Princess Cruise Lines has agreed to plead guilty to seven felony charges and pay a $US40 million ($53 million) penalty for polluting the ocean with waste and then trying to cover it up. Federal prosecutors said the payment represents the largest-ever criminal penalty involving deliberate pollution by a ship at sea.

California-based Princess is a subsidiary of Carnival Corp, which owns multiple cruise lines that collectively comprise the world's biggest cruise company.

At the heart of the criminal case lies one ship in particular, the 3192-passenger Caribbean Princess, which prosecutors said used a so-called "magic pipe" to bypass the ship's usual equipment and illegally discharge thousands of gallons of oily waste into the ocean. The practice came to the attention of authorities after an engineer on the ship reported the problem to British investigators in summer 2013. The ship was sailing off the coast of England at the time, and the whistleblowing engineer quit his job when the vessel reached Southampton, England.

Officials from the Justice Department said the ship's chief engineer and senior first engineer tried to cover up the practice, removing the magic pipe and ordering subordinates to lie to authorities. Upon the ship's arrival in New York the following month, US Coast Guard investigators conducted an examination of the Caribbean Princess, during which some crew members continued to mislead them about the illegal dumping practice.