FACULTY OF LAW

University of Lund

Henrik Tunfors

Liner Conferences

Master thesis
20 points

Lars-Göran Malmberg

Maritime Law / EC Competition Law

Spring 2001
Contents

SUMMARY 1

PREFACE 2

ABBREVIATIONS 3

1. INTRODUCTION 4

1.1 Purpose 4

1.2 Material 5

1.3 Method 6

1.4 Limitations and disposition 7

PART I LINER CONFERENCES IN

GENERAL 8

2. ORIGINS OF SHIPPING – HISTORY OF PROTECTIONISM 9

2.1 Early developments of the law of the sea 9

2.2 Middle ages –Discoveries – Colonialism 11

2.3 Dawn and demise of the free seas 12

2.4 Post war syndrome – cold war 14

2.4 Containerisation 16

2.5 Analysis 17

3. LINER CONFERENCES 19

3.1. Liner shipping 20

3.2 Organisation, operation and meetings of conferences 22

3.3 The Conference Agreement 23

3.4 Common Elements of Liner Conferences 23

3.4.1 Liner freight rates 24
3.4.2 Regularity 25
3.4.3 Membership of conferences 26
 3.4.4 Arrangements within trades 26
3.4.5 Loyalty Arrangements 26
3.4.6 Pooling arrangements 28

3.5 Competition and Conferences 28

3.5.1 Internal competition 28
3.5.2 External competition 29

3.6 Merits of Liner Conferences 31

3.7 Disadvantages of Liner Conferences 31

3.8 Analysis 32

PART II IMPORTANT CONFERENCE

REGIMES 34

4. LINER CONFERENCES AND THE UNCTAD CODE 35

4.1 UNCTAD and shipping 35

4.2 UNCTAD Code of Conduct for Liner Conferences 37

4.2.1 Principles - objectives - application 37
4.2.2 Relations among members 38
4.2.3 Relations with shippers 40
4.2.4 Freight rates 40
4.2.5 Provisions and machinery for settlement of disputes 41

4.3 Analysis 41

5. LINER CONFERENCES AND THE UNITED STATES 43

5.1 Relevant governmental machinery of the United States 43

5.2 United States and Liner Conferences 44

5.3 United States and the UNCTAD Code 46

5.3.1 Legal objections under the 1916 Regime 47
5.3.2 Policy developments following the Code 48

5.4 The Shipping Act of 1984 48

[Link] Scope 49
[Link] Common Carrier 49
[Link] Permitted agreements 49
[Link] Prohibited agreements 50

5.5 Recent developments 50

5.6 Analysis 52

6. LINER CONFERENCES AND THE EUROPEAN UNION 53

 6.1 The Transport industry of the European Union 53

6.2 Transport Policy of the European Union 54

6.2.1 Extended Historical Perspective 56
6.2.2 The Common Maritime Transport Policy 57

6.3 Maritime Transport and the Community Competition law 59

6.3.1 EC Law and the UN liner Code 60
6.3.2 Block exemptions 60
6.3.3 Liner conferences 61
6.3.4 Council Regulation no. 4056/86 62
[Link] Legal basis and effect of Regulation 4056/86 63
[Link] Scope and a definition 63
[Link] Technical agreements 65
[Link] The conference block exemption 65
[Link] The non-discrimination condition 66
[Link] Obligations attached to the exemption 67
[Link] Monitoring of exempted agreements 67
[Link] Effects incompatible with the Art 82 of the Treaty 68
[Link] Conflicts of international law 69

6.4 Application of Council Regulation 4056/86 70

6.4.1 French West-African Shipowners’ Association 71
6.4.2 CEWAL 71
6.4.3 Trans-Atlantic Agreement 72
6.4.4 Far Eastern Freight Conference 73
6.4.5 Trans-Atlantic Conference Agreement 73
6.4.6 Compagnie Maritime Belge 74

6.5 Motives for exemption 76

6.6 Analysis 77

PART III EPILOGUE 79

7. CONCLUSIONS 80

7.1 Liner Conferences in general 80

7.2 UN – US – EU 81

BIBLIOGRAPHY 84

TABLE OF CASES 86

TABLE OF LEGISLATION 88

TABLE OF DECISIONS, REPORTS AND PUBLICATIONS 90

Summary
The focus of this thesis is on liner conferences. Liner conferences are formations
of lines collaborating or otherwise operating collusive on specific routes at fixed
schedules. Other definitions will follow. The outline comprises three parts over
seven chapters whom each will end in an analytical summary of its content

The first part introduces the reader to the historical background of shipping in
general, and liner conferences especially, both from a private and public
perspective, but also a brief presentation of protectionism in its earliest forms, as
well as recent reformed utilisation of preference programmes. History gives
evidence for conferences schemes being exploit by governments as a tool to
battle off activities of foreign lines, and sometimes are the victims of subsidies
programmes. This will be followed by a description of the operation and
characteristics of liner conferences, the common elements thereof, merits, flaws
and some relevant competition problems.

The second part, a comparative study of three different legal regimes, United
Nations – United States – European Union, in relation to liner conferences; what
legal background the three have committed to, how the different regimes have
influenced each other and, where relevant, the situation today. The chapter on the
EU is the dominating section as well as the main subject of investigation within the
frame of this essay. The UN and US chapters nevertheless provide the reader
with important information for the further reading of the easy, the EU. Interesting
legally, and naturally presented below, for this essay are, concerning the UN – the
UNCTAD Code of Conduct for Liner Conferences, regarding the US – the
Shipping Acts of 1916 and 1984 but also the recent Ocean Shipping Reform Act,
and vis-à-vis concerning the EU – Council Regulation 4056/86. To the
investigation important cases, from both US, but principally, EU Courts, will be
presented and concerning the EU also an insight into the application of Council
Regulation 4056/86 with Commission decisions and the practice of the Court of
First Instance and the European Court of Justice.

The third part of the essay, one lone concluding chapter, attempt to summarise
and analyse the whole of the essay, hopefully clarify its content and connect some
loose ends in the mind of the reader. Liner conferences, albeit being competitively
infringing cartels, are vital to shipping and world trade as a facilitator and
stabilisator of various factors involved therein. This, however, does not
completely excuse such behaviour and intuitively one is tempted to dismiss liner
conferences as a future component of world trade. The fate of conferences
ultimately lies in the hands of consumers, but in reality only the mighty economic
powers can alter the present situation, not developing countries.
Preface
There lies a mysterious mist around maritime transport and shipping. Many are
those, including myself some time ago, who rarely reflect over the logistics
networks systematically covering destinations worldwide, reassuring the needs of
modern society and its metropolitan structures. The backbone of this world wide
web is spelled ‘shipping’, and many shipping lines are members of liner
conferences; cartels at sea. These liner conferences are made legitimate for
various reasons – puzzling to some and clear for others.

My inauguration into the field of shipping was a fine course in ‘Maritime law’
given by Lars–Göran Malmberg at the University of Lund and its Faculty of Law
in the spring of 2000, giving a public perspective of maritime law. Naturally,
therefore Lars-Göran Malmberg deserves special thanks, being my helpful tutor,
inspirational lecturer, and provider of good advice, ideas and relevant literature. I
also want to thank my lovely girlfriend Karin, for support, inspiration, advice
discussion and love, i.e. everything! Moreover, special thoughts go to my mom,
dad and grandfather for caring, love and support on my journey to complete my
education and this essay.

The subject matter of this thesis first arose as an idea to combine my two
favourite legal subjects, maritime law and European competition law. Actually I
owe the specific subject, liner conferences, to my girlfriend, Karin, who wrote an
essay on the same subject in the spring of 2000, thus opening up my eyes to the
world of liner conferences. In the fall of 2000 these ideas evolved into a piece on
liner conferences under Council Regulation 4056/86 following a course with the
name ‘EU Competition Law’, which has served as an outline and basis to this
more advanced and expanded piece.

Lund, June 2001.

2
Abbreviations
AIWASI Association of Independent West African Shipping Interests
CENSA Council of European and Japanese Shipowners’ Associations
CEWAL Associated Central West African Lines
CES Committee of European Shipowners
CFI Court of First Instance
CMEA Committee for Mutual Economic Assistance
CMB Compagnie Maritime Belge
CSG Consultative Shipping Group of Governments
CTP Common Transport Policy
DSVK German Shippers Council
ECOSOC Economic and Social Committee (EU)
ECJ European Court of Justice
FMC Federal maritime Commission (US)
FEFC Far Eastern Freight Conference
GRT Grosse tons
IATA International Air Transport Association
ICC Interstate Commerce Commission (US)
ICS International Chamber of Shipping
INTCC International Chamber of Commerce
LDC Less Developed Country
OECD Organisation for Economic Cooperation and Development
OPEC Organisation of Petroleum Exporting Countries
OSRA Ocean Shipping Reform Act
TAA Trans Atlantic Agreement
TACA Trans Atlantic Conference Agreement
TEU Twenty Foot Equivalent Standard
UNCTAD United Nations Conference on Trade and Development
WTO World Trade Organisation

3
1. Introduction
As the title of this essay implies the subject to be dealt with is ‘liner conferences’,
i.e. the price arrangement cooperation between international liner service
operators on particular routes. A more detailed description will be provided later
in this essay. The general subject of this essay is shipping law and restrictive
policies as well as competition policies attached hereto. The specific matter is liner
conferences; their history, of what they consist, under which terms they operate,
under different regimes and reason to their existence. Liner Conferences are
legitimate associations cooperation between shipowners operating at sea,
legitimately permitted to violate general principles of competition in their
operation, both in theory and practice. There are answers hereto, and certainly
opinions as to whether these cartels should be legitimate, i.e. benefiting from
immunity under United States laws or an exemption under Community law.

Liner conferences have not been favoured on the agenda of governments.

Especially European countries have been reluctant to act upon a policy in relation
to liner conferences. During a long time the matter went unregulated ahead in the
most powerful trading block in the world, the European Union. The US took
upon itself the regulating role stipulating rules already in 1916. The EU could not
settle for a common competition approach in shipping until after the United
Nations initiative, in issuing a regulation bringing maritime transport under the
competition rules of the Treaty.

In recent years the conference system has been eagerly discussed, also in
Sweden, but more regarding the future being or not being of liner conferences.
New regulating initiatives have come on both sides of the Atlantic: from the EU
when trying to further develop its rules in the regulation on consortia, and the US
by its reform of 1998.

1.1 PURPOSE

Three basic purposes exist: First, to describe and analyse liner conferences, their
characteristics, merits, disadvantages, and legal status under different regimes;
moreover, to seek their history –the factors that triggered shipowners into forming
conferences; and more important to endeavour an investigation with the objective
to find what aims and rationales that build the foundation of exempting these
cartels from ordinary competition/antitrust provisions under three different
regimes. This outline tempted me to arrange a comparative section, where the
United Nations, the United States and the European Union are displayed in
relation to conferences.

4
 1.2 MATERIAL

Some books have been more important than others and I will present them and
their authors in the following. The book by Luis Ortiz Blanco and Ben Van Houtte
dates back to 1996, and is special in the sense that both authors are officials of
the European Commission in the Transport Division of DG IV on the application
of competition rules in the transport sector. They therefore possess not only
theoretical knowledge of this subject but also wisdom concerning the practical
application of the rules. Alberto Bercovitz, Professor of Commercial Law and
author of the foreword to the Spanish edition, summarise with the conclusion that
the book is destined to become reference text, of absolute necessity for anyone
concerned either with transport law or with the competition rules of the European
Union.

Mark Clough and Fergus Randolph are Barristers of the Brick Court Chambers
(Brussels and London) and their work is part of the Current EC Legal
Developments series. Their book on Shipping and EC Competition law is a fairly
broad, but not superficial, and unbiased account for the subject.

Bruce Farthing is a lawyer, former deputy Director General for British Shipping,
and current or former officer of numerous international shipping and shipowning
organisations, including the (Interstate Commerce Commission) ICC, Council of
European and Japanese Shipowners’ Associations (CENSA), Committee of
European Shipowners (CES), and International Chamber of Shipping (ICS). His
book serves as an introduction to international shipping and its institutions. It is
particularly interesting, with its European and British perspective, in contrast to the
next book by the American view given by Amos Herman.

Amos Herman, LL.B., S.J.D. is a Lecturer in Law at Tel Aviv University / Haifa
University. His book was published following the entry into force of the
UNCTAD Code and is an entertaining lecture over the flagrant and irresponsible
approach adopted by Europe and the UN in general and the UK in particular.

EC Shipping Law, by Vincent Power – B.C.L.(N.U.I.), L.L.M.(Cantab.) and

Partner of A. & L. Goodbody, Dublin, N.Y. London and Brussels, is a true bible
for any true or emerging scholar in the field of shipping. This second edition is
even broader and richer in both outline and substance. This book comprises
everything worth knowing concerning shipping and the Community. Moreover,
the pedagogical aspect of the book is impressive with the rich set of sections.

The book by Anna Bredima-Savopoulou and John Tzoannos dates back to

1990. The formed is advisor to the Union of Greek Shipowners, member of the
Economic and Social Committee of the European Community as well as being a
member of the Board of Directors of the Comité des Associations d’Armateurs

5
des Communautés Eurpoéennes (CAACE). The latter is head of the Maritime
Research Department at the Institute of Economic and Industrial Research in
Athens with practical knowledge of policy making on maritime issues as a
member of CAACE. These two scholars delivered the first analysis of the law
and regulations governing the common shipping policy of the Community.

Krister Sundin addressed a substantial number of government officials on shipping

task forces with an enquiry form concerning their countries’ policies of
protectionism. His book, Protektionism och bilaterala sjöfartsavtal, is the report
from his findings about bilateral and unilateral methods of excluding third parties in
favour of national interests.

Hans Jacob Bull of the Scandinavian Institute of Maritime Law and Helge
Stemshaug of the Centre for European Law both at the University of Oslo, edited
an anthology following the 17th Nordic Maritime Law Conference 2-4 September
1996. The topic of the conference was EC Shipping Policy and among the
contributors are Rosa Greaves, Allen & Overy Professor of European Law at
Durham European Law Institute (UK) and Helmut W. R. Kreis, former Acting
Head of the Transport Division, DG IV, European Commission.
As a general remark with regard to the literature one must state that its age is
somewhat alarming. The books on liner conferences in general are more than a
decade old, while the literature dealing with the Community policies are more
contemporary. This fact may also suggest a further investigation on the topic, such
as this essay.

Other material used include the (EEC) Treaty of Rome, the secondary legislation
of the Community, the practice of the European Court of Justice and Commission
of the European Union decisions, but also international law, national law,
memoranda and communications.

1.3 METHOD

Concerning the method a professor at the faculty of Lund once told me that law
scholars do not utilise any particular method. The method of law scholars can be
described as first, the gathering of material – information and facts, second the
processing and accurate reproduction of the facts and information, and third,
attempting to draw sound and sensible conclusions there from. It is my opinion
that the above-described mode of method is utilised below.

Furthermore I want to add that all articles are named according to the provisions
laid down in the Treaty of Amsterdam

6
 1.4 LIMITATIONS AND DISPOSITION

The limitations of this essay are several. First it describes shipping and
competition. Second it describes liner conferences and competition. Concerning
the Community rules it is limited to liner conferences – consortia and inter-modal
transport are excluded. The chapter on the United Nations piece is much like the
US perspective limited to only conferences, and the institutions involved in the
process. The time period is in a sense unlimited, but limited to historic times.

This essay can either be seen as an anthology of individual studies of views on

Liner Conferences, or as a comparative study on the same subject matter. My
approach to the subject can, of course, render in reiterations of facts but hopefully
not exclusion thereof. The first part may, for devoted readers on the subject,
appear shallow, but should be considered as a backyard from which the
comparative chapters can spring. The investigation of the EU regime is the most
important, which is evident from the outline and scope provided for in the essay.

7
 PART I

LINER CONFERENCES IN
GENERAL

8
2. Origins of shipping – history
of protectionism
When did man first utilise sea as a means of transportation and how did this mode
of transport become the revolutionising catalyst of trade? Competition restrictions
throughout history have been a common instrument in shipping, already during
Antiquity, through to the UNCTAD Code of Conduct for Liner Conferences and
beyond this important milestone in liner shipping. Can things improve or will short-
term economic solutions reign in the future too? I am hopeful that these matters
can be elevated, discussed and answered in the following.

2.1 EARLY DEVELOPMENTS OF THE LAW OF

THE SEA

Maritime law is one of the senior branches of international law, senior both
regarding age, dimension and significance. We know that there were sailors
before there were farmers and shepherds, that there were ships before people
had settled in villages and made the first pottery.1 The Romans proved that it
would cost more to cart a certain quantity of grain seventy-five miles than to ship
it by sea from one side of the empire to the other, thus providing the basic
principle of marine transport. The Egyptians, on the other side of the
Mediterranean are credited with inventing the sail some 8000 years ago, but the
possibility of prior ship mobility by sail in the unknown world remain.2 The
earliness of Egyptian maritime commerce was not only overshadowed by the
Phoenicians, whose importance in different areas, not solely shipping, cannot be
disregarded, but also the Judeans, Greeks and, the often forgotten Etruscans
followed in the wake of Egyptian prime. The Phoenician would predominantly
become the premier seafaring peoples in the last millennium B.C. claiming the
throne of shipping in the Mediterranean Sea and founding plentiful colonies
including the mighty Carthage. According to the “father of history”, Greek
traveller Herodotus, Phoenician sailors circumnavigated Africa around 600 B.C.,
a fact challenged by some scholars but by no seamen. 3 Trade is a catalyst of
prosperity and prosperity means growth. Hence, Tyre, the main Phoenician city,
presumably had a population exceeding 1 million; Carthage, the famous antagonist
of republic Rome had 700,000; and Alexandria, the Greek and grain market
metropolis had 1 million.4 To sustain such colossal cities in terms of both food and
other supplies, trade activity, in this context sea trade, was presumably enormous.

1
Gold, p. 1.
2
Ibid, p. 2.
3
Ibid, p. 3.
4
Ibid, p. 4.

9
The births and demises of empires aside, insecure and chaotic states, the sea law
matured in the shape of a continuous body of trade custom. This system regulating
the ancient seas lived its own life for almost 5,000 years, obeyed by all navigators
including pirates.5 The Tigris-Euphrates Basin, cradle of Western law, had one of
the earliest codifications, the Law of Babylon, based on Sumerian laws and
codified around 2200 B.C. by Hammurabi. The first universal sea law, however,
was the Phoenician system of business law, vital for commerce of that vast
dimension. This mysterious people was the undisputed masters of the
Mediterranean for over 1,000 years, not only did they invent the alphabet, built
mighty cities, colonies and developed the type of ship used well into the Middle
Ages, but this superiority led to their hubris-like demise in 332 B.C. after
offending Alexander the Great who conquered and wiped out their capital Tyre,
and of course the devastating Punic wars6 with the Romans. Phoenician sea law
lived on forming the basis of a significant part of present maritime law. These
provisions form the core of modern-day maritime law regulating such issues as
carriage of goods by sea, general average, salvage, bottomry, seamen’s
compensation and discipline and maritime insurance.7

The first known conventions were concluded between the different nations of
South East Asia 1000 B.C. aiming at regulating the exploitation of the seas.8
Since oceans cover two thirds of the earth, all nations, seaside or not, have
always shown tremendous interest for the seas as convenient means of
transportation and endless provider of natural resources. Supremacy and control
of the seas were for a long time the most important goal for foreign policies of
numerous maritime nations. After the Phoenicians maritime supremacy in the
Mediterranean was passed on to the Greeks, today still a dominant maritime
force. Then, after the Greek supremacy, when no maritime power was completely
dominant, raids, wars and extensive piracy threatened shipping. Now the first
claims of exclusive ownership of the sea materialise.9 Protectionism in its earliest
forms appear where the Egyptians destroying competing ships or, more elegantly,
the Carthaginians or Greeks placing rigorous restrictions on foreign trade and
vessels.10 The Romans, originally an agrarian society regarding the sea with
horror, would throughout a short period of time not merely become seafarers but
the unchallenged power of the Mediterranean, or, as the Romans preferred, Mare
Nostrum (our sea). The Romans swiftly restored faith in sea trade, almost
bringing to an end the terror of piracy. Declarations of the Roman public maritime
law were clear and unambiguous. According to Ulpian:

5
Gold, p. 4.
6
The three Punic wars between Rome and Carthage (264-241, 218-201 and 149-146 B.C.) that
led to the total annihilation of Carthage.
7
Gold, p. 5.
8
Bring and Mahmoudi, p. 150.
9
Gold, p. 6-7.
10
Ibid, p. 9.

10
 The sea, which by nature is open to all, cannot be subjected to
private servitude. For the sea as well as the shore and the air which
is common to all, and by no law may one be prevented from fishing
in front of my buildings.

However, the Digests clarify this notion of generosity by limiting this to be a right
of the Roman peoples alone. What followed in the subsequent decline of the
Roman Empire also scattered Roman law for a long time. Commercial maritime
laws did not cease to be produced, and reproduced was the Roman usages in the
Rhodian Sea Law.11

2.2 MIDDLE AGES –DISCOVERIES –

COLONIALISM

After Romans came the Saracens (Arabs), not a seafaring people at first,
consisting of nomadic tribes driven out of the Central and Northern Arabic
Peninsula, but a thirst and respect for knowledge made them the most civilised
and advanced culture since the glory of Rome. But trade was scarce, often
convoyed in the shadow of piracy, and the well-known principle of the fittest
survivor was the unchallenged standard. Naturally the Saracens occupation of not
only Jerusalem, but also much of the Mediterranean area, collided with the
interests of Christianity and the mighty Christian armadas and armies, the eight
crusades between 1096-1270, was sent with destination Holy Land. This release
of expanding energy on behalf of Western Europe led to the sell-sufficiency and
independence of a span of Mediterranean coastal cities, and their might and ability
in trade became the lifeline of goods and supplies of the Crusaders. Venice,
Amalfi, Trani12, Pisa13, Genoa, Marseilles, Jerusalem and Oleron14 all contributed
to the relative wealth of the West as well as being active constitutors of maritime
law.15

Concepts like Mare Nostrum, Mare Clausum (closed sea) or Dominium Maris
(sea territory) have been utilised for centuries as means, for one or more maritime
nations, of excluding the rest of the world from certain parts of the seas. From the
Swedish perspective these modes were utilised from the mid 16th century to the
beginning of the 18th century where the Baltic Sea, by Sweden and Denmark,
was considered Dominium Maris Baltici, a sea territory in the possession of
these two countries.

11
Gold, p. 16.
12
On the Adriatic and now fallen into oblivion.
13
Now inland from the sea but once a trading centre.
14
Oleron is a small island off La Rochelle, and once English territory.
15
Gold, p. 17-19.

11
 2.3 DAWN AND DEMISE OF THE FREE SEAS

A novelty was introduced when Hugo Grotius, the father of international law,
introduced the opposing concept of Mare Liberum (free seas) in his famous
work De jure praedae commentaries in 1609 the foundation of the doctrine of
the free seas was laid down. The basic principle was, according to Grotius, that
the oceans could not, due to their unique characteristics, be occupied or be
regarded as the territory of a nation. 16 Grotius, a young Dutch lawyer, sought to
contest Portugal’s claimed exclusive right to trade with the East Indies, although
not “legally” occupied by Portugal. All nations were to be able to freely utilise the
seas and during the 18th and 19th centuries the doctrine was gradually accepted as
a principle of international law. Although facing fierce resistance from the mighty
marine powers the doctrine won advocates during the mid 19th century in the
wake of the needs of the emerging industrialism as a prerequisite thereof. These
principal rights have later been established through international agreements, but
time has given the meaning of the rights a variety in essence.17

The official Swedish interpretation of the meaning of Mare Liberum concerning

trade and sea borne trade is in harmony with the one given by the International
Chamber of Commerce (INTCC):
“The organisation of sea transport service must be free to choose
the most suitable vessel to transport his goods. Secondly the
Shipowner must be free to compete for cargo in various trades.”18

However, opinions differ, something that can be illustrated by the former eastern
states that claimed to have undisputable prior rights to transport of domestic
goods. Brazil and several South American countries interpretation of Mare
Liberum means that the freedom criteria gives every individual the right to go its
own way in finding solutions with regard to national interests. The Polish approach
is, that since the free seas only benefit the strongest it is necessary to accept
protectionism of new merchant fleets, at least to a certain extent. Even the mighty
American view has been that all countries have a right to a possess a merchant
fleet and a reasonable share of its of flow of goods. The present development is
pointing towards a situation where Mare Liberum, in practice, is impossible.
Developed countries that thrived during good economic times of free seas began
to feel the stalking competitors of the rest of the world and imposed restrictions
on foreign trade. It is a classic solution used, for a limited period at least by
France during mercantilist eras, but the present preservation of free seas are
sinking.

16
Bring and Mahmoudi, p. 150.
17
Sundin, p. 13.
18
Statements and resolutions of the INTCC 1971-1973, XXIV the INTCC Congress Rio de
Janeiro of 1973, p. 31.

12
As a final part of this excursion through history I want to return to Grotius’ vision
of Mare Liberum. This universal right to the seas has since been subject to
frequent agreements. International organisations have repeatedly made attempts
to codify this generally accepted custom, but history has shown that no consensus
could be reached upon the meaning of Mare Liberum.19

If interest in maritime transport was focused on military and foreign policies during
the 17th century attention turned to more commercial considerations in the 18th
century merchant fleet policy. Several agreements were concluded between the
competent authorities regulating the main European routes between Bremen –
Amsterdam and Hamburg – London, and when steamers were introduced20 lines
serving the same routes and trades swiftly concluded competition agreements, the
first liner conferences where established.21 But Mare Liberum was narrowed
already in 1660 when Cromwell introduced the Navigation Act, containing severe
restrictions of competition. England, together with Holland the leading naval
power, reserved all trade with its colonies to one flag. One reason to this was said
to be England fear of the Dutch superiority in technology, but also England’s close
connection between its merchant fleet and navy. American pressure forced
England to lift these restrictions only to see the Navigation Act of 1784 impose
new reservations of trade, whereby all import were to be shipped by British
vessels. The antagonist, the grand maritime nation of U.S.A. was the target for
this restriction and the reply was delivered in a law prescribing that all import from
England was to be shipped by American vessels.22 The effect of this was that all
liner ships always completed one journey with empty holds, and thus an increase
of costs – a situation that remained until 1849 when both nations recognised the
potential economic crisis it could have evolved into.23

This is where the liner conferences first appear. Earlier technical conditions did
not allow fixed schedules because of weather, but the steam revolution realised
steady flow of cargo on a regular basis with set tariffs. The stage was open to
conferences. The industrial revolution brought new dimensions and maritime
transport was necessary to meet the needs of transportation to new markets. In
1850 the world fleet consisted of about 7 million tons, 90 percent were sail ships,
and by 1900 the world tonnage amounted to 29 million tons. A voyage by sail
ship from the U.K. to Australia was on average sixty-five days, shortened by
fifteen days with steamships.24 A group of liner steamer shippers established a
common tariff with uniform rates in 1875 and a system of deferred rebates in
1877, thus the first liner conference was a fact, so were the standards for the
composition and cartel characteristics. Within a few years this mode gained

19
Sundin, p. 41.
20
The first steamer was launched 1819 in the United States, and was named Savannah.
21
Sundin, p. 42.
22
Ibid, p. 43.
23
Ibid, p. 44.
24
Herman, p. 7.

13
members from all industrialised nations, covering all international maritime trades,
as well as critics.25 Several inquiries have consequently been made into liner
conferences; two by sceptical United States will be described below. Generally it
can be said that Europe initially chose a less regulative approach.

2.4 POST WAR SYNDROME – COLD WAR

The demise of the free seas, if ever existing, continued and still continues into the
21st century. If the situation was discouraging prior to the Second World War
matters did not improve. Before only a few maritime nations existed on the scene
and still it was difficult to limit different restrictions on competition. The United
States was the only nation involved in World War II with a greater post than pre
war merchant fleet and not late to take advantage of the situation. The same
situation could be found in air transport. The previously liberal United States, with
preference laws concerning public goods such as mail26, state officials27 and war
material28, now veered in becoming a nation of extensive competition restrictive
actions.29 This fact and United States strong economic position made the situation
of other weaker by war terrorised nations severe since much of the trade was to
be made on US terms. Even the ‘Marshall plan’ was given provisions of US
preference of 50 percent for cargo shipped to Europe.30 The countries of Latin
America, spared from the ravage of war with many shipping companies founded
in the wake industrialism, adopted policies of restrictions on competition to aid its
own fleet. But besides restrictive measures by Argentina, Peru, Ecuador, Brazil,
Cuba and Panama, also France, Holland and Portugal adopted these regimes
together with countless others.31

With great creativity and intensity competition restrictive measures soon

summoned an international opinion, especially among the countries of northern
Europe, for common action. The ICS stated that if no measures were taken future
international trade might be jeopardized. Already in 1949 a resolution against
competition restrictions in ocean trade was adopted whereby it recognized that
the free flow of world commerce and exchange of international shipping was the

25
Blanco and Van Houtte, p. 104.
26
The Merchant Act of 1920 Section 24 stipulated ”That all United States mails shipped or
carried by on vessels, if practicable, shall be shipped or carried on American built vessels
documented under US Laws.
27
The Merchant Act of 1936 contained provisions meaning that employees “on official
business overseas or to or from any of the United States shall travel and transport his
personal effects on ships registered under laws of the United States”.
28
The Cargo Preference Act of 1954 contained rules on how military transports were to be
conducted, to be precise, shipped 100 percent by American built vessels.
29
Sundin, p. 44.
30
Sundin, p. 45, 47.
31
Ibid, p. 47-48.

14
best guarantee of economic equity and world peace.32 The situation did not
immediately improve, United States sought to expand its Marshall load
reservations in 1950, while 70-75 percent of the American fleet operating on
trades between foreign countries was subsidised.33 At the ICS meeting of 1954
an increasing tendency was shown of countries attaching special treatment clauses
to their trading agreements. An extreme was the rebuilding example of Chile,
whose entire export was to be shipped by domestically owned ships.34 By way of
regulations reserving tonnage, relief of customs fees for domestic vessels,
monopolised import licences, currency manipulation and reserved quay slots in
the harbours were some of the fashions utilised toward strong merchant fleets up
to 1960.35

The East engaged in ocean trade during the 1960’s and 1970’s and the expansion
was immense with consequences around the world. In the United States the
subsidies system was so extensive that the Department of Transportation
considered a fully state owned merchant fleet.36 The development of
protectionism in South America started to give effect among Western Europe
shipowners and at 1962’s Chamber of Shipping’s meeting new restrictions were
actualised. Venezuela, however, was an outstanding South American example of
differing opinion as its government early on clarified that Venezuelan sea trade
was to be conducted according to purely commercial principles.37 The emerging
industrial power of Japan deceived its way into the OECD in 1964 when the
obligation of a non-subsidiary policy as an obligation for entry remained nothing
but a theory. Japan’s unscrupulous attitude also resulted in systematic attempts by
Japanese liner companies to sabotage the operation of the “Far Eastern Freight
Conference”, which to a great extent covered liner shipping between Japan and
Europe.38 The United States trade blockade against Cuba 1963 and failure
among the Soviet crops led to competition restrictions from the United States,
imposing preference provisions into its help programme to communist countries.39
East State expansion, especially Soviet the leader of the Committee for Mutual
Economic Assistance (CMEA), was originally initiated to secure the export and
import of goods to its own countries, but both Poland and East Germany
competed on other trades mostly Dutch and West German imports. Soviet also
stated in 1970 that “the principle of the freedom of the seas must be upheld”, but
the objectives were much deeper than that as Soviet Union as well as the United

32
Sundin, p. 49-50.
33
Ibid, p. 53.
34
Ibid, p. 58.
35
Ibid, p. 59. Brazil, Chile, Ecuador, Peru, Turkey, United Arab Emirates, USA, Argentina,
India, Colombia, Czechoslovakia, Poland, Spain, Burma, China and Venezuela are some of
the culprits. Sweden and Norway had an interesting relationship dating back to the Bill of
Products (s.k. produktplakatet) of 1724 and its Annex of 1726, whereby Swedish merchant
ships were prohibited to served the Norwegian coast line and vice versa (p. 55).
36
Ibid, p. 61.
37
Ibid, 62, 66.
38
Ibid, p. 63-64.
39
Ibid, p. 64-65.

15
States foremost saw shipping in terms of power of political aims, not a tool in the
service of world trade.40 The US policies in shipping will be further discussed
below in Chapter 5.

The Soviet merchant fleet became more recognized and noticed in the third land
traffic, operating as outsiders in the trades to Australia with rates well below the
conferences, “Australia to Europe and Continent to Australia Conferences”, and
conference measures were taken until it was evident that Soviet tonnage must be
admitted into the conferences. In a short time the Soviet merchant fleet increased
by 300 percent and by size now was sixth in the world. Its subsidies program,
like most other upcoming shipping nations, helped build a national merchant fleet,
almost swept out the Australian lines during the early 1970’s. The situation was
similar for the European conferences on the Euro-American trades as the US
subsidies policy made existence a challenge in the late 1970’s. The world wide
governmental efforts to influence or dictate the transport conditions for importers
and exporters continued, more and more countries imposed freight reservations.
The situation has not changed, only the methods to impose trade and competition
restrictions have and the restrictions are increasing in number.41

2.4 CONTAINERISATION

In the same way as the 1860s and 1870s experienced the change from sail to
steam the corresponding decades of the 20th century saw the change from break
bulk liner services to container shipping. The container revolution led to new
forms of cooperation. The containerised version of joint services is liner
consortia.42 In the following period big liner groupings began to take over the
individualistic liner companies, working together internationally in even bigger
groupings – consortia – in particular trades. Today consortia handle many of the
trades to and from Europe, as a way of rationalising shipping to the demands of
the trade and matching major competitors. The basis of consortia is that while the
ships normally are owned, or chartered in, by the parties of the consortia, it is the
consortia as a co-operational body that operates the fleet and deals with the liner
operations.43

Consortia it was thought would out compete liner conferences, but they have not.
The process of change, which occurred in liner shipping while containers were
introduced in the trades, has been characterised by what shipowners label an
“orderly approach, broadly respecting the positions of other conference lines and
also effecting the change within established conference structure”.44 The consortia

40
Sundin, p. 67.
41
Ibid, p. 80-81.
42
Blanco and Van Houtte, p. 154.
43
Farthing, p. 124.
44
Blanco and Van Houtte, p. 154.

16
became the conferences’ internal reorganisation, an industrial co-operation
allowing the shipowners to adapt to the new scale of shipping operation and
jointly face necessary investments. Meanwhile, alongside consortia, liner
conferences remained the traditional forum for cartel control over rates and
market sharing between lines. The consortia solutions, of various modes, continue
to increase as the preferred form of cooperation, a trend observed among
outsiders as well. Distinguishing between liner conferences and liner consortia is
not possible. A true conference capable of stabilising trades and a consortium of
equal qualities are, in fact and by definition, both conferences.45

2.5 ANALYSIS

The fundamental aim of free sea borne trade and the right to freely compete over
loads between countries have since the Second World War played a
subordinated part, this is evident. The meaning of the freedom of the seas has
been narrowed. Today it includes, legally; the freedom to navigate upon the high
seas, freedom of fisheries, freedom to lay submarine cables, and freedom of the
air space above the high seas.

Maritime law is old, it consist of ancient institutes. Trade customs developed into
written, or maybe carved, law, i.e. the Hammurabi codifications. The enigmatic
Phoenicians further upgraded the commercial law. Public laws, however, first
arose in South East Asia.

Maritime transport, it was found, was easier than road transport and could handle
larger loads. This increase of capacity led to flourishing merchant societies and
city-states – even empires. Periods of lone dominance meant stability while
periods of balance meant terror. The demise of the glorious Roman Empire led to
different fractions of power, foremost between Christians and Muslims - still
today in various interest conflicts.

The to a large extent applied concepts of Mare Nostrum, Mare Clausum and
Dominium Maris regulated sea relations for a lengthy period. Grotius’
innovation, Mare Liberum, altered the scene but temporarily, as the major
maritime nations soon out manoeuvred the concept in favour of its own short term
national interests - a concept well recognised today still. Mare Liberum can
unfortunately be interpreted in various manners, no universally accepted or
recognised definition has been concluded and individuals, deprived of the
opportunity to freely thrive outside national interests, suffer there from.

The steam engine, installed into the hull of vessels, revolutionised sea trade and
made possible liner conferences – the increase in tonnage and possibility of

45
Blanco and Van Houtte, p. 155.

17
timetables. Liner conferences, it can thus be said, is a side effect of the steam
engine, i.e. a sign of progress, however, definitely more a result of the wishes of
shipowners than shippers. Liner conferences have suffered severe damage and
have either been systematically defied or used by governments acting in national
interests through the years. In a way it can be said, in spite of its obvious
detrimental effects on competition, that the conference system has the ability to
function as an integrating institution between lines of different nationalities in times
of protectionism. The US as well as less developed countries (LDCs) were ready
protectionists during the 19th century, and the rest of the west followed after the
establishing of CENSA, and their own subsidies programmes.

18
3. Liner Conferences
This chapter aims at giving the reader an understanding of what liner conferences
are; organisation and characteristics, competitions aspects in general, claimed
advantages and disadvantages. It is important for the reader to understand the
problems that can occur where liner conferences operate, in this essay, foremost
hampering of competition. This chapter will describe liner conferences as a
universal concept; the following chapters will deal with the specific policies with
regard to the United States approach, the UNCTAD Code of Conduct for Liner
Conferences and the European Union position, both politically and legally.

Liner conferences can be described in numerous ways, and every author uses
their own definition. One can generally and very simplified describe liner
conferences as bodies or associations that consist of shipowners or operators
who operate regular shipping services for the carriage of general cargo according
to fixed schedules and rates on particular routes.46 Council Regulation 4056/8647,
the main attraction of this essay, follows the definition laid down in the UNCTAD
Code of Conduct for Liner Conferences and can be found in chapter [Link].

Liner conferences as a successful concept arose on the route between Calcutta

and the U.K.48 from the desire of importers and exporters of goods for a stable
rate of freight as well as the need of shipowners for more rationalised schemes of
transport in an increasingly capital-intensive industry.49 Huge variations in the
freight rates was a result of the over- and under supply of transport space, this
because of the variation in available ships due to the many perils known to sailing
ships, including weather. If a vessel would be alone in port at a given time this
could charge all but moderate rates. This situation of course might be followed by
an accumulation of superfluous vessels and bargain fares. With the expansion of
trade in the second half of the 19th century and the transformation from sail to
steam, liner companies were able to increase the regularity of their service and
gradually the idea was accepted among the traders, whose risks were reduced,
certainty and assurance that they were receiving identical treatment from all
shippers of that conference. The original conference was born and with it
followed the formation of numerous others.

Liner conferences can be classified as being either open or closed in terms of

membership. The debate of liner conferences is a long-lasting one and has at
times been fierce and bitter. Advocates argue that liner conferences utilise the

46
Power, p. 295. See also Gold, p. 350, for an excellent but extensive definition of the term
‘liner conferences’.
47
Council Regulation 4056/86 of 22 December 1986, laying down detailed rules for the
application of Articles 81 and 82 of the Treaty to maritime transport, OJ 1986 L378.
48
A.k.a. the ‘Calcutta conference’, which is still operating.
49
Farthing, p. 95.

19
coordination of services and resources, while critics regard them as anti-
competitive cartels, manipulating markets and effective competition in the interest
of shipowners.50 The US standpoint, and its Shipping Acts of 1916 and 1984 is in
contrast to the EU position in this field as the EU governments have been reluctant
to legislate in this area, instead self-regulatory approaches have been set up to
encourage shipowners and shippers to establish their own regimes. The 1964
Note of Understanding, later transformed into the for the developing states
unacceptable CENSA-ESC Code of Practice in 1971, concluded between a
number of European shipowners and shipping companies embodied this regime.
Until 1986, the regulation of liner conferences was in effect a matter for national
law. English courts have declared liner conferences to be not unlawful. The US
have made liner conferences operating on trades involving US’ ports subject to
the rules of anti-trust or competition law through the Shipping Act of 1916. The
US shipping policy will be further discussed later.

Additionally I would like to stress that the term ‘conference’ is broad in the sense
that it covers a wide variety of associations, both formal (written) and less formal
agreements of rates, frequency of service, and other purely informal associations
comprising only general loyalty working agreements. In the following of this
chapter we will look upon the common elements of conferences. The first part of
this chapter will concentrate on liner shipping, under which the liner conference
system operates.

3.1. LINER SHIPPING

Refined goods constitute seventy-five percent of the value of world trade. Liner
shipping, i.e. regular time scheduled traffic, is the principal mean of transporting
these refined goods. Container shipping51 is the largest and growing mode of
maritime transport, the rest is shipped by ro-ro ships52 or break bulk ships.53
2,400 container ships, 1,800 ro-ro ships and 16,800 multi deck ships (General
Cargo Ships) are in the service of liner shipping, and the countries of the OECD
control two-thirds of the container ship fleet. EU shippers own approximately 60
percent of the OECD fleet. Between 1991 and 1997 the fleet grew by ten
percent a year, in China by remarkable fifty-four percent every year between

50
Power, p. 295.
51
Container ships are stowed using land-based cranes placing the containers into slots
aboard the carrier. Container volumes are calculated using the system of Twenty Foot
Equivalent Standard (TEU) – length 20 feet, height 8 feet and width 8 feet (the size of one
container).
52
Roll-on-roll-off ship: where the cargo is loaded on to mobile carriers that are rolled on the
ship and rolled of at the port of call.
53
The break bulk ship has one, two or several ship-length deck levels where cargo can be
placed in cartons, wooden boxes, sacks etc.

20
1991-1997 leaving China second only to United States, which handle fifteen
percent of container world total. 54

Eight major routes of maritime trade can be identified in the world: (1) the North
Atlantic route; (2) the Mediterranean-Asian-Australian (Suez Canal) route; (3)
the South American route, including trade from North America to the East and
West Coasts of South America; (4) the Caribbean Sea route; (5) the South
Pacific route; (6) the North Pacific route; (7) the European-East Coast of South
America route; and (8) the South African route.55

The birth and introduction of the container has been compared to, regarding
efficiency, the transformation from sail to steamer ships in the nineteenth century.
Efficiency is one aspect to what has been a characteristic in liner shipping, and the
heavy ocean trades of the North Atlantic and Pacific Ocean is concentrated into
larger and fewer shipping companies. During its first decades of existence this
adaptation of container shipping was immense leaving shipowners with no option
but to form consortia, of both cost- and capacity reasons. The present phase of
container shipping might lead to a different position where the consortia
formations are disintegrated and the giant actors of the market forming new and
even greater alliances.

The Liner shipping can be described as a link between fixed port destinations with
a set schedule and fixed tariffs. The ships are trafficking the routes regularly even
though there is a shortage of goods, then sailing in spite not carrying a capacity
load. An oddity with liner shipping is the advanced sales system providing the
ships with cargo. This system can both be attached to the shipping company or to
special ‘liner shipping agents’, which can be more or less dependent of the
shipping company. It is often the skills and efficiency of the sales organisation that
provide the shipping company with a chance of survival and opportunity of
growth.56

Restrictions on competition are, at least for this study, of interest and for
consumers especially. Even though the freight costs represent an insignificant part
of the end price of a product this is where the price is most fiercely trimmed, and
reversal, where the price increase is the highest when chaos strikes. Discussing
restrictions on competition leads one to the subject of ‘liner conferences’. Liner
shipping between two trade areas is generally regulated by a liner conference; a
cartel like institution regulating traffic and price. Outsiders, operators not willing or
able to join the conferences, often operate alongside in competition with these.
The first successful conference was one regulating the trade between England and
India in 1875.

54
Sjöfartens Bok 2000, p. 58.
55
Herman, p. 4.
56
Sjöfartens Bok 2000, p. 59.

21
Most liner conferences demand their own type of special tonnage and special
equipment. Investments of this kind are only possible if supported by a steady and
stable rate of business. Moreover, the tariff system of liner conferences is
designed in a fashion where increase or decrease of freight cargo only in plausible
after a notification and negotiation. Meanwhile, in the tramp vessel markets the
freight quantities can be characterised by rapid fluctuation. Most of the liner
conferences apply various systems of rebates, aimed at cargo owners undertaking
to solely utilise ships of that conference.57 Liner Conferences, it characteristics,
merits and disadvantages will be further discussed below. The basic advantage of
using this system is that it provides the member lines with the opportunity to
calculate with fairly fixed variables of freight cargo and reduced competition from
independent lines and tramp shippers in time of depression. The cargo owners are
assured of freight space aboard conference ships at a moderately steady price
over long periods of time.

3.2 ORGANISATION, OPERATION AND

MEETINGS OF CONFERENCES

A conference needs some kind of headquartering, a main secretariat. The

secretariat is normally situated in the country or region where most of the member
lines are situated. Traffic and tradition are other factors leading to the location of
the headquarters.58

Conferences normally have a board with all members represented, and a

chairman as a rotating honorary position of the conference organisation. The
duties, powers and influence of the chairman vary. A conference can also have a
secretary, the chief executive officer, with limited powers, but the important task
of executing day-to-day management of the conference. The expenses of
establishing and maintaining a conference are normally divided equally amongst
members, unless the proportion of shipped goods is varying.59

Policy decisions of conferences are made at meetings where all members vote or
reach a consensus through other channels of communication. Some conferences
have only one type of meetings, a conference where all members are assembled,
whilst others have two or three types of meetings depending on the importance of
the issue surfaced. Certain appointed committees prepare the research and
investigation prior to a member conference whose normal function is to make
recommendations for decisions taken by the conference. Another function of the

57
Herman, p. 60.
58
The liner conference system, Report by the UNCTAD secretariat, TD/B/C.4/62/Rev.1 -
United Nations – New York –1970, (The UNCTAD Report), p. 8. For anyone seeking deeper
knowledge ground knowledge of Liner Conferences this report is very rewarding.
59
UNCTAD Report of 1970, p.9.

22
committees is to monitor arrangements following the conference agreement. Such
arrangements can include restrictions on the number of sailings or pooling of
cargo, and will, as well as the conference agreement, be discussed below. 60

3.3 THE CONFERENCE AGREEMENT

The conference agreement is the basic document defining the contractual

relationship between the members of a conference – the code of conduct. In
reality the agreement is primarily an arrangement between the competing member
lines construed to restrict or eliminate competition between themselves and
contest actual or potential competition of lines outside the conference. The
content of the agreement is therefore only reluctantly disclosed. The competition
limiting qualities of conference agreements make them very controversial. Despite
their crucial influence over liner shipping worldwide, only the conferences
agreements among the conferences operating in the overseas trades of United
States are made public, filed by the Federal Maritime Commission (FMC). 61

The scope of conference agreements vary widely most depending on how

immense competition is internally, between member lines, and externally, from
outsiders. The minimum requirement of an agreement is for all members to charge
a certain minimum rate and follow the same rules governing this process. In more
complex conferences the members agree to pool their freight earnings in a
colossal commercial construction whereby all liners act as one both internally and
externally – a touch of egalitarianism. The agreement also regulates conduct not
accepted by the conference members and thus considered malpractice. More
intriguingly, provisions endorsing members to report other members’ malpractices
to the conference chairman or secretary are common. It is normal that the
member lines from developing countries act as monitors.62

3.4 COMMON ELEMENTS OF LINER

CONFERENCES

A few common elements can be identified among all associations depending on

the degree of sophistication. The following can be identified among most
conferences:

n Common freight rates63

n Agreed frequency of service64

60
Ibid, p.9.
61
UNCTAD Report of 1970, p.7.
62
Ibid, p. 8.
63
See chapter 4.3.1.

23
 n Common approach to membership 65
n Arrangements within trades66
n Loyalty arrangements67
n Surcharge and adjustment factors68, and
n Pooling69, for the really sophisticated conferences.

This enumeration give at hand that conferences constitute sever infringements in

restricting fundamental principles of competition. Conferences, however, do
restrict competition but they do not monopolise trade. Conferences are, in
economic theory, cartels not monopolies. This can be explained because of the
conference structure being open to competition internally in terms of quality of
service and externally in terms of competition from outsider shippers, increasing
air transport activity, and over land, from rail and road transport. Moreover, the
past situation of conferences acting out secret service and closed society club
manners is altered. As will be discussed below, a number of inquiries have been
made to reveal and illuminate conferences. 70

3.4.1 Liner freight rates

A common freight rate is one of the fundamental characteristics of liner

conferences. The same rate for the same goods, whether the cargo is offered in
large or small quantities disregarded of whether or not the vessel is fully loaded or
not.71 All members agree, by reference to the agreement, to charge uniform rates.
In order to implement the agreement effectively the members in many cases follow
the same rules and regulations for the calculation of the freight rates, payment of
freight, acceptable packaging for different commodities, issue of bill of lading and
uniform rates of commission to agents or brokers.72 Naturally it is up to the lines
of the conference to set the level of freight rates on the various categories of
commodities that are shipped. Imagine anything, it is shipped. Whatever you can
find in your home, use for transportation, eat, drink or wear has most certainly
been shipped, as long as it is not made in the EU. The freight rate is, however, not
only set on the basis of distance, as there are many factors that can be taken into
account when determining the freight rate. These include:

n The value of the goods,

n Weight/measurement fraction,

64
See chapter 4.3.2.
65
See chapter 4.3.3.
66
See chapter 4.3.4.
67
See chapter 4.3.5.
68
See chapter 4.3.1.
69
See chapter 4.3.6.
70
Farthing, p. 97.
71
Ibid, p. 97-98.
72
UNCTAD Report of 1970, p. 4.

24
 n Nature of the cargo, easiness of handling,
n Claims record,
n Ports served and nature thereof,
n Quantities moving to a particular area,
n Competitive factors,73

Conferences have also made it practice to maintain profits by putting surcharges,

often called adjustment factors, on existing rates on various grounds that can
include: periods of port congestion, where neither shipowner or shipper is
responsible where the ship is expensively held at the port; currency movements
against the shipowner; or maybe sudden and rapid increases in bunker oil price;
emergency surcharges; preshipment surcharges; and handling surcharges. The
imposition of surcharges is justified, by shipowners, on the basis that they are
temporary and the events giving rise to them are unexpected and swift.74
Surcharges are not a fine, neither a remedy to cure inefficient ports, but a means
to limit the initial losses of carriers. Sometimes the initial losses tempt shipowners
to maintain the new rate level, as was the case after the Six Days War, upon
breakout of which the Suez Canal was closed and all conferences using that route
imposed surcharges, which were not removed or reduced by all the involved
conferences following the reopening of the canal.75

3.4.2 Regularity

While speculators welcome one-bulk commodity deals, regular shippers prefer

regularity in liner shipping, together with full geographical coverage and assurance
that cargo of all qualities, attractive/unattractive, easy or difficult to handle, is
accepted. A well-coordinated, time-scheduled liner service is one of the aims of
conferences. Thus, an agreed share of sailing is one of the elements of
conferences.76 Scheduling is a difficult matter, and the more ports a vessel calls at
the more likely delays become. One frequent way of solving this dilemma is by
making way-port77 calls, unless the line is banned from such a port.78 Waste of
time is a truly challenging experience for lines, given that the cost of domesticating
vessels in a port easily escalates into giant dimensions doing great damage to the
suffering lines.

73
Farthing, p. 98.
74
Ibid, p. 102.
75
Herman, p. 54-55.
76
Farthing, p. 99.
77
Way-port trade is any trade from or to a port, which is served by conferences as a part of
a longer route (UNCTAD Report of 1970, p. 61.).
78
UNCTAD Report of 1970, p. 64.

25
3.4.3 Membership of conferences

Being a member of a conference is like being member of a club. Only reluctantly

are new entries made that might upset the equilibrium within the member group.79
Therefore two classes of memberships exist: ordinary or full membership with full
rights according to the agreement and associate membership with restricted sailing
rights in comparison with full members. Both classes are entitled a line to receive
cargoes from shippers tied to the conference.80

Certain criteria to become a member can be identified: owned ships, long-term

commitment to the trade, an ability to bring some new business to the trade
(testimony of achievement), mutual benefit and sufficient financial resources.81
Conferences operating under such terms are often called ‘closed’ conferences, as
opposed to ‘open’ where every line has the intention and ability to offer a regular
liner service in the conference’s area and the prospect of joining the conference
demand only application and acceptance of the conference agreement. 82 The
UNCTAD Code of Conduct, which provides rules on this matter, shall be
described below. The above criteria has been declared unlawful in the United
States, where the mere application is to be sufficient for membership, but that
matter too will be addressed further on.

3.4.4 Arrangements within trades

The large conferences (from a European perspective) on the routes to India, the
Far East, Australia, the African continent, the United States and Latin America
cover huge areas. The lines therefore section the trading area so that each has a
particular territory where they influence both loading and discharging as well as
some ports on the way between the key destinations (way ports). For example in
the U.K. one group of lines is restricted to the west coast whilst others load and
discharge on the east coast. This is one of the obligations conferences take upon
them to fully cover the trade and provide sufficient services, whether cargo is
offered or not.83

3.4.5 Loyalty Arrangements

Regularity, frequency and stability are not at all obvious, but the conferences
expect their customers, the shippers, to be loyal. This loyalty is established by a

79
Farthing, p. 100.
80
UNCTAD Report of 1970, p. 12.
81
Farthing, p. 100.
82
UNCTAD Report of 1970, p.12.
83
Farthing, p. 101.

26
system giving regular customers rate advantages. Two methods exist: the deferred
rebate system and the contract system. Exploiters of the deferred system retains
and give back (after six months generally) a percentage discount thus imprisoning
the shippers in a situation where the only way out of the relation is to be disloyal,
shipping via non-conference lines, while the contract system conferences bind
shippers by contract and the shippers unqualified collaboration with the possibility
for shippers to temporary or definitely exit the contract whenever they wish.84

The origin of the deferred rebate system lies in the U.K. - Calcutta trade. The
arrangement provide that the conference repay the shippers a certain percentage
(on the Calcutta trade ten percent in 1877) at the end of each six months
provided that the shipper utilised the services of the conference. This rebate is
thus deferred the rebate captivating the shipper to the conference, and a failure by
the shipper to dispatch its cargo with the conference is considered a breach of the
agreement and earned rebates are lost. The second most significant element
deferred rebate schemes is the absence of a written contractual agreement, thus
shippers have little evidence of either competition restrictions or accumulated
rebates kept by the conference of the rightful share of shippers. Loyalty
agreements might be the most effective tools in the hands fighting competition
trying to secure steady flow of freight. The deferred rebate system is available to
all shippers, big or small, but naturally, provided that they are not represented by
an organisation, the latter receive unequal conditions. Though not effective in
cases where shippers dispatch their merchandise on an irregular basis, the loyal
and regular shippers are easy prey for conferences that can raise their rates
without risking a massive exodus of shippers.85

The dual rate contract is a direct discount available to shippers who dispatch all
their cargo, or specified commodities, exclusively via conference operated
vessels. Shippers immediately enjoy the discount as they pay the freight rates, thus
are not tied annually to their scheming servants. The tariff quotes two rates for
each commodity, the rates for contractual shippers and the ordinary rates.
Another difference between the loyalty systems is the form of agreement, where
the dual rate contracts are set in a written contract containing rights and
obligations of both sides. No strict rules regarding the level of freight rates exist -
the fiercer the competition, the higher the discount. When a mutual dependency
arise maintaining an orderly service becomes and the threat from outsiders
diminishes, and tying is an effective method to avoid opportunists from creaming
off in peak seasons. The opportunity for shippers to negotiate with the
conferences, not being dictated the terms, and the immediacy of the discount are
the advantages of dual contracts.

84
Farthing, p. 102.
85
Ibid, p. 60-61.

27
3.4.6 Pooling arrangements

Pooling can take various forms ranging agreements to control the number of
sailings of each pool member to a system where the actual cargo earnings of each
member are controlled.86 Only the most sophisticated conferences have pooling
arrangements. In pools a balance is created between those turning a profit and
those suffering a loss. Pools are almost always specialised in that a similar type of
ships are pooled together, indeed a danger on the occasion where the basic trade
upon which the pool rely crumple, or where a minority of pool members carry the
big burden of a pool during a substantial period of time.87 There are basically two
types of pools: pools controlled by their members, and pools operated, organised
and controlled by an administration. The pool activities can be divided into three
subcategories: employment of pooled vessels on a sensible mixture of short,
medium and longer term business; undertaking contracts of affreightment; and
chartering in tonnage both on a speculative basis and to enhance pool activities.
The pool must not, however, act too opportunistic since the reputation and public
image is of vital importance to a successful operation. The pool must not only find
feasible and lucrative employment for its members, but also be able to employ
outside ships when such needs occur, something only possible for a pool of high
regard.88

Pooling is, despite its age, still not uncontroversial from competition perspective
protecting less efficient carriers at the expense of more expensive ones thus
hampering the possibility of healthy competition. Nevertheless, shipping pools
shave a potential to play an important role in the future of shipping. The welfare
qualities aside, a well-run pool can be highly cost effective.

3.5 COMPETITION AND CONFERENCES

The basic aim of a liner conference, like any other cartel, is to control competition
between the members of the cartel and eliminate competition from outsider on a
specific market. Conferences’ internal control involves the uniform rates charged.

3.5.1 Internal competition

Even if a conference has complete monopoly on a trade route, factors outside the
conference’s power overlooked, this does not purely lead way for a monopolistic
policy of the conference. It has been stated that internal competition, i.e. forces
within the conference moving in different directions, and, the endeavour of lines to

86
UNCTAD Report of 1970, p. 42.
87
Packard, p. 3.
88
Ibid, p. 4-12.

28
eliminate fellow carriers within the conference, provide a climate not willing to set
monopolistic freight rates.89 One must bear in mind that the members of a
conference once were competitors uniting to, in the long run possibly, avoid
extinction, but competition never completely disappear. The members may cover
a wide range of nationalities and histories of operation, and the extent of interest
each member have in a particular trade and in other lines certainly differ widely.
Moreover, the policies of governments towards national lines and foreign lines can
take several shapes. These conditions and factors make members inclined to
capitulate only the absolute minimum allowed by the conference agreement of its
competitive freedom. In order to achieve better returns, individual members will
strive for maximum utilisation and deficiency. The desire for greater profits is the
strongest inducement for competition among the members Normally the
agreement provides the scope of competition within the conference.90

But at times the rules of the agreement aiming at regulating the behaviour of the
members are broken as a result of competition amongst members. Breaches of
the agreement, malpractices, can be used to attract shippers, by, for example,
calculating the freight rate upon weight instead of volume to give the shipper a
lower rate and thus the miscalculating member an additional shipper.

One of the most effective ways to promote its interests on the expense of
competition is as stated loyalty agreements. But even these arrangements cannot
tie the shipper to one carrier, and thus internal rivalry thrives. Hopefully internal
competition results in better service for shippers.

3.5.2 External competition

Outside competition to conferences can be identified among various sources. The

traditional threats come from independent lines and tramps. Especially bulk
tonnage can be a strong threat when charter vessels are overflowing the world
since the charter rates then are at its lowest and usually loyal shippers become
tempted. Tramps, which are usually engaged in bulk carriage, can be transformed
into liner service. Generally it can be said that where there are attractive rates
tramps will compete with conferences to a much greater extent than occasional
bulk hauls. Still, operation of liner service outside a conference is difficult in any
trade where the loyalty agreements are valid.

Conferences have two common practices when determining the type of measured
to be regarded in relation to independent lines. One way is where the lines are
admitted into the conference, a very common way to deal with competition in any
business. The other is to cut rates, tie shippers and out best the independent lines

89
Herman, p. 31.
90
UNCTAD Report of 1970, p. 4.

29
via better service. At times neither approach is possible and rate wars break out.
A war is won by the stronger part. When the outsiders are small conferences
prevail rather comfortable. But when the outsiders are subsidised or otherwise
backed up by a conglomerate not dependent on maritime trade or a government
war is truly devastating for conferences. Status quo can then only be reached by
acts of sensibility; mediation, negotiation and an understanding that a win-win
situation only can be reached by new divisions of the trade.

Conferences compete with each other too of course offering alternative routes for
the transportation of similar products through different gateways. Alternative
routes and products can hence limit the monopolistic trends, whereby the
conferences now hoard into super constellations. The coordination of conference
activities between conferences and consortia will play important roles in the
future.

Competition to conferences can also be felt for the carriage of valuable goods by
air transportation, and, where possible, land haul. The competition between sea
borne and airborne transport may in the future grow considering the increasing
capacity of aircrafts. The birth of the jumbo jet, both a passenger and freight
transporter, in the late 1960’s initiated a new era. These planes cover their costs
via passenger fares, thus any cargo might be charged close to the handling costs.
International air transportation of passengers is organised by International Air
Transport Association (IATA), a private organisation of scheduled airlines –
something of a gigantic ‘air conference’ – considering that one of IATA’s main
functions is to fix tariff rates for international air transport. IATA is a fairly
powerful organisation without equal in the maritime world. The reason hereto is
the strong ties between IATA and the governments involved in aviation matters.
This may be so because of many of the companies being wholly or partially state
owned. Nearly all scheduled airlines are represented at IATA, more than ninety
percent of the air traffic is carried under its influence and the government ties is the
key to the IATA success. Most of IATA’s activities are expressed in Resolutions
and Recommended Practices adopted by the IATA Traffic Conferences and
become binding upon the approval of the interested governments, thus a fair
chance of applicability in practice, as opposed to resolutions and
recommendations in the maritime branch91 Many aspects distinguish the air and
sea. By virtue of its nature maritime transport could not be organised into one big
association, neither could single tariffs be found to the thousands of commodities
being shipped, considering the difficulties to set one tariff for one commodity,
passengers.92 Airfares are still too expensive, but for small and valuable
commodities to be transported at high-speed air transport stand as a genuine
competitor. New times are ahead, planes continue to grow and the potential air
carriage threat is taken seriously.

91
Diedricks-Verschoor, p.7, 35.
92
Herman, p. 81.

30
3.6 MERITS OF LINER CONFERENCES

Advocates of the conference system, its including members, claim that

conferences, in general, benefit to both customers (shippers), member lines and
the trade of served countries in general. To the gain of shippers are of course the
stability of freight rates, services and schedule. This means no discrimination
between shippers served by a conference, occurrence of increase in price only
after a notification period of two months plus and uniform freight rates over a
wide range of loading and unloading ports. A shipper is sure that its competitors
cannot by shopping around gain lower rates. The regular service creates
confidence for both shipowners and shippers that business is secure, and in
addition conferences provides broader geographical coverage than individual
lines, as well as a variety of ships with flexibility and ability to provide vessels of
fitting size and speed capable of meeting the requirements of the trade.93

The conferences furthermore claim that the elimination of competition between

members lead to service competition, updated equipment of cargo handling and
office organisation, but also that the conferences, aware that shippers are loyal,
dare to make necessary investments. Moreover, and not defendable from a
competition point of view, weaker lines, which might be eliminated in a free
competition regime, survives under the wings of conferences94

3.7 DISADVANTAGES OF LINER CONFERENCES

The major flaw of conferences from shippers view is the level of freight rates.
Since they are set to balance out good times on bad times rates are constantly
high it has been claimed.95 The monopolistic character96 of conferences; the very
limited competition among the members, and substantial elimination of outsider
competition can lead to self-satisfaction among the members and decline in the
quality of the services provided by the conference, is perhaps the most appalling
quality of conferences in the eyes of outsiders. Another alarming consequence is
the effect of the loyalty agreements is, in reality, that the freedom of shippers is
hampered and the risk of abuse of the conferences’ dominance impending. Many
shippers claim that the high rates hardly is justified by the quality of the services
offered. Shippers also complain over the unequal relation in times of business
negotiations unless shippers’ organisations are present, both in terms of size and
since the shipper is more eager to obtain conference services than the conference

93
UNCTAD Report of 1970, p. 5.
94
Ibid, p. 5.
95
Ibid, p. 6.
96
As discussed above conferences do not, in theory, constitute monopolies, but, for better
or worse, cartels.

31
is to dispatch the commodities of one shipper on a trade where the conference is
dominant.

The membership issue is also controversial. Especially before the UNCTAD

Code the lines from developing countries were unable to enter conferences and
compete on equal terms. The lines of developing countries were excluded from
the trades affecting their own countries. As we shall see with the entry of the
UNCTAD Code matters improved. On the other side of this aspect is the
protectionist tool conferences have become in the hands of LDCs in post
UNCTAD Code shipping. Lastly the notion of shipping pools must be mentioned
as the utter evidence the somewhat socialistic welfare element of liner
conferences, and the rigid structure thereof. 97

As will be shown in the following of this essay, there are various standpoints in the
general opinion of countries and organisations.

3.8 ANALYSIS

Without being radical or bold it is safe to say that liner shipping is of utter
importance to the world trade and economy of today. It is furthermore safe to
conclude that liner shipping is concentrated to a few titanic maritime trades. The
demand for efficiency and large capacity to minimum rates has turned a costly
industry into broad forms of collaboration. Huge associations are a problem from
a competition point of view, but this is nothing unique for shipping. But like other
sectors of commerce regulation of competition and shipping now exist, both with
regard to liner conferences and other formations as consortia.

The first liner conferences were formed to reach stability of rates, goods and
sailings. The introduction of steam and the increased capacity facilitated the
formation of conferences, still playing an active part in world trade. Conferences
these days may be on the verge of a new period of transformation. Their
characteristics, including elements like price maintenance (common freight rates),
division of markets (frequency of service, arrangements within trades and
pooling), unequal contract provisions (loyalty arrangements, surcharges and
adjustment factors) surely qualify them as full feathered cartels. These are, in
practice, closed clubs with demanding entry processes and different classes of
members. Are these consequences worthy of legitimising regulation worldwide?
The advocates prime arguments; employment and regularity, the almighty
economic and political factors, again set the pace of reform, while critics stand
aside yearning for objective factors of competition to prevail.

97
UNCTAD Report of 1970, p. 6.

32
Advocates claim that the internal competition of conferences, alleged rivalry
originating from the time when the members were competitors outside the
conference. But do members of a cartel ever astray from the group? Certainly,
but the cartel repercussion is unlikely to be mild. More real is then the outside
competition, permanent by independent lines, but also from air transport and,
more devastating, protectionist lines. It will be interesting to investigate the
conference system in the future. Will stable rates, regularity and flexibility triumph
stable excessive rates, cartel structure, loyalty agreements and fighting ships?

33
 PART II

IMPORTANT
CONFERENCE REGIMES

34
4. Liner Conferences and the
UNCTAD Code
In general, but difficult to imagine when examining their conduct (see above
Chapter 2), developed countries believe in free competition and minimum
governmental involvement in commercial matters. When LDCs therefore, much
like the developed countries did, subsidised their emerging merchant fleets to
reach the level of developed countries, the later react. LDCs supported
uneconomical fleets at high costs, were constantly short of capital, had poor
technical skills, but were blessed with plenty of cheap labour. The situation is
identical today. The political and economic structures of LDCs make their
shipping needs different from developed countries.98 LDCs raised several
complaints, some correct others invalid. Most LDCs had either very small or no
deep-sea fleets, and up to 1975 only nine countries had merchant fleets with over
half a million GRT.99 As LDCs were predominantly shippers’ nations
consequently they oppose the rate fixing and unilaterally set schedules without
consulting governments or local shipping organisations. Moreover the LDCs felt
discriminated by conferences, which they mean, use old vessels on the routes
serving LDCs.100 Efforts towards cooperation and mutual understanding, i.e.
dialogues, would eliminate the feelings of LDCs that they were exploited by
conferences. Conferences’ practices were and are not utopian, but claiming that
intention to harm LDC economies exists seems hasty. The UNCTAD Code of
Conduct for Liner Conferences is one example of the endeavours to solve
conference matters in an international forum.

4.1 UNCTAD AND SHIPPING

The United Nations Conference on Trade and Development was established as a

permanent organ of the United Nations General Assembly in 1964. Its goals were
the promotion of world trade and economy with special emphasis on LDCs. The
UNCTAD was believed to become a spokesman for the third world.

In the area of shipping UNCTAD adopted two Recommendations: the first101,

which was adopted without dissent, stated the objective “to promote
understanding and cooperation in the field of shipping”. The second

98
Herman, p. 157.
99
Ibid, p. 157. These nine countries were India 3,869,187; Kuwait 990,857; Philippines
879,043; Republic of Korea 1,623,532; Argentina 1,447,165; Brazil 2,691,408; Mexico 547,857;
and Peru 518,361.
100
Herman, p. 159.
101
Annex [Link].21 UN Doc. E/Conf. 46/141, Vol, 54 (1964).

35
Recommendation102, A Common Measure of Understanding on Shipping
Questions, dealt directly with liner conferences stating, that “the Liner Conference
system is necessary in order to secure stable rates and regular service”.
Something of an openness principle evolved as the Recommendation suggested:

n Publications of conference tariffs and regulation,

n Prior notice on surcharges and rate increases,
n Loyalty agreements,
n Conference representation in LDCs,
n Adequacy of service,
n Improvement and promotion of LDC’s trades, and
n Rationalisation of routes, sailings and freight.

The UNCTAD also has a permanent Trade and Development Board. Subsidiary
to the Board is the Committee on Shipping, which started to work in 1965
studying economic and legal aspects of shipping, and reports back to the Board.
The Committee was assigned to promote understanding and cooperation in the
field of shipping policies of governments and regional economic groupings falling
within the competence of UNCTAD.103

The first Conference on Trade and Development (UNCTAD I) held in Geneva

1964 was the beginning of a new era of close cooperation and consultation
worldwide setting up the guidelines for the operation of this organ. In the second
Conference (UNCTAD II) in Delhi 1968 shipping was discussed in more
concrete terms. LDC representatives also met in Algiers 1967 and a Charter (of
Algiers) was adopted calling for stronger and more extensive cooperation,
abolishment of discrimination of LDC carriers, and demanding technical
assistance to facilitate development.104

In November 1971, the Consultative Shipping Group of Governments (CSG)

endorsed the CENSA Code for Conferences, and soon thereafter UNCTAD III
was held in Santiago 1972. The CENSA Code was criticised, mainly because the
ministers present not had been invited at the drafting of the Code, and they were
dissatisfied with the enforcement mechanisms of the Code, thus recommending
the preparation of a new legally, binding and enforceable Code.105 However, the
possible creation of a Code and its form substance was not resolved in
UNCTAD III as the maritime nations disagreed on an international instrument
being the correct solution for implementing the Code.106 Because agreement could
not be reached the General Assembly was asked in 1972 to intervene with a
special conference to adopt a Code of Conduct for Liner Conferences. In 1973

102
Annex [Link].22 UN Doc. E/Conf. 46/141, Vol, 54 (1964).
103
Herman, p. 167.
104
Ibid, p. 168.
105
Ibid, p. 169.
106
Ibid, p. 169-170.

36
the Conference of Plenipotentiaries107 was summoned by the Secretary General
to consider an adoption of a convention or any other multilateral, legally binding
instrument for Liner Conferences. A Preparatory Committee by appointment of
the Secretary General held two sessions in 1973 and, finally after two years of
negotiations, on April 6, 1974, a Convention on a Code of Conduct for Liner
Conferences was adopted.108

4.2 UNCTAD CODE OF CONDUCT FOR LINER

CONFERENCES

After several years of conferences and discussions the United Nations Code of
Conduct finally became reality. Included in this process is the CSG drafting of
another Code, the CENSA Code of guidelines for the behaviour of liner
conferences adopted by the shipowners’ association, CENSA, after the 1968
UNCTAD II meeting.

The Code consists of a Convention containing seven chapters, an Annex with

model rules of procedure for international mandatory conciliation, and three
Resolutions.109 Some 83 States signed it in Geneva on April 6, 1974. It did not
enter into force until 1983 when the necessary twenty-four States with a
combined world tonnage of twenty-five percent had been permanently
committed.110

4.2.1 Principles - objectives - application

The Preamble to the Convention declares the contracting parties desire to

improve the conference system, recognising the need for a universally acceptable
code of conduct for liner conferences, and thereby taking into account the special
needs and problems of the LDCs with the respect to the activities of the
conferences serving their foreign trade. Three fundamental objectives and three
basic principles are also set out:

(a) the objective to facilitate the orderly expansion of world sea

borne trade;
(b) the objective to stimulate the development of a regular and
efficient liner services adequate to the requirement of trade
concerned;

107
TD/CODE/13, Sales No. [Link].D.11, and TD/CODE/13/Add.1Sales No. [Link].D.12.
108
Herman, p. 170.
109
The UNCTAD Code of Conduct for Liner Conferences (1974) 13 ILM 910.
110
Power, p. 298.

37
 (c) the objective to ensure a balance of interests between suppliers
and users of liner shipping services;
(d) the principle that conferences practices should not involve any
discrimination against the shipowners, shippers or the foreign
trade of any country;
(e) the principle that conferences hold meaningful consultations with
shippers’ organisations, shippers’ representatives and shippers on
matters of common interest, with, upon request, the participation
of appropriate authorities;
(f) the principle that conferences should make available to interested
parties pertinent information about their activities which are
relevant to those parties and should publish meaningful information
about their activities.

The Code is flexible, almost loose. But, the rigid centre of it is the [Link]
formula, meaning that exporting and importing State’s national lines have forty
percent of each of the trade with third State’s having the balance of twenty
percent.111 No universal approval has been reached however as the United
States, Greece, Japan and Brazil have opposed it. More important, for this essay,
is the bitter opinion of the Community. In short it can be said that what originally
appeared to be the most promising legal tool of change, became an instrument of
extensive protectionist legislation of LDCs and the complete demise of
competition in liner shipping.112

The Code applies to Liner Conferences, i.e. “ a group of two or more vessel-
operating carriers which provides international liner services for the carriage of
cargo on a particular route or routes within specified geographical limits and
which has an agreement or arrangement, whatever its nature, within the
framework of which they operate under uniform or common freight rates and any
other agreed conditions with respect to the provision of liner services”.113 The
following subchapters will present the main provisions, their meaning and effect, of
the UNCTAD Code, relating to relations between members, relations with
shippers and freight rates.

4.2.2 Relations among members

Part One, Chapter II of the Convention is dealing with relations among the
members of a conference, i.e. the shipping lines:

n Article 1 deals with the structure of a conference, recognising the

existence of closed conferences, and making a clear distinction

111
The Code, Article 2.
112
Power, p. 299, with reference to Oeter in Bernhardt (ed.), Encyclopedia of Public
International Law, vol. 11, 1989, p. 199.
113
The Code, Part One, Chapter One: Definitions.

38
 between national lines an non-national lines, where the former
have easier access when applying for member ship. However, it
must be stressed that conference decisions are subject to dispute
settlement procedure (Article 23).

What this Article provides is assurance for the participation of national lines. Third
flag carriers have different criterion for acceptance. A national line have to
provide evidence as to its ability and intention to operate adequately and efficient
on a long term basis (Article 1.2), whilst non-national lines have to comply, not
only with the criteria set out above but also a large sequence of further criteria
(Article 1.2 and 1.3). This angle of the provision was desired by the LDCs
wanting to promote their fleets and economies.114

n Article 2 is the basis of the so-called “[Link]” formula for cargo

sharing, whereby the national lines of each country shall have an
equal share of the freight and volume of traffic generated by their
mutual foreign trade. Third country shipping lines have the right to
the remaining twenty percent.

Article 2.1, 2.2 and 2.3 set out the principles under which interested parties are to
share the trade: (2.1) that every member of the conference shall have sailing and
loading rights in the conference trades; (2.2) the right of every member to
participate, with equal shares, where conference pools operates; (2.3) that cargo
will be divided according to nationality of lines, regardless of their number in the
conference. National shipping lines of a particular country are to be regarded as a
single group of lines for that country. Article 2.4 provides third country shipping
lines, i.e. vessel operators that are non-national in any of the two countries they
serve, a substantial share of the trade, according to 2.4(b) twenty percent of the
trade. It is from this provision the [Link] formula, even though not in fact
appearing in the Code, is deduced.115

n Article 3 deals with decision-making procedures of conferences.

It is based on equality of all the members. Decisions relating to
trade between two countries cannot be made without the consent
of national shipping lines of those two States.116

Remaining Articles: Article 4 deals with sanctions in cases of withdrawals, “after

giving a three months notice”(4.1), or expulsion of lines, in cases of malpractice
and reasons are stated (4.2); Article 5 deals with self policing by conferences,
whereby malpractices are identified through a comprehensive list in the
conference agreement and a self policing machinery to deal with such

114
Herman, p. 177.
115
Clough and Randolph, p.11.
116
Compare with the Brussels package, Council Regulation 954/79, where consultation is
limited to matters regulated in the conference agreement.

39
malpractices (5.1); and Article 6 deals with conference agreements and the right
of appropriate authority to have the agreement made available at their request and
inspect.

4.2.3 Relations with shippers

Chapter III of the Convention deals with the relations between conference
members and the shippers:

n Article 7 deals with loyalty agreements, allowing such agreements

with shippers if they provide explicit mutual safeguards based on
any lawful system (7.1).

Thus, both loyalty agreements containing dual rates agreements and loyalty
agreements containing deferred rebates, whereby shippers receive a future rebate
for goods shipped with the conference on the condition that he continues to use
the conference service, are allowed.117

n Article 11 establishes consultation machinery providing for

consultation, between the various interests involved.

There shall be consultations between the conference and the shippers’

organisations, representatives of shippers and where practicable shippers
themselves. These consultations shall take place whenever any of these parties so
request. Moreover, appropriate authorities also have the right to fully participate,
except for playing a decision-making role (11.1).

4.2.4 Freight rates

Chapter IV of the Code deals with freight rates. Six important provisions, Articles
12-17, set out criteria for the determination, the non-discriminatory application,
general rate increases, and currency adjustment factors, of freight rates:

n Article 12 states that freight rates shall be fixed at the lowest

commercially feasible level (12(a)); and provides that the cost of
operations of conferences should be evaluated for the round
voyage of ships, with the inward and outward legs being counted
as one unit. Still where applicable, the outward and inward
voyage should be considered separately (12(b)).

117
Clough and Randolph, p. 13.

40
Article 12 was introduced to create a fairer system for the establishment of freight
rates in that are not based on costs of any single leg, which might have been more
costly than the whole operation. The reservation of separation was introduced to
cover the situation where one conference carries the trade outward and another
inward.118

n Article 13 establishes the practice of shipowners upholding the

published tariffs and to “special arrangements”, i.e. loyalty rebates
and deferred discounts, allowed by the Code (13.1).

The remaining articles include: Article 14 on general freight-rate increase, which

shall follow a 150 days notice to interested parties (14.1); Article 15 on
promotional freight rates; Article 16 on surcharges, that shall be regarded as
temporary and reduced as the situation improves (16.1), and finally cancelled
(16.6); and Article 17 on currency changes, i.e. currency adjustment factors, that
might be introduced where exchange rate changes, including formal devaluation or
revaluation, leads to changes in the aggregated operational costs; and, Article 18,
where the only reference to non-conference liners are made, providing that,
“Members of a conference shall not use fighting ships119 in the conference trade
for the purpose of excluding, preventing or reducing competition by driving a
shipping line not a member of a conference out of that said trade”.

4.2.5 Provisions and machinery for settlement of disputes

The second part of the Code relates to provisions and machinery for the
settlement of disputes (Chapter VI). Article 23 provides that in event of relevant
dispute the parties are to settle by exchange of views and negotiations (23.3), or,
if not solved hereby, by request of any of the parties, referred to international
mandatory conciliation in accordance with the Code. The panel of independent
conciliators, selected by the contracting parties (Article 30.1), will submit a
recommendation to the parties, based on all the relevant facts.120 One problem
attached is that the recommendations only become binding following acceptance
from the parties (Article 37) - a true Achilles heel of the enforcement of the Code.

4.3 ANALYSIS

The UNCTAD Code of Conduct for Liner Conferences provides rules for
relations among members of conferences, and it promotes closed conferences.

118
Clough and Randolph, p. 14.
119
The term “fighting ship” is not explained among the definitions of the Code, however,
the wording is explicitly arranged.
120
Clough and Randolph, p. 16.

41
There is also a risk that the element of cargo sharing force conferences to pool the
trade of conferences. To proceed chronically; while carriers from all over the
world fought for free access to conferences LDC representatives forced through
the biased criterion of Article 1 to the disadvantage of non-national lines, an
obvious case of discrimination. According to Article 1.2 any shipping line applying
for membership shall furnish evidence of its ability and intention to operate a
regular service on a long-term basis, only to allow the use of chartered tonnage –
a contradiction of long-term service! Furthermore, the ([Link]) cargo sharing
formula of Article 2 detain eighty percent of the cargo to national lines hence
scarcely promoting competition to greater extent than bilateral agreements.
Following the first review of the Code in 1988 the situation was deadlocked in the
bitter question whether the formula was to apply only to conference trade or the
whole trade of a route. Free traders argue the latter while protectionists the
former. Given, as stated above, that the formula itself can choke competition the
Code must be regarded, on a global scale and with regard to the various
commercial cultural differences, even from the sturdy American school, as a
positive instrument. The diplomatic initiative and solution is primarily to prefer.

Then of course another weakness of the Code appears as we look into the
dispute settlement and enforcement structure. Lack of enforcement possibilities is
a problem of every international instrument. The Code provide for mediation and
negotiation as a primary means of solution. If not successful mandatory
conciliation can be issued, but the word ‘mandatory’ is quite voluntary. A
recommendation set forward by the conciliators is only binding upon acceptance
of the parties.

This dilemma of international law makes one of the following chapters even more
intriguing. Through the extensive powers of the Commission of the European
Union (the Commission) a blunt instrument of international proportions become an
efficient mechanism in the service of effective competition. Of importance for the
European version of the Code are the customary principles regarding the activity
of liner conferences, and its importance for EC law cannot be overestimated. The
Code has been the cornerstone of Community’s approach to the enforcement of
the EEC competition rules in the shipping sector. This can be deduced from the
outline of the Brussels package121, the name given to the instrument enabling the
countries of the Community to ratify the Code

121
Council Regulation 954/79 of 15 May 1979 concerning the ratification by the Member
States of, or their accession to, the United Nations Convention on a Code of Conduct for
Liner Conferences.

42
5. Liner Conferences and the
United States
The United States’ merchant fleet might not be of great size, although it grew by
one third between 1980-1987, but the country itself, a huge market and important
on a political level, is interesting to study from a shipping point of view, especially
its anti trust policy, a forerunner to the EU Competition policy, and other certain
policies (partly reflected in Chapter 2). However, the deeply rooted US belief in
anti trust law principles, originating from the time in history when huge
conglomerates (trusts) commercially monopolised the markets, possess a strong
position even in shipping. The general antitrust laws of United States apply to all
sectors of the industry not specifically regulated due to public discontent or
lobbying success. Ocean Shipping is such a regulated industry and the Shipping
Act of 1984122 grants certain anticompetitive behaviour immunity from the federal
antitrust laws. The regulated industries vary to a great extent as regards underlying
principle, administration and intensity of their regulation; and the tighter the
regulatory control the less room is there is for antitrust policy.123 US policy prior
to 1984 was a turmoil of differing views on the approach to shipping as a whole
and liner conferences in particular. At the time of the enactment of the 1984 Act,
it must be remembered, the United States was the only country in the world
actively applying its antitrust law to maritime transport, and he Sherman Act
Sections 1 and 2 still applied to shipping activities not granted antitrust immunity
under the 1984 Act.124

5.1 RELEVANT GOVERNMENTAL MACHINERY

OF THE UNITED STATES

In order to begin to understand the behaviour of the United States in the shipping
sector a brief study of its power structures, who does what, when and to what
extent?

The division of power between the President (executive), the Supreme Court
(judiciary) and the Congress (legislative) is well known. The powerful committee
structure of both Congress bodies, the House of Representatives and the Senate,
is also well known. The notorious and in reality politicised ‘Hearings’ held in
different committees are of an inquisitional kind. These structures of these
committees affect the departments of state making common shipping policies
difficult to reach. The main committees concerned with shipping of the Senate are

122
The Shipping Act of 1984, 46 USC §§ 1710 et seq.
123
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p. 104.
124
Ibid, p. 105.

43
the Commerce Committee and its Sub-committee on Merchant Marine Affairs
and the Judiciary Committee. In the House of Representatives the Merchant
Marine and Fisheries and its Merchant Marine Sub-committee deal with shipping
together with the Judiciary Committee.125

Departments with shipping initiatives include the Department of Transportation,

with its Maritime Administration division, for the promotion of the US Merchant
Marine and subsidies programme. Also worth mentioned are the Department of
Justice and its Antitrust division, a supervisor in all anti trust matters, and the
Department of State which is concerned with all foreign affairs, including
shipping.126

An important regulatory agency in shipping matters is the Federal Maritime

Commission, a purely regulatory arm of the Congress, responsible to the
Congress only, but also, over the years, for the regulation of shipping under
various Shipping Acts, particularly those of 1916 and the 1961 (Bonner)
amendments. The FMC is not a policy-making institution albeit some of its
chairmen occasionally have tried to use the FMC in that manner.127

5.2 UNITED STATES AND LINER

CONFERENCES

Previous chapters have described the history of shipping and liner conferences,
protectionism as well as liner shipping and the liner conference system. The
conference concept is not uncontroversial – some say absurd and unfair, others
claim it not to be fully understood - and several major inquiries have been made
into conferences. As a way of presenting the history of US activities in the field of
liner conferences two inquiries and their effect will be discussed. The United
States has made a number of major investigations into liner conferences, this
chapter will process two: The Alexander Report of 1914 and the Congressional
Hearings between 1958-1961. Besides these, five other major inquiries have
been made and the system has not escaped untouched, but generally accepted
despite its flaws. Even the ICC, speaking for the shippers, has supported the
system for its stability and equality.128

The Alexander Report of 1914 was a report by the House of Merchant Marine
and Fisheries Committee. It looked broadly into the nature of conferences, i.e.
their effect. Especially the deferred rebate system, which was lawful only inwardly
to the United States, fighting ships, quantity discounts and the level of freight rates.

125
Farthing, p. 78-79.
126
Ibid, p. 79.
127
Ibid, p. 80.
128
Ibid, p. 104.

44
The outcome of the evidence given to the committee was that this restriction of
competition, albeit providing stability, should come under governmental regulation.
The Recommendations of the Alexander Committee were later enacted into the
US Shipping Act 1916129. The central theme was that as conferences on US
trades were brought under regulation, it was considered that these were immune
from US anti trust proceedings.130 The new law meant that discriminating rebate
schemes were prohibited, equality of rates obligatory, fighting ships and deferred
rebate systems prohibited and unlawful. Furthermore, the ICC was given the
authority to disapprove and investigate certain agreements. This was a turning
point for conferences and shipping, as the first time governmental authorities has
engaged in decisions concerning commercial shipping.131 The 1916 Act also
expressly granted an exemption from the antitrust laws for conference agreements
on as long as those agreements were first submitted to and approved by the
newly created US Shipping Board (later the Federal Maritime Board and,
eventually, the Federal Maritime Commission).132

Following the enactment of the 1916 Act, and particularly in the years after
World War II as carriers once again were faced with overcapacity and
competition from non-conference carriers, conferences began making extensive
use of “dual rate” contracts to bind shippers to the conferences and stave off non-
conference carrier competition. These dual-rate contracts, also referred to as
“loyalty contracts,” offered discounted rates to shippers who agreed to use only
conference carriers; they differed from the outlawed deferred rebates only in that
the shipper could obtain the discount at the time it paid for a shipment. The
Federal Maritime Board never challenged dual-rate contracts, but the Supreme
Court ruled in Federal Maritime Board v. Isbrandtsen Co.133, that dual rate
contracts, while not specifically prohibited by the Shipping Act, nevertheless
violated a provision of section 14 of the Act that prohibited resort by carriers to
discriminating or unjust methods because a shipper has supported another
carrier.134

Between 1916 and the 1960s was the reign of a moderate regulatory regime. The
Isbrandtsen decision indicated a change in the 1950s. In the wake of the decision,
the Congress amended the 1916 Act in1961 to permit dual-rate contracts, though
limiting the permissible discount to fifteen percent. At the same time, Congress
also amended the Act to require the filing of tariffs, to transfer the Board’s
authority to an independent Federal Maritime Commission, and to give the
Commission the power to disapprove agreements between and among carriers

129
US Shipping Act of 1916, 46 USC 801.
130
Farthing, p. 106.
131
Ibid, p. 107.
132
H.R. 3138, DOJ, Statement of John M. Nannes (Deputy Assistant Attorney General -
Antitrust Division), March 22, 2000, p. 3-4.
133
Federal Maritime Board v. Isbrandtsen, 356 U.S. 481 (1958).
134
H.R. 3138, DOJ, p. 4.

45
that were “contrary to the public interest”. 135 In the Isbrandtsen case, the
substitute of the deferred rebate system, i.e. the dual rate system, whereby loyal
shippers were given the lower of two rates (normally ten to fifteen percent below
normal rate), was found to be contrary to the Act.136 The impact in the shipping
world was immense, and the conferences operating in the US trades formed a
pressure group, the CES, and the governments of Europe established the CSG.
Notice had been taken as hearings continued. European shipowners were
questioned; both on the dual rebates system and upon whether the legislation of
1916 was fulfilled. Congressmen Bonner and Celler, and Senator Engle led the
hearings – the first named the 1961 amendment of the 1916 Shipping Act (the
Bonner Act).137 The important novelties of the amendment were that it required
conferences to and from the United States to be open to all qualified operators,
and that agreements were to be filed with the FMC and subject to the US anti-
trust acts.138 These Bonner Amendments, the increased trust in anti-trust policies
and distrust of conferences led to strained international positions. The FMC took
its role as a regulator with enthusiasm and numerous laws were stipulated.
Agreements were concerned presumptively illegal until a US interest could be
identified.139 The Commission interpreted its public interest authority to include
consideration of antitrust principles and, in Federal Maritime Commission v.
Aktiebolaget Svenska Amerika Linien140, the Supreme Court upheld that
interpretation, along with the Commission’s determination to approve conference
restraints that conflicted with antitrust principles only if a conference could
“demonstrate that the . .//. . rule was required by a serious transportation need,
necessary to secure important public benefits or in furtherance of a valid
regulatory purpose of the Shipping Act.” Shipowners complained that the
Commission’s approach led to regulatory uncertainty and prolonged proceedings.
141
These were harsh time for conferences. Regulation was needed, but on an
international agreed basis.

5.3 UNITED STATES AND THE UNCTAD CODE

The United States voted against the adoption of the UNCTAD Code of Conduct
for Liner Conferences in 1974. The main reason hereto, it was expressed by the
head of the American delegation in Geneva, was because of the basic differences
between the American way of thinking and the Code’s position. The US opposed
cargo sharing and central economic planning. Moreover, the Americans feared

135
H.R. 3138, DOJ, p. 5.
136
Farthing, p. 108.
137
Ibid, p. 109.
138
Ibid, p. 110.
139
Ibid, p. 113.
140
Federal Maritime Commission v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238
(1968).
141
H.R. 3138, DOJ, p. 5.

46
that closing trades to third flag carriers would flood their routes with both foreign
and American vessels. Here the protectionist side of the United States worried
about that the implementation of the formula would not increase the participation
of US carriers in national trades. In 1975 American liners carried only thirty
percent of US foreign trade. However, when arriving at the number of thirty
percent a failure to separate conference vessels from independent left a misleading
percentage in many routes. In the North Atlantic route American vessels carried
thirty-five percent of the trade, but American conferences carried fifty-five
percent, leaving a superfluous fifteen percent when applying the [Link]
formula.142

5.3.1 Legal objections under the 1916 Regime

On a legal basis the implementation of the Code would have violated of over
thirty bilateral treaties of friendship, commerce and navigation, which United
States had entered into. These bilateral agreements constituted, on their own, a
protective policy, in embracing the most favoured nation treatment principle,
providing all cargo to be shipped on vessels to or from the territories of the
signing parties – as can be seen in chapter 2.143

Furthermore, the Code was in direct conflict with certain provisions of US law.
Section 814(2) of the Act144 required that conferences’ membership must be
open to all lines on an equal basis. On the contrary, the Code145 set up different
criteria for national lines and third country lines, giving the latter a difficult chance
of admission if unfavourably to the conference. The cargo-sharing concept of the
Code146 was in conflict with the general US maritime transport policies, as well as
the FMC’s interpretation147 of the Shipping Act, the prohibition of preferential
treatment of national lines. A fundamental objection was against the Code’s
laissez faire approach towards ‘deferred rebates’148, while Section 813(2) of the
Shipping Act strictly opposed such schemes. The ‘dual rate’ system was the lone
loyalty arrangement allowed under the 1916 Act regime.149

It is evident that the contradiction between US law and the Code150 was deep,
but matters improved when the Shipping Act of 1916, which still applies to

142
Herman, p. 197-198
143
Ibid, p. 198.
144
US Shipping Act of 191646 USC § 814(2).
145
Article 1(2)-(6).
146
Article 2(4).
147
Northern Pan American Lines A7S (Nepal Lines) v. Moore McCormack Lines, 8FMC
203, (1964).
148
Article 14(7).
149
Blanco and Van Houtte, p. 123.
150
Additional discrepancies of the two instruments include: dual rate contracts, Article 7 of
the Code – 46 USC § 813a; the consultation requirement with shippers’ organisations,

47
domestic trade, was replaced by the Shipping Act of 1984. The 1984 Act applies
to US foreign trade and is more tolerant to shipping cartels.151 A partial novelty
under the 1984 Act is that traditional loyalty agreements are inadmissible, unless
they enjoy competition law immunity, which they only can be granted if they fulfil
common competition standards for approval. 152

5.3.2 Policy developments following the Code

The policy situation in the late 70’s was very unclear, and the future direction of
the US policy on conferences too was a matter of struggle between the
Department of Justice, eager to abolish or at least limit their freedom, while the
Congress proposed an Omnibus Maritime Reform Act153, whereby conferences
would be able to close membership to cross traders. The following discussions of
the Department of Justice, the Congress, different institutes, studies, and even
task forces initiated by President Carter all failed in their endeavours to
accomplish a satisfying solution for both domestic and foreign policies. The
situation, with the United States reluctant to alter its domestic legislation in
conformity with the principles of the Code only two alternatives remained:
accession to the Code with restrictions, or signing bilateral agreements with other
countries to assure reasonable amount of cargo for US lines.154 A third way was
chosen: the Shipping Act of 1984, and the further application of the 1916
Shipping Act domestically.

5.4 THE SHIPPING ACT OF 1984

The 1984 Act was signed by President Reagan on 20 March 1984, and annuls all
provisions of the 1916 Act relating to foreign commerce, except the interstate
commerce by water.155 Section 1 of the 1984 Act establish certain goals: a non-
discriminatory process for the foreign maritime carriage of goods; an efficient and
economic transportation system in the ocean commerce and harmony with
international practices; and to encourage development and an sound US liner fleet
capable of meeting national security needs. Under the 1984 Act, any agreement
or activity exempted by the Act is immune from antitrust liability. The scope of

Article 11, while US shippers’ organisations are non-existent with respect of a possible
breach of US antitrust laws; and the criteria for rate determination, where the Code, Article
12(9), provide rates to be set at a level for reasonable profit for shipowners, whereas the
FMC requires rates not to be detrimental to US commerce, § 817(b)(5).
151
Blanco and Van Houtte, p. 104.
152
Ibid, p. 123 (note 71), Shipping Act 1984, s. 3 (21), 46 USC app. 1702 (21).
153
H.R. 4769, 96th Cong. 1st Sess. (1979).
154
Herman, p. 200-203.
155
US Shipping Act of 1916, 46 USC 801.

48
such immunity, the procedural requirements to achieve such immunity and a petite
section on fines will be discussed in the following.

[Link] Scope
According to Section 7 of the 1984 Act agreements must be filed with the FMC
to benefit from immunity. Antitrust immunity is generally granted to any activity or
agreement within the scope of the 1984 Act. In order to decide the scope of the
immunity one must identify the common carrier(s), what agreements are permitted
and which are prohibited.156

[Link] Common Carrier

Section 3(6) of the 1984 Act defines a “common carrier” as a provider of
carriage between a US port or point and a foreign port or point by a carrier that
holds itself out to the general public and not by a ferry, tramp vessel or a chemical
parcel-tanker, in order to obtain antitrust immunity.157 Following a FMC decision,
Containerships158, the most important indicators of a common carrier were
concluded to be regularity of sailings, the number of shippers using the service and
that the services are being held out to the general public. The publicity may be
most important for the shipowners regarding that non-common carriers are
subject to ordinary antitrust laws.159

[Link] Permitted agreements

Section 4 of the 1984 Act contains agreements where the Act is applicable, i.e.
agreements detach from the ordinary antitrust rules. Included are agreements by
or among ocean carriers to: “price fixing; pooling arrangements; arrangements
within trades; engage in exclusive, preferential, or cooperative working
arrangements; control, regulate or prevent competition in international ocean
transportation; and regulate or prohibit their use of service contracts.” The
conclusion here from is that service contracts, agreements related to time-volume
rates, i.e. adjustment factors and surcharges, intermodal rates and conference
agreements.160

Intermodal rates were approved already in the 1916 Act, but the 1984 Act
clarified the situation. Some limitations exist regarding the negotiations, with the

156
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p. 109.
157
The addition of explicitly mentioning ferry, tramp or chemical parcel-tanker resulted of a
1986 amendment. See Stemshaug op cit, p. 110.
158
Tariff Filing Practices, Etc. of Containerships, Inc., 9 FMC 56 (1965).
159
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p. 111.
160
Ibid, p. 114.

49
inland carriers on matters relating to rates or services provided to common ocean
carriers, which must be conducted individually and not concerted among the
common carriers (Section 10(c)(4)). Nor should the common carriers agree on
inland division among themselves – conferences and other concerted actions
among common carriers to reach agreements with inland transportation cartels are
prohibited in accordance with a well-established position of the US Justice
Department.161

A conference agreement on the must provide an open character regarding both

entry and exit, state the purpose of the conference, contain rules of consultation
and a list of malpractices. Most important is the right to independent action, which
any member of a conference may take, on any rate or service, to adopt an
independent rate or service. Independent action does not apply to service
contracts however.162 Service contracts keep shippers loyal through their
commitment of a certain quantity of cargo over a special period of time, to one
shipowner, for a certain rate and schedule. Finally, agreements between members
of different conferences are permitted under the 1984 Act (Section 5(c)),
provided that independent action is established as an inviolable right in that same
agreement.

[Link] Prohibited agreements

Section 10 of the 1984 Act contains a black list, divided into four groups: (a)
persons; (b) common carriers; (c) conferences or groups of common carriers;
and (d) common carriers, ocean freight forwarders and marine terminal operators.
Boycotting or taking concerted action such as predatory pricing to eliminate
competition is prohibited (10(c)). The list of acts prohibited under the 1916 Act
can be found in Section 10(b) and still applies. Classic provisions such as: (1)
prohibition not to charge uniform rates within the conference; (2) prohibition of
rebates, refunds or remits in any manner; (3) prohibition to deny contracted
services; (5) prohibition to retaliate toward disloyal shippers; and (7) prohibition
of deploying fighting ships. Moreover, negotiations between common carriers, or
a group of carriers, and non-ocean carriers are not only prohibited but also
subject to the ordinary statutes of antitrust law.

5.5 RECENT DEVELOPMENTS

With the 1984 Shipping Act the Congress both broadened the antitrust
exemption, and rationalised the process of obtaining such exemptions. Now not
only agreements that had gone into effect under the Act was covered by the

161
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p. 115.
162
Ibid, p. 116.

50
exemption, but also activities, “whether permitted under or prohibited by this
Act,” if they were undertaken “with a reasonable basis to conclude” that they
were in connection with an effective agreement. The 1984 Act abolished the
Commission’s public interests standard when reviewing carrier agreements, but
otherwise preserved the common carrier provisions of the 1916 Act, under which
the conferences were required to file published tariffs with the Commission, held
on and somewhat expanded the list of explicit prohibitions against specific acts,
including the prohibitions against fighting ships and deferred rebates. In addition,
the Act stipulated a ‘study commission’ to be established to make
recommendations to the Congress about further legislative changes that might be
warranted.163

This study commission, unable to reach consensus recommendations, nevertheless

issued a report that would subsequently, in 1998, become the Ocean Shipping
Reform Act (OSRA).164 The OSRA ensures conference members a greater
extent of independent actions, i.e. to negotiate service contracts with shippers
where the tariffs differ from the conference standard. But the OSRA also allows
conference members to adopt “voluntary” guidelines, whereby certain behaviour
can be indicated. The FMC will not "reject" defective tariff material under the new
regime. Instead it will seek to ensure voluntary compliance with the regulations by
contacting carriers and requesting correction of material that is unclear,
incomplete or in violation of applicable law or regulations. The law no longer
requires tariffs to be filed with the FMC. Instead, all ocean carriers subject to
FMC regulation (that is, those offering service between the United States and a
foreign country) are required to publish their rate tariffs electronically. As regards
commodity description numeric codes are recommended to utilise facilitate the
U.S. Harmonized Tariff Schedule commodity classifications. Finally the FMC can
grant exemptions from any of the statutory requirements if it finds that exemption
not will result in substantial reduction in competition or be detrimental to
commerce.

These and other provisions of the 1998 Act endorsed the conference system,
either by facilitating inter-carrier agreements that would be unlawful in the absence
of an exemption or by restricting the ways in which conference members can
meaningfully compete on an individual basis for the business of large and small
shippers alike. It is safe to say that, under American conditions, the conference
system could not exist in the absence of an antitrust exemption.165

163
H.R. 3138, DOJ, p. 7.
164
Ocean Shipping Reform Act of 1998 46 USC 1701 – PL 105-258, Sec. 1, 1 Oct 1998, 112
Stat. 1902.
165
H.R. 3138, DOJ, p. 8.

51
5.6 ANALYSIS

This chapter has described under to what extent shipping activities are subject to
the antitrust laws of US. The power structure of the country makes it tempting to
conclude that often politics interfere in the reigns of economy and commerce and
vice versa. The US has a long history of antitrust, and its position as forerunner to
the European competition policies is evident. The view on conferences has
changed substantially. The US approach to conferences was during a long period
stern. The Alexander Report of 1914 and the 1916 Shipping Act established a
stronghold for antitrust application in shipping. The reluctance to regulate during
the following forty years led to slow disintegration of the conference system and
erosion of antitrust immunity, staring with the Isbrandtsen case, where the
Supreme Court held that the immunity only applied to expressly enumerated
practices. The Svenska Amerika Linien case added the public interest standard,
as well as shifting the burden of proof over to the conferences.

A number of 1916 Act legal objections forced the US to vote against the
adoption of the UNCTAD Code. United States withheld its antitrust principles
and defended its liner participation share, which exceeded the [Link] formula.
Deferred rebates have always constituted the deepest discrepancy between US
and other policies. The 1984 regime offered greater possibilities for conferences
to both withhold its cartel characteristic, and applying for exemption at the FMC.
The 1984 Act grants antitrust immunity to liner conferences and common carriers,
thus meaning that liner shipping in general and liner conferences in particular are
subject to less restrictive antitrust regimes than the majority of economic activities.
This immunity given to conferences, still supported by the FMC (Section 8 of
1984 Act), under US laws has been criticised by both the Federal Trade
Commission and the Department of Justice, but the situation in the 1980´s and the
decade before gave certainly rise to a need for particular protection of merchant
fleets, all nations agreed hereto, as did the US, to stay alert in relation to the
activities of LDCs as well as domestic opportunistic commercially detrimental
regimes.

The OSRA, then, was meant to guide the US into an era of universal contentment
in the shipping industry, but rate increases followed. These increases (up to eighty
percent), mainly surcharges were explained by the Asia financial crisis when rates
dropped to forty percent below the 1996 level. 166 The OSRA’s first
commandment is to let the market set the prices, but because of the antitrust
immunity arrangement still being applicable the joint setting of prices is still
permitted. The OSRA, however, became effective on May 1 1999 and evaluating
this instrument at this stage might prove to be rash.

166
Lloyds’s Shipping Manager, September 2000 – London – 2000, p. 23.

52
6. Liner Conferences and the
European Union
This chapter is the primary and most important piece of this essay, in aiming at
describing the relation between the EU and liner conferences. The EU and its
powerful Commission have brought new dimensions to the ability of international
institutions to enforce competition. The powerless UNCTAD piece of legislation
has through the Commission reached new dimensions in the assessment,
enforcement and punishment of conferences infringing competition laws agreed by
the EU.

The beginning of this chapter will be the birth of the European Community in
1957, and continue through the idle policy drought up to the UNCTAD Code
and the diligent activities following it only to be summed up by a testimony of the
recent practice of the European Court of Justice (ECJ) and Commission.

6.1 THE TRANSPORT INDUSTRY OF THE

EUROPEAN UNION

Since the ratification in 1957 and entry into force of the Treaty of Rome 1958 the
transport industry has undergone fundamental change in order to adapt to the still
growing needs of a global market and the internal market. Road transport may
have undergone the greatest change considering both the increase of passengers
and goods, and the infrastructure additions the Channel Tunnel and the Öresund
Link.

Regarding passenger transport European railway has developed into a high tech
industry; constantly developing new strategies and means to compete with the
other modes of transport, especially air traffic. The immensely increased air
transport long haul capacity has left the maritime transport sector relegated to the
short-haul ferry market.167

In the transport of goods field, road transport has become the fierce competitor
of the railway, due to the latter’s inability to provide the services demanded by the
industrial users. Furthermore, the liner shipping has experienced a revolution with
the introduction of containers in 1970.168

167
Blanco and Van Houtte, p. 1.
168
Ibid, p. 1.

53
The transport sector as a whole represents four percent of EU’s GNP, and if
personal and private transport is included the figure increases to more than seven
percent. In 1991 between more than four percent of the waged labour (5,6
million people) were employed in the sector. Of these forty-five percent were
employed in the road haulage, sixteen percent in the rail transport, 0,4 percent in
inland waterway transport, 3,9 percent in maritime transport, 6,2 percent in air
transport and twenty-eight percent in transport related activities. The transport
sector is furthermore an expanding industry in the EU, growing proportionately
with the GNP. The freight activities have increased during the last twenty years by
fifty percent: road transport has doubled in absolute terms representing around
seventy percent of the sector, whilst rail transport has decreased by fifteen
percent in absolute terms now representing fifteen percent totally leaving the
inland waterways with nine percent totally despite a slight growth and oil pipelines
at six percent.169

Despite its modest role as an employer, the maritime transport is of vital

importance in terms of tonnage for the longest international routes, carrying
approximately ninety per cent of EU goods in international trade and increasing
thirty-five per cent between 1975-1985 and still 2,1 per cent annually. Maritime
transport is depended on in both international and intra-community trade as the
prime mode of transport. Approximately ninety per cent of the Union’s
participation in international trade is shipped by sea, and thirty-three per cent
regarding the intra community trade.170

It is important to stress though, the huge industrial importance of the transport

sector. Industrial meaning transportation’s role as a basic production factor
making other industrial sectors efficient as well as being the support activity on
which the entire international trade depend - the tying link between the European
Union and the rest of the world, but also the between different regions within the
European Union, especially the remote regions.

6.2 TRANSPORT POLICY OF THE EUROPEAN

UNION

Transport policy is one of the original three common policies of the

Community171, but the provisions of the Treaty do not establish any common
principles for the implementation of such a policy. The provisions merely offer a
procedure whereby the Council must adopt the guidelines for a common policy.
The reason hereto is the absence of a consensus on a direction of a common

169
Blanco and Van Houtte, p. 2.
170
Ibid, p. 2-3.
171
The Common Policies of the European Community are (original three) Transport,
Agriculture, Competition and (Subsequent) Foreign Trade.

54
transport policy. Then as well as now governmental intrusion and a confused
complex composition of bilateral and multilateral inter-state agreements
characterise the EU transport sector. Every Member State was devoted to
protecting their carriers from the callous international competition, therefore
fundamental principles of the Community were not implemented, or at least being
applicable following considerable delay, in the transport sector. But not all
principles though, the delay of using the crucial principle of freedom to provide
services in the transport sector was the clear status of Article 49172 as not being
direct applicable in transport matters.173

Until 1974 uncertainty, due to unclear wording of Article 80174, prevailed

concerning the application of the Treaty in maritime matters. In 1974 a Court
ruling swept this uncertainty away. This was the French Seamen case175, in which
the Court, for the first time, held that Article 51.1176 established an exemption
from the general rules of the Treaty governing services in transport matters, if the
Council has not decided otherwise. Article 71 provides that, within the
framework of the common transport policy, the Council would have to establish
‘the conditions under which non-resident carriers may operate within a Member
State’.177 Given the wording of Article 80.1, the above stated is only applicable to
road, rail or inland waterway transport; whereas air and maritime transport,
Article 80.2, confers upon the Council to decide upon measures to be taken. In
the French Seamen judgement the Court finally ruled that regardless of the fact
that the rules in Title IV (now Title V -Transport) of Part II of the Treaty were not
applicable to maritime transport until the Council had decided otherwise, the
general rules of the Treaty applied to shipping, as well as any other mode of
transport.178 The question remained as to what rules of the Treaty that are to be
regarded as ‘general rules of the Treaty’, a matter not satisfactory dealt with in the
French Seamen ruling. This question was answered in a later by the Court in the
1986 case Nouvelles Frontières179, where the Court ruled that the competition
rules were part of the general rules of the Treaty, thus applicable to air transport.
The French Government claimed that the prejudicial scope of the French
Seamen case did not include Part III of the Treaty. The reply of The Court was
that economic sectors of the Treaty could only be excluded from the competition
rules by an express provision of the Treaty, for example, Article 42 on agriculture.

172
Article 49; governing the freedom to provide services.
173
Blanco and Van Houtte, p. 4-5.
174
Article 80.1 of the Treaty: The provisions of the Title shall apply to transport by rail, road
and inland waterway, and Article 80.2: The Council may, acting unanimously, decide
whether, to what extent and by what procedure appropriate provisions may be laid down for
sea and air transport. Only article 80.2 explicitly mentions maritime and air transport.
175
Case 167/73, Commission v. France, [1974] ECR 359 2 CMLR 216.
176
Article 51.1; providing that the free movement of services in the transport sector is
governed by the transport provisions of the Treaty.
177
Article 71.1(b) of the Treaty.
178
Case 167/73, Commission v. France, at paras 32 and 33.
179
Joined Cases 209-213/84 Ministère Public v. Lucas Asjès (‘Nouvelles Frontières’) [1986]
ECR 1425.

55
Consequently, the competition rules, Articles 81 and 82, apply invariably to
Articles 71 and 80.180

6.2.1 Extended Historical Perspective

To aid the reader in obtaining a greater understanding of the common transport

policy a historical presentation is likely to assist. The Common Transport Policy
(CTP) is very much a political issue and its evolution is often divided into three
phases. 181

The first phase of Community transport policy stretch from the entry into force of
the Treaty in 1958 to 1974. The Community, during this period, focused entirely
upon creating a common market for road, rail and inland waterways, stimulating
competition between carriers from all the Member States. The concept was
formulated and presented in a Memorandum 1961 and an Action Programme
1962182, both receiving a frosty response in Member States.

In 1973, at the end of the first phase, when Denmark, Ireland and the U.K.
became members of the Community the stagnated transport policy was liberalised
and less land-centred, making the Commission re-define its policy scheme with a
Communication to the Council in October 1973183, on the common transport
policy - thus leading the Community into the next phase. The Commission
concentrated on harmonisation of the conditions of competition, the opening up of
the common market, often being the big issue in contradiction with Member
States interests. Significant events occurred in 1974 in the maritime and air
transport sector: the Court gave its judgment in the French Seamen case, and the
UNCTAD184, adopted a Code of Conduct for Liner Conferences.185 Neither the
French Seamen nor the Code prevented the Commission from continuing its
efforts in inland transports with inept technical regulations outside the real
objective of the CTP – the creation of a single market.

180
Blanco and Van Houtte, p. 41-42.
181
Blanco and Van Houtte, p. 5.
182
Memorandum sur l´orientation à donner à la politique commune des transports.
Document VII/COM (61) 50 final, of 10 April 1961, and Programme d´action en matière de
politique commune des transports.
183
Commission Communication to the Council on the development of the common transport
policy, Document COM (73) 1725 final, of 24 Oct. 1973, and Supp. 16/73 of the Bulletin CE.
184
United Nations Conference on Trade and Development, Geneva, Conference of
plenipotentiaries of the United Nations on a Code of Conduct for Liner Conferences. Held
at Geneva from 12.11. to 15.12.1973 (Part One) and from 11.3. to 6.4.1974 (Part Two).
Vol. II, Final Act (including the Convention and Resolutions and tonnage requirements).
United Nations, New York, 1975. [Document TD/CODE/13/Add. 1].
185
Convention on a Code of Conduct for Liner Conferences (the UNCTAD Code), Geneva,
6th of April 1974.

56
Beginning in 1983 through 1985 the Commission presented a series of proposals
for the benefit of a structured development of the CTP piloting the Community
into the third phase. This third phase also contained the adoption and entry into
force of the Single European Act in July 1986, expressing the Member States’
political will to complete the internal market by 1993 at the latest. The initiative
unleashed an intense process of liberalisation trying to create open space for
competition between commercial interests, important for the transport sector,
especially the immature air and maritime sectors.186

6.2.2 The Common Maritime Transport Policy

Sea transport is mentioned in the Treaty only once, in the above shown Article
80.2. This second paragraph was added on Dutch initiative, the Netherlands
being the principal ministers of the principle of freedom in maritime transport. But
action was unlikely since the provision, at first glance, offers more than it can give.
Instead of providing for a proposal of the Commission Article 80.2 offers a
unanimous decision of the Council. No such decision was made between 1958
and 1977; making Article 80.2 a waterproof compartment for conservative
forces, isolated from the rest of the Treaty. 187 In the period prior to 1973 the EC
was extremely reluctant to engage in the maritime transport policy. However, a
number of instruments were created with either the intention to exempt maritime
transport from the competition rules or celebrating a marriage of the common
maritime sector and competition rules in empty words of action. I will not give a
further account of these meagre means in the history of CTP.

The addition of Denmark and U.K. in 1973 meant that shipping was given greater
attention.188 Considerations were given the fact that neither Ireland nor the U.K.
could be reached other than by sea or air. The only significant legislative measure
taken by the EC was the adoption of Council Regulation 954/79189, a regulation
part of a policy based on four elements: freedom to provide services, a
competition regime, a system of protection against unfair trade practices, and the
implementation of the United Nations Code of Conduct for Liner Conferences.190
This Code appeared to be the most promising piece of legal effort to change the
global economic order, but as has been shown in the earlier parts of this essay,
LDCs have utilised the Code for their preferential, i.e. protectionist, policies and
legislation. Protectionist regulation of conferences has led to an increase in non-

186
Blanco and Van Houtte, p. 7-9.
187
Savopoulou and Tzoannos, The Common Shipping Policy of the EC – North-Holland –
Amsterdam – 1990, p. 71.
188
Bull and Stemshaug (eds.): Rosa Greaves, EC’s Maritime Transport Policy: a
Retrospective View, p. 25.
189
Council Regulation 954/79 OJ 1979 L121/1.
190
Bull and Stemshaug (eds.): Rosa Greaves, EC’s Maritime Transport Policy: a
Retrospective View, p. 26.

57
conference shipping. An increase of non-conference shipping leads to demands of
protectionist regulation of the same, in the end the complete demise of
competition in liner shipping.191 The latter was the true catalyst of Community
maritime policy. Council Regulation 954/79, the Brussels package was an
important milestone but the policy remained in complete hibernation until 1986.

Shipping again came into focus when Greece accessed and fleets all over the
Community diminished into oblivion due to many shippers out flagging in order to
survive. Moreover, the European Parliament took the EC Council before the
European Court of Justice to put pressure on the Council to act and adopt a CTP
as required by the Treaty. 192 The concept of a single European market was now
beginning to mature. In 1984 the Commission published a Memorandum on
maritime transport 193 containing the main lines of EC shipping policy, and in
1985 the Commission addressed a Communication to the Council.

In December 1986 the EC Council adopted the 1986 maritime package,

consisting of four regulations, giving legal force to the flexible approach outlined in
the Commission’s Memorandum. These were: Council Regulation 4055/86
applying the principle of freedom to provide services to maritime transport;194
Council Regulation 4056/86 applying Articles 81 and 82 of the Treaty to maritime
transport;195 Council Regulation 4057/86 setting out procedures for dealing with
unfair pricing practices in maritime transport;196 Council Regulation 4058/86
coordinating actions to safeguard free access to cargoes in ocean trades.197
However, only Council Regulation 4056/86 has made a substantial impact, thus
the sole instruments to be further examined below.

The 1986 package focused primarily on the threat to Community shipping from
the protectionist policies and practices of non-Member States – the free and non-
discriminatory access to cargoes EC shipowners and fair competition on a
commercial in trade, both from and within the Community.198 This was only the
beginning, and the 1986 package, despite working fairly well, did not halt the
decline of the shipping industry. Further measures were inserted into the

191
Power, p. 298.
192
Case 13/83 Parliament v. Council [1985] ECR 1513; [1986] 1 CMLR 138.
193
Memorandum on maritime transport COM(84) 668 final.
194
Council Regulation 4055/86 OJ 1986 L378/1, applying the principle of freedom to provide
services to maritime transport between Member States and between Member States and
third countries.
195
Council Regulation 4056/86 OJ L378/4, laying down detailed rules for the application of
articles 81 and 82 of the Treaty to maritime transport.
196
Council Regulation 4057/86 OJ L378/14 on unfair pricing practices in maritime transport.
197
Council Regulation 4058/86 OJ L378/21, concerning coordinated action to safeguard free
access to cargoes in ocean trades.
198
Bull and Stemshaug (eds.): Rosa Greaves, EC’s Maritime Transport Policy: a
Retrospective View, p. 28.

58
programme in the shape of proposals assembled in a Communication199 to the
Council, some of them so controversial in relation to national interests and thereby
making them impossible to adopt as a package.200 An exception of importance
for competition law was the early 1990´s adoption of the Council Regulation
3577/92, the cabotage regulation. 201 The main concern during the 1990´s was
safety at sea. Bearing the Herald of Free Enterprise, Scandinavian Star, and, the
still delicate and controversial catastrophe, Estonia in mind this strategy does not
stand out as an enigma.202

6.3 MARITIME TRANSPORT AND THE

COMMUNITY COMPETITION LAW

This chapter will focus on the concept of Liner Conferences and the special status
these conferences are enjoying under Community law. I will not present maritime
transport, in the field of Community competition law, as a whole.

Do the competition provisions in Articles 81-86 apply to maritime transport?

While Regulation 17/62 implemented articles 81 and 82 of the Treaty, Regulation
141/62 disapplied Regulation 17/62 in relation to transport.203 This could have led
to serious confusion. The issue was briefly touched on earlier in this essay, where
it is stated that the French seamen case where the Court held that sea and air
transport, even though excluded from the provisions of Title V of the Treaty, the
common transport policy, it is subject, to the same extent as other modes of
transport, the general rules, including the competition rules (Nouvelles
Frontières), of the Treaty. However no secondary legislation was approved prior
to 1986 when Council Regulation 4056/86, applying to “international transport
services from one or more Community ports, other than tramp vessel services”,
was adopted.204 By this time Regulation 17/62 had been in operation over three
decades. The competition rules of the Treaty include Article 81.3, the block
exemption rule – crucial to the upcoming feature of Liner Conferences.

199
Communication title – “A Future for the Community shipping Industry: measures to
improve the operating conditions of Community shipping” COM(89) 266 final.
200
Bull and Stemshaug (eds.): Rosa Greaves, EC’s Maritime Transport Policy: a
Retrospective View, p. 30.
201
Council Regulation 3577/92 OJ 1992 L364/7, applying the principle of freedom to provide
services to maritime transport between Member States (cabotage).
202
Bull and Stemshaug (eds.): Rosa Greaves, EC’s Maritime Transport Policy: a
Retrospective View, p. 28-31.
203
Power, p. 316.
204
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p. 93.

59
6.3.1 EC Law and the UN liner Code

Considering the amount of space dedicated the UNCTAD Code in the preceding
aside, it is vital to investigate from a Community point of view as well. There was
no representation at the Conference from the Commission, other than an
observing role, as the Community Member States were not united in their
approach to the Code. Some states voted in favour 205, a few against206, others
abstained207 and two states did not attend.

Some elements of the Code were not compatible with EC law, especially the EC
law principles of non-discrimination on the basis of nationality208, freedom of
establishment in another Member State209, freedom to provide services to
persons in other Member States210 and the general rules on EC competition
law.211 Regulation 954/79 attended two needs: the harmonisation of the position
of the Member States in relation to the Code, as well as establishing common
reservations to uncomfortable Code provisions.212 The most important role of the
Regulation, it must be stated, was to provide for Member states to ratify or
accede to the Code, and for the Code to enter into force the important tonnage
countries were needed as Contracting States and thus trigger the entry of the
UNCTAD Code.213 The main mission of the Regulation was for the EC to decide
that the [Link] cargo sharing formula was inapplicable, at least, in the relations
between Member States.

6.3.2 Block exemptions

Article 81.3 provides the basic provision for possibility of exemption from, under
EC Competition law (Article 81.1), otherwise prohibited cartel agreements,
decisions and concerted practises. Thus both individual-and block/group
exemptions can be benefited from or granted.214

205
Belgium, France and Germany were supporters from an early stage. The former two say
cargo opportunities together with Italy and Spain.
206
Denmark and the U.K. voted against.
207
Italy and the Netherlands later acceded to the Code.
208
Article 12 of the Treaty.
209
Article Articles 43-48 of the Treaty.
210
Article 51 of the Treaty.
211
Articles 81-87 of the Treaty. See Power p. 309.
212
Clough and Randolph, p. 17.
213
Remember Article 49 of the Code, which provides that, the Code only would come into
force six months following the accession of no less that 24 States with a combined world
tonnage of at least 25 percent.
214
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p.129.

60
To benefit from a block exemption two alternative solutions exist: first through a
Council Regulation based on Article 83, under which the Council acts upon a
Commission proposal and adopt a suitable regulation, or, the Council adopt, on
the basis of Article 83, an implementing regulation, by which it is granting itself a
block exemption for certain categories of agreements. In liner shipping there exist
to date only two block exemption regulations: the liner conference block
exemption, an implementing Council regulation, and the consortia block
exemption, a Commission regulation based on a enabling Council regulation. The
remainder of this modest essay will mainly focus on the phenomenon of liner
conferences.215

6.3.3 Liner conferences

The first successful conference was the Calcutta Conference.216 The conference
contained the crucial characteristics of owner cartels, price fixing and market
sharing. The British shippers initialised the system, and, given that the British fleet
was the dominant maritime power, it rapidly grew into an international practice. In
less than a decade conferences covered all maritime routes of the world. Signs of
dissent were slowly detected on both sides of the Atlantic and in the beginning of
the 20th century measures were taken. The United States embraced a regulatory
approach adopting their first Shipping Act in 1916217, which was not succeeded
until the Shipping Act of 1984218, the latter with a more tolerant scheme towards
shipping cartels. The U.K. preferred the lenient approach permitting conferences
to exercise their schemes without public interference. This was generally the case
in Western Europe, where conferences even were encouraged and excluded from
the application of competition law. In the 1960´s developing countries started to
criticise the conferences claiming them to be remains of the colonial past, which
undermined their emerging fleets. This fact led to the adoption of UNCTAD’s
Code of Conduct for Liner Conferences in 1974.219

The EC attitude towards the UNCTAD Code differed. The Commission was at
first critical threatening to bring the Member States, which had signed it before the

215
Bull and Stemshaug (eds.): Helge Stemshaug, Maritime Transport and Antitrust in the EC
and US, p.130.
216
Blanco and Van Houtte, p. 104. The conference gathered steamer owners, on the route
between U.K. and Calcutta, who customised a common tariff with harmonised rates in 1875
and a binding system of delayed refunds for shippers in 1877.
217
Shipping Act of 1916, 46 USC 801.
218
Shipping Act of 1984 46 USC app. 1701.
219
Blanco and Van Houtte, p. 104. UNCTAD’s Code of Conduct for Liner Conferences
introduced the cargo sharing formula of [Link]. This formula is found in Article 2.4 of the
Code, meaning in practice that 80% of the cargo carried by a conference is due for its
national countries at each end of a route, while the remaining 20% ends up in third country
conference lines (‘cross traders’), while it originally was intended as a tool to develop the
merchant fleets of poorer nations (p.104, note 11).

61
Court under Article 226 because of the incompatibility of certain provisions of the
Code with the Treaty. The issue was solved with the adoption of Council
Regulation 954/79, the Brussels Package, which aimed at settling this
contradictory relation, enabling the Code entering into force within the Community
1983, nine years after its inauguration. Was it possible to merge the cartel-friendly
Code with the restrictive competition law set out in Article 81 of the Treaty? The
last recital of Regulation 954/79 provided the answer, whereby both recognizing
the stabilizing role of conferences as a provider of consistent commerce - a tacit
block exemption, but then again also mentioned is a proposal for a regulation on
the implementation of articles 81 and 82 to maritime transport - thereby making
infringements of these provisions liable for penalties. The result was to be the
famous Regulation 4056/86, whose negotiation stretched over five years
beginning in 1981220 seven years after the French Seamen judgement and
adoption of the Code 1974. It took, however, the pressure of the Parliament to
push the Council221 to adopt the regulation. 222

6.3.4 Council Regulation no. 4056/86

Liner conferences have existed in Western Europe since 1875, thus during 125
years, 82 years longer than the Community. Their traditional practice of
systematic distortion of competition is given authorisation through Regulation
4056/86, thereby repeating the design laid down in Regulation 1017/68223. The
role of Regulation 4056/86 is not merely the one as the instrument of Articles 81
and 82 in the transport sector, but in particular as a pillar of the maritime transport
policy. It was probably clear already in 1979, during the preparatory work, that
the regulation in no way was to be an instrument for the promotion of free
competition, but a formalisation of the Community acceptance of the ‘status quo’,
i.e. conference schemes, in international and Community maritime transport. 224

The main content of Regulation 4056/86 is the block exemption in favour of

specific agreements of liner conferences, the main objective of adopting the
regulation. On proposal of the Commission the Council grant an exemption, lined
out in a remarkably brief fashion, lacking the detailed lists of ‘black’ and ‘white’
clauses typical for earlier Commission exemption regulations. The reason hereto
may be that, as opposed to Commission practice, no previous experience in the
individual application of Article 81.3 to conferences could be relied on. I will now

220
The draft document can be traced to Document COM (81) 423 final, of 13 Oct. 1981, and
OJ 1981 C 282, p.4.
221
Case 13/83 Parliament v. Council.
222
Blanco and Van Houtte, p. 105-106.
223
Council Regulation (EEC) 1017/68 of July 1968 OJ 1968 L175. This regulation, as well as
Regulation 4056/86, deals with both application and exemption at the same time. The
substantive elements of the latter are far more numerous and economically important.
(Blanco and Van Houtte, p. 106).
224
Blanco and Van Houtte, p. 103.

62
further analyse Regulation 4056/86, issue-by-issue - provision-by-provision,
starting with a definition of Liner conferences.

[Link] Legal basis and effect of Regulation 4056/86

The Regulation was adopted on the basis of Articles 80.2, providing that the
Council of Ministers may, acting by a majority, decide whether, to what extent
and by what procedure appropriate provisions may be laid down for sea and air
transport, and 83 of the Treaty. 225 The importance of legal basis for substantive
Community legislation had been established in numerous cases before the ECJ.
This includes the difference in voting procedure between Article 83 - majority
vote - and Article 80(2) – unanimity vote. The differences of views between the
Commission, whose original proposal in 1981 was to be adopted solely upon the
basis of Article 83, and the Parliament, who opposed this adoption together with
the Economic and Social Committee (ECOSOC), has also affected the adoption.
Despite accepting the Brussels package and its endorsing approach to the
UNCTAD Code, the Commission attempted to introduce provisions preventing
conferences from breaching competition rules. The Commission aimed at, through
the Regulation, “amplify or clarify a number of points (of the Code) through
Community rules”, not “simply reaffirm the principles” thereof.226 But the
Parliament insisted that there should be the “greatest possible concordance
between the UN Code and the Regulation with respect to the rules of competition
laid down in the Treaty”.227 Thus, the rare “dual basis” adoption was a fact.

Article 27 of the Regulation provides that it is binding in its entirety and directly
applicable to all Member States. Thus no need for national implementation was
needed. Regulation 4056/86 gave the Commission the means of implementing
Articles 81 and 82 to maritime transport.

[Link] Scope and a definition

In accordance with Article 1.2 Regulation4056/86 ”shall apply only to

international maritime transport services from or to one or more Community
ports, other than tramp vessels services”. Thus, neither cabotage traffic or tramp
vessel services are able to be exempt under this regulation.

Liner Conferences are, as defined in Article 1.3(b) of Council Regulation

4056/86,

225
Council Regulation 4056/86, Preamble, first paragraph.
226
Eleventh Competition Report (1981), para 6, p 21.
227
European Parliament Resolution on the proposal from the EC Commission to the EC
Council for a Regulation laying down detailed rules for the application of Articles 81 and 82
of the Treaty to maritime transport, OJ C172 2.7.84, p. 178, at paras 2 and 4.

63
“a group of two or more vessel-operating carriers which provide international
liner services for the carriage of cargo on a particular route or routes within
specified geographical limits and which has an agreement or arrangement,
whatever its nature, within the framework of which they operate under uniform or
common freight rates and any other agreed conditions with respect to the
provision of liner services”.228

The definition follows the one set out in the UNCTAD Code.229 The reference in
the definition to ‘a group of two or more vessel-operating carriers’230, infer the
first limitation, through which agreements between carriers who do not operate
vessels, although subject to the regulation, are not qualified for an exemption.

The wording ‘International liner services’, excludes both restrictive agreements in

non-liner shipping and specialised neo-bulk transport, and cabotage conferences.
Also excluded, even though included in the 1981 draft regulation, are restrictive
agreements between passenger shipping companies. Consortia and joint ventures
are not included.

The requirement ‘on a particular route or routes within specified geographical

limits’, is not specified in the regulation, but conference shipping companies are
not free to select routes since the monopolistic character of the conferences curb
each company into its own niche.

The conference members also have to operate ‘under uniform or common freight
rates and any other agreed conditions with respect to the provision of liner
services’. To understand the meaning of uniform or common freight rates one has
to turn to the UNCTAD Code, whose Article 13 clarify that rates have to be
non-discriminatory and unique for each product. The Commission has therefore
interpreted that rates have to be the same irrespective of the offeree operating
outside (uniform rates) or within (common rates) the conference. Therefore, as
the Commission has found231, a conference, with differential rates and agreements
between conferences and outsiders, cannot receive the benefit of Article 3
exemption.

We can therefore conclude liner conferences to be bodies or associations which

coordinate the operation of regular shipping services for the carriage of general
cargo on set routes with fixed schedules and tariffs. These conferences
standardise or harmonise the uniform freight rates, sailings et cetera of the
members of the conference. Conferences furthermore, as widely discussed earlier
in the essay, utilise a monopolistic structure of powers for their operation,

228
Council Regulation 4058/86 OJ L378/21, Article 1.3(b).
229
Convention on a Code of Conduct for Liner Conferences (the UNCTAD Code).
230
So called ‘Non-Vessel-Operating Carriers’ (NVOCs).
231
Commission decision, Trans-Atlantic Agreement (TAA) OJ 1994 L 376, 1.

64
preferably: restricted membership; cargo sharing and pooling; loyalty agreements;
and agreements on a common tariff and general conditions.232

[Link] Technical agreements

Article 2.1 of the Regulation provides an exemption under Article 81.3 of the
Treaty for certain types of agreements, decisions and concerted practices, if they
do not, as a general rule, restrict competition, and their sole object and effect is to
achieve technical improvements or cooperation. These goals can be achieved by;
(a) the introduction of uniform application of standards or types of vessels and
other means of transport, equipment, supplies or fixed installation; or (b) the
pooling for the purpose of operation transport services, of vessels, space on
vessels or slots or other means of transport, staff, equipment or fixed installations;
moreover (c) the organisation and execution of successive or supplementary
maritime transport operations and the establishment and application of inclusive
rates and conditions for such operations; (d) the coordination of transport
timetables for connecting routes; (e) the bulking of individual consignments; and
finally (f) the establishment or application of uniform rules concerning the structure
and the conditions governing the application of transport on condition that such
rules do not directly or indirectly fix rates and conditions of carriage.233 A classic
example of a white list, similar to that contained in comparable air transport
measures.234 It must be stressed that the sole object and effect must be to
conclude a technical agreement. Any other motive will inactivate the exemption.
Article 2.2 impose upon the Commission, if necessary, to submit proposals of
amendment of the list to the Council.

[Link] The conference block exemption

Article 3 is the principal provision of Council Regulation 4056/86 as the giver of

life to liner conferences, as well as being the second test. This provision provided
the long awaited legal security as regards the application of the Treaty’s
competition rules to maritime transport.235 Liner conferences, meeting the criteria
in the definition of Article 1.3(b), qualify for exemption under Article 3 of the
Regulation. It is stated that ‘agreements, decisions and concerted practices of all
or part of members of one or more liner conferences’ are exempted from the
application of Article 81.1 of the Treaty. The exemption may be withdrawn under
certain circumstances, but is otherwise for an unlimited period of time.
Furthermore, the exemption is not complete since conditions (Article 4) and
obligations (Article 5) are imposed.

232
Report of ECOSOC’s Section for Transport and Communications on the Proposal for a
Council Regulation 4056/86… (CES) 211/82.
233
A similar list of exception can be found in Article 3 of Council Regulation 1017/68.
234
Power, p. 326.
235
Ibid, p. 328.

65
Liner Conferences and agreements are exempted when they have as their
objective the fixing of rates and conditions of carriage of goods and, as may well
be, one or more of the objectives as stated under Article 3(a)-(e). Following one
or more of these objectives: (a) the co-ordination of shipping timetables, sailing
dates or dates of calls; (b) the determination of the frequency of sailings or calls;
(c) the co-ordination or allocation of sailings or calls among members of the
conference; (d) the regulation of the carrying capacity offered by each member;
(e) the allocation of cargo or revenue among members.236 Thus, the main
characteristic of the liner conference block exemption is that the members of liner
conferences fix rates. 237

[Link] The non-discrimination condition

Article 4 of Council Regulation 4056/86 require a conference agreement,

enjoying exemption pursuant to Article 3, not to, ‘…within the common market,
cause detriment to certain ports, transport users or carriers by applying for the
carriage of the same goods and in the area covered by the agreement, decision or
concerted practice, rates and conditions of carriage which differ according to the
country of origin or destination or port of loading or discharge…’ There is a
contradiction in the apparent aim, to require non-discrimination for purposes of
tariffs. Situations of discrimination appear when like is treated differently and
unlike is treated equally. The regulation can thus consider non-discriminatory that
which normally would be considered discriminatory, i.e. requiring different ports
to be treated equally. An important reservation is invoked meaning that ‘unless
such rates or conditions can be economically justified.’ The result thereof is that
the condition no longer is automatically activated.238

The consequence of defying the provision is automatic nullity, as a whole, or if

severable in part, according to Article 81.2 of the Treaty. The importance of
Article 4 is apparent considering that the agreement could be automatically void.
The condition ‘detriment’ has been criticised since the criteria for the application
are left out. The level of detriment necessary to trigger activation is not defined
neither are ‘rates and conditions of carriage’ or ‘economically justifiable’ –
possible subjects of considerable debate.239

236
Article 3(a)-(e) of Council Regulation 4056/86.
237
Bull and Stemshaug (eds.): Helmut W.R. Kreis, Liner Services: The Block Exemptions and
Inter-modal Transport, p.131.
238
Blanco and Van Houtte, p.120.
239
Power, p. 331.

66
[Link] Obligations attached to the exemption

Article 5 of Council Regulation 4056/86 constitute a number of obligations that

shall be attached to an exemption:

• consultations between transport users and conferences to seek

solutions concerning rates, conditions and quality of liner
services;
• conference members shall be able to conclude and maintain
loyalty arrangements with transport users;
• transport users shall be entitled to utilize undertakings of their
free choice in respect of inland transport-and port services not
covered by the freight charges;
• tariffs, related conditions and regulations of the conferences
shall be made available to transport users; and
• awards given at arbitration and recommendations made by
conciliators shall be notified to the Commission.

These five obligations form part of the requirements to maintain an exemption

once the shipowners have fulfilled and agreed to abide the conditions for obtaining
it. Defiance is not immediately hazardous since the Commission must adopt an act
denying the liner conference the benefit before withdrawal. The last three are
common in nature, requiring the conferences to exercise certain activities. The first
two imply restrictive practices that are exempt from the prohibition in Article 81.1
of the Treaty by virtue of Article 6 of the regulation.240 Article 6 states that
agreements between transport users and conferences and agreements between
transport users which may be necessary to that end, are also block exempted if
they concern rates, conditions and quality of liner services as long as they are the
subject of consultations and loyal agreements. This exemption is also governed by
the non-discrimination condition set out in Article 4 of the regulation.241 Article
19.2(b) enable the Commission is in all cases authorized to impose fines on
shipping companies who default in their obligations.

[Link] Monitoring of exempted agreements242

The conference block exemption is subject to monitoring. Monitoring is an

exercise where observation of an agreement, and the behaviour of the parties
thereof, can come in question. The provision governing this aspect of the liner
conference regulation is found in Article 7 of Council Regulation 4056/86.

240
Blanco and Van Houtte, p.122.
241
Bull and Stemshaug (eds.): Helmut W.R. Kreis, Liner Services: The Block Exemptions and
Inter-modal Transport, p.132.
242
Section based on: Bull and Stemshaug (eds.): Helmut W.R. Kreis, Liner Services: The
Block Exemptions and Inter-modal Transport, p.132-135.

67
Monitoring takes place in the following two cases: breach of an obligation and
where the effects of an exemption are incompatible with Article 81.3 of the
Treaty. Only the latter is of practical importance. Article 7 gives the Commission
the sole power to monitor an exempted agreement. If the practices are found
incompatible with the mentioned provisions the Commission can take appropriate
measures under Article 7.2(c). The gravity of the measures must be in proportion
to the gravity of the situation. Naturally the principle of proportionality applies
here as everywhere else in Community law. Certain special circumstances can
trigger monitoring, such as:

• acts of conferences whose outcome is absence of actual or

potential competition;

• acts of conferences which may prevent technical or economical

progress;

• acts of third countries which prevent the operation of outsiders

in a trade or which impose unfair tariffs on conferences
(cargo-sharing, limitations on type of vessels).

If these circumstances result in the absence or elimination of actual or potential

competition contrary to article 81.3(b) the Commission shall withdraw the
exemption, but at the same time investigate whether an individual exemption under
Article 7.1(c) can come in question. The fundamental concept behind the rules
was the increasing trend to exclude non-conference competition from trades in
which the so-called closed conferences, those who practise under the rules of the
UN Code of Conduct for Liner Conferences. According to Article 19.2(a) the
Commission is in all cases authorized to impose fines on shipping companies who
default in their obligations while Article 20.1(a) provides the right to impose
periodic fines.

[Link] Effects incompatible with the Art 82 of the Treaty

The provision in the regulation for application of Article 82243 of the Treaty is
found in Article 8 of Council Regulation 4056/86, where it is stated that ‘the
abuse of a dominant position within the meaning of Article 82 shall be prohibited,
no prior decision to that effect is required.’ Where the Commission, either by its
own initiative or following a request by a Member State, finds the conduct of a

243
Article 82 of the Treaty prohibits certain types of abuse of a dominant position as
incompatible with the Common Market, by one or more undertakings holding such a
dominant position within the Common Market or in a substantial part of it, insofar as such
abuse affects trade between the Member States. What the different criterion of this
definition essentially represent subject matter for another essay, but also part of the rich
praxis of the ECJ.

68
conference benefiting from a block exemption being incompatible with Article 82
it may withdraw the benefits and take other measures to stop the infringement.
The Commission may thus withdraw the benefit of an exemption and take,
pursuant to Article 10, appropriate measures to bring to an end the infringements
of Article 82, however, before taking a decision from the above said the
Commission may address the conference concerned with recommendations for
termination of the infringement.244

Determination of a dominant position, in the maritime sector, depends on many

factors including the level of services and not only upon percentages of the trade
shared between the conference and the outsiders. Each given trade must be
examined and there is no established answer depending only on the percentage.245
In order to solve this issue a traditional analysis of the market must be made. A
market definition must be established, in long-haulage defined by the Commission
by studying the substantiality between different types of transport on the same
routes and similar technical attributes offered on different maritime routes – both a
technical and a geographical analysis.246 The next step in the analysis under Article
82 is to assess the existence of a dominant position, a work similar to that of
assessing other industries, basically relating to market structure, the structure and
operation and their conduct on the market.247 In relation to market structure
market share and potential competition is very important. A large share is crucial
but not necessarily sufficient to examine whether dominance exist.248 Potential
competition, as indicated by the Commission, is effective only when it imposes a
direct and certain threat, at least credible.249

[Link] Conflicts of international law

The liner conferences are not only a question for Community legislation. The
reader cannot possibly have escaped this fact while travelling through the previous
chapters of this essay. Conflicts of international law are conflicts with the laws of
third states. The conferences have members from every continent and are
therefore also an object to international law and a variety of national laws. Laws
of conflict can be very important components in areas of both Community and
international importance and interest. Article 9 of Council Regulation 4056/86
seeks to establish an internal and international institutional procedure to consult
and negotiate with third countries. Paragraph 1 provides that where the
application of the Regulation to certain restrictive practices or clauses is liable to

244
Power, p. 338.
245
Savopoulou and Tzoannos, p. 187.
246
Blanco and Van Houtte, p.135-136.
247
Ibid, p.136.
248
As stated in Case 85/76 Hoffmann-Laroche v. Commission [1979] ECR 461, a monopolist
is, by definition, dominant.
249
Blanco and Van Houtte, p.136.

69
create a conflict with the provisions laid down by law, regulation or administrative
action of certain third countries250 which would compromise important
Community trading and shipping interests the Commission shall consult the
relevant authority of this third country, merging its interest with the Community
interests. Two steps exist: the consultation stage and an optional step of
negotiation. This procedure has never been used to its full consequence, but the
Commission has had contact with the US Federal Maritime Commission.251

6.4 APPLICATION OF COUNCIL REGULATION

4056/86

Unlike the other regulations originating from the 1986 package252 regulation
4056/86 had been applied on several occasions. The Commission has dealt with
a number of cases concerning liner shipping, potential breaches of Articles 81 and
82 of the Treaty and the question whether these breaches can become subjects to
the exemption in the regulation or not. The Commission has in these cases
interpreted the text and meaning of the Regulation very restrictive and has
therefore had problems giving the current liner conferences an exemption and has,
on occasions, imposed fines.

The French-West African Shipowners’ Committees253 was the first case in

which fines were imposed for substantive breaches of Articles 81 and 82 in the
shipping sector. The Commission found that not only article 81 was infringed but
also Article 82. The extremely interesting cases Cewal, Cowac and UKWAL254,
where fines where imposed for abusing their joint dominance by offering loyalty
rebates as a means to eliminate competition. The Commission decision, appealed
to the Court of First Instance (CFI)255, as Compagnie Maritime Belge v.
Commission later found its way to the ECJ256 and will be examined in the
following. So will the Trans Atlantic Agreement (TAA) and Trans Atlantic
Conference Agreement (TACA) decisions.

250
Blanco and Van Houtte, p.139, Article 9 was drafted with USA in mind.
251
American Shipper (Magazine), January 1990, p. 14 and onwards (cited in Power, p. 340).
252
Blanco and Van Houtte, p.140, Regulations 4057/86 and 4058/86 have been applied only
one time each while regulation 4055/86 has been utilized six times.
253
French-West African Shipowners’ Committees, OJ 1992 L134/1, 18.5.1992 - IP/92/242.
254
Cewal, Cowac and479/92 UKWAL, OJ 55/3 29.2.92 – IP/92/1110.
255
Joined Cases T-24/93 to T26/93 and T28/93, Compagnie Maritime Belge Transports SA
and Others v. Commission [1996] ECR II-1201.
256
Joined Cases C395/96 and C-396/96P, Compagnie Maritime Belge and others v.
Commission.

70
6.4.1 French West-African Shipowners’ Association

Already in 1992 the Commission adopted the above mentioned negative decision
within the ambit of shipping trade between France and West Africa.257 Sir Leon
Brittan, responsible Commissioner of Competition at the time stated that the “case
was an important breakthrough for competition policy in the sea transport sector”,
in general it sent out a message to ensure complained, by operators, of the
Community’s competition rules.258 The Commission found that the shipowners’
committees set up in respect of trades between France and 11 West African and
Central African countries constituted agreements contrary to Article 81 whilst
their practices were in breach of Article 82 (both provisions of the Treaty). The
concrete infringements were the attempted cartel formation of the whole of the
trade, whereby hindering outsider entry and eliminating effective competition. It
was fond to be a major breach and fines of ECU 15,000,000 were imposed on
the major players.259

6.4.2 CEWAL260

An extensive legal saga started following a complaint raised by the Danish

Shipowners’ Association, the Danish Government and AIWASI against
anticompetitive practices by shipping conferences operating in the shipping trade
with West Africa. Eleven shipowners’ committees and four liner conferences
(CEWAL, MEWAC, COWAC and UKWAL), and, the Commission found in
its proceeding that Articles 85 and 86 of the Treaty imposing heavy fines in
relation to the CEWAL shipping conference, where Compagnie Maritime Belge
was the dominating line, two lines owned by CMB and Nedloyd. The fines
imposed on CEWAL and CMB amounted to ECU 20,000,000.

In its decision the Commission defined the relevant market as the market for
services supplied by liner vessels for the transport of general cargo principally
between ports of Europe and those of the Democratic Republic of Congo, where
the members of the CEWAL conference had a market share of seventy percent.
In its Statement of Objections the Commission first claimed: (1) claimed that
CEWAL, COWAC and UKWAL had infringed Article 81.1 by entering a non-
competition agreement, (2) the members of CEWAL had abused their joint
dominant position in three modes: (a), by participating in the implementation of the

257
Commission Decision 92/262/EEC, French West-African Shipowners’ Committees, OJ
1992, L134/1, 18.5.1992 – IP/92/242.
258
Commission Report on Community Competition Law in the Transport Sector – Recent
Landmarks 1991-1997, 27 October 1997 (Press Release: 1992-04-01), p. 29.
259
Recent Landmarks 1991-1997, p. 30.
260
Commission Decision 93/82/EEC, CEWAL Liner Conference, OJ L 34, 10.2.1993 –
IP/92/1110.

71
‘Ogefrem261’ cooperation agreement, concluded between Ogefrem and CEWAL,
under which all cargo on this route would be carried by the latter’s members; (b),
the application, by members of CEWAL, of the fighting ships262 method where
the shortfall was borne equally by all members; (c), the application the imposition
by CEWAL members of 100 percent loyalty agreements reaching beyond the
exemption under Article 5.2 of Regulation 4056/86, with black lists of disloyal
shippers attached - leading to dissimilar conditions to equivalent transactions with
trading partners.

6.4.3 Trans-Atlantic Agreement

The ‘Trans-Atlantic Agreement’ was notified on 28 August 1992 for individual

exemption under Article 81.3. The TAA is an agreement between fifteen liner
shipping operators who provide transatlantic liner shipping services representing
an eighty percent market share between Northern Europe and the USA. The
TAA includes rules on establishing freight rates, service contracts and capacity
management.

The Commission decision263 of 19 October refused exemption on the grounds

that the agreement infringed Article 81.1 and unqualified for an exemption under
Article 81.3. The Commission also held that an agreement or liner conference that
established at least two rates levels or provides for the non-utilisation of capacity
falls outside Article 3 of Regulation 4056/86.

In December 1994 the shipowners of TAA appealed to the CFI264 was

successful in having the decision partially annulled by the CFI265 on March 5
1995, and the ECJ266 confirmed the suspension. The CFI held that the decision
had failed to assess the impact of the agreement on inland, through multimodal267
rates, as part of the market for maritime services, but also to show how the inland
rates affected the trade between Member States.268

261
L´Office Zairois de Gestion de Fret Maritime.
262
Whereby the conference modify the freight rates in parity or lower than the ones of
independent competitors with the aim of eliminating the same.
263
Commission Decision 94/980/EC, Trans-Atlantic Agreement, OJ 1994 L 376, 31.12.1994 -
IP/94/956, p 1.
264
Case T-395/94, Atlantic Container Line and Others v. Commission.
265
Case T-395/94R, Atlantic Container Line Ltd AB v. Commission, [1970] ECR II-595.
266
Case C-149/95P, Commssion v. Comité de Liason Européen des Commissionaires at
Auxiliaires de Transport du Marché Commun (CLECAT).
267
Multimodal transport refers to transport in which various modes of transport are
connected, e.g. maritime and inland transport (in North American terminology – intermodal
transport), Blanco and Van Houtte, p. 13n.
268
Power, p. 360.

72
6.4.4 Far Eastern Freight Conference269

The Far Eastern Freight Conference (FEFC) has members on the liner trade
between Europe and the Far East. On December 21 1994 the Commission
prohibited the conference from fixing multimodal freight rates on the European
land portions for containerised cargo. According to the Commission such
activities do not qualify for group exemption benefited by liner conferences.
Furthermore, the practice did not fulfil the criteria of Article 81.3 of the Treaty.
Symbolic fines of ECU 10,000 were imposed to mark the offence and provide
for future compliance with the competition rules.270

On 28 April 1989, the Commission received a complaint from the German

Shippers´ Council (DSVK), concerning certain price fixing activities of the
members of the FEFC relating to multimodal transport. The group exemption for
liner conferences, contained in Regulation 4056/86 permits price fixing for sea
transport services. The DSVK complained that members of the FEFC agreed
between themselves prices not only for sea transport but also for the other
elements of a multimodal transport service, including inland transport services.
The Commission concluded that it was difficult to receive an exemption widening
the scope of Article 3 of Regulation 4056/86 outside the scope of the Regulation
itself.271 On 7 April 1995 the FEFC applied for suspension of the decision in the
CFI. The price agreement, it was furthermore concluded, did not as such improve
multimodal transport, and the users did not benefit from the agreement, which in
no way was indispensable for the maintenance of such services.272

6.4.5 Trans-Atlantic Conference Agreement

The TACA is a revised version of the TAA, a supplementary submitted to the

Commission seeking an exemption under Article 81.3 of the Treaty. Amongst
other restrictions of competition the TACA contains price agreement relating to
inland transport services supplied within the territory of the Member States to
shippers as a part of multimodal transport operation for the carriage of
containerised cargo. The like of agreement was prohibited already in the TAA
decision and in the following FEFC Decision. The Commission issued warning to
the sixteen maritime companies if matters remained unaltered.

In principle when parties notify their agreements to the Commission they obtain
immunity from fines. In November 1996 the Commission adopted a Statement of
Objections lifting the immunity from fines in respect of inland rate fixing on behalf

269
Commission Decision 94/985/EC, The Far Eastern Freight Conference, OJ 1994 L378/17 -
IP/94/1260.
270
Recent Landmarks 1991-1997, p. 42.
271
Commission Decision 94/985/EC, at para. 75.
272
Ibid, at paras 115-118 and 119-139.

73
of the TACA parties.273 Naturally the TACA parties lodged for a suspension of
this decision to the CFI who dismissed the application. Finally, on 16 September
1998, the Commission issued a decision in which the by TACA notified
agreement was concluded to constitute an infringement of both Articles 81 and 82
of the Treaty. The Commission used the same arguments as in the TAA and
FEFC decisions. Fines of EURO 13,500,000 were imposed on the parties of
TACA, who again sought relief at the CFI274 and a pending case at the ECJ.275
Furthermore, the parties also sought interim relief, unsuccessfully, from the fines
awaiting the ruling of the ECJ276, not surprisingly in vain. – a complicated case
travelling through a complex system.

6.4.6 Compagnie Maritime Belge

The CEWAL decision was brought on appeal before the CFI and later also
before the ECJ, the first opportunity of the Court to pronounce itself on anti-
competitive behaviour by liner conferences. It furthermore clarified the
requirements for collective dominance, and it serves as prevention against liner
conferences considering their abuse of the benefits given to them through
Regulation 4056/86. The parties appealed to the CFI277, which reduced the fines
but otherwise sympathised with the Commission’s findings, thus dismissing the
applicants.

Advocate General Fennelly delivered an Opinion on 29 October 1998 whereby it

was stated that the CFI correctly had applied the two-fold test of collective
dominance as well as making the right assessment regarding the other abuses
(Ogefrem agreement, fighting ship and loyalty rebates). The entirety of the fines
imposed, however, should, according to Fennelly, be quashed. The Commission
had imposed fines on the members of CEWAL individually since it assumed that
CEWAL itself lacked legal personality, but according to Article 19.2 of
Regulation 4056/86 fines could be imposed on ‘associations of undertakings’,
which CEWAL must be regarded as.

The ECJ agreed with Fennelly in that the implemented agreement enabled the
conduct of the members of the conference to be assessed collectively. The
members were so linked that their conduct on the market presented them as a
collective entity to their trading partners and consumers.278 As regards the other
abuses the ECJ referred to dominant undertakings special responsibility not to

273
Commission Decision C (96) 3414 final of 26 November 1996 – IP/96/1096.
274
Case T-191/98 Atlantic Container Lines and Others v. Commission, on 1 March 1999.
275
Case C-364/99 P(R).
276
Case C-361/00 P(R).
277
Joined Cases T-24/93 to T26/93 and T28/93, Compagnie Maritime Belge Transports SA
and Others v. Commission [1996] ECR II-1201.
278
At para, 44 of the Judgement.

74
allow their conduct to impair genuine competition279 and that the Ogefrem
agreement had such effect. Also fighting ships constituted an infringement of
Article 82, thus the applicants argument that fighting ships were a mere reaction to
competition and not selective price cutting, in the meaning the ECJ delivered in the
AKZO case280, and the ECJ pointed out that it was settled case law that the
enumeration in Article 82 cannot be considered exhaustive.281 Moreover, the fact
that the conference held a seventy percent relevant market share and the
appellants had admitted that the purpose of their conduct was to eliminate
competition helped the ECJ to sympathise with the CFI position. The loyalty
agreements, even though not insisted on, were held to be abusive, since the
CEWAL market share made it an unavoidable trading partner, and more, the fact
that the practice is authorised (in this case exempted under Article 5.2 of
Regulation 4056/86) does not mean that the conduct can never constitute an
abuse of the dominant position.282 In respect of the fines imposed, challenged by
appellants as err in law by both the Commission imposing and the CFI for
confirming, the ECJ pointed out that it is established case law that since the
essential safeguard of a fair hearing is the Statement of Objections this must set
out all points on which the Commissions case rests.283 The Commission failed to
notify the members of CEWAL of their exposure of the fines, thus infringing the
right of a fair hearing; consequently the ECJ followed Fennelly and quashed the
decision relating to fines.

The CMB case is not only of importance for the maritime transport but interesting
from the competition law as a whole since the CFI and ECJ pronounced
themselves explicitly on the required links, between the undertaking holding
collective dominance, which must exist. An innovation is the statement of the
ECJ284 implying that links may be constituted by mere oligopolistic
interdependence, maybe a step toward healthier control of abusive conduct by
oligopolies. Following the annulment of the fines, what is left of the case is an
important warning to liner conferences with regard to their legal position, and their
benefits enjoyed under the regime of Regulation 4056/86, which should not be
interpreted with the megalomaniac confidence of the past. Liner Conferences can,
by their very nature, be characterised as collective entities.

279
Case 322/81, Nederlandsche Banden-Industrie Michelin NV v. Commission, [1983] ECR
3461, para 57.
280
Case 62/86, AKZO Chemie BV v. Commission, [1993] 5 CMLR 215, paras 115-144.
281
Case 6/72, Europemballage and Continental Can v. Commission, [1973] ECR 215, para
26.
282
Case 85/76, Hoffmann-La Roche, [1979] ECR 461, para 41.
283
Joined Cases 100 to 103/80, Musique Diffusion Française and Others v. Commission,
[1983] ECR 1825, paras 10 and 14.
284
Para 45 of the Judgement. See also a Commentary Note by Sigrid Stroux, p. 1260.

75
6.5 MOTIVES FOR EXEMPTION

In its Explanatory Memorandum to the original proposal the Commission stated

that Article 81.2 of the Treaty permits the exemption of a category of agreements
from the prohibition set out in Article 81.1, and the natural evolution, bearing in
mind the considerable part conferences played in regular transport services
world-wide and the establishment of the UNCTAD Code, would be to grant
exemption for such agreements between shipowners as a recognition of their
beneficial role.285 The Commission proceeds by stating that sea transport, more
than any other mode of transport, is hampered by severe fluctuations, of both
business and seasonal character in demand for cargo. Furthermore, absence of
regulation would lead to the instability of freight – a problematical situation for
both shipowners and shippers: for the former in the lack of foresee ability and thus
possibility of planning future investments; and the latter stability in freight services,
stable rates, and, because of the shipowners possibility of secure investments,
modern equipment for their transportation. The ECOSOC also stated that a
conference block exemption primarily would be for the benefit of shipowners, but
that effort must be to facilitate the entry into conferences of any national shipping
company on the same conditions as existing members.286 In another
Memorandum287 of 1985, which led to the adoption of the 1986 package
including Regulation 4056/86, the Commission express its concern about the
decline of the EU fleet, partly caused by unfair competition from state trading
countries, i.e. protectionist policies via subsidies programmes. The shipowners
were hence advised to formulate a justification of why antitrust immunity is needed
for liner conferences in the present and future.

The Council, upon the adopting Regulation 954/79, considered that it is

recognised that the stabilising role of conferences, by its nature, guarantees regular
service to shippers, but that it is necessary to avoid possible breaches of the EC
competition law by conferences. The Preamble of the Regulation set forth the
purpose as being to steer a middle course between perils in dire straits: to
approach undue distortion of competition within the common market by either a
liberal or regular means.288 The conflicting interests between shipowner and
shipper are the important issue the Regulation addresses, as well as providing
increased legal certainty and clarifying the relation between the involved
interests.289

285
Commission Explanatory Memorandum COM(81)423 final, pp. 6-7.
286
Power, p. 330.
287
COM (85)90 final.
288
Savopoulou and Tzoannos, p. 181.
289
Power, p. 369.

76
6.6 ANALYSIS

The transport policy of the European Union followed at first a steady non-
development curve and during its later stages leaps of evolutionary character. This
essay has presented this progress and the maritime transport in particular. The
explanation to this evolution is the composition of the Community when the Treaty
entered into force in 1958 – it was a continental block, thus naturally the inland
transport modes were in the centre of attention. The enlargement of the
Community altered the situation, and when paramount maritime nations Great
Britain and Denmark became members maritime issues attained greater attention.
The relation to the other economic superpowers, United States and Japan, both
giant maritime nations, made the community eager to form an alliance and protect
its interests.290 The mere geographical expansion of the European Union is
another factor in the increased attention, when considering the distance between,
for example, harbours in northern Sweden or Finland and Portugal or Spain.
Moreover, the clarification of the European Court that the general rules of the
Treaty were applicable to transport as a whole and, more specifically, to maritime
transport and the adoption of the UNCTAD Code of Conduct for Liner
Conferences in Geneva hastened and matured the Community attitude. But the
most important step towards a common maritime transport policy was taken with
the 1986 package and the synchronisation of differing Community views in this
field of transport.

The main implications of the 1986 package were probably to strengthen the
Community position in international maritime affairs, but also to appear committed
in the work for an international maritime regime. At the strict Community level the
creation of the single market was an important aim. However, the Commission
may, in spite of expressing a desire in December 1986 to proceed into stage two
of the common maritime policy, have to accept that liberalisation of the maritime
markets are proceeding independent of common markets.291

Are there no critical voices of Liner Conferences then? The conference schemes
are flagrant violations of the holy provisions in the early eighth decade of the
Treaty. Can nothing be done even with the strong provisions and position of
Community law and the executive and enforcement powers of the Commission?
One answer to this lack of critical assessment can be the view of the Commission
that the results of the negotiations with the Council were inescapable regarding the
wishes of the Commission to obtain powers of control and sanction early on.292

The shipping industry is, due to its long history, regional habits and the weak
International Maritime Organisation, problematic. Explanations to the Community
measures being at all effective are their enforcement powers and available

290
Wiberg, p. 23.
291
Savopoulou and Tzoannos, p. 237.
292
Blanco and Van Houtte, p.257.

77
remedies in joint collaboration with its supremacy and direct applicability. One
could say that the unexplored depths of the mighty oceans of this planet may well
be used as a parallel when trying to understand the situation maritime authorities
around the world have to function in and assess.

Cooperation between shipowners has intensified since the transformation to

container shipping, and even more so during the last decade. The world’s
shipping lines are divided up under three large agreements, respectively
monitoring the Europe-Asia trade, the Trans Atlantic trade and the Trans Pacific
trade. Shipowners need and desire to cooperate following the development
during the 1970’s led to the engagement of far reaching joint service agreements –
the in this essay not discussed Liner Consortia. An interesting addition in this
respect is the Commission Consortia Regulation 870/95293, which assess and
exempt a second category of agreements, decisions and concerted practices
under the provisions in Council Regulation 497/92294. The consortia block
exemption is welcomed, but complicated and lacking legal certainty, having
provisions outside the scope of the Council enabling provision.295 This fact may
lead to the consortia regulation giving the liner conference system a renaissance
rather than the terminal blow.

293
Commission Regulation 870/95 OJ 1995 L5, on the application of Article 81.3 to certain
categories of agreements, decisions and concerted practices between liner shipping
companies (consortia), p.3.
294
Council Regulation 479/92, OJ 1995 L55, p.3.
295
Bull and Stemshaug (eds.): Helmut W.R. Kreis, Liner Services: The Block Exemptions and
Inter-modal Transport, p.159.

78
 PART III

EPILOGUE

79
7. Conclusions
Liner conferences are of utter importance to the logistics systems involved in
ocean transportation of general cargo. They have served well during 125 years as
reliable freighters. Even the most passionate opponents do not question the
existence of conferences. A matter of debate, however, is the different practices
utilised by conferences in their operation.

7.1 LINER CONFERENCES IN GENERAL

A great many things can be deduced from this essay. Shipping is ancient, and
upon maritime merchant activities were all the most important empires of the
ancient west built. Around these activities rules of custom arose, of commercial
character initially, but also, and for this essay important, public laws regulating
international relations. Laws, naturally, did not emerge out of the blue – a need for
regulation existed. But, however, need for regulation does not always pave way
for regulation. Endless are the examples of neglecting regulatory need, as a result
of both principal and economical interests. Numerous are also the examples
where regulation of an area, both regarding territory and law, which impose
restrictions on the opportunity of outsiders exploiting the same areas. This thesis
of preferential or protectionist behaviour can also be applied on the micro level of
economics, in the context of the study conducted within the frame of this essay,
liner conferences. The protectionist ideals are also ancient, thus the Roman
maxims of Mare Nostrum, Mare Clausum and Dominium Maris only named a
custom haunting us still today. Protectionist schemes have been ambitiously
applied by existing and emerging maritime powers throughout the history of
maritime transport, and, in a way, it is rather hypocritical of existing established
maritime nations to ban and condemn LDC measures to fulfil the ambitions of any
maritime nation – to possess and operate in the vital transport upon water. The
same hypocritical actors utilised the same behaviour in their youth.

Given that liner conferences played, and still plays, an important part in the field of
shipping, and thus in world trade as a whole, they have of great interest to both
major and minor actors of trade. Liner conferences have been used as a tool of
protectionism. The recent trend of container shipping has even more tightened the
cooperation structure of conferences into formations like consortia, but the extent
of conferences being utilised as a means ambitious activities has not diminished.
But now even greater formations of associations of lines and shipowners are
merging, into what may be the only option for operators of survival faced with the
challenge of providing regularity, stability and flexibility at a fair price. Naturally
the rate is the controversial issue, both here in this study and in the everyday
operation of shippers.

80
The observant reader has now understood the important role liner shipping hold in
this global economy we all, willingly or not, habituate. Liner Conferences then, by
some observers sturdily rejected while others – more moderate and realistic
(maybe even cynic) – refer to the conference system as a necessary evil; a
different breed of lobby group and cartel for the sake of shipowners and lines
(much like the OPEC etc.) and their well being providing them the certainty to
perform the part in the world trade drama.

Must the conclusion therefore be - liner conferences, an ugly duck? Liner

conferences formed in the wake of industrialism, as a side effect or rationalistic
catalyst thereof. Their origin surely makes me ponder upon conferences in terms
of efficiency, rationally, utility, flexibility and stability. Honorary terms in the world
of many economists, but these terms do not always constitute the most rational
method economically. Economically justifiable or not conferences have survived
over a century and this because of their sharp qualities and abilities, set out in the
conference agreement, and characteristics forming the foundation of their capacity
to survive, not operate competitively best. The nature of conferences is restrictive,
the outline of operation of conferences contain severely restrictive elements; price
maintenance, division of markets, loyalty agreements and other imposed factors to
the relations between shipowners and shippers such as surcharges, and the
practices regarding entry into conferences of outsiders and independent
shipowners.

Still civilised legal regimes continue to protect these enterprises, built on repeated
and calculated infringements of competition laws, customers’ rights and ultimately
the interest of consumers worldwide. The answer hereto, a mantra of shipowners
and advocates: regularity, stability and flexibility.

7.2 UN – US – EU

Three different legal regimes, three different legal traditions, but as the millennium
rests behind us divergences slowly smoothen out. The legal systems of United
Nations and the European Union are relatively immature, and compared United
States, with a short history of relations to conferences. The US has always been
and considered itself a pioneer in the field of competition, or antitrust as called in
America. This background directed US towards a harsh policy established in the
Shipping Act 1916 and maintained through to the Shipping Act of 1984.

The UN regime is by far the weakest of the three. As many opportunities to make
a difference before the UNCTAD Code has shrunk, diminished, and sunk into the
depths of the opportunistic oceans of protectionism. The Code of 1974 was
greeted as a tool of the future, a promoter trade, not just for the benefit of the
northern hemisphere, but for all members of the UN community. Sadly the group

81
of countries that were the target of the Code exploited it in the name of
nationalistic ambitions to promote merchant fleets unable to freely float
commercially. Moreover, the lack of enforceability has put the Code in the back
yards of global economic and political agenda. No actor in the market
deliberately surrender its immunity from sanction, thus surrender its instinct of self-
preservation, for the sake of competition. Even I as a layman hold considerable
doubts to as whether I would my immunity, or advice a client to do so. But the
Code stands as a prototype for Council Regulation 4056/86.

The EU as well as UN are both legal systems of their own, sui generis. The EU,
much like the UN have their origins in a period where peace, consensus and
consent were leading ideals. This background has made the EU a rigid and slow
organisation, much like the UN, but with one great and important difference,
enforcement possibilities. The thrilling feature of the EU is that the respective
governments have surrendered powers to the organisation, and so the
Commission seek, investigate, assess, stop and fine liner conferences infringing the
already generous rules relating to their activities. But for a long time, until the
accession of he UNCTAD Code by the Community on behalf of its Member
States, Council Regulation 954/79, a reign of uncertainty ruled Western Europe
through three decades - a flexible approach of Europe versus the regulatory
Americans. The leaders of Europe finally realised that certainty through regulation
was the lone way out of the shipping chaos that had followed in the wake of the
oil crisis of the 1970’s.

Since a legal history exists regarding liner conferences it is interesting to see what
similarities and differences that have evolved between the three legal regimes. As
exhibited above general policy discrepancies have continuously played the main
part of the drama, but also details in the regulations evidently differ.

An immense matter of prestige has been the controversial deferred rebate

schemes: distinctly prohibited in the US until 1984 when some possibilities arose,
while the UNCTAD Code allow all loyalty agreements, as well as Regulation
4056/86, provided they are based on the contract system of any lawful legal
system.

The famous [Link] cargo-sharing formula: initiated by LDCs as a part of the

UNCTAD Code and promptly rejected by the US and initially also the Member
States until Regulation 954/79 decided that the formula was inapplicable between
Member States.

Membership of conferences and the admission thereto has seen different polices
during the years: the US approach was the sacred status of open membership
systems and equal possibilities of all lines to enter a conference, whereas under
the UNCTAD Code a distinction was made between national and non-national
lines, while the Community in Regulation 954/79 made a reservation in this

82
respect (on the definition ‘national lines’) in relation to existing conferences, new
conferences and establishment.

As presented above, the everlasting dissident is the United States. The US belief
in enforcing antitrust principles has, if not diminished, been replaced by a more
cynic policy in an attempt to rescue marine merchant activities. Still, and I agree,
with the voices constantly raised in complaint over the immunity regime now
choking the industry. Protectionist measures, in whatever guise, is, and this is a
fact, detrimental in the long perspective to trade and commerce especially in the
interests of customers and consumers, which always end up on the losing end.
Given this I hold that the wealthy and developed countries own a special
responsibility in acting as forerunners and pioneers in areas where policy
statements and changes are needed.

One could easily become a believer of cooperation, on an international basis, as

to the regulation of conferences and salute the UNCTAD Code. The consensus
and attention given to the LDCs proved to be dissatisfying, a loose instrument
without enforcement possibilities have tainted the once optimistic faith of believers
of progressive development in shipping. What could have been a cunning tool in
assisting LDCs to a fair share of the global economy misfired and sunk. The
tendency now is far away from the creation of competitive merchant fleets
worldwide, but the continuing story of short term profits on the account of others
– the true side of monopolised capitalism.

Regarding the EU perspective it is my distinct feeling that the special regulation of

conferences might prove to be wrong in the end. When Regulation 4056/86
arrived the merchant fleets of Member States were devastated by the competition
from southern hemisphere fleets, so the measure was fair in the eyes of the 1980’s
and 1990’s. Today, a year into the third millennium the situation has altered.
Today, with the calls of global free trade without restrictions echoing out from the
headquarters of WTO, is it then possible to accept further pampering of
conferences? Should liner conferences even exist given their attributes making
them the ultimate anti-competitive combinations, advocates will have to sharpen
their pencils into swords on the day of the battle, for I am sure that the discussion
will rage intensely in the future, both regarding the being or non-being of
conferences, but also its cousins the shipping pools and consortia. Of this only
regularity, stability and flexibility know.

83
Bibliography
BOOKS:

Blanco, Luis Ortiz/Van Houtte, Ben EC Competition Law in

the Transport Sector – Clarendon Press – Oxford – 1996.

Bring, Ove/ Mahmoudi, Said Sverige och Folkrätten,

Nordstedts Tryckeri – Stockholm – 1998.

Bull, Hans Jacob / Stemshaug, Helge (eds.) EC Shipping Policy:

th
The 17 Nordic Maritime Law Conference 2-4 September 1996 – Juridisk
Forlag – Oslo – 1997:

n Rosa Greaves: EC’s Maritime Transport Policy: a Retrospective View.

n Helge Stemshaug: Maritime Transport and Antitrust in the EC and US.
n Helmut W.R. Kreis: Liner Services: The Block Exemptions and Inter-modal
Transport.

Clough, Mark and Randolph, Fergus Shipping and EC

Competition Law – Butterworths – London – 1991.

Diedricks-Verschoor, [Link]. An Introduction to Air

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Law - 3 edition – Kluwer Law and Taxation Publishers –
Deventer/Netherlands.

Farthing, Bruce International Shipping:

an introduction to the policies and politics and institutions of the maritime world –
LLP – London – 1987.

Gold, Edgar Maritime Transport.

The Evolution of International Marine Policy and Shipping Law, D.C. Heath and
Company – Lexington, Massachusetts – 1984.

Herman, Amos Shipping Conferences

– Kluwer Law and Taxation Publishers – Deventer/Netherlands – 1983.

Oeter and Bernhardt (eds.) Encyclopaedia of

Public International Law, vol. 11, 1989.

Packard, William V. Shipping Pools - 2nd

edition – LLP – London – 1995.

84
Power, Vincent EC Shipping Law -
2nd edition – LLP - London – 1998.

Anna Bredima-Savopolou / John Tzoannos The Common Shipping

Policy of the EC – North-Holland – Amsterdam – 1990.

Stroux, Sigrid Common Market Law Review 37:

1249-1264, Kluwer Law International – Printed in the Netherlands – 2000, p.
1260.

Sundin, Krister Protektionism och bilaterala sjöfartsavtal: En studie

om konkurrensbegränsade åtgärder inom handelssjöfarten, Tullbergs – Klippan –
1981.

Wiberg, Ragne FAKTA EUROPA –

Europeisk Transportpolitik, en översikt, Nordstedts – Stockholm – 1988

JOURNALS CONSULTED:

American Shipper, January 1990.

Svensk Sjöfartstidning, nr 50 (Sjöfartens Bok 2000), 17 december 1999.

Lloyds’s Shipping Manager, September 2000 – London – 2000.

85
Table of Cases
Europen Union:

Case 6/72, Europemballage and Continental Can v. Commission, [1973]

ECR 215, [1973] CMLR 199.

Case 167/73 Commission v. France, [1974] ECR 359 2 CMLR 216 (French
Seamen’s case).

Case 85/76 Hoffmann-Laroche v. Commission [1979] ECR 461.

Joined Cases 100 to 103/80, Musique Diffusion Française and Others v.

Commission, [1983] ECR 1825.

Case 322/81, Nederlandsche Banden-Industrie Michelin NV v. Commission,

[1983] ECR 3461, [1985] CMLR 282.

Case 13/83 European Parliament v. European Council [1985] ECR 1513;

[1986] 1 CMLR 138.

Case 209-213/84 Ministère Public v. Lucas Asjès (‘Nouvelles Frontières’)

[1986] ECR 1425, [1986] 3 CMLR 173.

Case 62/86, AKZO Chemie BV v. Commission, [1986] ECR 2585, [1993] 5

CMLR 215.

Joined Cases T-24/93 to T26/93 and T28/93, Compagnie Maritime Belge

Transports SA and Others v. Commission [1996] ECR II-1201.

Case T-395/94R, Atlantic Container Line et al v. Commission, [1970] ECR

II-595.

Joined Cases C395/96 and C-396/96P, Compagnie Maritime Belge and

others v. Commission, Judgement of the Fifth Chamber of 16 March 2000.

Case T-191/98 Atlantic Container Lines and Others v. Commission, on 1

March 1999.

Case C-364/99 P(R).

Case C-361/00 P(R).

86
United States:

Federal Maritime Board v. Isbrandtsen, 356 U.S. 481 (1958).

Northern Pan American Lines A7S (Nepal Lines) v. Moore McCormack

Lines, 8FMC 203, (1964).

Tariff Filing Practices, Etc. of Containerships, Inc., 9 FMC 56 (1965).

Federal Maritime Commission v. Aktiebolaget Svenska Amerika Linien, 390

U.S. 238 (1968).

87
Table of Legislation
CONVENTIONS AND TREATIES:

The EEC Treaty (The Treaty of Rome 1957)

Convention on a Code of Conduct for Liner Conferences (the UNCTAD Code),

13 ILM 910,Geneva, 6th of April 1974.

NATIONAL LEGISLATION (USA)

Shipping Act of 1916, 46 USC 801.

Merchant Act of 1920.

The Merchant Act of 1936.

The Cargo Preference Act of 1954.

The Shipping Act of 1984, 46 USC 1710.

Ocean Shipping Reform Act of 1998 46 USC 1701 – PL 105-258, Sec. 1, 1

Oct 1998, 112 Stat. 1902.

COMMUNITY SECONDARY LEGISLATION:

Council Regulation 1017/68 1968 OJ 1968 L175, applying rules of competition

by rail, road and inland waterway transport.

Council Regulation 954/79 of 15 May 1979 concerning the ratification by the

Member States of, or their accession to, the United Nations Convention on a
Code of Conduct for Liner Conferences.

Council Regulation 4055/86 OJ 1986 L378/1, applying the principle of freedom

to provide services to maritime transport between Member States and between
Member States and third countries.

Council Regulation 4056/86 OJ L378/4, laying down detailed rules for the
application of articles 81 and 82 of the Treaty to maritime transport.

Council Regulation 4057/86 OJ L378/14 on unfair pricing practices in maritime

transport.

88
Council Regulation 4058/86 OJ L378/21, concerning coordinated action to
safeguard free access to cargoes in ocean trades.

Council Regulation 479/92 OJ 1995 L55, whereby the Council delegated

regulating powers to the Commission in the field of shipping.

Council Regulation 3577/92 OJ 1992 L364/7, applying the principle of freedom

to provide services to maritime transport between Member States (cabotage).

Commission Regulation 870/95 OJ 1995 L5, on the application of Article 81.3 to

certain categories of agreements, decisions and concerted practices between liner
shipping companies (consortia).

89
Table of decisions, reports and
publications
TABLE OF DECISIONS:

Commission Decision 92/262/EEC, French West-African Shipowners’

Committees, OJ 1992, L134/1, 18.5.1992 – IP/92/242.

Commission Decision 94/980/EC, Trans-Atlantic Agreement, OJ 1994 L 376,

31.12.1994 - IP/94/956.

Commission Decision, French-West African Shipowners’ Committees, OJ

1992 L134/1, 18.5.1992 - IP/92/242.

Commission Decision, Cewal, Cowac and UKWAL, OJ 55/3 29.2.92 –

IP/92/1110.

Commission Decision 93/82/EEC, CEWAL Liner Conference, OJ L 34,

10.2.1993 – IP/92/1110.

Commission Decision 94/985/EC, The Far Eastern Freight Conference, OJ 1994

L378/17 - IP/94/1260.

Commission Decision C (96) 3414 final of 26 November 1996 – IP/96/1096.

TABLE OF REPORTS AND PUBLICATIONS:

International:

UNCTAD Recommendation (I) Annex [Link].21 UN Doc. E/Conf. 46/141, Vol,

54 (1964).

UNCTAD Recommendation (II) Annex [Link].22 UN Doc. E/Conf. 46/141, Vol,

54 (1964).

The liner conference system, Report by the UNCTAD secretariat,

TD/B/C.4/62/Rev.1 - United Nations – New York –1970.

Statements and resolutions of the INTCC 1971-1973, XXIV the INTCC

Congress Rio de Janeiro of 1973, p. 31

90
United Nations Conference on Trade and Development, Geneva, Conference of
plenipotentiaries of the United Nations on a Code of Conduct for Liner
Conferences. Held at Geneva from 12.11. to 15.12.1973 (Part One)
TD/CODE/13, Sales No. [Link].D.11.

Conference of Plenipotentiaries held 11.3. to 6.4.1974 (Part Two). Vol. II,

Final Act (including the Convention and Resolutions and tonnage requirements).
United Nations, New York, 1975, TD/CODE/13/Add.1Sales No. [Link].D.12.

United States:

H.R. 4769, 96th Cong. 1st Sess. (1979).

H.R. 3138, DOJ, Statement of John M. Nannes (Deputy Assistant Attorney

General - Antitrust Division), March 22, 2000.

European Union:

Memorandum sur l´orientation à donner à la politique commune des

transports. Dokument VII/COM (61) 50 final, of 10 April 1961, and
Programme d´action en matière de politique commune des transports.

Commission Communication to the Council on the development of the common

transport policy, Document COM (73) 1725 final, of 24 Oct. 1973, and Supp.
16/73 of the Bulletin CE.

Memorandum from the Commission to the Council on the applicability of

the competition rules in the Treaty establishing the European Economic
Community and the interpretation of the Treaty’s application to sea and air
transport; Memorandum on the basic approach to be adopted in the
common transport policy; Action Programme for a common transport
policy (Communication from the Commission to the Council); Proposal for a
Council Regulation regarding the temporary non-application of Articles 85
to 94 (now Articles 80 to 89) of the EEC Treaty to sea and air transport;
Regulation No 141 of the Council (Exempting transport from the scope of
Regulation 17).

Draft Document COM (81) 423 final, of 13 Oct. 1981, or OJ 1981 C 282.

Commission Explanatory Memorandum COM(81)423 final.

Eleventh Competition Report (1981).

91
Report of ECOSOC’s Section for Transport and Communications on the
Proposal for a Council Regulation 4056/86, (CES) 211/82.

Memorandum on maritime transport COM(84) 668 final.

Communication title – “A Future for the Community shipping Industry: measures

to improve the operating conditions of Community shipping” COM(89) 266 final.

Commission Report on Community Competition Law in the Transport Sector –

Recent Landmarks 1991-1997.

92