Law: Sailing stormy waters: Diana Faber examines the effect of new European Community competition legislation on ferry companies and their legal advisers

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EC LAW is big business. Much is made of the constitutional implications, and a number of city lawyers are fully occupied dealing with the competition aspects of community law.

Ferry operations are threatened by the effect of the Common Market and are are having to adopt new business practices. In doing so they expose themselves to the EC competition legislation and have to call in the lawyers.

To be effective on behalf of ferry companies, lawyers must acquire a wide knowledge of their clients' business and the market in which they operate. Legal advisers also need to be well informed about the attitude of the European Commission to the market in question. These requirements have three major implications for practice management.

First, to keep abreast of events in the particular area of business, lawyers not only take in-depth instructions when a particular problem arises but also keep in touch with the relevant trade journals, published both in this country and abroad. These provide information about the commercial pressures on the ferry industry and its responses to them.

Lawyers would be expected to be familiar with many issues, including the sale on board ship of duty-free goods, which has historically been of great importance to the passenger ferry industry. As a result of the recent EC free trade provisions, EC residents can load their cars to capacity in any other EC country with alcohol for personal consumption without incurring duty. This freedom obviously makes the purchase of a few bottles of duty-free alcohol on board a ferry far less attractive, and is a threat to the viability of some ferry operators.

Ferry companies are also facing competition from fixed links, such as the Channel Tunnel, and plans to link Sweden and Denmark by a road and rail bridge.

Lawyers need to be aware of the reaction of the ferry companies to these new challenges. For some it has meant retrenchment in their activities, while for others it has led to innovative developments.

There has been, for instance, an expansion of more general shopping facilities on board and some North Sea, Channel and Baltic ferries now resemble floating shopping malls. Another area of development is seaborne conference facilities, now very common on the Baltic ships.

A recent report suggests that some ferry companies are to raise prices to achieve greater financial strength to fight competition from the Channel tunnel. Other companies are taking the more expected course of offering reduced fares and improved facilities. Another innovation is the introduction of high-speed craft such as the catamaran which is coming into service on the Irish Sea.

The most obvious response to such threats to businesses is for ferry companies to combine their operations. Two or more operators can form joint venture companies and their pooled resources can be used to increase the number of crossings, improve shore facilities and loading time, and to upgrade their vessels.

Where a company owns port facilities it can impose restrictions on competitors using the port to make it harder for them to offer attractive services. It is this sort of response that attracts the attention of the European Commission, which can impose huge fines or prohibit certain business activities.

Apart from familiarity with the industry, lawyers must also be aware of the Commission's attitude to new business developments. Some guidance can be obtained from official reports and directives as the EC keeps itself informed on changes in business practice, and internal discussions are held before the Commission takes any action.

It is also necessary for law firms to maintain regular contact with those working for the Commission, which is most effectively achieved by visiting Brussels. An intimate knowledge of the industry ensures that the right questions are raised, and in this way lawyers receive advance information of steps under consideration by the Commission. Such discussions are also useful to the EC because, through industry lawyers, they can give informal warnings to commercial enterprises not to undertake certain activities.

Finally, it is vital that not only specialist partners, but also their teams of assistant solicitors are fully informed of all these matters. To this end firms arrange extensive programmes of in- house seminars given by lawyers and others involved in the industry. Individual partners also make it their business to give their assistants regular briefings on recent developments.

Lawyers assisting ferry companies in their dealings with the EC must be aware of the relevant law and also have a thorough understanding of the commercial pressures on their clients. To be effective they have to be aware of published proposals for EC action and to anticipate steps to be taken by the Commission. Of even greater value however, is their ability, at the planning stage, to give advance warning to ferry companies of potential EC law problems that may result from new business practices.

The writer is a solicitor and partner with Richards Butler

(Photograph omitted)