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standards for self-policing. The final recomendation deals with the issue of Commission oversight on self-policing.

In the hope that the implementation of the recommendations in a model self-policing agreement would assist the reader in a ready understanding of the recommendations, the Appendix to this Report contains such an agreement. It would seem that every conference should be in a position to adapt the model to its own individual needs if it so desires. The Commission, if it accepts the suggested recommendations, would then have standards to use as a guideline in effecting prompt deliberations on the acceptability of those self-policing agreements which meet the proposed criteria.

None of the many industry officials to whom I sent my Report containing the recommendations voiced substantive objections to the proposals. Although it would be naive to presume that this silence on the part of the industry is an indication that it considers the recommendations to be viable and readily acceptable, I would hope that these recommendations could be the basis for a dialogue between the industry and the Commission on how best to improve self-policing.

As stated in the initial report, the posture of the Commission should be one of guidance without interference, The oversight mechanism proposed herein is intended to be the comunication channel to promote development of an effective neutral body system. Confidentiality clauses based on fear of Commission intervention, which fear historically has been proven to be baseless, should not be permitted to interfere with this development. If a meaningful dialogue is allowed to develop, and the proposed recommendations and neutral body standards are implemented, then, judging from my close-up study of the industry's self-policing, I can only conclude that those outside doomsday prophets of the conferences' self-regulated self-policing will be proven to be wrong.




For convenience of reference, the initial ten recommendations proposed in Volume I are being restated and, where there is an amendment, the revision has been appropriately noted. Section B of this part contains the last two recommendations of the study.

Recommendation 1 (Restated)

All conferences whose lines have cargoes with a significant tonnage and dollar value, or have a demonstrated need for self-policing, and which are in the United States commerce, shall have a permanent, effective neutral body to conduct the required investigations of malpractices and subsequent adjudications.


The criteria for determining the need for a permanent, full-time neutral body are general, but should be sufficient to form the basis for Commission action if a conference were to attempt to evade its self-policing obligation. This is so especially when read in conjunction with the specific criteria of Recommendation 2. As of the writing of this Report, most conferences meeting the criteria, including some of the Mediterranean conferences, employ full-time neutral bodies. (This iss is under serious discussion by the entire Mediterranean group.) (See also Volume I, Part VI, Recommendation 1, pp. 39-41, incl.)

Recommendation 2 (Restated)

All other conferences in the United States commerce shall have, at the minimum, a competent, practicing neutral body on retainer to conduct investigations on referral from the conferences as well as to conduct self-initiated investigations. The neutral body will also adjudicate as required. Additionally, each line shall have, at a minimum, one office audit each year. The above conferences must file a certification annually with the Commission that:

a. The costs for a permanent, full-time neutral body are not commensurate with the profit from the cargoes carried;

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b. The trade is clean, with stated reasons for this condition, e.g., limited membership, pools, cargo allocation, over-tonnaging not present, equipment considerations;

c. The conference chairman, secretary, or owners' committee has the time and expertise to police the conference (specifically, what self-policing functions they perform);

d. There are guidelines for referring serious malpractices to a competent neutral body which is on retainer, as well as giving the neutral body the authority to conduct self-initiated investigations;

e. An office audit for each member line will be or has been conducted by a neutral body; and

f. The annual advice by a responsible operating official of each line that there are no known malpractices in the conference and there is no need for a permanent neutral body. (For discussion of the above, see Volume I, Part VI, Recommendation 2, pp. 41-44, incl.; related to the advice requirement, but applicable to the permanent neutral body conference, is Part XI (D) (2), infra.)

Revision 1

The duty for the adjudication of malpractices (wift) shall rest with the neutral body, whether contracted with on a full- or part-time basis.

Investigation of the alleged malpractice shall take place under the direction of the neutral body's chief investigating officer. If the neutral body official believes there is a violation, a letter containing the charge and initial assessment of damages shall be prepared under the direction of the investigative officer. The hearing for the charge shall be conducted by the principal of the neutral body and shall constitute a de novo review of the evidence which was the basis for the initial finding by the neutral body's chief investigating officer. The principal, acting as the impartial adjudicator, shall not take part in any investigation or prosecution with regard to any matter before him for adjudication (see Appendix, Article X(A) ).

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The mandatory provision of the first portion of this revision is consistent with Recommendations 1 through 3 that the adjudication process be handled by the neutral body and not be delegated to conference chairmen, or, in the alternative, to a group of the accused line's peers (see Volume I, Part VI, Recommendation 3, p. 44; also, Volume 1, Part IV(B), pp. 14-17, incl.).

As to the second paragraph of the revision, the Comission's regulations require the availability of an impartial adjudicator separate from the neutral body. This provision is complied with through the availability of the arbitration procedure (see Appendix, Article XIV).

The rationale for the above revision is that, ideally, the neutral body process should include a built-in impartial adjudication procedure. Such a procedure is useful because, in the normal investigation of an allegation, an investigator could on occasion lose his objectivity. Partly, this is because the investigator has available to him a store of facts, conjecture and evidence which is not made available to the accused line to rebut, but which could sway his opinion.

Also, disputes sometimes arise which could affect the investigator's impartiality and, consequently, his objectivity.

The neutral body, whenever it has the ability to do so, should create a line of demarcation within its selfpolicing organization so that the principal, acting as the impartial adjudicator, is insulated from everyday investigative matters. Ideally, the neutral body would have available an independent reviewer of the investigative reports to analyze the evidence and legal issues involved. Where feasible, the reviewer could conduct an informal hearing with the accused line. This procedure would eliminate baseless charges and, on the other hand, develop the evidence required to prove a violation (see Appendix, Article X(A) (2)). If there is an apparent violation, the reviewer could prepare the charging letter and represent the neutral body in any subsequent hearings, i.e., before the neutral body adjudicator and at arbitration.

Thus, if a formal hearing were held, the accused line would have some assurance of impartiality when the final determination was made on behalf of the neutral body. The

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neutral body principal is also given the alternative of placing the hearing with a qualified adjudicator within the neutral body if the principal has operational reasons for the delegation. Consequently, there would be a review process within the neutral body adjudication procedure which would afford the accused line and the investigative group equal opportunity to present their respective cases. Affording the accused line as much full due process as possible increases the credibility of the neutral body. The line's knowledge that it has the additional right of review by the arbitration process is further assurance to the line of fair treatment by the neutral body, especially when both parties recognize that the neutral body's decision is subject to review and criticism if not reasonably based on the available evidence (arbitration is discussed in Volume I, Part IV (C), pp. 17-18).

Revision 2

Any contract between a conference and a neutral body shall be for a period of three years. The contract shall be renewed automatically unless one year prior to its scheduled expiration either party gives notice to the other that the contract will not be renewed (see Appendix, Article II).


A conference has freedom of selection before entering into the initial agreement with a neutral body. However, as a contract period proceeds, either party should be given the opportunity of terminating the contract for whatever reasons. Thus, the "permanency" of a neutral body agreement is suggested as a three-year period.

The gearing up of a neutral body's services requires hiring qualified personnel who must undergo a learning process with respect to the peculiarities of the individual lines and trades. A neutral body would not be able to hire the necessary personnel, or relocate present staff, absent some degree of permanency of the contract. Also, initial operating difficulties must be ironed out, with conferences and neutral bodies adjusting to each other. Any contract term of less than three years' duration would fail to afford a neutral body adequate opportunity to meet the challenges of the individual situations. A one-year notice period to rectify shortcomings on the part of either party is a fair and proper provision.

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