Marine pollution law and regulatory frameworks

Marine Pollution Law

Although the problem of international liability and compensation for pollution caused by oil spills is specifically adressed by the 1969 International Convention on Civil Liability for Oil Pollution Damage and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, the issue of pollution is also the object of other international treaties and conventions, such as the MARPOL 73/78 Convention, Intervention Convention, the London Convention and others. Before taking a thorough look at the 1969 and 1971 International Conventions, a brief description of other acts should create a clearer image of the whole situation.

International Maritime Organization (IMO) MARPOL: The International Convention for the Prevention of Pollution from Shipping (MARPOL 73/78) is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. It is a combination of two treaties adopted in 1973 and 1978, respectively, and has been updated by a number of amendments through the years.

MARPOL 73/78 governs the design and equipment of ships; establishes systems of certificates and inspections; requires states to provide reception facilities for the disposal of oily waste and chemicals. It covers all the technical aspects of pollution from ships, except the disposal of waste into the sea by dumping, and applies to ships of all types, although it does not apply to pollution arising out of the exploration and exploitation of seabed mineral resources.

MARPOL 73/78 regulates what kind and quantities of polluting substances that ships may discharge into the sea, taking into account the ecological sensitivity of different sea areas. Six Annexes to MARPOL 73/78 cover regulations for specific kinds of pollution. The regulations concerning oil and oily wastes are included in Annex I, and air pollutants in Annex 6.

IMO: The International Maritime Organization (IMO) and its Marine Environment Protection Committee (MEPC) is responsible for co-ordinating the implementation of the MARPOL Convention. IMO is the UN specialized agency responsible for improving maritime safety and preventing pollution from ships. IMO also provides the secretariat for other marine conventions, including the London Convention, the Intervention Convention; the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC); and the SOLAS Convention.

Oil Pollution Manual: The IMO Oil Pollution Manual provides a useful guide for governments of developing countries and for those persons directly associated with the sea transportation and transfer of oil. The manual is divided into six sections on Prevention, Contingency Planning, Salvage, Combating Oil Spills, Administrative Aspects of Oil Pollution Response, and Guidelines for Sampling and Identification of Oil Spills. See this and other IMO publications on maritime environmental protection.

Dispersant guidelines: IMO/UNEP Guidelines on Oil Spill Dispersant Application, including Environmental Considerations, provide up-to-date information on the use of oil spill dispersants. They are intended primarily for use by Member Governments and other oil spill responders and should be read with the Manual on Oil Pollution.

Intervention Convention: The 1969 Convention relating to Intervention on the High Seas in Cases of Oil Pollution Casualties (Intervention Convention) entered into force in 1975. It affirms the right of a coastal State to take such measures on the high seas as may be necessary to prevent, mitigate or eliminate danger to its coastline or related interests from pollution by oil or the threat thereof, following upon a maritime casualty. The 1973 Protocol extended the Convention to cover substances other than oil. The lists of substances covered by the Convention have been amended twice in 1991 and 1996. The IMO provides the secretariat for the Convention.

London Convention: The 1972 London Convention (Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, LC, formerly referred to as the London Dumping Convention) entered into force in 1975. The 1996 Protocol to the London Convention has still not entered into force, but is expected to do so in 2004 or 2005. When it does it will replace the 1972 Convention. The IMO provides the secretariat for both agreements."

The international law regime regarding compensation of pollution damage produced as a result of oil spills from tankers is found itself on two treaties, which were adopted by the International Marine Organization (the "IMO"). The first two conventions applicable to situations of this kind entered into force in 1975 (the 1969 International Convention on Civil Liability for Oil Pollution Damage) and 1978 (the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage) respectively.

These conventions whereon the international regime of compensation for oil spills is founded was amended in 1992 by two corresponding Protocols, thus resulting the 1992 Civil Liability Convention and the 1992 Fund Convention. The purpose of the Protocols was the enhancement of the scope of application, as a result of the need to cover extremely hazardous accidents, and the raise of the compensation limit. The two conventions began to produce effects at the end of May, 1996.

Liability of ship-owners for oil pollution damage is a difficult matter to set straight, because accidents on the sea often involve parties from more than one country, and the effects are usually felt by the inhabitants of another country (fishermen, researchers, local armed forces etc.). That is why it was necessary to find means to fairly reimburse the ones affected, no matter in what way, and to eventually bring the ones responsible to justice. This is the role of the Civil Liability Conventions mentioned above. They not only set the principle of strict liability for ship-owners whose ships cause pollution by oil spills, but also create a system of compulsory liability insurance, which is a supplementary measure of safety for the victims of the accident, should the ship-owner refuse or be in the impossibility to pay for the damages. Limitation of liability is provided for, in direct proportion to the tonnage of the ship in question.

In addition to the Civil Liability Convention, a way was found to provide additional compensations to victims of accident, should the applicable Civil Liability Convention be inadequate. An international organization was established by the Fund Conventions, with the purpose of managing the fund destined to allocated to victims. The International Oil Pollution Compensation Funds from 1971 and 1992 are based in London. Each state signing the Fund Conventions becomes a member of the corresponding Fund. However, the 1971 Fund Convention was meant to be terminated in May 2002. Therefore, the only applicable regime at this time is the one set by the 1992 Fund Convention, whereto more than 90 states are now Parties.

Features of the 1992 Conventions

The object of the 1992 Conventions is damage caused by pollution, or contamination on the territory of a state, including the territorial sea, and in the exclusive economic zone or an equivalent area of a state which is Party to the Conventions.

The meaning of "pollution" is explained by the 1992 Conventions as contamination, which also includes any measures that would have been taken to minimize or prevent pollution damage (referred in the Convention as "preventive measures."

Ships which enter under the provisions of the 1992 Conventions are usually tankers, either laden or unladen (in some circumstances. The cargo of tankers is oil in bulk, so this kind of ships represents the major threat of pollution damage. The conventions are specifically designed for tankers and do not apply to other ships.

The liability of a tanker's owner is strict, which means that even the absence of fault leads to liability, if oil spilling from his/her tanker, following an accident, result in oil pollution. Liability exemptions are also provided for in the text of the 1969 Civil Liability Convention, but the circumstances in which a ship-owner may benefit from such exemptions are extremely rare, as he/she is required to prove that the damage was caused by an act of war, hostilities, civil war, insurrection or a grave natural disaster, by sabotage from another party or by the negligence of public authorities in the respective state to maintain proper navigational aids, such as lights.

The ship-owner may benefit from limitation of liability, in proportion to the tonnage of the vessel. The 1992 Civil Liability Convention provides for the following values, in regard to limitation of liability: (1) 4,510,000 Special Drawing Rights for a ship not exceeding 5,000 units of gross tonnage, 2) 4,510,000 Special Drawing Rights + 631 SDR per additional unit of tonnage for ships with tonnages between 5,000 and 140,000 units of tonnage, and 3) 89,770,000 Special Drawing Rights for ships of 140,000 units of tonnage or more.

The benefit of limitation of liability is not granted, under the 1992 Civil Liability Convention, should the ship-owner be personally responsible for creation of the damage. The ship-owner does not have this right if his/her personal act or omission, committed either with the intent to produce such a damage or because of reckless behavior, while knowing about the possibility of occurrence of such a damage.

Only the registered owner of the ship is liable and claims may be filed against him/her, under the provision of the 1992 Civil Liability Convention. However, this Convention strictly refers to the ship-owner and does not exclude claims of any type directed to any other person, other than the owner, which is considered liable for the production of the accident. Still, agents of the owner, in the widest sense, are protected by the 1992 Civil Liability Convention, which means that a victim cannot file a claim against servants, pilots, charterers, mangers or operators of the ship, or persons conducting salvage operations or taking preventive measures.

The compensation payable by the Fund is also limited to an aggregate amount of 203 million by SDR per accident, which also includes the sum the ship-owner or insurer are obliged to pay under the 1992 Civil Liability Convention

The governing body of the 1992 Fund is the Assembly, which is composed of representatives of all the member states. Its session are held only once a year, and its attributions include taking of all important decision, as the Assembly is the supreme organ of the Fund. Settlements of claims is handed by the Executive Committee, a body elected by the Assembly and composed of 15 Member States.

Both funds, the 1992 Fund and the 1971 Fund, are managed by a Secretariat based in London, which comprises 26 functionaries.

How the 1992 Fund is financed.

All monetary values are calculated in Special Drawing Rights, which is the official unit of the International Monetary Fund. Resources of the 1992 Fund are composed of annual contribution levied in order to meet anticipated payments of compensation and administrative expenses for the following year. The criteria on which the contributions are based regards the quantity of crude oil and heavy fuel oil a legal entity from a state which is party to the 1992 Fund Convention receives by sea transport. Anyone which receives more than 150,000 tonnes in a calendar year using this way has the obligation to pay a contribution, i.e. A specified amount per each tonne of oil received. The Assembly decided the size of the contribution that need to be levied in one year

Payment is a direct process, which involves only the contributor and the 1992 Fund. Member states are not liable in any way for any non-performance of payment obligations by its national contributors, unless it specifically accepts this responsibility.

The Fund functions mainly based on the contributions of the Japanese oil industry, which contributes more than 20% of the total amount. Next comes Italy with 11% and the Republic Korea, the Netherlands, France, United Kingdom, Singapore, Spain, Germany, Canada, Australia and Norway.

For a period of time, there were two regimes regarding international liability and compensation for oil pollution damage functioning in parallel: one was imposed by the 1969 Civil Liability Convention and the 1971 Fund Convention, and the other by the 1992 analogue Conventions. As the 1992 Conventions entered into force in 1996, the old Conventions were denounced by several member states. More and more states joined the new 1992 Fund, thereby decreasing the importance of the 1971 Fund and its corresponding regime.

The method that was chosen in order to terminate the 1971 Fund Convention was to hold a Diplomatic Conference in September 2000, which adopted a Protocol which the 1971 Fund Convention would cease to be in force on the date whereon the number of member states fell below 25, or one year from the date on which the Assembly, or any other mandatory body, noted that the total amount of contributing oil received in the remaining member states had fallen below 100 million tonnes. The original Convention required for the number of member states to fell under three, which was very unlikely, despite the increasing number or denunciations; that is the reason for which The Diplomatic Conference in 2000 was summoned.

The date on which the 1971 Fund Conventions ceased to produce effects was May the 24th, 2002, as the number of member states fell bellow twenty-five, as a result of mass denunciations. After that date the Convention produces no more effects, although compensation for claims arising from incidents that took place during the time the 1971 Fund Convention was in force are still being paid by the Fund. The Fund shall be wound-up after all claims have been paid, which is a process expected to last several years.

Settlement of claims.

The total amount paid by the IOPC Funds as a result of compensation for oil pollution damages rises to $700 million, corresponding to the 125 incident wherein the IOPC Fund was involved since it was founded, in 1978.

The way usually taken in order to settle the disputes was amicable, and law suits were generally avoided. However, there were a few cases when the intervention of the courts was required in order to set the matters straight.

A few accidents make up for most of the amount which was used to compensate the victims: Aegean Sea (Spain) $49 million, Braer (United Kingdom) $73 million, Sea Empress (United Kingdom) $49 million, Nadhodka (Japan) $179 million and Erika (France) $54 million.

Admissibility of claims for compensation lays down a set of criteria which have to be met in order for a claimant to be paid compensation. The claim needs to be justified and proved by producing supporting documents of any kind (explanatory notes, receipts, invoices etc. TO simplify the process the Fund provides the claimants with a Claims Manual and with Claims Forms that need to be filled out by the victim of the accident. Based on these pieces of information, the Fund establishes whether a claimant should receive compensation and the exact amount that particular person is entitled to get. The manual was published in order to help the public understand the procedure and contains general information about claims' presentation and conditions of admissibility.

The conditions set by the 1992 Fund Convention include proving that the claim seeks reimbursement for an expense that has actually incurred and that there was a causal relation between the oil spilling accident and the expense. Also, the claimant has to prove that the purposes for which the expense was made were reasonable.

The experience of the IOPC Funds when it comes to analysis of the criteria laid down for the admissibility of compensation, is quite considerable. Settlement of claims founds itself on the definition of "pollution damage," which has is "damage caused by contamination." The examination of the criteria for the admissibility of claims for compensation, under the 1969 Civil Liability Convention, the 1971 Civil Liability Convention and the 1992 Protocols, was thoroughly performed in 1994 by a working group of the 1971 Fund. This examination was concluded by a Report, which now forms the basis for the 1992 Fund's policy on the criteria for admissibility of claims. The Report was endorsed by the Assembly of the 1971 Fund and was adopted by way of a Resolution by the Assembly of the 1992 Fund.

The uniform interpretation of the definition of "pollution damage" was considered by both the 1971 and the 1992 Fund Assemblies essential for the adequate operation of the regime of compensations established under the two Conventions. Not only the problem of whether a claim should be admitted or not, but also the assessment of the actual loss or damage is considered by the IOPC Funds. Since the Funds function under the provisions of international law, one member state's oil industry is bound to pay for the clean-up operations incurred and the eventual economic losses suffered by residents of another member state. In order to avoid tensions, the uniformity of interpretation of the definition is paramount. The risk of conflicts arising between member states and the possibility of collapse of the international compensation system makes the need for consistency even more pressing.

Each claim is analyzed by the 1992 Fund separately and in concrete, on the basis of the particular circumstances in which the damage was incurred. Although the criteria of admissibility of claims cannot be overlooked, due to the different nature of various incidents, a certain flexibility is allowed, which enables the Funds to present solutions to new types of situations and claims. Amicable settlement of claims is the preferred policy of the Fund, which tries to avoid as much as possible lawsuits.

All claims subjected to a decision on their admissibility and which present interest to all member states are mentioned in the IOPC Fund's Annual Report.

The Adequacy of The International Compensation Regime

Since the accidents have become more and more important and dangerous, a need for raising the maximum amount for compensation appeared. The Legal Committee of the IMO adopted in October 2000, under special procedure, two resolutions whereby the compensation limits provided by the 1992 Civil Liability Convention and the 1992 Fund Convention was increased by more than half. These amendments entered into force on November 1st, 2003.

This modification to the 1992 Fund Convention made the total amount available under the 1992 Conventions rise to 203 million Special Drawing Rights.

Although on numerous occasions the system had performed very well, there were still some inadequacies. Therefore, the 1992 Fund Assembly decided in April 2002 to establish a Working Group which had the job of examining how well the international compensation regime established by the 1992 Civil Liability Convention actually worked.

A number of member states alleged during the discussions in the Working Group that the victims of even the most serious oil spill accidents should receive full compensation in order for the international compensation system to remain credible at all, and that the level of the maximum compensation levels should be increased accordingly. There was however an opposition, since other states refused to take into account further increase of the maximum levels of compensation beyond the limits set by the IMO in October 2000, which meant that the available sum was in total value of 203 million Special Drawing Rights after November 1st, 2003.

To reconcile the differences, the Working Group found a compromise solution. They proposed the establishment of an optional third tier of compensation by way of a Protocol which creates a Supplementary Compensation Fund. The role of this Fund is to provide additional compensation over what is available under the terms of the 1992 Civil Liability Convention and the 1992 Fund Convention.

The representatives of the shipping, insurance and oil industry supporter this plan, in principle; one debated issue was that it is important to maintain the load of compensation shared between the oil and the shipping industry.

A proposal for the voluntary increase of the liability limit for small ships was proposed by the International Group of P & I Clubs, with the support of ship-owners. This proposal was meant to apply only to states which have ratified the Supplementary Fund Protocol discussed by the Working Group. There hasn't yet been decided to what level the new liability limits should amount, but it is widely expected that the limit for small vessels shall be increased from 4 and a half million to approximately 20 million Special Drawing Rights.

The problem of a Supplementary Compensation Fund was further debated in London, under the patronage of the IMO, at the beginning of May. 2003. Tight negotiations lead to the adoption of a Protocol, which created such a Supplementary Compensation Fund. The provisions of the Protocol regarded several issues, such as the total amount of compensations, how the contribution would be paid, the minimum quantity in order to be considered a contributor etc.

The 203 million available from November the 1st, 2003 for the member states to the Protocol was supplemented, so that the total amount of compensation available for the victims of pollution damage now reaches 750 million Special Drawing Rights. This extra sum shall be financed as before, by contributions of oil receivers in the states which chose to ratify the Protocol. There is a new provision in the act, introducing the capping of contributions, which refers to the fact that the total amount of contributions due by the oil receivers in one state during a calendar year should not exceed 20% of the aggregate amount of the contributions levied. The provision regarding capping shall be in force until the total amount of oil received in the member states of the Supplementary Fund has extended to 1,000 million tonnes or for a period of ten years, whichever is earlier.

A level of 1 million tonnes of contributing oil received in each of the member states to the Supplementary Fund has been set as a minimum, in order to standardize and facilitate the calculation of contributions. The date of entry into Force of the Protocol is set to three months after the ratification by a minimum of 8 states which have received an aggregate amount of 450 million tonnes of oil during a calendar year. Obviously, the Protocol is not retroactive (i.e it only applies to incidents occurred after it has entered into force).

Environmental issues

According to the provisions of the 1992 Conventions, there is a limit for the compensation for damaging the environment (except for the profit loss eventually incurred), set by the costs of the measures of reinstatement. These measures have to be reasonable and to actually be undertaken or at least planned for.

The Working Group from 2001 debated a proposal suggesting the introduction of a new concept of compensation for environmental impairment, viewed as a damage brought upon collective property; compensation would become available for a certain state, but not on the basis of the Fund Conventions. Compensation should be paid based on international right granted by other Conventions to which that state is a party. The actual amount of the compensation would have been established on the conclusions of environmental impact studies, which were previously conducted by respecting the procedures adopted by the 1992 Fund.

Another proposition discussed by the Working Group was quite revolutionary and it referred to the total disregard of the suffered economic losses in the process of compensation calculation. The proposal envisaged a theoretical model whereby the Fund would establish the amount of compensation for environmental damage.

Both proposals were rejected. The Group based its decision on the definition of "pollution damage." The definition adopted under the 1992 Conventions was not broad enough to cover the aspects to which the makers of the proposal referred. Any claims for reinstatement of the environment and the reimbursement of costs regarding the environmental impact studies should be interpreted and accepted on the basis of the current definition of "pollution damage." Permanent long-term environmental damage was considered, and the parties agreed that this issue should be debated again.

The criteria for the admissibility of claims for costs of post-spill environmental studies and for expenses of measures to reinstate the polluted environment have been determined by the Fund since 1994. These criteria were reconsidered by the Working Group during the spring of 2002 and a new revised section of the Claims Manual has been published. The Assembly has approved the proposition during the October 1992 session. Following the discussions of the Working Group regarding the interpretation of the definition of "pollution damage" from the 1992 Conventions, it was intended that the new text clarify the exact meaning of the criteria applied in order to determine the admissibility of the claims.

Ship-owners' liability

Discussion in the Working Group regarding whether amendments should be maid or not to certain provision of the 1992 Civil Liability Convention brought up serious divergences regarding ship-owners liability.

The ship-owners and the insurance companies tried to enforce the idea that this particular problem (ship-owner's liability) should not be debated once again, since it wouldn't be in the best interest of the victims of oil pollution. The arguments brought up by representatives of the ship-owners implied the fact that the purpose of the 1992 Conventions was the establishment of a credible and effective international compensation regime, and that these acts did not intend to enstate shipping safety regulations or to set-up sanctions for guilty parties. Another problem would have been the appearance of disputes regarding singed international treaties, in relation to liability issues. One crucial aspect that had to be considered was the fair sharing of burdens by the two involved industries: shipping and cargo. It was proven, as a result of an analysis of oil spills conducted during the 1990 decade that the regime in force resulted in an equitable distribution of burden between the two industries. The shipping industry proposed the increase, on a voluntary basis, of the limit sum applicable to small vessels to 20 million Special Drawing Rights. Their argument was that, this way, the balance of interests would be maintained and proposed holding a future debate based on the experience gathered during the 3-5 years after the Protocol for the establishment of the Supplementary Fund entered into force.