Companies Held Criminally and Vicariously Liable for Deliberate Violations of MARPOL


On May 7, the U.S. Court of Appeals for the Fourth Circuit affirmed the jury’s verdict that two shipping companies were guilty of criminal violations of the 1973 International Convention for the Prevention of Pollution from Ships, known as MARPOL. Both companies are headquartered in Greece, with Oceanic Illsabe Ltd. (Oceanic) being a Liberian corporation and Oceanfleet Shipping Ltd. (Oceanfleet) being a Marshall Islands corporation. The case is U.S. v. Oceanic Illsabe Ltd. and Oceanfleet Shipping Ltd.

MARPOL requires the signatory states to punish under domestic law any violations of MARPOL—in this case, the deliberate dumping of oily waste and pollution into international wasters and disabling onboard pollution control equipment. The U.S. Congress enacted in 1980 the Act to Prevent Pollution from ships, which punishes such illegal discharges and authorizes the U.S. Coast Guard to assert jurisdiction over a foreign ship which fails to make complete and accurate entries in the ship’s Oil Record Book. Indeed, applicable Coast Guard rules contain directives on how the Oil Record Book is to be maintained, and violations of these mandates are subject to criminal enforcement.

There were nine counts in the criminal indictments against the defendant companies and two members of the crew, whose actions were surreptitiously reported to the Coast Guard by other members of the crew. Relevant Fourth Circuit precedent — U.S. v. Automated Medical Labs, Inc. and U.S. v. Singh — provides that “a corporation is liable for the criminal acts of its employees and agents done within the scope of their employment with the intent to benefit the corporation.” Acknowledging that the crimes were directly committed by supervisory personnel located in the Engine Department of the M/V OCEAN HOPE, the defendants were criminally liable as a result of the vicarious liability legal doctrines that are applied in the Fourth Circuit.  The Coast Guard confirmed that the Oil Record Book “contained a plethora of inaccurate and false information” which the defendants never uncovered, and even the ship’s “piping diagrams” were incomplete in violation of federal regulations. Prior to sentencing, reports were prepared for the U.S. District Court which opined that neither defendant had an effective program to prevent violations, and neither defendant “self-reported” any violations or cooperated in the investigation by federal authorities. The District Court concluded that the conduct and malfeasance of the defendants satisfied this test, and the sentences also satisfied the relevant sentencing guidelines. The District Court imposed substantial monetary fines on the defendant companies and placed them on probation and banned them from sending their ships to US ports until the penalties were paid.

On appeal, the defendants argued that that their liability was “insufficiently proven,” but this argument was rejected by the Fourth Circuit after a careful review of the evidence presented to the jury. There was no evidence that the corporate defendants knew of or directed these illegal activities, and indeed provided the crew with policies and procedures to maintain environmental compliance. However, the Fourth Circuit suggests that the defendants could have taken proactive measures to ensure that the procedures were in fact being followed.