The International Regime onLiability and Compensation for Oil Pollution Damage

PAJ Oil Spill Symposium 2012

Akiko Yoshida
Legal Counsel
International Oil Pollution Compensation Funds

Outline Rational of the International CompensationRegime
 Legal Framework
 How the IOPC Funds work?
 Assessment of Claims Current Topics

The international regime:
Why do we need it?

•

Compensation to victims of pollution damage caused by spills ofpersistent oil from tankers•

Compensation through amicable settlement•

Uniform and consistent application of compensation regime•

Equal treatment of all claimants

1992 Compensation Regime
When does it apply?

•Pollution damage•

Spills of persistent oil fromtankers•

Territory, territorial waters andExclusive Economic Zone orequivalent•

Preventive measures•‘Mystery spills’The international compensation regimeHistory• 1969 Civil Liability Convention• 1971 Fund Convention (ceased to be in force inPrevious regime

2002)

Current regime

Additional
protection• 1992 Civil Liability Convention• 1992 Fund Convention• 2003 Supplementary Fund Protocol

The compensation regime- Three Tier System

Compensation regime
Third tierSecond tier1992 FundConvention
First tier1992 CivilLiabilityConvention

Paying organism

Levies on oilreceivers inSupplementary Fund
Member States

SupplementaryFund

Levies on oil
receivers in 1992
Fund MemberStates

1992 Fund

Ship owner(legally liable)

Insurance(P&I Clubs)

Claimants

Supplementary
Fund Protocol

Source of money

Compensation limits
Laid down by the Conventions

SDR (millions)

750 m
Supplementary Fund

1992 Fund

203m
1992 CLC

Gross Tonnage (x 1 000 tonnes)

90m

1992 Civil Liability Convention
First Tier•

Strict liability of registeredtanker owner•

Limitation of liability based on
the gross tonnage of the ship•

Ship owners required to havecompulsory, third party
insurance and certificate•

Direct action against insurer ofthe ship

1992 Civil Liability Convention
Ship owner’s liability
Ship owner is exempt
if it is proved•••

damage resulted from an act of war or
natural phenomenon (force majeure)damage was result of an intentionalact by a third party
damage was caused by negligence orwrongful act of public authorities

Ship owner cannot limit liability
if it is proved•

damage resulted from theowner’s personal act with theintent to cause such loss or
recklessly and with knowledge
that such loss would probably
result1992 Fund Convention
Second Tier

WhatWhenNot applicable

Establishes the IOPC
Fund to:- pay compensation- collect contribution

Ship owner is exempt
under the 1992 Civil
LiabilityConvention(CLC)

Maximum compensationis 203 million SDR,
including the amount tobe paid under 1992 CLC

Ship owner is financially
incapable

Damage is causedby an act of war or
spill from a warship

Damage exceeds theship owner’s limited
liability amount under1992 CLC

Claimant cannot
prove it came from aship

Legal framework ofjurisdiction andenforcement

Damage occurs in
non-Member StateJurisdictional Framework

 Exclusive Jurisdiction
 courts of state party in whose territory, territorial sea or EEZ
or equivalent the damage occurred Time Bar Court action within 3 years from the date the damageoccurred, or Formal notification to the 1992 Fund of a court action
against ship-owner within the same period
 Court action in any case within 6 years from the date ofincident

The Member States••

1992 Fund Convention (105 Member States)
1992 Civil Liability Convention (127 States)••

Supplementary Fund (28 States)
1969 Civil Liability Convention (37 States)

The IOPC Funds•

Administer Fund Conventions•

Consist of Assembly, ExecutiveCommittee and Secretariat•

Establish criteria for admissibilityof claims•

Financed by contributions fromoil receivers

How does the IOPC Funds work?
Operation of the Secretariat

Who contributes to the Fund?
•Oil receivers: ‘persons’ who receive more than 150 000 tonnesof contributing oil (crude oil and heavy fuel oil) per year after
sea transport•

Member states are required to submit oil reports to theSecretariat each year•

The Fund Assembly decides the amount of contributions to belevied each year, based on amounts required to meet claims•

Oil receivers (not governments) pay

Contributions
From Member States’ oil industry

1992 Fund policy on outstanding oil reports

 No provision in the Convention on failure to oil reporting Policy decision by the Assembly in October 2008;
 Where a state is two or more oil reports in arrears, any claim
submitted by Administration of that State or a public authority
working on the recovery from that incident
 will be assessed but payment will be deferred until reporting
deficiency is rectified.
 In 2003 Supplementary Fund Protocol, no compensation will be paid
to non oil-reporting States (including “nil”-reports)

Compensation- Main Types of Claim - Property damage
 Clean-up operations and preventive measures
 Losses in fishery, mariculture and tourism sectors
Consequential lossPure economic loss
 Environmental damage; limited to costs of reasonablemeasures of reinstatement actually undertaken or tobe undertaken

Compensation- Admissibility Criteria - Existing criteria: Claims Manual Reasonableness;
 Relationship between costs and benefits; Objective criteria;

Political/social considerations are outside the scope of theConventions

Compensation- Presentation of Claims -General guidelines:• 1992 Fund Claims Manual• Early notification to enable experts toattend on-site• Key to successful recovery is goodrecord-keeping linking action to expenditurePreparing a clean up claim

Documentation:
Daily activity logs – Response organisation/contractors
Worksheets
Aircraft/ vessel logs - extracts from log books
Beachmasters – daily reports- number of personnel,- type and amounts of equipment/materials- type and length of shoreline cleaned
Purchase orders (invoices)

Presentation of claims• Invoices insufficient by themselves• Narrative describing response activities and linking these withexpense• Maps & spreadsheets very helpful• Cost items should be supported by invoices, receipts,worksheets, wages records etc.

Evidence provided must be sufficient for the IOPC Fund to form its
own opinion of the losses suffered

Role of experts• Local and international experts• Jointly appointed by IOPC Fund + P&I Club
• Advise and assist all parties on most effective clean upto minimize resource damage• Investigate damage & monitor clean-up• Offer guidance on admissibility of claims

Expert’s role is always advisory

Claims for Compensation• Early notification to Fund to enable experts to attend on-site• Key to successful recovery is good record keeping linking
action to expenditure• Assessment carried out on the basis of technical criteria• Assessments can be revised provided further information issubmitted based on Fund criteria i.e no ‘horse trading’CURRENT TOPICS

Hebei Spirit
Republic of Korea, 2007•

Samsung Heavy Industries’ cranebarge collides with Hong Kongregistered crude carrier Hebei Spirit•

Spills 10 900 tonnes of crude oil•

375 km of shoreline affected•

127 000 persons affected•

Special Law to compensate victims ofthe spill•

Korean Government decides to ‘standlast in the queue’ with some claims•

18 000 claims, representing 74 000
people assessed: £92 million•

KRW 135 120 million (£79 million)
paidHebei Spirit
Republic of Korea, 2007

Claim assessment teams•

Komos, Hyopsung, Spark, Inteco,Homarus, CMA, ITOPF•

Four local companies andinternational experts carry outassessments•Claims managers from IOPC Funds
and P&I Club•

Mainly Korean 75 experts•Local claims office (‘Hebei SpiritCentre’)•

Limited evidence of loss•

Non-licensed activity•

Large number of claims for smallamounts

Major incidents and compensation

Estimate164

Working Group
Large number of claims for small amounts

1.
2.
3.
4.

The role of Member States
Existing practices
Changes to the Claims Manual
Amendments to the Conventions

Working Group
Large number of claims for small amounts• Large numbers of claims: capacity problems; small Secretariat;
limited availability of experts/surveyors; quiet times vs. peakdemands; training of surveyors• Claims for relatively small amounts: Principles underpinning theConventions; Need for flexible approach? Need for clarity about
scope for flexibility• Lack of (documentary) evidence: Principles underpinning theConventions; Reject or investigate? Be critical or be criticised?
Need for flexible approach? Need for clarity about scope forflexibility

Working Group’s proposal
The role of Governments•

Stand last in the queue•

MoU with domestic insurancecompanies•Access to statistical data•

Grouping of claims and claimants•

Standard reference prices•

Reimbursement of overpayment ofinterim payments•

National expert list and expert
mediation panel•

Use of social security system

Working Group’s proposal
Existing practices

•
•
•
•
•

Partnership with commercial adjusters and accountants
The use of economic models
Outsourcing
Remuneration of experts
Claims Manual and claims forms in languages of Member States

Working Group’s proposal
Changes to Claims Manual• Compensation based on estimation (ofpreliminary assessments)• Fraud detection/prosecution• Six-month settlement period

Working Group’s proposal
Amendments to the Conventions

Working Group rejected the adoption of UNCC methodologies as
this would require changes in Conventions

Definition of ‘ship’

Is the regime applicable to floating storage and offloading units(FSOs or FSUs)?
Article I, 1992 Civil Liability Convention
1. ‘Ship’ means any sea-going vessel and seaborne craft of any typewhatsoever constructed or adapted for the carriage of oil in bulk as
cargo . . .

SlopsGreece, 2000•

A floating storage unit (FSU),
converted from an oil tanker,
explodes and spills 1 000 to
2 000 tonnes of oil in Piraeus,Greece•

In 2000, Executive Committee
decides Slops is not a ‘ship’ as
defined by the 1992 CLC•

Greek Supreme Court holds thatSlops is covered under the 1992
CLC•

1992 Fund pays €4 million incompensation•

In 2008, 1992 Fund Assembly
starts discussion on definition ofshipDefinition of ‘ship’
FSO are not ‘ships’• Secretariat was instructed to provide“legal analysis” on interpretation of‘ship’• Legal Analysis (Professor Lowe):
FSOs are not ‘ships’ because theterm is linked to “carriage of oil”,
which involves “the navigation of theship on a voyage”•Working Group was set up in 2011
to consider the implications ofmaking a decision on theinterpretation

www.iopcfund.org