LATIN AMERICAN PANEL NOVEMBER 1, 2007 UPDATE ON LEGAL MATTERS JOSEPH ANGELO DEPUTY MANAGING DIRECTOR

LAWSUITS MASSACHUSETTS LAWSUITMASSACHUSETTS LAWSUIT BALLAST WATER LAWSUITBALLAST WATER LAWSUIT EUROPEAN SHIP SOURCE POLLUTION DIRECTIVEEUROPEAN SHIP SOURCE POLLUTION DIRECTIVE CARB AIR EMISSION REGSCARB AIR EMISSION REGS

LEGAL AUGUST 2004 – MASSACHUSETTS PASSES STATE LAW REGULATING SHIP DESIGN AND OPERATIONSAUGUST 2004 – MASSACHUSETTS PASSES STATE LAW REGULATING SHIP DESIGN AND OPERATIONS JAN 2005 – US FEDERAL GOVT TAKES MASS TO COURT - STATE LAW PREEMPTED BY FEDERAL LAWS/REGSJAN 2005 – US FEDERAL GOVT TAKES MASS TO COURT - STATE LAW PREEMPTED BY FEDERAL LAWS/REGS FEB 2005 – INDUSTRY COALITION JOINS FEDERAL GOVERNMENTFEB 2005 – INDUSTRY COALITION JOINS FEDERAL GOVERNMENT

MASS LAWSUIT JULY FEDERAL COURT RULES PROVISIONS OF MASS LAW INVALIDJULY FEDERAL COURT RULES PROVISIONS OF MASS LAW INVALID DECISION UPHOLDS COAST GUARD AUTHORITY OVER VESSEL OPERATIONS IN US WATERSDECISION UPHOLDS COAST GUARD AUTHORITY OVER VESSEL OPERATIONS IN US WATERS REINFORCES UNANIMOUS US SUPREME COURT DECISION IN 2000 WHEN INTERTANKO TOOK STATE OF WASHINGTON TO COURTREINFORCES UNANIMOUS US SUPREME COURT DECISION IN 2000 WHEN INTERTANKO TOOK STATE OF WASHINGTON TO COURT

MASS LAWSUIT SEPT MASS FILES NOTICE TO APPEAL FEDERAL COURT DECISIONSEPT MASS FILES NOTICE TO APPEAL FEDERAL COURT DECISION DECEMBER MASS FILES APPEALDECEMBER MASS FILES APPEAL FEBRUARY 20, FEDERAL GOVT AND INDUSTRY COALITION SUBMIT RESPONSE TO MASS APPEALFEBRUARY 20, FEDERAL GOVT AND INDUSTRY COALITION SUBMIT RESPONSE TO MASS APPEAL MAY 8, ORAL ARGUMENTS HEARD BY COURT OF APPEALSMAY 8, ORAL ARGUMENTS HEARD BY COURT OF APPEALS

MASS LAWSUIT ISSUES APPEALED BY MASSACHUSETTS: - TUG ESCORT REQUIREMENTS; - MANNING REQUIREMENTS; AND - FINANCIAL RESPONSIBILITY LEVEL, BUT ALLOW THE STATE TO REDUCE THE LEVEL BASED ON COMPLIANCE WITH OTHER REQUIREMENTS

MASS LAWSUIT JUNE 2007 – APPEALS COURT DECISION: OVERTURNS DISTRICT COURT DECISION THAT THREE PROVISIONS WERE INVALIDOVERTURNS DISTRICT COURT DECISION THAT THREE PROVISIONS WERE INVALID HOWEVER, DOES NOT DECLARE THE THREE PROVISION VALIDHOWEVER, DOES NOT DECLARE THE THREE PROVISION VALID MANDATES FURTHER ANALYSIS OF THE LEGALITY OF THE THREE PROVISIONS BE PERFORMED BY DISTRICT COURTMANDATES FURTHER ANALYSIS OF THE LEGALITY OF THE THREE PROVISIONS BE PERFORMED BY DISTRICT COURT LIFTS INJUNCTION AGAINST ENFORCEMENTLIFTS INJUNCTION AGAINST ENFORCEMENT DIRECTS PARTIES TO NEGOTIATE INTERIM AGREEMENT ON ENFORCEMENTDIRECTS PARTIES TO NEGOTIATE INTERIM AGREEMENT ON ENFORCEMENT

MASS LAWSUIT MASS HAS REBUFFED EFFORTS TO REACH AGREEMENT ON ENFORCMENTMASS HAS REBUFFED EFFORTS TO REACH AGREEMENT ON ENFORCMENT MASS DEP NOT AGRESSIVELY ENFORCING THE THREE PROVISIONSMASS DEP NOT AGRESSIVELY ENFORCING THE THREE PROVISIONS INTERTANKO ADVISES MEMBERS TO COMPLY WITH MASS REQUIREMENTSINTERTANKO ADVISES MEMBERS TO COMPLY WITH MASS REQUIREMENTS OCTOBER 15 – STATUS CONFERENCE OF PARTIES TO REVIEW APPEALS COURT DECISIONOCTOBER 15 – STATUS CONFERENCE OF PARTIES TO REVIEW APPEALS COURT DECISION

BALLAST WATER LAWSUIT IN 2004 ENVIRONMENTAL GROUPS TAKE US EPA TO COURT FOR NOT REGULATING BALLAST WATER DISCHARGESIN 2004 ENVIRONMENTAL GROUPS TAKE US EPA TO COURT FOR NOT REGULATING BALLAST WATER DISCHARGES MAIN REASON IS THAT THEY ARE UPSET WITH SLOW PROGRESS OF USCG IN REGULATING BALLAST WATER DISCHARGESMAIN REASON IS THAT THEY ARE UPSET WITH SLOW PROGRESS OF USCG IN REGULATING BALLAST WATER DISCHARGES JUNE 2005 – INDUSTRY COALITION JOINS FEDERAL GOVT IN LAWSUITJUNE 2005 – INDUSTRY COALITION JOINS FEDERAL GOVT IN LAWSUIT

BALLAST WATER LAWSUIT SEPT 2006 FEDERAL COURT ORDERS EPA TO DEVELOP REGS FOR ALL SHIP DISCHARGES, INCLUDING BALLAST WATER, UNDER NPDES PERMIT SYSTEM NO LATER THAN SEPT 2008SEPT 2006 FEDERAL COURT ORDERS EPA TO DEVELOP REGS FOR ALL SHIP DISCHARGES, INCLUDING BALLAST WATER, UNDER NPDES PERMIT SYSTEM NO LATER THAN SEPT 2008 JUDGE ACKNOWLEDGES THAT USCG HAS AUTHORITY UNDER CERTAIN LAWS, BUT BELIEVES CONGRESS ALSO GAVE AUTHORITY TO EPA UNDER THE CLEAN WATER ACTJUDGE ACKNOWLEDGES THAT USCG HAS AUTHORITY UNDER CERTAIN LAWS, BUT BELIEVES CONGRESS ALSO GAVE AUTHORITY TO EPA UNDER THE CLEAN WATER ACT

BALLAST WATER LAWSUIT EPA DISAGREES WITH COURT DECISION WHICH WILL HAVE A SIGNIFICANT IMPACT ON EPAEPA DISAGREES WITH COURT DECISION WHICH WILL HAVE A SIGNIFICANT IMPACT ON EPA NOVEMBER 2006 – FEDERAL GOVT AND INDUSTRY COALITION FILE NOTICES OF INTENT TO APPEAL COURT ORDERNOVEMBER 2006 – FEDERAL GOVT AND INDUSTRY COALITION FILE NOTICES OF INTENT TO APPEAL COURT ORDER MARCH 2007 – FEDERAL GOVT AND INDUSTRY COALITION FILE APPEALSMARCH 2007 – FEDERAL GOVT AND INDUSTRY COALITION FILE APPEALS AUGUST 2007 – ORAL ARGUMENTS HEARD BY APPELLATE COURTAUGUST 2007 – ORAL ARGUMENTS HEARD BY APPELLATE COURT

BALLAST WATER LAWSUIT INDUSTRY PRIORITIES IN US BWM LEGISLATION: ESTABLISH SINGLE LAW THAT GOVERNS BALLAST WATER DISCHARGES IN US WATERSESTABLISH SINGLE LAW THAT GOVERNS BALLAST WATER DISCHARGES IN US WATERS ESTABLISH US COAST GUARD AS LEAD FEDERAL AGENCYESTABLISH US COAST GUARD AS LEAD FEDERAL AGENCY PREEMPT STATE REGULATIONSPREEMPT STATE REGULATIONS MIRROR IMO TREATY REQUIREMENTSMIRROR IMO TREATY REQUIREMENTS

EU DIRECTIVE SEPT 2005 EU ISSUES “SHIP SOURCE POLLUTION” DIRECTIVE (2005/35/EC)SEPT 2005 EU ISSUES “SHIP SOURCE POLLUTION” DIRECTIVE (2005/35/EC) MEMBER STATES REQUIRED TO IMPLEMENT DIRECTIVE BY APRIL 2007MEMBER STATES REQUIRED TO IMPLEMENT DIRECTIVE BY APRIL 2007 DIRECTIVE (CRIMINALIZES ACCIDENTAL POLLUTION) HAS TWO PROBLEMS:DIRECTIVE (CRIMINALIZES ACCIDENTAL POLLUTION) HAS TWO PROBLEMS: - CONTRADICTS MEMBER STATES’ TREATY OBLIGATIONS - LIABILITY TEST FOR “SERIOUS NEGLIGENCE” LACKS LEGAL CERTAINTY

EU DIRECTIVE INDUSTRY DOES NOT HAVE DIRECT ACCESS TO EUROPEAN COURT OF JUSTICE - ACTION MUST COME FROM MEMBER STATEINDUSTRY DOES NOT HAVE DIRECT ACCESS TO EUROPEAN COURT OF JUSTICE - ACTION MUST COME FROM MEMBER STATE DEC 2005 INDUSTRY COALITION INITIATES LEGAL PROCEEDING IN UK HIGH COURT IN LONDON REQUESTING “JUDICIAL REVIEW”DEC 2005 INDUSTRY COALITION INITIATES LEGAL PROCEEDING IN UK HIGH COURT IN LONDON REQUESTING “JUDICIAL REVIEW” OBJECTIVE IS TO HAVE UK COURT RULING TO REFER MATTER TO ECJOBJECTIVE IS TO HAVE UK COURT RULING TO REFER MATTER TO ECJ

EU DIRECTIVE IN JUNE 2006 UK JUDGE GRANTS REQUEST, REFERS 4 ISSUES TO ECJ: CAN EU IMPOSE CRIMINAL LIABILITY WITH RESPECT TO DISCHARGES FROM FOREIGN SHIPS IN EEZ;CAN EU IMPOSE CRIMINAL LIABILITY WITH RESPECT TO DISCHARGES FROM FOREIGN SHIPS IN EEZ; CAN EU EXCLUDE MARPOL DEFENSES FOR DISCHARGESCAN EU EXCLUDE MARPOL DEFENSES FOR DISCHARGES DOES IMPOSITION OF CRIMINAL SANCTIONS FOR DISCHARGES CAUSED BY “SERIOUS NEGLIGENCE” HAMPER RIGHT OF INNOCENT PASSAGEDOES IMPOSITION OF CRIMINAL SANCTIONS FOR DISCHARGES CAUSED BY “SERIOUS NEGLIGENCE” HAMPER RIGHT OF INNOCENT PASSAGE DOES “SERIOUS NEGLIGENCE” SATISFY LEGAL CERTAINTYDOES “SERIOUS NEGLIGENCE” SATISFY LEGAL CERTAINTY

EU DIRECTIVE NOV INDUSTRY COALITION FILED WRITTEN SUBMISSION TO ECJNOV INDUSTRY COALITION FILED WRITTEN SUBMISSION TO ECJ SUBMISSION HAVE ALSO BEEN FILED BY EC, EU COUNCIL, EU PARLIAMENT AND A NUMBER OF EU MEMBERS, SOME IN SUPPORT OF INDUSTRY AND OTHERS AGAINSTSUBMISSION HAVE ALSO BEEN FILED BY EC, EU COUNCIL, EU PARLIAMENT AND A NUMBER OF EU MEMBERS, SOME IN SUPPORT OF INDUSTRY AND OTHERS AGAINST SEPTEMBER 25, ORAL ARGUMENTS HEARD BY THE ECJSEPTEMBER 25, ORAL ARGUMENTS HEARD BY THE ECJ

AIR EMISSIONS - CARB JAN 1, 2007 – CARB REGS FOR AUX. ENGINES AND DIESEL ELECTRIC MAIN ENGINES IN EFFECT WITHIN 24 MILES OF CALIFORNIAJAN 1, 2007 – CARB REGS FOR AUX. ENGINES AND DIESEL ELECTRIC MAIN ENGINES IN EFFECT WITHIN 24 MILES OF CALIFORNIA PMSA GOES TO FEDERAL COURT SEEKING INJUNCTIVE RELIEFPMSA GOES TO FEDERAL COURT SEEKING INJUNCTIVE RELIEF LAWSUIT ADDRESSES LIMITED ISSUESLAWSUIT ADDRESSES LIMITED ISSUES - 24 MILE JURISDICTION - FAILURE TO REQUEST EPA APPROVAL

AIR EMISSIONS - CARB AUGUST 12 – DISTRICT COURT HEARINGAUGUST 12 – DISTRICT COURT HEARING AUGUST 30 – DISTRICT COURT RULING:AUGUST 30 – DISTRICT COURT RULING: - ENJOINS CA FROM ENFORCING REGS UNTIL APPROVAL RECEIVED FROM EPA - CARB REGS ARE NOT “IN USE” REGS, THEY ARE “EMISSION STANDARDS” UNDER CLEAN AIR ACT - UNNECESSARY TO RULE ON 24 MILES

AIR EMISSIONS - CARB NEXT STEPS: CALIFORNIA HAS THREE OPTIONS: APPEAL DISTRICT DECISION TO CIRCUIT COURT OF APPEALSAPPEAL DISTRICT DECISION TO CIRCUIT COURT OF APPEALS SEEK EPA APPROVAL AS “EMISSION STANDARD” (COULD TAKE 2-3 YEARS TO GET APPROVAL)SEEK EPA APPROVAL AS “EMISSION STANDARD” (COULD TAKE 2-3 YEARS TO GET APPROVAL) ISSUE REGS AS “FUEL STANDARD”ISSUE REGS AS “FUEL STANDARD”

AIR EMISSIONS - CARB CARB CURRENTLY CONDUCTING “WORKSHOPS” TO DEVELOP REGS TO REDUCE AIR EMISSIONS FROM MAIN DIESEL ENGINESCARB CURRENTLY CONDUCTING “WORKSHOPS” TO DEVELOP REGS TO REDUCE AIR EMISSIONS FROM MAIN DIESEL ENGINES INDICATED THEY WOULD ISSUE PROPOSED RULES BY END OF 2007INDICATED THEY WOULD ISSUE PROPOSED RULES BY END OF 2007 APRIL 2007 – CARB SENDS LETTER TO US EPA SUPPORTING US PROPOSAL TO IMO ON REVISION OF ANNEX VIAPRIL 2007 – CARB SENDS LETTER TO US EPA SUPPORTING US PROPOSAL TO IMO ON REVISION OF ANNEX VI

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