Conference agrees to early winding up of 1971 oil pollution compensation fund

Contracting Parties to the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (IOPC Fund) have signed a Protocol allowing for the early winding-up of the 1971 Fund, which was established to provide compensation to victims of oil pollution from ships carrying oil as cargo.

    The 2000 Protocol was signed on 27 September following a Diplomatic Conference held from 25 to 27 September.

    The 1971 Fund is being replaced by a 1992 Fund which has higher limits on the amount of compensation payable by the Fund, made up of contributions from Contracting States.

    From 16 May 1998, Members of the 1992 Fund ceased to be Members of the 1971 Fund Convention due to a mechanism in the Protocol which established the 1992 Fund allowing for compulsory denunciation of the "old" regime. However, with the departure of these States, the total quantity of contributing oil on the basis of which contributions to the Fund are assessed has been dramatically reduced. The effect of this reduction in the contributions base is two-fold.

    In the first place, a considerably increased financial burden will fall on the contributors in those States which remain Members of the 1971 Fund if a major oil spill occurs in any of those States, since the contributors will be legally responsible for the funding of the total amount of compensation due from the 1971 Fund.

    In addition, as long as the 1971 Fund remains in existence, the concern remains that it will face a situation in which an incident occurs where the 1971 Fund has an obligation to pay compensation to victims, but where there are no contributors in any of the remaining Member States.

    In such a situation, if a tanker spill should occur, the remaining 1971 Fund Member States would not have the financial protection which they would expect under the provisions of the 1971 Fund Convention.

    Under Article 43.1 of the 1971 Convention, the 1971 Fund ceases to exist when the number of Contracting States falls below three. In order to allow the Convention to terminate sooner, the Conference agreed to amend Article 43.1 so that the Convention ceases to be in force:

(a) on the date when the number of Contracting States falls below twenty-five; or
(b) twelve months following the date on which the Assembly notes that, according to the information provided by the Director on the basis of the latest available oil reports submitted by Contracting States in accordance with article 15, the total quantity of contributing oil received in the remaining Contracting States by those persons who would be liable to contribute pursuant to article 10 of the Convention during the preceding calendar year falls below 100 million tonnes,

    whichever is earlier.

    The 2000 Protocol will be brought into force by the tacit acceptance procedure, whereby it is deemed to have been accepted six months from the date of its adoption unless objections are received by not less than one-third of the Contracting States.

    The 1971 Fund Convention currently has 40 Contracting States, representing 13.3 percent of world merchant shipping tonnage. Twelve of these 40 will cease to be 1971 Fund Member States by July 2001.

    The 1992 Fund currently has 61 Contracting States, representing 85.7 percent of world merchant shipping tonnage.

    The Conference also adopted a Resolution "on the winding-up of the 1971 International Oil Pollution Compensation Fund", which urges Contracting States which have not already done so, to denounce the International Convention on Civil Liability for Oil Pollution Damage, 1969 and the 1971 Fund Convention and to become Parties to the International Convention on Civil Liability for Oil Pollution Damage, 1992 and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992.

    The Conference was attended by representatives of 24 Contracting States to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971 as well as by representatives of 23 Member States of IMO as observers and representatives from one associate Member of IMO.

IOPC Funds and the CLC Convention

    Compensation payable by the IOPC Fund is additional to compensation payable under the 1992 Protocol to the 1969 International Convention on Civil Liability for Oil Pollution Damage (1992 CLC Convention). The CLC Convention regulates the strict liability of the shipowner for damage suffered as a result of a pollution incident. Limits in the 1969 CLC Convention were raised by a 1992 Protocol, adopted at the same time as the 1992 Fund Protocol.

    While the Civil Liability Convention puts the onus on the shipowner, the Fund is made up of contributions from oil importers. The idea is that if an accident at sea results in pollution damage which exceeds the compensation available under the Civil Liability Convention, the Fund will be available to pay an additional amount. In this way, the regime established by the two treaties ensures that the burden of compensation will be spread more evenly between shipowner and cargo interests.

    The maximum amount of compensation payable from the Fund for a single incident, including the limit established under the 1992 CLC Protocol, is 135 million SDR (about US$182 million).

The IOPC funds and IMO

    Although the 1971 and 1992 Funds were established under Conventions adopted under the auspices of IMO, they are independent legal entities.

    Unlike IMO, the IOPC Funds are not United Nations agencies and are not part of the UN system. They are intergovernmental organisations outside the United Nations, but follow procedures which are similar to those of the United Nations.

    To become a member of the Fund, a State must accede to the 1992 Protocols to the Civil Liability Convention and the Fund Convention by depositing a formal instrument of accession with the Secretary-General of IMO. These Conventions should be incorporated into the national law of the State concerned.

    Further information can be found on the IOPC Funds website.