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ShippingMay2012NEW AUSTRALIAN CIVIL ANDCRIMINAL PENALTIES FORPOLLUTION BY SHIPOWNERS,CHARTERERS AND OPERATORSBackgroundThe Maritime Legislation Amendment Act 2011(Cth) (MLAA)) came into force on 5 December2011.The Act amends the Navigation Act 1912 (Cth)(Navigation Act) and Protection of the Sea(Prevention of Pollution from Ships) Act 1983(Cth) (PSPPSA) through, among other things,the introduction of new offences, the extensionof strict liability offences and increasing ofpenalties under existing offences.Rationale for reformThe MLAA was introduced as a reaction to tworecent maritime environmental incidents offthe Australian coast, namely, the grounding ofthe Shen Neng 1 in 2010 on the Barrier Reef(resulting in a spill of approximately 4 tonnesof heavy fuel oil) and spill of approximately270 tonnes of heavy fuel oil from the PacificAdventurer off Brisbane after 31 containerswere lost overboard damaging the ship’s hull.The MLAA is also intended to bring currentAustralian Federal legislation into line with theInternational Convention for the Preventionof Pollution from Ships (MARPOL), to whichAustralia is a signatory. MARPOL Article 4(4)requires member states to impose penaltiesthat are sufficiently severe to discourageviolation of the Convention and to ensurethat the penalties must be equally severeno matter where violations occur. Formerly,Australian federal legislation implementingMARPOL was not consistent with legislationin individual Australian States, which imposedmore onerous penalties for marine pollutionoffences.Major changesThe MLAA is intended to increase thedeterrence against pollution emanating fromships by:1. Introducing into the Navigation Act newoffences relating both to operating aship in a manner that has or may cause

pollution and failure to reportship movements in ecologicallysensitive areas.2. Setting out in the Navigation Acta formalised regime empoweringAMSA to seek the impositionof pecuniary penalties forcontraventions under the Act.3. Extending the list of persons whomay be charged with an offenceunder the PSPPSA in respectof oil discharge to include“charterers”.4. Increasing the maximum penaltyfor strict liability oil dischargeoffences under the PSPPSA fromA$55,000 to A$2.2 million forindividuals and from A$275,000to A$11 million for corporations.The legislation is silent as to whetherthe extension of liability to charterersincludes all types of charterers includingthose in a chain of charterparties orjust a particular type of charterer (e.g.demise charterers). However, there is areal possibility that Courts will apply abroader interpretation of “charterer” asthere is no apparent legislative intent torestrict the term to any particular type ofcharterer.As part of the new civil penaltyregime, the MLAA also introducesan accessorial liability regime underwhich people who aid, procure,induce or are knowingly concerned inor conspire to cause a contraventionof the Navigation Act are deemedto have committed the samecontravention themselves.New offences under the NavigationActThe MLAA introduces into theNavigation Act new offences aimedat enhancing the deterrence againstpollution in the coastal sea andexclusive economic zone of Australia(Protected Area) and beyond. It isnow an offence for:1. The master of any ship tooperate the ship in a recklessor negligent manner thatcauses pollution or damage tothe marine environment of theProtected Area.2. The master of any ship torecklessly or negligently fail toensure that the ship is operatedin a manner that does notcause pollution or damage tothe marine environment of theProtected Area.3. The master of an Australian shipto operate the ship in a recklessor negligent manner that causespollution or damage to themarine environment beyond theProtected Area.4. The master of an Australian shipto recklessly or negligently fail toensure that the ship is operatedin a manner that does not causepollution or damage to themarine environment of seas thatare beyond the Protected Area.If any of the above offences arecommitted, the master is liable topay a penalty. The maximum penaltyfor each offence is 600 penalty units,i.e. $66,000. In addition, each ofthe above offences can be deemedaggravated offences resulting inhigher civil penalties. An aggravatedoffence is one deemed to haveresulted in or had the potential tocause serious harm to the marineenvironment. The maximum penaltyfor an aggravated offence is 6,000penalty units, i.e. $660,000.Whilst the master is the party liablefor the offence, an owner or chartereror other accessory may also nowbe liable under the new accessorialliability provisions.New offence of failure to reportship movementsDivision 14 of Part IV of theNavigation Act allows regulationsto be made requiring reporting ofship’s movements in particular areas.The Great Barrier Reef ParticularlySensitive Sea Area is one such area.Failure to report in accordance withregulations is now a strict liabilityoffence rendering the master liablefor a penalty. The maximum penaltyfor the offence is $26,400.Whilst the master is the party liablefor the offence, an owner or chartereror other accessory may now alsobe liable under the new accessorialliability provisions (see below).New civil pecuniary penalty andaccessorial regimeThe MLAA amends the NavigationAct such that it now includes amechanism for AMSA to requestthe imposition of civil pecuniarypenalties for breaches of sectionsof the Navigation Act that imposecivil penalties (known as civil penaltyprovisions). These civil penaltyprovisions may apply to the newoffences set out above.The pecuniary penalty payable(known as a civil penalty order)must not be more than the penaltyspecified in the relevant section (in02 Shipping

the case of an individual) or 5 timesthat penalty (for a corporation).The MLAA also introduces anaccessorial liability regime similarto the one applying under theCompetition and Consumer Act 2011(Cth) (formerly the Trade Practices Act1974 (Cth)). Now, a person who has:1. Attempted to contravene a civilpenalty provision.2. Induced, aided, abetted,counselled or procured acontravention of a civil penaltyprovision.3. Been directly or indirectlyknowingly concerned or party toa contravention of a civil penaltyprovision.4. Conspired with others to effecta contravention of a civil penaltyprovision... is deemed to havecontravened the civil penaltyprovision themselves, renderingthem liable to the applicablepenalty.The new accessorial liabilityprovisions could leave an owner orcharterer liable for contraventions bythe master where, in contravening thenew offences, the master acts on theinstructions of the owner/ charterer,and the owner/charterer hassufficient knowledge of the facts thatwould make the master’s conduct acontravention of those provisions.The penalties that would apply toa corporation would be A$330,000for non-aggravated contraventions(i.e. A$66,000 x 5) and A$3.3 millionfor aggravated contraventions (i.e.A$660,000 x 5).Extension of operation andincrease of penalties under thePSPPSAThe MLAA amends the PSPPSAwith a view to providing a strongerdeterrent against pollution from thedischarge of oil and oily residuefrom ships. Under the PSPPSA it iscurrently an offence if:1. Oil or an oily mixture isdischarged into:- In the case of an Australianship, any seas whatsoever otherthan waters of an AustralianState or Territory with legislationgiving force to MARPOL.- In the case of non-Australianships, the Australian exclusiveeconomic zone and waters nearany Australian State or Territorywithout legislation giving effect toMARPOL.2. An Australian ship dischargesoil residue into any waters otherthan waters of an AustralianState or Territory with legislationgiving effect to MARPOL.Prior to the enactment of the MLAA,these strict liability offences weredeemed to have been committedby both the master and owner ofthe ship. The maximum penalty wasA$55,000 in respect of the masterand A$275,000 in respect of theowner (assuming the owner is acorporation).The MLAA adds “charterer” to themaster and owner, as a person thatis deemed to have committed anysuch offence. The term “charterer” isconsidered further below.There are some limited defences tothe above offence, including wherethe oil or oily mixture “escaped fromthe ship in consequence of nonintentionaldamage to the ship orits equipment and all reasonableprecautions were taken after theoccurrence of the damage or thediscovery of the discharge ...”. Whilstthis may seem like a broad defence,the PSPPSA excludes damagecaused by the mere negligence ofmaster or owner (even if carried outwithout intent) from being classifiedas “non-intentional damage”. Further,non-intentional damage to the shipor its equipment does not include“deterioration resulting from failureto maintain the ship or equipment”or “defects that develop duringthe normal operation of the ship orequipment”.To date, only NSW has followedthe Commonwealth in amendingcorresponding state legislation givingeffect to MARPOL such that the nonintentionaldamage defence expresslyexcludes negligently caused damage,and wear and tear. However, inthe other States and the NorthernTerritory, “damage” does not includethe consequences of wear and tear.The MLAA also increases themaximum penalty to A$2.2 millionin respect of the master and A$11million in respect of the owner andcharterer (assuming those entities arecorporations).Liability of the chartererThe MLAA extends liability under thePSPPSA to the charterer. The MLAAis silent as to whether this is intendedto apply to all or one specific typeof charterer, or all charterers (wherethere is a chain of charterparties).Shipping 03

Neither the amended PSPPSA,Explanatory Memorandum norMARPOL define “charterer”. Theparliamentary debate appears not tohave included a discussion on whichcharterers should be included for thepurpose of extended liability underthe PSPPSA.The term “charterer” is already usedin the PSPPSA and equivalent StateActs concerning the obligation toreport the occurrence of pollutionincidents. However, with regard tothe failure to report, in the case ofthe charterer, a defence is availablewhere they were not aware of theincident or, where a master hasfailed to report, neither knew of norsuspected such failure.There has been no judicialconsideration of “charterer” inthis context. With regard to thedischarge of oil or an oily mixture,it would appear that a chartereris limited to the same defencesavailable to the master and owner,notwithstanding that they may haveno direct involvement or control inrelation to the ship’s operations andmaintenance.As a matter of statutory interpretationthere does not appear to be anycompelling reason why a Courtshould read the word “charterer” insections 9 and 10 of the PSPPSAas meaning something less than allforms of charterers. The Court isrequired to apply the plain andordinary meaning of a word in astatute unless the result of applyingthe ordinary meaning would bemanifestly absurd or unreasonable.In the circumstances, it is possiblethat a Court would find that applying“charterer” to mean all types ofcharterers is not manifestly absurd orunreasonable. With regard to this:1. The word “charterer”, usedon its own in section 17 ofthe Admiralty Act 1988 (Cth)(Admiralty Act), has beenconstrued by the Court asmeaning charterer of any kind.2. The word “charterer” is alreadypresent in a subsequent sectionof the PSPPSA where a broadinterpretation would not be in anyway inconsistent with its purpose17 and if a different interpretationwas intended it could havebeen addressed expressly in theamendment.3. Notwithstanding that theoffences are strict liabilityoffences, Parliament’s intentionis to maximise the deterrenceagainst pollution possibly bymaking all charterers, as partiesinterested in the maritimeadventure, liable for prosecutionregardless of their actual level ofcontrol over the ship from whicha discharge occurs.Lawyers for international commerce hfw.comHOLMAN FENWICK WILLANLevel 41, Bourke Place600 Bourke StreetMelbourneVictoria 3000AustraliaT: +61 (0)3 8601 4500F: +61 (0)3 8601 4555Against this a charterer could arguefor a more limited reading of the word“charterer” on the basis that:1. With regard to the use of theword “charterer” in section 17of the Admiralty Act, that wordis used in a completely differentcontext to that in the PSPPSA.2. It is arguably manifestly absurdor unreasonable that a time,voyage or slot charterer shouldbe criminally responsible fora strict liability offence arisingfrom events over which it hadabsolutely no control, directly orindirectly. This is to be contrastedwith the position in relation tothe failure to report an offencewhere a time or voyage chartererfails to report a pollution incidentin circumstances where theyare aware of the incident andsuspected or knew that themaster had not reported it.It is not possible to provide adefinitive view on how the Courtswill interpret the term charterer in theamended sections of the PSPPSA.However, it cannot be assumed thata Court will restrict the term to aparticular type of charterer (such asa demise charterer) who exercisessome control over the operation ofthe vessel.For more information, please contact:David Coogans, Partner, on+61 (0)2 9320 4601 ordavid.coogans@hfw.com, orFrancis Burgess, Associate, on+61 (0)3 8601 4531 orfrancis.burgess@hfw.com, orGavin Vallely, Partner, on +61 (0)38601 4515 or gavin.vallely@hfw.com,or your usual contact at HFW.© 2012 Holman Fenwick Willan LLP. All rights reservedWhilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not beconsidered as legal advice.Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences pleasecontact Craig Martin on +44 (0)20 7264 8109 or email craig.martin@hfw.com