Under the ruling released earlier this month, the block exemption will be restricted to vessel-sharing agreements (VSAs) between shipping lines whose market shares do not exceed 40%.
VSAs above that limit, and voluntary discussion agreements (VDAs) between shipping lines will be excluded from the block exemption order.
In Singapore, the Southeast Asian transhipment hub that competes strongly with Hong Kong, the block exemption order includes VSAs with market share lower than 50% as well as VDAs.
The Hong Kong regime puts the onus on the lines to self-assess. While this may seem to give a high degree of flexibility, the corollary to this is it also introduces an equally high degree of uncertainty.
Any individual can bring up a complaint against a line which could ultimately result in a punitive penalty. "This puts shipping lines in an awkward position and is not a scenario we want to entertain," Hong Kong Liner Shipping Association secretary-general Roberto Giannetta told Seatrade Maritime News.
While he maintained that he was "quite confident" the agreements they have currently will not contravene the rules, the fact remains that once a complaint is made the line will have to go through the relevant court processes and make provisions on its books for any potential liability.
Industry players have suggested that the more stringent regime for liner shipping agreements could harm the competitive edge of Hong Kong's container terminals. Transshipment accounts for about 70% of the port’s volumes and it competes for transhipment business with ports throughout the region, many of whom have taken a different view towards competition rules.
This makes Hong Kong "the odd man out" in the region as all the ports that compete with the city offer this legal certainty because there are clear cut guidelines, Giannetta reiterated.
Although there is a six-month grace period that ends in February 2018 for the lines to sort themselves out, many law firms are guiding that their clients err on the side of caution. Ince & Co suggested that "parties involved in VDAs need to assess the nature of the VDAs carefully to ascertain whether the nature and content of discussions fall within what could be considered acceptable by the Competition Commission".
Meanwhile Norton Rose Fulbright said: "Given that pricing discussions remain permitted in some other jurisdictions in the Asia-Pacific region, parties could conceivably carve out Hong Kong from their joint recommendations in respect of general rate increases or voluntary contract rate benchmarks. They will however need to be particularly careful to ensure that discussions of rates for services from other ports in North Asia do not have the object or effect of restricting competition in Hong Kong markets."
However in the first few weeks after the ruling, the consensus seems to be a wait-and-see attitude. While there has been hot-headed talk of lines leaving the city abruptly, any movement is likely to be driven more by cost considerations that the actual block exemption order, a source suggested.
The reality is that Hong Kong's block exemption is still mostly in line with those in competing jurisdictions. The lack of legal clarity and firm guidelines could well prove to be a boon or a burden, depending on how the situation pans out.
"We need to put our heads together, talk to the commissioner and come up with a plan," concluded Giannetta.
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