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estimated the number of ships by flag of vessel that are likely to be subject to IMO ballast water
treatment regulations and found that seven of the top eleven flag countries are Asian,
representing more than 25% of the vessels we consider to be subject to the regulations (See
Table 1b).
Despite the role that P&I Clubs might play in risk minimization, or high compliance with health
and safety regulations, some observers have argued that these clubs may play a strong role in the
opposite direction in the case of ballast water regulations by spreading the deterrent effect of
fines imposed for lack of compliance. A persistent offender of these regulations, for example,
might find his “calls” (premiums) rise as a P&I Club member. However, the increase in these
“calls” may not be enough to serve as a significant deterrent.
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If this is the case, chronic
noncompliance could be the least cost solution for some ship owners and ship operators to deal
with ballast water regulations.
This could be a particular problem if ballast water regulators have difficulty distinguishing
between violations that are accidental and those that are intentional. P&I Clubs are unlikely to
spread risk of fines for violating regulations, but if a discharge is considered “accidental,” the
cost of a fine could be covered under some club risk sharing arrangements unless there is
evidence of gross negligence. If the “magic box” doesn’t work, then blame would be included in
an inspection report where a decision will need to be made about how blame should be shared
among the vessel owner, the ship master, the responsible crewmember, or the manufacturer or
company hired to service the BWTS. If the crew and owner have acted in good faith, but the
unit is found to have lost effectiveness, who will bear the cost of repairs or replacement?
Additionally, what penalties will be levied against a vessel or owner who does not knowingly
violate the standards, but has a unit that is faulty? Of course, competition means that it is still
possible for substandard ships to obtain coverage from less discriminating clubs/insurers, but the
central question remains: how will P&I Clubs evaluate and share the risks associated with new
IMO ballast water regulations.
Despite these caveats, our assessment is that P&I Clubs are positioned to be a positive force for
supporting the development of healthy BWTS markets and widespread compliance with IMO
ballast water regulations.
Figure 4 outlines some of the possible players involved with compliance with international,
national, and state ballast water treatment regulations.
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Penalties for non-compliance can be
expected to be imposed on shipowners and masters, unless it can be demonstrated that there is
specific fault assigned to a crew member (who would have little reason to risk such penalties). If
there is any incentive to cut corners, it would be by the vessel Master or Chief Engineer who
may be looking for cost savings when compared to other ships in his company’s fleet.