As part of the European ship carbon reporting system governed by the EU MRV Regulation (EU) 2015/757 (“EU MRV Regulation”) shipping companies have until 30 April 2019 to submit their ship emissions reports for relevant ships for compliance year 1st January to 31st December 2018. These reports are to contain data on CO2 emissions; weight of cargo carried and/or the number of passengers carried (as applicable) and energy efficiency. They are to be provided to the European Commission and to the authorities of the Flag State. From 30 June 2019 inspections of ships of ≥5,000 gross tonnage sailing into and between EU ports will include checks of whether a valid Document of Compliance (DoC) demonstrating conformity with the EU MRV regulation is kept on board. From 1 June 2020 ships will also have to have a Statement of Compliance on board in order to demonstrate compliance with the Global Fuel Data Collection System (“IMO DCS”). See our previous Law-Now articles here on the mechanics of the EU MRV Regulation and IMO DCS and the requirements in relation to a DoC.

Enforcement mechanism for the EU MRV Regulation in the UK

Member states are responsible for enforcement of the EU MRV Regulation. Sanctions for non-compliance with EU MRV differ across Member States. The Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) and Port State Control (Amendment) Regulations 2017 (the “2017 Regulations”) provide the enforcement mechanism for the EU MRV Regulation in the United Kingdom. The key point to note is that under the 2017 Regulations both the ship owning company and the master of the non-compliant ship could be criminally liable for non-compliance.

For completeness, a “company” is defined in the 2017 Regulations (and this aligns with the EU MRV Regulation, Article 3(d)), as the shipowner or any other organisation or person such as the manager or the bareboat charterer which has assumed responsibility for the operation of the ship from the shipowner.

As mentioned above, a DoC will be issued for each ship to be kept on board in readiness for inspections by local enforcement authorities and/or Port State Control which will commence from 30 June 2019. Failure to present a DoC to an inspection officer will expose the master of the ship and the ship owning company to criminal and administrative sanctions including fines.

The potential fines should a relevant ship:

(1) enter or leave a port in the United Kingdom without a valid DoC; and/or

(2) fail to keep on board a valid DoC or to present a valid DoC upon inspection,

are unlimited in England and Wales, and subject to the statutory maximum in Scotland and Northern Ireland. The current statutory maximum in Scotland is £10,000. The current statutory maximum in Northern Ireland is £5,000.

In addition, the fact of a contravention will be published.

Otherwise, under the 2017 Regulations there are wide powers of enforcement including the power:

  1. To detain a relevant ship; and

  2. Where a Member State has informed the UK’s Secretary of State that it has issued an expulsion order, refuse entry for the particular relevant ship to any port in the UK.

An expulsion order can only be issued by Member States (including UK) where a relevant ship has failed to comply with the monitoring and reporting requirements for two or more consecutive reporting periods and where other enforcement measures have failed to ensure compliance (Article 20(3) of the EU MRV Regulation). Notably, the UK’s Secretary of State has discretionary power to allow entry to a relevant ship that has been refused entry in limited circumstances. Provided UK’s Secretary of State is satisfied that adequate measures to ensure safe entry have been implemented by the company or master of the ship, the circumstances are:

(a) force majeure;

(b) overriding safety considerations;

(c) the need to reduce or minimise the risk of pollution; or

(d) the need to have deficiencies rectified.

Provisions for arbitration and compensation

The 2017 Regulations make provision for arbitration in the event that the master of the ship and/or the company alleges that a relevant ship was improperly detained. In the event that an arbitrator finds in favour of the master of the ship and/or the company following detention of a relevant ship, compensation will be payable in respect of any loss suffered in consequence of the detention of the relevant ship, should and as the arbitrator thinks fit.

Cooperation and information exchange

The EU MRV Regulation also requires Member States to establish an effective exchange of information and effective cooperation between their national authorities responsible for ensuring compliance with monitoring and reporting obligations as well as those entrusted with penalty procedures. National penalty procedures against a specified ship by any Member State will be required to be notified to the Commission, the European Maritime Safety Agency (EMSA), to the other Member States and to the flag State concerned. UK will no longer have such reporting obligations, when it leaves the European Union.

What about Brexit?

Special provision has been made by UK Government by virtue of the Merchant Shipping (Monitoring, Reporting and Verification of Carbon Dioxide Emissions) (Amendment) (EU Exit) Regulations 2018 (the “EU Exit Regulations”) in preparation for UK’s departure from the EU. The amended legislation is intended to preserve the exiting regulatory framework whilst laying down key necessary changes to ensure effective operation of the MRV scheme in the UK. The Explanatory Memorandum to the EU Exit Regulations explains that ships visiting ports in the UK will continue to be required to carry a DoC which will in future be issued under the UK regulatory framework. It further explains that UK regulators will continue to be able to enforce the MRV requirement to carry a DoC on board a ship against foreign vessels in UK waters, including EU vessels and DoCs issued under the EU regime will continue to be accepted in the UK. The Explanatory Memorandum also confirms that the new UK-governed MRV will no longer require ships to monitor and report on voyages which do not start or end at a port in the UK. Existing requirements on the UK to make certain reports to the European Commission will become redundant and all obligations to submit emissions reports to EU Databases (e.g. Thetis MRV) will be replaced with a UK-based gov.uk website.

UK sanctions for non-compliance with IMO DCS

Similarly, one year from now, by the end of March 2020, as part of IMO DCS relevant fuel data of the first compliance period will need to be reported to the Flag State. Assuming the reported data is in order, the Flag State will issue a Statement of Compliance by no later than 1 June 2020 and will pass on the data to the IMO. It will be the responsibility of individual Flag States to introduce appropriate enforcement measures to penalise non-compliance with the IMO DCS.

Most countries are in the process of implementing such measures. In the case of the UK, a Senior Policy Advisor from the Department of Transport (DfT) has explained that the domestic statutory instrument to implement the IMO DCS is still being drafted and is to be laid before Parliament in the next couple of months. He also confirmed that the main focus of the Maritime and Coastguard Agency (MCA)’s enforcement efforts in relation to the IMO DCS regime will be checking if non-UK ships have a valid SoC to confirm that they have collected the required fuel consumption data for the year concerned when they call at a UK port. The first of these statements will be issued in 2020. UK flagged ships will have to satisfy MCA surveyors or organisations authorised to act on behalf of the MCA (‘Recognised Organisations’), that they have the appropriate documentation and procedures in place to comply with the IMO DCS, when they are next surveyed. Fines for non-compliance are likely to be similar to those levied under the 2017 Regulations.

Of course, it will take a little while before any patterns may emerge in terms of (1) compliance and enforcement (in the UK and elsewhere) and (2) what use (maybe in terms of subsequent tightening legislation, or introduction of economic or other incentives or disincentives) regulators and legislators will make of the information that is gathered.