OIL POLLUTION: Handling a Marine Casualty Rajah & Tann 2 April 2007

Straits of Malacca

Collision between two oil tankers in the Straits of Malacca: What are the emergency actions that should be taken? Where the oil spill affects the waters of either Singapore, Malaysia or Indonesia; and In the event of a major spill affecting the waters of all 3 countries.

Overview of Presentation 1. Applicable Conventions in Singapore, Malaysia and Indonesia 2. Oil Spill Response Plans in Singapore, Malaysia and Indonesia - government authority to notify - relevant national oil spill contingency plans - regional oil spill contingency arrangements 3. Measures to be taken when oil pollution occurs - activation crisis management team - relevant notifications - preservation of evidence

4. Civil and Criminal Proceedings - types of possible civil claims - criminal liability 5. Limitation of Liability - Civil Liability Convention - Limits of the Civil Liability Convention - Fund Convention

Introduction Oil pollution represents one of the significant exposures for shipowners and consequently the vessel’s P&I Club. Given the far-reaching effects of oil pollution, the international community has concluded various treaties relating to 3 main aspects of marine pollution, namely:- - Preventing pollution (MARPOL, SOLAS) - Response to pollution (OPRC Convention) - Compensation for pollution (CLC 69, LMC 76, CLC 92, FC 71, FC 92)

Applicable Conventions in Singapore, Malaysia and Indonesia

Singapore International Convention for Prevention of Pollution from Ships, 1973 as modified by the Protocol of 1978 (MARPOL 73/78) - enacted Prevention of Pollution of the Sea Act 1990 International Convention on Oil Pollution Preparedness, Response and Cooperation 1990 (OPRC) Civil Liability Convention 1992 and Fund Convention 1992 - given effect by the Merchant Shipping (Civil Liability and Compensation for Oil Pollution) Act.

Malaysia International Convention for Prevention of Pollution from Ships, 1973 as modified by the Protocol of 1978 (MARPOL 73/78) International Convention on Oil Pollution Preparedness, Response and Cooperation 1990 (OPRC) Civil Liability Convention 1992 and Fund Convention 1992 (with effect from 9 June 2005) - The Merchant Shipping (Oil Pollution) Act 1994 was amended in 2005 to give effect to the CLC 92 and Fund Convention 1992.

Indonesia International Convention for Prevention of Pollution from Ships, 1973 as modified by the Protocol of 1978 (MARPOL 73/78) Civil Liability Convention 1992 Not a party to: - International Convention on Oil Pollution Preparedness, Response and Cooperation 1990 (OPRC) - Fund Convention 1992

OPRC Convention The Convention is designed to facilitate international co-operation and mutual assistance in preparing for and responding to a major oil pollution incident and to encourage States to develop and maintain an adequate capability to deal with oil pollution emergencies. As can be seen below, although Indonesia is not a party to the OPRC Convention, Indonesia has its own oil spill contingency Standard Operating Procedure. This coupled with the regional and bilateral agreements reduces the necessity of Indonesia being a party to the OPRC Convention.

Fund Convention The Fund Convention is supplementary to the Civil Liability Convention. It provides compensation in circumstances where: - the CLC exempts the shipowner from liability; or - the owners and his insurers cannot pay; or - claims resulting from the incident exceed the liability limits under the CLC. It is applicable only in the country where the proceedings are commenced. As Indonesia is not a party to the Fund Convention 1992, claimants will be limited to the compensation under CLC 1992 in such situations.

Oil Spill Response in Singapore, Malaysia and Indonesia

Overview Relevant government authority to notify Relevant national oil spill contingency plans Regional oil spill contingency arrangements

Singapore

Who to Inform National authority to be notified - Maritime and Port Authority of Singapore The MPA co-ordinates the spill clean-up operation, monitors and enforces measures to prevent oil pollution in Singapore waters. At the MPA’s request, the PSA Corporation and oil majors will deploy their resources for controlling and cleaning up oil spills.

Panel of Oil Spill Response Companies S’pore has two oil response centres, EARL and SOSRC that are fully equipped to respond to any oil pollution incident in Singapore and in the region. East Asia Response Pte Ltd (EARL) - founded by major oil companies with the aim of complementing the Singapore, Malaysia and Indonesia oil spill response plans. - established a large stock pile of air-transportable equipment

Singapore Oil Spill Response Centre (SOSRC) - private oil spill clean up company set up by SembCorp Logistics Ltd - maintain its own stockpile of oil pollution response equipment - Petroleum Association of Japan has also sited a small stockpile of response equipment with SOSRC

Oil Spill Contingency Plan Marine Emergency Action Procedure (MEAP) - contains detailed procedures on reporting, control, co-ordination and rescue - comprises two parts: Strategy and Operation Plan

Regional Oil Spill Contingency Arrangements ASEAN- Oil Spill Response Action Plan (ASEAN OSRAP) Standard Operating Procedure for Joint Oil Spill Combat for the Straits of Malacca and Singapore 1981

The “Evoikos” Oil Spill (1997) The vessels collided off Singapore’s port limits, resulting in a spill of 28,500 tonnes of heavy marine fuel oil. The worst oil spill in the history of Singapore and East Asia Cleaned-up in a record 3 weeks Swift response by the MPA in activating and co-ordinating the MPA’s oil spill response plan: - the spill was well contained within the Southern Islands - shipping traffic in the S’pore Strait was not disrupted and the Straits remained opened. - oil/petrochemical complexes were able to continue their operations without interruption. - Singapore coast and beaches along East Coast and Sentosa were unscathed.

MPA’s oil spill contingency plan was proven to be effective and practical. The successful containment of the oil spill was due to several factors: - MEAP - quick initial response - multi-prong clean-up action plan - communication and media management A paper on the Evoikos incident presented by the MPA at the PAJ Oil Spill Symposium’98 is available on request.

Malaysia

Who to Inform National Authority to be notified: - Director General, Department of Environment(DOE) - this is required under Section 27 of the Environment Quality Act (1974). DOE has overall responsibility for oil spill response with the major operating role falling to the Marine Department of the Ministry of Transport. In a major oil spill, coordination is carried out by the National Oil Spill Committee, which is chaired by the Director General of DOE.

Oil Spill Contingency Plan National Oil Spill Contingency Plan (NOSCP) - established coordinated oil spill response system - enhanced response capability 3-Tiered Response System a. Local Response - small spill within port limit and control of local resources b. State Response - for spill that have gone beyond control of local response

c. Regional Response - major spill which requires assistance from neighbouring countries

Oil Spill Response Company Petroleum Industry of Malaysia Mutual Aid Group (PIMMAG) - private company established by Petronas - render assistance to the National Oil Spill Control Centre and is capable of supporting local and state response.

Regional Oil Spill Contingency Arrangements Lombok-Macassar Oil Network Response Plan 1987 Standard Operating Procedure for Joint Oil Spill Combat for the Straits of Malacca and Singapore 1981 Standard Operating Procedure for Malaysia and Brunei ASEAN- Oil Spill Response Action Plan (ASEAN OSRAP)

Indonesia

Who to Inform National Authority to be notified - Sea & Coast Guard Division, Directorate General of Sea Communications (SEACOM) Responsibility and control lies with the National Operations Centre for Oil Pollution (NOCOP) in SEACOM’s head office Pertamina - State Gas and Oil Enterprise - operational supporting agency together with other related government and industry institutions - role of operating and providing oil spill equipment - has its own oil spill response plan

Oil Spill Contingency Plan Indonesia has had in place since 1975, a Standard Operating Procedure (SOP) for oil spills in the Straits of Malacca and Singapore Standard Operating Procedure covering oil tanker routes passing through through the Straits of Lombok and Makassar Straits. Draft National Oil Spill Contingency Plan - spill response within Indonesia is based upon a draft National Oil Spill Contingency Plan

Regional Oil Spill Contingency Arrangements Tripartite plan with Singapore and Malaysia covering the Straits of Malacca and Singapore 1981 ASEAN- Oil Spill Response Action Plan (ASEAN OSRAP)

Regional Oil Spill

ASEAN OSRAP Where the oil spill is major, assistance will be provided from the neighbouring countries under the ASEAN- Oil Spill Response Action Plan (ASEAN OSRAP) The ASEAN OSRAP was established by Brunei, Indonesia, Malaysia, the Philippines, Thailand and Singapore in 1993. The objective of ASEAN OSRAP is to enhance the ability of a country to respond to oil spills which exceed the response capability of the individual country. ASEAN OSRAP provides a cooperative plan for mutual assistance from member states for oil spill response.

Areas of Responsibility - all waters within the exclusive economic zone of the ASEAN countries and the territorial waters surrounding Singapore. Where there is an oil spill, the lead agency of the country concerned will initiate the Pollution Reporting System (POLREP) within the ASEAN Countries. The lead agency of the country whose waters is affected is responsible for initiating any action within the area of responsibility in accordance with the country’s National Oil Spill Contingency Plan.

ASEAN OSPAR Project on Oil Spill Preparedness and Response (OSPAR) sponsored by Japan in 1994. Aim is to promote cooperation between Japan and the ASEAN countries to combat oil spills in the region. OSPAR project as contributed to the development of an ASEAN Oil Spill Information Network System and the enhancement of equipment stockpile bases in various ASEAN countries.

Measures to be taken when oil pollution occurs

Activation of Crisis Management Team In most major shipping organisations, there is usually a contingency plan to deal with maritime emergencies. The plan would invariably involve the establishment of a crisis management team. The team would usually include the following personnel: - key personnel from ship management office - an appropriate expert - a competent and experienced surveyor - an experienced solicitor - an experienced Public Relations officer - the insurance broker

Overview Activation crisis management team Relevant notifications Preservation of evidence

Media Control - effective public relations is an integral part of the entire operation. - in a major oil spill, failure to provide pertinent information to the public and the media as quickly as possible may create unnecessary difficulties in dealing with the incident.

B. Notification The P&I Club will be notified by the shipowner In the event of an oil spill, it is also incumbent on the shipowner to inform the following parties: - the relevant government authority Singapore: Maritime and Port Authority of S’pore Malaysia: Department of Environment/ Maritime Rescue Coordination Center Indonesia: Sea & Coast Guard Division, Directorate General of Sea Communciations - insurance brokers - underwriters for cargo and/or hull and machinery

C. Preservation of Evidence Full and detailed statements should be recorded from all persons involved in the incident. Inspection of vessel The following documents should also be obtained from the shipowner to facilitate investigation and/or inspection of the vessel: - working charts - deck log book - engine log book - course recorder/AIS printouts - vessel’s plans, trading certificates, classification records, maintenance records - vessel’s records of cargo loaded onboard including oil record book, stowage plans, cargo manifest.

- documents relating to repairs/maintenance of the vessel - vessel’s crew list together with certificates of competency of the ship’s officers. E.g The “Song San” - Criminal charges were brought in the Singapore Court against the owner, the master and the chief officer for not maintaining the oil record book - The owners were fined S$50,000 for the failure to maintain oil record books.

Documentation of observed environmental damages, as well as collection and preservation of samples, pictures and field reports should be preserved and maintained. - in order to validate future claims.

Civil and Criminal Liability

Types of Legal Proceedings Civil Proceedings Criminal Proceedings Marine Department/Police Inquiry Coroner’s Inquiry

Civil Proceedings Types of possible claims: Loss of life or personal injury Pollution damage Salvage Wreck Removal Inter-ship collision claims Property damage Cargo Claims

Criminal Proceedings The owner, agent, master and/or crew may be charged in relation to the pollution. Singapore: - Merchant Shipping Act see for example Section 115 - Prevention of Pollution of the Sea Act e.g. oil pollution offence (s7), failure to report (s 15), record books (s12) - fine and/or imprisonment - fines range from $500-$1,000,000 (Jupiter Shipping Pte Ltd v PP : overflow of oil during bunkering. No aggravating factors. Fine of S$10,000) - imprisonment for a term not exceeding two years

Malaysia - Environment Quality Act 1974 (Amendment 1996) provides for marine pollution offences. E.g Section 27, discharge of oil into Malaysian waters: - fine and/or imprisonment - fines exceeding RM 500,000 - imprisonment for a term not exceeding five years

In such an instance, the shipowner will need assistance with the local authorities. The P&I Club has legal and commercial correspondents in many ports worldwide and, either directly or through them, are able to provide such assistance.

Limitation of Liability: Liability Regimes in Singapore, Malaysia and Indonesia

Overview Civil Liability Convention 1992 Fund Convention

Civil Liability Convention Strict liability in exchange for limited exposure. - exposure is limited in terms of both principle (i.e. save for types of claim specified no other claims allowed) and quantum (i.e. maximum liability is fixed) The shipowner will set up a fund in the affected jurisdiction and all claimants will look to the fund for compensation. Countries agree that their courts will not require the shipowner to set up more than one fund.

Limits of the CLC Only applicable to pollution by oil carried as cargo Does not cover pollution by bunkers or other types of oil/chemicals Spills from tankers in ballast or bunker spills from ships other than tankers are not covered E.g. “The Stolt Advance” (S’pore) - grounding ruptured vessel’s tanks and oil escaped into the sea - ship was not carrying oil in bulk as cargo. The shipowners are therefore not subject to the convention liability. The shipowner has to look to the Merchant Shipping Act for limitation under LLMC 1976.

CLC Limits For a ship not exceeding 5,000 gross tonnage, liability is limited to  3 million SDR (about US$3.8 million) For a ship  5,000 to 140,000 gross tonnage:  liability is limited to 3 million SDR plus 420 SDR (about US$538) for each additional unit of tonnage For a ship over 140,000 gross tonnage: liability is limited to  59.7 million SDR (about US$76.5 million)

Singapore, Malaysia and Indonesia are all parties to the CLC 92. In the event that pollution occurs, a shipowner can limit his liability by setting up a limitation fund in either of the countries. Once the fund is set up, all claims are to be brought against the fund. - the limitation fund will be distributed to the claimants in proportion to their established claims. - all claims rank pari passu.

Fund Convention 1992 Both Singapore and Malaysia are parties to this Convention. If a claim in Singapore and/or Malaysia exceeds the sum available under the fund set up under CLC 1992, the claimants can make a claim against the Fund established under the Fund Convention. Under the 1992 Protocol, the maximum amount of compensation payable from the Fund for a single incident, including the limit established under the 1992 CLC Protocol, is 135 million SDR (about US$173 million). However, if three States contributing to the Fund receive more than 600 million tonnes of oil per annum, the maximum amount is raised to 200 million SDR (about US$256 million).

If the claims brought against the Fund exceed the value of the Fund, the fund will be distributed in proportion to the established claims.

THE END The information contained in this paper is correct to the best of our knowledge and belief at the time of writing. The contents of the above are intended to provided a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as the information above may not necessarily suit your specific business and operational requirements. It is to your advantage to seek specific legal advice for your specific situation. In this regard, you may call the above lawyers or email Rajah & Tann’s Knowledge & Risk Management Group at eOASIS@rajahtann.com. No part of this paper can be reproduced at anytime for whatever purpose at all without the clearance of the Knowledge & Risk Management Group of Rajah & Tann.