INTERNATIONAL CONVENTIONS ON
LIABILITY AND COMPENSATIONFOR OIL POLLUTION DAMAGE

Hideo Osuga
Legal Officer
International Oil Pollution Compensation FundPAJ OIL SPILL SYMPOSIUM 1996
Tokyo
4 March 1996

−1−
1

INTRODUCTION

The Torrey Canyon incident off the English coast in March 1967 resulted in a spill of oil
causing pollution damage of an extent previously unknown. This incident made theworld aware of the need for international regimes of liability and compensation forpollution damage caused by spills of oil from tankers. Following the Torrey Canyon
disaster, the International Maritime Organization (IMO) convened a Diplomatic
Conference in Brussels in 1969, which adopted the International Convention on Civil
Liability for Oil Pollution Damage (Civil Liability Convention, CLC). This Convention
lays down the principle of strict liability for shipowners and provides for a system ofcompulsory insurance.
The 1969 Conference noted, however, that the Civil Liability Convention regime wasinadequate as it might not provide full compensation to victims of pollution damage andrecognised the need for a scheme providing supplementary compensation. After further
deliberations within IMO, a Diplomatic Conference was convened in Brussels in 1971.
This Conference adopted the International Convention on the Establishment of anInternational Fund for Compensation for Oil Pollution Damage (Fund Convention). The
Fund Convention set up an international organisation, the International Oil Pollution
Compensation Fund (IOPC Fund), to administer the system of compensation created bythat Convention.
The Civil liability Convention entered into force in 1975 and the Fund Convention in
1978.
The International Oil Pollution Compensation Fund (IOPC Fund) was established in
October 1978. It is the only worldwide inter-governmental organisation which pays
compensation to victims who have suffered pollution damage. It also relieves the
shipowners of part of the financial burden imposed on them by the Civil Liability
Convention.
As at 5 February 1996, the Civil Liability Convention had 93 Contracting States, andthe Fund Convention 68 Contracting States.
Both the Civil Liability Convention and the Fund Convention have been amended byProtocols in 1976, 1984 and 1992. The 1976 amendments were of a technical nature.
The 1984 and 1992 Protocols imply fundamental amendments to the Conventions.
2

CIVIL LIABILITY CONVENTION

The Civil Liability Convention forms the basic structure on which the regimes of
liability and compensation for oil pollution damage from ships are based. The following
are the fundamental elements of the Civil Liability Convention regime.
2.1

Scope of application

The Civil Liability Convention applies to oil pollution damage resulting from spills fromladen tankers and suffered in the territory (including the territorial sea) of aContracting State. The only criterion for its applicability is, therefore, where thedamage occurred. The flag State of the tanker and the nationality of the shipowner are
irrelevant for determining the scope of application of the Civil Liability Convention.
The Civil Liability Convention also applies to measures, wherever taken, to prevent or
minimise pollution damage in the territory (including the territorial sea) of aContracting State ("preventive measures").

−2−Damage caused by non-persistent oil is not covered by the Civil Liability Convention.
Therefore, spills of gasoline, light diesel oil, kerosene, etc, do not fall within the scope of
the Civil Liability Convention.
Only spills from a tanker which is actually carrying oil in bulk as cargo are covered by
the Civil Liability Convention. Spills from a tanker during a ballast voyage are,therefore, not covered by the Civil Liability Convention, nor are spills of bunker oilfrom ships other than tankers.
The Civil Liability Convention applies only to damage caused or measures taken after
an incident has occurred in which oil has escaped or been discharged. The Convention
does not apply to "pure threat removal measures", ie preventive measures which are so
successful that there is no actual spill of oil from the tanker involved.
Compensation for oil pollution damage not covered by the Civil Liability Convention, ie
damage caused by spills from unladen tankers or from ships other than tankers, costsof pure threat removal measures and damage caused by non-persistent oil, is governedby the applicable national law, normally the law of the State where the damage wassustained.
It should be noted that the Civil Liability Convention (and the Fund Convention) only
deals with oil pollution from ships. Pollution resulting from off-shore operations falloutside the scope of the Conventions, and compensation for such pollution damage isgoverned by the applicable national law.
2.2

Strict liability

The owner of a tanker has strict liability (ie is liable also in the absence of fault) for
pollution damage caused by oil spilled from the tanker as a result of an incident. He
may be exempted from liability only in a few particular cases, namely:(a)the damage resulted from an act of war or a grave natural disaster,(b)

the damage was wholly caused by sabotage by a third party, or(c)the damage was wholly caused by the failure of authorities to maintainnavigational aids.

The grounds for exemption are very limited, and the owner will, therefore, be liable forpollution damage in almost all incidents which occur under normal circumstances.
2.3

Limitation of liability

The shipowner is, under certain conditions, entitled to limit his liability to an amount of
133 SDR (US$205) per ton of the ship's tonnage or 14 million SDR (US$21.7 million)
whichever is the less. In order to be entitled to limit his liability, the owner must
establish a limitation fund by depositing the limitation amount with a court or by
furnishing a guarantee for that amount acceptable to the court.
If a claimant proves that the incident occurred as a result of the personal fault (the"actual fault or privity") of the owner, the latter will be deprived of the right to limit his
liability.
2.4

Channelling of liability

Claims for pollution damage under the Civil Liability Convention can be made only

−3−against the registered owner of the tanker concerned. This does not preclude victims
from claiming compensation outside the Civil Liability Convention from persons otherthan the owner. No claim can, however, be made against the servants or agents of theowner. The owner is entitled to take recourse action against third parties in accordancewith national law.
2.5

Compulsory insurance

The owner of a tanker carrying more than 2 000 tonnes of persistent oil as cargo is
obliged to maintain insurance to cover his liability under the Civil Liability Convention.
Tankers must carry on board a certificate attesting the insurance cover of the ship.
When entering or leaving a port or terminal installation of a State Party to the Civil
Liability Convention, such a certificate is required also for ships flying the flag of aState which is not Party to the Civil Liability Convention.
The victims may bring legal actions directly against the insurer.
2.6

Competence of Courts

Actions for compensation against the owner or his insurer under the Civil Liability
Convention may only be brought before the Courts of the Contracting State in the
territory or territorial sea of which damage was caused.
3

FUND CONVENTION

The Fund Convention was elaborated as a supplementary convention to the Civil
Liability Convention. Only those States which have become Parties to the Civil
Liability Convention can become Members of the IOPC Fund. As already mentioned,
the IOPC Fund has at present 68 Member States.
The main functions of the Fund Convention are to provide supplementarycompensation to those who cannot obtain full and adequate compensation for oil
pollution damage under the Civil Liability Convention, and to indemnify the owner fora portion of his liability under the Civil Liability Convention.
The IOPC Fund is financed by persons who receive crude oil and heavy fuel oil in Fund
Member States.
3.1

Supplementary compensation

The IOPC Fund pays compensation to any person suffering oil pollution damage if that
person is unable to obtain full and adequate compensation under the Civil Liability
Convention for one of the following reasons:
(a)
(b)
(c)

No liability for pollution damage arises under the Civil Liability Convention,
because the owner can invoke one of the exemptions under that Convention.
The owner is financially incapable of meeting his obligations under the Civil
Liability Convention and his insurance is insufficient to satisfy the claims forcompensation for pollution damage.
The damage exceeds the owner's liability under the Civil Liability Convention.

The experience of the IOPC Fund has shown that most incidents fall within category
(c).

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The IOPC Fund is relieved of its obligation to pay compensation if it proves that thepollution damage resulted from an act of war or if it was caused by a spill from awarship. In addition, the IOPC Fund has no obligation to pay compensation if theclaimant cannot prove that the damage resulted from an incident involving one or moreladen tankers. This latter case refers to spills of oil from an unidentified source.
3.2

Limit of Compensation

The compensation payable by the IOPC Fund in respect of an incident is limited to an
aggregate amount of 60 million SDR (US$89 million), including the sum actually paidby the owner (or his insurer) under the Civil Liability Convention<1>.
Of the 79 incidents with which the IOPC Fund has dealt so far, only a few, (for example
the Tanio incident) have given rise to claims in excess of the limit of compensation thatapplied to the incident. In such a case, compensation paid to claimants is reduced pro
rata, so that the maximum amount of 60 million SDR is not exceeded. In all otherincidents, the total amount of the claims arising out of each incident has been below thelimit of compensation available.
The IOPC Fund had taken it for granted that the conversion of the (gold) franc into
national currency should be made on the basis of the Special Drawing Right of theInternational Monetary Fund, and this had also been the interpretation which has been
generally accepted internationally. The reasons were that the word "official" had been
included in the text of the Civil Liability Convention to rule out the application of thefree market value of gold, and that the unit of account in the two Conventions was thesame. In the Haven case (Italy, 1991), however, it was maintained by some claimants
that the conversion should be made by using the free market price of gold, since the1976 Protocol to the Fund Convention which replaced the (gold) franc with the SDR
was not in force.
The Court of first instance in Genoa in charge of the limitation proceedings has held,
however, that the maximum amount payable by the IOPC Fund should be calculated by
the application of the free market value of gold which gives an amount of LIt 771 397
947 400 (including the amount paid by the shipowner under the Civil liability
Convention), instead of LIt 102 643 800 000, as maintained by the IOPC Fund,calculated on the basis of the SDR.
The IOPC Fund has appealed against this judgement. The Court of Appeal has not yet
rendered its judgement on this issue.
The IOPC Fund will if necessary take the question to the Supreme Court of Cassation.
If the decision of the Court of first instance in Genoa were to be confirmed, themaximum amount payable by the IOPC Fund would correspond to over US$460 million
instead of US$93 million. This might in the IOPC Fund's view seriously jeopardise thefuture of the system of compensation established by the Conventions.
3.3

Organisation of the IOPC FundThe IOPC Fund consists of an Assembly, an Executive Committee and a Secretariat.
The Assembly, which is composed of representatives of the Governments of all Member
States, is the supreme organ governing the IOPC Fund and holds regular sessions oncea year. The Executive Committee is elected by the Assembly. It is composed of 15
Member States. Its main function is to approve settlements of claims against the IOPC
Fund.
_________________________<1>

The limit was originally 30 million SDR (US$46.45 million). It was increased an stages to 60 million SDR by the IOPC
Fund Assembly.

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The Secretariat is headed by a Director. At present it has in all twelve staff members at
its headquarters in London.
3.4

Contributions

The payments of compensation and indemnification as well as the administrative
expenses of the IOPC Fund are financed by contributions levied on any person who hasreceived crude oil and heavy fuel oil ("contributing oil") in a quantity exceeding 150 000
tonnes in one calendar year in a Contracting State of the Fund Convention.
4

THE 1992 PROTOCOLS TO THE CIVIL LIABILITY CONVENTION
AND THE FUND CONVENTION

4.1

Background

A Diplomatic Conference held in November 1992 under the auspices of IMO adopted
two new Protocols amending the Civil Liability Convention and the Fund Convention,in order to provide higher limits of compensation and a wider scope of application,
thereby ensuring the viability in the future of the system of compensation establishedby these Conventions. The 1992 Protocols superseded two Protocols adopted in 1984;
they have the same substantive provisions, but with lower entry into force
requirements for the 1992 Protocols.
4.2

Entry into force

The 1992 Protocols will enter into force on 30 May 1996 in respect of the following nine
States which have deposited instruments of ratification, acceptance, approval or
acceptance relating to both Protocols: Denmark, France, Germany, Japan, Mexico,
Norway, Oman, Sweden and the United Kingdom. The Protocol to the Civil Liability
Convention will also enter into force on that day in respect of Egypt. As at 1 December
1995, the following six States had also deposited instruments of ratification, acceptance,
approval or accession relating to both Protocols: Australia, Finland, Greece, Liberia,
Marshall Islands and Spain, which will bring the number of States Parties to the 1992
Protocol to the Fund Convention to 15 and the number of States Parties to the 1992
Protocol to the Civil Liability Convention to 16 (cf the Annex).
The 1992 Protocol to the Fund Convention provides a mechanism for the compulsory
denunciation of the 1969 Civil Liability Convention and the 1971 Fund Convention,
when the total quantity of contributing oil received in the States Parties to the Protocol
to the Fund Convention reaches 750 million tonnes. In the light of information
available to the Director concerning progress towards ratification in other States, it isexpected that the requirements for the compulsory denunciation might be fulfilledduring the summer of 1996. States Parties to the 1992 Protocol to the Fund Convention
as well as States which have deposited their instruments of ratification in respect ofthat 1992 Protocol would then have to denounce the 1969 Civil Liability Convention
and the 1971 Fund Convention within six months, with effect twelve months later.
In its instrument of ratification relating to the 1992 Protocol to the Fund Convention,
Spain made a declaration pursuant to Article 30.4 of that Protocol, so that the
instrument relating to the latter will not take effect until the end of the six-month
period referred to in Article 31, ie six months after the total quantity of contributing oil
has reached 750 million tonnes. No corresponding declaration was made pursuant to−6−Article 13.2 of the Protocol to the Civil liability Convention.
4.3

Main Amendments

The main differences between the Civil liability Convention and the Fund Convention
in their original version and the Conventions as amended by the 1992 Protocols are thefollowing.
uSpecial liability limit for owners of small vessels and substantial increase of
the limitation amounts. The revised limits will be: (a) for a ship not exceeding 5000 units of gross tonnage, 3 million Special Drawing Rights (SDRs) (US$4.4
million); (b) for a ship with a tonnage between 5 000 and 140 000 units of tonnage,
3 million SDRs (US$4.4 million) plus 420 SDRs (US$622) for each additional unitof tonnage; and (c) for a ship of 140 000 units of tonnage or over, 59.7 million
SDRs (US$88 million).

u

Increase in the limit of compensation payable by the IOPC Fund to 135 million
SDRs (US$200 million), including the compensation payable by the shipownerunder the 1992 Protocol to the Civil Liability Convention. This limitation figure
would be increased automatically to 200 million SDRs (US$296 million) if there
were three Member States of the 1992 Fund (ie the Organisation which will beestablished under the 1992 Protocol to the Fund Convention) whose combined
quantity of contributing oil received during a given year in their respective
territories exceeds 600 million tonnes.

u

A simplified procedure for increasing the limitation amounts in the two
Conventions.

uExtended geographical scope of application of the Conventions to include theexclusive economic zone (EEZ), established under the United Nations
Convention on the Law of the Sea.

u

Pollution damage caused by spills of persistent oil from unladen tankers will becovered.

u

Expenses incurred for preventive measures are recoverable even when no spill ofoil occurs, provided that there was a grave and imminent danger of pollution
damage.

u

New definition of pollution damage retaining the basic wording of the present
definition with the addition of a phrase to clarify that, for environmental damage,
only costs incurred for reasonable measures to restore the contaminatedenvironment are included in the concept of pollution damage.

u

No indemnification of the shipowner.

The 1992 Protocol to the Fund Convention also introduces provisions setting a cap on
contributions to the IOPC Fund payable by oil receivers in any given State. This cap
was fixed by the Conference 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 of the new Fund set up under the
1992 Protocol exceeds 750 million tonnes, or at the expiry of a period of five years fromthe entry into force of the 1992 Protocol to the Fund Convention (ie 30 May 2001),
whichever is the earlier.

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THE VOLUNTARY INDUSTRY SCHEMESAt the same time as the 1969 Civil liability Convention and the 1971 Fund Convention
were negotiated, two corresponding voluntary industry schemes were adopted. These
two schemes were known as TOVALOP (Tanker Owners Voluntary Agreement
concerning Liability for Oil Pollution) and CRISTAL (Contract Regarding a
Supplement to Tanker Liability for Oil Pollution). The purpose of these industry
schemes was to provide benefits comparable to those available under the Civil Liability
Convention and the Fund Convention in States which had not ratified these
Conventions. Both TOVALOP and CRISTAL were intended to be interim solutions andto remain in operation only until the international conventions had worldwide
application.
The voluntary schemes have been amended several times. In the case of TOVALOP, in1987 a Supplement was added to the Agreement which was in force prior to that date(henceforth known as the TOVALOP Standing Agreement). The TOVALOPSupplement applies only to incidents where the tanker is carrying a cargo owned by aparty to CRISTAL. In all other cases, only the TOVALOP Standing Agreement canapply. As regards CRISTAL, an extensively amended contract was adopted in 1987. The
voluntary schemes are designed to have a duration up to 20 February 1997.
In November 1995, the Directors of the Boards of the International Tanker Owners
Pollution Federation Limited (ITOPF - the company which administers TOVALOP) andCristal Limited (the company which administers CRISTAL) decided that the voluntaryagreements would not be renewed when their present terms ended in February 1997.
The Directors believed that the relevance of the interim TOVALOP and CRISTAL
agreements had eroded over the years, as more States had become Parties to the 1969
Civil Liability Convention and the 1971 Fund Convention. Their decision to discontinue
TOVALOP and CRISTAL reflected the rapid growth in the acceptance by maritime
States of these two Conventions and of the 1992 Protocols thereto, which offer
significant advantages over the voluntary agreements for those claiming compensationfor oil pollution damage. The Directors considered that the continued existence of thevoluntary agreements could slow progress by acting as a disincentive to States which
had not yet ratified these Protocols.
7

CONCLUSIONSIn the light of sixteen years of experience of the IOPC Fund, it is fair to say that thesystem of compensation established by the Civil liability Convention and the Fund
Convention has worked remarkably well. This is due to a large extent to the spirit ofco-operation shown by Governments of Member States as well as by shipowners, P & I
Clubs and the oil industry.
At the International Conference, held in London in November 1990, which adopted theInternational Convention on Oil Pollution Preparedness, Response and Co-operation, anumber of delegations stated that an efficient system of compensation was of great
importance for ensuring rapid response and assistance between States, since such asystem would make it easier for the States involved to recover costs incurred for theassistance given. The Conference inserted in the preamble to the Convention astatement emphasising the importance of the Civil Liability Convention and the Fund
Convention.
The present international framework for liability and compensation for oil pollution
damage had its origins in a maritime disaster in 1967. With the entry into force of the
1992 Protocols next May, a major step will be made towards ensuring that it continues
to meet the needs of society in respect of compensation for victims of oil pollution
damage.

ANNEXIOPC Fund Member Statsie States Parties to Both the Civil Liability Convention
and the Fund Convention
as at 1 February 1996

States Parties to the 1969 Civil Liability Convention
but not to the 1971 Fund Convention(and therefore not Member of the IOPC Fund)
as at 1 February 1996

States Parties to the 1992 Protocols to the
Civil Liability Convention and the Fund Convention(to enter into force on 30 May 1996)
as at 1 February 1996

<1>

In accordance with a declaration made in Spain’s instrument of accession, the Protocol to the Fund Convention will notenter into force for Spain until 18 months after the total quantity of contributing oil has reached 750 million tonnes.

State Party to the
1992 Protocol to the Civil Liability Convention
but not to the 1992 Protocol to the Fund Convention(to enter into force on 30 May 1996)
as at 1 February 1996