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Protection of the Sea (Civil Liability) Amendment Bill 2000

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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)





PROTECTION OF THE SEA (CIVIL LIABILITY) AMENDMENT BILL 2000

 

 

GENERAL OUTLINE

 

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.

 

 

FINANCIAL IMPACT STATEMENT

 

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.

 

 

REGULATION IMPACT STATEMENT

 

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

 

 

NOTES ON CLAUSES

 

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.

 

Schedule 1 - Amendment of the Protection of the Sea (Civil Liability) Act 1981

 

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.