New fund heralds better deal for oil pollution victims

Supplementary Fund for Compensation for
Oil Pollution Damage to enter into force

Increased levels of compensation will be available for victims of oil pollution from oil tanker accidents, following the ratification by Spain (on Friday 3rd December) of the 2003 Protocol establishing an International Oil Pollution Compensation Supplementary Fund. Spain's ratification means the instrument has now reached the entry into force criteria (ratification by at least eight States who have received a combined total of 450 million tons of contributing oil) set at its adoption by a diplomatic conference held at IMO Headquarters in London in May 2003. The new Fund will come into existence on 3 March 2005, three months after the date of Spain's ratification.

The Fund will supplement the compensation available under the 1992 Civil Liability Convention (CLC) and Fund Convention with an additional, third tier of compensation. Participation is optional, although open to all States Parties to the 1992 Fund Convention.

The total amount of compensation payable for any one incident will be limited to a combined total of 750 million Special Drawing Rights (SDR) (just over US$1,152 million) including the amount of compensation paid under the existing 1992 CLC/Fund Convention.

With the entry into force of this Protocol, IMO has substantially enhanced the compensation available under the 1992 Convention. The supplementary scheme introduced by the 2003 Protocol should therefore ensure, for the foreseeable future, that victims of oil pollution damage will be fully compensated for their losses.

It is expected that the increased compensation should put an end to the practice of pro-rating of payment of claims, which, although it has been unavoidable, has led to criticisms of the 1992 Convention.

The supplementary Fund will apply to damage in the territory, including the territorial sea, of a Contracting State and in the Exclusive Economic Zone of a Contracting State.

Annual contributions to the Fund will be made in respect of each Contracting State by any person who, in any calendar year, has received total quantities of oil exceeding 150,000 tons. However, for the purposes of the 2003 Protocol, there is a minimum aggregate receipt of 1,000,000 tons of contributing oil in each Contracting State.

The Assembly of the Supplementary Fund will assess the level of contributions based on estimates of expenditure (including administrative costs and payments to be made under the Fund as a result of claims) and income (including surplus funds from previous years, annual contributions and any other income).

Amendments to the compensation limits established under the Protocol can be adopted by a tacit acceptance procedure, so that an amendment adopted in the Legal Committee of IMO by a two-thirds majority of Contracting States present and voting, can enter into force 24 months after its adoption.

Background:
The 1969 International Convention on Civil Liability for Oil Pollution Damage (CLC), and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, (the Fund Convention, which established the IOPC Fund), ensure that compensation is available for victims of oil pollution from ships. The CLC places liability on the shipowner up to a set limit and requires the shipowner to take out insurance against such claims. If an accident at sea results in pollution damage which exceeds the compensation available under the CLC, additional compensation is available through the IOPC Fund, which is financed by contributions by oil receivers. The compensation regime as a whole thereby ensures that the burden of compensation is spread between shipowner and cargo interests.

The 1992 Protocols to the International Convention on Civil Liability for Oil Pollution Damage (CLC), 1969 and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund Convention) 1971 replaced the original Conventions.

The 1992 Fund Convention has been ratified by 91 States, representing 88.39 per cent of world merchant shipping tonnage. The 1992 CLC Convention has been ratified by 104 States (93.44 per cent).

In the wake of the Nakhodka oil tanker incident in 1997 off Japan and the Erika oil tanker incident off the coast of France in December 1999, the IMO Legal Committee in October 2000 adopted amendments to the 1992 Protocols to the CLC and Fund Convention which raised the limits of compensation payable by more than 50 per cent to 89.77 million Special Drawing Rights (SDR) for a ship over 140,000 gross tonnage under the CLC and 203 million SDR payable by the IOPC Fund. These amendments entered into force on 1 November 2003.

For a number of States, however, even these proposed increases were considered to be still too low. A European proposal for the establishment of a fund providing compensation over and above that generated by the 1992 Civil Liability and Fund Conventions whenever an oil pollution incident occurred in European waters was brought to the attention of the IOPC Fund Assembly, which in April 2000 decided to set up an Intersessional Working Group to further consider the matter. The Working Group recommended the establishment of a supplementary fund, to provide compensation over and above that currently available under the 1992 Civil Liability/Fund regime, thus in essence creating a third tier of compensation for pollution damage caused by oil spills at sea. This supplementary fund is not limited geographically to Europe but covers oil spills wherever they occur.

The text of the new Protocol was approved by the sixth session of the IOPC Fund Assembly in October 2001 and submitted to the Secretary-General of IMO. At its 84th session, in April 2002, the IMO Legal Committee approved the draft text, prior to its submission to the May 2003 conference for adoption.

The IOPC Funds and IMO
Although the IOPC Funds were established under Conventions adopted under the auspices of IMO, they are independent legal entities with their own Directors and own Assemblies.

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

To become a member of the 1992 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 at www.iopcfund.org

Special Drawing Rights Conversion Rates
The daily conversion rates for Special Drawing Rights (SDR) can be found on the International Monetary Fund website at www.imf.org under "IMF Finances".

9 December 2004

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IMO
IMO - the International Maritime Organization - is the United Nations Specialized Agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships.

Web site: www.imo.org

For further information please contact:
Lee Adamson, Public Information Manager on 020 7587 3153 (media@imo.org)
or Natasha Brown, External Relations Officer on 020 7587 3274 (media@imo.org)