The International Regime for Compensation for Tanker Oil Spills

Working Group on Integrated Maritime Policy 24 March 2011

Måns Jacobsson

Former Director,International Oil Pollution Compensation Funds

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International Compensation Regimes

1969 Civil Liability Convention1971 Fund Convention

• 1971 Fund

Old Regime

1992 Civil Liability Convention1992 Fund Convention

• 1992 Fund

2003 Supplementary Fund Protocol

• Supplementary Fund

New Regime

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International Treaties

• 1992 Civil Liability Convention123 States Parties

• 1992 Fund Convention105 States Parties

• 2003 Protocol to 1992 Fund Convention27 States Parties

1971 Fund Convention ceased to be in force on 24 may 2002

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1992 Conventions Apply to

• Pollution damage caused by• Spills of persistent oil from laden tankers

• Bunker spills from unladen tankers with oil residues from previous voyage on board

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The Three Tier System

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Supplementary Fund Protocol Supplementary Fund Oil receivers after

sea transport

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1992 Fund Convention 1992 Fund Oil receivers after

sea transport

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1992 Civil Liability Convention Shipowners Insurers

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Main Features under Civil Liability Convention

• Strict liability of registered owner

• Limitation of liability

• Compulsory insurance

1992 Civil Liability ConventionLimits of Shipowner’s Liability

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GT SDR US $

5000 4 510 000 7 114 164

Per additional GTup to 140 000

631 995

GT 140 000 89 770 000 141 604 993

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The Fund Conventions

Applies:

• Shipowner exempt

• Shipowner financially incapable of meeting his obligations

• Damage exceeds the shipowner’s liability limit

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Shipowner exempt:• Damage resulted from an act of war,

hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character, or

• Damage was wholly caused intentionally by a third party, or

• Damage was wholly caused by negligence of public authorities in maintaining navigational aids.

Fund exempt:

• Damage resulted from an act of war, hostilities, civil war or insurrection

Exemptions

Jurisdiction and Enforcement of Judgements

• Courts in the State where damage occurred have exclusive jurisdiction

• Judgements rendered by courts competent under the 1992 Conventions or Supplementary Fund Protocol to be recognised and enforced in all States Parties

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Maximum Amount of Compensation

1992 CLC/Fund Conventions203 million SDR (US$ 320 million)

2003 Supplementary Fund Protocol750 million SDR (US$ 1 170 million)

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Limits Laid Down in the Conventions

0

200

400

600

800

1 000

1 200

0 20 40 60 80 100 120 140 160

$ (Millions)

Units of tonnage of ship(In thousands of units)

1992 CLC

1992 Fund

Supplementary Fund

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Structure of 1992 Fund

Assembly

ExecutiveCommittee

Secretariat

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Who Contributes to the Fund?

• Persons receiving >150 000 tonnes of contributing oil/year after sea transport

• Contributing oil = crude oil and heavy fuel oil

• Contributions decided by Fund Assembly

• Oil receivers pay, not governments

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1992 Fund: General Fund Contributions

Netherlands 7%

Rep. of Korea 8%

Italy 9%

Japan 17%

Others 26%

Spain 4%

Singapore 5%

Canada 5%United

Kingdom 5%India 7%

France 7%

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Supplementary Fund

• Supplementary Fund established in March 2005

• Maximum compensation 750 million SDR (US$ 1 180 million), including amounts payable under 1992 Conventions

• Contributions to Supplementary Fund payable by oil receivers in Member States of that Fund

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Main Types of Damage

• Property damage

• Costs of clean-up operations and preventive measures

• Losses in fishery, mariculture and tourism:

• Environmental damage

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Property Damage

• Cleaning costs including costs of material and manpower

• Replacement

• Diminution of value

• Loss / damage caused by clean–up operations

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Common Problems as Regards at Sea Response

• Excessive use of aircraft for surveillance

• Excessive use of oil recovery vessels

• Failure to recognise limitations of response techniques

• Failure to monitor/control operations

Hebei Spirit, December 2007

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Common Problems as Regards Shoreline Clean-up

• Excessive use of manpower & equipment

• Excessive volumes of oil waste collected

• Failure to monitor/control operations

• Failure to consider net environmental and economic benefits of actions

Hebei Spirit, December 2007

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Admissibility Criteria for Costs of Clean-up and Preventive Measures

• Expense must actually be incurred

• Expense must be linked directly to the contamination

• Response measures should be reasonable and justifiable

• The costs incurred, and the relationship between these costs and the benefits derived or expected must also be reasonable

• Reasonableness is an objective technical criterion, not a political one

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Impact on Fishing and Mariculture

• Damage to fishing gear and consequential economic losses

• Contamination of mariculture facilities (fish cages, shellfish rafts, onshore tanks and ponds)

• Contamination of captive stocks (tainting, mortality)

• Fishing and harvesting bans

• Supply shortages may affect related industries

• Market effects

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Economic Loss

• To qualify for compensation there must be a sufficiently close link of causation between the contamination and the loss

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Environmental Damage

Admissible claims:

• Economic losses which can be quantified in monetary terms

• Costs of reasonable measures to reinstate contaminated environment

• No compensation paid for claims based on an abstract quantification of damage using theoretical models

• No punitive damages

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Reinstatement of the environment

• Clean-up

• Sand replacement following clean-up

• Replanting of mangrove saplings

• Replanting of marsh vegetation

In order to qualify for compensation:

• Measures should accelerate natural recovery process

• Measures should not cause further damage

• Measures should not degrade other habitats or adversely effect other natural economic resources

• Measures should be technically feasible

• Costs should not be disproportionate to extent and duration of damage and the likely benefits

Environmental Damage

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Uniform Application of the Conventions

• Essential for the functioning of the regime

• Equal treatment of claimants

• Development of international law

• United Nations Convention on the Law of the Sea Article 235

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Conclusions

• The international compensation regime under 1992 Conventions has in general worked well

• Continuous increase in Member States

• 140 incidents in 32 years

• US$ 950 million paid to victims

• Used as model in other fields

• Reviewed to ensure it meets the needs of society in the 21st century