Article: MARPOL fines for oil pollution and operational best practice
12 October 2020
Members are reminded that club cover for fines under the International Convention for the Prevention of Pollution from Ships (MARPOL) is discretionary. The club’s board has adopted an increasingly strict approach to these types of discretionary claims. There should be no expectation that the club’s board will approve reimbursement, save for under truly exceptional circumstances.
MARPOL Fines and Discretionary Cover
Authorities around the world continue to aggressively pursue suspected violations of MARPOL even in the midst of the COVID-19 pandemic. In the United States these violations can lead to multimillion-dollar financial penalties on shipowners and third-party vessel managers, while crewmembers can face prison if found guilty.
The United States has implemented MARPOL through the Act to Prevent Pollution from Ships which makes it a crime for any person to knowingly violate MARPOL. Enforcement efforts have been directed at all types of registered and domestic tonnage and those prosecuted for MARPOL violations include owners, operators, technical managers, crewmembers and shoreside personnel. Authorities expect companies operating in US waters to understand the risks associated with failing to comply with MARPOL and adopt a zero-tolerance approach to enforcement. .
Basis of liability
Illegal practices that result in MARPOL investigations and prosecutions often involve a 'magic pipe' (or flexible hose) bypass of the oily water separator or improper discharge of sludge. Some have involved garbage violations under Annex V of MARPOL. Almost all cases have included prosecutions for false statements and records, such as misleading entries in the ship’s Oil Record Book and Garbage Record Book. This allows US authorities to prosecute shipowners in the US even if the alleged discharge took place outside of US waters. The false statements by crew members to US Coastguard inspection teams and prosecutors, destruction or concealment of bypassing equipment, and incriminating records are a feature of many prosecutions and add considerably to the level of fines incurred. There is also an expectation that authorities will begin to target Annex VI violations which covers air emissions in light of IMO 2020.
A shipowner can be found guilty of MARPOL violations even if it was unaware of the crew’s actions, if those actions benefitted the company (generally interpreted to mean saving money) and were related to the crew’s responsibilities. It is then for the shipowner to demonstrate that it had in place adequate environmental policies and procedures to prevent this.
Other than in cases of purely accidental discharge, P&I cover for pollution fines and associated expenses is only available on a discretionary basis. For a discharge to be accidental, there should be no intention to cause the discharge. Rather, the discharge itself must be accidental. For example, if water, which unwittingly contains oil, has been intentionally discharged or allowed to escape from the ship this would not be deemed accidental even if this was thought to be justifiable in the circumstances. Situations of accidental pollution in this context are likely to be very rare.
If cover is discretionary, then to have any prospect of recovery from the club, a member needs to satisfy the board that it had taken all such steps as appear to the board to have been reasonable to avoid the event giving rise to the fine. This is a very difficult test to meet and involves detailed scrutiny of the circumstances of the offence, as well as an assessment of the environmental policies and procedures in place.
There will be no recovery in the event of any personal act or default on the part of a member (or its managers) or where there has been willful misconduct. Because cover for MARPOL fines is discretionary, the club will only provide security as a last resort and a member will need to provide adequate counter-security, usually by way of a bank guarantee.
In terms of claims handling, a member would be expected to act as a 'prudent uninsured' in responding to proceedings, with the often considerablecosts and expenses incurred falling to the member in the first instance. Any claim for reimbursement could then be submitted for the board’s consideration at the conclusion of the matter.
Operational best practice
Previous publications on the club’s website (most recently the October 2014 Standard Safety and October 2017 Standard Bulletin provided a summary of MARPOL operational best practice. The main issues to be addressed are:
The member’s environmental compliance policy implementing 'zero pollution' culture
a clear environmental statement that places proper waste management practices above cost savings and operational expediency
a no-blame culture, with open reporting of all illegal practices
shore-side management supervision, with a senior person in the company responsible for environmental compliance reporting to the chief executive and/or the board
procedures and guidance on equipment control, planned inspection and maintenance regimes
establishing a robust monitoring regime and recognising the critical role of ship superintendents in checking compliance with environmental procedures and, in particular, detailed analysis of discharge records through oil record books and the ship’s documentation
effective on-board management of oil waste systems by the chief engineer and master
installation of the most up-to-date equipment with an effective maintenance programme, prompt procurement of spares, adequate holding tank capacity and shoreside discharge facilities, if required
periodic testing and calibration of equipment and tamper-proof measures to make bypassing difficult and detectable
accurate and honest documentation of oil waste management practices, with prompt reporting of any problems to shoreside management for possible escalation to flag or port authorities
formal training on MARPOL requirements, both on board and ashore – this should be provided on a regular basis and be supported by safety publications
briefing crew on the implications related to falsification of records and MARPOL violations
audits and inspections for MARPOL compliance conducted by superintendents and external inspectors, with proper testing of equipment and interviews with engineering crew – results should be clearly documented for review by senior management, with recommendations for improvements.
The club continues to see a rise in the size of civil and criminal penalties for MARPOL non-compliance, especially in the US. Rigorous training and supervision, regular auditing and effective senior management oversight are key to ensuring MARPOL compliance. The most effective way to mitigate risk in this area is maintaining a company-wide culture of compliance among, and co-operation and trust between, both ship and shoreside staff that is actively promoted by senior management. MARPOL best practice must be treated as the highest priority, rather than as simply another operational process.It should never be assumed that the club’s board will simply approve reimbursement.