China's oil pollution laws are well worth watching

News Release Thomas Miller P&I Ltd July 26, 2010

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26 July 2010
China’s oil pollution laws are well worth
watching.
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.”
 
<UL style="MARGIN-TOP: 0cm" type=disc>
<LI style="LINE-HEIGHT: 150%; MARGIN: 0cm 0cm 10pt" class=MsoNormal>The
UK P&I Club’s Legal briefing
‘Chinese Marine Pollution Law’ follows four advisory circulars since November
2009.  Materials can be downloaded from <A
href="UrlBlockedError.aspx" target=_blank>www.ukpandi.com. 
</A></LI></UL></DIV></BODY></HTML>