Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

The Protection of the Sea Legislation Amendment Bill 2008 before us today implements very important objectives. Firstly, it is intended to implement in Australia the protocol of 2003 to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage. Secondly, the bill seeks to introduce amendments to the Protection of the Sea (Prevention of Pollution from Ships) Act 1983. Thirdly, the bill has some amendments relating to shipping and marine navigation levies. I will shortly outline some of the detail of each of those objectives and their importance. However, before I do so I want to touch on some of the background regarding the regulatory and commercial aspects of the international shipping industry because it is important to understand in context the need for the changes that are the subject of the legislation before the House.

The shipping industry is responsible for more than 90 per cent of global trade—that is, the carriage of it—and it is subject to intense global competitive and commercial pressures. It is also the subject of an international regulatory regime that is unfortunately largely ineffective. The bulk of the regulatory environment for international shipping is set by international bodies which have nation states as their members. The regulatory framework is therefore subject to some of the same shortcomings as other areas of international legal regulation—namely, problems relating to enforcement by nation states. The most important international agency that oversees the regulation of shipping activities is the IMO, the International Maritime Organisation, which is an agency of the United Nations. The IMO currently has 167 member states and three associate members, with Australia of course being a member state of the IMO. The fundamental role of that organisation is defined as the protection of the marine environment and the safety of life and property at sea. Its aim is to achieve safe, secure and efficient shipping on a clean ocean.

Another agency of the United Nations that relates to the international shipping industry is the International Labour Organisation, which helps determine the employment conditions of seafarers and deals with occupational health and safety issues. These matters are largely spelt out in what is known as convention 147 of the ILO. While these two international bodies help establish the basis for and definition of the regulatory environment, enforcement, as I noted before, is left to member states. In shipping, the flag state is the country in which a ship is registered and which undertakes the responsibility for the implementation of international conventions and agreements relating to that ship. I will say a little bit more about the responsibilities of a flag state in a moment, because therein lies some of the fundamental weaknesses of the regulatory environment. There are also bodies called classification societies, which sometimes, at the behest of a flag state, perform the work of a flag state in ensuring compliance with certain regulations.

The state where the port is based—that is, where the ship is visiting—is called the port state. It is permitted under the international system to inspect visiting foreign ships to ensure that they are in compliance with international regulations. While port state control is important, it remains a secondary measure to the responsibilities of a flag state in ensuring regulatory compliance. In Australia the functions of the flag and the port state are met through the Australian Maritime Safety Authority, AMSA. AMSA works to ensure that Australian flagged ships comply with international standards and that foreign vessels trading in Australian ports meet their requirements. Apart from these bodies, the shipowner, or the charterer in a lot of cases, maintains the overall responsibility for the safe operation of their ships.

That, in brief, is the regulatory environment in which the matters before the House should properly be seen. But it is not just the regulatory environment at an international level which is relevant; it is also the commercial environment in international shipping. Like many other international industries, shipping is subject to intense commercial and competitive pressures, but these pressures in the international shipping industry have been added to, if you like, and driven by the weakness of the regulatory environment that I have described. Shipping companies and owners experience immense pressure to cut costs as they increasingly face lower financial returns for their activities in a weak regulatory environment. These lower financial returns have led shipping companies to look at ways in which they can increase their margins in the face of increasing international competition. Perhaps the most common method for doing so is through the use of flag of convenience arrangements.

Flag of convenience arrangements have led to a degrading of ship standards, poor treatment of ships’ crews, environmental damage and an inability to meet the original intent and purpose of the current international regulatory standards. Flags of convenience are offered by some states at a lower cost and with some significant incentives added for shipowners to flag their ship in a particular state. The concern with this practice is that it has also inevitably involved, at best, an inability to enforce international regulations and, at worst, a blatant attempt to avoid such scrutiny. Classification societies attached to flag of convenience states often contribute to the problems of poor compliance monitoring.

The issue of flags of convenience was, of course, brought to the attention of many Australians in the early 1990s following a trilogy of parliamentary reports made at that time, under the Keating government, on ship safety. These reports were titled Ships of shame.

See this speech in context