BILLS DIGEST NO. 85, 2014–15              20 March 2015

Limitation of Liability for Maritime Claims Amendment Bill 2015

Paula Pyburne
Law and Bills Digest Section 

Date introduced: 26 February 2015

House:  House of Representatives

Portfolio: Infrastructure and Regional Development

Commencement:  Sections 1–3 on Royal Assent; Schedule 1 on the later of Royal Assent and 8 June 2015.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

Purpose of the Bill

The purpose of the Limitation of Liability for Maritime Claims Amendment Bill 2015 (the Bill) is to amend the Limitation of Liability for Maritime Claims Act 1989[1] to implement amendments to the Protocol of 1996 to the Convention on Limitation of Liability for Maritime Claims.

Background

Australia is a party to the Convention on Limitation of Liability for Maritime Claims 1976 as affected by the 1996 Protocol to amend that Convention.[2] A copy of the Convention is annexed as Schedule 1 to the Limitation of Liability for Maritime Claims Act. In accordance with section 6 of the Limitation of Liability for Maritime Claims Act, the Convention (with some exclusions) has the force of law in Australia. It applies in respect of incidents occurring from 1 June 1991 (which is the date on which the Convention entered into force for Australia).

How the Convention operates

Article 1(1) of the Convention provides that shipowners may limit their liability in accordance with the rules of the Convention, set out in Article 2.[3] Article 1(4) of the Convention extends the protection of the Convention to any person for whose act, neglect or default the shipowner is responsible (such as the master or crew), where a claim is made against such a person. The protection is also available where an action is brought against the ship itself.[4] Importantly Article 2(1) of the Convention applies to claims whatever the basis of liability.[5]

Procedure

The right to invoke limitation arises when a claim is either made or is apprehended. Limitation may be invoked by the shipowner commencing a limitation proceeding in either the Supreme Court of a state or territory or the Federal Court[6] consistent with the Admiralty Rules 1988.[7] It is for the Court to determine whether the shipowner is entitled to limit liability. Where a Court determine that this is the case, it makes a limitation decree, makes orders about the manner for advertising the decree and fixes a period within which any person who wishes to make a claim, may either prosecute the claim or apply to set aside or vary the decree.[8]

The Fund

The fund is constituted by depositing the amount of the liability into the Court.[9] The amount of the liability limit is calculated by way of the formula set out in Article 8 of the Convention. Once a fund is constituted in accordance with Article 11, any person who makes a claim against the fund is barred from exercising any right in respect of such claim against any other assets of the shipowner who constituted the fund.[10]

Pacific Adventurer oil spill 2009

On 11 March 2009, Cyclone Hamish was causing gale-force weather with large swells off the Queensland coast. MV Pacific Adventurer, which was owned by Swire Shipping, was approximately seven nautical miles off the ocean side of Moreton Island heading north when 31 containers broke loose and went over the side. Several of the containers struck against the ship’s hull penetrating it on both the port and starboard sides thereby releasing some 270 tonnes of fuel oil.[11] Subsequent investigations identified a number of safety issues including the condition of the fixed and loose lashing equipment on the vessel and that the cargo in the containers which were lost overboard, being ammonium nitrate, was not packaged in accordance with international dangerous goods shipping requirements.[12]

The effect of the massive oil spill on south-east Queensland's coastline was significant. Moreton and Bribie Island and Sunshine Coast beaches were declared to be disaster zones.[13]

Costs of the clean-up

The costs associated with the clean-up fell into two categories. First was the cost of investigating, preventing or minimising the discharge, treating animals and rehabilitating the marine and coastal environment. These costs fell to the Queensland Government, which was then entitled to recover them as a debt payable to the State by the shipowner or master.[14]

The second category of cost was the recovery for loss or damage caused by the spill to property and associated interests. This relates to loss and damage to owners in industries such as fishery, tourism and boat operations.[15]

In early July 2009 Swire Shipping’s lawyers wrote to the Premier of Queensland refusing to cover all the costs associated with the clean-up effort. According to Premier Bligh:

This ship spilt 270 tonnes of heavy fuel oil onto the pristine beaches of Moreton Island, Bribie Island and the Sunshine Coast. The State Government's clean up involved 2500 people and allowed beaches to reopen within just nine weeks of the disaster.

But that clean up comes at a cost - currently estimated at $34 million and we have always said the polluter must pay. Taxpayers should not be left with the bill because this company is trying to avoid paying the full costs of the cleanup.

International maritime conventions refer to a cap on clean up payments of US$17 million but Swire's has repeatedly accepted full responsibility and said they would cover the full cost.[16]

Establishment of the Limitation Fund

On 15 September 2009 Justice Dowsett of the Federal Court made the declaration of the right to limit. That declaration stated that under the Convention on the Limitation of Liability for Maritime Claims 1976, the applicants were entitled to limit their liability arising from the incident and that the limit of liability was $16,891,198.74 plus interest at 7.25 per cent from 11 March 2009 being the date of the incident and then seven per cent from 8 April 2009 until the fund was actually constituted.[17] The orders included that the fund be constituted by 29 September 2009 and that the applicants advertise the fund in the newspapers nominated in the order.[18]

Commonwealth response

One effect of the limitation decree was that the Commonwealth Government identified a need for a higher level of compensation to be paid, given the gap between the limitation amount and the overall cost of the clean-up. It was recognised that the liability limits as provided for in Convention on Limitation of Liability for Maritime Claims were insufficient to address incidents of this magnitude.

In order to bridge the funding gap from 1 April 2010 the amount of the shipping levy, collected under the Protection of the Sea (Shipping Levy) Act 1981[19] was increased from 11.25 cents to 14.25 cents per net registered tonne.[20] The increased amount of the shipping levy was directed to the Queensland Government to defray its clean-up costs.

In his address to the International Maritime Organisation’s General Assembly in London in December 2009, Minister for Infrastructure, Transport, Regional Development and Local Government, Mr Albanese, ‘took the opportunity to impress on the global shipping community the importance of lifting the existing compensation liability limits’.[21]

The Australian delegation to the Legal Committee of the International Maritime Organisation put forward resolutions to this effect over a number of sessions and the matter came for a decision in the 99th session of the Legal Committee in April 2012.[22] Resolution LEG.5(99) was adopted by the Legal Committee on 19 April 2012.[23] Arising from that resolution are new limits which will enter into force on 8 June 2015—that is, 36 months from the date of notification of the adoption under the tacit acceptance procedure.[24]

This Bill operates so that the new limits will be part of Australian law from that date. The limits have increased by approximately 50 per cent. In the context of the Pacific Adventurer spill, had the new limits been in place the level of liability would have been about $26 million, rather than $17 million.[25]

Committee consideration

Standing Committee for the Selection of Bills

At its meeting of 4 March 2015, the Senate Standing Committee for the Selection of Bills resolved to recommend that the Bill not be referred to Committee for inquiry and report.[26]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comments on the Bill.[27]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[28]

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.[29]

Policy position of non-government parties/independents

At the time of writing this Bills Digest, neither members of non-government parties nor independents had commented on the Bill.

Position of major interest groups

At the time of writing this Bills Digest no stakeholder comments had been identified.

Financial implications

The Bill does not give rise to any costs to the Commonwealth. There is likely to be an increase in costs for shipping companies. However, according to the Explanatory Memorandum these:

… will be manageable because liability limits support the commercial availability of insurance to cover their risks. Insurance for the global shipping industry is organised through insurance pools, whereby premiums respond to calls on those insurance pools, rather than fluctuating as a direct result of increases in liability limits. Premiums will increase in the aftermath of a significant incident, but shipping companies advise that channelling liability through a global, capped scheme supports the availability of insurance and the polluter pays principle.[30]

Key issues and provisions

Item 1 of the Bill repeals and replaces the definition of Convention in subsection 3(1) of the Limitation of Liability for Maritime Claims Act to update the drafting so that the Convention on Limitation of Liability for Maritime Claims 1976, done at London on 19 November 1976, as amended by the 1996 Protocol has force of law in Australia.

Item 2 of the Bill inserts the definition of the 1996 Protocol into subsection 3(1) of the Limitation of Liability for Maritime Claims Act. The definition reflects the amendment made by Resolution LEG.5(99) in 19 April 2012 to the liability limits. Item 3 of the Bill inserts the text of the Resolution as Schedule 2 to the Limitation of Liability for Maritime Claims Act.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.

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[1].              Limitation of Liability for Maritime Claims Act 1989, accessed 13 March 2015.

[2].              Convention on Limitation of Liability for Maritime Claims, 1976 as affected by the 1996 Protocol to amend that Convention, done at London on 2 May 1996, [2004] ATS 16 (entered into force 13 May 2004), accessed 16 March 2015.

[3].              The term shipowner means the owner, charterer, manager and operator of a seagoing ship, Convention on Limitation of Liability for Maritime Claims, Article 1(2).

[4].              Convention on Limitation of Liability for Maritime Claims, Article 1(5).

[5].              For a detailed explanation of the operation of the Convention on Limitation of Liability for Maritime Claims see A Duffy, ‘Limitation of Liability for Maritime Claims’, Hearsay, 45, November 2010, accessed 16 March 2015.

[6].              Limitation of Liability for Maritime Claims Act, section 9.

[7].              Admiralty Rules 1988, accessed 16 March 2015.

[8].              Admiralty Rules, rules 62 and 64.

[9].              Convention on Limitation of Liability for Maritime Claims, Article 11.

[10].              Ibid., Article 13.

[11].              A Caldwell and B Williams, ‘Oil spill far worse than first realised’, The Courier Mail, 13 March 2009, p. 4; P Morley, ‘Violent roll led to cargo shifting’, The Courier Mail, 15 April 2009, p. 14, accessed 16 March 2009.

[12].              M White, ‘Pacific Adventurer oil spill 2009: lessons past and future’, Australian Law Journal, 87(5), May 2013, pp. 320–330 at p. 320, accessed 16 March 2015.

[13].              A Harper, ‘Oil spill threatens “disaster”’, The Canberra Times, 14 March 2009, p. 2, accessed 16 March 2015.

[14].              Transport Operations (Marine Pollution) Act 1995 (Qld), sections 111, 112 and 115, accessed 19 March 2015.

[15].              M White, ‘Pacific Adventurer oil spill 2009: lessons past and future’, op. cit., p. 322; A Caldwell and J Wright, ‘Seafood trade fears bay backlash’, The Courier Mail, 17 March 2009, p. 4; K Fraser, ‘Oil compo bid “futile"’, The Sunday Mail Brisbane, 10 May 2009, p. 24, accessed 16 March 2016.

[16].              A Albanese (Minister for Infrastructure, Transport, Regional Development and Local Government) and A Bligh (Premier of Queensland), Oil spill ship must pay all clean up costs, joint media release, 5 July 2009; M Madigan, ‘Swire cuts oil clean-up offer’, The Courier Mail, 17 July 2009, p. 16, accessed 16 March 2015.

[17].              Swire Navigation Co Ltd and Bluewind Shipping Limited and anors v State of Queensland, Order, 15 September 2009, accessed 19 March 2015.

[18].              M White, ‘Pacific Adventurer oil spill 2009: lessons past and future’, op. cit., p. 323.

[19].              Protection of the Sea (Shipping Levy) Act 1981, accessed 18 March 2015.

[20].              Protection of the Sea (Shipping Levy) Amendment Regulations 2010 (No. 1), accessed 18 March 2015.

[21].              A Albanese (Minister for Infrastructure, Transport, Regional Development and Local Government), Australia calls for better maritime pollution compensation, media release, 3 December 2009; A Sharp, ‘Shippers may soon pay more’, The Sydney Morning Herald, 4 December 2009, p. 11, accessed 18 March 2015.

[22].              M White, ‘Pacific Adventurer oil spill 2009: lessons past and future’, op. cit., p. 328.

[23].              The text of LEG.5(99) is set out in item 3 of the Bill, which will insert a Schedule 2 into the Limitation of Liability for Maritime Claims Act.

[24].              International Maritime Organisation (IMO), Convention on Limitation of Liability for Maritime Claims, IMO website, accessed 18 March 2015.

[25].              M White, ‘Pacific Adventurer oil spill 2009: lessons past and future’, op. cit., p. 328.

[26].              Standing Committee for the Selection of Bills, Report No. 2 of 2015, Senate, Canberra, 5 March 2015, accessed 13 March 2015.

[27].              Senate Standing Committee for the Scrutiny of Bills, Alert Digest No. 3 of 2015, The Senate, Canberra, 18 March 2015, p. 18, accessed 19 March 2015.

[28].              The Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory Memorandum to the Bill.

[29].              Parliamentary Joint Committee on Human Rights, Twentieth report of the 44th Parliament, The Senate, Canberra, 18 March 2015, p. 2, accessed 19 March 2015.

[30].              Explanatory Memorandum, Limitation of Liability for Maritime Claims Amendment Bill 2015, accessed 13 March 2015.