Shipping Pool Agreements Could be Illegal

SHIPPING pool agreements need to be reviewed, and possibly revised, if they are to meet new EU regulations, warns Øystein Meland, partner at the Bergen office of law firm Wikborg Rein. Speaking at Shipping China 2005 earlier this month, Meland outlined new enforcement rules which may come into effect in 2005 or 2006 making some existing pool agreements illegal.

"A pool agreement is a horizontal agreement between competitors which may create market dominance and increase barriers to entry. In many jurisdictions this already makes them illegal," says Meland. "To date, they have largely been left alone due to the positive effect they have on world trade and lack of enforcement of the competition rules. But all that could be about to change."

In the wake of a number of recent shipping cases, the regulators are increasingly focused on competition in international shipping. The EU is now looking at revising Regulation 4056/86 of the EC Competition Rules in order to abolish the block exemption currently enjoyed by both liner and tramp shipping.

"While it is hoped that the regulators will appreciate the important role played by shipping pools, shipowners are strongly advised to review and possibly rewrite their shipping pool agreements as soon as possible. Failure to do so could result in huge fines and/or civil suits," says Meland.

According to Meland, pool agreements need to be rewritten to emphasise that the purpose of the agreement is increased efficiency and utilisation of vessels, and demonstrate that the customer gets a fair share of the benefit.

Non-competition clauses should be minimised, particularly those that hinder any of the pool participants from buying similar ships to operate either on their own or in co-operation with other operators.

"Agreements that fail to comply with the new rules could attract corporate fines of up to 10 per cent of annual worldwide turnover on a group basis, or up to ten years imprisonment for individuals," he warns. The new rules will also introduce stricter filing or registration requirements leading to increased bureaucracy and costs for owners.