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Gard News 197, February/April 2010

Gard News presents answers to some frequently asked questions regarding the new Chinese regulations on prevention and control of marine pollution.

On 9th September 2009 the Chinese State Council of the People's Republic of China (PRC) promulgated the Regulations of the People's Republic of China on the Prevention and Control of Marine Pollution from Ships (Regulations).  The Regulations will come into effect on 1st March 2010.1

General
What is the purpose of the Regulations?
The Regulations are intended to establish comprehensive rules governing oil pollution prevention, response and clean-up within PRC waters, updating/replacing the previous pollution regulations promulgated on 29th December 1983.

What is the scope of the Regulations?
The Regulations cover any ship-sourced pollution and any ship-related operation that causes or may cause pollution damage in the internal waters, territorial waters and the contiguous zones, exclusive economic zone and continental shelf of the PRC and all other sea areas under the jurisdiction of the PRC (wherever the pollution occurs).

What do the Regulations cover?
The Regulations cover a wide range of issues, such as the discharge and reception of oil pollutants; dumping of waste and permissions for dumping; oil pollution response planning; oil spill clean-up arrangements reporting and emergency handling of pollution incidents; investigation and compensation of pollution incidents; supervision of the loading, lightening and discharging of polluting hazardous cargoes; and penalties for contravening any requirement of the Regulations.

The Regulations also introduce a compulsory insurance regime for certain vessels and a domestic ship oil pollution compensation fund.

Pollution liability
Under the Regulations who is liable for pollution damage?
The party causing the pollution to the marine environment is liable for the pollution damage.  If the pollution was wholly caused by intentional act or fault of a third party, then that third party is liable (Article 50).

Do the Regulations provide for a limit of liability?
Yes.  The limit of liability is calculated according to the PRC Maritime Code, which follows the 1976 Limitation Convention in respect of any international ships of 300 GT or above. However, as to marine pollution within Chinese territorial waters caused by ships carrying persistent oil in bulk (including persistent hydrocarbon mineral oil), the limitation of liability is calculated pursuant to the relevant international conventions ratified or acceded by China (Article 52), including the 1992 CLC Convention and the 2001 Bunker Convention.2

Do the Regulations provide for any defences to/exemptions from pollution liability?
Yes.  Under Article 51, a party is exempt from liability for pollution if the pollution damage was wholly caused by (1) war; (2) natural disaster of an irresistible nature; or (3) negligence/ wrongful act of government authority in exercising its responsibility for the maintenance of lights or other navigational aids in the exercise of that function and if the pollution could not be prevented even though timely and proper measures were taken.

Compulsory Insurance
Why is compulsory insurance required?
The PRC is a state party to the 1992 CLC Convention and the 2001 Bunker Convention.  The liability provisions in the Regulations largely mirror those contained in those Conventions, which provide for strict liability of the owner3 for pollution damage arising from the carriage of persistent oil by sea (1992 CLC) and strict liability of the shipowner4 for pollution damage caused by spills of bunker oil (2001 Bunker Convention).  These Conventions make insurance mandatory for certain vessels.

Who do the Regulations require to maintain compulsory insurance?
The owner of any ships (except ships of less than 1,000 GT and not carrying oil cargo) navigating in the PRC governed waters is required to maintain insurance for oil  pollution liability or to have other appropriate financial security in place in accordance with the relevant subsidiary legislation/byelaw to  be promulgated by the PRC government (Article 53).

Under the Regulations who is an approved insurer in the PRC?
The Maritime Safety Administration (MSA) will determine and publish a list of competent insurance providers that will be qualified to provide the necessary insurance cover.  Gard currently is on a list of approved insurers issued by MSA.

What  amount of insurance is required for the compulsory insurance?
Not less than the limitation as calculated under the PRC Maritime Code, which adopts the same calculation as under the 1976 Limitation Convention,5 or in accordance with the relevant international Conventions which PRC adopted or ratified (for example, the 1992 CLC and the 2001 Bunker Convention) (Article 53).

Ship Oil Pollution Compensation Fund
The Regulations refer to a "Ship Oil Pollution Compensation Fund" - What is it?
A domestic fund to which receivers (and their agents) of persistent oil cargoes transported by sea to a Chinese port must contribute (Article 56).  Note that PRC is not a state party to the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage.

How will the Ship Oil Pollution Compensation Fund be administered and used?
This is not included in the Regulations, but the detailed rules as to how the funds are collected, used and administered will be jointly formulated by the Finance Department and the Administrative Department of Communications of the State Council (Article 56). 

Clean up contracts/Clean-up costs
The Regulations require that clean-up contracts be agreed in advance of entering a PRC port - who is required to enter into the contracts?
The operator of any ship carrying polluting and hazardous liquid cargoes in bulk and any other vessel above 10,000 GT is required to have a pollution clean-up contract with an approved pollution response company (Article 33). 

To whom do the Regulations refer when they say "operators"?
Article 33 of the Regulations does not define "Operator".

What companies has the MSA approved as local clean-up contractors with whom an operator must contract?
The MSA currently is considering contractors for approval in various Chinese ports and it is expected that in the near future further legislation will be issued concerning approvals.  It is expected that the legislation will cover both the terms of the clean-up contracts into which operators must enter and the MSA-approved contractors.

Indications are that there will be four "levels" of contractors based upon the capability of the contractor to respond to spills of different size and extent.  The additional implementing legislation is expected to clarify with which contractors, in terms of "levels", operators will need to contract (for example with reference to operators' type of trade and size of vessel operated).

Do the Regulations set a deadline by which operators who call at a PRC port must contract with an approved clean-up contractor of the appropriate "level"?
The clean-up contracts are required to be in place prior to the vessel's operations or entry into/departure from the Chinese ports (Article 33).  Because the Regulations will become effective on 1st March 2010, any vessel intending to call at China should conclude the contracts before 1st March 2010.

If after 1st March 2010 a ship of an operator calls at a PRC port without previously having concluded the clean-up contract, do the Regulations provide for any "punishment" of the operator?
Yes.  The operator will be subject to a fine of between RMB 10,000 (about USD 1,465) and RMB 50,000 (USD 7,325) (Article 68).

Generally, a breach of the Regulations can result in one of a series of possible fines. Depending upon the facts, the fines can range from RMB 10,000 (about USD 1,465) to RMB 500,000 (about USD 73,250).  Logically, each breach may result in a fine.

Under the Regulations, who is liable for any clean-up costs incurred by the MSA?
Where the MSA has taken action in response to pollution, before the ship involved in a pollution incident may sail the ship must pay the MSA's costs or must provide a relevant financial guarantee (Article 42).  The MSA  may detain the vessel while investigating any such incident.

What type of guarantee is required? An IG Club LOU? An LOU/guarantee from a PRC insurer? A PRC bank guarantee?
This is unknown at the moment, but the International Group of P&I Clubs (IG) is seeking clarification.

On board emergency response plans
Do the Regulations require any form of emergency response plans?
Shipowners, operators or managers must maintain emergency response plans for the prevention and control of marine pollution, and have the plans approved by MSA (Article 14).  It is generally understood that a MARPOL SOPEP (Shipboard Oil Pollution Emergency Plan) will be sufficient to meet this requirement.

Others
What is the ship's report obligation set out in the Regulations?
If a ship has caused or will probably cause pollution within the territorial waters of the PRC, or beyond the territorial waters of the PRC but that has caused or may cause pollution to the territorial waters in the PRC jurisdiction, the incident must be reported to the local MSA.  The accident report should contain the following information (Articles 37 and 38):
- The ship's name, nationality, call sign or number;
- The name and address of the owner, operator or manager of the ship;
- The time, place, weather and sea condition of the accident;
- Preliminary determination of the cause of the accident;
- The type, quantity, stowage location, etc., of the pollutant on the ship;
- The degree of the pollution;
- The pollution control and/or pollution removal measures adopted and to be adopted and the situation of the control of the pollution and any salvage requirements; and
- Any other information as required by the Administrative Department of Communications of the State Council.

Will the PRC be providing any explanations of the Regulations and details as to how they will be implemented?

The IG understands that the MSA is drafting further implementing legislation to give effect to a number of the provisions contained in the Regulations.  The further legislation is expected to include information concerning the requirement to contract with approved pollution response companies and the requirement to maintain insurance or other financial security to cover liabilities arising from oil pollution damage. It is expected that when further details and/or legislation is issued Gard and other IG Clubs will as appropriate issue further circulars.

Whom should I contact if I have further queries?

Any further enquiries can be sent to GardNewsEditor@gard.no.

Footnotes
1 See Gard's Member Circular No. 7/2009, Regulations of the People's Republic of China on the Prevention and Control of Marine Pollution from Ships.
2 See also comments to the question "Why is compulsory insurance required?", below.
3 Defined as the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship.
4 Defined as including the registered owners, bareboat charterers, managers and operators.
5 See comments to the question "Do the Regulations provide for a limit of liability?", above.