CELEX: 51974PC1112
Language: en
Date: 1974-07-15
Title: Proposal for a Decision of the Council concerning common action by the Member States in respect of the United Fations Conventions on a Code of Conduct for Liner Conferences. (submitted to the Council by the Commission)

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 ---pagebreak--- UOMMISSION OF THE EU2.0.FSAN COMMXJM3ISS
                                          COM ( 74 ) 1112 final .
                                          Brussels , 15 July 1974
                                   Proposai fer a
                               Decision of the Council
                  concerning common action "by the Member States
                  in respect of the United Fat ions Conventions
                  on a Code of Conduct for Liner Conferences .
                   V. submitted to the Council by the Commission )
    COM ( 74 ) 1112 final .
 ---pagebreak---                                        - 1 -
                        Proposai for a Décision of the Council
                        concerning common action "by the Member
                 States in respect of the United Nations Conventions
                      on a Code of Conduct for Liner Conferences
                              MPLMATORY m.ïOR/JTO TJM
BACKGROUND :
       For some time a consensus of opinion has "been growing m favour of
general rules for certain aspects of liner conferences . This consensus of
opinion received a powerful stimulus from UNCTAD 1 s work in the field of
sea transport and it developed in favour of mandatory rules aimed at
institutionalizing cargo reservation in favour of the exporting and importing
countries served by a liner conference .
       UNCTAD 's work , the aim of which was the establishment of a " code of
conduct " for liner conferences , resulted in the convening of a conference
of plenipotentiaries who met in Geneva from 12 November to 15 December 1973
and from 11 March to 7 April 1974 * On 7 April 1974 this Conference adopted
its Pinal Act to which a " Convention on a Code of Conduct for Liner
Conferences " and two resolutions were annexed .
       When the final vote was taken , the opinions of the Member States
differed (in favour of the Code : Germany, Belgium France ; abstentions : Italy,
Netherlands ; against : Denmark , United Kingdom ; absent from the Conference :
Ireland , Luxembourg ). All the developing countries and the socialist
countries were in favour of the Code , as were a number of market economy
countries (Australia, Japan , Spain , Turkey ). Other industrialized countries
( Canada , New Zealand , Greece ) abstained and some voted against the Code
(United States , Norway , Sweden, Finland , Switzerland ).
       The Convention will remain open for signature as from 1 July 1974
 ---pagebreak--- until ana including 30 June 1975s an(i shall thereafter remain open for
accession . " States may become contracting parties by:
«•    signature subject to ratification , acceptance or approval ;
–     signature without reservation as to ratification , acceptance or
      approval , or
–     accession .
      The entry into force of this Convention shall remain subject to the
accession of at least 2d countries having at least 25% of the world 's
general cargo tonnage .
SUMMARY OP THE PRINCIPAL PROVISIONS OF THE CODE OF CONDUCT FOR LINER CONFERTWCES
      The Code contains seven chapters and an Annex j two resolutions are also
annexed to it . The seven chapters deal with the following topics : definitions ,
relations among member lines , relations with shippers , freight rates , "other
matters ", provisions and machinery for settlement of disputes , final clauses .
The Annex contains model rules £>r international mandatory conciliation . The
two resolutions annexed to the Code concern non-conference lines and the
question of local conciliation .
      Generally speaking , the Code of Conduct can be considered as representing
a significant departure from the former situation , particularly a3 regards
the provisions for cargo sharing which provide that the group of national
shipping lines of each of two countries , at one end or the other of its
traffic which is carried by the conference , shall have equal rights to
participate in the freight and volume of traffic generated by their mutual
foreign trade and carried by the conference , and that third country shipping
lines shall have the right to acquire a significant part , such as 20$, in the
freight and volume of traffic generated by that trade .   Such provisions
institutionalize the distribution of shares of trade in the following
proportions : 40$ for the shipping lines of the exporting country , A-Ofo - or
those of the importing country and 20fo for those of third countries . Other
provisions concern the conditions for membership of a conference and lay
down fairly strict rules as regards the accession of third-country shipping
 ---pagebreak---                                      - 3 -
lines#   It must be added that the various provisions referred to above
leave no opening for any interpretation whereby the Community could he
considered a single entity and not as nine independent markets and national
merchant navios #
        The Code of Conduct also contains large sections on relations between
shipping lines within a conference and , more generally , between shipowners
and shippers#
        As far as freight rates are concerned , the Code stipulates that 150
days ' notice must be given before any general increase nay be nade •
        The Code also contains quite complex rules aimed at introducing a
system of international mandatory conciliation# More detailed comments on
the various chapters , especially on the provisions which are of particular
interest to the Common Market , are annexed to this draft Decision#
PARTICULAR INTEREST TO THE CdaMCM" MARKET
        This Convention concerns various matters relating to maritime transport
policy# In addition , its conclusions can give rise to problems concerning
compatibility with obligations arising from the Treaty , particularly as
regards the prohibition of discrimination , competition rules and commercial
policy# .
        It would therefore be inadvisable for the Member States to conclude
this Convention before the problems of compatibility as well as the reper­
cussion of this Convention on possible Community action in this field
have been cleared up# The Commission therefore reserves the right to take
any action in this connection which it considers necessary in order to see
that the Treaty are respected .
        However , regardless of these problems of incompatibility , it should be
emphasised that the area governed by the Convention on a Code of Conduct
for Liner Conferences is of prime importance to the Common Market :
- most of its experts and a substantial part of its imports are
   transported by liners belonging to liner conferences ;
 ---pagebreak--- –       approximately one-quarter of the trade within the Community is .carried
        out "by sea , and part of this is governed by agreements such as those
        concluded within the framework of conferences ; ■
–       the shipping lines of the Member States have approximately one-quarter
        of the world general cargo tonnage and. make a substantial contribution
        to the employment and balance of payments situations within the
        Community .
        On account of the provisions which it contains , the Convention on a
Code of Conduct for Liner Conferences is liable :        '
–       to influence the cost and quality of liner services between the
        Community and the other parts of the world ;
–       to interfere with the development of trade within the Community .
        The Commission draws particular attention to the fact that it considers
that the present provisions of the Code of Conduct do not pay equal ragard
to the interests of shipowners and of shippers and are likely to damage
certain fundamental interests of the Community .
        Finally , the Commission is aware of the serious risks connected with
the differences of opinion of the various Member States which were observed
ttfhen a vote was taken on the draft Convention and which could jeopardize
the general organization of sea traffic on both a worldwide scale and a
Community scale .
COMMON ACTION     .
        For the reasons and with the reservations given above , it is imperative
that the Member States should adopt a common position on the question of the
possible conclusion of the Convention on a Code of Conduct for Liner
Conferences , and that , while awaiting the implementation of such common
action , they should abstain from signing, ratifying or the possibility of
acceding to that Convention .
 ---pagebreak---                                         - 5 -
 Proposal for a Decision of the Council concerning connon action "by the
Member States in respect of the United ITati or.s Convention on v.
 Conduct for Liner Conferences
THIS COULTCIL OP THE EUR0FEA1T CQMULTITIES
Having regard to the Treaty establishing the European Economic Community ,
 and in particular Article 116 thereof ,
Having regard to the proposal from the Commission ,
Whereas the question of the operation of liner conferences has been treated
"by IMCIAjD , and -whereas U1ICTAD' s work has resulted in the drawing-up of a
 Convention on a Code of Conduct for Liner Conferences ;
Whereas that Convention is aimed in particular at laying dawn certain
 internationally-applicable rules relating to cargo sharing, th§ accession
 of shipping lines to conferences and the relations between transporters
and shippers j
Whereas the application of such internationally-applicable rules affects the
terms on which transport is effected , both within the Community and with
non-member countries ,, and whereas such rules would affect the interests of
the shipping lines and shippers of the Member States :
Whereas , regardless of the possible incompatibility of certain provisions
 of this Convention with the obligations arising from the Treaty and the
repercussions that the Convention can have in the field of maritime transport ,
 its entry into force is of particular interest to the Common Market , and
whereas common action on the part of the Member States is required in this
 connection ;
Whereas the definition of the positions which the Member States will adopt
as part of their common action requires careful examination , and whereas in
the meantime they must abstain from any action which could prejudice or
affect the inpleEjontation of their subsequent common action j
 ---pagebreak---                                     - 6 -
HAS ADOPTED THIS DECISIOÎT î ■
                                Article 1
X , Without prejudice to all other possible Community actions , the Council
shall define "before 30 June 1975 » an& on a proposal from the Commission ,
on the form of the common action to he implemented as regards the possible
conclusion by the Member States of the Convention on a Code of Conduct for
Liner Conferences .
2 . While awaiting the decision referred to in paragraphaph 1 , the Member
States shall abstein from signing , ratifying or acceding to the above-
mentioned Convention .
                          i
                                Article 2
     This Decision is addressed to the Member States-
     Done at                                          For the Council
 ---pagebreak--- COMMENTS PIT THE VARIOUS CHATTERS OF THE CODE OF COKDUCT FOR LIJER
CONTEREMCES frJITH PARTICULAR REFERENCE TO THOSE PROVISIONS WHICH ARE OF
PARTICULAR INTEREST TO THE COMMON MARKET OR WHICH RELATE TO AN AREA
GOVERNED BY THE GENERAL RULES CONTAINED IN THE TREATY
CHAPTER I : Définitions
      There are no particular comments to be made on this chapter , except
to say that the definition of the expression "national shipping line " is
restrictive . In order to "be regarded as a "national shipping line ", a
shipping line must have its head office of management and its effective
control in that country .
CHAPTER II : Relations among member lines
      Article 1 : lîerabcrship
      This Article provides that any national shipping line (see
definition in Chapter I ) shall have the right to be a member of a conference ,
provided that certain criteria are met , in particular as regards its ability
to operate a regular , adequate and efficient service as defined in the
agreement concluded between the members of the Conference . Furthermore ,
it must be able to prove that it will be able to fulfil its obligations
within the framework of the agreement and shall deposit a financial guarantee
to cover any outstanding financial obligation in the event of subsequent
withdrawal , suspension or expulsion from membership of the Conference .
Any shipping line not regarded ac a "national shipping line" ("cross
trader") must meet the same requirements and a number of additional           :
requirements (especially as regards the existing volume of trade on the
route or routes served by the conference and prospects for its growth ; the
adequacy of shipping spa.ee for the existing and prospective volume of trade
on the route or routes served by the Conference ; the probable effect of
admission of the shipping line to the conference on the efficiency and
quality of the conference service ; the current participation of the
 ---pagebreak---  shipping line on -the sane route or routes within the framework of another
 conference ). Furthermore , the admission of such a shipping line shall also
be subject to the application of the cargo sharing provisions (see below).
       ilrticle 2 : Participation in the trade -
       For the purpose of determining the share of trade which member lines
shall have the right to acquire , the national shipping lines of each country ,
irrespective of the number of lines , shall be regarded, as a single group of
shipping lines for that country .
       Shares of trade within a pool shall be determined as follows , unless
otherwise mutually agreed :
–      the group of national shipping lines of each of two countries , the
       foreign trade of which is carried by a conference , shall have equal
       rights to participate in the freight and volume of traffic generated
       by their mutual foreign trade and carried by the conference ;
-■     third–country shipping lines , if any , shall have the right to
       acquire a significant part , such as 20Jb in the freight and volume
       of traffic generated by that trade .
       These provisions therefore institutionalise the distribution of
freight in the following proportions : 40-40–20 .
       Other provisions relate to the distribution of shares of trade in
cases where the national shipping lines of one country decide not to carry ,
or cannot carry , their full share of . trade . In such cases , that portion
of their share of trade which those shipping lines do not carry shall be
distributed among the individual member lines participating in the trade
in proportion to their respective shares (in exceptional cases where no
national shipping line of one country will participate in trade , the
national shipping lines at the other end of the route , and third-country
shipping lines will distribute the trade as follows :
 ---pagebreak--- 66^/^ for the national shipping lines and 33 for third country shipping
 lines .
         Another provision provides that national shipping lines of a region ,
members of a conference , at one end of the trade covered "by the conference ,
may redistribute among themselves "by mutual agreement the shares in trade
allocr.t3d to then .
         Article 2 also maices provision for cases where a conference has not
yet distributed the trade "between the member lines . In such cases the
national shipping lines have the right to require the establishment of a
eyctom of pooling whereby they would receive the share of trade defined
abo /c .
         Ix a conference makes provision for such a case in a pooling agreement ,
any vessel shall be allowed to lift cargo , even in excess of the pool share
of the line , if otherwise the cargo would be shut out and delayed beyond a
period set by the conference .
         Article 4 s Sanctions and Article 5 i Self-policing
         These articles relate to sanctions against shipping lines which fail
to abide by the terms and conditions of a conference agreement ,- with
particular reference to financial sanctions and the suspension or expulsion
of a shipping lino .
         Article 6 : Conférence arrsements
         This article lays down certain rules concerning the fact that all
documents relating to the agreement shall be made available to the
appropriate authorities of the countries whose trade is served by the
conference .
 ---pagebreak--- CHAPTER III • Relations with shippers
      This Chapter stipulates in particular that the members of conference
are entitled to institute and maintain loyalty arrangements with shippers .
Whatever loyalty arrangements are made , the freight rate applicable to
loyal shippers shall be determined within a fixed range of percentages
of the freight rate applicable to other shippers . Article 31 of this
chapter relates to the machinery for consultations between conferences and
shippers ' organizations .
OH'PTER IV : • Frci.-rht rates
      This chapter requires that a number of criteria be taken into account
when determining freight rates (but does not provide for any machinery fcr
satisfying these criteria ). The member lines of a conference crust cdLsr ")
strictly to freight rates , rules and terms laid down by the conference .
At least I50 days * notice must be given before a general increase in freight
rates can taZce place . Surcharges may be imposed temporarily in order to
cover sudden or extraordinary increases in costs cr losses of revenue .
CHAPTER V : Other matters
      Members of a conference shall not use fighting ships to prevent
competition from a shipping line which is not a member of the conference .
General provisions require that shipping lines ensure regular services .
CHAPTER VI : Provisions and machinery for settlement of disputes
      This chapter gives a more detailed account of the procedure for
applying quite a complex system of conciliation or of international
mandatory conciliation for the purposes of applying the various provisions
of the Code .
CHAPTER VII : Final clauses
      This chapter contains , in particular , provisions relating to the
 ---pagebreak--- signature and ratification of the Convention and its entry into force .
Another important provision provides that a review conference shall be
convened five years from the date on which the Convention enters into
force .
        Resolution in the Annex concerning non-conference lines
        This Resolution provides in particular that non-conference lines
should adhere to the principle of fair competition on a commercial basis .
As long as they do so , such companies should not be prevented from operating
on any given route .