Insights - Blank Rome

Blank Rome LLP’s Gregory Linsin and Jeanne Grasso explain thechallenges and lay out a cogent solution.

CURRENT TRENDS IN MARPOL ENFORCEMENTThe United States has long been aggressively enforcing compliance

with the International Convention for the Prevention of Pollution fromShips, as amended (“MARPOL”), which is implemented in the UnitedStates by the Act to Prevent Pollution from Ships (“APPS”). Since theearly 1990s, the effort has been directed at all types of registered anddomestic tonnage – the full spectrum of waterborne commerce. Thoseentities and individuals prosecuted for MARPOL violations also spana wide spectrum of owners, operators, technical managers, masters,engineers, shoreside personnel and corporate officers.

MARPOL prosecutions commonly involve bypasses of the oilywater separator or discharges of sludge overboard rather than throughincineration. Few of these prosecutions involve illegal discharges inU.S. waters – virtually all involve false entries in the Oil Record Book(“ORB”). Maintaining an inaccurate ORB while in domestic waters orpresenting an inaccurate ORB to the U.S. Coast Guard is a crime anda basis for prosecution, along with post-incident conduct such asobstruction of justice or false statements made to investigators follow-ing commencement of the investigation. These efforts are oftenviewed by the rest of the world as heavy handed, as many believe thatenforcement actions for recordkeeping violations with respect to ille-gal discharges occurring in international waters should be the respon-sibility of the flag State. The United States government disagrees andhas stated unequivocally that it will continue to enforce, even moreaggressively, until the illegal discharges stop.

The Department of Justice (“DOJ”) recently noted that 88 milliongallons of oil are discharged illegally from vessels each year – morethan eight times the amount spilled from the Exxon Valdez. Thus, untilflag states increase serious enforcement of MARPOL compliance, theUnited States will likely continue to be the world’s MARPOL cop.

Prosecutions continue unabated, with more than a dozen MARPOLcases prosecuted during the last 24 months, as companies fail to learnfrom the mistakes of others. And, the prosecutions are now yieldinghigher penalties, jail time and the banning of ships from United Statesports.

As an example of the DOJ’s persistence, Stanships Inc. and threerelated companies, collectively the owners and operators of the M/V

Americana, pled guilty again, in April of this year (Stanships pledguilty in a prior case in June 2010) to 32 felony counts for violationsof APPS, the Ports and Waterways Safety Act and obstruction of jus-tice. The companies will be fined $1 million and prohibited from trad-ing to the United States during the five-year probationary period. Theindividual owning the companies is also banned from owning shipstrading to the United States for five years. A whistleblower’s report tothe Coast Guard, including cell phone photographs of the “magicpipe,” kicked off this investigation, which involved illegal dischargesof sludge and oily water and the failure to report a hazardous condi-tion prior to a United States port call. In the past, it has been rare toban ships from trading to the United States and this is the first time anowner has been banned.

While whistleblowers have been part of the seascape in APPS pros-ecutions for years, more than 50% of the new cases stem from whistle-blowers, probably because of the lucrative rewards DOJ is requestingand courts are awarding. This can amount to as much as 50% of anypenalty paid for APPS violations. Unfortunately – and because of thereward prospects, whistleblowers often ignore company policies andthe ISM Code by reporting wrongdoing directly to the Coast Guardrather than through the chain of command or to the Designated PersonAshore. This serves to undermine international systems in place todeal with potential violations.

The maritime industry has had ample notice of the aggressiveness ofthe enforcement actions and the lucrative awards being given towhistleblowers. Industry must therefore understand the controllinglaws and enforcement mechanisms and take aggressive steps to ensurecompliance and reduce enforcement risks. This is particularly impor-tant in light of the recent Memorandum of Understanding between theEnvironmental Protection Agency (“EPA”) and the U.S. Coast Guardregarding enforcement of EPA’s Vessel General Permit, whichincludes numerous recordkeeping and other requirements.

DEVELOPING A CULTURE OF COMPLIANCEMany vessel owners and technical managers have become more

proactive regarding MARPOL compliance as the pace of enforcementhas increased. In some instances, enhanced compliance measures havebeen imposed by the courts in the United States following a port StateMARPOL enforcement action. In other situations, companies haveelected proactively to strengthen their compliance regimes, recogniz-

InsightsLegal Beat

MARPOL Enforcement in the United States

By Gregory Linsin & Jeanne Grasso, Blank Rome LLP

Reprinted with Permission from the May 2011 edition of Maritime Professional www.MaritimeProfessional.com

ing both the escalating environmentalrequirements and to minimize the risks ofbecoming the target of a MARPOLenforcement action.

These efforts can take the form of equip-ment upgrades or technical changes inengine rooms in an effort to preventimproper discharges. Uneven in theireffectiveness (at best), technical improve-ments can be beneficial but experience hasrepeatedly demonstrated that environmen-tal compliance is dependent primarily on(a.) the ship’s complement, (b.) the degreeof shoreside management oversightemployed and perhaps most importantly, (c.) the strength of the over-all corporate compliance culture.

For these reasons, many companies have dedicated increasedresources to improving management practices designed to foster andenhance environmental compliance aboard their ships. These include:• Enhanced Compliance Training - Frequent crew rotations and theunpredictability of future vessel assignments present a daunting chal-lenge to the vessel manager attempting to develop a sustainable com-pliance culture aboard its ships. A number of companies have conclud-ed that enhanced training programs for both engineering officers andunlicensed crewmembers are an important tool for communicating thecompany’s commitment to rigorous compliance standards. To beeffective, such training must be repeated periodically and regularlyupdated based on changing conditions. • Open Reporting System – Information has value. For this reason,some companies have decided to augment the DPA reporting systemunder their Safety Management System by providing open hotlines oranonymous electronic reporting options to crew members wherebythey can alert shoreside management of environmental deficiencies orviolations aboard a ship. A few companies have even instituted aninternal monetary reward system for crew members who provide accu-rate information regarding environmental problems. • Audit Program – Most shore-based companies that are faced withthe challenge of complying with complex regulatory systems also relyon periodic audits to evaluate the company’s level of compliance andto identify opportunities for improvement. Maritime companies arealso recognizing that a periodic audit program is a critical element ofa robust environmental compliance program. Some have developedinternal audit teams and others have concluded that third-party audi-tors provide a more objective assessment. To further improve the reli-ability of audit findings, some companies arrange for a percentage ofthe audits to be conducted on an unannounced basis. • Role of Superintendent – Periodic shipboard visits by the manag-er’s technical superintendent is a vital component of any environmen-tal compliance system. Because of their detailed knowledge of the shipand familiarity with the engineering officers and crewmembers, super-

intendents should have a greater ability thanport State control inspectors to identify con-ditions in the engine room that raise envi-ronmental compliance issues.Superintendents should be given clear andunequivocal guidance that, if any such con-ditions are identified during their attendanceon a ship, the company’s shoreside manage-ment must be promptly and thoroughlyinformed of the conditions, the conditionsmust be remedied, and the compliance risksmust be thoroughly understood. • Internal Investigations – If informationis developed from any source, whether it be

through the open reporting system, audit findings, or a superinten-dent’s observations, that suggests an intentional MARPOL violationhas occurred or is on-going aboard a vessel, careful considerationshould be given to engaging outside counsel to conduct an immediateinternal investigation to develop a complete factual record and to pro-vide legal advice concerning any corrective actions or reporting obli-gations that may exist. Seizing the initiative in the development andmanagement of such information can help to control the potential neg-ative consequences of any identified MARPOL deficiency, whilestrengthening the company’s overall environmental compliance pro-gram.

REVIVING THE ROLE OF THE FLAG STATEThe maritime environmental enforcement program in United States

ports over the past several years has significantly distorted the MAR-POL compliance and enforcement regime that is embodied in the Lawof the Sea Convention (“UNCLOS”) and in the MARPOL Conventionitself. For many reasons, both UNCLOS and MARPOL vest primaryresponsibility for oversight of environmental compliance in theMaritime Administration of the flag State. From the issuance orendorsement of a vessel’s International Oil Pollution Prevention cer-tificate, to the development and distribution of ORB’s, to annual ves-sel inspections and renewals of Documents of Compliance, the flagState is intended to have primary, on-going responsibility for ensuringcompliance with environmental requirements and, if a deficiency isidentified, evaluating what corrective action or enforcement responsemay be warranted.

The central role for the flag State with respect to compliance withenvironmental responsibilities parallels the range of other oversightresponsibilities for vessel operations under international conventionsthat are vested with the flag State, all of which flow logically from anAdministration’s comprehensive knowledge of and relationship with avessel’s owners and technical managers. While port and coastal statesare authorized under both UNCLOS and MARPOL to perform portState control inspections or to investigate and consider enforcementactions for pollution events occurring in their territorial waters, under

Insights

The Department of Justice (DOJ) recently noted that 88 million gallons of oil

are discharged illegally from vessels eachyear – more than eight times the amount

spilled from the Exxon Valdez. Thus, untilflag states increase serious enforcement of MARPOL compliance, the United States

will likely continue to be the world’s MARPOL cop.


both conventions these functions are secondary to the primary envi-ronmental compliance assurance role reserved to the flag State.

Early MARPOL enforcement cases brought by the United Stateswere generally consistent with the international regulatory regime inthat the cases brought against foreign flag ships were based on dis-charges of oil or plastic wastes that occurred in U.S. territorial waters.Over the years, “mission creep” has vastly expanded the scope of U.S.MARPOL enforcement program to the point where it is now whollyirrelevant where the alleged improper discharges occurred. In fact,none of the recent MARPOL enforcement cases brought in the UnitedStates have involved allegations of intentional pollution in U.S waters.Rather, in its role as port State, the United States has arrogated untoitself the primary compliance assurance role that was intended byinternational law to be performed by the flag State. This situation hasdeveloped over time due to a number of factors which include substan-tial financial awards for whistleblowers, the comparative passivity ofmajor Administrations with respect to MARPOL compliance assur-ance and enforcement and finally, the reluctance of vessel owners andmanagers to discuss information regarding MARPOL complianceissues with the Administration and to resolve those issues in thatforum.

This distorted MARPOL enforcement pattern can and should be cor-rected. Vessel owners and managers, working to identify MARPOLcompliance issues themselves by utilizing the management techniquesoutlined above, will be in a better position to determine how and underwhat terms the compliance issue will be resolved. For example, pre-sume a situation where a rogue Chief Engineer aboard a ship ignorescompany’s MARPOL compliance policies and directed discharges ofoily mixtures through the use of a “magic pipe.” If the vessel’s ownerand its manager are not attentive to this situation, they are ceding sig-nificant authority to potential whistleblowers on board the ship, whowill then collect evidence to document the violation and wait until theyarrive at a United States port to disclose the information to the CoastGuard. Under this scenario, the ability to investigate the allegationsand determine an enforcement resolution has been yielded entirely toUnited States authorities.

If, however, the information regarding this MARPOL violation wasfirst obtained by the vessel’s shoreside management before it waspackaged by the whistleblowers and reported to the United States, thevessel’s manager would be in a position to approach theAdministration and develop a resolution based on the flag State’sjudgment concerning any required corrective action or, if warranted,appropriate enforcement response. If warranted, corrective entriescould be made in the vessel’s ORB. This approach has the benefit ofbeing consistent with the intended compliance assurance regime underMARPOL and UNCLOS and, for a number of reasons, would be farmore likely to result in a balanced and measured resolution that wouldbe advantageous to the vessel’s owner. Additionally, unless the dis-charges in question had occurred in United States territorial waters, itwould preclude further enforcement action by the United States.

CONCLUSIONThe challenge of managing environmental compliance issues aboard

vessels will only grow more difficult in the coming years. There areconcrete steps that operators can take, as discussed above, to addressthese challenges intelligently and place themselves in a position toreduce the expanding enforcement risks.

The Authors

Jeanne M. Grasso, partner at Blank Rome, focuses her practice on maritime,environmental, and transportation law for domestic and international clients. Ms.Grasso counsels owners and operators of vessels, cargo owners, and facilities,including manufacturing facilities, both marine-side and inland. Ms. Grassowrites and lectures extensively on criminal enforcement of environmental laws,Coast Guard regulatory matters, and maritime security.

Gregory F. Linsin, partner at Blank Rome, is an experienced criminal litigatorand concentrates his practice in the areas of white collar criminal law, environ-mental criminal litigation involving shore-based and maritime clients, environ-mental compliance, and internal corporate compliance investigations. Prior tojoining Blank Rome, Mr. Linsin served for more than 25 years with the UnitedStates Department of Justice, where he managed and prosecuted complex crim-inal cases in federal courts throughout the country. Mr. Linsin is a frequent authorand speaker on environmental criminal and compliance issues.
