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The Tampa Legacy

Middletons examines recent Australian policy on foreign stowaways

The Australian government’s robust approach to dealing with unlawful entrants on commercial vessels gained international attention during the ‘Tampa’ crisis. The policy of imposing a highly onerous burden on shipowners was again illustrated by the Department of Immigration (DIMIA)’s response to stowaways on board a vessel calling at Australian ports earlier this year. In short, the current policy casts shipowners adrift to address this growing international problem on their own, as well as presenting serious financial ramifications for not only shipowners, but also masters, port agents, operators and charterers of vessels entering Australian waters.

Usual practice
Under S 229 of the Migration Act, an offence is committed when a ‘non-citizen’ is brought into Australia without a valid visa, irrespective of whether or not they leave the vessel on which they entered. The offence carries a maximum penalty of A$10,000.

Historically, so long as stowaways left Australia on the same vessel, or left the vessel in the custody of DIMIA, the shipowner was not ordinarily prosecuted. Further, even when stowaways jumped ship at an Australian port, the usual practice of DIMIA was to issue Infringement Notices in lieu of formal prosecution. If the Infringement Notice was not contested, the maximum penalty was reduced to A$5000.

New approach
In an incident earlier this year, two men boarded a Polish vessel in South Africa prior to departure for Australia. They were found several days after sailing, and the Australian immigration authorities were notified. On arrival in Tasmania, the master, shipowner, agent and charterer were each issued with a Detention Notice under the Migration Act, which had the effect of placing the stowaways in ‘immigration detention’ on board the vessel. It also contained a direction to the master, owner, agent and charterer to prevent the stowaways from leaving the vessel other than in the company of an immigration officer.

The stowaways were interviewed in Tasmania by Australian Customs and later by DIMIA, which determined that they should remain on board and depart Australia with the vessel. Even when the stowaways became agitated at the vessel’s next port in Victoria and the master expressed concern to the authorities about the safety of his crew, DIMIA refused to permit the removal of the stowaways.

Then the stowaways exercised a legal entitlement to independent legal advice and refugee applications were lodged on their behalf. DIMIA then removed them to an immigration detention centre.

However, notwithstanding that:

• there was no evidence that the stowaways boarded with the knowledge of anyone associated with the vessel;
• the master cooperated fully with Australian immigration authorities and complied with the Detention Notice; and
• the stowaways’ removal from the vessel was a function of their applications for refugee status and nothing to do with the shipowner; DIMIA issued Infringement Notices on the master and port agents in respect of each stowaway based on the technical breach of S 229, requiring payment of fines totalling A$10,000. DIMIA also placed the vessel’s port agents on notice of their liability to pay costs associated with the detention and repatriation of the stowaways.

The Australian government’s hardline response has increased the risk of disruption to vessels’ schedules. Inevitably, shipowners and related commercial interests will be caught in the crossfire of conflicting agendas between DIMIA and the legal representatives of asylum seekers.

Middletons protests taxation ruling
On a separate subject, the Australian Taxation Office (ATO) last year issued a draft taxation ruling that caused alarm within international shipping and trade sectors. The Draft Ruling, TR 2002/D11, asserts that time charters are contracts for ‘use’ of a vessel and, therefore, payments made under cross-border time charters are subject to Royalty Withholding Tax (RWHT). The rate of RWHT is 30% (generally reduced to 10% where owner or bare-boat charterer is resident in a country with which Australia has a double tax agreement).

Middletons has worked closely with the industry since the Draft Ruling was issued, with a view to getting it withdrawn. Acting on behalf of the Australian Shipowners’ Association, Middletons lodged a detailed submission with the ATO in November 2002 highlighting the technical deficiencies and noting that Australia’s was the only sophisticated economy seeking to tax time charters in this way.

Middletons was invited to appear before the ATO’s International Tax Rulings Panel in December 2002, and partners Gavin Vallely and Philip Diviny spoke of the uncertainty that the Draft Ruling had created in the industry and the competitive disadvantage to Australian shipping and trade were the Draft Ruling to be finalised in its current form.

P.S. Since preparing this report Middletons has been notified by the ATO that they have reversed the position taken in Draft Ruling TR2002/D11 and decided not to impose RWHT on 'standard' time chartering arrangements. A final Ruling reflecting this position is expected in April 2003.

Article by Middletons. Contact:
Gavin Vallely:
gavin_vallely@middletons.com.au
Philip Diviny:
philip_diviny@middletons.com.au
Website: www.middletons.com.au

www.middletons.com.au