The Regulations on the Prevention and Control of Marine Pollution from Ships of the People's Republic of China (PRC) 2010 (the Regulations) have been the centre of attention for ship owners and operators trading with the PRC, since they came into effect on 1 March 2010. Under the Regulations, ship owners, operators and managers (together called "ship operators" in the Regulations and below) of any ship carrying polluting and hazardous cargoes in bulk, or any other ship above 10,000 gross tons, are obliged to conclude a ship pollution response agreement (SPRA) with a pollution clean-up company, approved by the Maritime Safety Authority (MSA), prior to its entering PRC ports, or conducting ship-to-ship transfers in PRC territorial waters.
Two pieces of supplementary legislation - the Regulations on Ship-Induced Marine Pollution Emergency Preparation and Response Management and the Detailed Rules on the Implementation of the Ship-Induced Pollution Response Agreement Regime (the Detailed Rules), both of which were promulgated in June 2012 - set out the framework for ship operators and MSA-approved ship pollution response organisations (SPRO) to implement the Regulations effectively (please see our previous commentary in Legalseas July 2011 issue.
Recently, the MSA updated the Detailed Rules and issued a revised version in September 2012 (the Revised Detailed Rules), which require all SPROs to have the mandatory qualifications listed in the Revised Detailed Rules as from 1 January 2013. Although the new requirement primarily affects the SPROs, it may well be regarded as a signal that the MSA is on the move and intends to carry out strict enforcements of the SPRA regime throughout the PRC, later in 2013. This article examines how these amendments will affect ship operators trading with the PRC.
The Revised Detailed Rules
The amendments mainly concern the conclusion and termination of SPRAs.
- Ship operators can sign or instruct their branch companies, liaison offices and representative offices in the PRC to sign SPRAs with SPROs. Ship operators can also authorise agents registered and approved by the MSA, or ship masters, to sign SPRAs on their behalf. Overseas ship operators can now sign SPRAs with SPROs directly themselves; there is no longer a requirement that they instruct their branches, representatives or agents in the PRC to sign SPRAs on their behalf.
- The SPROs may form consortia or alliances to provide services through a network of branches or associated companies. The SPROs can sign the SPRA through chain branches or associated companies. As a result, ship operators can sign a long term SPRA with one branch or associated company of a SPRO consortium and gain access to the service through its network, covering a wider area where there are several ports which their ship may enter frequently.
- Where both parties agree to terminate a SPRA, or where one party terminates a SPRA because of the other party's breach, the MSA must be informed immediately.
- If a pollution incident occurs and the SPRO commences work under the SPRA, the parties to the SPRA can only terminate the agreement when all of the following conditions are satisfied:
- alternative measures have been agreed between the ship operators and the SPRO for responding to the pollution incident;
- termination of the SPRA does not affect clean-up operations; and
- the approval of the relevant MSA has been obtained.
By virtue of these amendments, if the contracted SPRO does not provide a satisfactory and effective service, ship operators can contact the MSA and seek its approval to terminate the SPRA in order to find a replacement SPRO to continue clean-up operations. However, it is unclear what criteria the MSA will use in granting approval, although the rationale behind the requirement is clearly that the MSA should first be satisfied that proper replacement clean-up arrangements are in place. Specific guidance from the MSA on this would be helpful.
The Model SPRA
The Model SPRA attached to the previous Detailed Rules has also been amended. It now has only two clauses and these set out the rights and obligations of each party to the SPRA. The two clauses of the SPRA are mandatory; they cannot be avoided by contracting out.
The International Group of P&I Clubs (the IG) has recommended in recent circulars, that members should choose to use the IG-approved SPRA sample, which is based on the previous version of the Model SPRA and which has been newly updated to effect editorial amendments.
Under the IG-approved SPRA sample, termination of the SPRA can be agreed by parties by giving 30 days notice in writing before the ship enters the SPRO's service zone. Once the ship is in the SPRO's service zone, no termination of the SPRA is allowed unless the parties to the SPRA have consulted the relevant MSA and obtained its approval.
As to the applicable law and jurisdiction clause in the SPRA, the Model SPRA provides that the agreement is governed by PRC law and the parties may elect to resolve their disputes by mediation through the MSA, by arbitration through China Maritime Arbitration Commission, or by litigation before the PRC courts. In this regard, the IG has recommended in its approved SPRA sample that members choose litigation before the PRC court as the only venue for resolving disputes arising out of the SPRA.
The IG has recommended that if members are in any doubt about the SPRA, they should contact their respective clubs before contracting with a SPRO.
Non-compliance and sanctions
The MSA note attached to the Revised Detailed Rules clarifies that the signing of a SPRA is not a pre-condition for the MSA to grant a ship's entry to a PRC port. However, ships entering a PRC port without a SPRA arrangement in place, will be penalised by the MSA in such manner as the MSA deems appropriate.
It is not entirely clear what penalties the MSA may impose on non-compliant ship operators. Under the Regulations, the MSA has discretion to use a wide range of measures. In principle, failure to conclude a SPRA can result in a fine of between RMB 10,000 and RMB 50,000. The MSA can also order rectification of the omission and if this fails, the MSA can prevent entry into, or departure from, a PRC port.
In the event that there is no MSA-approved SPRO in the port area which the ship plans to enter, the MSA will allow other SPROs within the MSA's geographical jurisdiction, to provide temporary services to the ship.
For inland waterway ships, LNG carriers, or ships carrying petroleum or ballast water of less than 10,000 gross tons, there is no compulsory requirement for the ship operator to sign a SPRA when entering PRC ports.
It is possible that, in the past, some local MSAs were more rigorously enforcing SPRA requirements than others and that SPRA requirements were not strictly enforced across the PRC. With an increase in the number of MSA-approved SPROs in place, ship operators are advised to ensure full compliance with SPRA requirements in order to avoid fines and possible delay in port.
Ship operators can follow their Club's circulars and recommendations regarding SPRAs and can also refer to the most recent lists of approved SPROs and registered local shipping agencies (which are updated and published by the MSA on its dedicated Oil Spill and Prevention website). If PRC law is chosen to govern a SPRA for the resolution of disputes between the ship operator and the SPRO, PRC law advice should be sought as soon as a dispute arises.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.