EU investigates top shipping companies for antitrust violations

The European Commission has raided the offices of many major shipping companies in Europe. The Commission says that the companies “may have violated the antitrust rules that prohibit cartels and restrictive business practices.” The Commission spokesperson Amelia Torres, stressed, however, that it was premature to reach any conclusions about these companies having broken the law. Representatives of the EC and UK Office of Fair Trading called on premises last week to ascertain whether there was any evidence of "infringement of European competition law related to rate collusion between lines and possible misuse of positions of market share dominance".


The Commission is said to be investigating the period after 2008, when ‘conferences’- shipping cartels- were banned in Europe. This action, followed soon with the downturn, saw shipping companies hard hit and responding by laying up vessels and slow steaming. There was much volatility in the freight markets at the time, and industry observers feel that see-sawing rates may have drawn the investigators’ attention. Mercator International’s Jesper Kjaedegaard implies that record profits last year may have spurred the move. “How quickly the situation changed is astounding and may have raised eyebrows in Brussels,” he said.

It is believed that major outifts like A.P. Moller-Maersk, MSC, Orient Overseas Container Line (OOCL), CMA CGM, MOL Neptune Orient Lines (NOL), Hanjin, Cosco and Hapag Lloyd are being investigated for possible anti-trust law violations. Many, including Maersk and MSC, have confirmed the raids. Besides documentation and public records, computer hard disks are also being scrutinised by inspectors.

Although these investigations seem to be preliminary, there is apprehension across industry that final EU actions may be similar to those taken by US and Europe against the airline industry and some freight forwarders last year. The Commission, if it feels it has sufficient evidence, can launch a formal investigation where companies would be liable, if found guilty, to massive fines of up to 10 percent of their annual worldwide sales. Panalpina, one of the forwarders investigated last year, was fined a total of US$50.3 million after pleading guilty to air cargo price fixing. Reports say that almost two dozen airlines paid more than $1.8 billion in fines then, and Air France-KLM alone was hit for $505 million. What is worse, the EU move sparked large civil lawsuits at the time by European shippers who claimed that the airline price fixing had hurt them. No wonder almost all the shipping companies raided were quick to promise full cooperation with the Commission’s investigators last week, while their PR arms moved quickly to soothe frayed employee and shareholder nerves.

Concerns aside, a humourist from one of the raided lines had the final word, according to media reports. Pointing to the collapse of many freight indices in recent times and the hard times that shipping companies are going through, he said, “If the industry has been fixing rates, it has been doing a terrible job of it.".
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Taiwanese fishing boat Captain killed in pirate-US warship crossfire.

Traumatised family seeks proof, compensation from the US

The Taiwanese skipper of that country’s fishing boat Jih-Chun Tsai 68 has been killed in crossfire between Somali pirates and a US naval warship, reports say. Captain Wu Lai-yu was taken hostage on March 30 this year; three Somali pirates are also believed to have been killed in the incident, and the fishing boat sunk by the actions of USS Stephen W. Groves, a U.S. Perry-class guided-missile frigate that is part of NATO’s anti-pirate fleet. The incident is supposed to have occurred ten days ago, on May 20.

Wu’s family are disbelieving of official reports, since negotiations for the return of the fishing boat and its crew were reportedly making headway when Taiwanese authorities informed them that Wu had been killed. It appears that Taiwan’s  Ministry of Foreign Affairs (MOFA) got the news only on May 21, and received Wu’s death certificate from the US just a couple of days ago. Wu’s body is said to have gone down with the fishing boat.

Taiwanese newspaper reports say that initial ransom demanded for the Jih Chun Tsai 68 and its 14 crew was a staggering US$8 million, with negotiations running into difficulties after international brokers intervened. There have been similar reports in other cases critical of mainly UK based negotiators who claim sole mandate to negotiate ransoms from the pirates, often bypassing owners completely. In any case, a deal was struck with the pirates last month: all of the crew were to be freed one month after the ransom was paid.

 Wu's wife now says she does not believe that Wu has been killed, and wants to see video footage of the assault on his vessel- which the pirates were using as a mother ship- for confirmation.  She is doubly traumatised since the news of her husband’s death came weeks after she received repeated phone calls from the hostage fishing boat: she says she could hear Wu crying and moaning as he was punched and hit with rifle butts. She once heard her husband screaming, "They're trying to break my legs."

Taiwanese authorities are reportedly seeking an explanation from the Americans. The government had earlier asked the shipping company and the local fisheries association to negotiate with the pirates. Taiwanese legislator Justin S. Chou has demanded a full explanation from his government “as to why such a tragedy occurred when both sides had finally agreed on the terms of a peaceful settlement”. "How come the government's so-called active rescue efforts ended up with the skipper losing his life?" Chou asked.

At one time, Wu had also pleaded with China's honorary consul general in Somalia, Mr. Zhou, for help, Chinese media reports say. Zhou later learnt that Wu’s legs had been broken and he had nothing but Chinese herbal medicine aboard to treat his agony. In recordings of pirate phone calls to Zhou, the reports say, Wu’s voice can be heard trembling and pleading, "Come to my rescue, would you? Please!"

The Captain’s family has urged MOFA to "find out the facts" and help it seek compensation from the United States.

Snapshots

Somali authorities seized two unmarked aircraft with $3.6 million in cash, newswires say. Six foreigners, including citizens from the US, UK and Kenya have been detained, according to the Somali Interior Minister Abdi Shakur Hassan Farah, who added that airport authorities got suspicious after briefcases were being transferred from one aircraft to another. “After investigation, $3.6 million were found,” he said.


Helicopters and aircraft are often used to drop ransom payments for merchant ships and crews held off Somalia. Observers say that the 3.6 million was probably one of such payments. This seemed to be indicated by airport deputy security Chief Burhan Mohamed when he told reporters, “We seized the two planes and their pilots plus the ransom for the pirates. One plane was from Nairobi and it wanted to give the money to the pirates using another plane that landed soon after,” he added.

Speculation is rife that the ransom was for the MV Suez; recent reports have said that the ordeal of the crew of that ship, including the six Indians, may be coming to an end after she was hijacked last year. Industry watchers are waiting and hoping that the release of the Suez, when it happens, means the release of all its crew- and is not a repeat of the Asphalt Venture incident, when some Indian crew were held back by the pirates even after ransom was paid.

 
 
 IMO agrees to look into the problem of under declared container weights: The IMO’s Maritime Safety Committee has “agreed to a proposal from the Netherlands, Denmark and Australia to address the issue of incorrectly declared containerised cargo and to take other measures to improve the safety of container stowage and ship operations”. The International Chamber of Shipping and the World Shipping Council have welcomed the move, saying that this decision would eventually help save lives, reduce cargo losses and improve operational efficiency; a joint statement said that they supported the initiative “that demonstrates the compelling need to address the problem.


The problem of under declared container weights- and its major consequences on ship stability and safety- has been highlighted by the industry for some years now. Attempts a few years ago to self regulate have by and large come to naught, causing many in the industry to push for mandatory verification of container weights prior to loading. The ICS and WSC joint statement have repeated this demand in their statement. “The problem will not be solved until there is a legal requirement to verify container weights before containers are loaded onto ships,” they say. “Verification of actual container weight before vessel loading and the availability of the actual container weights for proper and safe stowage planning will mark a long overdue and important improvement in industry safety.”


Capacity race: Box ship orders will lead to oversupply, experts warn. The dramatic revival of container ship fortunes last year has seen a steep rise in newbuild orders, say analysts, with a record number of container ships set to be delivered in 2013. Alphaliner is not alone in cautioning the industry that “the unrestrained ordering observed in the past 12 months could lead to more oversupply problems for the industry”. Analysts at the company fear that ship owners have been “lured by attractive new building prices” and the strong recovery in the market, and they should “keep an eye on the burgeoning containership order book”. A record 1.6 million TEU of new capacity has been ordered in the last twelve months, says Alphaliner.


“2013 vessel deliveries could exceed 2 million TEU,” it said. “This would mark the highest-ever annual level of containership new building.” The 2013 deliveries would include some of

Maersk’s recent order of 10 Triple E-class 18,000 TEU vessels; Maersk has an option to build another 20 of these giants thereafter. Another major ship owner, Evergreen, has 22 8,800 box ships due in 2013; another 13 will follow.

“Other carriers and non-operating owners have joined, or are planning to join, the new capacity race,” warns Alphaliner.

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Countries ‘carving up the Arctic’, says Wikileaks

Oil companies “rushing to extract the fossil fuels that caused the melting in the first place"- Ben Ayliffe

Seemingly unconcerned with the accelerated rate of ice melt in the sensitive and frigid North- or perhaps because of it- stakeholder nations have planned to ‘carve up the Arctic’, Wikileaks reveals. Secret US embassy cables released by the whistleblower website show that some countries are eyeing Arctic resources- oil, gas, even rubies and aluminium. Oil reserves in the region are estimated to be equivalent to those the North Sea and are a major factor in the Arctic rush. Another factor: sea routes to the East that will be a third shorter than at present as ice melts; moreover, these will avoid the Suez Canal and the piracy swamped Indian Ocean.

One commentator says that the rush to the Arctic is reminiscent of the 19th century and the division of Africa and her resources by the West. Wikileaks says that the Danish Foreign minister Per Stig Moeller joked with the Americans at a conference, saying "if you stay out, then the rest of us will have more to carve up in the Arctic".

The Arctic Council member states - Russia, the United States, Canada, Denmark, Norway, Finland, Sweden and Iceland – meet regularly to discuss their interests in the Arctic. And, although many are shocked at the rush for Arctic oil and the opening up of sea routes that are serviced by ageing Russian icebreakers- and what environmentalists see as a potentially catastrophic Russian plan to locate nuclear power generating reactors on platforms in the region-analysts say that this commercial momentum in the Arctic is by now irreversible.

Inevitably, there are political undertones to the exploitation of resources. Greenland, an autonomous Danish dependent territory with limited self-government, is seen by the US as on "a clear track to independence", according to the leaked cables. The US sees this as "a unique opportunity" for American gas and oil companies to get a foothold; Former US Ambassador to Denmark James P Cain is quoted in the cables saying that he introduced Greenland's government to New York financiers "to help the Greenlanders secure the investments needed for such exploitation".

Wikileaks reveals that, after Russian Artur Chilingarov planted a Russian flag via submarine on the seabed under the North Pole, a senior Russian official told the US that this was a deliberate move by the Kremlin and that Chilingarov was "following orders from the ruling United Russia party". Russian Ambassador Dmitriy Rogozin told NATO, "the 21st Century will see a fight for resources and Russia should not be defeated in this fight". Tension is also reported between other countries, including allies Canada and the US, over these resources. Canadian Premier Stephen Harper reportedly told NATO to keep out of the Arctic; he felt that some European countries without Arctic territories were trying to use NATO to give them "influence in an area 'where they don't belong'".

Environmentalists are expectedly aghast at these ongoing developments. They point to recent reports by Professor Peter Wadhams of Cambridge University and the findings of the Intergovernmental Panel on Climate Change (IPCC), both of which say that the ice melt has accelerated rapidly in recent years. Professor Wadhams says, in fact, that it has ‘gone off a cliff’, the ice having both thinned and shrunk, and that, in summer, "it could easily happen that we'll have an ice free North Pole within a year or two". The IPCC said in Copenhagen recently, after 400 scientists met at a conference, that sea levels will rise by more than 5 feet in this century.

"Instead of seeing the melting of the Arctic ice cap as a spur to action on climate change, oil companies are rushing in to extract the very fossil fuels that caused the melting in the first place," environmentalist Ben Ayliffe told the BBC.

Oil companies seem to be unmindful of the criticism, though, and are aggressively lobbying their governments to give them a slice of the action. British firm Cairn Energy is reportedly at the forefront of the Arctic oil rush. The company's Commercial Director Simon Thomson told the BBC, "We're leading the charge".

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Indian Government to allow armed guards on Indian flagships

Meanwhile, security firms promote code of conduct and ethics to keep out ‘cowboys’

The Indian government will allow armed guards aboard the country’s merchant ships to ward off pirates. A report carried by the Times of India quotes Director General of Shipping SB Agnihotri as saying, "We have decided to allow the armed guards on Indian flagged merchant vessels. The standard operating procedures (SOP) for the recruitment of armed guards and use of firearms will be finalised within in a month." Shipowners will be given the mandate to use former defence personnel as armed guards. "We are not comfortable with the thought of allowing private security guards as their unknown background can pose a risk to the lives of crew members."

The move comes after the number of pirate attacks have sharply increased, and after the furore created by the ‘Asphalt Venture’ hijack. The pirates kept six Indians back when releasing that vessel last month after a reported $3.5 million ransom was paid, intending to use the hostages as bargaining chips to negotiate- with the Indian government- the release of well over a hundred suspected Somali pirates in Indian custody. A high-level joint cabinet committee in India had met after the incident and examined the prospect of deploying armed commandos in plainclothes on merchant vessels. Comprising of the secretaries of the ministries of home, external affairs, shipping, and law, the committee examined whether Indian naval commandoes could be utilised along the lines of sky marshals deployed in the US on commercial aircraft. Widespread opinion at the time said that India was perceived as the prime target of Somali pirates, following robust Indian naval actions since January against them.

The Indian National Ship Owners' Association (INSA) and the National Union of Seafarers of India (NUSI) have welcomed the decision of the shipping ministry, the TOI says, quoting INSA chief executive officer Anil Devli, "India does not have a policy of allowing armed guards. This move will definitely provide a sense of security to the crew members threatened by pirates.”

In connected developments, maritime security firms across the world are coming together to create a code of conduct and ethics with the launch of the Security Association for the Maritime Industry (SAMI). With a surge in security providers, some with questionable backgrounds, shipowners are hard pressed to decide which ones are most suitable. To manage what some say is a complex mess, SAMI wants to ‘bring together security providers and the maritime industry to forge robust, reliable and reassuring vetting processes and standards’. SAMI founder Peter Cook points out quality issues with some security agencies, “It is fair to say that the current business opportunity is attracting companies who have gained experience ashore rather than at sea. This does have implications for the quality of service, the understanding of seafarers and ships, and of the foundations many start-up firms are built upon.”

One commentator says that finding an appropriate security firm today is, for the shipowner, like finding a random plumber, pointing out that many security guards are just ‘cowboys’. One hopes that the Indian armed response to piracy will be better organised than that.