But USCG May Impose Non-financial Conditions

On December 15, 2015, the U.S. Court of Appeals for the District of Columbia Circuit held that the U.S. Coast Guard’s assertion of authority to impose non-financial conditions on the release of vessels detained for suspected environmental violations is subject to judicial review. However, the court went on to hold that the Coast Guard had the authority it claimed to impose non-financial conditions on the release of a vessel.

The case was brought by Watervale Marine Co., Ltd. and Mercator Lines (Singapore) PTE, Ltd., operators of two vessels held by the Coast Guard based on allegations that their crews had engaged in improper discharges of oily water and had failed to properly maintain oil record books. The companies challenged the Coast Guard’s authority to force them to sign non-negotiable Vessel Security Agreements that would require the companies to keep numbers of crew members in the U.S. with full wages, housing, and food allowances for an indefinite period of time at the government’s whim, to provide other support to the government investigation, and to waive several potential objections.

The Court of Appeals rejected the government’s argument that the Coast Guard Vessel Security Agreements are unreviewable by a court. However, it went on to conclude that since the relevant statute authorized the Coast Guard to hold a vessel until a civil or criminal proceeding was completed, the Coast Guard could certainly impose conditions on the release of a vessel to ensure that those proceedings would not be jeopardized. Notably, the court pointed out that since the companies had not claimed that the nonfinancial conditions in the Vessel Security Agreements were unreasonable, the court would not need to consider that question.

While the Coast Guard appears to have triumphed once again against challenges to its zealous MARPOL enforcement practices, the case suggests an opening for companies facing MARPOL investigations. A company may now get its day in court to challenge the actual reasonableness of nonfinancial conditions imposed in a Vessel Security Agreement. It may not be much of an opening, but it is more than they have had previously.

A copy of the Court of Appeals decision is available here.