Oil Pollution and Compensation

an overview of oil the international oil spill

compensation regimes

Tim WilkinsRegional Manager Asia-Pacific

Environmental Manager

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“Those effected by spills of persistent crude oil and fuel oil from tankers now benefit from a uniquely successful compensation regime”

(ITOPF 2007)

Torrey Canyon (1967)Torrey Canyon (1967)

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• 121,000 tonnes of Kuwaiti crude oil spilled• Coasts UK and France affected• No International Convention• Limited Compensation paid

• 121,000 tonnes of Kuwaiti crude oil spilled• Coasts UK and France affected• No International Convention• Limited Compensation paid

Swift and effective compensation aimed at protecting the victims of oil pollution

1. The Three Layers of International Compensation – The Regimes

2. Claims processes

Three Levels of Compensation (1)

Civil Liability Convention

Fund Convention

Tanker Owner

Insurance (P&I Clubs)

Supplementary ConventionIOPC Fund

Oil Cargo Receivers

IOPC Fund Oil Cargo Receivers

Primary Layer of Compensation

Supplementary Layer of Compensation

Three Levels of Compensation (2)

Primary Layer of Compensation

The International Convention on Civil Liability for Oil Pollution Damage (1992 CLC)

• Registered tanker owner– adequate financial security required (oil pollution insurance

through P&I club)– amount determined by the gross tonnage of the tanker– claims brought against the insurer not the tanker owner

• Strict Liability– liable in the absence of fault (few exceptions)– pay compensation for oil spill damage and clean-up in the EEZ of

the effected state– overall objective to benefit victims of oil spill

Three Levels of Compensation (3)

Primary Layer of Compensation

The International Convention on Civil Liability for Oil Pollution Damage (1992 CLC)

• Limitation of liability

– e.g. ships below 5,000gt USD7mill

ships above 140,000gt USD137million

– can be lost if if damage resulted from personal act or omission of owner done with intent or recklessly and with knowledge that damage would occur

• Key points

– International

– Simplicity

– 90% of claims paid by owners irrespective of fault

Three Levels of Compensation (4)

Civil Liability Convention

Fund Convention

Tanker Owner

Insurance (P&I Clubs)

Supplementary ConventionIOPC Fund

Oil Cargo Receivers

IOPC Fund Oil Cargo Receivers

Primary Layer of Compensation

Supplementary Layer of Compensation

Three Levels of Compensation (5)

Supplementary Layer of Compensation

The International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1992 Fund)

• And provides and additional level of compensation for victims• Operates if:

– claims exceed tanker owner’s limit of liability (1992 CLC)– if tanker owner is exempt from liability under 1992 CLC (war etc.)– tanker owner unable to meet the claims

• Funded by Oil receivers (crude oil and heavy fuel oil by sea)– oil companies and other entities located in oil receiving states

who are a party to the 1992 Fund

Three Levels of Compensation (6)

USD Millions

306

135

140,000 GT

Compensation Limits

1992 Fund

1992 CLC

5 GT

Three Levels of Compensation (7)

Civil Liability Convention

Fund Convention

Tanker Owner

Insurance (P&I Clubs)

Supplementary ConventionIOPC Fund

Oil Cargo Receivers

IOPC Fund Oil Cargo Receivers

Primary Layer of Compensation

Supplementary Layer of Compensation

Three Levels of Compensation (8)

Source: ITOPF 2006

Three Levels of Compensation (9)

Supplementary Layer of Compensation

International Oil Pollution Compensation Supplementary Fund 2003 (Supplementary Fund)

• Concerns by states that the levels of compensation in first two tiers may be insufficient to cover all valid claims arising from a major tanker accident• Similar finance arrangement as 1992 Fund for oil receivers (1 million tonnes pa minimum)• Entry into force 3 March 2005

Three Levels of Compensation (10)

USD Millions

1,132

306

135

140GT x 1,000

Compensation Limits

Supplementary Fund

1992 Fund

1992 CLC

5

Claims (1)

Admissible Claims

• Assessed by P&I Clubs and 1992 Fund (expertise drawn in from likes of the International Tanker Owners Pollution Federation - ITOPF)

• Admissible = Pollution Damage or Preventive Measures

1. Preventive Measures (clean-up)2. Damage to property3. Economic loss4. Reinstatement/restoration of impaired environments

Admissible Claims

1. Preventive Measures (clean-up)• Removing oil from a damaged/sunken tanker• Preventing oil from reaching sensitive areas• Clean-up costs at sea and on the coast/shoreline• Disposal costs of recovered oil/debris• ‘Reasonable cost’ qualification

• Technical assessment at time of incident• Regardless of result of measure• No hindsight assessment

2. Damage to property• Contaminated fishing gear, mariculture, yachts, industrial

installations, ports, terminals etc.• Replacement possible

Claims (2)

Claims (3)

Admissible Claims

1. Economic loss• Fishing activity• Tourism• ‘Consequential’ and ‘Pure economic’ losses

1. Contaminated fishing gear prevents fishing (consequential)2. Oil in fishing areas prevents fisherman from working (pure

economic)

2. Reinstatement/restoration of impaired environments• Technically feasible measures• Enhancement of natural recovery• Reasonable/Proportionate to expected results of measures

Other Regimes

International

1. Bunker Spills Convention2. HNS Convention3. OPRC Convention (OPRC-HNS)

Regional/National

1. OPA 90 (USA)2. SOPF (Canada)

Further reading and information

• ITOPF– ITOPF Handbook 2007/2008– www.itopf.com

• IOPC Fund– IOPC Fund Annual Report 2006– www.iopcfund.org

Time for coffee…