EC shipping block exemption critic expects renewal

EC shipping block exemption critic expects renewal

Olaf Merk, ports and shipping administrator for the OECD

HAMBURG — The block exemption regulation that excludes container shipping from competition laws is likely to be amended later this month and renewed for another five years, said Olaf Merk of the Organization for Economic Co-operation and Development (OECD).

Merk, who leads the OECD’s work on ports and shipping through the International Transport Forum and has lobbied for the consortia block exemption regulation (BER) to be repealed, said a ruling by the European Commission’s college of commissioners was expected by the end of September. The BER expires on April 25, 2020.

Speaking at the JOC Container Trade Europe Conference, Merk on Tuesday said that of the three possible outcomes being considered by the EC — scrap, renew, or amend and renew — an amended BER was the most likely option.

“One option is to continue the current consortia block exemption that exists, the second option would be to get rid of it and have the regular EU shipping law apply to the shipping sector as well, and the third option will be to continue some sort of regulation for the shipping sector but in an amended form,” he said.

“There is not a very convincing reason why the shipping sector should have its own regulation. There is quite some opposition against what exists now, and at the same time the shipping sector seems to be vehement on keeping some sort of exemption, so I would expect there to be some sort of revised block exemption.”

Polar opposites

The BER is a deeply polarizing issue between shippers and their carriers, and those divisions were exposed in a 12-week public consultation in autumn 2018 that saw industry associations providing their views on the EU consortia rules. The position papers submitted reflected vastly divergent opinions ranging from abolishing to amending to retaining the block exemption.

The World Shipping Council (WSC), the European Community Shipowners’ Associations (ECSA), the International Chamber of Shipping (ICS), and the Asian Shipowners’ Association (ASA) presented a combined effort and called for renewal, while shipper associations such as the Global Shippers Forum (GSF), which has a history of taking exception to conferences on behalf of shippers across the globe, put forward arguments for non-renewal.

The OECD’s ITF published a case-specific policy analysis report on the BER and recommended that the EU discontinue the block exemption. It also published a report criticizing the lack of relevant data within the block exemption, with both papers challenged as being flawed by the WSC.

Although schedule reliability of the carriers has improved this year, Alan Murphy, CEO of Sea-Intelligence, said reliability in 2018 was the worst it has been since they began monitoring schedules 10 years ago. Shipper frustration over the unreliability of carriers and the reduction in the number of port calls has been regularly expressed in annual shipper satisfaction surveys by Drewry and the European Shippers’ Council.

Merk said it was his hope that any amended regulation would better reflect the transparency of the container shipping sector within the alliances, requiring the monitoring of reliability, and considering service levels and port calls.

“At the moment, that is not very clear in the vessel sharing agreements [VSAs] that exist, so I hope there will be something on this,” he said.

Asked if it would be more difficult for carriers to operate in alliances if the BER were allowed to expire, Merk said it would mean they did not receive an automatic free pass and would need to operate within the EU competition framework.

“VSAs are already operating beyond the threshold of the regulations, so we are already in a sort of limbo with no legal certainty that can be referred back to this regulation. So, the uncertainty already exists, and it seems most of the VSA on trades going into Europe are already beyond the regulations and are not compliant.”

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