Arkin v Borchard Lines Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Colman |
| Judgment Date | 10 April 2003 |
| Neutral Citation | [2003] EWHC 687 (Comm) |
| Docket Number | Case No: 1997 Folio No. 956 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 April 2003 |
[2003] EWHC 687 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Colman
Case No: 1997 Folio No. 956
Nicholas Green QC and Roger Masefield (instructed by Singletons) for the Claimant
Peter Irvin and Sarah Lee (instructed by Constant and Constant) for the 1 st Defendant
Steven Gee QC and Hugh Mercer (instructed by Davies Arnold Cooper) for the 2 nd, 3 rd, 4 th Defendants and the 3 rd, 5 th 8 th and 10 th Part 20 Defendants
Vasanti Selvaratnam QC and Fergus Randolph (instructed by Berwin Leighton Paisner) for the 1 st and 6 th Part 20 Defendant
Hearing dates : 20.2.02 to 26.4.02, 2.10.02 to 31.1002 and 16.12.02 to 20.12.02
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| INDEX | |
| TITLE | PARAGRAPH NO. |
| Introduction | 1–35 |
| 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 |
| Analysis | 43–51 |
| 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 |
| Discussion | 137–142 |
| 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 |
| Discussion | 293–305 |
| Abuse of Dominant Position: the Facts | |
| Predatory Pricing | 306–341 |
| Fighting Ships | 342–351 |
| Circulating Rumours | 352–358 |
| Conclusion on the Case under Article 82 | 359 |
| Article 81 | |
| The Parties' Submissions, | |
| The Claimant' Submissions | 360–372 |
| TITLE | PARAGRAPH NO. |
| 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 Competitors | 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 |
| Causation | |
| Introduction | 489–490 |
| Claimant's Submissions | 491–510 |
| Defendants' Submissions | 511–535 |
| Conclusions on Causation | 536–570 |
| Insolvency as a Defence | 571–587 |
| Quantification of Damage | 588–592 |
| Conclusions | 593–595 |
Introduction
The Claimant, Mr Arkin, claims damages for breach of the Rome Treaty and in particular of Article 82 and, in the alternative, of Article 8This, I am told, is the first time that the English courts have had to determine such a claim. The nearest similar case is Courage Ltd v Crehan [2001] 3 WLR 1646, but that was concerned only with Article 81 (then numbered 85) and not with Article 82.
Mr Arkin was managing director of a liner operating company called BCL Shipping Line Ltd ("BCL"). He and his wife were the only shareholders. BCL was incorporated in the United Kingdom. It operated liner services on various routes to and from Haifa and Ashdod in Israel. This action is concerned only with the operation of liner services on the routes between ports in the North Continent and Israel and ports on the East and West Coasts of the United Kingdom and Israel. There was both northbound and southbound traffic on both routes. I refer to these routes collectively as "the Relevant Market", although I shall have to consider later in this judgment the legal justification for treating them as a single market.
The liner services offered by BCL with which this action is concerned were for container transport, although BCL also carried break bulk cargoes as well as containers on board its vessels. Those vessels were owned by one-ship companies usually incorporated in Liberia and invariably owned and controlled by Mr Arkin. BCL chartered from those companies the tonnage deployed on its liner services.
BCL was incorporated in 1988 and entered the Relevant Market in March of that year. It subsequently operated services between Israel and South Africa, the Adriatic and Turkey. It had a large office in Israel as well as its head office in London.
Up to that time the only regular liner services on the Relevant Market were provided by two conferences. CONISCON provided the services between the North Continent and Israel and UKISCON those between the East and West Coasts of the United Kingdom and Israel. Both Conferences had almost identical conference agreements signed on 31 July 1984 which included a provision that the parties were "committed to do their utmost in order to compete with any third party line commencing any service within the scope of (the) Agreement."
The defendants were all members of one or both of CONISCON and UKISCON. The members of CONISCON were Zim, who are 1 st and 6 th Part 20 defendants, DNOL 3rd Part 20 defendant, KNSM, 5 th Part 20 defendant, Borchard who are 1 st defendant and Part 20 Claimant, ISCONT and CIS. The members of UKISCON were Zim, Furness Withy who are 3 rd defendant and 8 th Part 20 Defendant, Ellerman Lines now known as Camomile Lines who are 2 nd defendant and 10 th Part 20 Defendant, Borchard, ISCONT and CIS.
Mr Arkin, in addition to his ownership and control of BCL and the shipowner companies, also owned and controlled Multifleet Marine Ltd, a UK incorporated management company which had the function of operating and managing the one-ship companies. It was viewed by Mr Arkin and his various bankers as a group control company. Its functions included the payment of the disbursements, including port dues, charter hire and commissions, arising from the operation of the lines and the shipowner companies.
Another liner operator owned and controlled by Mr Arkin was BCSL. This operated liner services between the United States and Israel. Other liner services operated by Mr Arkin's group included those to South America and West Africa. Included in that group was a company called Bay Maritime, whose only relevant function was a treasury for funding other companies in the group.
In the course of 1988 and 1989 and up to August 1990 BCL built up a small and fairly stable market share on the Relevant Market. This was in the order of 10–12 per cent. The rates were substantially below those of the Conferences – usually by about 20 per cent. BCL aimed to attract business from shippers who were prepared to accommodate delayed delivery and less regular services than those offered by the Conference vessels. BCL only operated about two shipments per month and because its vessels were slower and were not exclusively container ships but also carried break bulk cargoes, loading operations tended to be less speedy and smooth-running than with conference vessels which only loaded containers. BCL vessels therefore tended to attract less valuable cargoes than Conference vessels.
In spite of the fact that for these reasons BCL aimed at the bottom end of the market, the Conferences saw it as a serious competitor. They engaged in vigorous anti-competitive activities even before the time when BCL entered the Relevant Market. Thus, in December 1986 both conferences introduced a system of non-contractor rates (NCRs). These involved charging shippers who did not ship exclusively with Conference members a 20 per cent premium above tariff. In June 1987 so-called "fighting committees" were set up to co-ordinate the Conference's response to competitors. There can be no real doubt, although this was not debated in the present trial, that the NCR system was unlawful because it was an abuse of the Conference's dominant position under Article 86 (now 82) and because it was at that time the result of an anti-competitive agreement, decision or concerted practice under Article 85 (now 81).
It was not until 1 July 1987 that EC Regulation 4056/86 ("the Block Exemption") came into effect. This was an important event for the European shipping industry and the Conferences in particular because it created an exception to the effect of Article 85 (now 81) in favour of liner conferences charging uniform or common rates of freight. In essence, under Article 85(3) it exempted from unlawfulness agreements, decisions or concerted practices by liner conferences which would otherwise have been unlawful anti-competitive conduct and rendered void under Article 85(1) and (2) and imposed on such liner conferences various duties to be performed in the course of their operations.
I shall have to examine the meaning and effect of this Block Exemption in some detail later in this judgment.
After BCL entered the market the Conferences operated the NCR system and for internal reasons, which do not matter for present purposes, introduced a...
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