Adoption: 3 May 1996

Entry into force: 18 months after the following conditions have been fulfilled:

·          12 States have accepted  the Convention, four of which have not less than two million units of gross tonnage

·          Provided that persons in these States who would be responsible to pay contributions to the general account have received a total quantity of at least 40 million tonnes of contributing cargo in the preceding calendar year.

Status: See status of conventions

Introduction
Limits of liability
HNS Fund
HNS and the CLC/Fund Convention
Special drawing rights

Overview of the HNS Convention

Introduction

The Convention will make it possible for up to 250 million SDR   (about US$320 million) to be paid out in compensation to victims of accidents involving HNS, such as chemicals.

The HNS Convention is based on the two-tier system established under the CLC and Fund Conventions .  However, it goes further in that it covers not only pollution damage but also the risks of fire and explosion, including loss of life or personal injury as well as loss of or damage to property.

HNS are defined by reference to lists of substances included in various IMO Conventions and Codes. These include oils; other liquid substances defined as noxious or dangerous; liquefied gases; liquid substances with a flashpoint not exceeding 60°C; dangerous, hazardous and harmful materials and substances carried in packaged form; and solid bulk materials defined as possessing chemical hazards. The Convention also covers residues left by the previous carriage of HNS, other than those carried in packaged form.

The Convention defines damage as including loss of life or personal injury; loss of or  damage to property outside the ship; loss or damage by contamination of the environment; the costs of preventative measures and further loss or damage caused by them.

The Convention introduces strict liability for the shipowner and a system of compulsory insurance and insurance certificates.

The unit of account used in the Convention is the Special Drawing Right (SDR) of the International Monetary Fund (IMF).

Limits of liability

For ships not exceeding 2,000 units of gross tonnage, the limit is set at 10 million SDR (about US$12.8 million). For ships above that tonnage, an additional 1,500 SDR is added for each unit of tonnage from 2001 to 50,000; and 360 SDR for each unit of tonnage in excess of 50,000 units of tonnage. The total possible amount the shipowner is liable for is limited to 100 million SDR (US$128 million).

States which are Parties to the Convention can decide not to apply it to ships of 200 gross tonnage and below, which carry HNS only in packaged form and are engaged on voyages between ports in the same State. Two neighbouring States can further agree to apply similar conditions to ships operating between ports in the two countries.

In order to ensure that shipowners engaged in the transport of HNS are able to meet their liabilities, the Convention makes insurance compulsory for them.  A certificate of insurance must be carried on board and a copy kept by the authorities who keep record of the ship's registry.

HNS Fund

It has generally been agreed that it would not be possible to provide sufficient cover by the shipowner liability alone for the damage that could be caused in connection with the carriage of HNS cargo. This liability, which creates a first tier of the convention, is therefore supplemented by the second tier, the HNS Fund, financed by cargo interests.

The Fund will become involved:

·          because no liability for the damage arises for the shipowner. This could occur, for example, if the shipowner was not informed that a shipment contained HNS or if the accident resulted from an act of war.

          because the owner is financially incapable of meeting  the obligations under this Convention in full and any financial security that may be provided  does not cover or is insufficient to satisfy the claims for compensation for damage

·          because the damage exceeds the owner's liability limits established in the Convention.

Contributions to the second tier will be levied on persons in the Contracting Parties who receive a certain minimum quantity of HNS cargo during a calendar year. The tier will consist of one general account  and three separate accounts for oil, liquefied natural gas (LNG) and  liquefied petroleum gas (LPG). The system with separate accounts has been seen as a way to avoid cross-subsidization between different HNS substances.

As with the CLC and Fund Conventions, when an incident occurs where compensation is payable under the HNS Convention, compensation would first be sought from the shipowner, up to the maximum limit of 100 million SDR (US$128 million).

Once this limit are reached, compensation would be paid from the second tier, the HNS Fund, up to a maximum of 250 million SDR (US$320 million)  (including compensation paid under the first tier).

The Fund will have an Assembly consisting of all States which are Parties and a Secretariat headed by a Director. The Assembly will normally meet once a year.

HNS and the CLC/Fund Conventions

The HNS Convention excludes pollution damage as defined in the International Convention on Civil Liability for Oil Pollution Damage and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, to avoid an overlap with these Conventions.

However, HNS covers other damage (including death or personal injury) as well as damage caused by fire and/or explosion when oils are carried.

Special Drawing Rights Conversion Rates

The daily conversion rates for Special Drawing Rights (SDRs) can be found on the International Monetary Fund website at http://www.imf.org/ under "Fund Rates".