LATIN AMERICAN PANEL NOVEMBER 1, 2007

1. LATIN AMERICAN PANEL NOVEMBER 1, 2007 UPDATE ON LEGAL MATTERS JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

2. LAWSUITS • MASSACHUSETTS LAWSUIT • BALLAST WATER LAWSUIT • EUROPEAN SHIP SOURCE POLLUTION DIRECTIVE • CARB AIR EMISSION REGS

3. LEGAL • AUGUST 2004 – MASSACHUSETTS PASSES STATE LAW REGULATING SHIP DESIGN AND OPERATIONS • JAN 2005 – US FEDERAL GOVT TAKES MASS TO COURT - STATE LAW PREEMPTED BY FEDERAL LAWS/REGS • FEB 2005 – INDUSTRY COALITION JOINS FEDERAL GOVERNMENT

4. MASS LAWSUIT • JULY 2006 - FEDERAL COURT RULES PROVISIONS OF MASS LAW INVALID • DECISION UPHOLDS COAST GUARD AUTHORITY OVER VESSEL OPERATIONS IN US WATERS • REINFORCES UNANIMOUS US SUPREME COURT DECISION IN 2000 WHEN INTERTANKO TOOK STATE OF WASHINGTON TO COURT

5. MASS LAWSUIT • SEPT 2006 - MASS FILES NOTICE TO APPEAL FEDERAL COURT DECISION • DECEMBER 2006 - MASS FILES APPEAL • FEBRUARY 20, 2007 - FEDERAL GOVTAND INDUSTRY COALITION SUBMIT RESPONSE TO MASS APPEAL • MAY 8, 2007 - ORAL ARGUMENTS HEARD BY COURT OF APPEALS

6. MASS LAWSUIT ISSUES APPEALED BY MASSACHUSETTS: - TUG ESCORT REQUIREMENTS; - MANNING REQUIREMENTS; AND - FINANCIAL RESPONSIBILITY LEVEL, BUT ALLOW THE STATE TO REDUCE THE LEVEL BASED ON COMPLIANCE WITH OTHER REQUIREMENTS

7. MASS LAWSUIT JUNE 2007 – APPEALS COURT DECISION: • OVERTURNS DISTRICT COURT DECISION THAT THREE PROVISIONS WERE INVALID • HOWEVER, DOES NOT DECLARE THE THREE PROVISION VALID • MANDATES FURTHER ANALYSIS OF THE LEGALITY OF THE THREE PROVISIONS BE PERFORMED BY DISTRICT COURT • LIFTS INJUNCTION AGAINST ENFORCEMENT • DIRECTS PARTIES TO NEGOTIATE INTERIM AGREEMENT ON ENFORCEMENT

8. MASS LAWSUIT • MASS HAS REBUFFED EFFORTS TO REACH AGREEMENT ON ENFORCMENT • MASS DEP NOT AGRESSIVELY ENFORCING THE THREE PROVISIONS • INTERTANKO ADVISES MEMBERS TO COMPLY WITH MASS REQUIREMENTS • OCTOBER 15 – STATUS CONFERENCE OF PARTIES TO REVIEW APPEALS COURT DECISION

9. BALLAST WATER LAWSUIT • IN 2004 ENVIRONMENTAL GROUPS TAKE US EPA TO COURT FOR NOT REGULATING BALLAST WATER DISCHARGES • MAIN REASON IS THAT THEY ARE UPSET WITH SLOW PROGRESS OF USCG IN REGULATING BALLAST WATER DISCHARGES • JUNE 2005 – INDUSTRY COALITION JOINS FEDERAL GOVT IN LAWSUIT

10. BALLAST WATER LAWSUIT • SEPT 2006 FEDERAL COURT ORDERS EPA TO DEVELOP REGS FOR ALL SHIP DISCHARGES, INCLUDING BALLAST WATER, UNDER NPDES PERMIT SYSTEM NO LATER THAN SEPT 2008 • JUDGE ACKNOWLEDGES THAT USCG HAS AUTHORITY UNDER CERTAIN LAWS, BUT BELIEVES CONGRESS ALSO GAVE AUTHORITY TO EPA UNDER THE CLEAN WATER ACT

11. BALLAST WATER LAWSUIT • EPA DISAGREES WITH COURT DECISION WHICH WILL HAVE A SIGNIFICANT IMPACT ON EPA • NOVEMBER 2006 – FEDERAL GOVT AND INDUSTRY COALITION FILE NOTICESOF INTENT TO APPEAL COURT ORDER • MARCH 2007 – FEDERAL GOVT AND INDUSTRY COALITION FILE APPEALS • AUGUST 2007 – ORAL ARGUMENTS HEARD BY APPELLATE COURT

12. BALLAST WATER LAWSUIT INDUSTRY PRIORITIES IN US BWM LEGISLATION: • ESTABLISH SINGLE LAW THAT GOVERNS BALLAST WATER DISCHARGES IN US WATERS • ESTABLISH US COAST GUARD AS LEAD FEDERAL AGENCY • PREEMPT STATE REGULATIONS • MIRROR IMO TREATY REQUIREMENTS

13. EU DIRECTIVE • SEPT 2005 EU ISSUES “SHIP SOURCE POLLUTION” DIRECTIVE (2005/35/EC) • MEMBER STATES REQUIRED TO IMPLEMENT DIRECTIVE BY APRIL 2007 • DIRECTIVE (CRIMINALIZES ACCIDENTAL POLLUTION) HAS TWO PROBLEMS: - CONTRADICTS MEMBER STATES’ TREATY OBLIGATIONS - LIABILITY TEST FOR “SERIOUS NEGLIGENCE” LACKS LEGAL CERTAINTY

14. EU DIRECTIVE • INDUSTRY DOES NOT HAVE DIRECT ACCESS TO EUROPEAN COURT OF JUSTICE - ACTION MUST COME FROM MEMBER STATE • DEC 2005 INDUSTRY COALITION INITIATES LEGAL PROCEEDING IN UK HIGH COURT IN LONDON REQUESTING “JUDICIAL REVIEW” • OBJECTIVE IS TO HAVE UK COURT RULING TO REFER MATTER TO ECJ

15. EU DIRECTIVE IN JUNE 2006 UK JUDGE GRANTS REQUEST, REFERS 4 ISSUES TO ECJ: • CAN EU IMPOSE CRIMINAL LIABILITY WITH RESPECT TO DISCHARGES FROM FOREIGN SHIPS IN EEZ; • CAN EU EXCLUDE MARPOL DEFENSES FOR DISCHARGES • DOES IMPOSITION OF CRIMINAL SANCTIONS FOR DISCHARGES CAUSED BY “SERIOUS NEGLIGENCE” HAMPER RIGHT OF INNOCENT PASSAGE • DOES “SERIOUS NEGLIGENCE” SATISFY LEGAL CERTAINTY

16. EU DIRECTIVE • NOV 2006 - INDUSTRY COALITION FILED WRITTEN SUBMISSION TO ECJ • SUBMISSION HAVE ALSO BEEN FILED BY EC, EU COUNCIL, EU PARLIAMENT AND A NUMBER OF EU MEMBERS, SOME IN SUPPORT OF INDUSTRY AND OTHERS AGAINST • SEPTEMBER 25, 2007 - ORAL ARGUMENTS HEARD BY THE ECJ

17. AIR EMISSIONS - CARB • JAN 1, 2007 – CARB REGS FOR AUX. ENGINES AND DIESEL ELECTRIC MAIN ENGINES IN EFFECT WITHIN 24 MILES OF CALIFORNIA • PMSA GOES TO FEDERAL COURT SEEKING INJUNCTIVE RELIEF • LAWSUIT ADDRESSES LIMITED ISSUES - 24 MILE JURISDICTION - FAILURE TO REQUEST EPA APPROVAL

18. AIR EMISSIONS - CARB • AUGUST 12 – DISTRICT COURT HEARING • AUGUST 30 – DISTRICT COURT RULING: - ENJOINS CA FROM ENFORCING REGS UNTIL APPROVAL RECEIVED FROM EPA - CARB REGS ARE NOT “IN USE” REGS, THEY ARE “EMISSION STANDARDS” UNDER CLEAN AIR ACT - UNNECESSARY TO RULE ON 24 MILES

19. AIR EMISSIONS - CARB NEXT STEPS: CALIFORNIA HAS THREE OPTIONS: • APPEAL DISTRICT DECISION TO CIRCUIT COURT OF APPEALS • SEEK EPA APPROVAL AS “EMISSION STANDARD” (COULD TAKE 2-3 YEARS TO GET APPROVAL) • ISSUE REGS AS “FUEL STANDARD”

20. AIR EMISSIONS - CARB • CARB CURRENTLY CONDUCTING “WORKSHOPS” TO DEVELOP REGS TO REDUCE AIR EMISSIONS FROM MAIN DIESEL ENGINES • INDICATED THEY WOULD ISSUE PROPOSED RULES BY END OF 2007 • APRIL 2007 – CARB SENDS LETTER TO US EPA SUPPORTING US PROPOSAL TO IMO ON REVISION OF ANNEX VI

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