IMO Conventions — Liability and Compensation
4.2 Civil Liability Convention (CLC) 1969 and
There are two IMO conventions that establish a scheme to pay compen- sation and to reimburse the clean-up costs and damages if a spill occurs from an oil tanker, which are the CLC 1992 and the Fund Convention 1992. It is to be noted that they apply to oil spills from oil tankers only and oil spills from non-tankers come under the Bunkers Convention 2001, see below. The CLC and the Fund Convention work together, as will be seen. First it is appropriate to describe the provisions of the CLC.
The first version of the CLC scheme was the 1969 Civil Liability Con-
vention (the CLC 1969)1 which came into force internationally on 19 June
1 International Convention on Civil Liability for Oil Pollution Damage done at Brussels on 29 November 1969.
1975. The CLC 1969 had as its main provision a requirement that the oil tanker owners or operators should take compulsory insurance with a suitable insurer. As the only insurers, which are really mutual risk clubs specialising in this type of risk, are the Protection and Indemnity Clubs (P&I Clubs)2 the effect was that the tanker owners paid premiums to P&I
Clubs to cover claims for oil spill damages and costs of clean up. There was set out an upper limit of the amount of the liability, which was related to the tonnage of the ship. The trade-off was that liability was strict, for the most part, so the claimants of the coastal state that had suffered the clean-up costs and damage had no need to prove more in relation to liability than that the tanker held insurance under the CLC and that the oil from that tanker had caused the loss and damage. The two key characteristics of the CLC are that it is the tanker owners or operators who pay the premiums and it is an insurance system under which the relevant P&I Club, the one that has the tanker entered into its books, that meets the payments. Claimants have no need, therefore, to prove negligence but they may not claim beyond the amount allowed under the CLC.
The CLC 1969 served well for many years but it was overdue for updating so it was much amended by its 1992 Protocol (CLC 1992), which came into force internationally on 30 May 1996. Under the CLC 1992 the system of liability was altered, the territory in which the spill may occur was extended to the EEZ, the upper limits of liability were increased and other changes were made. As the 1969 scheme has now ended, this section will only be concerned with the CLC 1992. The CLC links in with the Fund Convention, as to which see below, and is the first monetary tier of the funds available for compensation for oil spills from relevant tankers.
There are some limiting aspects in the provisions of the CLC 1992, which should first be mentioned:
(a) a ‘ship’ for its purposes has to be one ‘constructed or adapted for the carriage of oil in bulk as cargo, provided … it is actually carrying oil in bulk as cargo and during any voyage following such carriage’, unless it proves there are no oil cargo residues on board. The effect is that tankers are covered unless they have no residue of any oil cargo at all.3 Warships and other government
ships not used for commercial purposes are not covered by the convention;4
2 The P&I Clubs are mutual insurance companies that gradually grew out of the mutual insurance hull, and then other risks, societies of the 18th century. Their main base was, and is, in Great Britain although there are several whose head- quarters are in Europe, Japan and the USA. They all have informative websites and there are numerous publications about them.
3 Article I. 4 Article XI.
(b) the type of ‘oil’ that is covered must be a ‘persistent hydrocarbon mineral oil’ such as crude oil fuel oil, heavy diesel oil and lubri- cating oil, and this can be cargo or bunkers.5 The effect of this is
that spills of the very light fractions of oil, such as kerosene, gasoline, avgas, etc are not covered by the CLC.
A claim may be made by the state on behalf of its itself, agencies or citizens. In practice the claimants usually make a direct claim themselves, which is made on the ‘owner’ but, in fact, on the relevant P&I Club. A claim is valid only if the damage that occurs is ‘caused in the territory, including the territorial sea, of a Contracting State and … in the [EEZ]’.6
So the criterion is the place where the damage from the oil actually occurs rather than where the spill happens. The damage must be to the ‘territory’, meaning states’ shores or its seas out to the outer limit of the EEZ.
A key provision is the type of ‘pollution damage’ that is covered. The definition is that it means ‘loss or damage caused outside the ship by contamination resulting from the escape or discharge from the ship …‘ but the compensation for damage to the environment other than loss of profit is limited to ‘costs of reasonable measures taken for reinstatement actually undertaken or to be undertaken’.7 These costs of reinstatement
from oil damage were inserted to clarify that mere loss of amenities, such as mangrove trees killed but not replanted, did not give rise to a claim. The other part of ‘pollution damage’ that is recoverable is the clean up costs which come within the ordinary meaning of loss or damage.
It was an issue whether the costs associated with preventive mea- sures was recoverable, as opposed to actual costs of cleaning up the oil spill. These costs are recoverable because ‘pollution damage’ is now defined to include the ‘costs of preventive measures and further loss or damage caused by preventive measures’. If an oil tanker goes aground, therefore, and costs are incurred in laying out oil spill booms, getting skimmers in place to retrieve the oil and otherwise limit the damage from the spill, the claimants can recover those costs incurred in the preventive measures even if no oil is actually spilled. Such measures must, however, be ‘reasonable’.8
There are some exceptions and some limitations to liability of the owner to recompense under the CLC 1992, which are set out in Art III. These are:
5 The earlier provisions of the 1969 CLC only covered oil cargo, but this was extended to include the bunkers. This left the problem about bunkers from non- tankers, which is now covered by the Bunkers Convention 2001, as to which see below.
6 Article II. 7 Article I(6). 8 Article I(7).
(a) if the damage resulted from an act of war, hostilities, civil war, insurrection or natural phenomenon of an exceptional, inevitable and irresistible character; or
(b) it was wholly caused by an act or omission done with intent to cause damage by a third party; or
(c) it was wholly caused by a government or other authority respon- sible for the lights or other navigational aids in the exercise of that function; and
(d) the owner may be partially or wholly exonerated if the owner proves that the pollution damage resulted wholly or partially either from an act or omission done with intent to cause damage by the person who suffered the damage or from the negligence of that person;
(e) no claim may be made in the contracting state against the owner otherwise than in accordance with the CLC 1992;
(f) the owner is at liberty to seek to claim recompense from third parties;
(g) no claim may be made against the servants or agents of the owner or members of the crew, the pilot or other person perfor- ming services for the ship, charterer, manager, operator, salvor acting with the owner’s consent, or person taking preventive measures, or any of their servants or agents, unless the damage resulted from ‘their personal act or omission, committed with intent to cause such damage, or recklessly and with knowledge that such damage would probably result’.9
It may be noted from these limitations that liability may be appor- tioned between owner and claimant if the person who suffered the damage was the person who caused the damage with that intent, or it resulted from that person’s negligence. Where two or more ships are involved in causing the pollution damage then liability is joint and several, unless one of the exceptions or limitations mentioned above applies.10 Subject to these exceptions and limitations, if the oil spill from a
tanker occurs in the waters of a state party to the CLC 1992 then it is strict liability on the part of the owner, provided the owner is in a P&I Club.11
9 This is the same key phrase which applies to breaking the limit of liability of the ship owner etc in the Limitation of Liability Convention 1976, under which the ‘owner’ may lose the right to limit liability; see White M, ‘Limitation of Liability’, Chapter 10 in White M (ed), Australian Maritime Law (Federation Press, 2nd ed, 2000); Davies M and Dickey A, Shipping Law (Law Book Co, 3rd ed, 2004) Chapter 16.
10 Article IV. If both ships are entered with different P&I Clubs then the clubs share the payments for the claims; the proportion of shares depending on the circum- stances.
11 If the tanker owner has not entered the ship in a P&I Club, then the Fund Con- vention 1992 probably will apply, as to which see below.
Naturally an important aspect is the amount of the liability of the owner in the event of an oil spill. This is calculated by taking the tonnage of the ship, as measured by the Tonnage Convention,12 and multiplying it
by the ‘units of account’ to arrive at the amount, but this is subject to a minimum and a maximum limit. The ‘unit of account’ is the Special Drawing Right (SDR), established by the International Monetary Fund,13
which is often used in such conventions.14 The minimum amount of
liability, which is for ships up to and not exceeding 5000 gross tonnage, is 4.51 million SDRs and the maximum amount rises at the rate of 631 SDR per ton until an absolute maximum at 140,000 tons and a monetary liability of 89.77 million SDRs.15 The monetary amounts that these come
to depend on the value of the SDRs at the time of the incident which, like any exchange rate, fluctuates. For Australia and New Zealand, it is often around 50 cents, so the minimum would then be about $2.25 million (from 4.51 million SDRs) and the maximum about $45 million (from 89.77 million SDRs).16 The exchange rate of the SDR for the relevant date(s) can
be established from the daily financial papers or from the central banks. Thisuppermonetarylimitforashipcanbebrokenbytheclaimants proving that the pollution damageresulted from theowner’s ‘personal actoromission,committedwiththeintenttocausesuchdamage,orreck- lessly and withknowledge that suchdamage would probably result’.17
The time limit for claiming isthree years from thedate of thedamage ornomorethansixyearsfromthedateoftheincident,whicheveristhe sooner.18
After an incident the owner may establish a fund in the court of the relevant state and it is then for the court to administer the fund and pay it out to claimants who prove their claims. If there is a surplus it goes back to the owner but if the amount is less than the total of the proven claims then payment is made pro rata, that is in proportion to the amount claimed. If a fund is established then an arrested ship that has given adequate security must be released. The CLC provides that member states are to pass legislation to give effect to these provisions. In fact, the P&I Club often prefers to meet with and pay the claimants direct, rather than pay the amount into a court for it to administer.
12 International Convention on Tonnage Measurement of Ships 1969, Annex I; see the CLC 1992 Art V(10).
13 Article V(9(a)).
14 For instance, limits of liability for air carriage are set by the units of account under the Warsaw Convention 1929.
15 The limits of liability were increased on 1 November 2003. Care needs to be taken to ensure that a current version of the CLC 1992 is used for the date on which the oil spill occurred. The IOPC website is very informative on this subject; see <www.iopcfund.org>.
16 The exchange rate between Australian and NZ fluctuates but it is usually close to parity.
17 Article V(2). 18 Article VIII.
An important, but slightly different, aspect of the CLC 1992 is that the owner must have a certificate of ‘insurance or other financial secu- rity’, as evidence that it is covered by a P&I Club in the event of an oil spill.19 This requirement is, however, limited to tankers carrying more
than 2000 tons of oil in bulk as cargo. States can, and do, demand these certificates be produced under their port state control regimes20 and if no
satisfactory certificate is produced then the vessel may be turned away or, if already in port, detained until one is obtained. This system works very well and ensures that almost all tankers carrying oil as cargo are covered by the CLC. If there is a dispute between claimants and the owner (P&I Club) then litigation in the courts may proceed in the usual way and if any judgment is obtained it is enforceable in the courts of other member states,21 or under the usual other provisions for mutual
enforcement of judgments.
The limits of liability for payment relate to each ‘incident’ so, in the event of a complex disaster such as where one tanker drags its anchor and hits another ship which then also drags onto a third ship (another tanker), the question arises whether it is the one or is two incidents. The definition under the CLC is that an ‘incident’ is ‘any occurrence, or series of occurrences having the same origin …’.22 It may be seen that this
definition is fairly vague and, to some extent, begs the question as it depends on the meaning of ‘having the same origin’. In the end this becomes a question of fact and law and if the parties are unable to agree if there has been one incident, or more, then it will need to be litigated or arbitrated.
Asmentionedabove,thesystemhasstrictliability,sonegligencedoes nothavetobeproven, andtheupperlimitfortheP&IClubliabilityfor damages and costs is clearly set out. It is a very successful insurance system.Ifthetotalamountoftheclaimsexceeds,orislikelytoexceed,the upper limit forthat shipthenthe provisionsofthe FundConventionare usuallyapplicable.InthiscasetheP&IClubcooperateswiththeagentsof thefundandtheybothworktogether,withtheadjustmentbetweenthem beingpaymentbytheP&IClubtoitsupperlimitofliability.
The upper limit of liabilities of the CLC and the fund have been reviewed periodically, especially after large oil spills. One example is that the breaking up of the tanker Erika, that spilled a huge quantity of oil that fouled the French and Spanish Atlantic coasts in 1999, evoked an enormous response in Europe. The European Union was considering
19 Article VII.
20 See Chapter 11 for a description of how port state control regimes are imple- mented. The Australian Protection of the Sea (Civil Liability) Act 1981, Part IIIA and the Regulations also require tankers over 400 tons to have a certificate for ‘general insurance’; see Section 7.5 below.
21 Articles IX, X. 22 Article I(8).
establishing a unilateral regime for spills from tankers, like the USA did after the Exxon Valdez spill. This was then compounded when the Prestige disaster occurred in 2002 and further large amounts of oil were spilled on the Spanish and French Atlantic coasts. In the result the IMO dealt with it by the Legal Committee adopting the ‘Tacit Acceptance’ amendments23
to the CLC and the Fund Convention that raised the upper limits of liability under these two conventions, including the optional third tier. The provisions of the Fund Convention will be addressed shortly but, to keep with the chronological progression of conventions, the next conven- tion to mention is the Nuclear Material Convention 1971.