End of block exemption regulation: vessel sharing agreements can continue but ‘uncertainty’ remains for liners
Leadership Insights Newsletter story
23 October 2023
The European Commission’s (EC) decision to end the Consortia Block Exemption Regulation (CBER) for shipping in April 2024 will not put an end to Vessel Sharing Agreements (VSAs) but industry figures raise uncertainties over costs and administrative complications, which could reshape how VSAs are undertaken.
First introduced during the 2009 global financial crisis, CBER exempted liner shipping consortia from EU antitrust rules that apply to all other economic sectors. It was extended in 2014 and 2022, however following a review launched in August 2022, the EC has declared that CBER “no longer promotes competition in the shipping sector”.
John Butler, President & CEO of World Shipping Council told ICS Leadership Insights that the decision “will create uncertainty for carriers as they adjust to the new regulations, and that uncertainty could have a chilling effect on carriers’ willingness to participate in VSAs”, leading to a “negative development” for efficiency and service levels.
While the EC recognises VSAs remain lawful and provide efficiencies that are shared with customers, a need for clear messaging on its continued support for VSAs is required, said Butler.
Rico Luman, Senior Economist Transport, Logistics & Automotive, at ING Research told ICS Leadership Insights that while container line cooperation and VSAs “won’t be completely impossible” he explained, they could be more difficult due to compliance. “There will be an administrative burden to prove that the cooperation doesn’t adversely impact competition, and this could be complicated. So, it is likely that container liners will reconsider their focus” Luman said.
Bud Darr, Executive Vice President, Maritime Policy and Government Affairs for MSC Group, also noted without CBER there will be legal uncertainty and greater cost for liner shipping to continue with VSAs. “I believe that the decision was poorly founded and sends a signal that these arrangements are to the detriment of our shipper customers and consumers, which is exactly wrong,” he said. “Further, I am concerned that this error in logic may be carried forward by other jurisdictions outside the EU.”
In response to the EC decision, ICS said while it puts the EU “out of step” with other jurisdictions worldwide it is “significant that DG COMP has said that it continues to recognise the benefits of liner shipping consortia and vessel sharing agreements, which lead to economies of scale and better use of space on vessels with associated efficiency benefits passed on to the users of shipping services in terms of better coverage of ports and better services”.