UK (Parliament Politic Magazine) – Global shipowners are urging the UK to diverge from the EU in order to shield themselves from competition regulations. This request comes in the wake of the EU’s decision to eliminate the industry’s exemption from antitrust rules, dealing a significant blow to the sector.
The World Shipping Council, representing major container shipping groups, is calling on the UK to act as a “sovereign nation” post-Brexit and maintain the immunity from competition regulations that some shipowners currently enjoy under British law.
Shipping Industry Appeals for UK’s Independence from EU Antitrust Rules
In a letter obtained by the Financial Times, this appeal to the UK’s competition regulator underscores shipowners’ frustration following the EU’s recent ruling that its own exemption for the industry was no longer deemed suitable, despite years of increased profits and consolidation.
The EU’s decision to abolish the Consortia Block Exemption Regulation (CBER) from April next year, which has allowed shipping lines to reduce costs by sharing vessels, has added unwanted pressure on container carriers. Their earnings have suffered due to declining trade amid the global economic downturn.
In a joint communication, the World Shipping Council (WSC) and the Asian Shipowners’ Association conveyed to the Competition and Markets Authority their view that the EU’s conclusions were fundamentally flawed and lacked a sound basis.
Consortiums Deemed Vital in the Battle Against Climate Change
Following the UK’s exit from the EU, the country has retained the exemption from antitrust regulations for shipping consortiums with a market share below 30 percent. However, this exemption is slated to expire in April, and the CMA is preparing to provide the government with a recommendation on whether to renew it.
In an announcement made last month, EU competition commissioner Didier Reynders mentioned that “significant structural changes” in the shipping industry had led to the emergence of “new market conditions,” which became evident during the coronavirus pandemic.
The majority of global container trade is under the control of nine shipping lines, which have expanded through acquisitions of smaller competitors and established three vessel-sharing alliances. During the COVID-19 lockdowns, a surge in online shopping combined with port congestion led to a situation where demand exceeded supply, resulting in increased shipping costs and record profits for these groups.
UK’s Decision May Impact Global Maritime Hubs
However, the World Shipping Council (WSC) and the Asian Shipowners’ Association (ASA) argue that the EU’s decision to use the pandemic as a justification is “inconsistent and illogical.” They assert that the elevated freight rates and service disruptions witnessed during the pandemic were a transient outcome of extraordinary market forces.
The WSC and ASA further highlighted that consortiums play a crucial role in the battle against climate change by reducing emissions through enhanced operational efficiency. These arrangements also empower smaller shipping lines to compete effectively with their larger counterparts.
Those within the industry are optimistic that a favorable ruling in the UK could hold significant sway on a global scale. Given that a substantial portion of legal disputes in the shipping sector are resolved in London. The same way theEnglish law forms the foundation for many of the industry’s commercial agreements in different parts of the world.
UK’s Sovereign Opportunity to Preserve Regulatory Clarity in Shipping
Marjorie Holmes, a shipping and competition lawyer at the law firm Reed Smith, noted that the UK’s decision could potentially impact other maritime hubs such as Singapore and Hong Kong, both of which have similar exemptions in place for shipowners.
Even though the EU’s ruling doesn’t explicitly prohibit collaboration among shipping groups, the World Shipping Council (WSC) cautioned that it has introduced significant uncertainty for shipping lines. They must now evaluate whether their agreements align with antitrust regulations. The authorities in the shipping industry have urged to preserve the regulatory clarity in the shipping business.
In a statement, WSC emphasized that, as a sovereign nation, the UK has the opportunity to preserve the Consortia Block Exemption Regulation (CBER), thereby maintaining regulatory clarity rather than increasing bureaucratic complexities.
The Competition and Markets Authority (CMA), which had initially proposed replacing the CBER with an updated version prior to the EU’s ruling, has confirmed that it is still in the process of conducting its review.