Blame and Punishment: is there such a thing as an accident any more? September 2007

1. Blame and Punishment: is there such a thing as an accident any more?September 2007 Stephen Martin Director of Claims, and Head of Americas Syndicate Steamship Insurance Management Services Limited

2. “A disaster reflecting the decline of British Shipping.” “Built in Spain, owned by Norwegians, registered in Cyprus, chartered by the French, crewed by Rumanians, flying Liberian flag, carrying an American cargo, and rescued by a Chinese tug.”

3. “But actually, the pilot was to blame. He was Welsh.”

4. “Ships of dubious quality loaded with polluting cargoes … in European waters (causing massive pollution through accidents without the responsible parties being adequately penalised.”

5. “Seriously negligent conduct leading to major oil spills needs to be very severely penalised in order to have the intended dissuasive effects.”

6. “Measures of a penal nature … do not limit the efficient compensation of victims of pollution incidents.”

7. “France and Europe must not leave these shady men, these gangsters of the sea, to profit cynically from the lack of transparency in the current system.”

8. ““Erika” and “Prestige” demonstrate that ships of dubious quality with polluting cargoes continue to cause massive pollution in European waters without the responsible parties being adequately penalised for it.”

9. “Hoodlums of the sea.”

10. Oil Pollution: Initiatives for Change in Europe and Beyond • Attempts to revise CLC along “OPA” lines. • Prompted by “Erika” (1999) and “Prestige” (2002) casualties. • Voluntary schemes, subscribed to by shipowners and backed by their P&I Club insurers, to avoid wholesale revision of the present conventions. • TOPIA and STOPIA 2006. • 50:50 sharing between shipowners and oil company interests. • A serious threat averted? • CLC/Fund provide compensation for actual damage/restoration. • cf OPA, recovery for theoretical losses including natural resource damage and temporary diminution in unproven value pending restoration. • But is the situation really any better in Europe? • The European Community, political motivation, superficial analysis and ill-conceived regulation.

11. Directive of the European Parliament and of the Council on Ship Source Pollution and the Introduction of Sanctions including Criminal Sanctions for Pollution Offences.

12. The EC Directive on criminal sanctions for ship-source pollution. • The International Convention for the Prevention of Pollution from Ships 1973 (MARPOL). • MARPOL creates an offence, and provides for the imposition of sanctions in the case of prohibited discharges of oil, if the owner or master acted: • with intent to cause damage, or • recklessly, in the knowledge that damage would probably result. • Recklessness thus equates to misconduct in the expectation that harm will be caused, and being indifferent to the consequences. • The European Community Directive, by the introduction of merely two words, entirely changes the basis upon which a criminal offence is committed. • Article IV requires each European Community Member State to ensure that prohibited discharges amount to an offence “if committed with intent, recklessly or by serious negligence”.

13. The issue is “serious negligence”, a phrase which does not appear in MARPOL. • Conflict between internationally binding conventions, and regional law. • The EC Directive, by its requirement that Member States should punish “offenders” whose serious negligence causes oil spills, places those states directly into breach of their Treaty obligations under MARPOL. • What does “serious negligence” amount to anyway? • Is there any hope whatsoever that courts in various Member countries will construe it consistently? • Does “serious” describe the degree of negligence, or the consequences? • The criminalisation of masters, crew and others associated with marine casualties is becoming an endemic problem. • We are no longer surprised to hear that the master of a tanker involved in an oil spill has been imprisoned, and very often for several months without trial.

14. We are becoming accustomed to punishment of masters in these circumstances, where none of the mental element required for a criminal offence (intention to cause harm, or recklessness and indifference to it) is present. • “Tasman Spirit”, “Prestige” and “Nissos Amorgos”, “Erika” and recently the “Maersk Holyhead”. • Countries outside Europe will not be encouraged to treat seafarers fairly if they follow the examples set by governments within Europe. • The European Community unilaterally, and in breach of international law, imposes criminal liability in cases of accidental pollution caused by negligence. • Legal challenge to the Directive.

15. “Increased incidences of alcohol and drug abuse, domestic violence, mental health problems and occupation related problems.” “A high percentage … suffer from severe depression, post traumatic stress disorder, generalised anxiety disorder, or a combination of all three.”

16. “No mere accident.” “Management of (the Master) amounted to intentional malice towards the Plaintiffs.”

17. “Conduct targeted some financially vulnerable individuals.” “Bad conduct as to (the Master and his operation of the vessel) was intentionally malicious.”

18. “Admitted criminal responsibility for its conduct.” “Criminally spill a … load of oil.”

19. “Malice is … intention to harm another, usually seriously, for doing something unlawful … evil intention.”

20. Echoes of “Exxon Valdez” Selected Extracts from the Judgement of Judge Holland: see judgement. • What do these two rather distant entities, officials in the European Community, and Judge Holland in the Alaska Federal Court, have in common? • Each appears to be willing, perhaps indeed too anxious to portray human error as despicable misconduct, in order to justify punishment and criminal/quasi-criminal sanctions. • If the ill-conceived European Directive were to survive how would it affect liability underwriters such as P&I Clubs? • Can there be cover for fines imposed upon shipowning companies and managers? • Would a MARPOL fine for recklessly or wilfully intended pollution be covered?

21. Would an EC Directive fine for oil pollution caused by serious negligence be covered? • Oily water separators and oil record books: fines and penalties in the United States and elsewhere.

22. Limitation • The European Commission; has broader ambitions for regulation of maritime activities, not by any means confined to the environment. • The European Commission proposal for a directive of the European Parliament on the civil liability and financial security of shipowners. • In most European countries and in many other parts of the world, limitation of liability is determined in accordance with the 1996 Convention on the Limitation of Liability for Maritime Claims. Under this Convention, the right to limit is subject to the same conditions as set out under MARPOL. • Limitation is thus lost only if damage results from the owners’ personal act or omission, committed with intent to cause such damage, or recklessly and with the knowledge that such damage will probably result.

23. The right to limit is “practically unbreakable” according to the Commission. • Thus, (it is said) and in order to link liability more closely to conduct, limitation should be denied upon lesser grounds: “at least proof of gross negligence on behalf of the shipowner should trigger unlimited liability”. • Proposal: limitation lost in the event of “gross negligence”, in relation to claims not governed by any existing applicable Convention. • Misrepresentation of insurers’ position: the Commission in its proposal claims (incorrectly) to have consulted representatives of insurers, whose response (it is said) was to emphasise the “benefit of such a measure”. • Since the International Group of P&I Clubs covers liabilities of over 90% of the world’s ocean-going tonnage, the Commission’s reference to “insurers” must be taken to mean the Clubs. • No Group Club has ever expressed any support for this proposal.

24. What does “gross negligence” mean? Clearly something less than “recklessness”. The concept has no meaning in English civil law. • How exactly is “gross” negligence any different to “serious” negligence? • Will it not, at the end of the day, merely be interpreted as “ordinary” negligence? • In which case, the right to limitation will have been lost in the majority of cases. • Once again, the political ambitions of the Commission are evident: regional initiatives are employed rather than confronting issues at the international level. • Community states which are not party to the 1996 Limitation Convention are required to provide that owners will lose the right to limit liability in the event of “gross negligence”. • Member states which have adopted the Limitation Convention are of course entitled (and required) to apply the different and more stringent tests for loss of limitation. • A straight case of discrimination.

25. “For … death or personal injury to a passenger caused by a shipping incident, the carrier shall be liable (250,000 SDR) unless (he) proves that the incident • resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character, or • was wholly caused by an act or omission done with the intent to cause the incident by a third party.”

26. There is a distinction between the defences of an act of war, etc on the one hand, and other acts of third parties. • In the case of injury or death resulting from an act of war, there is no requirement that it be “wholly caused” by such an event. • It follows that a carrier is not liable for injury or death of passengers caused by war, even if its negligence was also a contributing cause. • However, to the extent that terrorism constitutes any defence at all, it does so only in accordance with sub para b.

27. Sub para b requires that the incident (for which read “terrorist incident”) must have been “wholly caused by a third party”). • It would be very difficult to establish that defence, since in any case involving terrorism it is likely to be alleged that the shipowner failed in one respect or another to ensure adequate security or precautionary measures to prevent acts of terrorism on board the vessel. • As far as terrorism is concerned, therefore, the defence in the Convention is largely illusory; and in fact it creates strict liability. • Example: terrorists board the vessel, blow it up and kill passengers. It is alleged subsequently that the security systems were inadequate and that the terrorists’ bags should have been searched more thoroughly; and/or that the shipowners should have taken other measures to identify and prevent the security risk they posed. • In this example, it might be held that the shipowners were, say, 10% to blame.

28. Under the Convention, however, they cannot make out a defence on this basis: because the defence is available only if the incident was “wholly caused” by the terrorists. • The carriers would thus be strictly liable for a shipping incident. • Shipping incident means shipwreck, capsizing, collision or stranding of the ship, explosion or fire on the ship, or defect in the ship. • Thus the owners are in effect required to be the insurers of the terrorists’ murderous actions. • There is also a clear discrepancy between the extent of cover available to owners from their P&I Clubs, and terrorism liabilities arising under the Convention. • Since the Clubs do not underwrite terrorist liabilities on a full mutual basis, but only under the extension of cover with a US$500m limit, it is clear that the Convention could impose liability upon an owner for which there is insufficient insurance capacity under the current arrangement.