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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Arkin v Borchard Lines Ltd. & Ors  EWHC 687 (Comm) (10 April 2003)
Cite as:  2 Lloyd's Rep 225,  2 LLR 225,  EWHC 687 (Comm),  Eu LR 287
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QUEENS BENCH DIVISION
 EWHC 687 (Comm Court)
Strand, London, WC2A 2LL
B e f o r e :
| YEHESKEL ARKIN|| VALIGN=BOTTOM WIDTH=19%> Claimant|
|- and -|
|BORCHARD LINES LIMITED & ORS||Defendant|
Peter Irvin and Sarah Lee (instructed by Constant and Constant) for the 1st Defendant
Steven Gee QC and Hugh Mercer (instructed by Davies Arnold Cooper) for the 2nd, 3rd, 4th Defendants and the 3rd, 5th 8th and 10th Part 20 Defendants
Vasanti Selvaratnam QC and Fergus Randolph (instructed by Berwin Leighton Paisner) for the 1st and 6th Part 20 Defendant
Hearing dates : 20.2.02 to 26.4.02 ,
2.10.02 to 31.10..02 and 16.12.02 to 20.12.02
Crown Copyright ©
|Article 82 Dominance|
|Were the two Conferences a collective Entity?|
|The Parties' Submission, The Claimant||36-37|
|The Defendants and Part 20 Defendants||38-42|
|What was the Relevant Product Market?||52|
|The Parties' Submissions, The Claimant||53-59|
|The Defendants and Part 20 Defendants||60-61|
|Conclusion as to the Relevant Product Market||62-67|
|Dominant Position, The Claimant's Submissions||68-91|
|Dominant Position, the Defendants' Submissions||92-166|
|Dominant Position: The Relevant Principle||117|
|The Hoffman-La Roche Case||118-127|
|The AKZO Case||128-133|
|The CMB Case||134-136|
|Dominance on the Facts||143-200|
|Abuse of Dominant Position|
|The Parties' Submissions, The Claimant||201-242|
|Abuse of Dominant Position|
|The Defendants' Submissions||243-292|
|Abuse of Dominant Position: the Facts|
|Conclusion on the Case under Article 82||359|
|The Parties' Submissions,|
|The Claimant' Submissions||360-372|
|The Defendants' Submissions||373-402|
|Article 81: the Pleaded Case||403-417|
|Article 81, the Block Exemption and the UNCTAD Code||418-427|
|The Relationship between the case under Article 81 and that under Article 82||428-430|
|Did the Conferences qualify as a Liner Conference?||431-442|
|Measures to reduce the Capacity of BCL and other Competitor||443-447|
|Predatory Pricing and Fighting Ships and Pricing below Cost||448-455|
|Negotiations with MSC||456-465|
|The Conference Agreements of July 1984||466-468|
|Failure to publish the Special Commitment or Selective Rates||469-474|
|Conclusion as to the Case on Article 81|
|The Letter from the Commission of 19 September 1993||475-479|
|Uniform Rates: a Hypothetical Issue||480-485|
|Conclusion on the Article 81 Case||486-488|
|Conclusions on Causation||536-570|
|Insolvency as a Defence||571-587|
|Quantification of Damage||588-592|
Article 82 Dominance
Were the two Conferences a collective Entity?
The Parties' Submissions
The Defendants and Part 20 Defendants
(i) whether the collective entity thus identified is dominant in relation to the market in question,
(ii) whether, if so, the conduct of the collective entity complained of represents an abuse of that entity's dominant position.
"First, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy. As the Commission specifically acknowledges, it is not enough for each member of the dominant oligopoly to be aware that interdependent market conduct is profitable for all of them but each member must also have a means of knowing whether the other operators are adopting the same strategy and whether they are maintaining it. There must, therefore, be sufficient market transparency for all members of the dominant oligopoly to be aware, sufficiently precisely and quickly, of the way in which the other members' market conduct is evolving;
Second, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market. As the Commission observes, it is only if all the members of the dominant oligopoly maintain the parallel conduct that all can benefit. The notion of retaliation in respect of conduct deviating from the common policy is thus inherent in this condition. In this instance, the parties concur that, for a situation of collective dominance to be viable, there must be adequate deterrents to ensure that there is a long-term incentive in not departing from the common policy, which means that each member of the dominant oligopoly must be aware that highly competitive action on its part designed to increase its market share would provoke identical action by the others, so that it would derive no benefit from its initiative (see, to that effect, Gencor v. Commission, paragraph 276);
Third, to prove the existence of a collective dominant position to the requisite legal standard, the Commission must also establish that the foreseeable reaction of current and future competitors, as well as of consumers, would not jeopardize the results expected from the common policy."
What was the Relevant Product Market?
The Parties' Submissions
The Defendants and Part 20 Defendants
Conclusion as to the Relevant Product Market
"If a product could be used for different purposes and if these different uses are in accordance with economic needs, which are themselves also different, there are good grounds for accepting that this product may, according to the circumstances, belong to separate markets which may present specific features which differ from the standpoint both of the structure and of the conditions of competition.
However this finding does not justify the conclusion that such a product together with all the other products which can replace it as far as concerns the various uses to which it may be put and with which it may compete, forms one single market.
The concept of the relevant market in fact implies that there can be effective competition between the products which form part of the same market in so far as a specific use of such products is concerned."
"for the banana to be regarded as forming a market which is sufficiently differentiated from other fruit markets it must be possible for it to be singled out by such special features distinguishing it from other fruits that it is only exposed to their competition in a way that is hardly perceptible."
The Claimant's Submissions
"Consequently Article 86 prohibits any abuse by an undertaking of a dominant position on the common market or a substantial part thereof in so far as it may affect trade between Member States, that is to say in so far as it prohibits any abuse of a position of economic strength enjoyed by an undertaking which enables it to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers."
(i) Market share in the relevant product market;
(ii) Breadth and length of experience of the alleged dominant undertaking in the trade;
(iii) The extent of the service offered by the alleged dominant undertaking by comparison with the service offered by rivals;
(iv) The ability of the alleged dominant undertaking to obtain and utilize market intelligence and information;
(v) The depth of financial resources available to the alleged dominant undertaking relative to the resources of rivals;
(vi) Whether the conduct of the alleged dominant undertaking is typical of that to be expected of undertakings enjoying substantial market power.
The Defendants' Submissions
"An undertaking may be dominant if it possesses a substantial level of market power. The essence of dominance is the power to behave independently of competitive pressures. This can allow a dominant undertaking to charge higher prices profitably (or, if it is a dominant buyer, extract lower prices) than if it faced effective competition. It can also use its market power to engage in anti-competitive conduct and exclude or deter competitors from the market."
It also relies on the definition in United Brands, quoted in para 3.10 of Guidelines:
" .. a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers."
"70. The court has already held inter alia in its judgment of 14 February 1978 in case 27/76 United Brands Company and United Brands Continental bv. v. Commission of the European Communities (1978) ECR 207 that even the existence of lively competition on a particular market does not rule out the possibility that there is a dominant position on this market since the predominant feature of such a position is the ability of the undertaking concerned to act without having to take account of this competition in its market strategy and without for that reason suffering any detrimental effects from such behaviour.
71. However, the fact that an undertaking is compelled by the pressure of its competitiors' price reductions to lower its own prices is in general incompatible with that independent conduct which is the hallmark of a dominant position."
"1. MSC was a well established efficient operator;
2. MSC was offering a regular fixed day of the week service;
3. MSC had access to other routes so they operated on this trade giving shippers the opportunity to trans-ship on to others, and its operations on other trades would be benefited through the extra business generated from this trade;
4. Boaz and Na'ama Arkin had all the contacts giving MSC the benefit of a highly competent and well-connected Israeli agency;
5. MSC used older ships and so had lower costs;
6. MSC was an established shipping line with its own vessels it had the fleet ready to switch into this trade;
7. MSC had substantial capital it sustained substantial losses and continued to trade."
"1. Market shares are an important factor but do not on their own determine whether an undertaking is dominant;
2. It is also necessary to consider the position of other undertakings operating in the same market and how market shares have changed over time;
3. An undertaking is more likely to be dominant if its competitors enjoy relatively weak positions or if it enjoys both a high and stable market share;
4. The Director General will usually look at the history of the market shares of all the undertakings in the market. This is more informative than considering market shares at a particular point in time, partly because such a snapshot might hide the dynamic nature of the market;
5. Volatile market shares for the largest undertakings, or successful entry and expanding market shares for many small undertakings, for example, may indicate that a market is relatively competitive;
6. Market shares are not always a reliable guide to market power. An undertaking with a persistently high market share may not necessarily hold market power for two reasons: first, if entry into the market is easy, the incumbent undertaking is likely to be constrained to act competitively so as to avoid attracting entry over time by potential competitors. Secondly, in a market where undertakings regularly improve the quality of their products, a persistently high market share may indicate no more than a persistently successful innovation. While consideration of market shares over time is important when assessing market power, an analysis of entry conditions and other factors are equally important;
7. Entry barriers and exit conditions are important in assessing whether an undertaking possesses market power. While an incumbent with apparent market power may claim that potential competition is waiting in the wings, a more objective judgment can be made by the Director if hard evidence of successful entry in the recent history of the market is provided;
8. Growth or prospective growth in a market will usually have bearing on the likelihood of entry: entry will usually be more likely in a growing market than in a static or declining one because it will be easier for an entrant to be accommodated without any precipitous collapse in prices and profits;
9. The main potential constraint on the market power of a seller is the strength of buyers and the structure of the buyer's market. The potential market power of a seller is offset by the buying power of a buyer, but for which prices would have been higher.
10. An undertaking's conduct in a market or its financial performance may in itself, provide evidence that it possesses market power;
11. Persistently significant high returns, relative to those which would prevail in a competitive market of similar risk and rate of innovation, may suggest that market power does exist. This would be especially so if they did not stimulate new entry or innovation."
"On the other hand the relationship between the market shares of the undertaking concerned and of its competitors, especially those of the next largest, the technological lead of an undertaking over its competitors, the existence of a highly developed sales network and the absence of potential competition are relevant factors, the first because it enables the competitive strength of the undertaking in question to be assessed, the second and third because they represent in themselves technical and commercial advantages and the fourth because it is the consequence of the existence of obstacles preventing new competitors from having access to the market."
Dominant Position: the relevant Principle
The Hoffman-La Roche Case
"38. The dominant position thus referred to relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, its customers and ultimately of the consumers.
39. Such a position does not preclude some competition, which it does where there is a monopoly or a quasi-monopoly, but enables the undertaking which profits by it, if not to determine, at least to have an appreciable influence on the conditions under which that competition will develop, and in any case to act largely in disregard of it so long as such conduct does not operate to its detriment.
A dominant position must also be distinguished from parallel courses of conduct which are peculiar to oligopolies in that in an oligopoly the courses of conduct interact, while in the case of an undertaking occupying a dominant position the conduct of the undertaking which derives profits from that position is to a great extent determined unilaterally.
The existence of a dominant position may derive from several factors which, taken separately, are not necessarily determinative but among these factors a highly important one is the existence of very large market shares.
40. A substantial market share as evidence of the existence of a dominant position is not a constant factor and its importance varies from market to market according to the structure of these markets, especially as far as production, supply and demand are concerned.
Even though each group of vitamins constitutes a separate market, these different markets, as has emerged from the examination of their structure, nevertheless have a sufficient number of features in common to make it possible for the same criteria to be applied to them as far as concerns the importance of the market shares for the purpose of determining whether there is a dominant position or not.
41. Furthermore although the importance of the market shares may vary from one market to another the view may legitimately be taken that very large shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant position.
An undertaking which has a very large market share and holds it for some time, by means of the volume of production and the scale of the supply which it stands for without those having much smaller market shares being able to meet rapidly the demand from those who would like to break away from the undertaking which has the largest market share is by virtue of that share in a position of strength which makes it an unavoidable trading partner and which, already because of this secures for it, at the very least during relatively long periods, that freedom of action which is the special feature of a dominant position."
"51. Since the relevant market thus has the particular features of a narrow oligopolistic market in which the degree of competition by its very nature has already been weakened, Roche's share, which is equal to the aggregate of the shares of its two next largest competitors, proves that it is entirely free to decide what attitude to adopt when confronted by competition.
Roche's technical lead over its competitors due to the fact that it is the proprietor of several patents relating to vitamin A, even after the expiration of these patents, is a further indication that it occupies a dominant position.
As has been indicated above, the same applies to the absence of potential competition from new manufacturers, whereas the competition derived from the surplus manufacturing capacity of existing undertakings rather favours Roche as is apparent from an extract from management information of the middle of August 1971 which reads 'although BASF will continue to intensify its activities, we expect to achieve a further steady increase of our turnover. However, the present overcapacity of production is such that a fixing of prices cannot be expected for the next few years. Such a development would, of course, be accelerated if one of our smaller competitors ceased production.'"
"58 Market shares of this size either in value or in quantity, complemented by the statement in the document jointly prepared by the parties that the figures for 1971 were 6% lower still than those for 1972 do not in themselves constitute a factor sufficient to establish the existence of a dominant position for most of the period considered by the Commission.
On the contrary it has become apparent that the rectification which the latter had to carry out was due to its omission to take account of the imports of a Japanese competitor which in 1973 accounted for 30% of the market.
On the other hand the Commission, in the case of this particular market, has not indicated what the additional factors would be, which together with the market share as corrected, nevertheless would be of such a kind as to admit of the existence of a dominant position.
The findings lead to the conclusions that, as far as concerns vitamin B3, there is insufficient evidence of the existence of a dominant position held by Roche for the period under consideration."
"The size of these shares, which is in itself significant, is made the more so by the fact that the shares of Roche's competitors must be estimated, after the before-mentioned rectification, for 1974, according to value, at 16%, 6% and 1% in the case of the other producers and at 19% for one or more importers who were in general firms operating from non-Member States.
Such a position as the one which has been established conforms even more typically than the one established in the case of vitamin A to the pattern of a narrow oligopolistic market in which Roche's share is much larger than the combined shares of the two next largest competitors.
Therefore the Commission was right to find that there was a dominant position on this market."
The AKZO Case
"(i) AKZO's market share is not only large in itself but is equivalent to all the remaining producers put together;
(ii) apart from Interox and Luperox the remaining producers have a limited product range and/or are of local significance only;
(iii) AKZO's market share (as well as that of the second and third placed producers Interox and Luperox) has remained steady over the period under consideration and AKZO has always successfully repulsed any attacks on its position by smaller producers;
(iv) AKZO was able even during periods of economic downturn to maintain its overall margin by regular price increases and/or increases in sales volume;
(v) AKZO offers a far broader range of products than any rival, has the most highly developed commercial and technical marketing organization, and possesses the leading knowledge in safety and toxicology;
(vi) AKZO has on its own account been able effectively to eliminate 'troublesome' competitors (besides ECS) from the market or weaken them substantially: the example of SCADO for one shows that AKZO is in a position, if it so wishes, to exclude a less powerful producer;
(vii) once such small but potentially dangerous competitors are neutralized, AKZO has been able to raise the price for the particular product in respect of which their competition was felt."
"60 With regard to market shares the Court has held that very large shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant position: Case 85/76, Hoffmann-La Roche v. EC Commission. That is the situation where there is a market share of 50 per cent such as that found to exist in this case.
61. Moreover, the Commission rightly pointed out that other factors confirmed AKZO's predominance in the market. In addition to the fact that AKZO regards itself as the world leader in the peroxides market, it should be observed that, as AKZO itself admits, it has the most highly developed marketing organisation, both commercially and technically, and wider knowledge than that of its competitors with regard to safety and toxicology .. ."
The CMB Case
"significant difference between Cewal's market share and that of its principal competitor, the benefits derived from the contract with Ogefrem giving Cewal exclusivity, the large size of its network, its capacities and the frequency of its services and, lastly, the experience acquired by Cewal over several decades on the market concerned."
"Competition lies at the heart of any successful market economy and is crucial to the protection of consumers' interests and the efficient allocation of resources. It is a process whereby undertakings constantly try to gain an advantage over their rivals and win more business by offering more attractive terms to customers or by developing better products or more effective ways of meeting their requirements. Competition has several dimensions of which price is only one, albeit in many markets, the most important. It encourages the development of new or improved products or processes and enhances economic growth and living standards."
Dominance on the Facts?
The minutes record that:
"The target of the freight policy was defined to retain as much cargo as possible, some lines were mentioning at least 80% and others 100%."
"Mr Polito pointed out that it should be a helpful factor to Mr Kreis to learn about the changed situation in the market with BCL, MSC and MCL arriving at a market share of 33% by the end of the year against previously 18%. The speed with which the trade moved away from the Conferences to outsiders clearly indicates that there is no major barrier for a shipping company to get into the market.
Mr Polito was advised that the conferences presently followed a mixed freight policy comprising:
- special rate lists open to all clients
- volume related quantity rebates with specific clients
- special rate agreements with clients with quantities linked to such agreements
Mr Polito confirmed that "once the dual rate system has been abandoned and considering that with a trade share of 65% the Conferences do no longer maintain a dominant position the freedom of action for the Conferences has greatly widened. Within reason the Conferences may opt for rate flexibility. It will also be very difficult for the commission to criticize the Conferences for undercutting competition rates. So yes, the Conferences may take fighting actions though there is some legal uncertainty to it."
"Activities of MSC and MCL are as much perturbing as BCL if not more in the UK trade and fighting should be equally directed against all three lines."
"- Based on opposition figures available the FMC proper to pick and to recommend to the Executive Committee another 3 main commodities southbound (next to tyres, paper and vehicle spare parts) which to be especially attacked on basis of competition rates plus a certain percentage having in mind the regular and reliable services of the Conference lines. Case need, however, opposition rates to be matched.
- the existing Special Rate List southbound to be extended by the list of commodities submitted by CIS (as per enclosure) at rates 20% below tariff. Furthermore existing positions of the Special Rate List still above 20% below tariff to be adjusted accordingly."
1. Their market share southbound was over 56 per cent and northbound over 79 per cent.
2. Their experience of the market was long-standing going back for many years in the case of Zim and Borchard in particular.
3. They had long-established contacts with shippers and importers in Israel.
4. The Conference disposed of a large carrying capacity and their sailings were frequent, to the effect that they were able to satisfy demands for regular availability of capacity.
5. The market had seriously unattractive features for operators contemplating entering it; not only was there the pre-existing established Conference position, but also the robust determination of MSC to establish and retain a significant minimum market share, as well as the Arab boycott, the notoriously awkward Israeli shippers and importers and the problems of port congestion.
6. Although the Conferences had lost market share southbound during the previous six months and had failed to limit the market penetration by MSC, this was to a significant extent the consequence of their somewhat restrained response to the entry of MSC. Moreover, they had largely retained the amount of cargo which they had carried before MSC's entry. Their loss of market share was thus attributable to their failure to take advantage of the increasing demand for capacity.
Conferences MSC BCL MCL
Sept 1990 88% 0% 9% 2%
Oct-Dec 1990 73% 15% 9% 2%
Jan-March 1991 66% 27% 7% 1%
Apr-Jun 1991 69% 25% 6% 0%
Jul-Sept 1991 66% 27% 6% 0%
Oct-Dec 1991 70% 30% 0% 0%
Abuse of Dominant Position
The Parties' Submissions
The Claimant's Submissions
(i) predatory pricing;
(ii) the deployment of fighting ships;
(iii) the spreading of rumours of the insolvency of BCL.
"70 Article 82 prohibits a dominant undertaking from eliminating a competitor and thereby strengthening its position by using methods other than those which come within the scope of competition on the basis of quality. From that point of view, however, not all competition by means of price can be regarded as legitimate.
71. Prices below average variable costs (that is to say, those which vary depending on the quantities produced) by means of which a dominant undertaking seeks to eliminate a competitor must be regarded as abusive. A dominant undertaking has no interest in applying such prices except that of eliminating competitors so as to enable it subsequently to raise its prices by taking advantage of its monopolistic position, since each sale generates a loss, namely the total amount of the fixed costs (that is to say, those which remain constant regardless of the quantities produced) and, at least, part of the variable costs relating to the unit produced.
72. Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor. Such prices can derive from the market undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable of withstanding the competition waged against them."
"41. In AKZO this Court did indeed sanction the existence of two different method of analysis for determining whether an undertaking has practised predatory pricing. First, prices below average variable costs must always be considered abusive. In such a case, there is no conceivable economic purpose other than the elimination of a competitor, since each item produced and sold entails a loss for the undertaking. Secondly, prices below average total costs but above average variable costs are only to be considered abusive if an intention to eliminate can be shown."
" .. the time period over which the alleged predatory price or set of prices prevailed or could reasonably be expected to prevail."
"Furthermore, it would not be appropriate, in the circumstances of the present case, to require in addition proof that Tetra Pak had a realistic chance of recouping its losses. It must be possible to penalise predatory pricing whenever there is a risk that competitors will be eliminated. The Court of First Instance found, at paragraphs 151 and 191 of its judgment, that there was such a risk in this case. The aim pursued, which is to maintain undistorted competition, rules out waiting until such a strategy leads to the actual elimination of competitors."
(i) the duration, continuity and scale of sales below ATC;
(ii) attacks on ancillary markets, and unexplained disparities in pricing between markets.
(iii) board minutes referring to the need to make major financial sacrifices to "fight competition".
(iv) the extent of price reductions to ascertain whether the dominant undertaking ever took steps to undercut the outside competitor.
(v) the effect of the conduct on sales by the dominant undertaking and on those of the competitor, in particular whether the former increased while the latter reduced or stopped growing.
" It is, moreover, established that, in certain circumstances, abuse may occur if an undertaking in a dominant position strengthens that position in such a way that the degree of dominance reached substantially fetters competition.
 Furthermore, the actual scope of the special responsibility imposed on a dominant undertaking must be considered in the light of the specific circumstances of each case which show that competition has been weakened (Case C-333/94P, Tetra Pak v. EC Commission).
 The maritime transport market is a very specialized sector. It is because of the specificity of that market that the Council established, in Regulation 4056/86, a set of competition rules different from that which applies to other economic sectors. The authorisation granted for an unlimited period to liner conferences to co-operate in fixing rates for maritime transport is exceptional in light of the relevant regulations and competition policy.
 It is clear from the eighth recital in the preamble to Regulation 4056/86 that the authorization to fix rates was granted to liner conferences because of their stabilising effect and their contribution to providing adequate efficient scheduled maritime transport services. The result may be that, where a single liner conference has a dominant position on a particular market, the user of those services would have little interest in resorting to an independent competitor, unless the competitor were able to offer prices lower than those of the liner conference.
 It follows that, where a liner conference in a dominant position selectively cuts its prices in order deliberately to match those of a competitor, it derives a dual benefit. First, it eliminates the principal, and possibly the only, means of competition open to the competing undertaking. Secondly, it can continue to require its users to pay higher prices for the services which are not threatened by that competition."
(i) exchange of information amongst conference members about competitors' shipping schedules, cargo carried and the identity of shippers;
(ii) the holding of conference meetings to decide which members would offer low fighting rates below standard conference tariffs to customers of competitors;
(iii) the joint fixing of charges related to those made by competitors;
(iv) cost sharing between conference members of the expense of differentials with competitors.
"We accept the Director's submission that to establish an intention to eliminate competition it is sufficient to show that the undertaking concerned must have been aware or, at least, could not have been unaware, that its conduct was of such a nature as to eliminate competition: see the cases cited at paragraphs 450 and 456 below."
"As to the meaning of 'intentionally' in section 36(3), in our judgment an infringement is committed intentionally for the purposes of the Act if the undertaking must have been aware that its conduct was of such a nature as to encourage a restriction or distortion of competition: see Musique Diffusion Francais and Park Pen cited above. It is sufficient that the undertaking could not have been unaware that its conduct had the object or would have the effect of restricting competition without it being necessary to show that the undertaking also knew that it was infringing the Chapter I or Chapter II prohibition: see BPB Industries and British Gypsum cited above, at paragraph 165 of the judgment, and Case T-29/92 SPO and Others v. Commission  ECR II-289, at paragraph 356. While in some cases the undertaking's intention will be confirmed by internal documents, in our judgment, and in the absence of any evidence to the contrary, the fact that certain consequences are plainly foreseeable is an element from which the requisite intention may be inferred. If, therefore, a dominant undertaking pursues a certain policy which in fact has, or would foreseeably have, an anti-competitive effect, it may be legitimate to infer that it is acting 'intentionally' for the purposes of section 36(3)."
(i) The Conferences established a so-called "Fighting Committee". I interpose that, up to March 1990, the July 1984 CONISCON Conference Agreements appear to have included by way of amendment express provision for two such committees, one in Israel dealing with fob shipments to Israel and one on the Continent dealing with cif shipments to Israel. There was also set up, as part of the July 1984 Agreement, as amended, a Freight Managers Committee ("FMC"). Whereas this had a well-defined mandate, the fighting committees had a somewhat obscure function which appears to have involved making "recommendations" to the Executive Committee as to particular specifically named Israeli exporters and importers who were "clients", but not taking any decisions. I infer that these committees were intended to make recommendations about having to compete so as to retain or regain the business of the client. By contrast the FMC was to take decisions on "special rates to specific clients, to monitor competition", and to meet regularly and, if necessary, in cases of emergency at seven days notice from any member. Mr Levy of Zim was a member of the FMC and he said in evidence that he provided to it information as to the activities of competitors. He stated that it was the duty of the Executive Committee to make decisions and set guidelines on rates whereas the function of the FMC was to discuss information about fluctuation of the market and "to discuss individual clients" and they were "able to play around a little bit in the rates offered to big clients" within the limited remit given to them by the Executive Committee. He was, as the Claimant emphasizes, unable in cross-examination to explain exactly what the "fighting committee" was or what it did. I further interpose that, whereas the separate committee known as the "fighting committee" had apparently been abolished in March 1990, the FMC continued to exist but by the joint meeting held on 10 April 1991 a local FMC in Israel was reinstated "for the purpose of ensuring an utmost exchange of information on competition and to co-ordinate possible contacts/visits to clients". It was, however, to have no power to decide on freight rates. That was to be the function of the Special Lines Committee. Mr Levy was unable to explain precisely the functions of these committees.
(ii) The Claimant relies on the conduct of the Fighting Committee and of the Conferences before the commencement of the relevant period in April 1991 as evidence of the Conferences' eliminatory intent during the relevant period. The conduct relied upon is as follows:
(a) The Conference attacked BCL as soon as it entered the market in 1988 by disseminating to the members a circular containing information about BCL's vessels, times of sailing, ports of call and by agreeing "to closely follow up" BCL's bookings of cargo.
(b) The Conference immediately introduced the NCR system which was intended to induce shippers not to use BCL in preference to the Conference. By June 1990 there were over 100 shippers on the blacklist to be charged an additional rate due to shipping with non-Conference carriers.
(c) At a joint Conferences meeting on 7 March 1990 it was agreed to try to regain some of the BCL major carryings in such products as paper, tyres and vehicle spare parts and on 7 and 8 March 1990 the FMC meeting decided on selective targeting of BCL's customers in response to information from Mr Simkin of Zim that the Principals had approved that positive action be taken on the Continental Service "to deter BCL".
(d) When MSC had announced that it was to enter the market, it was agreed at the 16 August 1990 meeting of the conferences in London to reduce rates on BCL's main cargoes of paper, tyres and spares.
(e) After MSC's entry, the Conferences agreed at their 17 October 1990 special meeting on a freight policy having a target of retaining as much cargo as possible with some lines mentioning 80 per cent and others 100 per cent.
(f) At the 26 November 1990 Conference meeting it was decided to reduce the UK-Israel southbound tariff to levels slightly above the levels being quoted by BCL and MSC.
(g) At the 15 January 1991 joint meeting in London the Zim representative stated that BCL must still be considered as serious a competitor as anyone else.
(h) At the 10th April 1991 joint meeting in Tel Aviv it was agreed to reinstate the local FMC in Israel with the purpose of ensuring the utmost exchange of information on competition and to co-ordinate contacts and visits to clients and also with the power to decide on freight matters, the minute further reading:
"Since it is the hope and intention that with the extended fighting measures increasing quantities of cargo will be regained from competition it must be ensured that at all times sufficient tonnage is being made available by members in order to cope with such increased quantities without failure."
(iii) The Claimant relies on the following conduct after the start of the relevant period.
(a) On 6 May 1991 it was noted by Mr Levy of Zim, secretary of the FMC, that the Conferences' recent freight adjustments were "acting hard and painfully on MSC reps' .. relationship with their clients." It was hoped that this would cause more and more importers and exporters to switch back to conference vessels.
(b) In the minutes of the joint conferences meeting at Hamburg on 11 12 June 1991 it was recorded:
"In the trade from UK the fight against outsider competition is presently being fought on a case to case basis ie. Special rates for specific clients which policy provide to be successful due to the specific structure of the UK market. In the trade from the Continent a similar policy would be less promising because of the huge number of shippers/receivers which would have to be covered by special rate requests. For this reason lines agreed on 2.5.91 again on a linear rate adjustment effective 5.5.91 after MSC had reduced their rates further as of 29.4.91"
(c) In June to July 1991 the FMC and the Conferences circulated to members reports of ship movements by BCL and MSC as well as sailing schedules.
(d) Following the secret meeting with Mr Aponte of MSC on 4 July 1991 to which I have already referred (see paragraph
(184) above) the Conferences, having rejected Mr Aponte's offer on market share and to stabilize higher rates, determined to intensify their efforts to cause MSC substantially to lose market share by reducing rates.
(e) In July 1991 Zim was reported to be threatening shippers on the Turkey-Israel route that, if they used BCL, Zim would refuse to carry their containers. I interpose that there is no evidence to suggest that, if this was indeed a true report, this conduct was sanctioned or in any way supported or even known of by the Conferences. Nor did it reflect any identifiable general policy of the Conferences.
(f) Zim was also reported to be threatening an associated company of Singapore agents called Everstar who were contemplating acting as agents for BCL. Again there is no evidence that the Conference approved or even knew about such conduct by Zim or that this conduct was consistent with the Conferences' policy.
(g) After BCL had left the market the Conference continued to try to regain its former market share from MSC, as is shown by Mr Borchard's messages on 7 and 12 February 1992 referring to "fighting competition".
(iv) The Claimant further submits, in reliance on the evidence of Mr Meurs of KNSM that BCL would inevitably be adversely affected by the price war between the Conference and MSC and was likely to suffer by the Conference's policy of targeting shippers of paper, tyres and spares. Mr Levy's evidence to the same effect is also relied upon. The Claimant also relies on the evidence of Mr Stramer of Zim that some members hoped that by fighting a fierce price war in the summer of 1991 MSC would be driven to "come on their knees" to renew negotiations on market share. Any such accord would clearly have been unlawful under Article 81.
(i) Once it is established that an undertaking is dominant it owes a special responsibility to do nothing which risks a material reduction in, or the elimination of, competition in the relevant market. The CMB Case illustrates this principle. In that case the outsider had succeeded in gaining initial market penetration to the extent of less than 10 per cent, leaving the conference with about 90 per cent, but, as evidence of the competitors' subsequent increase of market share showed, where the competitor was likely to be able to increase its market share beyond the level during the relevant period. The Conference was held not to be entitled to set matching rates targeting the competitors' customers to retain and regain its share even though such rates were not below ATC.
(ii) There is no reported case where aggressive pricing by a dominant undertaking has been held to be lawful on grounds of self-defence and several cases such as CMB, Tetra-Pak, AKZO and Napp where such defence has failed.
(iii) Even if, contrary to the Claimant's primary case, self-defence could be a defence under European Law, two conditions would have to be established by analogy with English law principles on the use of reasonable force, namely (a) that there was a real and credible threat to the very existence of the undertaking and (b) the response to that threat was reasonable and proportionate.
(iv) As to these pre-conditions, it is submitted by the Claimant that MSC did not pose a real and credible threat to the existence of the Conference. In particular, MSC was well known as a "niche operator" rather than a main-stream carrier. This was supported by an article in the journal 'Containerisation International' in February 1990 produced by Mr Johnson. It is also supported by the minutes of the joint conferences meeting in August 1990 to which I have already referred and further by the evidence of a number of the defendants' witnesses. Mr Koch of DNOL stated that it was well known to him in the early 1990s that MSC had a policy of entering a market and then obtaining market share by aggressive pricing in order to establish a target of 30 per cent in the hope that when they had obtained that target the rates could be stabilized, which was their tactic on the Europe to South Africa market. Mr Stramer's evidence was to similar effect. Mr Meurs said in evidence that, with the benefit of a little hindsight it was improbable that MSC would want to obtain a market share as high as 50 per cent because "they knew that that would not be very long term sustainable". MSC's aim was probably 30 per cent from the outset. Further, in view of the fact that according to the evidence of Mrs Richards, which I accept, when in January 1991 MSC introduced its two larger vessels on to the market it had slightly less than 30 per cent of market capacity and less than 25 per cent of market sailings, it must have been apparent that MSC were seeking a market share of only about 30 per cent. The meetings between the Conferences and Mr Aponte in January and July 1991 made it clear to the Conferences that MSC only sought a limited penetration and the July meeting suggested that this might be agreed as low as 25 to 28 per cent.
In the CMB Case the Commission referred to Article 18 of the UNCTAD Code, which provides:
"Members of a conference shall not use fighting ships in the conference trade for the purpose of excluding, preventing or reducing competition by driving a shipping line, not a member of the conference, out of the said trade."
"(1) The dissemination of information to conference members by a conference secretariat of the dates of forthcoming departures scheduled by the independent company, of the type of cargoes to be loaded and, as far as information was available, of the identity of the shippers;
(2) The convening of a Special Fighting Committee which had as its task the taking of decisions as to which conference ships would offer reduced rates different from the conferences' normal rates at which vessels were to sail either on or close to (before or after) the date on which the independent vessel was scheduled to sail;
(3) The adoption of fighting rates derogating from the conference's scale of charges, fixed by common agreement but which depended upon the charges applied by the independent line; and
(4) A sharing of the losses from the application of rates which differed from the conferences' normal rate."
(i) fighting ships involve a conference setting rates at either reduced levels of profit or at levels which make a loss,
(ii) fighting ships are illegal if the rate set either matches that of the independent competitor or undercuts the independent thereby forcing the independent further to reduce its rates if it is to maintain competition.
(iii) on the basis of the judgments of the ECJ in the TAA Case and the FEFC Case the block exemption does not provide for protection against the use of fighting ships.
"I would like to draw your attention to the endless stories from our various competitors and "friends" claiming that we shall not last more than a few months, that we shall not have vessels to carry your cargoes, that we shall not be able to supply trucks from Eilat to Tel Aviv etc etc etc."
Abuse of Dominant Position:
The Defendants' Submissions.
(i) selective discounting with eliminatory intent;
(ii) pricing below ATC with eliminatory intent;
(iii) pricing below AVC unless the defendant proves that there was no eliminatory intent.
"The reason for restraining dominant undertakings from seeking to hinder the maintenance of competition by, in particular, eliminating a competitor is that they would thus be enabled to charge abusively high prices. Thus, an inefficient monopoly would be reinstated and consumers would benefit only in the short run. If that result is not part of the dominant undertaking's strategy it is probably engaged in normal competition."
"Yes, the purpose of the conduct must be such that it is not conduct that a competitor would enter into in normal competitive circumstances, where what is meant by normal competitive circumstances are circumstances where you cannot conceive of eliminating someone and making the market less competitive and therefore more remunerative for you in the future."
"As has already been pointed out, it has been consistently held that whilst the fact that an undertaking is in a dominant position cannot deprive it of entitlement to protect its own commercial interests if they are attacked: and whilst such an undertaking must be allowed the right to take such reasonable steps as it deems appropriate to protect those interests, such behaviour cannot be allowed if its real purpose is to strengthen this dominant position and thereby abuse it (in particular, BPB Industries and British Gypsum v. E C Commission".
"Although a dominant undertaking is permitted to meet competition by 'making defensive adjustments, even aligning itself on [the competitor's] prices, in order to keep the customers which were originally its own', it would not be legitimate for it to attempt to maintain, through a selectively offered price reduction, the customers that it has poached through below-cost pricing from its competitors unless it gives its own 'customers the benefit of this adjustment'".
"Thus, to the extent that it is necessary, I believe that the present case passes the test of recoupment. At the same time, I would say that some such requirement should be part of the test for abusively low pricing by dominant undertakings. It is implied in the first paragraph of the quotation from AKZO (see paragraph 126 above). It is inherent in the Hoffmann La Roche test (see paragraph 24 above)."
"Therefore, sales below average (or short-run marginal; AKZO, paragraph 70) costs are in effect presumed to be abusive. While it is usually rational to sell above average variable costs, because that permits some return on capital, where the market will not bear a higher price, it is not usually rational to sell below average variable costs. Marginal costs need not be incurred and business has no interest in incurring them so as to make a loss. A dominant firm would be permitted, however, to rebut this presumption by showing that such pricing was not part of a plan to eliminate its competitor."
"To the extent that this implies a rigid presumption that pricing below average variable costs must be predatory, it is open to criticism. Prices below average variable costs may be set pro-competitively .".
"2. Non-conference shipping lines competing with a conference should adhere to the principle of fair competition on a commercial basis;
3. In the interest of sound development of liner shipping service, non-conference shipping lines should not be prevented from operating as long as they comply with the requirements of paragraph 2 above."
"Before variable costs can be discussed in detail, the relevant time frame must be clarified as the variability of a cost and hence the magnitude of variable costs will depend crucially on the time frame under consideration given enough time, for instance, a machine can be replaced by a smaller or larger machine. In AKZO the Court did not discuss explicitly the timescale appropriate for analyzing predation."
1. Before MSC entered the market, in 1990, the Conference had raised its rates at times on both southbound and northbound cargo which was quite inconsistent with a policy at that time of forcing BCL out of the market.
2. Conference members such as DNOL and Furness Withy were driven to leave the market after BCL's departure due to the low rates at the end of 1991 and CIS went into liquidation at the beginning of 1992 which, as Mr Meurs, of KNSM, stated, showed that the rate was not directed at BCL. It was therefore improbable that such members were taking the course they did on rates in order to drive out BCL.
3. There was no evidence of recoupment, for rates never went back to their level before the rate war.
4. The Conferences responded to rate cuts by MSC and did not initiate such cuts. Their purpose was to regain lost market share or to regain specific business. Had the Conferences ignored rate cuts by MSC and BCL that would have been suicidal. They would have lost even more business than they did.
5. For as long as BCL was the Conference's main competitor its share of the market remained more or less stable at fairly stable rates over a period of three years. It was only when MSC entered the market that BCL began to cut rates to protect itself against MSC. As MSC reduced its rates in response so the Conferences reduced their rates to compete with MSC.
6. The Conference Lines were taking legal advice throughout the relevant period. Zim drew attention to a number of documents which demonstrated the Conference's concern not to cross the line into breaches of European rules in the course of competition with BCL (March 1990). Advice was taken from Mr David Malkoff, an Israeli lawyer. At the 16 August 1990 joint conferences meeting it was decided that Mr Polito of Lovells should be informed of all decisions ("in order to clear the legal aspects vis-ΰ-vis Brussels and the EEC regulations)". At the 27 September 1990 meeting it was decided to consult Mr Polito about abandonment of the dual rate and its replacement by individual agreements and/or reductions of rates provided they were within EEC regulations. Further, Mr Polito attended the 13-14 November 1990 meeting and gave the advice which is set out at paragraph 155) above.
Given that the Conferences were already under threat of a fine in the pending proceedings before the Commission, it was inconceivable that, they would wish to imperil their position by acting contrary to legal advice and to pursue any attempt to exclude BCL from the market. The Conferences were demonstrating an intention to comply with the advice which they received. Their decision to abandon the dual rate and the non-contractor or rate system made it most improbable that they had set out with the purpose of forcing BCL out of the market.
7. By the time BCL entered the market in September 1988 the so-called "fighting committee" had ceased to exist: there was simply a freight managers committee (FMC) whose function was to collect information about competitors' operations. It was not directed at BCL. It had no power to set freight rates policy, which had to be approved by the executive committee.
8. No fighting fund was ever created.
9. Accumulation of information about competitors' operations was not sinister it was a normal feature of the trade, pursued by BCL itself.
"189. Although it is true, as the applicant points out, that the fact that an undertaking is in a dominant position cannot disentitle it from protecting its own commercial interests if they are attacked, and that such an undertaking must be conceded the right to take such reasonable steps as it deems appropriate to protect its said interests, such behaviour cannot be countenanced if its actual purpose is to strengthen this dominant position and abuse it.
190. Even if the possibility of a counter-attack is acceptable that attack must still be proportionate to the threat taking into account the economic strength of the undertakings confronting each other."
Abuse of Dominant Position: the Facts
"Noted regretfully that no agreement was reached regarding reducing rates n/b, which means that the lines are compelled to continue with the existing mechanism of the FMC on an individual basis.
Have expressed already our opinion at last FMC meeting, London 26.11.90, that this system is working against the Conference Lines.
The idea that by keeping the current rates at a high level, lines will indeed succeed to maintain their earnings, is in our opinion an illusion, very soon. Losses which we shall suffer due to losing shipments will be much higher than the eventual earnings.
At present we are losing more and more customers who switch to competition without leaving a trace. They just disappear from our manifests and reappear in the lists of competition. Those lists are becoming longer and longer from one sailing to the other. If we want to regain those customers we shall very soon have no choice but to match competition rates or even quote lower, which will decrease our income further.
Such a deterioration could have been stopped only by a reduced tariff or by introducing special commodity rates at a level preventing customers from switching to competition.
The opinion that lines will be able to keep different clients by granting each one of them special rates/commitment, is also dangerous, because such agreements with so many customers cannot remain secret for a long period. Sooner or later this will be known by other customer shipping same commodities or similar at higher rates, and the results will not be to the benefit of the conference lines.
Wish to emphasise that we experienced already the system of negotiating with individual clients and the conclusions were very disappointing. The moment that a name of a customer is mentioned in one of the telexes or faxes same client is being "attacked" by salesmen of all the lines who try to obtain his shipments. Furthermore, the salesmen who are anxious to obtain new bookings, contribute to the deterioration of rates by offering lower rates to clients who even didn't ask for it. (This happened already time and again )
All these will create Chaos in the market, leading to a situation in which the Conference Lines will compete between themselves and fight each other (recently experienced).
The only conclusion to prevent such a deterioration is by implementing a new list of special rates at a realistic level, as already suggested at last FMC meeting in London."
(2) Fighting Ship
(3) Circulating Rumours
Conclusion on the Case under Article 82
The Parties' Submissions
"The parties are committed to do their utmost in order to compete with any third party Line commencing any service within the scope of this Agreement and, to that effect, they shall abide by the Executive Committee's decisions in all matters pertaining thereto."
Article 81(ex Article 85)
1. The following shall be prohibited as incompatible with the common market; all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings;
- any decision or category of decisions by association of undertakings;
any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not;
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
4. Regulation 4056/86: the Block Exemption provided: Agreements, decisions and concerted practices of all or part of the members of one or more liner conference are hereby exempted from the prohibition in Article 85(1) of the Treaty, subject to the condition imposed by Article 4 of this Regulation, when they have as their objective the fixing of rates and conditions of carriage, and, as the case may be, one or more of the following objectives:
(a) the co-ordination of shipping timetables, sailing dates or dates of calls;
(b) the determination of the frequency of sailings or calls;
(c) the co-ordination or allocation of sailings or calls among members of the conference;
(d) the regulation of the carrying capacity offered by each member;
(e) the allocation of cargo or revenue among members.
5. The exemption provided for in Articles 3 and 6 shall be granted subject to the condition that the agreement, decision or concerted practice shall not, within the common market, cause detriment to certain ports, transport users or carriers by applying for the carriage of the same goods and in the area covered by the agreement, decision or concerted practice, rates and conditions of carriage which differ according to the country of origin or destination or port of loading or discharge, unless such rates or conditions can be economically justified.
Any agreement or decision or, if it is severable, any part of such an agreement or decision not complying with the preceding paragraph shall automatically be void pursuant to Article 85(2) of the Treaty."
" according to Article 85(3)(b) of the Treaty, an exemption cannot be granted to an agreement which eliminates competition. In that regard, the Court of Justice has stated that 'if Article [3(g)] provides for the institution of a system ensuring that competition in the common market is not distorted, then it requires a fortiori that competition must not be eliminated. This requirement is so essential that without it numerous provisions of the Treaty would be pointless (Case 6/72 Europemballage Corporation and Continental Can v. Commission  ECR 215, paragraph 24). Similarly, it is clear from the case law that 'price competition is so important that it can never be eliminated' (Case 26/76 Metro v. Commission  ECR 1875, paragraph 21).
In Regulation No 4056/86, the Council did not intend to derogate, and indeed could not have derogated, from Article 85(3) of the Treaty. On the contrary, the Council refers on several occasions, in particular in the 13th recital in the preamble to Regulation No. 4056/86 and in Article 7 thereof, to the need to ensure that the block exemption does not cover practices, which are incompatible with Article 85(3) of the Treaty. As regards the exemption of a horizontal price-fixing agreement which has as its object to effect the elimination, at least to a large extent, of internal competition between conference members, the existence of external competition from the independent shipping companies, that is those which operate outside the conference, constitutes the principal guarantee of maintaining effective competition where there is a block exemption. The introduction, or the practice, of differentiated prices makes it possible to attract into a group independent shipping companies which, otherwise, would continue to compete with the members of the conference. Admittedly, any agreement between shippers fixing two, or more, levels of prices does not automatically lead to the elimination of external competition. Thus, an agreement fixing several levels of prices, of the type contained in the TAA, might bring together only carriers representing, collectively, a relatively small part of the market and thus, not lead not the elimination of external competition. By contrast, a conference whose members charge uniform freight rates might represent almost the entire market and eliminate external competition. However, those situations are largely theoretical and, in general, it cannot be disputed that the possibility of fixing different levels of prices makes it possible to attract into the group companies which, without that flexibility, would remain independent and that this situation is likely to lead to the elimination of external competition; by contrast, the obligation to fix uniform freight rates for all conference members is not such as to encourage all operators to join the conference, which guarantees the existence of external competition."
"12. In arriving at a decision on questions of tariff policy in all cases mentioned in this Code, the following points shall, unless otherwise provided, be taken into account.
(a) Freight rates shall be fixed at as low a level as is feasible from the commercial point of view and shall permit a reasonable profit for shipowners;
(b) The cost of operations of conferences shall, as a rule, be evaluated for the round voyage of ships, with the outward and inward directions considered as a single whole. Where applicable, the outward and inward voyage should be considered separately. The freight rates should take into account, among other factors, the nature of cargoes, the interrelation between weight and cargo measurement, as well as the value of cargoes;
(c) In fixing promotional freight rates and/or special freight rates for specific goods, the conditions of trade for these goods of the countries served by the conference, particularly of developing and land-locked countries shall be taken into account.
18. Fighting Ships
Members of a conference shall not use fighting ships in the conference trade for the purpose of excluding, preventing or reducing competition by driving a shipping line not a member of the conference out of the said trade."
1. they cannot establish that they are a "liner conference" within Article 3;
2. they cannot establish compliance with Article 4.
(i) In reliance on the judgment in the CMB Case, supra, it is submitted that although there was an overarching agreement or there were concerted practices between the CONISCON and UKISCON Conferences, they charged different rates for carriage on their respective routes and operated different pricing strategy and those different rates and pricing strategies were the result of joint committee agreements.
(ii) The UNCTAD Code provides by Articles 9 and 11, and there were requirements of the Block Exemption that, the common and uniform rate should be available to all shippers in a simple clear form and should be published and be the subject of prior consultation with shippers councils and further that, having been published, the tariff has to be strictly adhered to. None of these requirements were complied with.
(iii) Throughout 1990 and 1991 the Conferences adopted a system of discriminatory and selective pricing that was targeted at regaining those customers lost to BCL and MSC. Reliance is placed on the twin system of emergency rates and selective or special rates below the tariff which was operated in 1990 and in 1991, including during the relevant period, and which I have already referred to in my consideration of the case on Article 82. The Claimant relies as evidence of what was going on in the course of the relevant period to the minutes of the joint meetings of the Conferences on 10 April 1991 and 11/12 June 1991 and on the evidence of Mr Meurs and Mr Record which I have already discussed. The Claimant draws attention to evidence that by the end of 1990 the Conference Lines were competing for customers against themselves, as recorded in Iscont's message, which I have quoted at paragraph 325 above. It is further argued that the Conferences cannot justify selective rates by reliance on the provision in Article 5 of the Block Exemption for loyalty rebates. Not only did the Conferences not view them as such and indeed on 17 January 1992 in their Response to the Commission's Statement of Obligations stated that loyalty arrangements were abandoned "early in 1991", but the emergency special rates did not comply with the other requirements of Article 5. In particular, these special rates were kept secret from the market were not in writing and lacked any economic justification since they were directed to targeting previous customers.
(iv) During the relevant period the Conferences had the objective of reaching an unlawful agreement on rates and market share with MSC and there had been meetings with Mr Aponte in January 1991 and July 1991 at the first of which there was apparently a measure of agreement on which Mr Aponte had reneged. In the end, in February/March 1992 there was an agreement with MSC which was unlawful and allowed the Conferences to restore rates to profitable levels.
The Defendants' Submissions
"Accordingly, I have no doubt that when a person detained and proposed to be removed as an illegal entrant enjoys the right to be in this country in pursuance of leave to enter and remain here which is valid on its face the onus lies on the immigration officer to prove the fact that the leave was obtained by fraud in contravention of section 26(1)(c) of the Act. The question about which I have felt most difficulty concerns the standard of proof required to discharge this onus. I was at first inclined to regard the judgment of Lord Parker CJ in Reg v. Governor of Brixton Prison, Ex parte Ahsan  2 QB 222 as sufficient authority for the proposition that proof is required beyond reasonable doubt. But I have been persuaded by the reasoning on this point in the speech of my noble and learned friend, Lord Scarman, and by the authorities which he cites that that proposition cannot be sustained. These have led me to the conclusion that the civil standard of proof by a preponderance of probability will suffice, always provided that, in view of the gravity of the charge of fraud which has to be made out and of the consequences which will follow if it is, the court should not be satisfied with anything less than probability of a high degree. I would add that the inherent difficulties of discovering and proving the true facts in many immigration cases can afford no valid ground for lowering or relaxing the standard of proof required. If unlimited leave to enter was granted perhaps years before and the essential facts relied on to establish the fraud alleged can only be proved by documentary and affidavit evidence of past events which occurred in some remote part of the Indian sub-continent, the courts should be less, rather than more, ready to accept anything short of convincing proof."
"it should be pointed out that for the purposes of establishing an infringement of Article 86 of the Treaty, it is not sufficient, as the Commission's agent claimed at the hearing, to 'recycle' the facts constituting an infringement of Article 85, deducing from them the finding that the parties to the agreement or to an unlawful practice jointly hold a substantial share of the market, that by virtue of that fact alone they hold a collective dominant position, and that their unlawful behaviour constitutes an abuse of a dominant position."
Article 81: the Pleaded Case
1. the taking of measures designed to reduce capacity and so reduce competition, although the measures have not been particularized in any detail;
2. the adoption of a scheme of predatory pricing and/or pricing below ATC or AVC with a view to driving the new competitors out of the market and/or into insolvency;
3. the absence of common and uniform rates of freight due to the use of selective rates, there being no particularisation of any precise instance of such selective rates being charged;
4. the conduct of negotiations with MSC with the unlawful objective of arriving at a market sharing agreement.
1. The absence of a common and uniform rate due to the fact that the two conferences charged different rates for carriage on their respective routes and pursued different pricing strategies.
2. Non-compliance with Articles 9 and 11 of the UNCTAD Code in respect of publication and clarity of rates and failure to consult shippers councils.
3. Non-compliance specifically with Article 4 of the Block Exemption in as much as the rates charged by the Conferences on the three routes covered were not objectively "economically justified" because they were below cost, were discriminatory and were aimed at eliminating competition from MSC and BCL and had the consequence that shippers would choose to ship their cargoes to Israel from ports that had lower rates than others thereby favouring points in one country rather than another.
Article 81, the Block Exemption and the UNCTAD Code
1. that the agreement, decision and concerted practice in question contributes to improving production or distribution of goods or to promoting technical or economic progress, while allowing consumers a share of the resulting benefit;
2. that the agreement, decision or concerted practice in question does not do either (a) or (b), the latter being "to afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question."
"3. Whereas this situation necessitates the adoption of a Regulation applying the rules of competition to maritime transport; whereas Council Regulation (EEC) No. 954/79 of 15 May 1979 concerning the ratification by Member States of, or their accession to, the United Nations Convention on a Code of Conduct for Liner Conferences will result in the application of the Code of Conduct to a considerable number of conferences serving the Community; whereas the Regulation applying the rules of competition to a maritime transport foreseen in the last recital of Regulation (EEC) No. 954/79 should take account of the adoption of the Code; whereas, as far as conferences subject to the Code of Conduct are concerned, the Regulation should supplement the Code or make it more precise;
5. Whereas this Regulation should take account of the necessity, on the one hand to provide for implementing rules that enable the Commission to ensure that competition is not unduly distorted within the common market, and on the other hand to avoid excessive regulation of the sector;
6. Whereas this Regulation should define the scope of the provisions of Articles 85 and 86 of the Treaty, taking into account the distinctive characteristics of maritime transport; whereas trade between Member States may be affected where restrictive practices or abuses concern international maritime transport, including intra-Community transport, from or to Community ports; whereas such restrictive practices or abuses may influence competition, firstly, between ports in different Member States by altering their respective catchment areas, and disturb trade patterns within the common market;
14. Whereas the automatic nullity provided for in Article 85(3) in respect of agreements or decisions which have not been granted exemption pursuant to Article 85(3) owing to their discriminatory or other features applies only to the elements of the agreement covered by the prohibition of Article 85(1) and applies to the agreement in its entirety only if those elements do not appear to be severable from the whole of the agreement whereas the Commission should therefore, if it finds an infringement of the block exemption, either specify what elements of the agreement are by the prohibition and consequently automatically void, or indicate the reasons why the agreement is therefore void in its entirety;"
"Liner conferences" means a group of two or more vessel-operating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the framework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provisions of liner services."
1. Uniform rates involve the charging by each member of the conference of the same rate for the same service, that is to say every shipper who seeks carriage of a given commodity from Port A to Port B is charged the same rate, no matter which conference member carries that shipper's commodity.
2. Common rates involve the charging by all members of the conference to all shippers of a different rate for the same service depending on whether the cargo and service are subject to "promotional freight rates" as defined by Article 15 of the UNCTAD Code, or special rates under "loyalty arrangements" as contemplated by Article 7 of the UNCTAD Code and Article 5(2) of the Block Exemption. In the latter case, for example, the same reduced rate is charged to all those shippers who enter into a loyalty agreement with the conference.
3. That definition of liner conference is not inconsistent with nor does it preclude the taking of independent action by individual members of the conference. This appears from the following passage from the judgment in the TAA Case at paragraph 159:
"Contrary to the applicant's submissions, that interpretation of the concept of a liner conference is not inconsistent with the possibility, acknowledged by the Commission, for a conference member to take independent action. That action is fundamentally different from the system of differentiated prices. The taking of independent action, which enables a conference member, subject usually to 10 days' notice, to offer, for a specific product, a lower freight rate than that in the conference tariff, does not create another level of prices which may be generally charged, since that action concerns only a single ad hoc transaction. The stabilizing effect of the existence of uniform or common freight rates for all conference members therefore continues in the event of independent action, whereas it is undermined where the conference tariff, which lists all the freight rates applicable, is replaced by a system of rates which vary according to the members. In addition, independent action is, by definition, decided on and taken by a carrier in accordance with the principle of competition law that each operator determines, completely independently, the policy which he intends to follow on the market; by contrast, a system of differentiated prices implies an anti-competitive arrangement additional to that of the liner conference, since it is in practice akin to the agreement between a conference and independent companies."
The Relationship between the case under Article 81 and that under Article 82
Did the Conferences qualify as a Liner Conference?
Measures to reduce the Capacity of BCL and other Competitors
Predatory Pricing and Fighting Ships and Pricing below Cost
(i) that the Block Exemption is to be read as incorporating the detailed provisions of the code or has to be construed so as to give effect to such provisions as Article 12(a);
(ii) on its proper construction Article 12(a) imposes on conferences a duty not to price below average total cost.
Negotiations with MSC
"Whereas there can be no exemption if the conditions set out in Article 85(3) are not satisfied; whereas the Commission must therefore have power to take the appropriate measures where an agreement or concerted practice owing to special circumstances proves to have certain effects incompatible with Article 85(3); whereas, in view of the specific role fulfilled by the conferences in the sector of the liner services, the reaction of the Commission should be progressive and proportionate; whereas the Commission should consequently have the power first to address recommendations, then to take decisions."
The Conference Agreements of July 1984
Failure to publish the Special Commitment or Selective Rates
"Tariffs, related to conditions, regulations and any amendments thereto shall be made available on request to transport users at reasonable cost, or they shall be available for examination at offices of shipping lines and their agents. They shall set out all the conditions concerning loading and discharge, the exact extent of the services covered by the freight charge in proportion to the sea transport and the land transport or by any other charge levied by the shipping line and customary practice in such matters."
"Where the persons concerned are in breach of an obligation which, pursuant to Article 5, attaches to the exemption provided for in Article 3, the Commission may, in order to put an end to such breach and under the conditions laid down in Section II:
- address recommendations to the persons concerned;
- in the event of failure by such persons to observe those recommendations and depending upon the gravity of the breach concerned, adopt a decision that either prohibits them from carrying out or requires them to perform specific acts or, while withdrawing the benefit of the block exemption which they enjoyed, grants them an individual exemption according to Article 11(4) or withdraws the benefit of the block exemption which they enjoyed."
(i) whether the Commission, if they had been drawn to its attention, would have recommended that there should be publication of special commitment rates or selective rates;
(ii) whether, if that recommendation were made, the Conferences would have observed it; and
(iii) whether, if they failed to observe it, the Commission would have withdrawn the benefit of the Block Exemption.
The Letter from the Commission of 19 September 1993
"The hearing took place on 30 April 1992.
After the hearing the lines have communicated evidence which demonstrate that they have formally terminated their rate differential system in January 1991 and abandoned their loyalty arrangements in February 1991.
Since February 1991, the lines have thus discontinued those aspects of their Agreements to which the Commission objected in the Statement of Objections. There seems to be no longer any necessity to require them to terminate their arrangements as was envisaged in the Statement of Objections.
On the basis of the information available and after a preliminary examination, the Agreements which were amended early in 1991 appear to be Conference agreements which can benefit now from the block exemption granted by Article 3 of Regulation no. 4056/86.
In view of the termination of the infringements and also of the fact that the trades concerned seem open now to competition as demonstrated by the successful entry of MSC, I think that this case does not display any more a sufficiently strong community interest to make a formal decision necessary.
Please let me know if you wish to make further comments, and do so within two months of the date of receipt of this letter. We, of course, reserve the right to re-examine this case should substantial new information be made available, whether it be through your observations or a later date."
Uniform Rates: a hypothetical Issue
Conclusion on the Article 81 Case
The Claimant's Submissions
(1) but for the unlawful conduct of the defendants, BCL would have made substantial profits on the relevant market;
(2) the defendants' unlawful conduct forced BCL to leave the relevant market in October 1991 and subsequently to cease trading altogether in May 1992;
(3) but for defendant's unlawful conduct BCL would have remained in business and would have continued to make substantial profits on the relevant market in the years after it ceased to trade.
(i) The rate war caused great losses to BCL and the Multifleet group. Before the rate war began, BCL was trading profitably with profits at the rate of about $774,245 p.a. on the relevant market. Mr. Arkin's shipowning companies were also making good profits during the same period, as shown by the amount of net profits earned during the period 1 January 1991 to May 1992, agreed by the experts to be about $8.8 million, and as at 18 April 1991 the ship owning companies in the Multifleet group were valued at $30.35 million with a net equity of over $14.2 million. As agreed between Mr. Dyson and Mr. Wilkinson, the accounting experts, BCL and Multifleet suffered substantial losses on the relevant market during the price war amounting to at least $1.757 million and a further $2 million according to Mr. Dyson. Additionally, BCL were not able to pay charter hire to the shipowning companies during this period and, according to the evidence of Mr. Dyson, BCL also incurred the costs of re-deploying its vessels on to new routes after withdrawing from the relevant market. These are estimated by him to be in the order of $2 million.
"When the conduct of the claimant exacerbates, or adds to the injuries, of which he complains, that conduct will generally result in a reduction of his damages on grounds of contributory negligence, or failure in his duty to mitigate damage. However, it may be that the conduct of the claimant is so wholly unreasonable and/or of such overwhelming impact that that conduct eclipses the defendant's wrongdoing and constitutes a novus actus.
It is submitted that for the claimant's subsequent conduct to be regarded as a novus actus interveniens it should be such as can be characterized as reckless. Unreasonable conduct can be dealt with by a finding of contributory negligence. Once the court has determined that the defendant was in breach of a duty to exercise reasonable care for the claimant's safety, the claimant's negligent conduct should not lead to a finding of novus actus."
"had the potential to be a sound little company and had the capability of developing a reasonable position on the UK-Continent-Israel trade with their customer case."
(i) BCL could not have anticipated that the rate war would last for as long as it did, for which reliance is placed on Professor Yarrow's and Mr Johnson's evidence.
(ii) Withdrawal would harm its clients' goodwill and would involve the cost of re-locating its vessels, so it was prudent to wait and see whether rates stabilised.
(iii) It was sensible for BCL to go on concentrating on the bottom end of the market knowing that MSC was concentrating on attracting more time-sensitive shippers and that MSC would not want to capture more than a limited market share. Although BCL was using old, slower tonnage and its vessels were prone to delay, it had succeeded in making reasonable profits in 1990 and the Multifleet group vessels had also made good profits during that period. There was thus a profitable corner of the market for a limited bottom of the market competitor such as BCL.
(iv) Because Mr Arkin was in a position to control both BCL and the profitable ship-owning companies, he could alleviate the impact of charter hire on BCL's profit-earning ability by reducing it and thereby reducing BCL's voyage costs of which charter hire represented an average of about 30 per cent. Therefore BCL could justifiably rely on the prospect of that power being exercised by Mr Arkin.
(v) Conference members having a higher ATC than BCL stayed in the market longer than BCL, DNOL and Furness Withy withdrawing in November 1991, having given two months notice and CIS went into administration in December 1991, which suggested it was not unreasonable for BCL to attempt to hang on.
(i) It would have to be established not merely that BCL was nearly insolvent on 18 April 1991 but that it was then already insolvent, for if it was not then inevitably insolvent and only pushed into insolvency by the rate war, that would establish sufficient causation in as much as the abuser of the dominant position or an undertaking in breach of Article 81 must take its victim as it found it, particularly having regard to the duty to preserve competition which was already weak, recognised by the ECJ in Tetra Pak  ECR I 5951 at 6007 paragraph 24.
(ii) Far from being insolvent, BCL had access to the substantial net assets of the Multifleet shipowning companies, agreed by the accountancy experts as a matter of estimate to amount to $14.2 million as at 18 April 1991. This valuation was based on the desktop valuation by Axis Appraisals Limited and J C O'Keefe Shipbroking Ltd. These were reliable valuations, whereas those lower valuations provided by Arnoult Gauthier of Vita Marine Financial Services Ltd (28 February 1991) were comparatively unreliable in as much as, for example, the sale of the vessel Brasiliana in April 1991 was for $1.4 million (cf Vita valuation $600,000, Avis and O'Keefe valuations $1.5 million). I interpose that I consider in all the circumstances and, taking fully into account the last paragraph of Gauthier's 28 February 1991 letter, that the Axis and O'Keefe valuations are more reliable in the sense that they are closer to the sale price actually realised, albeit tending to be on the high side, whereas with regard to the sale proceeds of the Multifleet vessels that were disposed of in 1991 suggest that Gauthier was consistently too low by a fairly wide margin and that Axis and O'Keefe, although sometimes higher than the prices subsequently achieved, were on average closer to those prices.
(iii) If it were correct to assume that net assets were of the order of $14.2 million, they far exceeded the net outstanding indebtedness as at April 1991. This was stated to be about $6 million as at October 1990 in the memorandum to Mr Diab on the Financial Restructuring of the Multifleet group signed by Mr Arkin and dated 26 November 1990. It was improbable that this net indebtedness had grown so substantially by April 1991 as to approach the net asset value of the group at that time. The only evidence to suggest that the April 1991 indebtedness was anywhere near $14.2 million was the evidence of Mr Amit Schiffmann in the Ocarina Case that, as at May 1992, the Multifleet group indebtedness was $13 million to $14 million before freights. However, that evidence was unreliable and inconsistent with the contemporary KPMG report of May 1992, which indicated aggregate indebtedness of Multifleet companies of about $2.5 million and with Mr Wilkinson's evidence that it was probable that in 1991 the shipowning companies were making profits of the order of $9 million. One possible explanation for the Amit Schiffmann estimate was that he had access to accounts covering running costs, bareboat charter hire, time charter hire, container charges, bunkers, management and outstanding agency creditors amounting to $5,469,000. There being also at that time charter hire outstandings due from the operating companies, such as BCL, to the shipowner companies amounting to $8,864,000, Amit Schiffmann might have added the two together to produce a total of about $14,333,000 which would be close to his estimate.
(iv) The suggestion advanced by the defendants' accountancy expert, Mr Wilkinson that there were massive hidden liabilities of about $20 million in the Multifleet group by May 1992 which accounted for Mr Schiffmann's estimate was speculative and unsupported by the evidence.
(v) There was no evidence of creditor activity up to October 1991, such as crew claims, arrest of vessels or liens being exercised. That suggested that there was no serious failure to discharge BCL's debts in the course of its business.
(vi) There was no substance in the suggestion advanced by the defendants based on the evidence of Ms Bill that it was relevant to test BCL's insolvency at April 1991 by reference to the Multifleet Group's tax liability. That liability was unquantified at all material times and, when it came to quantification, would have had to be negotiated with the Inland Revenue and those negotiations could have had regard to the issue whether the shipowner companies were tax-resident in the UK. In any event, it was improbable that the amount payable would have been finalised until 1994-1995. It was improbable that, even on the assumption of UK tax residency of the shipowning companies, by April 1991 the total liability of those companies for tax would have been greater than £1.1 million. In any event, 1991 vessel sales would have been caused at least in part by the Conferences' rate war and could not therefore be relied upon.
The Defendants' Submissions
"Despite the detailed explanation in your letter of the Commission's decision not to pursue this case further, I find it most unsatisfactory that shipping lines which, according to the Commission's own Statement of Objections as I understand it, were operating under a cargo sharing agreement designed to eliminate competition, should be allowed to do so with impunity, and in fact to benefit from their actions. Although these shipping lines formally terminated their rate differential system in January 1991 and abandoned their loyalty agreements in February 1991, by then the damage to my business had been done. I was forced to suspend BCL's operations as a direct result of their cartel practices.
I also question your assumption that the trades concerned are now open to competition, as demonstrated by the successful entry of MSC. I believe I have proof that prices are now co-ordinated between MSC and the Conference and that cartel practices are still being used to exclude competition, although the tactics have changed. I am now trying to accumulate new evidence of these practices, which I hope to be able to present shortly."
"The decision to cut rates was entirely Mr Arkin's while myself and other members of staff told him on more than one occasion that we felt it was not a correct move to make. All that Mr Arkin was creating was a freight war that I did not believe he could win .."
(i) Complete absence of management accounts relevant to staying in the market during the relevant period.
(ii) Complete absence of accounts for the shipowner companies evidencing their assets and liabilities or their tax position.
(iii) BCL's 1989 and 1990 audited accounts showed heavy losses as did those of BCSL. The 1990 balance sheet of BCL indicated that liabilities exceeded assets by $3,059,451, compared with a deficit in 1989 of $1,413,702. Trade creditors at $8,964,912 far exceeded the previous year's figure of $3,413,938. Moreover, I interpose that the current asset figure of $7,616,857 included a figure of $3,605,077 for other debtors, most of which consisted of indebtedness of BCSL which that company could not pay out of its own resources. If that is treated as a bad debt, the true picture would be that the balance sheet excess of liabilities over assets for the 1990 year was in the order of $6.6 million. The BCSL balance sheet to 31 December 1990 show that liabilities exceeded assets by $3,744,815. The company's loss after taxation for that year was $2,496,076 and it had a deficit of current assets against current liabilities of $145,497. The accounts were therefore qualified to the effect that their preparation on a going concern basis might not be appropriate.
(iv) The absence of audited or any other accounts for the liner companies for 1991.
(v) There was no explanation of the failure of the liner companies to pay charter hire to the shipowner companies, the inference being that they lacked the funds to do so, which in turn suggested that they were trading at a loss. By June 1991 some $9 million was due by way of charter hire from the liner operators, some of it outstanding for three years.
(vi) As shown by the Ocarina Case, there was insufficient money to service bank loans to the shipowner companies. Between the sale of the vessels, East Trader, Med Trader and Gulf Trader, by the shipowner companies to the special purpose Liberian companies created as borrowing vehicles for loans from Marcard Stein, in September November 1991 and April 1992 BCSL as bareboat charterer had failed to pay charter hire amounting to $820,877.07. By the end of April 1992 the outstanding charter hire had increased to $925,000. This was to be paid to the bank as assignee of charter hire by means of the emergency loan made by the bank to Multifleet on 23 April 1992, which is the subject of the Ocarina Case.
(vii) Amit Schiffmann's estimate of Multifleet's indebtedness in April 1992 at $13 million to $15 million was evidence of losses having built up over a long period and further showed that Mr Amit Schiffmann's evidence should be accepted. When in April 1992, in the course of persuading Marcard Stein to lend Multifleet more money, Mr Arkin had told that bank that payments of $3.54 million had to be made immediately to prevent the cessation of trading, he had misled it by failing to disclose much larger indebtedness.
Conclusions on Causation
1. loss of profits during the relevant period;
2. loss of profits up to the time in May 1992, after the relevant period when BCL ceased trading;
3. loss of profits after BCL ceased trading.
"I believe that Mr Arkin made most of his money out of speculation in tonnage. He was not, by choice, a liner operator and in my view did not fully understand the trade. Running liner operations provided a use for his various company ships and the chance to make money on ships being chartered in.
When Boaz and Na'ama Arkin joined MSC, it set off a considerable amount of emotions in Mr Arkin. He was determined they should not succeed. There had previously been bad blood between Mr Arkin and Boaz and Na'ama's father."
Insolvency as a Defence
1. At all material times and in particular by April 1991 BCL was insolvent and this insolvency was not caused by the defendant's breach of duty within the relevant period.
2. The basis of the claim is that BCL, being insolvent, went on trading on the relevant market and would, but for the defendant's breach of duty, have continued to do so after 4 October 1991.
3. Its claim for damages is thus based on losses sustained during a period when it would have continued trading while insolvent.
4. Its continuing insolvency rendered its continued trading unlawful.
5. It is precluded from relying its own unlawful conduct in order to found its claim.
"71. There is another respect in which I do not agree with the way in Mr Franses has viewed the matter. He seems to me to proceed on the basis that, if the company was insolvent in balance sheet terms that is if its balance sheet liabilities exceeded its balance sheet assets but the directors allowed it to continue to trade, that would in itself constitute wrongful trading of a sort which justified the directors being disqualified. I do not agree with that approach, at least not without substantial qualifications. It is common for a company to trade when its shareholders' funds as shown in the balance sheet are in deficit. In some cases the directors may be culpably wrong in allowing the company to carry on, but in other cases they are not, particularly in a company's early months when it is seeking to get itself established and may have anticipated an initial period of losses before turning the corner and moving into profit.
7.2 What makes trading wrongful is not the bare fact of balance sheet insolvency, but the continuation of trading at a time when the directors either knew or on any realistic view ought to have known that there was no reasonable prospect that the company's creditors would ever get paid The law has to leave room for cases where it was unacceptable for directors to take the view that their company, though insolvent in balance sheet terms for the present, was going to trade its way into profit so that all the creditors would be paid. Further, there has to be room for cases like that even if in the event the directors turn out to be wrong, so that the company does not succeed in trading out of its difficulties, and as it turns out the creditors, or some of them are not paid. Indeed, as will appear later, I believe that this case is of that nature."
"I therefore reach the conclusion that, although there is no case overruling the wide principle stated by Lord Eldon, as the law has developed the equitable principle has become elided into the common law rule. In my judgment the time has come to decide clearly that the rule is the same whether a plaintiff founds himself on a legal or equitable title: he is entitled to recover if he is not forced to plead or rely on the illegality, even if it emerges that the title on which he relied was acquired in the course of carrying through an illegal transaction."
"(1) Subject to subsection (3) below, if in the course of the winding up of a company it appears that subsection (2) of this section applies in relation to a person who is or has been a director of the company, the court, on the application of the liquidator, may declare that that person is to be liable to make such contribution (if any) to the company's assets as the court thinks proper.
(2) This subsection applies in relation to a person if :-
(a) the company has gone into insolvent liquidation,
(b) at some time before the commencement of the winding up of the company, that person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation, and
(c) that person was a director of the company at that time;
but the court shall not make a declaration under this section in any case where the time mentioned in paragraph (b) above was before 28 April 1986.
(3) The court shall not make a declaration under this section with respect to any person if it is satisfied that after the condition specified in subsection (2)(b) was first satisfied in relation to him that person took every step with a view to minimizing the potential loss to the company's creditors as (assuming him to have known that there was no reasonable prospect that the company would avoid going into insolvent liquidation) he ought to have taken.
(4) For the purposes of subsections (2) and (3), the facts which a director of a company ought to know or ascertain, the conclusions which he ought to reach and the steps which he ought to take are those which would be known or ascertained, or reached or taken, by a reasonably diligent person having both-
(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and
(b) the general knowledge, skill and experience that that director has.
(5) The reference in subsection (4) to the functions carried out in relation to a company by a director of the company includes any functions which he does not carry out but which have been entrusted to him.
(6) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.
(7) In this section "director" includes a shadow director.
(8) This section is without prejudice to section 213."
Quantification of Damage
(1) The two Conferences were a collective entity.
(2) The relevant market was the container market on all routes between UK and Israel and the North Continent and Israel.
(3) The Conferences held a dominant position in the relevant market throughout the period from 18 April 1991 to October 1991.
(4) The Conferences did not abuse their dominant position during the relevant period either by reason of predatory pricing, fighting ships or spreading rumours. Their conduct in relation to price-setting was without eliminatory intent. So also was the emergency rate and special commitment rate system. It is not established that any of the conference members spread rumours.
(1) The Conferences charged uniform or common rates and were a liner conference within the Block Exemption.
(2) On none of the grounds upon which the Claimant is entitled to rely measures to reduce the capacity of BCL and other competitors, predatory pricing, fighting ships pricing below cost, negotiations with MSC, the terms of the July 1984 agreements or failure to publish special commitment rates did the Conferences lose the protection of the Block Exemption.
(3) Alternatively, the effect of the principle of severance was that protection was lost only to the extent of the particular conduct in breach.
(1) The predominant cause of BCL's losses after 18 April 1991 was its failure to withdraw from the market by the commencement of the relevant period.
(2) Given BCL's continued participation in the market after 18 April 1991, such loss as it suffered later in the relevant period and its decision to leave the relevant market at the end of September 1991 were predominantly caused by BCL's remaining in the market and cutting its rates to unsustainably low levels.
(3) The Claimant has failed to prove that such losses as may have accrued after BCL left the relevant market and before it ceased to trade were caused by the Conferences' breaches of Articles 81 or 82 in the course of the relevant period.
(4) The Claimant has failed to prove that the predominant cause of BCL ceasing to trade as from May 1992 was the Conferences' breaches of Articles 81 or 82.
Quantification of Loss
(For copies of figures 1 to 4 referred to in this Judgment, please contact the Clerk to Mr Justice Colman)