Attemps to manipulate shipping markets through initiatives such as the Baltic Max Feeder scheme are unlikely to win European Commission approval.
Attemps to manipulate shipping markets through initiatives such as the Baltic Max Feeder scheme are unlikely to win European Commission approval, legal experts are warning shipowners.
Brussels has no sympathy for crisis cartels of any sort, and does not believe that capacity restrictions are the answer to the industry slump.
Lawyers are also advising any shipowners who are considering applications for state aid to think very carefully before taking that step because of the conditions that could be attached to government bail-outs.
The German-backed Baltic Max Feeder plan to limit the supply of feeder vessels of up to 1,400 teu, in an effort to restore earnings, ran into a storm of protest from charterers when it was unveiled earlier this summer. A number of amendments were forced on the original formula, which were detailed a month ago. The idea of setting minimum rates has been dropped, and instead, participating owners will be offered compensation for laid-up tonnage rather than promised higher charter fees.
That and other modifications have been run past competition officials in Brussels, who apparently have indicated that the changes are going in the right direction.
Even so, some lawyers question whether such a scheme could ever comply with European Union competition rules, unless watered down to such an extent as to be meaningless.
Despite the revisions, capacity would still be removed from the market, said Lovells" partner Matthew Levitt.
The commission would want to see clear benefits for consumers before approving a cartel that restricted supply, ?and it is difficult to see any,? Mr Levitt told delegates attending the European Maritime Law Organisation"s annual conference.
?The shipping crisis does not give players the right to disregard competition law,? he said.
Baltic Max Feeder would result in higher prices and less competition, Mr Levitt added.
Even if some shipowners were prepared to chance a Brussels antitrust investigation at a later date in order to survive the immediate future, Mr Levitt said he doubted whether banks that were required to fund the new company would be willing to take that risk.
The architects of the scheme brought in law firm Freshfields Bruckhaus Deringer at a late stage in the process after concerns about the legality of the proposal, but the proposal still lacked empirical evidence to support its case, said Mr Levitt.
The commission, which is keeping a close eye on such developments, continues to stress that crisis cartels are not permitted under any circumstances.
Referring to the recent case concerning the Irish beef market, Brussels antitrust official Hubert de Broca cited the European Court of Justice ruling that crisis conditions were no justification for restricting competition.
Mr de Broca, deputy head of the competition directorate"s antitrust unit covering transport and post, also spelled out the risks of forming secret cartels which are regarded by Brussels as hardcore violations of antitrust law.
The commission has no evidence that secret cartels are being set up, but is on the alert and constantly warning of the penalties, should companies be tempted to unlawfully fix prices.
As well as initiatives such as Baltic Max Feeder, the container shipping collapse has forced some shipping companies ? notably Hapag-Lloyd and German owners Peter Döhle and Claus-Peter Offen ? to apply for state aid.
But there could be a heavy price to pay for taking taxpayers money, said A&L Goodbody partner Vincent Power.
Just as other companies that have been rescued by governments have been forced to restructure, so shipowners could also be ordered to make painful cuts in exchange for state aid, he cautioned.
Maersk Line had every right to complain about state aid being provided to Hapag-Lloyd, said Addleshaw Goddard partner Mark Clough, since small countries such as Denmark would not be able to match the level of support for its shipowners that Germany could afford.