The 2003 Supplementary Fund Protocol: An important improvement to the international compensations system for oil pollution damage

Zbornik Pravnog Fakulteta u Zagrebu

Volumn 58, Issue 1-2, 2008, Pages 307-332

  Pavliha, Marko ^a   Grbec, Mitja ^a  

^a Faculty of Maritime Studies and Transport   (Slovenia)

Author keywords

2003 Supplementary Fund Protocol; Liability and compensation for oil polution damage; Maritime law conventions; Protection of marine environment

Indexed keywords

EID: 38849153469     PISSN: 03502058     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (62)

1. Popp A., Q. C., Lecture notes on liability and compensation in maritime law as modified by international conventions (unpublished), IMO IMLI lecture notes, Malta, 2002.
2. In cases involving pollution from ships other torts may be relevant, as nuisance and trespass (see Popp, p. 5)
3. The right of the carrier to limit his liability together with the notion of general average is one of the oldest institutes of general maritime law. This principle is closely related to the concept of the "maritime adventure" according to which the many risks of such adventure should be borne by all the participants to it (shipowner, cargo owners and freight). Another reason for such rules is the desire of states to foster maritime trade to increase their fleets. The concept of a "common maritime adventure" is also deeply rooted in the principles of general average, salvage and marine insurance.
4. The first signs indicating that oceans could not cope with all ship-generated wastes appeared after the introduction of oil as the main fuel for ships (from 1930 to 1950) The OILPOL Convention adopted in 1954 represented an improvement with this regard although it dealt only with "operational" without embarking on "accidental" oil pollution.
5. Some 80,000 tons of crude oil were released causing extensive pollution damage along both the British and French coasts.
6. Grbec M., Odgovornost za škodo zaradi onesnaženja morskega okolja z nafto, Podjetje in delo, No. 2, Ljubljana, 2002, p., 257.
7. All sorts of emergency measures were attempted, many of which made matters even worse; lots of chemical dispersants were eventually sprayed onto the oil slicks, but these were more lethal for life than the original oil.
8. The tanker had grounded in a location, which at the time was outside British territorial waters and so the decision of the British authorities to take action against the grounded vessel in international waters, including eventual bombing the wreck, was considered to be controversial (see Popp, Q. C. - p. 10). This right was in 1969 confirmed in the "Intervention Convention".
9. Another important problem faced by the victims was represented by the shipowner's insurance coverage for third parties liabilities (including oil pollution). The majority of ships are nowadays entered with one of the P&I clubs (mutual insurer). One of the main rules of P&I insurance is the "pay - to be paid rule" according to which a member (in most cases a shipowner) in order to be entitled to an indemnity in respect of liabilities or expenses incurred by him, "must first himself have discharged the liabilities or expenses concerned".
10. Needless to say, that this provision could cause significant hardships to victims of oil pollution in cases, where the shipowner is insolvent or bankrupt.
11. The Legal IMO Legal Committee, which is nowadays an indispensable organ within the IMO, was therefore established after and as a result of the Torrey Canyon accident.
12. The Intervention Convention confirmed the right of a coastal State to "prevent, mitigate or eliminate grave and imminent danger to their coastlines or related interests from pollution or threat of pollution of the sea by oil following upon a maritime casualty" (Article 2). It confirmed the right of a coastal state to undertake the necessary actions against the stricken vessel located on the high seas, which is threatening the coast and related interest.
13. Popp A., Q. C., Lecture notes on liability and compensation in maritime law as modified by international conventions (unpublished), IMO IMLI lecture notes, Malta, 2002.
14. HNS, Bunker Convention.
15. Pollution damage is according to Article 1 of the 1992 CLC defined as loss or damage caused outside the ship by contamination resulting from the escape or discharge of oil from the ship, wherever such escape or discharge may occur, provided that compensation for the impairment of the environment other than loss or profit for such impairment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken; the costs of preventive measures and further loss or damage caused by preventive measures.
16. Persistent oils are those oils, which because of their chemical composition, are usually slow to dissipate naturally when spilled into the marine environment and are therefore likely to spread and so require cleaning up (crude oil, fuel oil, heavy diesel oil and lubricating oil).
17. Popp, Q. C., Lecture notes, IMO IMLI, 2002.
18. The identification is based on administrative evidence - person or persons registered as the owner of the ship or, in the absence of registration, person or persons owning the ship (Article 3 (4) of the 1992 CLC Convention).
19. Taking into account that the shipowner's insurer in most cases is a P & I Club, the right to a direct action represents a substantial departure from the traditional P & I rules, "pay to be paid".
20. Article 3 (2) of the 1992 CLC Convention.
21. Article 3 (1) of the 1992 CLC Convention.
22. Article 4 of the 1976 Limitation Convention states that "A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result."
23. The burden of proof is on the victim and therefore these limits are many times referred to as the "unbreakable limits".
24. Exclusive Fisheries Zone, Fisheries - Ecological Zone, Ecological Zone.
25. Article IX (3)
26. See also Art. 235 of the UNCLOS Convention.
27. Under the 1992 Conventions the geographic scope is wider. The coverage extends also to damage occurred in the Exclusive Economic Zone, or equivalent area of a State party, as for example the Exclusive Fishery Zone. The 1992 Conventions cover also the cost of preventive measures before the spill has actually occurred, while the "old" conventions cover only the costs of preventive measures, taken after oil has actually been spilled. Furthermore, the new protocols apply, in certain circumstances; also to spills of tankers during ballast voyages. This right is limited only to voyages, which follow the actual carriage of oil by sea, if it is not proved, that there are no residues of such carriage of oil in bulk aboard.
28. Article 3 (2) of the CLC Conventions.
29. The amount of compensation which is available from the 1971 Fund could not exceed 60 million SDR (US$ 76 million), including the sum actually paid by the shipowner, under the relevant CLC Convention.
30. As two main oil importers, USA and China are not State parties to the 1992 Fund, this figure is almost impossible to achieve.
31. A State party cannot join the 1992 IOPC Fund without being a state party to the 1992 CLC Convention, the opposite is possible. If a State is a state party only to the CLC Convention, then the victims of oil pollution in that state cannot claim compensation from the IOPC Fund, while the shipowner is entitled to limit or exclude its liability on the basis of the Convention. Such situation is clearly unsatisfactory, although some states, the most notably example being China, have opted for it.
32. Sea going vessel or sea borne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo (Art. 1 CLC)
33. Art. 9 (1) of the CLC Convention and Art 7 (1) of the IOPC Fund Convention.
34. Person means any individual or partnership or any, public or private body, whether corporate or not, including a State or any of its constituent subdivisions. (Article 1 (2) of the 1992 CLC Convention).
35. IOPC FUNDS ANNUAL REPORT 2005, Report on the activities of the IOPC Funds in 2005, London.
36. The major contributors to the 1992 IOPC Fund, in the calendar year 1999, were Japan (21.15% of the total), Italy (11.25%), Republic of Korea (10.29 %), and Netherlands (8.28 %). The USA is not a State party neither to the CLC nor to the Fund Conventions. It has its "national" compensation system, which is enacted in the Oil Pollution Act (1990).
37. Only persons who received more than 150.000 tons of contributing oil should be reported.
38. IOPC Annual Report 2005, London, pp. 29-31.
39. In addition to the creation of the COPE Fund, the proposal also includes the introduction of a sanction or a financial penalty, to be imposed on any party, whether a ship-owner, a charterer, a classification society or anybody else, who has contributed to the oil pollution by his grossly negligent conduct or omissions.
40. For the time being the director of the 1992 IOPC Fund is also the Director of the 2005 Supplementary Fund protocol and the Funds also have a common secretariat.
41. The entry into force requirements were ratified by at least eight States which have received a combined total of 450 million tons of contributing oil. These requirements were met in December 2004.
42. It is expected, however, that the increased compensation which is approaching one billion Euros, will put an end to the practice of pro-rating of payment of claims, which has led to criticisms of the 1992 Convention.
43. The 2003 Fund will supplement the compensation available under the 1992 Civil Liability Convention (CLC) and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND), with an additional, third tier of compensation. The scope of application of the 2003 Supplementary Fund Protocol is in line with the scope of application of the 1992 CLC and Fund Conventions.
44. Art. 4(1) of the Supplementary Fund Protocol.
45. The definition of an "established claim" is found in Article 1 Paragraph 8 of the 2003 Supplementary Fund Protocol according to which this is a "claim which has been recognized by the 1992 Fund or been accepted as admissible by decision of a competent court binding upon the 1992 Fund and not subject to ordinary forms of review, and which would have been fully compensated if the limit set out in Article 4 paragraph 4 of the 1992 Fund Convention had not applied to that incident".
46. See Article 1(8) of the 2003 Supplementary Fund Protocol.
47. Contributions should be paid by those oil receivers in a state party which in a calendar year, have received, in total, quantities exceeding 150,000 tons in the ports or terminal installations of the state by sea carriage, and in any installations situated in that territory which have been carried by sea and discharged in a port or terminal installation of a non-Contracting State.
48. A case which proves this fact is the example of the Republic of Slovenia, where there are no contributors, and accordingly the coverage provided by the 1992 FUND is a "free service".
49. It is rather strange therefore that certain states which do not have big oil importers have not ratified or at least have waited long before ratifying the 1992 Fund Convention. For example, the 1992 CLC and Fund Conventions in the Republic of Slovenia entered into force only in 2001, almost five years after the entry into force of the 1992 CLC & Fund Conventions.
50. That means that the member state is liable to pay contributions for a quantity of contributing oil corresponding to the difference between 1 mio tones and the aggregate quantity of actual contributing oil receipts reported in respect of that state.
51. Art. 14 of the 2003 Supplementary Fund Protocol.
52. Contracting States are obliged according to Article 13 of the 2003 Protocol to communicate to the Director of the Supplementary Fund the relevant information on oil receipts in accordance with Article 15 of the 1992 Fund Convention. However, communications made to the Director of the 1992 Fund under Article 15 paragraph 2 of the 1992 Fund Convention will be deemed also to have been made under the 2003 Protocol.
53. Another important consideration which should "force" states to submit this communication is the fact (provision) according to which if the Contracting State does not fulfill its obligations to submit this communication and this results in a financial loss for the Supplementary Fund, that Statewrill be obliged to compensate the Supplementary Fund for such loss (Article 13(2)).
54. According to Article VII of the 2003 Supplementary Fund Protocol "Where an action for compensation for pollution damage has been brought before a court competent under Article IX of the 1992 CLC against the shipowner or his insurer/guarantor, such court shall have exclusive jurisdictional competence over any action against the Supplementary Fund for compensation, unless that court is in a Contracting State which is not a party to the 2003 Protocol, in which case, the action against the Supplementary Fund shall at the option of the claimant: (i) be brought either before a court of the State where the Supplementary Fund has its headquarters (UK), (ii) or before any court of a Contracting State to the 2003 Protocol, competent under Article IX of the 1992 CLC."
55. The European Commission proposed for example: lowering the threshold for loss of the limitation right of the shipowner (intent/ recklessly+knowledge → 31 gross negligence), and removing the protection of certain other key players from practically any liability at all.
56. For more information about this process please consult the IOPC web site at: wWw.iop-cfund.org
57. Shipowners and their insurers took the view that the issues related to shipowners' liability should not be reopened, since to do so would be detrimental to the positions of victims of oil pollution. They pointed out that the international compensation system has at its centre the protection of the victim of oil pollution and not the achievement of other "policy reasons", as the safety of navigation or decreasing the number of oil spills. The majority view was that questions of civil liability should be kept separate from questions of criminal liability.
58. It is presumed that this imbalance is caused by the low limits of liability of the shipowners in cases small tankers are involved. For tankers of 5.000 GT or less the shipowner is entitled to limit its liability to a fixed amount of 4.510.000 SDR.
59. STOPIA 2005 applied to all ships insured by one of the P&I Clubs that are members of the International Groups of such Clubs and reinsured through the Group's pooling agreement. The agreement came into force on 3rd March 2005, the date of the entry into force of the Supplementary Fund Protocol.
60. After the dismantlement of the Working Group, the Assembly of the IOPC Fund instructed the Director to co-operate with the international group of P & I Clubs (on behalf of the shipping industry) and with the OCIMF (Oil Companies International Marine Forum) before the official agreement package was submitted to the Assembly and to provide technical and administrative advice with a view of consolidating the package and ensure that it is legally enforceable.
61. The main substantive difference between the original STOPIA and STOPIA 2006 is that, whereas the original STOPIA applied only to pollution damage in Supplementary Fund member states, STOPIA 2006 will also apply to pollution damage in all other 1992 Fund Member States.
62. STOPIA and TOPIA provide that a review of the functioning of the system should be carried out in 2016 and later on at the 5-year intervals. If the review reveals that either a shipowner or oil receivers have borne a proportion exceeding 60% of the overall costs of such claims, measures shall be taken for the purpose of maintaining an approximately equal apportionments.