FEBRUARY 2015

LEGALBRIEFINGSharing the Club’s legal expertise and experience

Latest update onthe Ballast WaterManagementConvention 2004

LEGAL BRIEFING

2 Legal Briefing February 2015

Sharing expertiseThis briefing is one of a continuing series whichaims to share the legal expertise within the Clubwith our Members.

A significant proportion of the expertise in theManagers’ offices around the world consists oflawyers who can advise Members on general P&Irelated legal, contractual and documentary issues.

These lawyers participate in a virtual team, writingon topical and relevant legal issues under theleadership of our Legal Director, Chao Wu.

If you have any enquiries regarding the issuescovered in this briefing, please contact JacquelineTan, Jeff Lock (jeff.lock@thomasmiller.com or+44 20 7204 2119) or Chao Wu (chao.wu@thomasmiller.com or +44 20 7204 2157) and wewill be pleased to respond to your query.

The team also welcomes suggestions fromMembers for P&I related legal topics andproblems which would benefit from explanationby one of these briefings.

Previous issuesCopies of previous briefings are available todownload as pdfs from our website. Visitwww.ukpandi.com/publications. �

Front cover: The ctenophore, also known as the comb jelly, is indigenousto the Atlantic coast of the Americas, but was accidentally introduced tothe Black Sea in the 1980s via the ballast water of ships. Later, via theballast water of oil tankers, it colonised the Caspian Sea. The explosion inits population has had a devastating impact on the local ecosystems.

THE AUTHORS

Jacqueline TanDirector of Claims

Jacqueline qualified asa barrister and later asa solicitor. She joinedThomas Miller in 1996and now works mainlywith the Club’s

Members in Japan. Jacqueline speaksMalay, French and Hokkien. Jacquelineis a Member of the Club’s environmentalteam which aims to inform Members ofthe latest changes to legislation andimplications for Members.

Direct +44 20 7204 2118jacqueline.tan@thomasmiller.com

February 2015 Legal Briefing 3

COMPLIANCE

Stricter ballast water controlsare imminent

Ratification status

As of 12th January 2015, 44 Statesrepresenting 32.86% out of therequisite 35% of the world’s merchanttonnage have ratified the Convention.The outstanding ratification is expectedto be obtained shortly and theConvention will likely enter into forcein 2016.

Which ships will the Conventionapply to?

A ship is defined in the Convention as“a vessel of any type whatsoeveroperating in the aquatic environmentand includes submersibles, floating craft,floating platforms, FSUs and FPSOs”.

The Convention will apply to:

• Ships 400gt and above.

• Ships from Flag States that have ratified,and ships entering jurisdictions ofFlag States.

The Convention will NOT apply to:

• Ships not designed or constructed tocarry ballast water,

• Ships operating only in waters of onemember State (unless the memberState determines otherwise),

• Ships of one member State operatingonly in waters of another member Stateand the latter authorises an exclusion.

• Ships which only operate in waters ofone member State and on the highseas (subject to conditions).

• Anywarship,naval or State owned ships.

• Ships with permanent ballast water insealed tanks not subject to discharge

The compliance schedule

The Convention was drafted with animplementation schedule includedunder regulation B-3.This scheduleanticipated that the requisite number ofratifying countries with the necessarypercentage of gross tonnage would havebeen attained and the Conventionentered into force as from 1st January2014.As the Convention did not comeinto force by 1st January 2014, thecompliance schedule could not beenforced.Therefore, on 25th November2013, the IMOAssembly formallyadopted by Resolution A.1088(28) arevised implementation schedule (seeabove).This schedule was proposed by

The International Convention for the Control and Management of Ships Ballast Waterand Sediments, 2004 (“the BWMC”), developed and adopted by the IMO, will comeinto force one year after ratification by at least 30 States comprising 35% of theworld’s total gross tonnage.

Revised schedule for ships constructed before the EIF of the Convention adopted byResolution A.1088(28)

Ballast capacity

Less than 1500m3

Between 1500m3

and 5000m3

Greater than 5000m3

Constructed before 2009

EIF before 2016: by 1st IOPPrenewal survey after the anniversary of the deliveryof the ship in 2016

EIF after 2016: by 1st IOPP renewal survey

EIF before 2014: by 1st IOPP renewal survey afterthe anniversary of the delivery of the ship in 2014

EIF after 2014: by 1st IOPP renewal survey

EIF before 2016: by 1st IOPP renewal survey after the anniversary of the deliveryof the ship in 2016

EIF after 2016: by 1st IOPP renewal survey

Constructed in or after2009 but before 2012

By 1st IOPP renewal survey after EIF

Constructed inor after 2012

By 1st IOPPrenewal surveyafter EIF

4 Legal Briefing February 2015

OUTSTANDING CONCERNS

MEPC 65 in May 2013. Under thisrevised schedule, the date for a ship tocomply is determined by her ballastcapacity, construction date and the dateof her first IOPP renewal survey afterEntry Into Force (“EIF”).

The revised implementation scheduleincludes provisions for EIF before 2014and before 2016. However, it is nowclear that EIF will not be before 2016.The latest position on compliance istherefore as in the table below.

Will the IMO delay the cominginto force of the Convention?

There remain some unresolved issuesand concerns with the Convention.However, the IMO does not intend todelay the Convention because doing sowould discourage manufacturers fromcontinuing to invest in advancing thenecessary technology in this field.Instead, the IMO’s preferred option is todelay the implementation of sanctionsfor a trial period of two to three yearsonce the Convention comes into force.

Outstanding concerns and IMO’sresponses to the same

(i) The equipment

Under the Convention, a ship is tocomply with the standard set byregulation D-2, which specifies thattreated and discharged ballast watermust have:

• fewer than ten viable organisms greaterthan or equal to 50 micrometers inminimum dimension per cubic metre

• fewer than ten viable organisms lessthan 50 micrometres in minimumdimension and greater than or equalto 10 micrometers in minimumdimension per millilitre

In addition, the regulation D-2 standard

specifies that discharge of the indicatormicrobes shall not exceed specifiedconcentrations as follows:

• toxicogenic vibrio cholerae (O1 andO139) with less than one colony-forming unit (cfu) per 100 millilitresor less than 1 cfu per 1 gram (wetweight) zooplankton samples

• escherichia coli less than 250 cfu per100 millilitres

• intestinal enterococci less than 100cfu per 100 millilitres

Compliance is required throughout thelife of the ship.

Previously, there were concerns about alack of choice from the few BallastWaterTreatment equipment which hadreceived IMO type approval. Over 50equipment have now received G8Guidelines type approval, with 36having been granted IMO FinalApproval.Many equipment are underdevelopment and at various stages ofthe approval process. Shipowners’concerns have now shifted to thequestion of how to choose the rightsystem for their ships from theconfusing array of equipment available.

In order to attain type approval, anequipment is subject to stringent tests,but in practice, it has not been possibleto test the equipment for reliability inall water conditions (ºC, PSU, salinity,turbidity, etc).The IMO is therefore notin a position to vouch that an equipmentthat has received type approval will beable to comply with the regulation D-2standard under all conditions for theduration of the ship’s life.

Guideline G8 of the Conventionexpressly provides:

“Approval of a system, however, does notensure that a given system will work on allvessels or in all situations…”

So, the technologies are now availablebut shipowners and Flag States still lackconfidence in the effectiveness of typeapproved equipment.At least twoequipment have been withdrawn fromthe market for compliance failure afterreceipt of type approval.

The IMO has now tried to addressshipowners’ and Flag States’ concernsby adopting at MEPC 67 (13-17October) as Resolution MEPC.253(67) measures to be taken to facilitateentry into force of the BWMC.Thisresolution provides for a comprehensivereview of the G8 Guidelines withspecial focus on the robustness of thetype approval process (see more under“MEPC 67” below).

(ii) Sampling and testing

The total volume of ballast wateronboard a ship can be in excess of5,000m3.The organisms and pathogensin the water are not necessarily evenlydistributed i.e. there may be patcheswith higher densities. Concentrationsof organisms and pathogens can alsovary over time as they replicate andregenerate.This makes the task ofobtaining representative samples verydifficult. Obtaining a representativesample for testing is crucial for areliable test result.

Similar concerns exist relating to thetesting of samples. Different analyticalinterpretations will lead to hugeuncertainties and unfairness.There isalso a current shortage of test facilities.

MEPC 67 has now adopted resolutionMEPC.252 (67) Guidelines for PSC onsampling and analysis.These guidelinesrequire clear grounds for violations anddetainable deficiencies and areaccompanied by recommendations thatPort States refrain from imposingcriminal sanctions on ships during a trialperiod of between two and three yearsfollowing entry into force.The IMOhopes that this trial period will enable allparties to improve upon and to refinethe sampling and testing methods.

(iii) Sanctions and rights of recourse

Different factors can contribute to a

The latest position:

All ships over 400 GT To comply with the D-2 standard

With keel laying dates before EIF On her first IOPP renewal survey after EIFWith keel laying dates after EIF On delivery

February 2015 Legal Briefing 5

YARD CAPACITY

sample failing a PSC analysis. If asample is found to be non-compliant, itwould be difficult for the shipowner toidentify the reason for the failure andhence the party against whom he willhave a possible recourse.Theresponsible party could be:

• The manufacturer whose equipmenthas failed to perform as warranted;

• PSC for having failed to take arepresentative sample; or

• The laboratory for having negligentlyperformed a test and/or interpretedthe test results.

A thorough investigation into the factswould be too costly for the shipowner.It is also likely to delay the ship further.

Shipowners would also like to know:

• What will happen to a ship if herballast water is found to be non-compliant?

• If she cannot discharge her ballastwater, what happens to the cargo sheis to load?

• If a repeat test is required, who will beresponsible for the cost and the delay?

• If the ship is unduly detained ordelayed, can the shipowner reallyobtain compensation from the portState for loss or damage suffered?

• What is the process for seekingcompensation?

• Might seeking compensation lead tothe ship being targeted on her nextcall at that port?

• Will sanctions be limited to fines oralso include criminal charges?

• Can shipowners expect sanctions tobe enforced in a uniform manneracross member States?

The above list is of course notexhaustive.The IMO is hoping that theanswers to some of these questions willbecome clearer during the trial periodfollowing entry into force.

(iv) Manufacturers’ warranties

Manufacturers warrant that theirequipment will work as described, butno guarantees are provided that samplestaken from ballast water treated by theirequipment will be compliant.Manufacturers’ warranties are typicallyfor a one year period even though theequipment are being sold as havinglifetimes of between 20 to 25 years.

Both the IMO and the USRegulations include obligations toreview standards of compliance andmore stringent standards can beexpected in the future.

It is unclear to what extent typeapproved equipment can be modifiedor upgraded to comply with futurehigher standards because anymodification or attempt to upgrade theequipment may prejudice theequipment’s type approved status.

Presently, the cost of upgrading andmodifying, and perhaps also the cost ofre-obtaining type approval, may all fallon the shipowner.

The IMO has not directly addressedthe above issues. However, we areaware that through negotiations, somemanufacturers have extended theperiod of their warranties or agreedto continue providing advice andrepairs for some time after thewarranties expire.

(v) Yard capacity

It is estimated that some 57,000 shipswill need to comply with the BWMC.If, as estimated, a maximum of 40 shipscan be retrofitted a day, it will takenearly four years for all the retrofittingto be completed!

Spaces in the major ship yards forfitting BWM systems have all beenbooked up for the foreseeable future,and there is a serious concern thatthere will simply be insufficient yardspace for fitting all ships in time forthem to comply.

Linking a ship’s compliance date to herfirst IOPP renewal survey date waspartly intended to address this concern,i.e. by staggering the dates ofcompliance. However, a real likelihoodof serious bottlenecks remains. Shipswhich fail to comply timely will faceserious commercial disadvantagesbecause their trading limits will beseverely restricted.

(vi) Shortage of other facilities

There are also concerns about theshortage of shore treatment facilities forballast water, sediment receptionfacilities and testing facilities. Efforts areongoing to establish these.

BWM system.This is likely to involve acheck of the BWM Certificate andrecords and a check of the familiarity ofthe designated officer with the system. Ifthe check triggers any suspicion or doubt,then the PSC may proceed to Stage 2.

Stage 2 – More detailed inspection

A more detailed inspection to check ifthe BWM system has been operatedaccording to the BWM Plan.

Stage 3 – Sampling andindicative analysis

This will be an indicative analysis to seeif the D-2 standard is met. However,the criteria for the indicative analysismethod still needs to be developed andthis will be submitted to MEPC 68 inMay 2015.

Stage 4 – Detailed analysis

A representative sample will be testedto ascertain compliance with the D-2standards.

MEPC 67 also agreed a plan and termsof reference for a proposed study onimplementation of the ballast waterperformance standard described inregulation D-2.The study will:

• Look at the water quality for discharge,related to specified maximumconcentrations of viable organisms.

• Include stakeholder surveys andcollection of data on similarities anddifferences in existing practices relatingto type approval, testing of BWMsystems and practices relating toanalysing the performance of BWMsystems after installation on board ships.

The industry is now looking to MEPC68 in May 2015 for further guidance.

Recommendations toshipowners

Entry into force of the BWMC is nowimminent and shipowners must beprepared.Many shipowners have alreadyinstalled BWM systems and manyothers are taking steps to do so.There isa risk that those shipowners who have

6 Legal Briefing February 2015

RECOMMENDATIONS

MEPC 67 (13 to 17 October 2014)

The IMO’s Marine EnvironmentProtection Committee had its 67thsession from 13 to 17 October, 2014 atthe IMO Headquarters in London.

MEPC 67 adopted ResolutionMEPC.253(67) on Measures to assist inaccelerating the entry into force andimplementation of the BWMC.

• The resolution acknowledged thatBWM systems need to be sufficientlyrobust and consistent so that anysystem approved will meet thestandards set out in the BWMC.

• An immediate comprehensive reviewof the G8 Guidelines will therefore becarried out to address the robustnessof type approval of equipmentparticularly in relation to reliability invarious water conditions.

• A correspondence group wasestablished to initiate the review andto report to MEPC 68 in May 2015with recommendations for revisionsof the G8 Guidelines.

• The existing G8 Guidelines willcontinue to apply until thecompletion of the review.

• The resolution agrees that “earlymovers”, in other words, shipownerswho have already installed type-approved ballast water managementsystems prior to the application of therevised Guidelines (G8), should notbe penalised and that port Statesshould refrain from applying criminalsanctions or detaining the ship, basedon sampling during the trial period.

MEPC 67 also adopted as resolutionMEPC.252 (67) Guidelines for portState control inspection for compliancewith the BWMC.

• The Port State Guidelines involve afour-stage inspection (see below) andrecommend that every effort shouldbe made to avoid any undue delays tothe ship:

Stage 1 – Initial inspection

To focus on documentation and visualchecks of the overall condition of the

yet to take such steps, may not be ableto fit ships with BWM systems in timeto comply with the Convention.

The trading limits of non-compliantships will be severely restricted andbusiness may be lost. Shipownersshould therefore act now.There is a realrisk in doing nothing!

1. Consider if the ship can benefitfrom an Exception, an Exemption oran Alternative Mode of Compliance?

The Convention provides for exceptions,exemptions and alternative modes ofcompliance to installing a type approvedBWM system provided that the samelevel of protection as fitting such a systemonboard can be achieved. If shipownerscan take advantage of any of theexceptions, exemptions or alternativemodes of compliance, they will be ableto save themselves the substantial costof investing in a BWM system and alsoavoid incurring the not insubstantialrunning costs of the system.

Regulation A-3 – Exceptions

Regulation A-3 lists exceptionalinstances when a ship would not needto comply with the BWMC.Thisincludes regulation A-3(5) below:

“5. Ballast water and sediments aredischarged at the same location where theballast water and sediments originatedand there has been no mixing withunmanaged ballast water and sedimentsfrom other areas”

Regulation A-4 – Exemptions

Under regulation A-4, a memberState(s) in waters under theirjurisdiction, may grant exemptions inaddition to exemptions containedelsewhere in the Convention but onlywhere they are granted:

• to a ship(s) on a voyage(s) betweenspecified ports or locations;

• to a ship which operates exclusivelybetween specified ports or locations;

• to ships that do not mix ballast wateror sediments other than between thespecified ports or locations;

February 2015 Legal Briefing 7

EXCEPTIONS

• Any exemption granted must bebased on the IMO G7 Guidelines onrisk assessment and will be valid forno more than five years.Anexemption may be withdrawn at anytime for breach of condition or inemergency situations.

An agreement was reached in 2012 todevelop a common approach to thegranting of exemptions underregulation A-4.The Joint HarmonisedProcedure (JHP) was adopted in 2013to provide clarity and a commonstandard of environmental protection.The JPHP is currently being reviewedand updated.

Regulation B-3 – Alternativemethods of compliance

“6.The requirements of this regulation donot apply to ships that discharge BallastWater to a reception facility designed takinginto account the Guidelines developed by theOrganisation for such facilities.

7. Other methods of BallastWatermanagement may also be accepted asalternatives to the ballast water exchangeand performance standards, provided thatsuch methods ensure at least the same levelof protection to the environment, humanhealth, property of resources, and areapproved in principle by IMO’s MarineEnvironment protection Committee.”

The alternative methods of compliancereferred to above may include:

• Discharge to shore ballast waterreception facilities

• Discharge to reception barges, whichthen discharge to a shore receptionfacility, or treat the water onboard ifthe barges are equipped with a BWTsystem. Barges can also be used todeliver treated water to a ship.

• Use of municipal water –This is not amethod approved by the MEPC dueto the scarcity of freshwater fordrinking and agriculture in manyparts of the world. However, it maybe an acceptable alternative tocompliance for ships with low ballastvolume requirements.

2. If not, then take steps to have aBWM system fitted

The experts have estimated that thewhole process from selecting a BWMsystem to installing the system takesfrom a minimum of six months up to ayear.The recommendation therefore isthat shipowners should consider settingaside an entire year for this process.

In the majority of cases, the ship willhave to be taken out of service for theactual installation of the equipment. Ifthe installation can be planned tocoincide with the ship’s scheduled dry-docking, this will save time and costs.

However, a lot of preparatory work forthe installation of the equipment can becarried out whilst the ship is still inservice. It is recommended thatshipowners start by evaluating theavailable space on board for a BWMsystem.This can be done by laserscanning the available space. From thisfirst step, the choice of equipment can benarrowed down by the space limitationon board.The choice can then be furthernarrowed down by cost considerationsand other considerations such as thecompatibility of the selected systemwith the ballast system already onboardand the electricity supply onboard, thereliability of the system selected and theshipowner’s confidence in the supplier.

Shipowners should take their time tochoose a system that is right for the

particular ship and right for them.Oncethe choice has been made however, theshipowner can start planning with thechosen manufacturer a schedule forcarrying out preparatory work forinstalling the system. Such preparatorywork can be carried out with minimaldisruption to the ship’s trade. and canhugely reduce the time period that theship will subsequently have to spend indrydock for the installation.

Working with a manufacturer early onmay also ensure that the ship isallocated a slot in a ship yard for whenthe system is to be fitted.

Train the crew

BWM systems can be very complexwith biological, chemical and physicalparts. Once the system has beenselected, the crew will need be trainedto operate the equipment and to repairthe same in the event of a breakdown.

The crew, or at least the designatedofficer, will need to be trained toanswer potential questions from PSCofficers. If the PSC Officers are notsatisfied with answers received, theymay suspect inadequate training orunfamiliarity with the system, andproceed to a detailed inspection (see“MEPC 67” above).

Apart from the costs of training thecrew, the workload and responsibilitieson the crew will also increase.

US REGULATIONS

New Jersey

Thomas Miller (Americas) IncT +1 201 557 7300F +1 201 946 0167

London

Thomas Miller P&I LtdT+44 20 7283 4646F +44 20 7283 5614

Piraeus

Thomas Miller (Hellas) LtdT +30 210 42 91 200F +30 210 42 91 207/8

Hong Kong

Thomas Miller (Hong Kong) LtdT + 852 2832 9301F + 852 2574 5025

www.ukpandi.com / www.ukdefence.com

Contractual issues

Under aTime Charter, it will be part ofthe shipowners’ obligations to ensurethat the ship complies with applicablelaws and regulations, and has thenecessary certificates.

Shipowners are advised to review theirlong term charter parties and, ifpossible, seek to renegotiate anyprovisions, as may be necessary, toclarify the parties’ respective obligationsin respect of the BWMC.New charterparties and new building contracts willneed to be negotiated with care.

Bimco have developed a draft BWMSampling Clause forTime Charters,mainly to deal with the allocation oftime and costs relating to the samplingof discharged ballast water.This clauseis subject to final approval by theBIMCO Documentary Committeebefore being published.

Conclusion

It is anticipated that the entry into forcecriteria will be met shortly as a numberof States have indicated that they aremaking arrangements to deposit theirinstruments of accession very soon.

The trial period of relaxed complianceafter entry into force will hopefullyassist in clarifying some of theabovementioned outstanding issues forall stakeholders.

If some issues remain not satisfactorilyresolved, even after the trial period hasexpired, it is very much hoped that theIMO will consider further extendingthe trial period.

For additional information on thissubject,Members are directed to theInternational EnvironmentalCompliance page on the UK P&I Club’swebsite.A separate update on the USposition is available on the website.