Opinion of the European Economic and Social Committee on the Liner Conferences — United Nations Convention COM(2006) 869 final — 2006/0308 (COD)
Date: 2007-07-11
Institutions: European Economic and Social Committee
Subjects: accession to an agreement, code of conduct, competition law, international convention, maritime conference, maritime transport

C 256/62

EN

Official Journal of the European Union

27.10.2007

Opinion of the European Economic and Social Committee on the ‘Liner Conferences — United
Nations Convention’

COM(2006) 869 final — 2006/0308 (COD)

(2007/C 256/12)

On 20 March 2007 the Council decided to consult the European Economic and Social Committee, under
Article 80 of the Treaty establishing the European Community, on the abovementioned proposal.

On 14 February 2007 the Committee Bureau instructed the Section for Transport, Energy, Infrastructure
and the Information Society to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Dr Bredima-
Savopoulou as rapporteur-general at its 437th plenary session, held on 11 and 12 July 2007 (meeting of
11 July), and adopted the following opinion by 86 votes with 3 abstentions.

1. Conclusions

1.1
The EESC agrees with the proposed repeal of Regulation
954/79, as it is the inevitable consequence of the repeal of
Regulation 4056/86 laying down a block exemption for liner
conferences. The EESC notes that these two Regulations have
constituted a legal package.

1.2
Regulation 954/79 deals with the accession to or
ratification by Member States of the United Nations Convention
on a Code of Conduct for Liner Conferences — hereinafter
referred to as the UNCTAD Liner Code or the Code. In this
respect, it is notable that the UNCTAD Liner Code has been rati-
fied by 81 countries including the new locomotives of world
trade (i.e. China, India, Russia and Brazil) as well as Australia,
Canada,
Indonesia, Saudi Arabia and
also been ratified by sixteen
Singapore. The Code has
EU Member States. Furthermore, liner shipping carries 60 % of
the overall value of international trade mainly by containers.
Hence, a repeal of Regulation 954/79 (as well as of Regulation
4056/86) will undoubtedly have implications which should not
be underestimated.

Japan, Nigeria, Mexico,

1.3
The EESC particularly invites the Commission to clarify
the legal position of EU liner carriers internationally following a
repeal of Regulation 954/79. Indeed, in view of the importance
of an integrated EU maritime policy for the role of the EU in
the world economy and considering the importance of shipping,
including EU shipping, in EU and worldwide trades, the EESC is
of the opinion that extra vigilance is required in the handling of
such repeal and careful consideration needs to be given to its
repercussions, both at European and international level. As to
the underlying Commission's proposal
to repeal Regulation
954/79, the EESC is of the opinion that it fails to take into
account the following two parameters: a) the discrimination
between EU liner carriers which may result from such repeal
and which should be avoided (in line with Art. 12 EC Treaty)
and b) the competitiveness of EU liner carriers (including short
sea operators) which should be safeguarded (in line with the
revised Lisbon Strategy).

1.4
In line with its past opinions and those of the European
Parliament, the EESC urges the Commission to tackle the conse-
quences (political, legal and practical) which would arise from
the repeal of Regulation 4056/86 as well as of Regulation
954/79 in order to avoid any adverse implications to European
shipping interests at the international level.

1.5
It is understood that the Guidelines explaining the appli-
cation of EC competition rules to maritime transport, which
will apply to liner shipping services after the prohibition of
liner conferences to and from the EU as of 18.10.2008, would
mainly allow liner operators to carry out a self-assessment of
their agreements under EC competition law. Consequently, the
EESC believes that it is unlikely that these Guidelines will deal
with the international
legal and practical) conse-
quences of a repeal of Regulation 4056/86 and of Regulation
954/79. However, the EESC as well as the European Parliament
have repeatedly asked the Commission in their past opinions to
analyse these consequences and take them into consideration
when establishing a new regime in the future. The EESC there-
fore wishes to be consulted in due course on the draft Guide-
lines concerning the application of EC competition rules to
maritime transport and to be given the opportunity to express
an opinion thereon.

(political,

1.6 Whilst agreeing with the repeal of Regulation 954/79,
the EESC fails to understand the urgency of proceeding to the
repeal before the international repercussions of recent European
policies relating to liner shipping are properly gauged and
addressed.

2. Introduction

2.1
The containerised liner shipping industry is a vital factor
for the European economy. Container transport by sea accounts
for around 40 % of EU-25 external in value terms. The world-
wide largest three liner operators are European, and the routes
connecting Asia and Europe, jointly with the routes connecting
trade
Asia and the USA, are by far

important

the most

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there are some 150 international

routes (1). Moreover,
liner
conferences worldwide, 28 of which operate on routes to and
from the EU. Member States with carriers operating scheduled
liner services include, amongst others, Denmark, Germany,
France,
the Baltic countries and Cyprus.
According to the latest available data (2), 60 % of the overall
value of international maritime trade and 25 % of the 5.9 billion
tonnes transported by sea are carried by scheduled services,
including liner conferences.

the U.K.,

Italy,

their accession to,

2.2
The current proposal aims to repeal Council Regulation
(EEC) No 954/79 of 15 May 1979 concerning the ratification
by Member States of, or
the United
Nations Convention on a Code of Conduct for Liner Confer-
ences. The present proposal
is a result from the abolition of
Regulation (EEC) No 4056/86 laying down a block exemption
for liner conferences by virtue of Council Regulation (EC)
No 1419/2006 of 25 September 2006. Regulation 1419/2006
also extends the scope of amends Regulation (EC) No 1/2003 to
include cabotage and international tramp services.

2.3
The UN Convention on a Code of Conduct for Liner
Conferences (Geneva, 6 April 1974) was drafted under the
auspices of the United Nations Conference on Trade and Devel-
opment (UNCTAD) with the aim of setting out a harmonised
international framework for the operation of shipping confer-
ences. The UNCTAD Liner Code was adopted to meet the legiti-
mate aspirations of developing countries for greater participa-
tion of their carriers in the transportation of liner cargoes. It
was the outcome of protracted multilateral negotiations between
developed and developing countries (3).
cargo sharing
formula between carriers of countries at the two ends of the
trade and carriers of third countries was devised to stem protec-
tionist trends Regulation 954/79 aimed at making the Code
mechanisms compatible with the principles of the EC Treaty.

Its

acceded to the
2.4 Member States having ratified or
include: Belgium, Bulgaria, Czech
UNCTAD Liner Code
Republic, Denmark, Finland, France, Germany,
Italy, Malta,
Netherlands, Portugal, Romania, Slovakia, Spain, Sweden and
the United Kingdom. Norway, an EEA member, has also acceded
to the Code.

2.5 When discussing the repeal of
the liner conference
system in the EU, the European Parliament underlined in two
opinions (2005, 2006) the following: ‘Enforcement of the Regu-
lation (4) (repealing Regulation 4056/86) will create a conflict of
law as regards the accession of certain Member States to the

(1) Global Insight final report on the application of competition rules to

liner shipping, October 2005.

(2) (UNCTAD — 2003, Clarksons — 2003).
(3) OJ C 157, 28.6.2005.
(4) European Parliament's Report A6-0217/2006 of 22.6.2006.

UNCTAD Code of Conduct for Liner Conferences. It is recom-
mended that
the Member States should withdraw from the
Code, although they cannot be obliged to do so. In view of this
situation, a clear-cut procedure needs to be put in place in order
to deal with such conflicts of international law as might arise.
The Commission should present to the European Parliament a
transparent overview of the position of third countries (China,
USA, Canada, Japan, Singapore and India) as regards the EU's
new policy on liner services (acceptance, adjustment, opposition,
negative effects) and their willingness to adapt
their own
systems. The Commission should investigate thoroughly the
commercial and political implications of a denouncement of the
UNCTAD Code. The Commission should examine whether it is
necessary to amend or repeal other EC legislation, such as Regu-
lation (EEC) No 4055/86 of 22 December 1986 applying the
principle of freedom to provide services to maritime transport
between Member States and between Member States and third
countries (5)’. Moreover, the European Parliament ‘Calls upon the
Commission (6) not to abolish Article 9 of Regulation (EEC)
No 4056/86 (which provides for negotiations to be held in the
event of a conflict between Community law and the law of
third countries) especially in view of the Commission's intention
to revise competition law in respect of maritime transport’.
However, contrary to the recommendations of the European
Parliament, Article 9 has been repealed altogether with Regu-
lation 4056/86 whilst the requested thorough assessment of the
impact of repealing the liner conference
legal and political
system in the EU seems to be lacking as yet.

repeal of

2.6
The EESC also discussed the repeal of Regulation
4056/86 and adopted two Opinions thereon notably in 2004
and 2006. Furthermore, in 2006 the EESC reserved its position
to see whether the proposed repeal of Regulation 4056/86
would have a sustainable effect. According to it, ‘the conference
system is still subject to multilateral and bilateral agreements to
and the Community are
which the EU Member States
contracting parties’. The EESC, also noted that ‘the Commission
recognises that — as a consequence of these agreements, the
date of
the following provisions of Regulation
4056/86 (i.e. Articles 1(3), points (b) and (c), Articles 3 to 8
and 26) should be postponed for a period of two years, in order
to denounce or revise these agreements with third countries’.
The EESC believed that ‘the Commission should also take into
account the interests of small and medium-sized businesses in
repealing Regulation 4056/86. Small and medium-sized busi-
nesses constitute the backbone of the EU economy and they
play an important role in the context of the revised Lisbon
Strategy. Markets should remain open to the current and poten-
tial competition,
including small and medium-sized shipping
operators’. The EESC, finally, maintained that ‘although consoli-
dation may have positive effects for EU industry (efficiency
gains, economies of scale, cost savings), caution is needed to
avoid that consolidation — which may follow from the repeal
of Regulation 4056/86 — results in fewer players in the rele-
vant markets, i.e. less competition’.

(5) OJ L 378, 31.12.1986, p. 1.
(6) European Parliament's report A6-0314/2005 of 24.10.2005.

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3. The European Commission's proposal

The proposed Regulation contains two articles only,
3.1
i.e. Article 1, repealing Regulation 954/79 and Article 2 relating
to the entry into force of the new Regulation, i.e. on 18 October
2008.

4. General Comments

4.1
The EESC has followed closely competition rules for
maritime transport and particularly the issue of liner confer-
ences for over two decades and divergent views were thereby
expressed as to the merits of a withdrawal of the block exemp-
tion for liner conferences. However,
following the repeal of
Regulation 4056/86 by virtue of Regulation 1419/2006, liner
conferences to and from the EU will be prohibited as of
18 October 2008.

4.2
Regulation 4056/86 and Regulation 954/79 constitute a
legal package with the latter being adopted due to the
ratification of the UNCTAD Liner Code by certain EU Member
the repeal of Regulation 4056/86 has
States. Consequently,
entailed the need to repeal Regulation 954/79. As a result, the
EESC — which originally objected to the repeal of Regu-
lation 4056/86 but later was compelled to accept it whilst
warning about its repercussions — cannot but agree to the
proposed repeal of Regulation 954/79 for the sake of simplifica-
tion of EU legislation. Nevertheless, as with the repeal of Regu-
lation 4056/86, the EESC would like to stress — once again —
that serious consideration needs to be given to any possible
repercussions (and potentially adverse
legal and/or political
effects) the proposed repeal of Regulation 954/79 might entail.
However, the EESC notes that the proposal to repeal Regulation
954/79 seems to lack — once more — an assessment of poten-
tial political, legal and practical problems that might result from
a repeal. Whilst the necessity for a repeal is not questioned, as
it,
is inevitable given the repeal of Regulation 4056/86, the
EESC maintains the view and repeats one more that any possible
repercussions thereof — political, legal and practical — should
be properly addressed by the EU.

instruments adopted by the EU. For instance,

4.3
The UNCTAD Liner Code and the liner conference
concept are mentioned in the acquis communautaire and in
it
other legal
forms the basis of Regulation 4055/86, Regulation 4058/86 (7)
as well as Regulation 823/2000 on liner consortia. Furthermore,
the Code is also specifically mentioned in some bilateral agree-
ments, such as the EU/Russia Agreement (Art. 39(1)(a) and the
EU/Algeria Association Agreement of 2005 (Art. 34 § 3).

4.4 When repealing Regulation 4056/86,
the European
Commission indicated that they would issue Guidelines in order

(7) Regulation 4055/86 of 22.12.1986 (‘applying the freedom to provide
services to maritime transport between Member States and between
Member States and third countries’) is based on the UNCTAD Liner
Code Art. 4 § 1 (a) (b) provides a phasing out of existing cargo sharing
arrangements by direct reference to the Liner Code; Regulation
4058/86 of 22.12.1986 (concerning ‘coordinated action to safeguard
free access to cargoes in ocean trades’) is based on the Liner Code.
Article 1 provides for action depending on Code trades and non-Code
trades — OJ L 378 of 31.12.1986, p. 4.

to explain how EC competition rules apply to maritime trans-
port, including liner shipping services. As regards such services,
the Guidelines should assist liner operators after 18 October
2008 (i.e. the date by which liner conferences will be prohibited
on trades to and from the EU) to carry out a self-assessment of
their agreements under EU competition rules (i.e. Arts 81-82
EC Treaty). However, it remains to be seen whether these Guide-
lines will include solutions for any potential legal problems that
would arise at the international level from a repeal of Regulation
954/79. For the time being, the EESC understands that the draft
Guidelines are of a very general nature thereby,
lacking the
required legal certainty the shipping industry is expected to
carry out a self-assessment. Moreover, it is understood that the
draft Guidelines do not address the international implications of
the repeal of Regulation 4056/86 or Regulation 954/79. The
EESC therefore expresses the wish to be consulted in due course
so as to closely monitor further developments and, if need be,
to provide assistance and/or expertise in the drafting process of
the final Guidelines.

4.5
The EESC believes that the key question to be addressed
is whether the proposed repeal of Regulation 954/79 would
also entails a legal obligation to denounce the UNCTAD Liner
Code. The EESC notes that the European Commission did not
examine this issue in the Explanatory Memorandum to the
proposal to repeal Regulation 954/79. However, it is understood
from the Commission that in its view, Member States which are
Contracting Parties to the Code would not have a legal obliga-
tion to denounce the Code. In such case,, the legal landscape
after the repeal of Regulation 954/79 would be as follows:
EU Member States will not have to denounce the Code but they
will no longer be able to apply it on trades to and from the EU.
However, the Code will continue to apply in other continents.
At the same time, EU Member States which have not yet ratified
the Code will after 18 October 2008 no longer be in a position
to do so, as it is explained in the Explanatory Memorandum to
and stipulated in the fifth recital of the proposal to repeal Regu-
lation 954/79. Consequently, if a Member State which is not a
Contracting Party to the UNCTAD Liner Code would wish to
accede thereto with an aim at safeguarding the interests of its
liner carriers operating in non EU trades, this Member State
would thus be precluded from doing so.

the

this

Against

following

4.6
legal
background,
paradox might arise after 18.10.2008: carriers of Member States
that are a Contracting Party to the LinerCode but that do not
denounce the Code would still benefit
from the provisions
thereof in relation to rights of crosstraders, outsiders as provided
in Article 2 § 4(a) and (b) and Resolution 2. On the other hand,
carriers of Member States that are not a Contracting Party to
the Code and that will not allowed anymore to ratify or accede

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to the Code after 18 October 2008 would not benefit from its
provisions. Consequently, the following questions arise: would it
be possible to adopt a proposal which would include a discrimi-
the
nation between EU carriers, contrary to Art. 12 of
EC Treaty? Moreover, would such a situation not affect the
competitiveness of EU businesses within Europe and/or world-
wide, contrary to the renewed Lisbon Strategy? Would such
situation not illustrate the need for a horizontal approach of EU
in particular transport and competition policies with
policies,
regard to maritime transport, as envisaged by the Green Paper
on a Future Policy for the Oceans?

4.7
The EESC strongly advocates the EU not to underestimate
the international implications which would arise from the repeal
of the liner conference system. The EESC notes that other juris-
dictions are — time being — maintaining their anti-trust immu-
nity systems. Some third country States have expressed concerns
about the repeal of the liner conference system in the EU. In
this respect, reference can be made to a recent statement of the
Asian Shipowners Forum (Bussan, Korea 29.5.2007):

the antitrust

‘The members noted recent developments in Australia, China,
Hong Kong, Japan and Singapore, but noted with concern the
EU's decision to abolish its block exemption for liner confer-
ences. The delegates affirmed the ASF's long-standing position
that
immunity system is indispensable for the
health of the shipping industry and its ability to encourage the
investments needed to support the growing demands of interna-
tional trade and the system benefits the whole trading industry.
It was agreed that carriers should make continuous efforts to
seek the understanding of related parties such as shippers and
governments for the important role of carrier agreements in
supporting trade. The ASF noted that ASF member Associations,
KSA, JSA and SSA, in particular, made written submissions to
the European Commission and the relevant bodies expressing
their opposition against the abolishment of the anti-trust law
immunity system; and, further, KSA, received a reply from the
EC to the effect that it would eliminate the Regulation 4056/86
but plan to prepare an alternative while keeping intact the
Consortia Regulation that is one of the two axes of the anti-
trust immunity systems’. The EESC takes note of the statement

Brussels, 11 July 2007.

of the Asian Shipowners' Forum as an illustration of the need to
assess — or at least to give proper consideration — to the inter-
national impact of repealing the liner conference system in the
EU on a worldwide basis and for a globalised economy, in line
with numerous similar requests made by the EESC and the
European Parliament.

4.8
In light of the above considerations, the EESC strongly
believes that the present issue cannot be examined only through
the competition law perspective. The political and maritime
transport policy dimensions of repealing the liner conference
system in the EU and thereby also of Regulation 954/79 cannot
be underestimated. Therefore, the EESC fails to understand the
to repeal Regulation
urgency of
954/79 since the international repercussions of the EU's policy
on competition rules for maritime transport and in particular of
repealing the liner conference system, have not yet been
addressed properly, despite multiple requests thereto, including
from the EESC.

the Commission proposal

5. Specific comments

Regarding the current status of ratifications of the Liner
5.1
Code, the EESC notes that the Explanatory Memorandum to the
Commission proposal to repeal Regulation 954/79 refers to
thirteen EU Member States as Contracting Parties
to the
UNCTAD Liner Code, whilst — in reality — sixteen EU Member
States are Contracting Parties to the Code following ratification
by Romania, Bulgaria and Malta.

Regulation 954/79 provided certain reservations to safeguard
the interests,
inter alia, of third country shipping lines (cross
traders). However, the proposal to repeal this Regulation does
not provide for such safeguarding measures. In this respect, the
liner shipping interests of EU carriers operating between other
continents (where the Liner Code is applicable) should not be
underestimated. It is also noteworthy that the UNCTAD Liner
Code is ratified by 81 countries including the new ‘locomotives’
of world trade, i.e., China, India, Russia and Brazil (BRICS) as
well as Indonesia, Mexico, Nigeria, Saudi Arabia, Australia,
Canada, Japan and Singapore.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS