China’s oil pollution laws are well worth watching

26 July 2010

PRESS INFORMATION

Ship owners and operators trading in Chinese waters face an extensive set of new legal and regulatory requirements governing their roles and responsibilities in oil pollution incidents.

China's Prevention and Control of Marine Pollution from Ships Regulation was implemented on 1st March 2010. It dovetails with the Marine Environment Protection Law of the People's Republic of China, laying down the principles and outlining the country's marine pollution legal system. However, the detailed requirements under the Regulation have yet to be revealed.

Chinese ministries have other supplementary regulations in the pipeline, such as the management and funding of a ship oil pollution compensation fund. A judicial guidance rule on compensation for oil pollution damage and limitation of liability, which would supplement the existing limitation of liability regime in the China Maritime Code, is being drafted by the Supreme Court.

Owners and operators wishing to keep a watching brief on developments to assess their impact when requirements emerge can refer to the UK P&I Club's July Legal Briefing. Helen Huang, Claims Executive in the UK Club's Hong Kong office, has reviewed the Regulation's main provisions and summarised key articles, with the support of Legal Director Chao Wu.

These cover a range of pollution-related incidents involving spillage of oil, oily mixture and other poisonous hazardous substances from ships or from ship-related operations. They encompass discharge and reception of oil pollutants; dumping waste; oil pollution response planning and clean-up arrangements; reporting and emergency handling of

pollution incidents; investigation and compensation; supervision of loading, lightening and discharging of polluting hazardous cargoes; and penalties for contravention.

Ship-induced pollution incidents are classified as extremely severe, very severe, severe and general, depending on the amount of oil spilled and the direct economic loss to those affected by the pollution. Owners and operators have emergency response plans in place to prevent and control pollution incidents. Existing Shipboard Oil Pollution Emergency Plans (SOPEPs), as required by MARPOL, are understood to suffice.

A compulsory insurance regime for all ships (except those less than 1,000 gt and not carrying oil cargoes) will cover claims arising from oil pollution damage. This should provide the implementing legislation which will give effect to the insurance provisions of the 2001 Bunkers Convention and the 1992 International Convention on Civil Liability for Oil Pollution Damage (CLC), both of them ratified by China.

A domestic Ship Oil Pollution Compensation Fund is to be funded by contributions from receivers of persistent oil cargoes which have been transported by sea to a Chinese port. This new fund reflects the fact that China is not a State party to the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (IOPC Fund), although the latter does apply to the Hong Kong Special Administrative Region.

Chinese domestic coastal trading ships used to carry little or no liability insurance. Collisions sometimes led to claims being directed against ocean-going vessels which were insured. Compulsory insurance for domestic coastal trading ships over 1,000 gt or carrying oil in bulk and the establishment of a domestic compensation fund will be welcomed by both claimants and operators of oceangoing vessels.

Ships carrying polluting and hazardous cargoes in bulk and other ships above 10,000 gt must pre-contract with an approved Chinese oil spill response organisation (OSRO) before entering into a Chinese port. A list of approved OSROs has yet to be published.

Oil tankers' liability limitation is the same as the scheme provided in 1992 CLC. Other ships may limit liability in accordance with the Chinese Maritime Code. According to the Regulation, clean up costs incurred by the Maritime Safety Administration should be compensated in priority to other claimants. This may conflict with the CLC and the Bunkers Convention which lays down that all admissible claims are to be treated equally and without priority for government claims.

The Regulation makes no reference to direct action against insurers. As per PRC Special Maritime Procedure Law, oil pollution damage claims may be brought directly against the insurers or other persons providing financial security for owners' liability. This means compulsory liability insurers for oil pollution damage can be sued directly under Chinese law and the CLC and Bunkers Convention.

Currently, the MSA issues CLC certificates and Bunker certificates for Chinese flag ships against blue cards from the P&I clubs.

The Maritime Safety Administration will enforce the Regulation and supervise and manage the prevention and control of marine pollution by ships and relevant ship operations in internal and territorial waters, the contiguous zones, the Chinese exclusive economic zone and continental shelf, and all other sea areas under PRC jurisdiction.

The briefing warns that while the Regulation sets up the general framework of Chinese oil pollution law, "it cannot resolve all issues initially. There are difficult long term questions, such as the title to sue, the admissibility of compensation claims, methods of investigation and burden of proof, which remain to be clarified, either by supplementary regulations or rules of judicial practice."

The UK P&I Club's Legal briefing 'Chinese Marine Pollution Law' follows four advisory circulars since November 2009. Materials can be downloaded from www.ukpandi.com.

For further information:

Nick Whitear

Thomas Miller P&I Ltd

Tel: +44 (0) 20 7283 4646

Email: nick.whitear@thomasmiller.com

Website:

www.ukpandi.comIssued by:

Martin Rowland

Dunelm Public Relations

Tel: +44 (0) 20 7345 5232

Fax: +44 (0) 20 7345 5234

Email: info@dunelmpr.co.uk