HL Deb 20 December 1984 vol 458 cc731-8

11.31 a.m.

Lord Brabazon of Tara rose to move, That the draft regulations laid before the House on 13th November be approved. [2nd Report from the Joint Committee.]

The noble Lord said: My Lords, I beg to move that the Merchant Shipping (Liner Conferences) (Conditions for Recognition) Regulations 1984 be approved.

I hope it will be for your Lordships' convenience if I speak at the same time to the other regulations standing in my name on the Order Paper: the Merchant Shipping (Liner Conferences) (Mandatory Provisions) Regulations 1984.

The purpose of the regulations contained in these two draft statutory instruments is to give effect in United Kingdom law to the United Nations Convention on a Code of Conduct for Liner Conferences. The regulations are made under the Merchant Shipping (Liner Conferences) Act 1982. The Government wish to accede to the liner code convention early in the new year, at the same time as other European countries. The convention came into force in October last year but so far, among the OECD countries, only the Netherlands and the Federal Republic of Germany have acceded.

The liner code deals with the relationships between shipping lines who are members of conferences and the relationships between these lines and their customers, the shippers. The United Kingdom's accession to the code will be subject to EC Regulation No. 954/79, commonly referred to as the Brussels package. The Brussels package sets out the reservations that EC member states must make when they accede to the convention. These reservations will significantly modify the way the code operates, particularly in governing the relationships between conference shipping lines.

The main reason why the code was unacceptable to the United Kingdom in its original form was that it sought to impose rigid cargo-sharing between conference shipping lines. But the Brussels package modifies the code by limiting such cargo-reservation to those countries, mainly developing countries, that wish to protect their shipping. As a result of this fundamental modification the Department of Transport has calculated that the code's cargo-sharing provisions will in practice only reserve cargoes representing between 10 per cent. and 15 per cent. of the world's liner conference trade; the remainder will be free of cargo-reservation. In this way the Government have been able to meet in very large measure our objective in maintaining the widest possible freedom for our shipping to compete in the world's liner shipping routes. The code's basic regime concerning relations between conferences and shippers was from the outset altogether more acceptable. The Brussels package contains some modifications to certain of the code's provisions but in the main the provisions which give rights to shippers to be consulted on the basis of full information are very welcome.

Before I turn to the regulations themselves, may I also refer to a further condition which will govern the United Kingdom's accession. It has long been the policy of British Governments to accept the conference system, and to exempt conferences from our restrictive trade practices legislation, provided conferences face actual or potential competition from non-conference lines. In order that other contracting parties to the convention are left in no doubt that that remains Her Majesty's Government's position, the Government have decided that the United Kingdom's accession will be subject to the condition that the United Kingdom will be bound by the convention only while our trading partners permit non-conference lines to compete in our mutual trades.

I should now like to turn to the two draft statutory instruments. The first, the mandatory provisions regulations, identifies the code's provisions which are to give rise to rights and duties. The second defines a United Kingdom national shipping line for the purposes of the code and defines those shippers' organisations which will have rights to be consulted.

The Merchant Shipping (Liner Conferences) (Mandatory Provisions) Regulations 1984 implement the code convention. The code's provisions are a mixture of mandatory and recommendatory provisions; and some of the mandatory provisions are ambiguous. It would not therefore have been possible or desirable to import the code as a whole into our law. Regulation 3 lies at the heart of the statutory instrument and sets out in the form of a table those provisions of the code which are to be mandatory. The table identifies those people by whom and against whom these provisions may be enforced. This regulation reproduces the code's mandatory provisions as faithfully as possible. Some minor clarifications have been made to ensure that the provisions work effectively and, above all, do not inhibit competition.

The Merchant Shipping (Liner Conferences) (Conditions for Recognition) Regulations 1984 set the conditions for a national shipping line and a shippers' organisation. The code itself defines a national shipping line but allows Governments to add further criteria. During the course of our consultations with shipowners, shippers and the seafaring unions some suggestions were made which in the Government's view would have imposed unduly restrictive conditions on national shipping lines. Some groups felt that United Kingdom national shipping lines should be British-owned. Other groups felt that United Kingdom national shipping lines should be compelled to fly the British flag. The Government have decided to set criteria so as to maintain as open a market system as possible for shipping lines operating out of the United Kingdom.

Regulation 2 therefore limits national shipping line status only in the following way. Lines will be regarded as national shipping lines only in respect of those conferences of which they are members; and they will have to be of British nationality, which is defined as having their principal place of business in the United Kingdom. The only other limitation is that lines from countries which would refuse similar treatment for British lines will themselves be excluded.

The code also allows Governments to decide who should have the right to take part in consultations with the conferences. Here, our objective has been to ensure that those organisations who already have a key role in representing shippers' interests will have the right to be consulted under the code. We have also been concerned to avoid a position where conferences are obliged to consult so many organisations that the process becomes unmanageable. The code itself contains a basic definition of a shippers' organisation, and allows Governments to add further conditions. These conditions, set out in Regulation 3, are necessarily expressed in broad terms. All those whom we have consulted have argued against a very rigid set of conditions.

Regulation 3 allows one national organisation, which is expected usually to be the British Shippers' Council, to claim consultation rights in respect of most, if not all, conferences subject to the code. In addition, other shippers' organisations may claim consultation rights where they can show that they represent shippers of such quantities of goods with that conference that it is reasonable for them to be consulted. If the conference sought to deny that claim it would be for the conference to show either that the shippers concerned were already adequately represented by recognised shippers' organisations or that there were so many other organisations representing more cargo that recognition would be inappropriate.

The Government consider that if both shipowners and shippers operate the consultation procedure in a constructive fashion the shippers' interests will be effectively and efficiently represented. The second avenue by which consultation rights may be established is designed to benefit large individual shippers and representatives of shippers. Regulation 5 gives the Secretary of State the power to designate these groups.

The code, together with the Brussels package, is an attempt to reconcile quite different and potentially conflicting aims. The Government recognise that the code represents something of a challenge, and we have sought to mitigate its worst effects through adoption of the Brussels package. We believe it is now in our best interests to become party to this code and to ensure that it works effectively. I beg to move that these regulations be approved.

Moved, That the draft regulations laid before the House on 13th November be approved—(Lord Brabazon of Tara.)

11.40 a.m.

Lord Underhill

My Lords, may I first thank the noble Lord for his explanation of these two regulations and say that he has done this and explained them to the satisfaction of your Lordships in seven minutes, whereas I note that in the other place the Minister required 30 minutes out of a total debate of 50 minutes to explain this complex matter. We rely upon the consultations which the Minister said are taking place to establish that the nine pages of the schedule are satisfactory. I can assure noble Lords that I do not know whether or not they are. We assume that the consultations will bring that out.

The debate in the other place followed immediately after a three-hour debate on the general problems of the British shipping industry. Most speakers in that debate expressed their great concern at the decline of Britain's merchant fleet. Noble Lords will recall the debate in your Lordships' House on 24th November last year, initiated by the noble Viscount, Lord Rochdale, on our own EC Committee's Report on EC competition policy with regard to shipping, when most of the speakers expressed the same concern about the serious deterioration in the size of the British merchant fleet over the last decade, during a period when the world shipping fleet has been increasing. Although we are not dealing specifically with this matter this morning, we must keep this in mind when dealing with these regulations. The issues cannot be separated.

During our previous debate I made clear that the Opposition had given support to the Merchant Shipping (Liner Conferences) Act 1982. Clearly, not to accede to the code could be damaging to our shipping interests. However, I have read in the past 24 hours what my noble friend Lord Ponsonby said on that Act which paved the way for these orders. He said—I am not quoting but paraphrasing—that it was a funny measure to which the Government were lending their support. He said it was a measure creating restrictive regulations on competition. That recalled to mind what I said when we debated the Motion of the noble Viscount, Lord Rochdale, 12 months ago. I said that liner conferences, if not actually restrictive practices, took the form of cartels and that loyalty agreements are also a form of discrimination. I repeat what I said then, that I am not attacking liner conferences or loyalty agreements, but it must be emphasised that these are examples of managed trade. We have a situation where the shipping trade, particularly British shipping trade, must be regulated. It cannot be left to the free play of market forces.

The Minister has explained the Brussels package. We on these Benches recognise that it has enabled support to be given to accession to the United Nations code. I must say again, in passing, how readily the EC Commission can lift its so-called vital articles on competition when it seems appropriate for it to do so; and that is why it was considered appropriate.

These regulations arise, as I said, from the 1982 Act which the Opposition supported. Therefore, we support these regulations. However, it must be agreed that they in no way resolve the situation which Britain's shipping industry is in. Most merchant fleets receive some form of subsidy from their governments. Many countries follow some kind of protection for their shipping interests. There is also the reservation of cargoes to national flag vessels by many countries. This opens up the point to which the Minister referred—the importance of the definition of a national shipping line. He explained that these are set out in paragraphs 2 and 3 of Regulation 12 which provide that a national shipping line is to be so regarded if it is formed under United Kingdom law or that of another EC state and has its business address in the United Kingdom or in such an EC state.

There is no condition as to ownership. Vessels can be owned by non-British competitors. There is no requirement that vessels must be registered in the United Kingdom. A shipping line may come within these regulations even though it is owned by overseas interests and/or has its vessels registered in other countries, even under flags of convenience. The Opposition's view is that recognition of a British national line should be given only if it is British owned and its ships are registered in the United Kingdom. Without such conditions a foreign owned company could take advantage of these regulations. Vessels could be registered under another flag, be manned by non-British crews and possibly—in fact, most probably—with inferior wages and conditions. Similar views and criticisms were voiced by the Opposition spokesmen in another place.

I note that there was no reference whatever by the Minister in his reply in the other place to those complaints. The noble Lord the Minister referred to this matter but perhaps this morning we can have sound answers and a justification of why the conditions to which I have referred are not laid down in the regulation on recognition. Will the Minister tell the House what organisations have been consulted? Is the shippers' council satisfied with the conditions for recognition of shippers under Article 3? I note that the Secretary of State provided a Written Answer in Commons Hansard, col. 338, on 10th December. He said that two responses have been received on these regulations which have been considered and the points replied to. No reference was made as to from whom the two responses were received, nor to the points involved. Will the Minister elaborate on that Written Answer?

In giving support to these regulations we have reservations as to whether they are what is needed to help maintain and possibly develop our shipping industry. Is it not now the time, and necessary, for a full inquiry into British shipping in the light of world conditions, bearing in mind that the last occasion a review was carried out was 1970 when the noble Viscount, Lord Rochdale, conducted that review?

11.48 a.m.

Lord Campbell of Croy

My Lords, it is appropriate that some brief comments should be made on the regulations in these two orders especially because the United Kingdom opposed the United Nations liner code, with the full support of the British shipping industry, in 1974 when it was adopted. The code is now acceptable, in changed conditions, and as a result of the negotiations leading to special arrangements being made within the EC. Those arrangements are known as the Brussels package. As the noble Lord, Lord Underhill, said, this is a technical subject and I have no intention of trying to delve into the details of that package. I support the orders and I hope that your Lordships will give them your blessing.

To my mind there is one overriding reason why we should support the orders. We must preserve, wherever we can, the opportunities for trade by our shipping industry in what are known as the "cross-trade routes"—that is, the business between second and third countries carrying cargoes which do not come from the United Kingdom or are to be shipped to the United Kingdom. The British shipping industry has great expertise in this area and can provide competitive services throughout the world. This is one of the legacies of our being a maritime nation. We retain the ability to carry out services of this kind in distant seas.

I do not think that this is the time for a general discussion on the state of the British merchant fleet. I shall simply draw attention to the fact that the number of vessels in the British merchant fleet has been showing an annual decline and that this is worrying. I believe that the reasons are well known to the Government and I hope that they will respond to the suggestions that are made from time to time to make sure that our merchant fleet is not put at a disadvantage in comparison with its competitors abroad. I do not think that the decline in the numbers of vessels should be interpreted as any decline in quality or necessary loss in some of the very valuable business which our merchant shipping carries out.

The United Kingdom shipping industry still excels in the cross-trade routes which I have mentioned in different parts of the world. The earnings in foreign exchange are substantial, bringing in as they do also earnings from other sources, particularly in insurance. London is a world centre for shipping transactions and for making such arrangements, at the Baltic Exchange in particular, often at short notice, and with a very high reputation for reliability in execution. British shipping lines, not necessarily large ones, specialise in particular services and on particular routes. The ones which I am familiar with are, of course, some of those based in Scotland. The Brussels package helps to preserve the cross-trade business engaged in successfully by the British industry and essential to this country's economic health. At the same time there are opportunities afforded for the developing countries to come in and provide these services if they can be competitive and supply what is needed.

There is one other point that I should like to make, and that is on the liner conference system as a whole. Cynics, quite understandably, can regard this as a restraint on trade and they question why the conferences have been exempted from our restrictive practices legislation. I was a member of the sub-committee to which the noble Lord, Lord Underhill, referred just now which, over a year ago, examined the whole question under the very able and experienced chairmanship of my noble friend Lord Rochdale. We concluded, as others have beforehand and, as I believe, others must if they look into it, that the liner conference system is not a restraint on trade. It means for the users (that is to say, the shippers) a regular and reliable service at known times. For the shipping industry it means that ships will be sailing with worthwhile cargoes and not with empty holds. If this were not so, costs would increase; they would be bound to increase, to the disadvantage of the users as well as the industry. That system therefore is still found to be acceptable, provided that there is competition and provided that there are alternative possibilities outside the conference for shippers, should they want to use them.

As regards the shippers—and within that term I include manufacturers and others in business who are selling their goods abroad, as well as the exporters of all kinds, including the agencies who specialise in exporting those goods—they are provided with, I believe, the opportunities to express their views in these regulations and I urge all those concerned to make sure that, through their various bodies, they get the chance of the consultation which my noble friend has described. For these reasons I think that we should continue to exempt the liner conference system from our restrictive trade practices legislation.

While supporting these orders, I take this opportunity to remind your Lordships that the British shipping industry is a vital British interest and that it contributes substantially to our economy, operating all over the world. At the same time I urge the Government to ensure that domestic burdens, imposed within the United Kingdom, do not hamper the enterprise of the industry or put it at a disadvantage in relation to its foreign competitors.

Lord Brabazon of Tara

My Lords, I should like to thank both the noble Lord, Lord Underhill, and my noble friend Lord Campbell of Croy for their general support of these Motions. Perhaps I may deal with just four points which were raised. Both the noble Lord, Lord Underhill, and my noble friend Lord Campbell of Croy wondered whether the regulations would help to arrest the decline of the British fleet. Indeed, much of the British fleet's earnings come from cross-trading on routes serving third countries. One of the key steps which the Government can take, in contrast to the steps which the industry might take, is to keep the shipping markets open to British lines. The code, together with the Brussels package, represents a very significant development in keeping these cross-trades open.

The noble Lord, Lord Underhill, mentioned protectionism, even in a modified form, of the liner conference system. Obviously, countries differ in their views about the wisdom of protecting their fleets, but each country has the ability to interfere in their market, whether or not their trading partners agree. The Government consider that an internationally-agreed regime is much less likely to lead to friction than would a variety of conflicting national protectionist measures; and the Brussels package guarantees that protectionism is contained.

The noble Lord, Lord Underhill, also mentioned the question of foreign owners flying foreign flags and employing foreign crews being defined as United Kingdom national shipping lines. The key condition governing national shipping line status is that the company has its principal place of business in the United Kingdom. This mirrors the key condition which has to be satisfied in order to fly the British flag. British Governments have a long-standing policy of welcoming foreign investment, and there is no reason why we should make an exception in this case. Of course, the Government would wish to see British shipping lines operating vessels under the British flag and employing British crews, but these are matters to be determined by each company on the basis of its own commercial judgment. The code convention itself is silent on this issue and the Government see no case for imposing additional conditions.

The noble Lord, Lord Underhill, also asked me whether I could expand on the response in the Written Answer supplied by my honourable friend in another place. I hope that I can satisfy him on that point. The General Council of British Shipping support the definition of the United Kingdom national shipping line and the seafaring trade unions, as I said in my original speech, were fully consulted and the responses came from the British Federation of Commodity Associations and the National Union of Seamen. If I have not answered the noble Lord's point in full, perhaps I may write to him.

On Question, Motion agreed to.