the UK bodies that carry out conformity assessment activities on the UK’s behalf, and information on the UK’s market surveillance procedures and other technical information that bears no substantive changes. In addition to the merchant shipping notice, the regulations are supported by two marine guidance notes, which replace MGNs 554 and 557; one is addressed to applicant conformity assessment bodies and the other relates to the UK’s approach to market surveillance. The marine guidance notes do not change the substance of the notes that they replace.

Finally, the MCA will be publishing a plain English marine information note, which I am sure will be very welcome. It will explain the UK system for marine equipment approvals and substantive changes from the EU system and it will address each major stakeholder—namely, UK ships, UK conformity assessment bodies and manufacturers.

The changes made in these regulations are needed in the event of no deal. They will ensure that the law on conformity assessment of marine equipment continues to function effectively after the UK’s withdrawal from the European Union in the event of no deal. They will enable the UK to continue to comply with its international obligations to ensure that equipment installed on board its ships is approved to the relevant, applicable international standards. I beg to move.

Amendment to the Motion

Moved by Lord Adonis

Leave out from “that” to the end and insert “this House declines to approve the draft Regulations because they were not subject to consultation or an impact assessment.”

Photo of Lord Adonis Lord Adonis Labour

My Lords, I am very grateful to the Minister for her rapid-fire introduction. I hope she will not mind me saying that the only thing that she said which I welcome is that there will be a plain English marine information note. She said that this would be for foreign ship owners, but may I suggest that she also circulates it to Members of your Lordships’ House, because we might find the plain English version a great deal more comprehensible than these regulations.

No one can doubt the importance of the issues that we are talking about, even at this late hour—although the noble Lord, Lord Grade, may think it superfluous for us to pay any attention to them at all because it is keeping him from his dinner. We are talking about life-saving appliances, firefighting equipment, navigation equipment, pollution prevention and reduction equipment and so on—literally life and death equipment in respect of ships and the operation of a safe marine industry. So it is important that we get this right, and the noble Baroness and her department are doing their level best to do so.

I have a question and a comment. The noble Baroness may have answered the question, but I need to be clear that I fully understand it so that people reading the account of our debate fully understand it. The big question is what is meant by “choice” in paragraph 7.2 of the Explanatory Memorandum, which says:

“Under these Regulations, UK ships will have the choice of two types of approved marine equipment: (i) equipment which has EU approval … or (ii) equipment which has been approved under the UK system which these Regulations establish”.

When I read that, it worried me, because the choice might mean that you have a confused situation where operators could potentially opt for the less demanding standards in respect of this equipment, as our standards diverge over time. That is not a situation, I think, that the House would welcome—let alone our EU partners, who might then raise some serious questions about trade between our countries.

I need to explain what I think is the situation for the Minister to tell me whether I am correct. There is not in fact a choice. The actual situation is that ship owners that are operating on exit day and that have EU equipment can simply continue operating with EU equipment without any end date. But what is the situation for new ships—or is it new equipment on ships? I am already reaching an issue that it is important to clarify. Is it new equipment that can meet UK standards rather than EU standards, or is it just new ships? I would welcome a clarification of what the actual regime is. If I have got it correct, the issue is not that they have a choice but that equipment and/or ships procured after exit day can observe new UK standards, insofar as they diverge from EU standards—one would hope that they do not diverge, or we could get a gaming situation in respect of different standards.

Simply in seeking to explain this to the House, I have already noticed one issue: namely, can ships that are in operation on exit day which have existing EU-approved equipment replace that equipment to the previous EU standard, or will they be required to have equipment of the new UK standard? Or does the new UK standard requirement apply only to completely new ships? I am not a shipping industry expert, but I imagine that a lot of this safety equipment goes together and that mixing and matching to different standards would not be a good thing. I would be grateful if the noble Baroness would confirm that the actual situation is that there is not actually a choice but that it is a question of dates.

I shall make a point that I make all the time—it does not become a less significant point just because this is about the 100th time I have made it—that, given the issues at stake here, there should clearly have been consultation with the industry. There has not been consultation, but we get a new formulation for the lack of consultation in each of the regulations. Sometimes it is “focused stakeholder engagement” and sometimes it is “trusted stakeholders”. In the Explanatory Memorandum of this one we are simply told, at paragraph 10.1:

“The marine equipment industry has been informed of the Department’s intention”.

That is all it says, and then it says that thereafter there has been “informal engagement”. There is not even a pretence of consultation in this regulation. The industry has simply been informed.

As for safety standards, of course it is the job of the Government and Parliament to set those safety standards. My concern is that they will not be in any way diminished and that there is nothing in these regulations—and in particular the prospect of UK regulations diverging from existing EU regulations—that could lead anyone to expect that they will be diminished over time.

Photo of Lord Mackay of Clashfern Lord Mackay of Clashfern Conservative

My Lords, this amendment is dependent on the requirement of consultation and a document setting out the effect of the regulations. As far as I know, there is no requirement for either of these in any of the empowering statutory provisions. Therefore, this is by no means a basis for the amendment that the noble Lord, Lord Adonis, has signified. As I understand it, what is happening is that the regulations, which previously were all European regulations, will continue to apply in the same form, but with the expression of these regulations in the UK area of shipping.

Perhaps I should mention that I am an Elder Brother of Trinity House: what effect that has on this, I am not sure, but I will mention it just to be certain. I am certainly concerned with the safety of shipping and I believe that the instrument is, too, in that it preserves the existing standard of safety, both in Europe and when it passes from Europe to us here. It is the same standard and I cannot for the life of me see any reasonable basis on which this regulation could be set aside. It would be a drastic thing to set it aside and I ask the same question that I asked the last time I spoke on something like this: has the noble Lord, Lord Adonis, asked anybody who is affected by this whether they would like this regulation to be set aside?

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport)

My Lords, it has already been said that this was originally listed for the negative procedure and has been upgraded to the affirmative procedure on the recommendation of the Joint Committee. I express my surprise that the Government thought it was appropriate for the negative procedure.

I understand the concept of continuity that is a thread within this SI. The regulations require marine equipment to be approved by a UK-approved body and will allow equipment approved by the EU-notified body to be accepted. There are currently 10 EU-notified bodies that assess and approve marine equipment. These 10 EU-notified bodies are going to become UK-approved bodies. What is the situation in relation to those bodies now? As I understand it, some of the larger bodies, at least, are preparing to move to the EU because, if they do not, they will not be able to provide EU assessments. That is clearly the bigger picture: they want work on the larger number of 27 countries, rather than concentrating only in the UK. It seems to me that if bodies move from the UK in order to retain their EU status, there will be job losses and jobs moving abroad, and as a result there will be fewer bodies to provide the approvals for the maritime sector that we are talking about. Can the Minister can give us some more information on that? How many bodies are thinking of moving? How many are in the process of moving? How many jobs are involved? We can see then how many will be left.

At first, the UK will continue to accept EU-approved products but, as I read it in the Explanatory Memorandum, it is government policy to time limit this, although the Minister seemed not to say that in her introductory comments. I would be keen to have some confirmation as to whether it is government policy. Manufacturers have expressed concern that they may have to get two different conformity assessments in future and that will be twice the effort and twice the cost. I realise that the Department for Transport disputes this. Perhaps the Minister can make a definite statement on it to reassure the House.

Manufacturers will, of course, produce goods to a UK standard if they are based in the UK, but many of the ships in UK waters are EU ships and, presumably, they need replacement parts from time to time and that is a valuable market for UK manufacturers. Will UK manufacturers in future have to produce to two different sets of standards to fulfil orders for repairs to EU ships? EU ships will require EU standards, and UK ships will require UK ones.

Finally, I want to mention briefly once again the issue of the impact assessment. Paragraph 12 of the Explanatory Memorandum claims that there is no significant impact on business so there has been no impact assessment, but paragraph 10 gives some detail on the “Consultation outcome”, including that manufacturers were concerned about having to pay for things twice. Can the Minister clarify whether there was a proper consultation process? Patently, there is an impact on business—on manufacturers, on the people who own and run the ships and on the notified bodies which may be going to move abroad. It is important that the Government accept that the policy of simply stating that there is “no impact” without any evidence because they have not done any consultation is not good enough in the case of these SIs.

Photo of Lord Rosser Lord Rosser Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Transport) 8:45 pm, 20th February 2019

The Explanatory Notes say that:

“The purpose of these Regulations is to ensure that the UK can continue to comply with its international obligations by applying international standards to marine equipment placed on UK ships and enforce those standards”.

As I understand it—and as has already been said—the kind of marine equipment covered includes life-saving appliances, crew accommodation, navigation, fire protection and maritime pollution prevention. Despite that, the Explanatory Memorandum states in paragraph 7.9 that:

“These Regulations are unlikely to draw attention from the general public but will be of interest to UK manufacturers, UK conformity assessment bodies for marine equipment and UK ship operators”.

Apart from the general public, who appear to have been excluded, another rather important group does not appear to have been consulted if the wording of the Explanatory Memorandum is to be taken at face value: those who work on ships—the officers, crew and their representative organisations. I say do not appear to have been consulted or involved because paragraph 10.1 of the Explanatory Memorandum states that,

“informal engagement has included regular meetings at long established forums with key industry stakeholders”.

What were the dates of these regular meetings and were the trade unions there as “key industry stakeholders”?

The Secondary Legislation Scrutiny Committee—as has already been said—recommended that this instrument should be subject to the affirmative resolution procedure because of the impact it may have on industry. At present, organisations known as EU-notified bodies assess and approve the conformity of marine equipment, with 10 such bodies based in the UK. These UK-based bodies will become UK-approved bodies on exit day and if any wish to retain their notified-body status in the EU they will need to seek notification from an EU member state. According to the Government, to do this they will need to relocate to the EU. Apparently, the Government are aware that some of the larger notified bodies have started this process already where they are relocating to one of their EU-based offices. What will be the difference between a UK-approved body based in the UK and a notified body based in the UK which has relocated to one of its EU-based offices as regards its powers, role and regulation, and what will be the difference between the two as far as the industry, including seafarers, is concerned?

Paragraph 7.2 of the EM states:

“Under these Regulations, UK ships will have the choice of two types of approved marine equipment: (i) equipment which has EU approval … or (ii) equipment which has been approved under the UK system which these Regulations establish”.

What do the Government believe are the advantages and disadvantages of the two types of approval from the point of view of ship owners and the seafarers who crew the ships? That is not clear from the Explanatory Memorandum.

The Government’s position is that, while on exit day the UK will facilitate continued acceptance of EU-approved products, this provision will at some stage be time-limited. What considerations will the Government take into account in determining when to time-limit this provision, and what will be the impact on the industry? Marine manufacturers have expressed concerns that they will have to pay twice for conformity assessment in the future when this happens. What is the Government’s response to that?

On the point about paying twice, the Government say in the Explanatory Memorandum that this instrument,

“will not require manufacturers … to pay twice”,

and that this would or could apply only following further secondary legislation,

“should the Government decide to time limit the continued acceptance of EU approved marine equipment”.

That is in paragraph 3.4 of the EM, but in paragraph 3.3 it says that it is government policy,

“eventually to time limit this provision”,

of continued acceptance of EU-approved marine equipment. Which is correct: paragraph 3.3, which states that the Government have already made a policy decision to time-limit this provision, or paragraph 3.4, which says “should the Government decide” to time-limit this provision—that is, that no such policy decision has been made?

Paragraph 6.2 of the Explanatory Memorandum refers to the current Merchant Shipping Notice being,

“updated to reflect the changes necessary as a consequence of the UK leaving the EU”,

and says that a draft of this revised Merchant Shipping Notice accompanies the Explanatory Memorandum. Can the Minister confirm that the MSN amendment 3 attached to my copy of the Explanatory Memorandum is the draft revised MSN referred to in paragraph 6.2? If it is, could she spell out the nature of the revisions that are being made to the current MSN by this draft revised MSN now in front of us?

Paragraph 7.3 of the EM states:

“The design and performance standards to which the approved prototype(s) was constructed form the ‘benchmark’ against which all subsequent production of the equipment is measured”.

Who will carry out that measurement after we leave the EU? Will they have to be bodies based in the UK or could they also be bodies that have been designated as an EU-notified body?

Paragraph 12.3 of the EM refers to the impact on businesses and the public sector being limited to “minor familiarisation costs”. What exactly are those costs, and where and how will they be incurred?

Lastly, can the Government explain the impact of this SI on new IMO regulations covering marine equipment, which are to be introduced after this SI comes into effect and before any future trade deals between the UK and the EU are agreed and implemented?

Since this—I hope—will be the last occasion this evening on which I will speak—

Hear, hear!

Photo of Lord Rosser Lord Rosser Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Transport)

I knew I would get approval for at least something I said. I take this opportunity, after a fairly long evening, to express my thanks to the Minister for dealing with these SIs in her usual good-natured and patient manner.

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

I thank noble Lords for their consideration of the final regulations of this evening. International conventions require each flag state administration to approve marine equipment, and once we have left the EU it would not be appropriate for the UK to fulfil its international obligations through an EU system that we can no longer influence. That is why we are setting up the UK system. It will allow the 10 UK-based conformity assessment bodies to continue offering services to the UK market. If we allowed only EU-approved equipment, those bodies would be in the strange position of having to relocate to the EU to provide to the UK market.

We understand that we need to ensure that the UK bodies can continue to offer EU-approved equipment. The new regulations apply both to existing ships and new ships, which will all be able to use either EU-approved equipment or UK-approved equipment. That does not have a time limit currently. The Government will consider whether we should move towards the UK system, but that would be done only after very careful consideration and consultation with the industry.

There will be no reduction in standards under the regulations. As I said in my opening statement, they retain the existing international standards set at IMO level, and that is what we will stick to. They apply the same familiar process and procedures to marine equipment approvals, to minimise disruption to industry. As the noble Baroness, Lady Randerson, noted, some of the 10 UK-based EU-notified bodies have a global client base—and long may that continue. They are global operations and have offices internationally. We anticipate that some of the UK-based notified bodies with offices in the EU will make contingency plans to enable them to maintain their EU-notified body status, but we have no information about any of the UK-based notified bodies moving there. These are global companies that provide to a global market, and we expect them to be able to continue to do so.

Both the EU system and the new UK system are established on IMO standards, so manufacturers do not need to produce to two standards. A UK manufacturer may maintain its existing EU approval and keep EU market access, while also maintaining UK market access.

No formal consultation has been done on this instrument, but the MCA and the department regularly meet the assessment bodies and the manufacturers. Both groups recognise that the regulations are needed to maintain the status quo, and I am pleased to be able to say to the noble Lord, Lord Rosser, on our final SI this evening, that both the UK Chamber of Shipping and Nautilus, the seafarers union, are participants in the MCA industry committees, and have been consulted. These meetings occur very frequently, every three to six months.

This statutory instrument is necessary: if the House does not approve it, there will be no legal basis for UK notified bodies to continue operating in the country. The companies and those who work for them would therefore face uncertainty. If this SI were not approved, we would not be able to accept equipment from the EU or investigate non-compliance. So it is essential. We have not carried out a full impact assessment of the regulations because their purpose, intent and real-world effect is to do everything possible to minimise cost and disruption. Noble Lords should be aware that the impacts and costs to business of not making these regulations would be significantly higher—as I said, it would lead to uncertainty.

I hope that I have managed to address the points that have been raised. I thank all noble Lords who contributed to the transport SI debates. I am genuinely grateful for their scrutiny; these are important pieces of secondary legislation, and the House is certainly doing its job in scrutinising them. Marine equipment approvals are, of course, vital to ensuring the safety of those on board ships and the protection of the marine environment. I hope that noble Lords will agree that this SI is essential to ensure that the legislation on marine equipment approvals will continue to work effectively in the UK in the event of no deal.

Photo of Lord Adonis Lord Adonis Labour

My Lords, I join in the appreciation of the Minister for the meticulous way in which she has handled our debates this evening. However, I want to clarify one point: that when the Explanatory Memorandum uses the word “choice”, it means that there will indeed be a choice on an ongoing basis, and that ships and their owners will be able to choose whether they have EU-approved and certified or UK-certified equipment—they will not have to shift from one to the other by virtue of the fact that they are purchasing the equipment after exit day.

Photo of Baroness Sugg Baroness Sugg Parliamentary Under-Secretary (Department for Transport)

That is indeed the case. They have a choice: UK or EU. That is for new and existing ships and there is no time limit on that choice through the regulations.

Photo of Lord Adonis Lord Adonis Labour

My Lords, I thank the Minister for clarifying that point. My one final remark is that a felicitous moment in the debate was the revelation that the noble and learned Lord, Lord Mackay, is an Elder Brother of Trinity House. He shares that great distinction with Sir Winston Churchill, who used to appear frequently in the uniform of an Elder Brother of Trinity House. I hope that the noble and learned Lord might do so in future in the House, so that his great and esteemed rank is fully on display. On that note, I beg leave to withdraw the amendment.

Amendment to the Motion withdrawn.

Motion agreed.