MARITIME TRANSPORTEC COMPETITION
Letter from the Chairman to Gerry Sutcliffe
MP, Minister for Employment Relations and Consumer Affairs, Department
of Trade and Industry
Sub-Committee B considered your Explanatory
Memorandum on this subject at its meeting on 30 January.
We noted that the Working Group set up under
the Austrian Presidency was to have met on 23 January 2006. Did
this meeting go ahead? We are maintaining scrutiny pending the
outcome of this Working Group.
1 February 2006
Letter from Gerry Sutcliffe MP to the
Thank you for your letter of 1 February.
You asked about the Council Working Group on
23 January, which did indeed go ahead. The Committee might find
it helpful to know, in broad terms, the outcome.
The Working Group was the first to discuss the
Commission proposal of December 2005. The Austrian Presidency
sought the views of countries on the proposed repeal of Regulation
4056/86. A clear majority of countries either spoke in favour
of repeal or did not object to it. The UK spoke in support of
repeal (subject to a scrutiny reserve). Two countries did not
have a position to report.
Many Member States welcomed the Commission's
proposal of guidelines, to be finalised by end 2007, covering
the maritime sector. Some asked the Commission to produce guidelines
in advance of the repeal of 4056/86. The Commission explained
that they did not have the legal powers to do this until the repeal
of 4056/86, which also amends Regulation 1/2003 to bring the maritime
sector within Community competence.
However, the Commission are also taking the
unusual step of offering informal guidance in the tramp shipping
sector in advance to try and overcome this problem. The Commission
noted that they were meeting the industry at least twice a month
at present, discussing the way forward on guidelines and on other
In response to questions about the impact of
repeal on developing countries, the Commission said that they
are expecting a positive impact of repeal and that developing
countries do not like liner conferences. The UNCTAD code had failed
and developing countries no longer had their own shipping lines.
African trades are still in the grip of liner conferences and
African shippers have told the Commission that they would like
to see the end of liner conferences so as to improve their negotiating
position. Developing countries are generally exporting low value
goods so the cost of their transport is a higher proportion of
In response to questions about the views of
other countries the Commission said that the US was unconcerned
about repeal, the role of liner conferences had diminished to
such an extent on US trades that repeal would not be an issue.
The Australian Productivity Commission had recommended repeal
to the Government. The Japanese system operated differently in
that it involves more cooperation between shippers and carriersdiscussions
with the Japanese Government have identified that possibly such
co-operation might be covered by the Consortia block exemption
(this is an existing block exemption that allows co-operation
but not price fixing or capacity regulation).
A few Member States questioned Article 83 (competition)
as the sole legal base. They argued that both Article 83 and Article
80 (shipping) should be the legal base, as in the original Regulation.
The Commission Legal Service explained their reasoning for proposing
Article 83 as the legal base, which centres on the point that
all other block exemptions (except one from 1968) are based on
Article 83 alone, even those in other transport sectors such as
cars and air and in particular the Consortia regulation amended
only last year. There are also a number of other precedents and
cases to take into account. The Council Legal Service will be
considering further in the light of recent cases and are likely
to report further on this issue at the next Working Group meeting.
Our lawyers are of the view that Article 83 is appropriate as
the sole legal base.
The next meeting of the Working Group is scheduled
for 23 February. Officials from DTI, DfT and OFT will attend.
16 February 2006
Letter from the Chairman to Gerry Sutcliffe
Thank you for your letter of 16 February 2006,
providing a report on the outcome of the Council Working Group
on 23 January 2006 which Sub-Committee B considered at its meeting
on 6 March 2006.
Sub-Committee B appreciates the fullness of
your report on the Working Group, and is satisfied that progress
appears to being made. You mentioned in your letter that the next
meeting of the Working Group would take place on 23 February.
We would also be grateful for a report on the conclusions of that
Working Group, and will maintain the scrutiny reserve pending
receipt of that report.
8 March 2006
Letter from Gerry Sutcliffe MP to the
Thank you for your letter of 8 March.
You asked for a report about the Council Working
Party meeting on 23 February. As requested, I am writing to inform
the Committee of the outcome.
This Working Party was the second to discuss
the Commission proposed Draft Regulation of December 2005. The
first took place on 23 January, which was the subject of my letter
to you of 16 February. Good progress was made with further discussion
of the appropriate legal base for the Regulation. All member states,
except one, agreed that Article 83 only is appropriate and removed
their reservations on this issue. The Commission announced that
the European Competition Network (ECN) would be looking at the
content of guidelines for the industry. As a result of this statement,
a number of member states pressed for early introduction of the
guidelines. However, the Commission said this would not be possible
in the timescale.
On the legal base issue, the view was taken
that the proposal is concerned with competition law and does not
have any direct effect on transport policy. Therefore the appropriate
legal base for the proposal is Article 83 alone and not Article
83 in conjunction with Article 80(2).
One Member State remains concerned on this issue
and said they would consider the implications including in relation
to the UNCTAD code, Council Regulation 954/79 (also referred to
as the Brussels package) and Article 80. Concern was also expressed
about the economic impact on short sea shipping in a relatively
In response, the Commission said that they were
looking at the implications for short sea shipping and were waiting
for views from the industry. With regard to the UNCTAD Code, Regulation
954/79 allowed member states to adopt this Treaty. It is anticipated
that Regulation 954/79 will be repealed at some point in the future
and that this will be under Article 80.
The Commission responded to questions about
the proposed guidelines for the shipping lines. The ECN had set
up a sub-group to look at this issue and would carry out some
preparatory work for the next working group. A number of Member
States wanted to see the guidelines before the regulation was
enacted. However the Commission believed it was too early to write
them. These had not been done for this sector before and so work
with other Member States was needed.
With regard to tramp shipping, the Commission
had been informed by the industry itself that they regarded competition
rules as already applying. Industry considered that there would
be no major changes in the way that it operated, as a result of
bringing the sector formally into the competition rules. However
industry had identified one potential problem, namely how competition
rules would apply to tramp vessel pools. Finally, the Commission
had just issued a tender for a study of tramp shipping to help
with the guidelines.
In respect of cabotage, the Commission was waiting
for data from the industry. However, the industry did not see
a problem with the proposals. It was generally a national issue
and there would be very few EU cases.
EU Member States' views on the proposed regulation
were mixed. Some could support the draft regulation, without further
comment. Others (including the UK) supported, subject to national
Parliamentary scrutiny. One thought the guidelines were important,
particularly for tramp shipping. Another wanted to see informal
guidelines. Finally, a small number maintained their reservations,
as they wanted to see guidelines in advance of any repeal and
a review of the timescale.
The Commission did not set a firm date for the
next meeting of the Working Party. However as and when this session
takes place, tramp shipping, the European Liner Affairs Association
(ELAA) proposal and preparatory work by the ECN sub-group would
20 March 2006
Letter from the Chairman to Gerry Sutcliffe
Thank you for your letter of 20 March 2006,
replying to my letter of 8 March. Sub Committee B considered your
letter at its meeting on 19 April 2006.
We were grateful for your update on discussions
in the Second Working Group and look forward to hearing of any
further details of this proposal as they emerge. We will maintain
the scrutiny reserve at this stage.
24 April 2006
Letter from Malcolm Wicks MP, Minister
for Energy, Department of Trade and Industry to the Chairman
Thank you for your letter of 24 April, replying
to Gerry Sutcliffe's of 20 March.
You asked to be kept informed of progress on
this proposal. In the last few weeks, events have progressed rapidly.
The European Parliament has completed its work on its opinion
(you will recall that the dossier is not co-decision) and voted
in favour of the repeal of the block exemption, subject to the
development of guidelines for the sector.
The Commission has also continued with its regular
contact with the shipping lines, trying to help them put together
a package of proposals for the exchange of information in the
industry that will not breach EU competition rules. The Commission
has also sought information from the industry on the operation
of the tramp and cabotage sectors as they have not been responsible
for the enforcement of competition law in this sector, the Commission
have little expertise in the area. In fact, in the UK, the OFT
also have little experience of the sector. We have therefore engaged
with the UK Chamber of Shipping and the Freight Transport Association
to ensure we are able to take account of their views and expertise.
On 10 July, a group of experts from Member States
met for the first time to discuss the issues that would need to
be covered in the guidelines. This included both a discussion
of the information exchange proposals from the liner shipping
sector and on the features of the tramp and cabotage sectors.
It is fair to say that we (and OFT) have concerns that some of
the proposals put forward in relation to information exchange
may breach EU competition law. Others however are broadly acceptable.
It was clear from this week's meeting that the Commission and
other Member States share this view. Nevertheless, we are content
with the Commission's approach which is to continue the dialogue
with the shipping lines to help them develop proposals that are
both useful for the industry and fall within the relevant laws.
The UK officials strongly endorsed this approach at the meeting.
In relation to the tramp shipping sector, there
was a discussion of the information received so far from industry
and Member States. Neither the Commission nor other Member States
it appears have much experience with the sector (and there is
no case law) so we will all be relying on the shipping industry
to highlight the key issues. However, the Commission will publish
an "issues" paper on the guidelines as a whole in September
and we think this will provide a good opportunity for us to engage
in a more focused way on the key issues with the UK industry.
The next steps in the process after publication
of the "issues" paper are for the Commission to develop
guidelines, taking into account the consultation on the issues
paper. We understand that the Commission plan to adopt the draft
guidelines by the end of 2007, which will allow them to be finalised
before the repeal of the block exemption comes into force towards
the end of 2008.
However, in order for the Commission to issue
the guidelines, the proposal repealing the block exemption first
needs to be adopted by the Council. This is because the proposal
not only repeals the block exemption, but also gives the Commission
competence to enforce EU competition law in the tramp and cabotage
sectors, which they do not have at the moment.
The new Finnish Presidency have therefore decided
to bring the proposal to Coreper on 19 July and the Council on
24 July to try and gain agreement before the summer recess. This
is sooner than we had been expecting. They have also judged that
they have the necessary qualified majority among Member States.
As you are aware, the Government strongly supports the repeal
of the block exemption. We are committed to playing a full part
in the development of the necessary guidelines for the industry
so that shipping lines and their customers can operate with sufficient
legal certainty in a newly competitive market.
Given the consistent progress being made, I
hope that the Committee will be able to consider lifting its scrutiny
reserve. I would be happy to continue to keep the Committee informed
of developments if it wishes.
12 July 2006
Letter from the Chairman to Malcolm Wicks
Thank you for your letter of 12 July, replying
to my letter of 24 April. Sub-Committee B considered your letter
at its meeting on 17 July.
We note the unexpectedly rapid progress made
on this dossier. We share the Government's aims of creating "a
newly competitive market" with legal certainty for both customers
and operators. We are reassured that the repeal of the block exemption
for liner conferences will assist this aim. We were however surprised
that the group of experts from Member States which you mention
did not meet until such a late stage (10 July). Neither are we
entirely clear how competition issues would arise in tramp shipping.
We would of course be grateful if you kept us informed of any
developments in relation to the emerging guidelines from the Commission.
We are content to lift scrutiny on this proposal
ahead of the Council on 24 July.
19 July 2006