American Club Circular No. 29/12 1 OCTOBER 23, 2012 CIRCULAR NO. 29/12 TO MEMBERS OF THE ASSOCIATION Dear Member: AUSTRALIAN POLLUTION LAW – OIL POLLUTION INDEMNITY CLAUSE FOR PENALTIES AND FINES The Australian Government introduced increased penalties for pollution from ships and damage to the marine environment by way of new legislation – the Maritime Legislation Amendment Act, 2011 – which came into effect on December 4, 2011. The Act amends the Australian Navigation Act, 1912 and the Protection of the Sea (Prevention of Pollution from Ships) Act, 1983. As a result of these recent amendments, longstanding criminal liability imposed on owners and masters for oil discharge, or threat of discharge, in Australian waters has been extended to charterers. Charterers, owners and masters are now severally liable with offences punishable by fines. The maximum penalty for this criminal offence is increased from 500 penalty units to 20,000 penalty units (AUD 2.2 million (USD 2.3 million)) for an individual. This may be multiplied by a further factor of five for a corporation, taking the maximum penalty to AUD 11 million (USD 11.5 million). In order to address concerns raised by both owners and charterers in respect of the new law, the International Group has drafted, in consultation with BIMCO, a recommended clause for inclusion in charterparties. The wording of the clause is not country specific and is capable of broader application. The clause addresses the specific situation of criminal fines and civil penalties. The International Group is aware that, pending publication of this clause, some charterers have sought to use pollution indemnity clauses that do not preserve an owner’s right to limit and have other provisions that render the clause uninsurable by clubs. Members are therefore strongly urged to use this new clause in their charterparties. The text of the clause and explanatory notes are attached. Should Members have any questions regarding this clause or its application they should contact the Managers in the normal way. Yours faithfully, Joseph E.M. Hughes, Chairman & CEO Shipowners Claims Bureau, Inc., Managers for THE AMERICAN CLUB All Clubs in the International Group of P&I Clubs have issued similar circulars. American Club Circular No. 29/12 2 ANNEX To Circular No. 29/12 of October 23, 2012 Oil Pollution Indemnity Clause for penalties and fines (a) Subject to the terms of this Charterparty, as between Owners and Charterers, in the event of an oil pollution incident involving any discharge or threat of discharge of oil, oily mixture, or oily residue from the Vessel (the “Pollution Incident”), Owners shall have sole responsibility for responding to the Pollution Incident as may be required of the vessel interests by applicable law or regulation. (b) Without prejudice to the above, as between the parties it is hereby agreed that: i. Owners shall indemnify, defend and hold Charterers harmless in respect of any liability for criminal fine or civil penalty arising out of or in connection with a Pollution Incident, to the extent that such Pollution Incident results from a negligent act or omission, or breach of this Charterparty by Owners, their servants or agents, ii. Charterers shall indemnify, defend and hold Owners harmless in respect of any liability for criminal fine or civil penalty arising out of or in connection with a Pollution Incident, to the extent that such Pollution Incident results from a negligent act or omission, or b