A merican Club Circular No . 39 / 20 1 OCTOBER 14, 2020 CIRCULAR NO. 39/20 TO MEMBERS OF THE ASSOCIATION Dear Member: CALIFORNIA: INCREASED CRIMINAL PENALTIES FOR OIL SPILL-RELATED OFFENSES Members are referred to Circular No. 35/20 of September 29, 2020 in which they were informed that new fines will be applicable in California from January 1, 2021 for ship sourced oil pollution damage in Californian waters. As previously advised, for Members trading to California, these legislative changes will result in: 1) A doubling of certain existing fines up to a maximum of US$1,000,000 for each violation, with each day or partial day of a violation being considered a separate violation; and 2) The courts being empowered to impose a new, additional fine of up to US$1,000 per gallon of oil spilled in excess of 1,000 gallons. In each case a fine may be imposed if the violator knowingly caused, or reasonably should have known that their actions would lead to, an oil spill into Californian State waters. The remainder of this Circular explains in detail the background to, and circumstances of, the new State legislation. Background On September 24, 2020, the Governor of California signed Californian Assembly Bill (AB) 3214 into law providing for such increased penalties and fines by means of amendments to California’s Lempert-Keene-Seastrand Oil Spill Prevention and Response Act (the Act). Under the current Act, such civil and criminal penalties can be imposed under various statutes, with Government Code §8670.3 defining liable persons (violator) as an individual, trust, firm, joint stock company, or corporation, including, but not limited to, a government corporation, partnership, and association, and thereby including shipowners, operators and masters amongst other parties involved in the transportation chain. The original draft Assembly Bill set out to: 1) Increase the level of Californian State certification of financial responsibility (COFR) - that a tank or non-tank vessel operating in Californian waters must demonstrate in order to cover damages caused by an oil spill – from US$1 billion to US$2 billion for tank vessels and US$300 million to US$600 million for non-tank vessels; and A merican Club Circular No. 39 / 20 2 2) Double the existing level of certain criminal fines that shall be imposed in the event of an oil spill; and 3) Empower the courts to impose an additional criminal fine of up to US$10,000 per gallon of oil spilt. In each case, the liability would be determined on the basis that the violator knowingly caused, or reasonably should have known that their actions would lead to, an oil spill in Californian waters. Under California law, the phrase, “reasonably should have known,” has been equated with a simple negligence standard. Members will be aware that International Group clubs do not issue the federal or state COFRs that tank and non-tank vessels are required to obtain in order to trade to the US, but that they do provide cover for oil pollution damage of up to US$1 billion per ship per incident (and which covers third party claims as well as fines where they fall under club Rules) needed to obtain a COFR. AB 3214 – Californian legislature Following direct representations from the International Group and local shipowner and energy organizations to the Bill sponsor, the proposed COFR increases were removed from the draft Bill. The Bill sponsor also reduced the potential per gallon fine from up to US$10,000 per gallon down to a ma