MAY 2009:
- Climate change - Australia’s carbon emissions trading scheme
- New law to force personal business freight rates to be quoted ‘all in’
- New Australian Guidelines for the issue of Coasting Trade Licences & Permits
- Anti-fouling paints
- Ship arrest in Australia - a straightforward way to secure Maritime claims
- A move towards borderless trucking regulation
- Australia and New Zealand close the gap on legal process
- Timely reminder of obligations when a pollution discharge occurs
- Limitation of Liability in Maritime Claims
Climate change - Australia’s carbon emissions trading scheme
During March the Australian Government released its long awaited carbon trading legislation designed to introduce its proposed Carbon Pollution Reduction Scheme (CPRS).
The package of six carbon trading bills will be introduced into the Australian Parliament during May and the Government hopes to have the laws passed this year, although whether or not that occurs will depend upon the Australian Government passing the bills through the Senate, where the Australian Government does not control the numbers.
The principal piece of legislation is known as the Carbon Pollution Reduction Scheme Bill (Scheme) and introduces a “cap and trade” system of carbon emissions trading. The scheme was to commence on 1 July 2010, however, citing the current economic conditions the Government has announced a revised start date of 1 July 2011. The scheme sets a 2020 greenhouse emissions reduction target for Australia of between 5% and 15% and potentially up to 25% if international agreement at this level is reached.
The European Union has an Emissions Trading Scheme (ETS) in place, but very few other countries have followed the lead. Australia is one of the few countries outside of Europe to have prepared laws to set up an ETS.
Under the proposed CPRS, there will be two primary types of liable entities - entities that have an operation or control over a facility with direct emissions of more than 25,000 metric tonnes of carbon dioxide per annum and, fuel importers, producers or suppliers. Ordinarily, liability will fall on the controlling corporation, however in some circumstances it may be possible for the controlling corporation to transfer its liability to another corporation within its group or to a corporation that has financial control of the particular facility.
Each year the Australian Government will issue Australian Emissions Units (AEU) up to the national scheme cap. One AEU will represent one tonne of carbon dioxide.
An AEU will be individually numbered, belong to a financial year and will be transferable personal property, the majority of which will be sold through auction. In the first year of the scheme permits will cost A$10 per tonne of carbon, with the transition to full market trading from 1 July 2012.
Liable entities will be required to surrender sufficient eligible emissions units (either AEUs or certain approved Kyoto Protocol emissions units) to cover their emissions for a financial year. If insufficient emission units are surrendered to cover an entity’s emissions liability, it will be required to pay a penalty. Compensation and assistance is available for entities involved in Emissions Intensive Trade Exposed (EITE) activities.
The CPRS Bill contains broad anti-avoidance provisions to apply with effect from 15 December 2008 and will be directed at entities who attempt to structure operations in a way to fall below applicable liability thresholds. Executive officers of a company that fails to comply with certain requirements under the CPRS may incur personal liability where they knew that (or were reckless or negligent as to whether) the contravention would occur, were in a position to influence the company’s conduct and take reasonable steps to prevent the contravention.
National Greenhouse Energy Reporting (NGER) Act 2007
The National Greenhouse Energy Reporting Act 2007 (NGER Act) has been retained as part of the Government’s carbon pollution reduction scheme, including the mandatory emission measurement and reporting obligations under NGER Act.
Under NGER Act from 1 July 2008, registration and emissions reporting became mandatory for corporations where energy production, energy use or greenhouse gas emissions met specific thresholds.
Corporations and business entities (including joint ventures) therefore need to be aware of the thresholds in the NGER Act for both a facility and the corporate group. There are two levels of thresholds at which corporations are required to apply for registration and provide reports of gas emission levels. Currently for a facility this is 100 terajoules (TJ) of energy consumption or 25 kilotonnes (kt) of greenhouse gases emitted. From 1 July 2008 all controlling corporations must apply for registration with the Greenhouse and Energy Data Officer if their corporate group emits greenhouse gases or produces or consumes energy are at or above these thresholds during a financial reporting year.
Written by Anthony Highfield, Partner
New law to force personal business freight rates to be quoted ‘all in’
Late last year the Federal Government passed the Trade Practices Amendment (Clarity in Pricing) Act 2008 (the Act). For products caught by the regime, the Act prohibits price quotes or advertisements unless they include the total quantifiable consideration for the supply. If any minimum level of charge is known, it must be included in the quoted or advertised price.
This will affect a wide range of industries. For freight services caught by the regime, the new rules mean that giving a quote on the basis of a base freight rate plus GST plus surcharges will become illegal unless the “all in” price (ie, including GST and all quantifiable surcharges) is also given.
A number of exceptions that mean that most, but not all, shipping services will escape the new regime:
- The new rules do not apply when quoting exclusively to bodies corporate. If you know you are dealing with a company, you can provide a quote on a GST exclusive basis or quote a ‘base’ freight rate without adding in all applicable surcharges.
- The new rules only apply to services that are of a kind ‘ordinarily acquired for personal, domestic or household use or consumption’. This means the new rules will not apply to, say, full container load shipments, because this is not a service ordinarily acquired for personal use. On the other hand, shipping of personal effects or individual motor vehicles are services that might ordinarily be acquired for personal or domestic purposes. The new rules are therefore likely to apply to such services.
- Charges only have to be included if they are quantifiable. The minimum quantifiable consideration at the time of any price representation must be included in the quoted price. It is likely this means that, say, the bunker price at the date of quoting must be included in a quoted price. If that price might change over the life of the quote, a clear clause should be included explaining this. There is some doubt about how this particular exception will apply in practice. The ACCC is preparing guidelines setting out its interpretation of the new rules. These are expected to be released shortly.
The new regime will come into effect by 25 May this year and penalties for breach of up to $1.1 million per offence may be imposed.
Determining what lines of business are affected by the new rules and what must be included in a customer quote will, in many cases, not be simple. For many businesses, the simplest way to ensure you comply with the new rules will be to simply not quote to individuals. Other businesses - such as those that do significant business with individuals and, in particular, ship personal effects - should be preparing their systems to comply with these new rules now.
Written by Richard Westmoreland, Partner, Trade Practices.
New Australian Guidelines for the issue of Coasting Trade Licences & Permits
The Australian Government recently introduced new Ministerial Guidelines for the granting of licences and permits for vessels, including foreign vessels engaged in Australian coastal shipping trade.
All vessels engaging in the Australian Coastal trade irrespective of flag and crew nationality, are required to be licensed to do so. The Guidelines however provide for a number of exceptions, including for passenger cruise lines other than those operating between Victoria and Tasmania. In addition, the Australian Government can grant permits to unlicensed vessels (such as foreign vessels) to engage in the Australian Coastal Shipping trade.
Licences
As with the 2007 guidelines licences are not restricted to Australian flagged, owned or crewed vessels. Licences are issued for 12 months ending on 30 June and renewable annually.
Licences are issued on the condition that:
- crew are paid Australian wages; and
- crew have access to the vessel’s library facilities.
It is an offence for a licensed ship to engage in coasting trade whilst receiving a subsidiary or bonus from a foreign government.
Coastal Permits
An unlicensed ship may be given a permit to carry either cargo or passengers on the Australian coast where:
- no licensed ship is available for the service; or
- the service carried out by the licensed ships is inadequate; and
- the Minister is satisfied that it is in the public interest to do so.
Two types of coastal permits can be issued:
- Single Voyage Permits (SVP) exist for circumstances where there is a one-off unavailability of a suitable licensed ship. An SVP is issued for a particular vessel to carry specified cargo or passengers between particular ports on specific days.
- Continuing Voyage Permits (CVP) may be issued when suitable shipping is unavailable for an extended period of time. A CVP may be issued for up to three months.
Changes since the 2007 Guidelines
The principal changes are as follows:
- Guideline 57 - now requires that permit and licence fees are to be paid by credit card. Previously the form of payment was unspecified.
- Guideline 58 - allows for details of each permit issued and details contained in individual statements of cargo carried to be made available at the Department’s website. This is an increase in public availability of information concerning permits, as previously only statistics of permits issued were available.
- Guideline 61 - concerns the tolerance (plus or minus 10%) for alteration outside the stated type and volume of cargo or passengers for an SVP. There is now a new requirement that in situations where cargo or passengers are loaded outside these tolerances, further permits will not be issued without a satisfactory explanation in writing to the Department. This provides an incentive not to exceed issued tolerances.
- Guideline 73 - now requests that CVP applications are submitted using the Department’s online system.
- Guideline 78 - whereas previously there was no fee for amending a CVP there is now a fee of $400 for amending a CVP if the face of the permit is changed. There remains no fee if an amendment does not affect the face of the permit.
Written by Zoe Paterson, Solicitor
Anti-fouling paints
The International Convention on the Control of Harmful Anti-Fouling Systems on Ships 2001 (HAFS Convention) has now entered into force internationally, including for Australia. The HAFS Convention is given effect in Australia by the Protection of the Sea (Harmful Anti-Fouling Systems) Act 2006 and, Marine Orders Part 98.
The HAFS Convention provides that all ships of 400 gross tonnes and above shall not apply or re-apply organotin compounds which act as biocides in anti-fouling systems. By 1 January 2008 (effective date), ships either:
- shall not bear such compounds on their hulls or external parts and surface; or
- shall bear a coating that forms a barrier to such compounds leaching into the water.
The International Convention for Bunker Oil Pollution liability
The International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (Bunkers Convention) entered into force internationally on 21 November 2008. The Bunkers Convention provides for ship owners to be strictly liable for fuel oil spills and requires them to carry compulsory insurance to cover any pollution damage following a fuel oil spill.
The Australian legislation implementing the Bunker Convention is the Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Act 2008 and the Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Consequential Amendments Act 2008.
Written by Anthony Highfield, Partner
Ship arrest in Australia - a straightforward way to secure maritime claims
The advent of the global financial crisis and subsequent economic downturn has had a significant impact on the shipping industry. After several years of boom, ship asset values and charter rates have plummeted rapidly, resulting in an increasing number of disputes as parties seek to back out of unfavourable contracts.
In these times of uncertainty, increased focus has been placed on obtaining security for claims. This issue is said to be the number one priority as it is unrealistic for parties to invest large quantities of time and money in protracted claims where there is no certainty of recovery at the end of the process.
One of the more traditional methods of obtaining security for maritime claims (at least in the common law world) is the proceeding in rem and subsequent arrest of maritime property. About 12% of world trade by volume is carried by sea either into or out of Australia, which gives opportunity for arrest in Australia for a large percentage of the world’s tonnage.
Along with opportunity, Australian jurisdiction holds an additional advantage in that effecting arrest of maritime property is straightforward and cost effective. In Australia, an application for arrest of maritime property does not require the Court’s leave. First, the claimant files a writ in rem against a ship or other property. A writ may specify either a proprietary or general maritime claim, or a maritime lien. Surrogate arrest may also be available for general maritime claims. Generally, an arrest will occur within a couple of hours of the application being filed.
Immediately after an action in rem is commenced, an application may be made for an arrest warrant to be issued in respect of the ship or property concerned. The Admiralty Marshals of the Court are available to arrest a vessel anywhere in Australia, any time on any day of the year. The proceeding for an arrest can be commenced anywhere in Australia, in the Central Sydney Registry. The registry can co-ordinate the arrest through either an Admiralty Marshal in other states or delegation to a suitably qualified officer, usually a member of the police force or sheriff.
The Admiralty Marshal’s practice is usually to obtain a nominal amount on account for his/her anticipated costs of effecting and maintaining the arrest, although usually the Admiralty Marshal does not charge the arresting party for his/her time. The arresting party should provide the Admiralty Marshal with information concerning the location of the ship and any information that impacts on the safety of the Admiralty Marshal. If there is no appearance by the ship owner’s in the proceedings, on application to the Court, the Admiralty Marshal has experience in ship sales.
Ship release is also straightforward in Australia. A ship or property may be released from arrest where:
- the party who obtained the arrest consents in writing to the release;
- the Court orders release on just terms, or where the proceeding is discontinued or dismissed;
- a bail bond in the required amount is filed in the Court; or
- the required amount is paid into the Court.
The ship or property will only be released if satisfactory arrangements have been made for the payment of the fees and expenses incurred in connection with its custody while under arrest. Additionally, the Court may make orders at any stage of a proceeding in relation to the preservation, management or control of a ship or property, including the loading and unloading of cargo. The Marshal or a party may apply at any time for directions with respect to the ship or property.
In summary, arresting vessels in Australia is straightforward. Although Australian legislation allows a court to make a determination of damages for wrongful arrest; there has never been a case on point here, which again on one view makes the process more attractive.
Written by Joe Hurley - Partner, Danella Wilmshurst - Partner, Amy Beaumont - Senior Associate
A move towards borderless trucking regulation
Late last year the Australian Government released a consultation paper calling for the abolition of state-based trucking regulation in favour of a single national body to administer and regulate heavy vehicle operation in Australia. The consultation paper proposes a new single regulatory body to harmonise laws in key areas of heavy vehicle operation, including mass and loading, oversize and over mass regulations, restricted access vehicle and higher mass limits, fatigue management and other enforcement activities. The consultation paper also works towards the establishment of a national heavy vehicle registration scheme and a single physical driver licence, along with consistent standards for driver competency testing and training school recognition.
Whilst current State based laws regulating fatigue management and chain of responsibility have been modelled on laws developed by the National Transport Commission, the consultation paper recognises that those laws have been implemented differently in each state and that under this approach “differences in the adoption, application, interpretation and enforcement of these model laws and the use of jurisdiction specific exemptions, permits, notices, business practices and guidelines, have lessened their national value and efficacy”.
It is envisaged that a formal Regulatory Impact Statement on a single system of heavy vehicle regulation and licensing is to be prepared for the Australian Transport Council for consideration by the Council of Australian Governments during 2009.
Written by Anthony Highfield, Partner
Australia and New Zealand close the gap on legal process
Businesses and individuals involved in trans-Tasman civil legal cases are set to benefit from reforms that will make legal process easier and more affordable.
Australia and New Zealand have now entered into a Treaty on Trans-Tasman Court Proceedings and Regulatory Enforcement. The principal features of the Treaty include:
- Allowing civil proceedings from a Court in one country to be served on the other without additional requirements.
- Extending the range of civil court judgments that can be enforced across the Tasman. Judgments can only be refused to be enforced if they conflict with public policy of the country of enforcement.
- Allows the regime to be extended to some administrative tribunals on a case by case basis.
- Adopts a “give way” rule when a dispute can be heard by a Court in either country.
- Allows lower court judges to authorise the issue and service of a subpoena across the Tasman in proceedings before that Court or Tribunal.
- Streamlines the taking of evidence in cross Tasman cases, including allowing parties or lawyers to appear by telephone or videolink.
- Allows enforcement of civil penalty orders across the Tasman.
- Allows the Trans-Tasman enforcement of fines to regulatory offences, where there is a strong mutual interest in doing so.
Australian Attorney-General Robert McClelland said in January this year, that legislation would be shortly introduced to the Australian Parliament to implement the Treaty, thereby “making it easier and more cost effective for Australia and New Zealand business and individuals to resolve disputes which will further encourage trade between our two countries”.
Written by Anthony Highfield, Partner
Timely reminder of obligations when a pollution discharge occurs
Following the recent oil spill at Moreton Island in Queensland, we remind vessel operators and masters of their discharge and reporting obligations under the Australian and State legislation which enacts the MARPOL Convention and Annexes into Australian law. Obligations are contained in both Commonwealth (Protection of the Sea (Prevention of Pollution from Ships) Act 1983) and State legislation (which has corresponding provisions to the Commonwealth Act and enacts the MARPOL Convention and Annexes). The State legislation applies to discharges in internal waters and up to three nautical miles from land, with Commonwealth legislation applying to discharges that occur beyond that and up to the Economic Exclusion Zone (200 nautical miles from land).
For example, the Commonwealth legislation prescribes a strict duty to report on certain “prescribed incidents” involving the discharge of certain substances. A “prescribed incident” is defined to include “an incident involving a discharge from the ship of a liquid substance, or mixture containing a liquid substance, carried as cargo or as part cargo in bulk”. Where a “prescribed incident” occurs in relation to a ship, the master of the ship has the primary obligation to notify the relevant authority without delay. A “prescribed incident” includes the discharge of oil, garbage, sewage, chemicals and other harmful substances. A “prescribed incident” can also include air emissions.
Significant penalties can apply if a vessel operator or master does not fulfil their obligations to report on a “prescribed incident”. Under the Commonwealth Act, failure to report is a strict liability offence and can result in penalties up to $55,000 per offence.
Should a discharge occur, the Commonwealth and State legislation provides a strict liability regime, with usually only a limited defence if the discharge from the ship was for the purpose of securing the safety of the ship and the persons on board the ship or saving life at sea. Should a discharge occur and the master and/or vessel operator is unable to rely on a defence, the master and vessel operator will be open to prosecution by the relevant authority. Varying penalties apply across the States and Commonwealth and for example, in New South Wales the penalty for oil discharged from a vessel is up to $500,000 for an individual and as much as $10 million for the ship operator.
Australian maritime authorities are typically vigilant in their enforcement of pollution laws, so vessel operators and masters should remain attentive to meeting their obligations under the relevant Australian legislation, and of course prevention is always the best cure!
Written by Matthew Brooks - Special Counsel and Kristin Hibbard - Graduate at Law
Limitation of Liability in Maritime Claims
The Limitation of Liability for Maritime Claims Act 1989 (Cth) (the Act) affords shipowners the special right to limit their liability in the face of tort and certain contract claims. The Act enacts the 1976 international convention of the same name, to which many other countries, including most of Australia’s neighbours, are a party. The Act enables shipowners to limit their liability in circumstances where the tort or contract breach occurred as a result of the negligence of the master and his crew.
The Act provides that a fund may be created to limit financial liability in response to claims for personal injury and property damage, loss resulting from delay and other limited circumstances arising from the same incident. The fund is capped as prescribed by the Act, based on the vessel’s tonnage (as opposed to the vessel's value). Compensation for all claims is drawn from the fund according to a prescribed formula.
In a recent New Zealand case, the Court of Appeal held that the existence of a limitation fund effectively stays any relevant litigation and can save the shipowner litigation costs, as well as negating the need for an admission of liability. Such issues have not yet been considered by an Australian court, however a similar outcome would be expected.
IMO Meeting - reduction of GHG emissions from ships
On the agenda at the IMO’s recent Working Group on Greenhouse Gas Emissions (GHG) from Ships meeting in early March this year, was development of a draft guideline containing measures to improve and enhance existing energy efficiency standards in the field of international shipping, with a view to decreasing GHG emissions.
The working group concentrated on potential technical and operational measures to reduce GHG from ships and considered submissions and papers provided by member governments and observer organisations on these issues.
Two indexes were focused upon - the Energy Efficiency Design Index for the design of new ships, and the Energy Efficiency Operational Index, which enables vessel operators to measure the fuel efficiency of an existing ship and thereby gauge the effectiveness of any measures adopted to reduce the vessel’s energy output.
The Draft Ship Energy Management Plan was also debated, and includes guidelines for improved voyage planning, speed and power optimisation, optimised ship handling, improved fleet management and cargo handling, and energy management for individual vessels.
Once the draft guidelines have been further scrutinised by the IMO’s Marine Environment Protection Committee they will be presented to the United Nations in Copenhagen in December 2009, where a successor instrument to the Kyoto Protocol is to be debated.
Written by Amber Pittlik, Associate
