1. INTERTANKO NORTH AMERICAN PANEL March 17, 2008
ENVIRONMENTAL “INSURANCE” How to Maximize Potential Benefit Under Coast Guard Voluntary Disclosure Policy
INTERTANKO
NORTH AMERICAN PANEL
March 17, 2008
Gregory F. Linsin
The information contained herein is abridged and summarized from numerous sources, the accuracy and completeness of which cannot be assured. This should not be construed as legal advice or opinion and is not a substitute for the advice of counsel.

2. ENHANCED REGULATORY ATTENTION FOR MARITIME INDUSTRY
Fact of life in 21st century
Criminal prosecutions for intentional Annex I MARPOL violations
OWS cases for oil discharges and false records
In $65 million dollars in criminal fines; 34 new cases charged
Oil spills resulting from marine casualties
Intertwined with response actions and civil liability issues under OPA 90 or CLC
Intensive publicity and political interest
Criminal charges based on evidence of negligence as proximate cause of spill
MARPOL Annex VI; CARB regulations; Ballast Water Convention
Port State authorities will rely on vessel record inspections to verify compliance
More Port States are intensifying vessel inspection protocols and enforcement efforts

3. BACKGROUND - ENVIRONMENTAL AUDITS AND VOLUNTARY DISCLOSURE
ENRD 1991 Voluntary Disclosure Policy
Self-audits and voluntary disclosure as potential basis for declination
EPA Voluntary Disclosure Program
In effect since 1995
Thousands of disclosures made
Vast majority result in waiver of gravity-based penalties or non-referral to Department of Justice
DoJ Principles for Federal Prosecution of Business Organizations
Corporate compliance program and voluntary disclosure as mitigating factor in exercise of prosecutorial discretion
USSG mitigating factor
Prior existence of compliance program as mitigating factor in sentence

4. COMPLIANCE PLANS FOR MARITIME OPERATORS YIELD BENEFITS
Empirical data from United States
Hundreds of ships sailed for years under ECPs following convictions
Only two ships have been found by court to have violated ECP
Many companies continuing ECPs after probation ends
Industry guidance on use of oily water separators
BIMCO, INTERTANKO and other industry associations
Provides technical and management approaches
Industry guidance on environmental compliance
International Chamber of Shipping & International Shipping Federation
Stresses need for more thorough management oversight and verification
The Standard P & I Club – December 2007 Bulletin
Sets out business case for enhanced management controls and implementation of comprehensive ECP

5. NEW COAST GUARD VOLUNTARY DISCLOSURE POLICY
Specifically for environmental crimes
Issued November 2007
Modeled on EPA Voluntary Disclosure Program
Designed to encourage and reward proactive compliance efforts
If conditions satisfied and new violation voluntarily reported, Coast Guard may forego referral of corporate violation to Department of Justice
To qualify, company must previously have implemented a Compliance Management System to prevent, detect and correct violations
Clear policies and standards
Designation of senior corporate official with responsibility for compliance
Monitoring and auditing regime
Effective training program
Incentives for managers and employees to comply
Procedures to promptly correct violations and modify CMS

6. NEW COAST GUARD POLICY – cont’d
If future violation discovered through audit or CMS, Coast Guard will consider factors:
Voluntary discovery – not through legally mandated monitoring
Prompt disclosure – within 21 days of discovery
Independent discovery and disclosure – prior to government inquiry
Must be corrected in 60 days – complex problems may require schedule
Take steps to prevent recurrence
No pattern of violations
Violations involving serious harm or substantial endangerment of human health and environment excluded
Full cooperation with any ensuing investigation
Policy is NOT a guarantee of immunity

7. CRAFTING ENVIRONMENTAL “INSURANCE” POLICY
ECP and EMS “insurance policy” requires an investment of resources
Must be –
Tailored to your fleet, your operations and your personnel
Integrated with SMS Manual
Supported by flexible environmental compliance budget
Actively managed by senior shoreside official
Implemented on a dynamic basis
Advice of counsel should be obtained –
For development, implementation and periodic re-evaluation of ECP/EMS
When new violations are suspected or discovered
Prior to any contemplated disclosure to the Coast Guard
As summarized in ICS guidance –
A company must “demonstrate, by behaviour and action, that environmental compliance is a core element of the company’s business plan.”

8. SUMMARY OF POTENTIAL BENEFITS
Properly structured ECP/EMS implemented in good faith can produce range of benefits –
Can help change corporate culture
Can significantly reduce environmental noncompliance
If new violations detected, new Coast Guard Voluntary Disclosure policy may help avoid referral to Department of Justice
If criminal investigation is initiated, can help influence charging decision under Department of Justice policies –
Declination
Deferred prosecution agreement
Reduced charges
Can help establish legal and factual predicate for “rogue employee” defense
If conviction results, can help mitigate penalty under sentencing guidelines

9. Questions?
Contact information:
Gregory F. Linsin
Blank Rome LLP
600 New Hampshire Ave, N.W.
Washington, D.C
(202)