Recently, a number of shipping companies who together, control a significant share of the Ghanaian container shipping market, wrote to their customers introducing new ‘Terminal Handling Charges’ as of the 1st of August, 2016 at an average rate of US$140 per TEU (Twenty Foot Container).
According to most of the shipping lines, the decision is to enable them recover third–party cost which they had previously, but could no longer absorb due to declining freight rates.
The announcement provoked the displeasure of the shipper community culminating in a formal petition by a number of trade associations to the Minister of Transport, demanding the government’s intervention to prevent the shipping companies from imposing the charge.
The shippers argued that the fact of a depressed freight market is not a valid reason for imposing a charge which will further increase the already high cost of shipping to and from Ghana.
In response, the Minister for and on behalf of the government issued a directive to the effect that:
- the Ghana Maritime Authority would investigate the issue raised by the shipping companies and make recommendations to the Ministry on justification for the introduction of the said charges in Ghana by August 24, 2016; and
- the Terminal Handling Charges be suspended effective 10th August, 2016 pending the outcome of the investigation and advice from the Ghana Maritime Authority.
The Ministerial directive has raised more questions than it has provided answers.
Why did the trade associations choose to petition the Minister instead of seeking the enforcement of existing law on the matter?
What were the issues raised by the shipping companies necessitating the call for investigations, and why the choice of the Ghana Maritime Authority (GMA) instead of the Ghana Shippers’ Authority (GSA) as the ‘regulator’?
These questions naturally arise due to the Minister’s obvious circumvention of the relevant GSA Regulations, and the petitioners’ seeming helplessness in spite of that law which is aimed, it appears, precisely at determining the legality or otherwise of the ‘Terminal Handling Charges’ sought to be imposed by the shipping companies and their agents concerned.
Under the Ghana Shippers’ Authority Regulations, 2012 (L.I. 2190), a shipping service provider, such as the shipping companies in question, are prohibited from introducing or imposing a charge which is not agreed to by the GSA.
The law imposes a duty on a shipping company seeking to charge an amount other than freight to a Ghanaian shipper in respect of shipping services provided in Ghana, to notify the GSA in advance of the imposition of the charge, and submit the proposed charge to negotiation and agreement with the GSA. Under the Regulations, therefore, the ‘Terminal Handling Charge’ purported to have been imposed on Ghanaian shippers on the 1st of August, 2016 is clearly illegal if it is not the result of a negotiated settlement with the GSA.
In that case, the shipping companies concerned are liable to a fine of two hundred penalty units for each day of the illegal imposition of the charge.
Why then are they not being penalised?!
Were it the case that the shipping companies and the GSA are deadlocked in their negotiations on the charge, the Regulations provide a remedy; that the parties undergo a stipulated mediation and arbitral process, the ultimate result of which shall be binding on all unless challenged in the courts of law.
That process did not envisage the involvement of the Ghana Maritime Authority (GMA).
It is inconceivable that in the face of a clear breach of the law the GSA will be reluctant, neglect or fail to enforce its own Regulations; and it is curious that the petitioners and ultimately the Minister of Transport failed to demand enforcement of the law by the GSA, the ‘regulator.’
Unless the thinking is that the factual circumstances of this matter do not lend themselves to the application of the GSA Regulations or that the Regulations are unclear or worse still illegitimate and unreasonable.
To understand the petitioners’ choice and the Minister’s directive, one must consider the issues possibly raised by the shipping companies which necessitated the ministerial directive requiring the GMA to investigate, and which ordered the suspension of the imposed charge pending the outcome of the investigation and the advice of the GMA.
The shipping companies may have blatantly refused to negotiate with the GSA or countered its attempt to enforce the Regulations with the following arguments:
- That considering the parent Act which established the GSA, the GSA has no legal authority to regulate their activities and to the extent that the enabling Regulations seek to do so, they are inconsistent with the parent Act, and therefore unenforceable.
- That, at best, the Act confers on the GSA a right to negotiate collectively on behalf of Ghanaian shippers with third parties such as they the ship owners, but that there is no corresponding obligation on them except an exhortation to consult.
- That hence the language of the Act in so far as it relates to them is not mandatory, but discretionary.
- Therefore, the mandatory and penal provisions in the Regulations are inconsistent with the spirit and letter of the GSA Act, and strictly speaking are outside the powers conferred by the parent Act.
The shipping companies may have also argued further that the Regulations by the GSA relating to them are unreasonable.
The GSA having been established to protect and promote the interest of Ghanaian shippers, and to provide a platform for engaging other industry players on behalf of those shippers, cannot then logically assume the role of a regulator with enforcement powers over third parties, whose interests are potentially at odds with that of shippers.
Those arguments may very well carry weight. The parent or empowering Act establishing the GSA namely, the Ghana Shippers’ Authority Act, 1974 (N.R.C.D. 254), states that the Authority “shall provide facilities for mutual consultation between shippers, ship owners and the Railway Corporation on matters of interest to shippers.”
In addition to that mandatory function, the Act stipulates that the Authority “may” (emphasis is mine), amongst other functions, “negotiate and enter into agreements with ship owners on matters affecting shippers.”
Notably, this latter function is discretionary; the Authority is not under obligation to reach a negotiated settlement with ship owners on matters affecting shippers.
In contrast, the subsidiary or subordinate legislation converts that discretionary authority to negotiate conferred by the parent Act on the GSA into an obligation, and expands the list of parties to be negotiated with beyond ship owners.
The Ghana Shippers’ Authority Regulations, 2012 (L.I. 2190) stipulates that “the Authority shall negotiate on behalf of shippers with associations of shipping service providers charges of ship owners, shipping lines and agents…terminal and shore handling charges..” (the emphasis is mine).
Further, the Regulations may have stepped outside the bounds allowed by the parent Act by imposing an obligation on shipping service providers, including ship owners, to notify and conclude on negotiations on charges with the GSA before imposing such charges on shippers.
Mandatory language such as ‘shall notify…, shall negotiate…, shall conclude negotiations’ is used throughout the Regulations in reference to ship owners and others.
To cement the Authority’s powers over ship owners and the like, the Regulations empower the GSA to exact fines for breaches of the duty to notify, negotiate and conclude negotiations with the GSA.
These powers were arguably not contemplated by the parent Act.
The governing legal principle in such matters is that, where a subsidiary or subordinate legislation is ultra vires (literally outside the powers conferred by) the parent or empowering Act, the former can be struck down by a court exercising the required judicial control by means of judicial review.
Therefore, were the arguments outlined above valid, then the most effective remedy opened to the ship owners is to apply for judicial review of the Regulations on grounds that they are substantive ultra vires the parent Act.
The GSA’s may seek to justify the expansive powers conferred by its Regulations with the catchall provision in the parent Act empowering the Authority to “do any other lawful act that is conducive or incidental to the performance of the forgoing functions.”
Namely, representing the views of shippers negotiating on their behalf and studying and enquiring into matters affecting shippers.
But a court may find nothing legally redeeming about a subsidiary legislation aimed at compelling third parties to ‘negotiate’ with the GSA.
The Regulations could also be struck down for unreasonableness. Commanding ship owners and other shipping service providers to negotiate their charges with what is effectively a statutory association of consumers, and at the same time empowering the said consumer association to penalise the service providers if they failed to conclude said coerced negotiation process may arguably be most unreasonable and unfair.
Both the petitioners and the Minister may have sought refuge elsewhere than in the GSA Regulations due to the aforementioned challenges or issues presented by the GSA Regulations.
The Minister’s choice of the GMA as investigator is additionally strengthened by the primary objective of the GMA which is to ‘regulate, monitor and co-ordinate activities in the maritime industry,’ and specifically by Section 2(2)(n) of the Ghana Maritime Authority Act, 2002 (Act 630) which states that the GMA shall “ensure an efficient, cost effective and orderly provision of services in the shipping industry in line with Government policies.”
It is arguable that on the proper construction of existing law, the ‘regulator’ of the matters in question ought to be the Ghana Maritime Authority.
The GSA Regulations present a situation which is murkier still. It authorizes the GSA to levy ship owners a ‘service charge.’ Monies the ship owners argue has no discernible connection to any stipulated ‘service’ the GSA renders to them.
The Regulations state in relevant part: “The Authority shall levy a service charge of two per cent of the gross freight value of a shipment to or from this country on a shipping line that operates in this country.”
Apart from describing the levy as a service charge, the Regulations do not specify the service the GSA is duty bound to render ship owners or their agents.
The GSA parent Act however insists that any such charge to be levied on ship owners or their agents must be “for a service it renders to shippers, shipping agents and ship owners.”
Worse still the levy so charged under the Regulations is shared by the GSA with the GMA. According to the Regulations, the GSA “shall remit to the Ghana Maritime Authority fifty per cent of the total annual service charges received by the Authority.”
This is most strange in that the parent Act did not authorise the collection of levies by the GSA for the benefit of the GMA.
Why is the GMA being paid a service charge for services ostensibly being provided by the GSA to ship owners and their agents?
Clearly, a compromise may have been reached between the GSA and GMA, both of whom may be claiming regulatory oversight over shipping companies or lines.
That apparent compromise over maritime turf control may very well have compromised the authority of both the GSA and the GMA in this matter.
The shippers who petitioned the Minister of Transport instead of seeking the enforcement of GSA Regulations, may have made that choice because they lacked confidence in the GSA’s capacity to enforce the law against the ship owners and their agents from whom the GSA is enjoying levies.
The Minister’s circumvention of the GSA law and choice of the GMA as regulator may also have been informed by similar concerns; the GSA could not possibly be expected to impartially enforce the law or regulate ship owners and their agents from whom the GSA was benefiting financially.
But the position of the GMA is no better in that regard. It is difficult to see how the GMA could regulate effectively shipping line charges when it is receiving enormous amounts from the ship owners by way of its entitlement to the levies charged ship owners under the GSA Regulations for literally no corresponding work done.
Clearly, the Minister having been placed between a rock and a hard place, chose the hard place.
But in making that choice he appears to be circumventing his own law.
Better to subject the law to judicial review in order to obtain clarity and achieve certainty of outcome in the application of the law.
The author, Stanley R. K. Ahorlu is a maritime lawyer and entrepreneur with business interests in the maritime sector.
He is the Founding Partner of Amitlaw Consult, a firm providing maritime and international trade advisory in Tema, Ghana.
Comments can be sent to [email protected].