1. Background

Several accidents have recently occurred on the Japanese coast resulting in pollution from ships' bunkers, and, because of the lack of or insufficient insurance coverage, the owners neither made any payment towards the cost of cleaning up after the oil pollution nor removed the wreck. The "Chil Song" case at Hitachi, Ibaraki, in December 2002, hardened the Japanese attitude and caused the policymakers to immediately prepare measures for non-insured ships. The MLIT thus started working on how to ensure compensation was available after an accident. They came to the conclusion that the responsible operator of ships, other than tankers, should respond to oil pollution damage caused by ship's bunkers and undertake wreck removal. Their response should be backed up by insurance cover or an alternative financial facility.

2. Outline of the amendments

1) Oil pollution damage arising from bunker of ships other than tankers
Responsibility for oil pollution damage arising from bunker of ships, other than tankers, is set forth in the draft legislation. The important points are:-
a. Liability principle:
Strict liability
b. Responsible party:
The registered owner and demise charterer to be jointly and severally responsible
c. Limit of liability:
In accordance with the Japanese national law for the 1976 LLMC

2) Compulsory insurance
Ships are required to maintain insurance or an alternative financial facility against i) oil pollution damage arising from bunkers, and ii) the costs and expenses for wreck removal carried out under the relevant national laws. The main factors are:-
a. Ships affected:
Ships, other than tankers, of 100 G/T and over engaged on international voyages which enter or leave Japanese ports. It does not apply to Japanese flag ships engaged only in coastal voyages.
b. Minimum amount to be insured:
For i) above, the limitation amount under the Japanese national law for the 1976 LLMC and for ii) above the amount equivalent to the limitation amount under the Japanese national law for the 1976 LLMC. Usually, the P&I cover provided by the P&I Clubs of the International Group meet this criteria.
c. Certificate:
Upon application from the ship's responsible party a certificate attesting that insurance or an alternative financial security is in force will be issued by the MLIT and shall be carried on board ship. For insurers approved by the Minister of the MLIT (the P&I Clubs of the International Group are believed to be included), a copy of the certificate of entry will be accepted in lieu of an MLIT's certificate.
d. Restriction to port entry:
The MLIT will be empowered to refuse entry into port for vessels without insurance, to order ship's masters or owners to make the necessary insurance arrangements or to impose penalties.

3) Effective date
It is proposed that the compulsory insurance legislation will come into effect on 1 March 2005. Issuing certificates will start on 1 December, 2004.

3. The Association's remarks

In their press release of July 2003, the MLIT proposed that 1) insurers like P&I clubs would be required to issue Blue Cards and 2) any claim could be brought directly against the insurer. This was not acceptable to the International Group of P&I clubs because the draft legislation is not applying an International Convention. However, as a result of the Association's approach to the MLIT in cooperation with the International Group and the Japanese Shipowners' Association, the MLIT finally withdraw the above items. After the introduction of the compulsory insurance legislation, it seems that the additional burden to the Members for ships entered with any P&I Club of the International Group will be:-