EMLO 23rd Annual Conference – November 2017: Travel Report / Social Media Release
This month, SMS Group has sent one of its representatives to the prestigious annual conference held by the European Maritime Law Organisation, an international organisation set up to provide a neutral and independent forum for debate and research in maritime affairs.
The conference focused heavily on global alliances and the impact of competition law, and the state of play of the industry at the close of the European Maritime Year 2017. Reference was made to the impact of Brexit and legal certainty, in terms of the importance of precedent and reciprocity of European and / or British judgements and questions as to whether Britain would continue to follow EU policy making or choose to adopt its own. The “Effects Approach” taken by the European Commission, particularly highlighted in a judgement this September, was also brought into play due to its potential influence on the behaviour of market players and, naturally, much desirable legal certainty. The effects of Brexit on maritime competition law are yet to appear on the radar but should not be underestimated. The industry and policy makers are still to take into account the loss of passporting rights for insurers, customs gridlocks in South England and in European Ports with shipping trades to England, the possibility of the UK making its own policies in matters such as employment and state aids, where there is no convention to harmonise practice with EU other than the EU instruments themselves. The loss of the possibility for cabotage operations between UK and EU countries and other such issues that have not yet been conceived of, yet alone discussed, were also raised. In particular, one must keep in mind that the UK is often the choice of applicable law in a large number of shipping contracts, even where the parties are EU-based.
The competition law perspective of the behaviour of market players forms an important part of this conference’s scrutiny, bringing into discussion the issue as to whether, like liner conferences, global alliances should no longer avail themselves of the safe harbour of the Block Exemption Regulation, or whether this Regulation should be extended in its validity. In particular the question was raised as to whether shipping alliances will cease to exist, since continued consolidation trends could give rise to competition concerns at EU level and beyond. This trend (or perhaps crisis) began in 2008, when the Block Exemption Regulation ceased to have effect for liner conferences, but not for shipping alliances; however, consorted “hardcore” behaviour within alliances could still fall foul of the Block Exemption Regulation, rendering legal certainty necessary in such times of doubt. Clearly, while it would perhaps be inadvisable to change the legal paradigm in times of such change, questions continue to arise as to the next steps in this matter.
Competitivity within the industry, aside from competition law concerns, remains key for the viability of the European fleet. Indeed, increased European regulation (such as the Capital Requirements Regulation, which mirrors the Basel Convention but renders compliance obligatory within the EU) has meant that banks are ever less able to take on financing of such large assets as are ships, especially due to their increasing size and value. The issue of tramp pools or other forms of consolidation was discussed as means of making the industry viable, it being an industry that operates like no other. In this, the increased participation of non-EU countries in the EU shipping trade was noted, potentially because of greater financial viability as well as different requirements in terms of lending, although some such countries are opting for different funding models such as ‘sale-and-lease-back’ and equity. The application of State Aid rules (or absence of, in the case of non-EU countries) potentially also impacts the decision of financing companies and / or ship-owning companies whether to remain in Europe or otherwise in order to achieve viability. Cyber Security and Digitalisation, which ought to be treated as a safety matter due to the importance of data concerning both the ship and its owners, also come into play in ensuring competitiveness within the industry. Not only are navigation and operation of ships increasingly digitised, but this is a requirement and the information being held digitally gives rise to the potential of pirate attacks as well as attempts at fraud and financial crime.
In terms of competition, and due to the Commission’s attitude as to what constitutes “collusive behaviour”, attention remains on the control of information being exchanged, the manner of doing so and, most importantly, the possibility of exchanging information by simply being a participant in such alliances. It is possible that there is no need to harbour excessive concern as to whether the Block Exemption should remain or done away with altogether since there appears to be no cause for consternation at present. Vigilance is advisable, however, as to the behaviour which can be interpreted as exchange of information, in particular, exchange of information and collusion on hardcore matters such as price.
When referring to “shipping” one must bear in mind that reference is being made to the entire “maritime cluster” that is to say, the entire complement of services that encompasses the industry so as to even include auxiliary services. The very large majority of cargo is borne by ships and the operation of this industry could very well shape world trade.