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1998-1999-2000
THE
PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
PROTECTION OF THE SEA
(CIVIL LIABILITY) AMENDMENT BILL 2000
EXPLANATORY MEMORANDUM
(Circulated by authority
of the Minister for Transport and Regional Services,
the Honourable John
Anderson, MP)
ISBN: 0642 438846
PROTECTION OF THE SEA (CIVIL LIABILITY)
AMENDMENT BILL 2000
The Protection of the Sea (Civil Liability) Amendment Bill will amend the
Protection of the Sea (Civil Liability) Act 1981 (the Civil Liability
Act).
The proposed amendments to the Civil Liability Act will:
• require all ships of 400 or more gross tons entering or leaving an Australian port to maintain insurance to cover the cost of a clean up resulting from the spillage of bunker fuel or other oil;
• clarify the liability of a shipowner where the Australian Maritime Safety Authority (AMSA) has incurred expenses in exercising its powers under the Protection of the Sea (Powers of Intervention) Act 1981;
• clarify the ability of AMSA to recover costs where AMSA has incurred costs or expenses, or suffered loss or damage, in performing its function to combat pollution in the maritime environment where there has been a threat of, but not an actual, discharge or disposal from a ship;
• convert all penalties from dollar amounts to
penalty units.
The Civil Liability Act implements in Australia the
International Convention on Civil Liability for Oil Pollution Damage (the Civil
Liability Convention) which provides that the owner of an oil tanker is strictly
liable for pollution damage where the damage occurs in the territory (including
the territorial sea) or exclusive economic zone of a Party to the Civil
Liability Convention and that the owner must maintain insurance to specified
limits. The owner is entitled to limit his or her liability in accordance with
the limits set out in the Civil Liability Convention.
The Civil Liability
Convention defines ‘pollution damage’ to mean:
(a) loss or damage caused outside the ship by contamination resulting from the escape or discharge of oil from the ship, wherever such escape or discharge may occur, provided that compensation for impairment of the environment other than loss of profit from such impairment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken;
(b) the costs of preventive measures and further loss or damage caused by
preventive measures.
The requirement in the Civil Liability Convention to
maintain insurance applies only to ships registered in a country that is a party
to the Convention and carrying more than 2,000 tons of oil in bulk as cargo.
The Civil Liability Act extends the requirement for insurance to all tankers
carrying more than 2,000 tons of oil in bulk as cargo entering or leaving an
Australian port.
As well as implementing the Civil Liability Convention,
the Civil Liability Act provides for the recovery of:
• expenses incurred under the Protection of the Sea (Powers of Intervention) Act 1981
- the Protection of the Sea (Powers of Intervention) Act 1981 authorises AMSA to take measures for the purpose of protecting the sea from pollution by oil and by other noxious substances discharged from ships; and
• loss or damage suffered by, or costs or
expenses incurred by, AMSA in preventing or mitigating pollution damage because
of discharges from ships as manager of Australia’s National Plan to combat
Pollution of the Sea by Oil and other Noxious and Hazardous
Substances.
Following a spillage of bunker fuel, a shipowner is generally liable for
the cost of the clean up but, without appropriate insurance, the shipowner may
not be able to meet the cost of the clean up, in which case the costs would be
met by the Commonwealth, the States/NT and the community. The potential costs
of clean up are very high. Bunker fuel is particularly persistent and viscous,
and difficult to clean up. For example, the loss of 325 tons of bunker fuel
from the vessel Iron Baron in Tasmania in 1995 cost more than $3.5m to
clean up. (Some large bulk carriers visiting Australian ports carry more than
5,000 tons of bunker fuel.) The amendment to require insurance will remove this
potential cost to Governments and to the community. Most shipowners already have
appropriate insurance cover. The amendment will have no financial impact on
those shipowners. For the small proportion of shipowners who currently do not
have appropriate insurance cover, the cost of that insurance will be
small.
The amendments to clarify the liability of a shipowner where AMSA
has taken intervention action and AMSA’s ability to recover costs where it
takes preventative action where that is a threat of pollution will remove a
potential cost impost on AMSA. These amendments will not affect the costs of
insurance.
The only amendment contained in this Bill which may have an impact on
business is the amendment to require all ships of 400 or more gross tons
entering or leaving an Australian port to maintain insurance to cover the cost
of a clean up resulting from the spillage of bunker fuel or other
oil.
1. ISSUE IDENTIFICATION
In accordance with the Civil
Liability Act, the owner of an oil tanker is liable for pollution damage
resulting from the escape or discharge of oil carried in bulk as cargo on board
the ship where the damage occurs in the territorial sea or exclusive economic
zone. The owner of the tanker is able to limit his or her liability in
accordance with limits set out in the Civil Liability Convention. Where an oil
tanker enters or leaves an Australian port, the owner is required to have
insurance to cover its liabilities under the Civil Liability
Convention.
There is no current requirement in the Civil Liability Act or
elsewhere in Commonwealth legislation for insurance to cover liabilities for oil
pollution damage arising from ships other than oil tankers. For these ships,
the spillage of oil used as bunker fuel is a potential source of
pollution.
AMSA receives about 300 oil spill sighting reports each year.
Of these, an average of 22 incidents are serious enough to warrant some type of
response activity. To date, all ships involved in major spills in Australian
waters have had insurance coverage and the costs of the oil spill response have
been reimbursed to AMSA and State/NT response agencies. There are, however, no
guarantees that all ships visiting Australian waters will have the necessary
insurance coverage. A recent incident in New Zealand involving an uninsured
ship has reinforced these concerns.
A shipowner does not have unlimited
liability in the case of a spill of bunker fuel. Rather, the shipowner’s
maximum liability is determined by the Convention on Limitation of Liability for
Maritime Claims, which is applied in Australia by the Limitation of Liability
for Maritime Claims Act 1989. In accordance with that Convention a
shipowner’s maximum liability is determined by the size of the ship
– the bigger the ship, the greater the liability. For example, the
current maximum liability in respect of a typical ship of 40,000 gross tons
would be approximately $15 million.
2. OBJECTIVES
The
objective of the proposed amendment is to ensure that the owners of ships of
400 gross tons or more (other than oil tankers covered by the Civil
Liability Convention) have normal ship-related insurance in place, and are
therefore prima facie able to meet any liabilities arising in relation to
any pollution damage that would be caused by the discharge or disposal of oil
from the ship.
3. OPTIONS
(i) not amend the Civil Liability
Act so that current arrangements are unchanged. Where there is a spillage, a
shipowner is required to meet the costs of the clean up to the limit of his or
her liability but, except in the case of oil tankers, there is no requirement
for shipowners to have insurance cover to meet those liabilities.
Where a
ship is uninsured and clean up costs cannot be recovered from the shipowner, the
Government has decided that AMSA will meet from its own resources the costs of
clean up of any incidents up to a maximum of $10 million. AMSA has a standing
loan agreement with a bank, and would increase the general pollution levy on
commercial shipping for whatever period was necessary to repay such a loan.
Beyond this $10m limit the Commonwealth Government provides stand-by access to
resources to ensure an adequate response even for very large
spills.
(ii) amend the Civil Liability Act so that all ships of 400 gross
tons or more other than oil tankers covered by the Civil Liability Convention
will be required to have proof of insurance to cover liabilities arising from
pollution damage. The 400 ton threshold is considered to be suitable as ships
of 400 tons and above are required to meet existing international standards, in
particular those relating to certification for safety and pollution prevention
standards. This threshold will minimise the impact on the shipping industry.
Larger vessels also represent the greatest risk of serious pollution. Also,
this size of vessel is subject to the existing enforcement regime, and the
monitoring and enforcement requirements can be met within existing
resources.
(iii) amend the Civil Liability Act so that all ships other
than oil tankers covered by the Civil Liability Convention will be required to
have proof of insurance to cover liabilities arising from pollution
damage.
4. IMPACT ANALYSIS
The effect of Option (i), that
is not changing the Civil Liability Act, will be that there is a continuing risk
of the Commonwealth or other innocent parties having to meet the cost of a clean
up if there is a spill of oil or bunker fuel from a ship that does not have
insurance coverage. While the risk is small – there have been only seven
major incidents in Australia since 1988, and all involved ships with proper
insurance in place – the actual cost of a clean up can be of the order of
several million dollars. However, a recent serious spill in New Zealand
involved a ship that had no insurance.
The effect of an amendment to
require ships of 400 gross tons or more (Option (ii)) to have proof of insurance
to cover the liabilities referred to above will not be very great. Such an
amendment will not create any new liabilities – the effect will be to
ensure that shipowners can meet existing liabilities. The existence of
liability cover for a business is nothing more than sound business practice.
Also, ships of 400 gross tons or more are already subject to various document
and inspection requirements under international law, and the impact of requiring
an additional document to be produced would be minimal. On behalf of AMSA, the
Australian Customs Service (ACS) currently verifies fifteen different types of
certificates when ships are entering and leaving Australia. Therefore the costs
of implementing this option will be minimal both for shipowners and for
government authorities.
Shipowners usually have a single policy in
respect of each ship to cover most, if not all, their liabilities in relation to
the ship. The vast majority of insurance policies in respect of ships of 400
gross tons or more will already cover the liabilities to which this amendment
relates. Over 95% of the world’s shipping fleet is insured with
Protection and Indemnity Clubs, each of which provides the necessary insurance
coverage. No additional insurance will be required, and there would be no
increase in insurance premiums.
Insurance policies, other than those
referred to in the previous paragraph, may simply be endorsed to provide the
additional cover. An increase, if any, in premiums would be small.
The
main benefit of requiring ships to have a policy of insurance to cover the
potential liabilities arising from an oil spill is to minimise the risk that the
Commonwealth will need to meet the costs of responding to a ship-sourced
pollution incident. However, there are indirect benefits for the marine
environment. Where it is clear that insurance is in place and costs will be
covered, organisations involved in ship salvage will not hesitate to become
involved. This is particularly important during the early stages of an
incident, where any delays caused by uncertainty regarding cost recovery could
have serious environmental implications. Ship salvors are a critical element of
Australia's oil spill response contingency plans.
The effect of an
amendment to require all ships to have a proof of insurance (Option
(iii)) to cover the liabilities referred to above may be significant in respect
of ships of less than 400 tons as smaller ships are not subject to the same
international regime as larger ships in respect of safety and pollution
prevention requirements.
The risk of significant spills from smaller
ships is minimal, and such ships may have a variety of insurance arrangements
which could make administration difficult and costly. Many of the existing
insurance arrangements may not cover the liabilities envisaged in this
legislation, and would require considerable upgrading and increase in
premiums.
5. CONSULTATION
All relevant shipping
organisations have been consulted about this proposed amendment. There has been
no opposition to the proposed amendments. Comments ranged from full support for
the proposal to a request from the Australian Shipping Federation to be
involved in the development of the necessary associated subordinate
legislation.
6. CONCLUSION
The preferred option is Option
(ii), namely to amend the Pollution Act so that all ships of 400 gross tons or
more other than oil tankers covered by the Civil Liability Convention will be
required to have proof of insurance to cover liabilities arising from pollution
damage.
7. IMPLEMENTATION AND REVIEW
ACS is responsible
for the verification of statutory certificates required to be carried on board
ships, in accordance with the applicable legislation. AMSA and ACS have entered
into a service level agreement and developed guidelines listing fifteen
different types of certificates to be checked by ACS when ships are entering and
leaving Australia. The service level agreement maximises the advantages of
shared information and processes in the interests of harmonisation of
Commonwealth responsibilities related to Australian and foreign ships transiting
Australian waters. The proposed documentation regarding proof of insurance
coverage will merely extend Customs activity already existing in respect of
tankers.
Where ACS have any concerns regarding a particular ship, such as
missing or invalid certificates, AMSA would be contacted and a decision made
regarding necessary follow-up action. Such action might include withholding
Customs clearance by ACS or detention of the ship by an AMSA surveyor.
In
addition, AMSA marine surveyors conduct port State control inspections of ships
visiting Australian ports. The aim of this program is to inspect at least 50%
of foreign ships visiting Australian ports. The proposed documentation
regarding proof of insurance coverage will be added to the documents required to
be produced during these inspections.
The outcomes of both the ACS
verification and the AMSA port State control procedures will be closely
monitored to determine compliance rates and any follow-up action required.
Statistics are produced in the annual reports of both organisations.
PROTECTION OF THE SEA (CIVIL LIABILITY )
AMENDMENT BILL 2000
Clause 1: Short title
1. Clause 1 is a formal provision
specifying the short title of the Bill.
Clause
2: Commencement
2. In accordance with clause 2, the introductory
clauses (1-3) will commence on Royal Assent.
Parts 1 and 2 of Schedule 1
will commence six months after the Bill receives Royal Assent. This will allow
sufficient time for industry to be notified of the amendments before they
commence.
Parts 3 and 4 of Schedule 1 will commence the day after the
Bill receives Royal Assent. Because these Parts have offences in them, it is
not considered appropriate that they commence on Royal Assent. Provisions which
commence on Royal Assent commence at the beginning of the day on which Royal
Assent is given. This will be some hours before Royal Assent is actually given.
As this would involve a minor element of retrospectivity, it is considered
appropriate that these provisions containing penalties commence the day after
Royal Assent.
Clause 3: Schedule(s)
3. Clause 3 is a formal
clause indicating that the Civil Liability Act is amended as set out in the
Schedule.
Part 1 – Amendments relating to insurance cover by certain
ships
Item 1
Item 1 inserts a new Part IIIA (sections
19A-19C) – ‘Proof of possession of adequate insurance cover by
certain ships’ – into the Civil Liability Act.
New section
19A - Definitions
This section defines several terms for purposes of
the new Part IIIA:
• Government
ship is defined to mean a ship, including a warship, owned by a country.
It also includes a ship owned by the Commonwealth or an Australian State or the
Northern Territory.
• officer is defined to mean a customs officer, a marine surveyor, a member of the Australian Federal Police or any other person included in a class of persons prescribed by the regulations. In accordance with the new subsections 19C(2) and (3), an officer may require the production of a relevant insurance certificate or detain a ship.
• owner is defined to have the same meaning as in the Civil Liability Convention. The Convention defines ‘owner’ to mean ‘the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship. However in the case of a ship owned by a State and operated by a company which in that State is registered as the ship's operator, owner shall mean such company’.
• relevant insurance certificate is defined as a document or documents containing the prescribed information about a ship. The prescribed information must be information that is relevant to establishing that the shipowner has adequate insurance to cover the liability of the owner for pollution damage for an amount that is not less than the prescribed amount. The effect of this definition is that the new Part IIIA will be of no effect until relevant regulations are made.
• State is defined to include the
Northern Territory.
New section 19B - Application
This
section provides that the new Part IIIA applies to ships of 400 or more tons
that carry oil as cargo or bunker (ie, as fuel) and to which Part III of the
Civil Liability Act does not apply. Part III applies to tankers carrying more
than 2,000 tons of oil in bulk as cargo and requires an insurance certificate to
be carried on board to indicate that the shipowner maintains insurance to cover
liabilities for pollution damage arising from a discharge or disposal of oil
(including bunker fuel) from the tanker.
New Part IIIA will apply to
Government ships only if they are being used for a commercial purpose. This
means, in particular, that the new Part will not apply to naval
ships.
New section 19C - Insurance certificates to be carried on board
ships to which Part applies
This section requires ships entering or
leaving, or attempting to enter or leave, a port in Australia to carry a
‘relevant insurance certificate’ (defined in new section 19A).
Where such a ship does not carry a relevant insurance certificate, the master
and owner are each guilty of an offence. The maximum penalty on conviction is
500 penalty units.
An ‘officer’ (defined in new section 19A)
may require the master or other person in charge of a ship to produce a relevant
insurance certificate. If the master or other person refuses or fails to
produce the certificate, the master or other person is guilty of an offence.
The maximum penalty on conviction is 20 penalty units.
An officer may
detain a ship if the officer has reasonable grounds to believe that the ship is
to be taken out of a port without a relevant insurance certificate. The officer
may continue to detain the ship until a certificate is obtained or produced to
the officer. If a detained ship leaves port before it has been released from
detention, the master and owner are each guilty of an offence. The maximum
penalty on conviction is 500 penalty units.
It is common in maritime
legislation that the master of a ship is considered to be responsible for
everything that happens on board the ship. International shipping practice in
many cases involves charter and sub-charter arrangements meaning that shipowners
generally have very little to do with the day to day operation of a vessel.
International maritime law is increasingly focussing on the masters, agents,
charterers and insurers of ships as having responsibility for a vessels
operation. In addition, in cases where the shipowner is a foreign corporation,
it is difficult to prosecute the owner in an Australian court. In recognition
of these difficulties, this Bill ensures that both the owner and the master are
criminally liable for offences.
Strict liability applies to offences
under this new section. This means that, for a prosecution to be successful,
the prosecution must prove the physical elements only of the offence. For
example, if a ship attempted to leave a port without carrying a relevant
insurance certificate on board, the prosecution to be successful would need to
prove:
(a) the ship attempted to leave the port; and
(b) there was not a relevant insurance certificate on board the
ship.
For a strict liability offence, fault elements are not taken into
account. That is, for a successful prosecution there is no need to consider
intention, knowledge, recklessness or negligence. The only defence to a strict
liability offence is mistake or ignorance of facts.
Chapter 2 of the
Criminal Code applies to offences under the new section 19C. That
Chapter sets out general principles of criminal
responsibility.
Part 2 – Amendments relating to limitations
of liability
This Part of the Bill amends the Civil Liability Act to
clarify the limits of the shipowner’s liability to meet the expenses
incurred by AMSA when it takes intervention action under sections 8, 9 or 10 of
the Protection of the Sea (Powers of Intervention) Act 1981 (the
Intervention Act) in relation to a ship to prevent pollution by oil or other
substances. The actions that AMSA may take to prevent pollution include:
(a) moving a ship from one place to another
(b) removing cargo from a ship
(c) sinking, destroying or discharging any of a ship’s cargo into the sea
(d) taking over control of all or part of a ship;
(e) salvaging all or part of a ship or any of the ship’s cargo
(f) (with the Minister’s approval) sinking all or part of a
ship.
There are also some minor amendments to clarify that it is AMSA
that may recover the expenses that it has incurred.
Item
2
This item inserts a definition of Authority into
subsection 3(1) of the Civil Liability Act to mean the Australian Maritime
Safety Authority.
Item 3
Currently, subsection 20(1)
provides that, where the Minister incurs any expense or liability under section
8, 9 or 10 of the Intervention Act, he or she may recovers the amount of that
expense or other liability. In accordance with those sections, AMSA, rather
than the Minister may incur expenses or other liabilities. Therefore item 3
replaces the incorrect reference to ‘Minister’ in subsection 20(1)
with a reference to ‘Authority’.
Item 4
This
item amends subsection 20(1) consequential upon the amendment made by item
3.
Item 5
This item amends subsection 20(3). That
subsection sets a limit to a shipowner’s liability to pay expenses when
AMSA has undertaken intervention action to prevent, or mitigate the effects of,
pollution from a ship. In its present form, subsection 20(3) does not reflect
liability limits set out in international conventions which are in force in
Australia.
The amendment to subsection 20(3) provides that, where AMSA
takes intervention action, a shipowner’s liability is limited to the
liability limits set out in relevant international conventions which apply in
Australia. For ships other than oil tankers, the only international convention
that applies at this time is the Convention on Limitation of Liability for
Maritime Claims, 1976 which is implemented by the Limitation of Liability for
Maritime Claims Act 1989. The amendment to subsection 20(3) will allow
liability limits set out in any future relevant international conventions
applying in Australia to also apply where AMSA takes intervention action without
having to further amend the Civil Liability Act. There is no need to list the
conventions that apply as shipowners are aware of all relevant conventions that
apply to their ships.
By virtue of existing subsection 20(5), section 20
does not apply to intervention action to prevent pollution from oil tankers
carrying 2,000 tons or more of oil in bulk as cargo because of the application
of the Civil Liability Convention to those ships. The Civil Liability
Convention applies to ‘pollution damage’ which is defined to include
‘the costs of preventive measures and further loss or damage caused by
preventive measures’. Therefore, where intervention action to prevent
pollution is taken in respect of an oil tanker, the applied provisions of the
Civil Liability Convention, rather than section 20, will be used to recover
AMSA’s costs and to limit the owner’s liability to meet those
costs.
Items 6 and 7
These items amend subsection 20(7) to
repeal the definitions of adjusted tonnage register and
tonnage factor which are made redundant as a result of the
amendment to subsection 20(3).
Item 8
This item replaces
the incorrect reference to ‘Minister’ in paragraph 21(a) with a
reference to ‘Authority’ for reasons similar to the amendment made
by item 3.
Item 9
This item amends paragraph 21(a)
consequential upon the amendment made by item 8.
Part 3
– Amendments relating to threat of discharge or disposal
This
Part of the Bill amends Part IVA of the Civil Liability Act to enable AMSA to
recover costs or expenses incurred in preventing or mitigating, or attempting to
prevent or mitigate, pollution damage. The amendments will remove doubts that
AMSA is able to recover any costs or expenses it incurs when there has been a
threat of, but not an actual, discharge or disposal from a ship and AMSA has
taken action to combat the threat. An example of where there may a threat of a
discharge is where a ship has gone aground.
Item 10
This
item replaces the heading to section 22A to include a reference to threatened
discharges from ships.
Item 11
This item amends paragraph
22A(1)(b) to make it clear that section 22A applies to action taken by AMSA in
performance of its function under paragraph 6(1)(a) of the Australian
Maritime Safety Authority Act 1990 to combat the threat of pollution caused
by the threat of a discharge or disposal from a ship.
Items 12 and
13
These items amends paragraph 22A(2)(a) and 22A(2)(b) to provide
that, where there is a threat of pollution resulting from a threatened
discharge, AMSA may recover the costs and expenses it has incurred in combating
the threat from, respectively, the owner or master of the ship from which there
was the threat of a discharge or disposal or from any person whose act caused
the threat of a discharge or disposal.
Item 14
This item
repeals the definition of Authority consequential upon the
definition been added to subsection 3(1) by item 2 of this
Bill.
Part 4 – Amendments relating to conversion to penalty
units
Modern drafting practice is to express penalties in terms of
“penalty units”. This Part converts all existing penalties in the
Civil Liability Act from dollar amounts to penalty units. The conversion will
not result in any increase in penalty levels.