Jurisdiction - Malaysia
Reports and Analysis
Malaysia – Block Exemption Order For Liner Shipping Agreement Gazetted.

30 July, 2014

 
 

Introduction


The Malaysia Competition Commission (“MyCC”) recently announced that the conditional Block Exemption Order for liner shipping agreements (“BEO”) had been gazetted on 4 July 2014 and came into effect on 7 July 2014. This BEO applies to liner shipping agreements in respect of Vessel Sharing Agreements (“VSA”) and Voluntary Discussion Agreements(“VDA”) between liner operators made within Malaysia or which have an effect on liner shipping services within Malaysia. The BEO will continue in force for a period of 3 years from 7 July 2014, or until it is cancelled by the MyCC.


By way of background, the application for the BEO was made by the Malaysian Shipowners Association, the Shipping Association of Malaysia and the Federation of Malaysia Port Operators Counsel on 16 December 2011. Following from the application, the MyCC considered many factors and engaged a number of stakeholders, including various Government Agencies, as well as engaged in a public consultation exercise to obtain feedback from other affected parties such as freight forwarders, hauliers and manufacturers.


At the end of this process, on 19 December 2013, the MyCC, having taken the view that the BEO satisfied the conditions of Section 5 of Malaysia’s Competition Act 2010 (“Act”), which is similar to the Net Economic Benefit (“NEB”) exemption in Singapore, issued the BEO.

Conditional BEO


The BEO granted by the MyCC applies only to transport services provided by liner operators in respect of ocean transport, and is not intended to apply to the whole of the intra-modal transport services, including any inland carriage of goods provided by logistics providers, forwarders, depot operators, truckers and other service providers, whether or not such entities are affiliated with the liner operators.

 

Further, it is worth noting that liner operators wishing to benefit from the BEO must lodge their respective VSA and / or VDA with the MyCC to ensure compliance with the conditions imposed. On this, the MyCC may make relevant parts of the lodged documents available and accessible to the public.


Apart from the requirement to lodge their respective VSA and / or VDA with the MyCC, liner operators seeking to fall within the ambit of the BEO must also ensure that their VSA and / or VDA comply with the conditions of the BEO, including:


(a) being limited in scope to the sharing of vessels, joint operation of vessel services, or exchange or charter of vessel space;


(b) not containing any element of price fixing, or price or tariff recommendation;


(c) not requiring the disclosure of confidential information concerning service arrangements by liner operators; and


(d) allowing a party to the agreement to withdraw from the agreement on giving of a reasonable notice.


Assuming the VSA and / or VDA of a liner operator does not meet the conditions of the BEO, the liner operator may still choose to make an application to the MyCC for an individual exemption pursuant to Section 6 of the Act.


At this juncture, it is also worth noting that the scope of the BEO is narrower than its Singaporean equivalent, the Competition (Block Exemption for Liner Shipping Arrangements) Order, which expires on 31 December 2015 (“Singapore BEO”). Essentially, the key differences between the BEO and the Singapore BEO are as follows:


(a) While the BEO only applies to VSA and / or VDA between liner operators, the Singapore BEO applies to all liner shipping agreements.


(b) While the BEO prohibits any element of price fixing, the Singapore BEO only prohibits the compulsory adherence to a tariff.


(c) While the BEO requires that all VSA and / or VDA be lodged with MyCC, the Singapore BEO only requires liner shipping agreements between parties which exceed a certain market share to be filed with the Competition Commission of Singapore.


Finally, companies intending to rely on the BEO should also be aware that the BEO will not exempt or provide any immunity in respect of any conduct amounting to an abuse of a dominant position, which infringes Section 10 of the Act, which is also the case in relation to the Singapore BEO.


Conclusion


While the gazetting of the BEO is good news for liner shipping companies, it is still important for liner shipping companies to review their agreements to ensure that their agreements fall within the ambit of VSA and / or VDA as defined in the BEO. Further, it is also imperative for liner shipping companies to ensure that their respective agreements do not fall foul of the conditions imposed by the BEO.


Finally, as the BEO requires that all VSA and / or VDA be lodged with the MyCC, liner shipping companies must also ensure that they have their respective VSA and / or VDA reviewed for compliance prior to lodging the same with the MyCC.

 

Rajah & Tann

 

For more information, please contact:

 

Kala Anandarajah, Partner, Rajah & Tann
kala.anandarajah@rajahtann.com

 

Dominique Lombardi, Partner, Rajah & Tann

dominique.lombardi@rajahtann.com


Tanya Tang, Rajah & Tann

tanya.tang@rajahtann.com

 

Shuhei Otsuka, Rajah & Tann
shuhei.otsuka@rajahtann.com


Kimberly Tan, Rajah & Tann
kimberly.tan@rajahtann.com


Marcus Teo, Rajah & Tann
marcus.teo@rajahtann.com

 

Competition & Antitrust Law Firms in Malaysia

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