A Practical Approach to Reduce MARPOL Enforcement Risks in the United States
Readers of Mainbrace know well that the United States has been aggressively enforcing compliance with MARPOL for decades. Often referred to as “magic pipe” cases, the U.S. Department of Justice (“DOJ”) has brought criminal MARPOL prosecutions against owners and operators of ships running the gamut from fishing vessels to bulkers, tankers, container ships, and cruise ships. These prosecutions have involved underlying violations of MARPOL Annex I (oil), but also Annex V (garbage) and more recently Annex VI (air emissions).
Criminal MARPOL cases are extraordinarily costly and disruptive to vessel owners/operators. Not only are significant fines levied against violators, but companies convicted of MARPOL violations suffer attendant reputational damage that can impact charter hire prospects and incur significant costs for paying wages, housing, and per diem to the crew members whom the government requires to remain in the United States for the duration of the criminal case. On top of that are the costs associated with a comprehensive Environmental Compliance Plan for the fleet, along with costs associated with a Third-Party Auditor and a Court-Appointed Monitor.
Unlike other areas of U.S. criminal enforcement, MARPOL prosecutions have continued at a steady pace, across administrations led by different political parties. This is due, in part, to the fact that the Act to Prevent Pollution from Ships (“APPS”), the U.S. statute that implemented MARPOL, is enforced by the U.S. Coast Guard (“USCG”), which is typically less affected by political change than other executive agencies responsible for criminal enforcement. Perhaps more importantly, APPS includes a whistleblower provision pursuant to which anyone who provides information to the USCG that leads to a conviction may be awarded up to 50 percent of the criminal penalty imposed under APPS. Potential awards incentivize seafarers to report misconduct to the USCG instead of to the company, even in cases where there is an open-reporting program. It also gives the USCG and DOJ a significant advantage, as they often receive photos and videos of the alleged improper conduct before their investigation even begins.
A Detailed SMS Is Not Enough to Combat the Risk Posed by Whistleblowers
Many vessel owners and operators may believe that maintaining a thorough Safety Management System (“SMS”) and having detailed policies and procedures will insulate them from the risk of a MARPOL prosecution. While these efforts to ensure regulatory compliance are required and are certainly worthwhile, a proliferation of forms and checklists alone will not prevent a MARPOL violation. Rather, a company’s compliance system must go beyond a detailed SMS to counter the serious risk of a whistleblower claim.
Enhancements to MARPOL compliance practices are imperative, as the conduct giving rise to MARPOL prosecutions is becoming increasingly more sophisticated and difficult for companies to detect. There are fewer and fewer true “magic pipe” cases where a pipe or hose is used to bypass the oil-water separator (“OWS”) and discharge untreated bilge water overboard. Instead, we are aware of several cases over the past few years where seafarers discharged bilge water or oily water, sometimes directly from the bilge wells, overboard through the ship’s sewage holding tank. This includes scenarios where the discharged bilge or oily water had never even entered the bilge system, and thus was not traceable through a review of the oil-record book (“ORB”). We also are aware of cases where seafarers have manipulated emergency cross-connect valves and used the ship’s eductor to discharge bilge water, thus bypassing the OWS. The location and nature of the equipment used in these discharges was difficult to access and not necessarily subject to extensive shoreside oversight. Critically, these types of violations are difficult for shoreside managers to discover, yet very easy for whistleblower crew members to record with their mobile phones.
Adding to these challenges, most MARPOL cases also involve “other” criminal conduct, such as lying to USCG investigators, manipulating or destroying vessel records, or even failing to report a hazardous condition. This risk only heightens the need for a deeper level of compliance oversight. For example, in January 2023, both the owner and the operator of a containership were sentenced for violating APPS and the Ports and Waterways Safety Act. The containership’s crew members had tricked the oil-content meter on the OWS so that they could discharge bilge water exceeding 15 ppm overboard, which in turn rendered the ORB false, but they also had disabled pressure relief valves on fuel oil heaters that were leaking oil, which created an explosion risk.[1]
What Can Be Done?
There is no secret formula for avoiding all risks attendant to a MARPOL violation; however, we strongly recommend focusing on two aspects of the business: culture and shoreside involvement.
It cannot be said enough that a compliance culture starts from the top down. A company’s senior management must fully buy in and commit to regulatory compliance, but also create an environment where seafarers feel comfortable reporting internally—or are even incentivized to do so. Similarly, a compliance culture includes implementing systems tailored to your operations and designed to identify, investigate, and promptly fix non-compliance issues, which may necessarily include transparency with flag state authorities and/or port state control officials about the findings and plans to come into compliance. For example, if a company detects and reports a potential MARPOL violation to the flag state while en route to the United States and notes the issue and the ongoing investigation in the ORB, the ORB will not be false and the USCG is likely to defer to the flag state’s jurisdiction if the flag state takes the matter seriously.
Active involvement of shoreside managers (including technical superintendents and the Designated Person Ashore) is also crucial to reducing the risk of a MARPOL violation. Personnel who are present can foster good relationships with the crew, encouraging them to report any potential issues shoreside so they can be addressed, rather than reporting to the USCG. In this current crewing crisis, particular attention should be paid to ships with senior engineers who are new to the company, its culture, and its SMS. The same is true with respect to vessels that have not recently called on a U.S. port, as they are likely to receive more scrutiny from the USCG.
Similarly, the more familiar management is with the vessel, the more likely they are to notice problems that could become the root cause behind the crew’s decision to improperly discharge oily water. Companies also should consider periodically engaging in a detailed review of bilge water management on board their ships and promptly follow up on any abnormalities.
Implementing these recommendations requires an investment of resources, but that investment is worthwhile if it means avoiding financial and reputational penalties emanating from a MARPOL prosecution.
This article is one in a series of articles written for Blank Rome’s MAINBRACE: March 2023 edition.