Merchant Shipping (Pollution) Bill [HL]

My Lords, I beg to move that this Bill be now read a second time. The UK is surrounded by a number of major shipping routes and the English Channel is the world’s second busiest international waterway, after the Malacca Straits. As an island state with a coastline of more than 10,000 miles, the UK Government are very conscious of the potential environmental impacts stemming from a major pollution incident. Overall, shipping is an environmentally friendly form of transportation. The Government wish to capture the environmental benefits of trade by sea while defending the UK’s marine and coastal environment. The Government recognise that trade by sea is inherently international and are committed to expanding our shipping industry’s share of it, not least as a direct contribution to environmental protection overall. Balancing our trading interests, the rights of others to trade freely past our coasts, and our environmental needs, require a proactive international approach from the UK in getting agreement. We must follow through by implementing what we have agreed, and the Bill helps us to do that. The main purpose of the Bill is to allow the UK to implement two important international treaties, one greatly to improve compensation for oil pollution and the other to introduce measures to reduce air pollution from ships. Marine oil pollution can have devastating effects. The public are familiar with the dreadful images of polluted coastlines and oiled sea birds and mammals, but the effects go much further. The economies of coastal communities, and their fishing and tourism industries, can be shattered by a major oil spill. Following the ““Torrey Canyon”” incident off Land’s End in 1967, it quickly became evident that there were inadequate arrangements for compensating those who suffered damage. That led to the development of an international system to ensure that victims of oil pollution damage would be fully and promptly compensated. The resulting international regime was founded on two treaties: first, a liability convention that made ship owners strictly liable for pollution damage and required them to maintain insurance to cover their liability; and secondly, a fund convention that provided additional compensation to victims of oil pollution damage when they were unable to obtain full compensation under the liability convention. The additional compensation provided under the fund convention is paid for by oil receivers in state parties to that convention. I stress the point that the regulatory regime is provided internationally by states; the liability and compensation system within it is funded by the industries concerned. When we read lurid stories following accidents, we should perhaps recall just how comparatively rare serious maritime accidents are, and how responsible the   industries have been in updating compensation arrangements, as well as employing better construction and operational standards in the ships used. The original instruments have since been superseded, but the international regime remains in place and, to date, 93 states have joined the regime. During the past 26 years, the regime has provided compensation in more than 130 oil pollution incidents. In the vast majority of cases, claims have been settled without the need for lengthy and costly court cases. Since the regime was established, the UK has experienced two further major incidents, the ““Braer”” off the Shetland Isles in 1993 and the ““Sea Empress”” off Milford Haven in 1996. The amount of compensation available at the time was just £51 million. The international fund provided compensation of £51 million in respect of the ““Braer”” and £37 million in respect of the ““Sea Empress””. Even with the compensation provided by the international system, cost recovery in those incidents was not without difficulty. There were concerns at that time that the levels of damages from those incidents could exceed the limit of compensation then available. That led to periods when claimants could not be paid in full or quickly. The limits of compensation were therefore significantly increased in 1996. Full payment of claims under the international system has proved to be a problem in a number of cases, notably after the extremely damaging ““Erika”” and ““Prestige”” incidents in 1999 and 2002 respectively. The present regime provides for an overall limit of £160 million of compensation. However, it has become clear that, following the most serious incidents, the present regime may not be able to settle claims for several years, and that claimants may never receive full compensation in the most serious of cases. The membership of the international regime agreed that it was necessary to address that fundamental shortcoming and consider other possible improvements to the regime. The Supplementary Fund Protocol was   therefore developed to provide an additional £440   million of compensation for victims of oil pollution in states that choose to ratify the protocol and are content for their oil industries to make additional financial contributions. In short, when both the existing fund and the supplementary fund can be applied to an incident they bring to bear a total of £600 million to compensate claims arising from that incident. I am pleased to report that the UK has played a prominent part in helping to develop the necessary reforms. The supplementary fund entered into force in March this year and has, so far, been ratified by 10   states—Japan, which has always been a significant contributor, and nine states in Europe. The membership is now expected to grow quite rapidly and we wish to ensure that the UK can have the added financial protection that the supplementary fund can provide. The Bill therefore makes provision for the UK to implement the Supplementary Fund Protocol and it is the Government’s intention to do so as soon as possible. The supplementary fund must be paid for, and it is the oil industry that will have to bear the additional costs. However, it is expected that the costs of all but the most extreme incidents will continue to be covered by the existing fund. The main benefit of this legislation is that the presence of the supplementary fund will enable claims for payment under the existing fund to be met without fear of exceeding the limit of that fund. Full and prompt payment should be assured by virtue of the fact that the total sum of £600 million compensation that will be available should cover any likely circumstances. In most cases, if an oil spill affects the UK coast, substantiated claims will be paid promptly and in full under the existing regime and, if necessary following a major spill, by the supplementary fund. This should, in future, avoid the likelihood of full payment of claims being delayed until the final costs of an incident can be more accurately assessed, as we saw after the ““Braer”” and ““Sea Empress”” incidents, and after other more recent incidents elsewhere in Europe and the wider world. Following enactment of the Bill, the UK would be able to join the Supplementary Fund Protocol, and have the benefit of the financial protection it offers, within a relatively short period of time. Until that happens, the UK cannot access the substantial additional benefits conferred. I now turn to the detail of the legislation. The Supplementary Fund Protocol would be implemented in the UK by secondary legislation. An Order in Council has been drafted and will be made available by the time that the Bill reaches Committee, if the House agrees to this procedure. The order contains the detailed provisions implementing the Supplementary Fund Protocol in the UK. The provisions are of a technical nature and amend those in the Merchant Shipping Act 1995 relating to the fund convention so as to extend them to the Supplementary Fund Protocol. The order will require major oil receivers in the UK to make contributions to the supplementary fund in the same way that they currently do in respect of the existing fund. The contributions will, of course, be needed only if the £162 million available from the existing fund proves insufficient in a particular incident. UK oil importers already contribute to the existing fund. They were consulted last year on the proposal to implement the Supplementary Fund Protocol. The oil industry clearly favours a predictable and international approach to providing compensation for oil pollution damage. The industry supports implementation of the Supplementary Fund Protocol as just one measure of a wider strategy to improve the existing regime. I now turn to the next part of the Bill, which makes provision for the implementation of future instruments governing compensation for oil pollution damage. The international regime is not perfect, but it works. It is preferable to and less burdensome on industry and governments than domestic or regional arrangements. The UK, along with a number of other states that have suffered major pollution from oil tankers, believes that the regime needs to be kept up to date. As I mentioned earlier, the original instruments were superseded a number of years ago. The fundamental principles of   the regime, however, remained unchanged, but improvements were made, for example, to widen the scope of application. The regime now provides for reasonable environment reinstatement measures. The regime has also developed considerably in respect of compensation for the economic consequences of an oil disaster, when originally it was conceived as primarily concerned with clean-up. The regime will no doubt continue to evolve. Indeed it must if it is to remain viable and successful and meet legitimate claims. The principles on which the present version of the regime is based were first agreed over 20   years ago but were not implemented until the present regime came into force in 1996. It is important, therefore, that the Bill makes provision for the implementation of any future instruments, when developed, to improve the regime still further. Such instruments are of course agreed only after extensive debate, in which the industries concerned fully participate. The UK Government will always want the option of being part of the international regime from the earliest opportunity. That is why the Bill makes provision for the UK to become a party to any instrument which modifies or replaces the existing regime. Of course, such a power would not be used before the usual public consultation and regulatory impact assessment exercises have been conducted. The provision of the power in the Bill means that the government of the day have the ability, if they so decide, to implement any new, internationally negotiated instruments governing oil pollution compensation without having to first pursue primary legislation. Parliament would of course retain an active scrutiny of the future proposal by virtue of the affirmative resolution procedure, which would apply to any secondary legislation made under this provision. The Bill also includes a very minor amendment relating to the existing international fund as contained in the Merchant Shipping Act 1995. That Act contains a provision relating to the time limit within which claims must be brought against the existing international fund. In order to ensure that the provision of the 1995 Act is interpreted consistently with the text of the fund convention, the Bill modifies the language used in Section 178 of the 1995 Act to follow more closely the wording of the treaty. The Bill also provides for a power to make secondary legislation regarding air pollution from ships. It does so by amending Section 128 of the Merchant Shipping Act   1995, so removing a doubt on the current scope of that section. The secondary legislation would implement Annex VI to the International Convention on the Prevention of Pollution from Ships, commonly known as the MARPOL Convention. Here again we are seeking to implement domestically what we have already negotiated internationally. The secondary legislation would apply the series of internationally agreed technical standards which forms Annex VI to UK flagged vessels. The aim of these standards is to reduce air pollution from shipping through control of emissions of nitrogen oxides, sulphur oxides and ozone-depleting substances. These pollutants have been identified as causing environmental degradation and damage to human health. Nitrogen oxides react with hydrocarbons at ground level to form ozone when exposed to sunlight; ground-level ozone exacerbates pre-existing lung complaints, including asthma, and has been demonstrated to increase rates of hospitalisation and use of medication. When released into the atmosphere, sulphur oxides and nitrogen oxides react to form acidic compounds. These can fall as acid rain or be deposited as dry particles causing localised acidic damage. Acid deposition in both forms can cause severe damage to forests and water bodies, and damage man-made structures. It is important to tackle emissions from shipping through internationally applicable technical standards. By 2020, the total number of ships worldwide is expected to be double what it was in 2000. This growth in the number of ships will be reflected in an increasing amount of traffic calling at UK ports and transiting UK waters. Generally, shipping is a friend to the environment, as I remarked at the outset of this debate, but there is considerable room for improvement in the atmospheric pollutant emissions from ships. Implementation of this   annex would be a positive step towards greener shipping—and shipping, along with other forms of transportation, must play its part in improving the environment. Applying domestic legislation which implements MARPOL Annex VI would ensure that all relevant ships were certified, maintained and operated in accordance with the internationally agreed technical standards. I am pleased to say that the proposal to implement this annex of MARPOL has been welcomed by the UK shipping industry and marine engine manufacturers in their response to consultation. It is important for the UK economy that the UK introduce legislation implementing MARPOL Annex VI as soon as possible. If we do not do so, UK flagged ships will be at risk of detention or delay in ports of states which have implemented it. Needless to say, that could have a severe impact on the UK merchant fleet. Above all, it is important for the environment, of both the UK and the wider world where UK ships ply their trade, that the UK implement the provisions of the annex. The Bill will enable the Government to implement this by secondary legislation. Draft secondary legislation contains the detail of the regulations contained in Annex   VI and will be made available by the department by the time the Bill reaches Committee. To sum up, the Government are determined that the UK should have the best possible financial and environmental arrangements available to protect our coastal interests from the effects of oil pollution from tankers and of air pollution from ships. Recent incidents in Japan, France and Spain have demonstrated that costs   of major spills can far exceed the amount of compensation that is available under the existing regime. The £602 million available through the Supplementary Fund Protocol should ensure that in virtually any conceivable circumstances compensation can be paid promptly and in full. We wish to have this protection in place as soon as possible. The Bill will allow the UK to implement two important international treaties, which will have benefits both for the environment and for the financial protection of UK coastal interests. It is also important for the UK to be seen to be actively taking these measures, especially bearing in mind the prominent role which the UK played in negotiating these provisions. I commend the Bill to the House. Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)