The European Union announced Monday that it will outlaw a system dating back to the 1870s which has allowed shipping companies to fix freight rates in exchange for ensuring regular services.

The ruling means that the so-called "block exemption on liner conferences" will end in October 2008, opening the industry to the Union's more restrictive competition rules.

The move risks sparking a war with the maritime transport industry, which is crucial for world trade. About 75 percent of EU exports and imports, in terms of volume, are carried out by sea, or around 45 percent in terms of value.

"The European shipping industry will benefit from the more competitive market that will result from the repeal of the block exemption and the EU economy as a whole stands to benefit from lower transport prices and more competitive exports," Internal Markets Commissioner Charlie McCreevy said.

The European Commission, the EU's executive body, said the abolition of liner conferences will affect EU and non-EU carriers operating on routes both to and from Europe.

It said it believed the ban would correct the "market distorting effects" of price fixing and result in lower prices for sea containers.

An independent study for the commission published in November 2005, found that transport prices would drop and service reliability improve if the liner conference system, essentially a cartel arrangement, were pulled apart.

It also found that there would be no negative effect on EU ports, employment, trade, developing countries, or small liner shipping carriers if the system, which dates from the 1870s, were ditched.

The shipping industry vehemently opposes any changes to the arrangement as it believes that the dramatic growth in world trade over the last decade would not have been possible without it.