1Compensation For Pollution Damage In A Transnationa1 Oil Spill
Dr. Chao Wu, Thomas Miller (Americas), UK P&I Club
Introduction
The "Evoikos" accident raises interesting issues of application of the CLC and Fund
Conventions because it was a transnational oil spill - an incident occurring in the
territory of country A, but which. caused or threatened pollution damage not only incountry A, but also in neighboring countries B and C.
In such a situation, different legal systems are involved. If, as a result of a single
incident, pollulion damage occurs in country A which is party to CLC 69, in country B
which is party to CLC 69 and FC 71, and country C which is not party to either of these
Conventions, different legal systems apply for compensating damage claims, The
situation can give rise to different complications, if four Conventions, not just two, areinvolved, ie the intial CLC/FC and the revised CLC/FC. Because o the relationships
between the Conventions (as laid down in the Conventions themselves), the way claims
will be dealt with is not at all straightforward.. It is the application of the Conventionsin these complex situations which is the subject of my presentation today.
For addressing this issue, we need first of all to examine certain keywords such as'pollution damage' and 'preventive measures', since the Conventions "apply exclusively
to pollution damage caused on the territoiy including the territorial sea of aContracting State and to preventive measures taken to prevent or minimize suchdamage." It is important to note that the definitions of these keywords are intentionallymade the same in CLC and FC, for the sake oft heir consistent application:
Under the intial CLC and FC 'pollution damage' is defined as "loss or damage caused
outside the ship carrying oil by contamination resulting from the escape or discharge ofoil from the ships wherever such escape or discharge may occur, and includes thecosts of preventive measures and further loss or damage caused by preventive
measures. " 'Preventive measures' is defined as "any reasonable measures taken by any
person after an incident has occurred to prevent or minimize pollution damage".
'Incident' is defined as "any occurrence, or series of occurrences having the same origin,which causes pollution damage."

2

Under the revised CLC and FC, 'pollution damage' is redefined as: "(a) loss ordamagecaused outside the ship by contamination resulting from the escape ordischarge of oil from the ship, wherever such escape or discharge may occur, provided
that compensation for impairment oft he environment other than loss of profit fromsuch impairment shall be limited to costs of reasonable measures of reinstatement
actually undertaken or to be undertaken; (b) the costs of preventive measures andfurther loss or damage caused by preventive measures. " The definition of 'preventive
measures" remains the same as in the initial CLC/FC, ie "any reasonable measurestaken by any person after an incident has occurred to prevent or minimize pollution
damage. " However, the definition of incident' is revised to the effect of including in'preventive measures' any measures taken to prevent or minimise a grave andimminent threat of causing pollution damage.
According to these definitions, the application of the Conventions does not depend on
the place where the spill occurs, or where preventive measures are taken; theConventions clearly state "wherever such escape or discharge may occur " and the FC
71, in its Preamble, further clarifies and emphasises admissibility of preventive
measures "wherever taken".
What matters is the place where pollution damage is suffered. This differentiation of
escape and pollution damage makes the compensation for pollution damage claims
somewhat tricky in certain cases.
If a spill occurs on the high sea, but pollution damage occurs within terriorial waters ofa contracting state, the claim for such damage is acceptable under the Conventions. If,again, a spill occurs in the territory of a non-contracting state, but pollution damage
occurs in the contracting state, claims for such are also covered under the Conventions.
We can indeed imagine numerous scenarios of a transnational oil spill (CLC 69CLO/FO 92; CLC 92-non CLC; CLC 69-FC71-CLC92 etc etc) where treatment of claims
has to vary. However time is too limited to fulfil such an exercise. Instead, I will choosethe "Evoikos" scenario which represents a typical example of a transnational oil spill to
discuss how the Conventions work to compensate claims,
In the case of "Evoikos", the incident occurred in Singapore waters, but pollution
damage was suffered not only by Singapore claimants, but also Malaysian claimants.

3

The different legal status of Singapore and Malaysia at the time of the incident of"Evoikos" exposes claimants of the two nations to disparate treatment of their claims.
This will be discussed in Section (A) below. (Please note that I am using "Evoikos" as an
example, and this paper does not seek to comment on any specific actual claim raised inthe "Evoikos" case.)
Furthermore, the CLC 92 recently became effective in Singapore, but the CLC 69 still
remains applicable until 31/12/98. During a period of a little more than three months,
CLO 92 may apply in Singapore, as well as the CLO 69, but the FC 92 is not yet
effective. Liability and compensation for pollution damage arising during this period,
based on a similar scenario as "Evoikos", will be analysed in Section (B) below.
Finally, after this intermediary period CLC 69 will no longer be applicable, OLC/FC 92
both will apply in Singapore, and Section (0) below will reflect that situation.
(A) "Evoikos" scenario at the time oft he incident-Analvsis of past legal situation. before
18/9/98
At the time "Evoikos" happened, Singapore was party to CLC 69, whereas Malaysia wasparty to CLC 69 and FC 71. As indicated earlier, these Conventions apply to "pollution
damage caused on the territory including the territorial sea of a Contracting State andto preventive measures taken to prevent or minimize such damage". Which pollution
damage and preventive meaures are recoverable under CLC and which under FC7 Let'slook at the principle first and then the procedure of compensation.
1. Principle
As far as pollution damage is concerned, Singaporian claimants receive compensation
provided by the CLC 69, whereas Malaysian claimants can recover under both CLC 69
and FC7 1,
However, the above simple answer only relates to pollution damage strictly speaking,that is damage suffered by claimants as a result of the pollution, such as contaminationof a fishing boat, loss of income by fishermen. loss of profit by certain businessmen
located - in the polluted area etc. The preventive measures, coats of which are also
included in the definition of "pollution damage", are however treated differently in the4

Conventions. In the aim of encouraging prompt measures for preventing or minimizing
pollution damage, the Conventions resolve to pay costs of preventive measures
wherever they are taken.
Hence, if a spill occurs on the high sea, measures taken on the high sea with the aim ofpreventing or minimizing pollution damage in the territorial waters of a contracting
state are covered under the Conventions. If a spill occurs in a non contracting state,
which causes or presents threat to cause pollution damage in its neighboring state
which is a party to CLO or CLC/FC, preventive measures taken in the non-contracting
state should also be recoverable under the Conventions if only they had a clear purposeof preventing pollution in a contracting state. In such a situation, i1~ due to themeasures successfully taken, no actual pollution damage occurred in the contracting
state, claimants for costs of preventive measures can still bring an action forcompensation in the court of the contracting state, as the CLO provides in art. IX that
"Where ...preventive measures have been taken to prevent or minimize pollution
damage in such territory including the territorial sea. actions for compensation may
only be brought in the Courts of any such Contracting State or States."
Now if we have an incident where preventive measures were taken in Singapore, butwith the aim of preventing or minimizing pollution damage not only in Singapore but
also in Malaysia, these preventive measures should be recoverable not only under CLO
to which Singapore is a party, but also under FC which applies in Malaysia. This isbecause the FC uses the same definition of 'preventive measures', ie measures
wherever taken to prevent or minimize pollution damage in a FC country. This is theway the Conventions should work.
2. Procedure (steps of compensation)
One of the most characteristic provisions of the Conventions is the one which
establishes a pro-rating mechanism. Both CLO 69, FC 71 provide that in caseadmissible claims exceed the available fund, the fund shall be distributed amongclaimants in proportion to the amounts of their established claims1. This pro-ratamechanism, peculiar to the Conventions, serves to ensure that claimants are treatedequitably. More importantly, it has a practical effect of strengthening shipowners' right
1 limitationofliability.
The
90, lacking
a similar mechanism, allows anarchy
CLCof69,
art. V(4)
andUS
FCOPA
71, art.
4(5)in claims settling and provides no protection to shipowners, even if they are entitled to5limitation.
By applying the provision of pro-rating, and taking into consideration the interaction
between CLO and FC, the following diagram explains how the Conventions work tocompensate admissible damage claims.
For the purpose of simplifying our explanation, we have assumed the following
conditions:- indemnification by the IOPC Fund to the shipowner does not apply;- the size of the ship is big enough to reach the maximum amount of limitation, ie
SDR14 million;-the shipowner is entitled to his right of limitation;-damages are arbitrarily divided into three categories: (i) preventive measures in
Singapore; (ii) other damages in Singapore including property damage, consequential
economic loss, pure economic loss, as well as costs for restoring the environment; and(iii) all types of damage in Malaysia. For the purpose of the example, each of the three
categories represents an equal amount of SDR 20 million as admissible claims. [SeeTable 1. Singapore (CLC 69); Malaysia (CLC 69, PC 71)1
First, the CLC limitation fund of SDR 14 million will be apportioned among admissible
claims for preventive measures and pollution damage suffered by Singaporean and
Malaysian claimants. If this fund is not sufficient to pay for all the claims, the latter
will be reduced proportionately, As claims for pollution damage in Singapore,preventive measures in Singapore, and all types of damage in Malaysia, are each
assumed to be SDR 20 million, each will only receive SDR 4.662 million from theshipowner's limitation fund, and in each case SDR 15,338 million remains unpaid
under CLC 69.
It can be seen that, in this situation, it is important that the Singaporean court and the
Malaysian court apply the same criteria of admissble claims, otherwise, claims would
be treated inequitably even within the CLC limitation fund.
Second, there is payment by the IOPO Fund. As Singapore is only party to CLC 69, not
to FC 71, claims in Singapore for pollution damage receive no further compensation1
However Singaporean claimants for preventive measures may submit claims for any
unpaid amount to the IOPC Fund. Even supposing there were no actual pollution
damage in Malaysia, preventive measures in Singapore are recoverable under the FC,
if they were intended to prevent pollution damage in Malaysia.

6

As for claims incurred in Malaysia, all admissible claims for pollution damage andpreventive measures, which remain unpaid by the shipowner's limitation fund, shouldbe paid by the IOPC Fund subject to its maximum amount of compensation.
Here we need to spare some time to explain the amount of the IOPC Fund's maximum
compensation. Art. 4.4(a) of the PC 71 provides that "the aggregate amount ofcompensation payable by the Fund under this Article shall in respect of any one
incident be limited, so that the total sum of that amount and the amount ofcompensation actually paid under the Liability Convention for pollution damage
caused in the territory of the Contracting States ..shall not exceed SDR 60 million."
The amount actually paid by the limitation fund under CLC for damage occuring in
Malaysia is SDR 4.662 million, therefore the maximum compensation payable by the
IOPC Fund in this case is SDR 60 million minus 4.662 million, ie 55.338 million. It may
be argued that payment made by the owner's limitation fund to Singaporean. claimants
for preventive measures should also be taken into account when calculating the IQPC
Fund's maximum compensation. However, I prefer to think that the Fund might want
to be flexible on this point in view of the difficulty of judging which part of preventive
measures were taken for preventing pollution damage in Singapore and which partwere taken for damage in Mi1aysia. Alternatively, it is possible that this argument
might be entirely abandoned in consideration of the FC's main purpose, expressed in its
Preamble, which is to ensure full compensation to victims with admissible claims.
In case claims for Singaporean preventive measures plus Malaysian damage of all
types together exceed the maximum compensation payable by the IOPC Fund, again,
they will be reduced proportionately in accordance with the amount of their establishedclaims.
In conclusion,, based on the legal status of Singapore and Malaysia at the time when
"Evokos" happened, private claimants for pollution damage in Malaysia may receive amuch higher level of compensation than most Singaporean claimants. However,Singapore claimants in respect of preventive measures may be entitled to payment by
the [OPC Fund, if their actions had the purpose of preventing or minimizing pollution
damage in a PC country.

7(B) "Evoikos" scenario during the period from 18/9/98 to 31/12/98-Analysis of present
legal situation
Let's analyze Singapore's legal statue first. Singapore acceded to the CLC 92 on 1 8/9/97
and FC 92 on 31/12197. These two Conventions take effect one year after theirrespective dates of accession. However, the CLC 69 was only denounced at the time
when Singapore acceded to the FC 92 and its denounciation will only taken effect on
31/12/98, the same date as that when the PC 92 enters into force. Therefore between
1819/98 and 31/12/98, both CLCs are in effect in Singapore, but not the FC 92.
If a tanker spill occurs during

period, which CLC shall apply in Singapore? Both CLC

69 and CLC 92 provide that "This Convention shall supersede any International
Conventions in force or open for signature, ratification or accession at the date on
which the Convention is opened for signature, but only to the e4ent that such
Conventions would be in conflict with it,. however, nothing in this Article shall affectthe obligations of Contracting States to non-Contracting Slates arising under such
International Conventions ", In accordance with this treaty provision, three situations
exist for Singapore depen4ing on the legal status of the polluting ship's flag country:
1. If the polluting tanker flies the flag of a country which is not party to either of the
CLCs, Singapore has no treaty obligations via-a-vis that country, therefore would apply
CLC 92, as the effect of the first part of the above-quoted provision which exists in both
CLC~ makes the now C2L1C to supersede the old CLC.
2. If the polluting tanker flies flag of a country which is party to CLC 69, CLC 69 would
apply. According to the second part of the provision, CLC 92 would not apply because
Singapore has to fulfill its treaty obligation arising from CLC 69 to apply thisConvention to a ship flying flag of a CLO 69 country.
3. If the polluting tanker flies the flag of a country which is party to CLC 92, then CLC
92 will apply - CLC 69 has to disappear from the picture in order for Singapore to fulfill
its treaty obligation under CLC 92 vis-a-vis a ship flying flag of a CLC 92 country
In the case CLC 69 applies, the steps for compensation for pol4ution damage in
Singapore arid Malaysia &e the same as described in Section A above.

8

In the case CLC 92 applies (i.e. the ship flies the flag of a country not party to CLC 69),
the situation of compensation needs some explanation. For the purpose of simplifying
ourexp1~nation, we have assumed the following conditions:- the sire of the ship is big enough to reach the maximum amount of limitation, ie
SDR14 million in the case of CLC 69 and SDR 59~7 million in the case of CLC 92;- the shipowner is entitled to his right of Limitation:- damages are arbitrarily divided into three categories; (i) preventive measuresinSingapore; (ii) other damages in Singapore including property damage, consequential
economic los0, pure economic loss, as well as costs for restoring the damaged
environment;and (iii) all types of damage in Malaysia. For the purpose of the example, each of thethree categories represents an equal amount of SDR 40 million as admissible claims.
Though Singapore has to apply CLC 92 to a CLC 92 flag ship, Malaysia does not havetreaty obligation towards such a ship, therefore it will apply CLC 69 as well as PC 71 towhich it is a party. [Table 2 shows how compensation of claims is processed inaccor4~nce with the three Conventions.]
In this sitLlation1, Singaporean claimants for pollution damage and costs of preventive
measures are compensated in accordance with CLC 92, whereas Malaysian claimants
for all types of pollution damage are compensated under CLC 69 and 1~C 71. As forpreventive measures taken in Singapore, if these are not fully compensated w4er CLC
92, then they are eligible for compensation under CLC 69 and FC 71, provided they
were taken for preventing or minimizing pollution damage in Ma1aysia
The same mechanism of pro-rating exists in the new regime of CLCIFC, if the available
fluids are not sufficient to satisfy all the admissible claims.
From this example, it can be seen that the burden on the shipowner and his Club can beenormous, as lie may be liable under two CLCs for one incident and has to set up two
limitation fun4s. If a third country which is not party to either CLCs is involved, theshipowner may be liable three times, under two CLCs and the third country's domestic
law. This double Or triple exposure of the shipowner demonstrates a certain advantageof the now no longer existant CRISTAL, as far as the shipowner is concerned. If
CRISTAL were still available, its mechanism of reimbursement to the shipowner would

9mostly have the effect of assuring that the shipowner's maximum liability in one
incident would not exceed the maximum limit laid down in TOVALOP Supplement, ie
SDR 59.7 million - for CRISTAL would reimburse the shipowner for any amount hepaid in excess of SDR 59.7 million up to SDR 120 million.
(C) "Evoikos" scenario after 31/12/98 - Analysis of future legal situation..
From 3 1 December of this year, CLC/~C 92 will both be in effect in Singapore and on
the same dates CLC 69 will be denounced to its effect, In a spill such as ":Evoikos"
which caused pollution damage both in Singapore and Malaysia, how do the four
Conventions work to compensate pollution damage? [See Table 3]
Here, the legal situation should be easier, a~ the two regimes exist separately.
Pollution damage and preventive measures m Singapore are compensated under the 92
regime, and pollution damage including preventive measures in Ma1aysia arecompensated in accordance with the old CLC/FC regime. As 1~or preventive measurestaken in Singapore, if not fully compensated under CLC/FC 92, they arc ffieoretic~I1yeligible for compensation under CLC 69 and FC 71, However, it might be foundunpopular that Singaporean claimants for preventive measures, especially if they aregovernmental bodies, after being paid high compensation of their claims by the 92
scheme. come to compete 4vith Malaysian private victims suffering pollution damage
for the relatively low fund offered by the old CLC/FC regime.
It is noted that preventive measures under CLC 92 &e wider than in CLC 69: in orderto encourage immediate action in the event of a tanker incident to "prevent" pollution,
CLC/FC 92 accept threat removal measures which are measures taken to remove a
grave and imminent threat of causing pollution damage.
As was noted above, the separate existence of the old and the new regimes creates aheavy burden on the shipowner who may be liable two times for the same incident andhas to set up two limitation funds. As far as oil companies are concerned, the bigger the
Fund's membership is, the smaller the burden of contribution. The existence of two
IOPC Funds means there is splitting of each Fund's membership and this results inheavier contributions. CLC/FC 92, with their increased level of compensation, havebeen shown to be a fairer solution to the problem of oil pollution from ships. They offer
more adequate compensation to pollution claimants. It is therefore in the interests of10potential claimants to see countries moving into the revised CLC/FC. As far as
shipowners and oil companies are concerned, it is also in their better interests to see
the world adopting a unified system.
CONCLUSTON
If; in the "Evoikos" scenario, both Singapore and Malaysia had been parties to CLCIFC
92, claimants of the two nations would have received the same treatment in terms ofcompensation of their pollution damage claims, and the legal complexity that we havedescribed would be non-existent. Neverthe1es~, however more reasonable and fair therevised CLC/FC are proving to be comparing to the initial Conventions, it is unrealistic
to assume that the whole world will, in a foreseeable future, move into a single andunified system. It follows that some inequity and complexity of the type examined inthis paper will remain, and a spirit of understanding and flexibility will continue to be
crucial to the successful implementation of the Conventions.

11

12

13