MERCHANT SHIPPING (CIVIL LIABILITY AND COMPENSATION FOR OIL POLLUTION) BILL

Order for Second Reading read.

The Minister for Communications (Mr Mah Bow Tan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the Bill seeks to give effect to the International Convention on Civil Liability for Oil Pollution Damage 1992 (CLC 92) and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage in 1992 (Fund 92). Both Conventions were adopted by the International Maritime Organization.

The International Convention on Civil Liability for Oil Pollution Damage 1969 (CLC 69) and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (Fund 71) set the international rules and procedure for dealing with liability and compensation for oil pollution damage. These Conventions provide for the sharing of the costs of compensation between the shipowners and cargo interests. Compensation is initially paid by the owner, whom the CLC 69 makes strictly liable for oil pollution damage. Since CLC 69 also generally provides for limitation of the owner's liability, additional compensation is available, if needed, from the International Oil Pollution Compensation Fund (the 1971 Fund), established under Fund 71. The Fund is financed by contributions from importers and receivers of oil.

Singapore has been a party to CLC 69 for many years. The existing 1981 Merchant Shipping (Oil Pollution) Act implements this Convention.

But the CLC 69 and Fund 71 have been found to be inadequate to meet current levels of claims. In 1992, the IMO adopted two Protocols to amend CLC 69 and Fund 71. The Protocols primarily raised the level of compensation that victims of oil pollution can claim as a result of an oil pollution from ships. Under CLC 92, the limit of compensation has been raised from about S$30 million (in CLC 69) to about S$130 million, or slightly more than four times. Under Fund 92, the limit of compensation has been raised from about S$130 million (in Fund 71) to about S$436 million.

The volume of oil imported to and exported from Singapore has been increasing steadily over the years. A large number of very large crude carriers (VLCCs) transit the Singapore Strait. As the maritime traffic in our waters and in the Strait increases, so too does the risk of a serious pollution incident. In fact, if Members may recall, such an incident did occur recently in October 1997 when two oil tankers collided in the Singapore Strait spilling some 28,000 tons of crude oil into our waters. We would like to have a higher limit of compensation in the event of a serious pollution incident like this.

The MPA consulted various public and private sector organizations involved such as the Singapore Shipping Association, oil industry, TDB, EDB and MTI. They have all supported Singapore's accession to the Protocols. Singapore acceded to CLC 92 and Fund 92 on 18th September and 31st December 1997 respectively. These will come into force one year later. In other words, in September and December this year respectively.

Our accession to CLC 92 means that Singapore-registered oil tankers will have to be covered by insurance against liability for oil pollution damage for a higher limit of compensation. Further, tankers calling at Singapore must also be insured to the same higher limit. Our accession to Fund 92 will enable victims of oil pollution damage to seek additional compensation where compensation from shipowners or their insurers is insufficient to meet the claims.

As a party to CLC 92 and Fund 92, Singapore is obligated to give effect to the provisions of these Conventions in its laws. The Bill contains the essential provisions to give effect to CLC 92 and Fund 92. Administrative and procedural matters will be dealt by subsidiary legislation.

Besides the higher compensation available to oil pollution victims which I have just mentioned, there are the following differences between the old Act, which implements CLC 69, and the Bill which implements CLC 92 and Fund 92:

Under clause 6 of the Bill, owners of ships not exceeding 5,000 tons can limit their liability to a fixed sum of 3 million special drawing rights (SDRs). This is equivalent to about S$6 million.

Under clause 3 of the Bill, expenses incurred for preventive measures are recoverable even where no spill of oil occurs, provided that there is a grave and imminent threat of pollution damage.

Provisions of the Bill apply to pollution damage both in the territory (including the territorial sea) as well as the exclusive economic zone (EEZ) of Singapore.

Provisions of the Bill apply to spills from sea-going vessels constructed or adapted to carry oil in bulk as cargo, whether laden or unladen and apply to spills of bunker oil from such ships.

In giving effect to Fund 92, the Bill requires contributions to be paid to the Fund by an importer or receiver of more than 150,000 tons per year of oil. The major oil companies and oil traders in Singapore will contribute to the Fund. The amount to be paid each year will depend on the number and size of oil spills in the States party to the Fund 92, the amount of claim that exceeds the limit of the CLC 92, the cost and expenses of administering the Fund and any deficit from operations in preceding years. The amount of contributions is to be fixed by the Fund. The Fund shall, subject to certain prescribed limits, be liable to any person who is unable to obtain full compensation for oil pollution damage from the shipowner or his insurer if the shipowner is incapable of meeting the claim or the claim exceeds the limitation fund of the owner established under clause 7.

The Bill also provides for the fines imposed for any offence under the Bill and sums collected to be paid into the funds of the Authority. Payment of fines to MPA will enable it to recover part of the clean up costs for oil spills from unknown sources and investigation expenses relating to pollution incidents.

Sir, I beg to move.

Question proposed.

Mr Chay Wai Chuen (Tanjong Pagar): Mr Speaker, Sir, first, I would like to support this Bill. This Bill has two main parts: one on Civil Liability for Oil Pollution and, secondly, on the accession to the International Oil Pollution Compensation Fund.

Singapore as an international port and maritime centre should subscribe to these two conventions and fund, which serve to limit liability to ship owners, and yet protect the interest of the countries around the seas where the pollution occurs arising from these ship operations. As the Minister pointed out, Singapore has been a signatory to the Civil Liability Convention of 1969, which was convened arising from the environmental pollution and damage of the "Torrey Canyon" in 1967.

This Bill is to be welcomed. The question I want to ask is why it took so long for us to be a signatory to it. The Civil Liability Convention (CLC) will only be in force on 17th September 1998. In this period since the Convention was operational in the other more progressive countries, why were we so slow to join in? In this period between now and 17th September 1998, owners of vessels operating in our waters are exposed to liability because of the limitations of CLC 69. We have already experienced vessel collision like Orapin Global and Evoikos in October 1997, which caused major pollution. So technically we are still exposed till 17th September 1998.

Does the accession to this Convention 92 mean that our ships from the neighbouring countries will be restricted in trade around our waters and our port, because such ships registered in these neighbouring countries may not be signatories? And will the higher insurance premiums and standard requirements imply that our port will be less open because it is more restrictive given the higher stringency for the regional vessels? Will this have implications for us in serving the regional vessels in an economically difficult period?

Clause 18 of this Bill stipulates that Government ships be exempted from these regulations. I can accept if it is due to matters of war, but navy vessels also operate within our congested waters around the port and around Singapore and they should be equally liable for such pollutions if they are due to accidents or through negligence.

Under clause 7, subsection 3a(i), liability damages are determined in SDRs (Special Drawing Rights) expressed in Singapore dollars. My question is: why must the rate of exchange be determined by the date of judgement? Bearing in mind that such damages extend into millions of dollars, and judgement and settlement can extend over years, should not the rate of exchange between SDRs and Singapore dollars be determined on the date of the event or the last closest rate to reflect the real cost damages?

On the Fund Convention, it puts our importers of oil and refineries on the need to contribute to this Fund. Does it affect the competitiveness of our refineries or oil importers when other refineries, including state-owned ones in other neighbouring countries, are not signatories?

Sir, I support this Bill.

Mr Mah Bow Tan: Sir, I thank Mr Chay for supporting the Bill. He asks why is it that we took so long to operationalise these two conventions (CLC 92 and Fund 92). Let me just point out that although they were adopted by IMO in 1992 (hence the name CLC 92 and Fund 92), both these conventions have only entered into force internationally in 1996, two years ago. The practice is to have a minimum number of countries accede to the protocol before it comes into force. It is our practice to accede to these conventions after it comes into force internationally. When it did so in 1996, the Government then started the process of consultation with various interested parties. In our case, of course, we consulted not only Government agencies and Ministries, like MTI, TDB and so on, but also other relevant parties in Singapore like the Singapore Shipping Association (SSA), oil traders, oil refiners and so on. That was done and completed last year and the Fund was acceded to last year and will go into operation this year. So I can assure the Member that there was no undue tardiness in this area.

As to what happens in between CLC 69 and CLC 92, in the period before CLC 92 comes into force, we are still governed by the provisions of CLC 69. If there are any pollution incidents that happen now, these will be covered by CLC 69. The Member mentioned the Evoikos incident. I would like to inform him that based on the estimates of the damage that has been caused by the Evoikos incident, MPA is confident that the clean up cost will be covered or met in full under CLC 69, the old convention. This of course is due in no small part to the fact that MPA and the relevant agencies took swift and preventive action to ensure that the damage was not unduly extensive. CLC 69 coverage is sufficient to cover any contingencies that we anticipate, if we are fully prepared for such emergency. However, to be safe we have decided to accede to CLC 92.

The Member also asks about higher insurance premiums and what happens to ships of countries that do not accede to the CLC

92 Protocol. Based on international convention, first of all, ships of countries that are party to CLC 92 will have no problem because under that convention they are obligated, as Singapore-registered ships are, to obtain the necessary insurance. However, ships which are not a party to CLC 92 will need to obtain a CLC 92 certificate to call at Singapore. What this means is that they must obtain the necessary insurance which will provide for the higher limits of indemnity required under CLC 92. In actual fact, the Protection and Indemnity (P&I) clubs that insure the ships and provide the insurance certificates informed us that most probably there will be very little or no increase in premium for a CLC 92 certificate as compared to a CLC 69 certificate. This means that there will be very little cost impact on ships calling on Singapore. Because the P&I insurance cover today is already very high, there would not be any significant increase in the premiums which means therefore that the cost impact on ships will also be negligible.

Are Government ships exempted? The two Protocols (CLC 92 and Fund 92) only apply to ships which are constructed for the carriage of oil in bulk as cargo and also of course to the spillage of bunker oil in the ships. So if such a ship is owned by government, by a state, or by a state-owned company, then the convention will apply to those types of government ships.

Mr Chay also asks why the conversion rate is set at the date of judgement rather than at the date of event. This is part of the international agreement that has been thrashed out and settled among various countries. There must be a reason why they have set it at the date of judgement. I am not familiar with the reason why that has been so. But that is an international convention and Singapore is obliged to follow. If he is interested, I can find out the reasons and respond at a later date.

Finally, on competitiveness of oil refineries and whether Singapore oil refineries will be affected in terms of high cost. As I indicated earlier, before we acceded to this convention, we canvassed the opinion of all interested parties from Singapore, including the oil refineries, and all oil companies have expressed support for this convention. I believe major oil companies in Singapore, they are multi-national companies, find it in their own interest for Singapore to accede to this convention. Firstly, it means that they are actually protected because CLC 92 sets a cap on their liability; and, secondly, I understand that they do buy insurance, they contribute to private insurance anyway. So the contributions to this convention would, I assume, be in lieu of contribution to their own private insurance funds. In that sense, I do not think that there will be any major impact on their competitiveness.

I believe those are the few questions that were raised.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Mah Bow Tan].

Bill considered in Committee; reported without amendment; read a Third time and passed.