CRIMINAL CAPITALI$M ON THE SEA
Samskip Admonishes Iceland for Misrepresentations Over $32M Collusion Fine
The long-running Icelandic investigation into the alleged collusion between Dutch shipping company Samskip and Iceland’s Eimskip heated up with the release of a report finding serious violations and illegal actions by Samskip and announcing a $31.7 million fine. Samskip released a response using strong accusatory language to reject the “assumptions and conclusions” of the Icelandic Competition Authority and promising to use all available means by law to overturn the decision.
The investigation into the purported collusion between the two shipping companies has been going on for 13 years. The Icelandic Competition Authority started the action in 2010, followed by raids on Samskip and Eimskip’s offices in 2013 and 2014. Samskip accused them of “seizing large amounts of information.”
The ICA issued initial reports in 2018 and again in 2019, with a third and final report in November 2020. The reports are more than two thousand pages and the accompanying documents number in the tens of thousands. The full report was published on August 31 in 15 volumes plus an appendix. Samskip says that it submitted detailed comments on the reports illustrating how the ICA’s preliminary conclusions were fundamentally incorrect.
The ICA concludes that Samskip violated the country’s competition law and conducted illegal consultations with Eimskip. Further, they reported that the investigators believed Samskip during the investigation provided “incorrect, misleading, and insufficient information and data delivery.” In addition to making recommendations for measures that the company needs to take to “prevent further infringements and promote competition,” the ICA is leveling a $31.7 million administrative fine.
The investigation had initially centered on the time from 2008 to 2013 alleging continuous collusion with the main objective to restrict competition. The investigation was exploring charges that the companies colluded by making changes to their operating schedules and routes. They said it was done to maintain or increase prices to customers. During the investigation, the time span was expanded to reach back as far as 2001, looking at actions for the transport services to North America between 2004 and 2009, actions in 2005, and alleged collusion in 2007 on stevedoring in the Iceland port of Reyðarfjörður.
“Samskip is deeply disappointed by the ICA’s procedure in the case. The ICA’s conclusion is characterized by half-truths, misleading statements, and misrepresentations of facts,” Samskip said in its public response to the report and the imposition of the fine.
The company went on to call the process “extraordinarily cumbersome,” saying that it has had a “crippling effect” on its operations. They contend that they had submitted detailed comments on the reports illustrating how the conclusions were “fundamentally wrong.”
Eimskip in June 2021 settled with the ICA acknowledging that there was communication and collusive behavior with Samskip between 2008 and 2013 in violation of Icelandic law. Eimskip paid a nearly $12 million administrative fine and agreed to certain actions to prevent further violations and promote competition.
The ICA in its report released yesterday says that when Samskip became aware that Eimskip was in settlement negotiations, they too requested settlement talks. The ICA says the discussions took place in June and July 2021, but it was “clear that they would not produce a result in the opinion of the ICA that included a satisfactory outcome.” They terminated the negotiations.
The Icelandic Competition Authority reports that Samskip has one month to pay the fine. Samskip said in its response that it would “not abide by the ICA’s decision,” and use all legal means to overturn the decision.
Police Investigate Co-CEOs of Stellar Daisy Shipowner Polaris
Police in Seoul have raided the offices of Polaris Shipping, the operator of the ill-fated bulker conversion Stellar Daisy, in connection with alleged breach of trust. The new round of law enforcement attention comes just as the company's owners were preparing to sell the firm.
On August 28, the Seoul Metropolitan Police's Financial Crimes Investigation Unit dispatched a team to Polaris' headquarters with orders to seize record books and computer hard drives with data on the firm's accounts. The authorities suspect that the firm's co-CEOs - Kim Wan-joong and Han Hee-seung - extracted about $38 million from Polaris' holding company, Polar Energy & Marine. The alleged transactions took the form of loans and were used "arbitrarily" to secure management rights, the Seoul police said.
Kim already faces criminal charges in connection with the sinking of the Stellar Daisy. He was convicted of failing to report known defects aboard the vessel in 2020, and was sentenced to six months in prison. The case is currently on appeal at South Korea's supreme court. In 2022, he was also indicted on charges of negligence and "ship-burying" in connection with the case.
Polaris was put up for sale in May, and about 20 firms have expressed interest, according to Chosun Daily. The value of the transaction is estimated at about $425 million. A sale would also buy out the firm's second-largest shareholders, NH Private Equity and Aeneas Private Equity.
Polaris is a leading owner of very large ore carriers (VLOCs), the super-large bulkers used to transport iron ore from Brazil to East Asia. It has 15 ships in this size category, and it holds valuable contracts with some of the world's largest ore mining companies and ore importers.
The firm came under intense scrutiny after the sinking of the Stellar Daisy, an aging VLCC-to-VLOC conversion that suddenly disappeared in the Atlantic in March 2017. The flag state, the Marshall Islands, determined that "catastrophic structural failure" was the cause of the casualty. Extensive cracking in the hull was identified as early as 2011, six years before the sinking.
Polaris sold its last VLCC-to-VLOC conversions for scrap in 2021, bringing its exposure to this vessel class to a close.
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