THE INTERNATIONAL REGIME FOR LIABILITY AND COMPENSATION FOR OIL POLLUTION DAMAGE INTRODUCTION 1 The TORREY CANYON incident in 1967 gave the stimulus to the development of an international regime for liability and compensation for oil pollution damage. Under the auspices of the International Maritime Organization (IMO) two international conventions were developed, the International Convention on Civil Liability for Oil Pollution Damage 1969 (1969 CLC), and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971 (1971 Fund Convention). These two instruments established an intergovernmental regime aimed at providing compensation for oil pollution damage, including the costs for clean-up operations, following spills of persistent oil from tankers. The regime applies regardless of whether or not the tanker causing the spill was at fault. Claimants can therefore normally receive compensation promptly, without the need for lengthy and costly litigation, and Government authorities can take action after an oil spill to prevent or minimize pollution damage knowing that, as long as their actions are reasonable in the circumstances, the costs they incur will be reimbursed. 2 The 1969 CLC entered into force on 19 June 1975 and the 1971 Fund Convention on 16 October 1978. At present 96 States are Party to the 1969 CLC and 70 to the 1971 Fund Convention. Beth Conventions have been amended by Protocols of 1976. By these Protocols the unit of account was changed from gold francs to SDRs. THE CIVIL LIABILITY CONVENTION, 1969 3 Under the 1969 CLC, the registered owner of a tanker is made strictly liable (i.e. liable also in the absence of fault) for pollution damage caused by an escape or discharge of persistent oil, such as crudel, fuel oil and heavy diesel oil, from the tanker. The scope of application is limited to damage caused in the territory (including the territorial sea) of Contracting States and to measures (wherever taken) to prevent or minimize such damage. Another condition is that the Convention applies only to ships which are actually carrying oil in bulk as cargo, i.e. laden tankers. Spills from tankers during bellastoyages are therefore not covered by the Convention, nor are spills of bunker oil from ships other then takers. The shipowner is not liable in a few specific cases, namely, if the shipowner proves that the damage (a) resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable or irresistible character; (b) was wholly caused by an act or omission done with intent to cause damage by a third party, or (c) was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights of other ravigational aids in the exercise of that function. 4 Un'ers the pollution damage was caused as a result of the actual fault or privity of the shipowner, the shi x vner is entid to limit his liability under the 1969 CLC to 133 Special Dra ing Rights (SDRs) USS 191.5 (at the rate of 1 SDR US$ 1.44) per ton of the ship's tonnage, or 14 million SDRs = US$ 20 25 million, whichever is the less. These amounts, when expressed in local currency, of course, vary from time to time in accordance with exchange rates. Any tanker carrying more than 2,000 tons of persistent oil in bulk as cargo must be insured against the liability arising under the 1969 CLC or maintain other financial security; this cover is rormal'; provided by a P & I Club. In addition, a certificate attesting that insurance or other financial securit evering this liability is in force has to be issued to each ship and carried on board. The certificate shall be issued by the Administration of the Flag State after determination that the ship complies with the requirements on insurance or other financial security. - 2 6 Claims against the shipowner or his insurer must be made within three years of the date the damage occurred. However, in no case shall an action be brought after six years from the date of the incident which caused the damage. THE 1971 FUND CONVENTION 7 Where the damage exceeds the owner's liability under the 1969 CLC, additional compensation may be obtained from the International Oil Pollution Compensation Fund (IOPC Fund) established through the 1971 Fund Convention. The IOPC Fund will also pay compensation where the owner is financially incapable of meeting his obligations under the CLC or can invoke one of the defences under the Convention. 8 The scope of application of the Fund Convention is basically the same as that of the 1969 CLC. Also the exceptions and defences of the IOPC Fund are similar to, but more restricted than, those available to the shipowner under the 1969 CLC, so that the IOPC Fund will compensate victims in the following cases not covered by the 1969 CLC: where (a) the damage resulted from a natural phenomenon of an exceptional, inevitable and irresistible character, (b) the damage was wholly caused by an act or omission done with intent to cause damage by a third party; (c) where the damage was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function. The maximum our payable by the IOPC Fund for one incident is 60 million SDRs = USS 86.4 million. The amount c compensation available under the 1971 Fund Convention is unrelated to the size of tanker and is clusive of, rather than additional to, any compensation actually paid by the shipowner or his insurer under the terms of the 1969 CI.C. Where the amount of established claims against the IOPC Fund exceeds the aggregate amount of compensation payable, the amount available shall be distributed in such a manner that the proportion between any established claim and the amount of compensation actually recovered by the claimant under the 1969 CLC and the 1971 Fund Convention shall be the same for all c':umats. Claims against the IOPC Fund must be made within three years of the date the damage was cused. However, in no case shall an action be brought after six years from the date of the incident which caused e damage. Payments of compensation and the administrative expenses of the IOPC Fund are financed by contributions levied on any person in a Contracting State who has received in one calendar year more than 150,000 tonnes of crude oil and heavy fuel oil ("contributing oil") after sea transport. Annual contributons are levied to meet the expected payments of compensation by the IOPC Fund. !! Pursuant to an agreement with the International Group of P & I Clubs, claims are often handled in co-ceration 'etween the IOPC Fund and the Club involved. As a result it is normally possible to ensure tent claimants present their claims only once, without having to prove thein separately against both the shipowner and the IOPC Fund. It is then left to the Club and the IOPC Fund to work out the distribution among themselves. EVISION OF THE CIVIL LIABILITY CONVENTION AND THE FUND CONVENTION Trendy shortly after the entry into force of the 1971 Fund Convention it was considered that the Frits liability had been eroded by inflation to such an extent that the systern might not be capable of Providr sufficient compensation in connection with a major incident. A revision procedure with a view upting these amounts was therefore initiated in the early 1980s. In this connection the need to vide mechanism for a speedy up-dating of the limitation amounts in the future seemed obvious. The LED OGASDRS EMG/GL/jr -3 experience gained during the first years of operation of the IOPC Fund had also demonstrated the need for some further amendments, in particular to the scope of application, and for clarification of the notion of damage (see paragraph 15 below). 13 A Diplomatic Conference was held in London in 1984. It successfully concluded its work by the adoption of two protocols which revised the 1969 CLC and the 1971 Fund Convention as indicated above. Another important feature of the revision was the intention to make certain adjustments to the system so as to enable States which so far had not found it possible to adhere to it, to overcome their particular problems and hesitations. 14 However, after the adoption of the Oil Pollution Act, 1990 (OPA 1990) it became clear that the prospects for the 1984 Protocols entering into force in the foreseeable future were rather limited. The conditions for entry into force had been based on the assumption that the United States would became Party to the Protocols and as a consequence the conditions for entry into force could hardly be met without the participation of the United States. In order to remedy this situation and to secure the future viability of the system, another Conference was convened under the auspices of IMO during November 1992. The Conference adopted two new Protocols which formally disregarded the existence of the 1984 Protocols and amended the 1969 and 1971 Conventions. In practice, however, the 1992 Protocols incorporated the same substantive provisions as the 1984 Protocols but with less stringent conditions for entry into force. In addition, the 1992 Protocol to the Fund Convention introduced a provision setting a cap on contributions to the 1992 IOPC Fund payable by oil receivers in any given State. This cap was fixed at 27.5% of the total annual contributions to the IOPC Fund. The capping system will cease to apply when the total quantity of contributing oil received during a calendar year in all Member States <f the new Fund set up under the 1992 Protocol exceeds 750 million tonnes, or at the expiry of a period of five; ears from the entry into force of the 1992 Protocol to the Fund Convention, whichever is the rlier. 15 The nain amendments introduced by the 1992 Protocols are the following: (1) (2) 3) (4) (5) (6) Special liability limit for owners of small vessels and a substantial increase of the limitation amounts. The revised limits are: (a) for a ship not exceeding 5,000 units of tonnage, 3 million SDRs (US$ 4.3 million); (b) for a ship with a tonnage between 5,000 and 140,000 units of tonnage, 3 million SDRs plus 420 SDRs (US$ 605) for each additional unit of tonnage; and (c) for a ship exceeding 140,000 units of tonnage, 59.7 million SDRs (US$ 86 million); Increase in the limit of compensation payable by the IOPC Fund to 135 million SDRs (US$ 194 million), including the compensation payable by the shipowner under the 1992 Protocol to the CLC. This limitation figure would be increased automatically to 200 million SDRs (US$ 288 million) if there were to be three Member States of the 1992 Fund whose combined quantity of contribug oil received during a given year in their respective territories exceeds 600 million tonnes; Extended geographical scope of application of the Conventions to include damage caused in the exclusive economic zone (EEZ), established under the United Nations Convention on the Law of the Sea, 1982; Pollution damage caused by spills of residues from unladen tankers is covered; Expenses incurred for preventive measures are recoverable even when no spill of oil occurs, provided that there was a grave and imminent danger of pollution damage, and New definition of pollution damage retaining the basic wording of the present definition with the addition of a phrase to clarify that, with regard to environmental damage, only LED O'GLASDRS EMG/GL/jr -4 costs incurred for reasonable measures of reinstatement actually undertaken or to be undertaken are included in the concept of pollution damage. 16 The 1992 Protocols entered into force on 30 May 1996. As at 15 July 1996 there are 18 Contracting States to the 1992 Protocol to the CLC and 17 Contracting States to the 1992 Protocol to the 1971 Fund Convention. 17 The 1992 Protocol to the Fund Convention provides a mechanism for the compulsory denunciation of the parent conventions when the total quantity of contributing oil received in the States Parties to the Protocol to the Fund Convention has reached 750 million tonnes. These States Parties as well as States which have deposited their instruments of ratification, would then have to denounce the 1969 CLC and the 1971 Fund Convention within six months, with effect twelve months after the expiry of this six-month period. The requirements for the compulsory denunciation are expected to be met during the autumn of this year. 18 The Assembly of the 1992 Fund held its first session in June 1996. During the transitional period, the 197' Fund and the 1992 Fund will be administered by a joint Secretariat and headed by one Director. CONCLUSIONS ་་ད There is no doubt that the international regime generally has succeeded in achieving its objective to provide adequate compensation and speedy settlement of claims. The steady growth of membership i the ICPC Fund is, of course, a clear indication of the importance being attached by States to the protection of victims of oil pollution damage offered under this system. The fact that it took less than three years for the conditions for entry into force of the 1992 Protocols to be met illustrates the desire in particuler of the States Party to the old regime to maintain its viability for the future. The rapidly approaching compulsory denunciation of the 1969/71 regime can only have the effect of encouraging frther States to accede to the 1992 regime and to do so as a matter of some urgency. The decision not 1. renew the voluntary industry agreements, TOVALOP and CRISTAL, when they expire in February 1997, will undoubtedly underscore the importance of the intergovernmental regime and have 1re effect of driving more States towards that regime. Against this background, it seems that the international system created by the CLC and the and Convention will continue to play a vital role not only in providing compensation to victims of oil outien damage but also to develop further the international maritime law in this field. DATE STAMP & RETURN BEFORE THE SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE HOUSE OF REPRESENTATIVES STATEMENT OF THE INTERNATIONAL GROUP OF P&I CLUBS 26 JUNE, 1996 OVERSIGHT HEARING RESPONSIBILITY UNDER THE OIL POLLUTION ACT OF 1990 The International Group of P&I Clubs (the "Group") submits the following statement to the Subcommittee on Coast Guard and Maritime Transportation. The Group consists of mutual insurance companies (the "Clubs") who between them insure the liabilities of over 95% of the world's ocean going merchant fleet. This includes effectively all oil tankers and almost all dry cargo ships trading to the United States together with a substantial proportion of the U.S. coastal traders. All the Clubs in the Group are linked by reinsurance arrangements so that they form what is in effect one insurance pool for the larger liability risks of shipowners worldwide. This material is prepared, edited, issued or circulated by The International Group of P&I Clubs, 78 Fenchurch Street, |