2020 debate at IBIA’s LISW event: Compliance & enforcement – it’s complicated
There is no doubt about the start date for the 0.50% marine fuel sulphur limit in MARPOL Annex VI, but questions remain around how it will be enforced and how good compliance will be. The answers to these questions are “it will vary” and “we don’t know but probably quite high” according to presenters and panellists at a forum hosted by IBIA during London International Shipping Week (LISW).
The International Maritime Organization defines the regulatory framework and provides guidelines, but implementation and enforcement is up to the member states and how they do this is varied, IBIA’s IMO representative Unni Einemo told the forum. She said current enforcement of emission control areas (ECAs) may serve as examples but application in the manner seen in North Europe and North America requires resources, and it could be a steep learning curve for many countries.
The entities that can enforce IMO regulations are the flag State which is the country where a ship registered and the issuer of required certificates; the port State where ships are calling at that country’s ports, and the coastal State which in principle is the same as a port State except the ship is only passing through its territorial waters, regulatory affairs expert Niels Bjorn Mortensen explained.
Flag States have obligations to ensure vessels flying their flag comply with relevant regulations no matter where in the world they are. The port State, meanwhile, has powers to enforce rules and regulations adopted by the country it resides in and may even pursue a ship for pollution outside its territorial waters if it is deemed to cause damage, but it is not obliged to do so, Mortensen said.
A state (flag, port or coastal) which has not ratified Annex VI does not have any legal instruments in place to penalise non-compliance. So a ship flying the Cabo Verde flag and operating permanently between Angola and Argentina could continue to burn fuel not complying with the global 0.50% sulphur cap because none of these states have ratified MARPOL Annex VI, Mortensen gave as an example.
There is an open question as to how effectively flag states will enforce the sulphur limits and how they might penalise non-compliance. Moreover, penalties would need to be sufficiently severe to act as a deterrent to non-compliance which could see ‘cheats’ save millions of dollars. Even in the European Union, where there is a Directive in place for how port states should check for compliance with sulphur regulations, each country has different penal systems where some have to pursue violations as criminal cases through courts while others can administer civil fines directly on the ship. The level of fines each country can administer also varies.
Only 88 out of IMO’s 172 member states are signatories to Annex VI of MARPOL and of these only 28 have experience of sulphur regulation enforcement so far, IBIA’s chairman, Robin Meech of Marine and Energy Consulting Limited told the forum.
However, he said 90% of global marine trade goes through ports in countries that are Annex VI signatories, which means they have powers to ensure ships are compliant when arriving at these ports.
The other question is how much of the global fleet that is flagged in Annex VI signatory countries, meaning these ships are under an obligation to comply, even if they sail between countries that are not signatories and hence would face no enforcement action on arrival.
Some 96% of global tonnage is flagged in Annex VI signatories, but Meech noted that there are 35 Open Registries of which 13 are signatories to Annex VI and 22 are not. Meech ventured a guess that non-compliance with the global sulphur limit, based on where vessels are flagged combined with instances of non-availability could be as high as 36% initially in 2020, before improved availability and more cohesive enforcement sees that figure shrink.
Although the financial incentive to not comply in 2020 will be huge, most predictions for non-compliance in 2020 are much less dramatic. Experience with the 0.10% sulphur limit in ECAs point to high levels of compliance with the fuel sulphur limit, maybe 95% or more, despite the higher cost. Both Meech and Mortensen pointed to the likelihood that blue chip shipping companies will comply, in part because some of the cargo owners will demand it.
We should differentiate between intentional non-compliance and non-compliance, which is why the IMO has agreed on the need to develop a draft standard format for reporting fuel oil non-availability that may be used to provide evidence if a ship is unable to obtain compliant fuel oil, Einemo told the forum. Regulation 18.2 in MARPOL Annex VI says a ship should not be forced to deviate or unduly delay its voyage if, despite reasonable efforts, it cannot bunker compliant fuel. This is in effect the only acceptable form of non-compliance but it needs to be carefully managed so it doesn’t become a loophole that is open to abuse, she said. The US has already demonstrated this in practice by requiring ships that are unable to source ECA-compliant fuel to submit a Fuel Oil Non-Availability Report (FONAR) to the US Environment Protection Agency (US EPA) and authorities at port of destination. If the US EPA suspects abuse of the system, it will investigate further so submitting FONARs is not a guarantee that the ship will be exempt from enforcement action.
Comments at another event during LISW saw representatives for large shipping organisations argue the virtues of shipping companies and flag states, saying most shipping companies want to comply and they see no issue with flag states because they don’t want ships on their registry to be arrested as it makes them look bad. What is needed, some argued, is stricter enforcement on bunker suppliers.
Indeed this is understandable if the ship receives bunkers that are not compliant with the sulphur limit, as that can leave the ship unintentionally non-compliant. Enforcement isn’t always sympathetic to this, however. As one US-based lawyer put it with regards to how sulphur regulations are enforced in California: “We don’t care what you bought, we only look at what you burn.”
The IBIA forum, held in London on 13 September during LISW was more than fully subscribed. Attendees were treated to presentations and panel debates with expert participants, followed by drinks sponsored by Intertek.