Australian pollution law – Oil pollution indemnity clause for penalties and fines

23 October 2012 No.12-015

Members are referred to the previous circular No.11-028 dated 26 March, 2012.

The Australian Government introduced increased penalties for pollution from ships and damage to the marine environment by way of new legislation - the Maritime Legislation Amendment Act, 2011 - that came into effect on 4 December 2011. The Act amends the Australian Navigation Act 1912 and the Protection of the Sea (Prevention of Pollution from Ships) Act, 1983.

As a result of these recent amendments, longstanding criminal liability imposed on owners and masters for oil discharge or threat of discharge in Australian waters has been extended to charterers. Charterers, owners and masters are now severally liable with offences punishable by fines.

The maximum penalty for this criminal offence is increased from 500 penalty units to 20,000 penalty units (AUD 2.2 million (USD 2.3 million)) for an individual. This may be multiplied by a further factor of five for a corporation, taking the maximum penalty to AUD 11 million (USD 11.5 million).

In order to address concerns raised by both owners and charterers in respect of the new law, the International Group has drafted, in consultation with BIMCO, a recommended clause for inclusion in charterparties. The wording of the clause is not country specific and capable of broader application. The clause addresses the specific situation of criminal fines and civil penalties.

The International Group is aware that pending publication of this clause some charterers have sought to use pollution indemnity clauses that do not preserve an owner's right to limit and have other provisions that render the clause uninsurable by Clubs. Members are therefore strongly urged to use this new clause in their charterparties.

The text of the clause and explanatory notes are attached.

Should Members have any questions regarding this clause or its application they should contact the Managers in the normal way.

All Clubs in the International Group of P&I Clubs have issued similar circulars.