Legislative Council

LC Paper No. CB(2) 2829/98-99
(These minutes have been seen
by the Administration)

Ref : CB2/BC/20/98

Members present :

Hon CHAN Kam-lam (Chairman)
Hon LEE Kai-ming, JP
Hon SIN Chung-kai
Hon WONG Yung-kan
Hon Howard YOUNG, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon TAM Yiu-chung, JP
Hon FUNG Chi-kin

Public Officers attending :

Mr Richard YUEN

Deputy Secretary for Economic Services

Mr Roger TUPPER

Principal Assistant Secretary for Economic Services

Mr Peter KWOK

Assistant Secretary for Economic Services

Mr M C TSANG

Deputy Director of Marine

Mr K M LEE

Assistant Director of Marine (Port Control)

M K M VARGHESE

Assistant Director of Marine (Shipping)

Mr G FOX

Senior Assistant Law Draftsman

Mr Lawrence PENG

Senior Government Counsel

Clerk in attendance :

Mrs Sharon TONG

Chief Assistant Secretary (2)1

Staff in attendance :

Miss Anita HO

Assistant Legal Adviser 2

Miss Betty MA

Senior Assistant Secretary (2) 1

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I. Election of Chairman

Mr CHAN Kam-lam was elected Chairman of the Bills Committee.

II. Meeting with the AdministrationBriefing by the Administration

2. At the invitation of the Chairman, Deputy Secretary for Economic Services (DSES) briefed members on the purpose of the legislative proposal. He said that there was at present no specific legislation on the control and regulation of local vessels. The safety standard, control and regulation of local vessels were set out in accordance with international practice. The Merchant Shipping (Local Vessels) Bill (the Bill) would provide a new statutory framework to regulate and control local vessels by putting existing legislation scattered among different Ordinances under a comprehensive body of legislation solely for local vessels.

3. DSES pointed out that the Bill sought to improve the following areas -

1. Simplified classification of vessels

   To consolidate the present 11 classes of local vessels defined under three sets of regulations into four new classes under one set of regulation.

2. Extension of compulsory third party risks insurance

   To extend the compulsory third party risks insurance requirement (which was only required for local ferries, launches and pleasure vessels under existing legislation) to all local vessels permitted to operate in Hong Kong waters.

3. Transparent safety survey standards

   To prescribe the standards of safety for each of the four new classes of vessels in order to introduce greater transparency to the safety inspection process. To further simplify the process and to reduce the workload of the Government surveyors, the Director of Marine (D of M) would be empowered to delegate inspections to authorized surveyors.

4. DSES stressed that about 70% of the provisions in the Bill were extracted from among different Ordinances, and hence such provisions were still in force and were well versed in and accepted by the trade. Deputy Director of Marine (DD of M) added that representatives of all major sectors of the local shipping industry had been consulted and were in support of the proposals.

5. DD of M further said that it was considered that views of the local shipping industry on the general regulation and control of local vessels would be solicited by the setting up of a Local Vessels Advisory Committee. The Committee would advise D of M on matters related to the performance or exercise of his functions or powers under the Bill. In addition, a system for licensing vessels including the issue of a certificate of ownership for each vessel and the requirement for each vessel to have operating licence was proposed.

DiscussionCompulsory third party risks insurance

6. Mrs Miriam LAU enquired about the amount of third party risks insurance cover for the respective classes of local vessels under the Bill. DD of M said that the amount of insurance cover required for the respective classes of local vessels would be laid down in the regulations of the Ordinance. The minimum insurance cover for third party risks insurance proposed for passenger vessels and non-passenger vessels were $10 million and $5 million respectively. He explained that under the existing legislation, compulsory third party risks insurance was only required for local ferries, launches and pleasure vessels. The Administration proposed to extend this compulsory third party risks insurance requirement to all local vessels.

7. Mrs Miriam LAU further asked whether the third party risk insurance were insured against the risk of each accident or each passenger sustaining injuries in an accident. She also enquired about the reasons for setting a limit for the insurance cover. In response, Assistant Director of Marine (Port Control) (AD of M (PC)) said that under the existing legislation, the minimum amount of third party risks insurance for ferries and pleasure vessels were $3 million and $0.6 million respectively. The insurance cover was taken out per event. Presently, the two ferry companies were taking out unlimited insurance cover. He further said that the trade had expressed the view that there should be unlimited cover in respect of the third party risks insurance. However, the insurance sector had reservation about an unlimited insurance cover given that most of the insurance companies did not have operational experience in third party risks insurance in respect of local vessels. In the light of the concerns expressed by the insurance sector, the Administration proposed to set a minimum amount in this respect. Otherwise, the premiums for insurance might be beyond the affordability of the vessels owners in question. The Administration was of the view that once the insurance sector had gained experience and confidence in the operation, the insurance amount might be raised. The proposed amounts, which were suggested by the insurance sector, were considered acceptable by the local shipping industry. DSES added that the setting of a minimum cover did not imply that all vessel owners could not insure their vessels for a higher amount. He said that the level of insurance cover would be kept under review.

8. The Chairman opined that under the proposals, vessel owners had to meet the safety standards set by insurance companies in order that a third party risks insurance policy could be taken out for their vessels. It seemed that the safety standards of vessels were to be determined by insurance companies rather than the Marine Department (MD). DSES said that prior to the Administration making any proposals to relax the safety requirements of vessels, it had to consider whether the proposals were acceptable to the insurance sector. Moreover, certain basic safety requirements for vessels were considered necessary.

9. In response to Mr WONG Yung-kan's enquiry about the coverage of third party risks insurance, AD of M (PC) said that the coverage of third party risks insurance was applicable within Hong Kong waters. Should the coverage be outside Hong Kong waters, it would be subject to the mutual agreement between the insurer and the insured.

10. Mr WONG Yung-kan opined that the premium for the proposed third party risks insurance was beyond the affordability of the owners of small vessels (which belonged to miscellaneous types), in particular P4 vessels. He requested the Administration to consider reducing the amount of third party risks insurance. AD of M(PC) said that the Administration had held discussions with the insurance sector on the issue. As the shipping industry was pursuing for a reduction in the premium instead of the insured amount, the insurance sector advised that the premium could not be reduced proportionately with a reduction in the insured amount. Thus, even if the Administration did agree with the relaxation of the insured amount in respect of P4 vessels, the actual saving to the owners in question might not be substantial. In addition, he pointed out that should the owners concerned need to pay compensation, they had to bear the amount in excess of the insured amount.

Classification of vessels

11. Mrs Miriam LAU enquired about the reasons for the re-structuring of the classification of vessels which were different from its original proposals submitted to the Executive Council. In response, DD of M said that the purpose of the original submission was to simplify the classification of vessels under which vessels were classified according to the material of construction. Since the submission, MD had conducted further reviews on the proposed classification and had consulted the local shipping industry. It was concluded that the proposed classification should be further re-structured and simplified as spelt out in the Bill. In brief, local vessels were classified according to their use, i.e. vessels used for passenger carrying, non-passenger carrying other than fishing and pleasure purposes, fishing as well as pleasure purposes. A clearer definition of "pleasure vessels" would be provided in the Bill.

(i) Class I - Passenger vessels

12. Mrs Miriam LAU enquired about the rationale for subdividing the category into three types of passenger vessels and their differences. DD of M explained that it was an international practice that commercial vessels used for carriage of more than 12 persons were required to meet more stringent safety standards and operating conditions. Given that most local passenger vessels carried more than 12 persons, it was considered too tight to require these vessels to meet the same survey standard equivalent to the one presently used for ferry vessels. Thus, these vessels would be subject to a survey standard slightly less than the one used for launches and ferry vessels. In the circumstances, Type A vessels were allowed to carry more than 60 persons plus crew whilst Type B vessels were allowed to carry more than 12 persons but not more than 60 persons plus crew.

13. Regarding Type C vessels, they were those presently known as 'Kaito operating with ferry licences' and were classified as miscellaneous types under the existing mechanism. They were a special type of vessel and were mostly used by passengers living in the outlying islands and remote areas. Should Kaito be subject to the same survey standard equivalent to the one used for launches and ferries, it would definitely result in a much higher fares. In order to limit the fares of Kaito within an affordable range for residents living in the remote areas, the Administration proposed to classify Kaito under a specific category.

(ii) Class III - Fishing vessels

14. Mr WONG Yung-kan pointed out that many fishing boats in Sai Kung were let for pleasure purposes. He asked whether these fishing boats would be classified as fishing vessels under the proposed legislation; and if not, whether the Administration had put in place any plans for the continued operation of these vessels after the enactment of the Bill. DD of M said that at present, fishing boats were subject to more relax safety requirements than other types of vessels because they were not used for commercial purpose but as a working platform. Any persons on board fishing boats should be engaged in fishing only. After the coming into effect of the Bill, should any fishing boats be used for carriage of fare-paying passengers, they should be subject to the same conditions and requirements of the appropriate class of vessel.

15. Citing the experience in Taiwan, Mr WONG Yung-kan asked whether owners of fishing boats were allowed to convert the boats into pleasure vessels. DSES said that owners of any types of vessels should obtain an appropriate licence before using the vessels for passenger carrying. He remarked that the Administration did understand the background and the concerns of the trade. Thus, the Administration had proposed the introduction of a new class of licence for carrying less than 60 passengers, the safety requirements for which would be lower than those of launches and ferries. The primary objective of the regulation was to ensure the safety of passengers so that they were covered by third party risks insurance.

16. As regards the limit for the number of passengers allowable on fishing boats, DD of M said that given owners of the fishing boats had passed the requisite examination for operation, they were aware of the requirement for life-saving appliances on boats and hence the maximum number of passengers on board their boats.

17. Mrs Miriam LAU expressed concern that it was not uncommon that P 4 vessels were overloaded with passengers. She enquired about the purpose of P4 vessels under the existing legislation and the enforcement measures put in place by the Administration to ensure that these vessels were used for their specific purpose. AD of M (PC) said that P4 vessels were unique vessels used for fish pond culturing within specified areas. Although requests for carrying passengers up to six and used for commercial purpose had been received, owners of these vessels were subject to prosecution if they used these vessels for other non-specified purposes, such as letting for commercial purposes. MD would liasie with the Marine Police to step up prosecutions in this regard. However, the Administration faced difficulties in instituting prosecutions in the light of loophole in the existing legislation. It was because fishing within the specified areas was in breach of the law only if it was a commercial activity. Prosecutions against using P4 vessels for non-specified purposes could be brought about only with the presence of witness.

18. Mrs Miriam LAU opined that P4 vessels could be used for commercial purposes without violating the law simply by making use of other payment methods. She urged the Administration to address the grey area in drawing up its enforcement measures. DD of M said that MD was considering deploying additional resources for instituting prosecutions and launching educational publicity in this regard.

19. Mr WONG Yung-kan suggested the Administration to consider issuing a specific licence for P4 vessels instead of classifying them under the miscellaneous types having regard to some 2 000 such vessels were being engaged in the fishing industry. DD of M said that the Administration would discuss with the trade as to whether a separate licence would be issued to P4 vessels or to classify them under "fishing vessels". The Chairman opined that if the power of engine of P4 vessels was increased, these vessels should be subject to the regulation of "fishing vessels".

(iii) Class IV - Pleasure vessels

20. Mrs Miriam LAU opined that the regulation of pleasure vessels were comparatively relaxed than those for ferries and launches. She enquired about the specific regulatory control for pleasure vessels. DSES responded that the monitoring mechanism for the respective classes of vessels would be spelt out in the subsidiary legislation. The Administration would discuss the details with the parties concerned. He further said that a more relaxed safety standards and operating conditions were allowed for pleasure vessels having regard to the fact that they were used for private purposes. Should any vessels be used for passenger carrying, they would be required to meet more stringent safety standards and operating conditions.

21. DD of M further said that the Bill proposed no amendment to the regulation of pleasure vessels but to provide a clearer definition of pleasure vessels. Given that pleasure vessels were used for private purposes, owners of the pleasure vessels should decide whether it was appropriate to engage the vessels in commercial activities.

22. Mrs Miriam LAU opined that the Administration should address the historical background about the leasing of pleasure vessels for commercial activities in drafting the Bill. DD of M pointed out that the primary objective of the legislative proposal in respect of pleasure vessels was to ensure proper protection to passengers by being covered under third party risks insurance when an accident occurred. He assured members that should owners of pleasure vessels wish to use their vessels for commercial purpose, such as carrying fare-paying passengers, they should apply for an appropriate licence and take out a third party risks insurance policy. DSES added that after obtaining an appropriate licence for service, pleasure vessels could be used for commercial purpose.

23. AD of M (PC) said that it was the responsibility of the Government to ensure the safety of passengers on board commercial vessels. Whilst for pleasure vessels, as they were for non-commercial use, it was therefore the owners and passengers' choice as to whether they should be on board the vessels. In the event pleasure vessels were used for commercial purpose, they would be required to comply with the safety standards on par with those adopted for launches and ferry vessels. Out of some 4 000 pleasure vessels, there was about some 200 engaged in commercial purposes. Should pleasure vessels be subject to the same stringent safety standard as launches and ferries, it would impose additional financial burden on the owners of pleasure vessels. He further said that pleasure vessels hired or let under the terms of a charter agreement were permitted under the Bill. The thrust of the legislative proposal was targeted at those pleasure vessels being used for commercial purposes which involved the sale of tickets. Such activities neglected the safety of passengers, failed to provide protection for third party risks and infringed the business of launches and ferries operators who had invested huge capital in order to comply with the safety standards. DSES added that masters and engine operators on vessels had passed the necessary examination before being permitted to operate pleasure vessels, they should have possessed sufficient experience and knowledge to determine the safety standards for pleasure vessels. He stressed that it was Government's responsibility to ensure the safety of fare-paying passengers on ferries and launches which were permitted to operate a commercial service.

24. Given that many pleasure vessels were currently used for commercial boat trips, Mr Howard YOUNG said that the Administration needed to strike a balance between passenger safety and the continued operation of the trade.

25. Mrs Miriam LAU pointed out that having regard to the construction and prevailing safety standards in most of the pleasure vessels, it was believed that these vessels were almost unable to meet the minimum requirements under the proposals for licences for service. She asked whether any transitional arrangements in this regard would be provided. DSES pointed out that as all local vessels were required to take out third party risks insurance under the Bill, if the safety standards were set too low, they would not be acceptable by the relevant insurance companies.

26. DD of M reiterated that the Administration could not adopt two sets of safety standards for vessels used for similar purposes in any event. There were about 500 to 600 launches which met the more stringent safety requirements. As fishing boats and working boats were not permitted to carry passengers, it would be unfair to owners or operators of passengers vessels who were in compliance with the law if the Administration adopted a set of looser safety requirements for fishing boats and pleasure vessels in order to allow them to carry passengers. He said that the proposals contained in the Bill were in line with the current practice. It only sought to provide a clearer definition in respect of "commercial purposes" and "pleasure vessels".

27. While sharing with the Administration's view that the policy should be fair to the parties concerned, Mrs Miriam LAU considered that there was grey area regarding the regulation of pleasure vessels. Under the proposals, chartered pleasure vessels were not subject to the same stringent safety standards for launches and ferry vessels. Thus, the safety of passengers was not safeguarded should illegal ferry services be provided by pleasure vessels under charter agreements. She urged the Administration to address the grey area and to state clearly in the Bill whether chartered pleasure vessels were permitted to provide passenger carrying service.

28. In response, AD of M (PC) said that chartered pleasure vessels were not allowed to carry fare-paying passengers. To facilitate enforcement, the owners were required to notify the MD of any charter agreements. AD of M (PC) added that consideration was given to amending the notification requirement. At present, pleasure vessels owners were required to notify MD of a charter agreement within 72 hours of the activity. Under the present arrangement, when owners were spotted for unlawful chartered service, they could notify the department immediately who would still fulfill the 72 hours notification requirement. To plug the loophole, it was proposed to amend the requirement to notify MD 72 hours prior to the activity.

29. Mrs Miriam LAU expressed concern that the amendment to the notification requirement would impose difficulties on the operation of the trade. DSES said that the amendment to the notification requirement had yet to be decided. The Administration would further consult the trade.

30. Responding to Mr TAM Yiu-chung, DD of M said that the licensing requirements for pleasure vessels would remain unchanged after the enactment of the Bill, i.e. pleasure vessels were not subject to mandatory periodic inspection as they were for private pleasure purposes. Nevertheless, pleasure vessels were required to comply with the requirements on life-saving appliances and fire-fighting apparatus, and they had to be operated by holders of Local Certificates of Competency. As regards pleasure vessels being hired under charter agreements, it would remain the responsibility of the owners of pleasure vessels to let the passengers know that the vessels were private vessels which were not subject to the mandatory safety inspection.

Local Certificates of Competency

31. Mr Howard YOUNG enquired whether certificates of competency issued by the relevant authorities in the Mainland and Macau were recognized by the Administration. In response, DSES advised that there was a lack of international system for licensing vessels similar to the one adopted for driving licences. DD of M pointed out that the licensing system in the Mainland and Macau adopted international standards. As such, holders of certificates of competency issued by the relevant authorities in the Mainland and Macau were allowed to operate vessels within Hong Kong waters. As to whether holders of Local Certificates of Competency were recognized overseas, it would be subject to the relevant regulations in individual countries. Nevertheless, local vessels should obtain port clearance before departure from Hong Kong waters. AD of M (PC) added that local pleasure vessels and fishing boats could leave Hong Kong waters. AD of M (PC) added that holders of certificates of competency (pleasure vessel) issued by overseas countries were allowed to operate pleasure vessels in Hong Kong waters only if they had acquired the necessary local knowledge.

32. The Chairman enquired about the implementation details of the proposal to streamline the system of Local Certificates of Competency. Assistant Director of Marine (Shipping) (AD of M (S)) explained that the Administration proposed to simplify the present 13 types of certificates to eight under which there would be no separate categories for fishing vessels and commercial vessels. As the syllabus for Local Certificates of Competency was outdated, the examination would be simplified by placing emphasis on the practical operation and knowledge so that more people could pass the examination and obtain the certificates. He added that although the existing certificates would be valid, conversion would be provided as new certificates issued under the new system would have less restriction. Parties concerned who were consulted welcomed the proposal.

33. Responding to Mr Howard YOUNG, AD of M (S) said that the certificate would be valid until the holder reached the age of 65, which was renewable for another three years and annually thereafter.

Impact of the Bill

34. Responding to Mr LEE Kai-ming, DD of M said that all local vessels, including mainland coastal and river-trade vessels plying regularly in Hong Kong waters were regulated under the legislative proposal. About 20 000 local vessels and 3 500 river-trade vessels would be regulated. He said that representatives of all major sectors of the local shipping industry had been consulted and were in support of the proposals. To solicit views from the industry, the Provisional Local Vessel Advisory Committee had been set up. At the request of the Chairman, DD of M agreed to provide a copy of the membership of the Provisional Local Vessel Advisory Committee.

Adm

(Post-meeting note : The membership of the Provisional Local Vessel Advisory Committee was circulated to members under LC Paper No. CB(2) 2064/98-99(01).)

35. At the request of Mr LEE Kai-ming, DD of M agreed to provide information of the number of vessels that would be affected by the Bill according to the proposed classification of vessels.	Adm

(Post-meeting note : The requested information was circulated to members under LC Paper No. CB(2) 2047/98-99(02).)

The way forward

36. Members agreed that the Bills Committee would meet deputations to consider their views and concerns on the Bill. A press release and letters would be issued to invite views from the relevant associations in the local shipping industry on the Bill.

III. Date of next meeting

37. The next meeting would be scheduled for 24 May 1999 at 4:30 pm.

38. The meeting ended at 12:45 pm.

Legislative Council Secretariat
10 June 1999