Protection & Indemnity
Understand the various international/national legal
regimes governing ship owners’ liability for pollution
Marcus Lindfors
Claims Manager, Team Norway
The
ofofMarine
TheNordic
NordicAssociation
Association
MarineInsurers
Insurers
1
Public awareness, uproar and (emotive?)
media coverage
The Nordic Association of Marine Insurers
2
’Everybody has a plan until you get punched in the mouth’
/Mike Tyson
Macondo Prospect blowout – 20 April, 2010
- evaluation of pollution risks, after the Macondo blowout, is
basically useless; USDB 60-70, USDB 25-30 could be
punischment alone.
Frade field well, Campos Basin – 7 November, 2011
- Chevron (and Transocean). Becomes the BP of Brazil. 370 km off
Rio. 3,600 bbls. No damages to nature. Claim at USDB 2 x 11.
Bohai Bay oil spill – 4 June, 2011
- ConocoPhillips and CNOOC. 700 bbls. Exxon Valdez 250,000
bbls. USDM 351 settlement. Equivalen to USD 500,000/bbl. Per
law YUAN 200,000 (USD 31,000).
Threat of the punch in the mouth - H&S at the top of the agenda.
The Nordic Association of Marine Insurers
3
Tony Hayward
BP CEO
GOM Macondo Prospect blowout,
20 April 2010 (semi-sub drill unit
”Deepwater Horizon”).
British Petroleum (Operator)
Transocean (Owner)
Halliburton (Contractor)
The Nordic Association of Marine Insurers
4
Panic vs. controlled panic!
The Secretary of States Representative for Maritime Salvage and
Intervention – SOSREP - empowered to make crucial and often timecritical decisions, without delay and without recourse to higher authority,
where such decisions are in the overriding UK public interest.
MSC NAPOLI, 2007
MSC NIKITA, 2009
MT PRESTIGE, 2002
Take ”two steps back” and think about crude
-
What is it?
-
What are the damages?
-
Who shouts the loudest, who is under pressure?
-
In terms of pollution, if a spill should occur, what do you for sure
not want around your charming family summer cabin in the
archipelago?
The Nordic Association of Marine Insurers
The Nordic Association of Marine Insurers
The Nordic Association of Marine Insurers
6
What about this baby max?
What kind of ship is this?
What kind of cargo does she normally carry?
The Nordic Association of Marine Insurers
7
Would you go for a swim?
The Nordic Association of Marine Insurers
8
Colorless odorless chemicals
Acetone cyanohydrin
9
P&I: claims analysis
Frequency
Cost
10
P&I Rules of various liability underwriters
The Member is covered in respect of liabilities, costs or expenses incurred by him in his capacity as owner,
operator or charterer of the entered ship and arising out of an event during the period of insurance as a
direct consequence of the operation of that ship.
-------------------------The standard insurance shall cover the member in respect of:
1. liability, other than fines or other penalties, arising out of the actual or threatened escape or discharge of
oil or other polluting substance,
2. costs of measures reasonably taken for the purpose of preventing or minimising pollution or any resulting
damage together with any liability for loss or damage caused by the taking of such measures,
3. costs incurred in order to comply with an order of any government or authority for the purpose of
preventing or minimising actual or threatened pollution,
4. liability and costs incurred by the member as a result of his participation in the Small Tanker Oil
Pollution Indemnification Agreement (STOPIA) or the Tanker Oil Pollution Indemnification
Agreement (TOPIA) or any other agreement approved by the Association for the purpose of this Rule.
-------------------------The Association shall cover:
a) liabilities, costs and expenses (excluding fines) arising in consequence of the discharge or escape from
the Ship of oil or any other substance or the threat of such discharge or escape;
b) liabilities, costs and expenses incurred by the Member pursuant to any agreement approved by the
Association for the purpose of this Rule.
11
P&I Rules – Example on excepetions
However the standard insurance shall not cover (…) costs which are required as
part of the normal operation, salvage or repair of the vessel...
Liabilities, costs or expenses incurred as a result of the discharge or escape from
the entered ship of oil or any other substance or the threat of such discharge or
escape unless such liabilities, costs or expenses form part or could form part of
General Average under the York/Antwerp Rules 1994.
No cover in respect of any (...) hazardous waste previously carried on the vessel
from any landbased dump, storage or disposal facility.
The Association's liability under an Owner's Entry for any and all claims in respect
of oil pollution (including claims resulting from attempts to reduce or prevent oil
pollution) shall be limited to such sum or sums and be subject to such terms and
conditions as are set out in Appendix ...
12
Hostorical reflextion - why are we here today? The ”Torrey Canyon”
18 March 1967, Seven Stones Reef, Scilly Isles – final voyage
The Torrey Canyon oil spill on the southwest coast of the UK in the spring of 1967
is one of the world's most serious oil spills which left an international legal and
environmental legacy that lasted decades. At the time the world's most serious oil spill,
as of 2014 it remains the UK's worst, with an estimated 120,000 m/t of crude
oil spilled. The wreck of the super tanker Torrey Canyon affected hundreds of miles
of coastline in the UK, France, Guernsey, and Spain and mitigation efforts involved
bombing raids by aircraft from the Royal Air Force and Royal Navy.
13
TORREY CANYON Spillt 120,000 tons crude oil
14
Legal short comings – 1969, 1971
 The absence of an international agreement on liability and
compensation in the event of such a spill.
 It led the international community to establish, under the
auspices of the International Maritime Organization (IMO), a
regime for compensation for victims of oil pollution.
 The framework for the regime was the 1969 International
Convention on Civil Liability for Oil Pollution Damage (1969
Civil Liability Convention, came into force in 1975) and the
1971 International Convention on the Establishment of an
International Fund for Compensation for Oil Pollution (1971
Fund Convention, came into force in 1978).
15
IOPC
- The International Oil Pollution Compensation Fund
The International Oil Pollution
Compensation Funds are three
intergovernmental organizations (the 1971
Fund, the 1992 Fund and the 2003
Supplementary Fund) which provide
compensation for oil pollution damage resulting
from spills of persistent oil from tankers.
The International Oil Pollution Compensation
Funds (IOPC Funds) provide financial
compensation for oil pollution damage that
occurs in its Member States.
Spills of persistent oil from tankers.
16
Legal Short comings cont.
CLC 1969
Under the 1969 CLC, the limit of the ship owner's liability is limited to up to
Maximum 14 million SDR. N.B. as at 31 December 2011, 23 States were
Parties to the 1969 CLC and also Parties to the 1992 CLC. In such cases,
States should denounce the 1969 CLC as it can lead to confusion in
national law.
1971 Fund (the money)
The 1971 Fund Convention ceased to be in force on 24 May 2002 and
thus does not apply to incidents occurring after that date. The
maximum amount of compensation payable by the 1971 Fund per incident
was 60 million SDR, including the amount paid under the 1969 CLC.
17
CLC 1969 + 1971 Fund
The Nordic Association of Marine Insurers
18
”Amoco Cadiz” 16 March 1978 – excess 200,000 m/t
The Amoco Cadiz ran aground on Portsall Rocks, 5 km from the coast of Brittany, France,
on 16 March 1978, and ultimately split in three and sank, all together resulting in the largest oil spill
of its kind in history to that date.
19
Coast of Brittany
20
”Atlantic Empress” and ”Aegean Captain”
4th largest spill in history – 19 July, 1979
The two oil tankers collided off the coast of Trinidad and Tobago.
Spilled 287,000 tons of crude oil
21
”Castillo de Bellver” – 7th largest spill in history
Caught fire about 70 miles off the coast of South Africa on August 6, 1983.
The ship was drifting off the coast and broke in two, generating a spill of 50-60,000 m/t of
light crude. The stern section of the Castillo de Bellver capsized and sank on 7 August in
deep waters 36 km off the coast, with 100,000 m/t of oil remaining in its tanks.
22
Too low.. forces against an increase?
Over time, it became clear that the amount of
compensation available for major incidents needed to be
increased, and the scope of the regime widened.
23
Legal short comings cont. - 1992
CLC 1992 (came into force in 1996)
Under this Convention, the registered ship owner has strict liability for
pollution damage caused by the escape or discharge of persistent oil from
his ship. This means that he is liable even in the absence of fault on his
part. He is exempted from liability only if he proves that:
-
the damage resulted from an act of war, hostilities, civil war, insurrection
or
-
a natural phenomenon of an exceptional, inevitable and irresistible
character, or
-
the damage was wholly caused by an act or omission done with the
intent to cause damage by a third party, or
-
the damage was wholly caused by the negligence or other wrongful act
of any Government or other authority responsible for the maintenance of
lights or other navigational aids, in the exercise of that function.
The ship owner is normally entitled to limit his liability to an amount
determined by the size of the ship.
24
CLC 1992
The Nordic Association of Marine Insurers
25
Legal short comings cont.
CLC 1992
The 1992 CLC prohibits claims against the servants or agents of
the ship owner, the members of the crew, the pilot, the charterer
(including a bareboat charterer), manager or operator of the
ship, or any person carrying out salvage operations or taking
preventive measures,
unless the pollution damage resulted from
the personal act or omission of the person concerned, committed with
the intent to cause such damage, or recklessly and with knowledge that
such damage would probably result – more or less impossible to prove.
26
1992 CLC
 Persistent oil includes crude oils, heavy fuel oils and
lubricating oils;
 Tanker owners required to maintain oil pollution insurance
and to carry certificate;
 Enables direct action against insurer;
 Ensures approximately US$ 6,9 million for tankers of less
than 5,000 gross tons;
 Up to approximately US$ 137.9 million for tankers >140,000
gross tons;
27
Advantages of 1992 CLC
 Tanker owner and P&I Club insurer ‘strictly liable’ to pay
compensation:
- up to high levels
- whether or not at fault (with a few exceptions.)
- regardless of flag/ownership
 Provides reasonable protection for responders and high level
of certainty of reimbursement for technically-justified clean-up
measures and damage, which facilitates quicker response;
 Prompt payment of compensation without litigation;
 Government, citizens and local industry financially ‘protected’
in the event of an oil spill within EEZ (the exclusive economic
zone);
28
Limitations of 1992 CLC
 Spill must be attributed to a specific tanker;
 The tanker must have at least residues of persistent cargo
onboard for CLC to apply;
 Amount of compensation determined by size of tanker
regardless of amount of oil spilled;
 Spill in sensitive area from a small tanker can easily exceed
available compensation;
 In rare instances tanker owner may be exempt under CLC
(e.g. acts of war or sabotage);
29
Legal short comings cont. – More money needed
The 1992 Fund (came into force in 1996)
The 1992 Fund Convention, which is supplementary to the 1992 CLC,
establishes a regime for compensating victims when compensation under
the 1992 CLC is not available or is inadequate. The International Oil
Pollution Compensation Fund, 1992 (1992 Fund) was set up under the
1992 Fund Convention.
The 1992 Fund pays compensation when:
-
the damage exceeds the limit of the ship owner’s liability under the
1992 CLC, or
-
the ship owner is exempt from liability under the 1992 CLC, or
-
the ship owner is financially incapable of meeting his obligations in full
under the 1992 CLC and the insurance is insufficient to pay valid
compensation claims.
30
1992 Fund
 Provides up to 203 million SDR (approximately US$ 303
million); including amount paid by tanker owner/insurer per the
1992 CLC);
 Funds provided by levies/fees on oil companies and other
entities in Fund-Member States receiving >150,000 tons per
annum of crude and/or heavy fuel oil (‘contributing oil’) after
sea transport;
 No direct cost to governments;
 Covering same type of damages as 1992 CLC (“mirrors it”);
31
Legal short comings cont.
1992 Fund
The maximum compensation payable by the 1992 Fund is “only”
203 million SDR for incidents occurring on or after 1 November
2003, irrespective of the size of the ship.
For incidents occurring before that date, the maximum amount
payable is 135 million SDR. These maximum amounts include the
sums actually paid by the ship owner under the 1992 CLC.
32
Advantages of 1992 Fund
 Amount of compensation not dependent on size of tanker
 Compensation is available even if tanker owner exempt or not
insured; only exceptions are acts of war and spills from
warships;
 Covers bunker spills from laden and unladen oil tankers, and
(N.B.) cargo spills proven to be from a tanker, even if specific
tanker cannot be identified;
 Government, citizens and local industry financially ‘protected’
in the event of an oil spill within EEZ (the exclusive economic
zone);
33
1992 Fund
34
Bang again! More money needed!
- The ”Erika” spill of 12 December, 1999
35
ERIKA
On December 8, 1999, she sailed out of Dunkerque, bound for Livorno and
with a heavy cargo of around 31,000 tons of fuel oil (About 20,000 tonnes of
oil were spilled). As she entered the Bay of Biscay, the Erika ran into a
heavy storm. On December 12, 1999, she broke in two and sank, releasing
thousands of tons of oil into the sea, killing marine life and polluting shores
around Brittany, France.
Total SA (the Charterer), Giuseppe Savarese (the shipowner), Antonio
Pollara (the handler) and Rina (the expert classification company) were
sentenced in solidum to pay indemnities of EURM 192 (280 MUSD), plus
individual penalties.
The judgement, while recognizing the risks inherent to oceangoing vessels,
reckons Total SA was "guilty of imprudence", from the fact that Total SA did
not take into account "the age of the ship", (nearly 25 years), and "the
discontinuity of its technical handling and maintenance
36
37
”Prestige” 19 November 2002
Spillt over 60,000 tons heavy fuel oil
38
Polluted thousands of beaches in Portugal,
Spain and France
39
Legal short comings cont. - 2003
The 2003 Supplementary Fund Protocol (came into force in 2005)
Following the Erika and Prestige incidents, a third instrument,
the Protocol to the 1992 Fund Convention (Supplementary Fund
Protocol), was adopted in 2003, providing additional
compensation over and above that available under the 1992
Fund Convention for pollution damage in the States that
become Parties to the Protocol. The Supplementary Fund Protocol entered
into force in 2005, establishing the International Oil Pollution
Compensation Supplementary Fund, 2003 (Supplementary Fund). The total
amount available for compensation for each incident is 750 million SDR,
including the amounts payable under the 1992 Conventions.
Annual contributions to the Supplementary Fund are made on the same basis
as contributions to the 1992 Fund. However, the contribution system for the
Supplementary Fund differs from that of the 1992 Fund in that, for the purpose
of paying contributions, at least 1 million tonnes of contributing oil are deemed
to have been received each year in each Member State.
40
IOPC Funds - http://www.iopcfunds.org/
Thus,
There are at present three International Oil Pollution Compensation Funds (IOPC
Funds): the 1971 (1978) Fund, the 1992 (1996) Fund and the 2003 Supplementary Fund (2005).
They came into force at different times (1978,1996 and 2005), and have different maximum amounts
of compensation and have different Member States. The membership of the 1992 Fund is increasing.
The Supplementary Fund was established to supplement the compensation available under the 1992
Civil Liability and Fund Conventions with an additional third tier of compensation. Membership of
the Supplementary Fund is optional and any State which is a Member of the 1992 Fund may join.
The membership of the Supplementary Fund is expected to increase fairly quickly. Due to a number of
denunciations of the 1971 Fund Convention, this Convention ceased to be in force on 24 May 2002
and the 1971 Fund therefore no longer has any Member States. The 1971 Fund will continue to deal
with a number of incidents which occurred in 1971 Fund Member States before that date. The three
organizations have a joint Secretariat, based in London.
Since their establishment, the 1992 Fund and the preceding 1971 Fund have been involved in 147
incidents varying sizes all over the world. In the great majority of cases, all claims have been
settled out of court.
41
IOPC Funds in practise
Arrange MOU contracts to be agreed between the Fund, the
P&I Club(s) involved and contractors for expert services
‘This Agreement is a contract for the provision of services and not a
contract of employment or of agency and does not constitute a partnership.
The Contractor shall be, and provide the Services in the capacity of, an
independent expert.’
‘The Services to be provided by the Contractor during the currency of this
Agreement (“the Service”), and the scope of such Service, shall be set out
in a document entitled ‘Scope of Service’.’
‘In the event the Contractor reasonably requires the services of any sub-
contractors in order to provide the Services or to facilitate the full provision
of the Services, the Contractor may appoint such person, firm or company
as a Sub-contractor provided that the Club and Fund have given their prior
written approval to such appointment.’
42
IOPC Funds in practise
- Anyone who has suffered pollution damage in a Member State may
make a claim against the IOPC Funds for compensation.
- Strives to provide prompt payment of compensation to victims of oil
pollution damage. In the great majority of cases, claims are settled out
of court.
- The 1992 Fund (& the Fund Protocol) pays compensation when:
- the damage exceeds the limit of the ship owner’s liability under the
1992 CLC, or
- the ship owner is exempt from liability under the 1992 CLC, or
- the ship owner is financially incapable of meeting his obligations in
full under the 1992 CLC and the insurance is insufficient to pay valid
compensation claims.
-
No incidents have occurred so far which involve the Supplementary
Fund.
43
IOPC Funds – Summing-up
The framework for the regime was the 1969 International Convention on Civil Liability
for Oil Pollution Damage (1969 Civil Liability Convention) and the 1971 International
Convention on the Establishment of an International Fund for Compensation for Oil
Pollution (1971 Fund Convention).
Over time, it became clear that the amount of compensation available for major
incidents needed to be increased and the scope of the regime widened. This resulted
in two further instruments, known as the 1992 Civil Liability Convention and the 1992
Fund Convention.
Following the Erika and Prestige incidents, a third instrument, the Protocol to the 1992
Fund Convention (Supplementary Fund Protocol), was adopted in 2003, providing
additional compensation over and above that available under the 1992 Fund
Convention for pollution damage in the States (countries) that become Parties to the
Protocol.
The IOPC Funds are financed by contributions paid by entities that receive certain
types of oil by sea transport. These contributions are based on the amount of oil
received in the relevant calendar year, and cover expected claims, together with
the costs of administering the Funds.
44
IOPC Funds – Summing-up
 Reasonable pollution prevention and clean-up measures (e.g.
booms, skimmers, dispersants, shoreline clean-up);
 Damage to property (e.g. oiling of fishing boats and gear);
 Economic losses (e.g. lost income by fishermen, hotel
operators);
 Costs of reasonable measures to reinstate a damaged
environment – how do you do that?;
45
46
IOPC - Summing-up
47
Legal short comings cont.
 Civil Liability and Fund Conventions (1992 CLC & 1992 Fund + 2003
Protocol)
 International Convention on Civil Liability for Bunker Oil Pollution
Damage, 2001, “Bunkers Convention”, in force since 21 Nov. 2008
Modelled on the International Convention on Civil Liability for Oil Pollution Damage,
1969. A key requirement in the bunkers convention is the need for the registered
owner of a vessel to maintain compulsory insurance cover. Opens up for direct
actions.
 1996 HNS Convention (2010 HNS Protocol) – not yet in force
The 2010 HNS Convention establishes a comprehensive regime covering pollution
damage from hazardous and noxious substances carried by ships, as well as the
risks of fire and explosion, including loss of life, personal injury, and loss of or
damage to property. Strict liability, compulsory insurance cover.
 Domestic legislations
E.g. OPA 90 (USA), SOPF (Canada).
48
ITOPF
’The International Tanker Owners Pollution Federation Ltd’
 Established in 1968 as a not-for-profit service organization for
administering the Tanker Owners Voluntary Agreement
concerning Liability for Oil Pollution (TOVALOP, signed on Jan.
1969 by oil major tanker owners).
 A sister voluntary oil spill compensation regime CRISTAL
(Contract Regarding a Supplement to Tanker Liability of Oil
Pollution) for cargo owners was developed in parallel.
Pending the widespread adoption by maritime states of two
international conventions developed by the International
Maritime Organization, namely the Civil Liability and the Fund
Conventions.
49
ITOPF
 Specialized group to provide technical advice on response
techniques and effects;
 Assess objectively the reasonableness of clean-up measures
and the merits of claims for compensation under both the
voluntary agreements and international conventions;
 About 20 marine biologists, chemists, ecologists and other
experts;
 Based in London;
 http://www.itopf.com/
50
ITOPF
 Since 1980 ITOPF has had observer status with the
International Maritime Organization and the International Oil
Pollution Compensation Funds.
 Non-tankers may become Associates of ITOPF
 The membership and associate status of ship owners and
corresponding funding of ITOPF continues to be arranged
through the P&I Clubs and other pollution insurers.
51
Major Oil Spills
The following slide is a brief summary of the top 20 major oil spills that
have occurred since the TORREY CANYON in 1967;
The locations are shown in the slide after that;
Note that 19 of the largest spills recorded occurred before the year
2000.
A number of these incidents, despite their large size, caused little or
no environmental damage as the oil was spilt some distance offshore;
EXXON VALDEZ and HEBEI SPIRIT are included for comparison
although these incidents falls some way outside the group.
The Nordic Association of Marine Insurers
52
Major Oil Spills since 1967 (quantities have been rounded to nearest thousand
1
ATLANTIC EMPRESS
1979
Off Tobago, West Indies
287,000
2
ABT SUMMER
1991
700 nautical miles off
Angola
260,000
3
CASTILLO DE BELLVER
1983
Off Saldanha Bay, South
Africa
252,000
4
AMOCO CADIZ
1978
Off Brittany, France
223,000
5
HAVEN
1991
Genoa, Italy
144,000
6
ODYSSEY
1988
700 nautical miles off
Nova Scotia, Canada
132,000
7
TORREY CANYON
1967
Scilly Isles, UK
119,000
8
SEA STAR
1972
Gulf of Oman
115,000
9
IRENES SERENADE
1980
Navarino Bay, Greece
100,000
10
URQUIOLA
1976
La Coruna, Spain
100,000
11
HAWAIIAN PATRIOT
1977
300 nautical miles off
Honolulu
95,000
12
INDEPENDENTA
1979
Bosphorus, Turkey
95,000
13
JAKOB MAERSK
1975
Oporto, Portugal
88,000
14
BRAER
1993
Shetland Islands, UK
85,000
15
AEGEAN SEA
1992
La Coruna, Spain
74,000
16
SEA EMPRESS
1996
Milford Haven, UK
72,000
17
KHARK 5
1989
120 nautical miles off
Atlantic coast of Morocco
70,000
18
NOVA
1985
Off Kharg Island, Gulf of
Iran
70,000
19
KATINA P
1992
Off Maputo, Mozambique
67,000
20
PRESTIGE
2002
Off Galicia, Spain
63,000
35
EXXON VALDEZ
1989
Prince William Sound,
Alaska, USA
37,000
HEBEI SPIRIT
2007
Taean, Republic of Korea
11,000
131
53
Location of major oil spills
The Nordic Association of Marine Insurers
54
ITOPF – Number of spills in excess of 700 m/t between 1973-2013
The Nordic Association of Marine Insurers
55
The Nordic Association of Marine Insurers
56
Oil spilt per decade as a % of the total spilt between 1970 and 2010
The Nordic Association of Marine Insurers
57
STOPIA & TOPIA
- To ease the burden on oil receivers, a voluntary agreement was reached
amongst owners of small tankers indemnified through members of the
International Group of P&I Clubs to introduce the Small Tanker Oil Pollution
Indemnification Agreement (STOPIA 2006).
- The terms of STOPIA 2006 cover the liability in respect of incidents involving
tankers up to 29,548 GT is increased to 20 million SDR - about $30 million.
STOPIA 2006 applies to incidents involving participating tankers in all 1992
Fund Member States.
- A second agreement known as the Tanker Oil Pollution Indemnification
Agreement (TOPIA 2006) provides for indemnification of the 2003
Supplementary Fund for 50% of the amounts paid in compensation by that
Fund in respect of incidents involving tankers entered in one of the P&I Clubs
which are members of the International Group.
- Funded by owners of small tanker ships.
The Nordic Association of Marine Insurers
58
P&I Clubs force its Members into TOPIA and STOPIA
A member insured in respect of a vessel which is a relevant ship as defined
in the Tanker Oil Pollution Indemnification Agreement (TOPIA)
shall,
unless the Association otherwise agrees in writing, be a party to such
Agreement for the period of entry of that vessel in the Association.
A member insured in respect of a vessel which is a relevant ship as defined
in the Small Tanker Oil Pollution Indemnification Agreement (STOPIA)
shall,
unless the Association otherwise agrees in writing, be a party to STOPIA for
the period of entry of that vessel in the Association.
There is no cover under this Rule or Rule … in respect of any event
arising during a period when the member is not in compliance with such
requirements unless the Association agrees in writing, or unless the Board of
Directors otherwise determines.
59
CLC 1992 – Stopia and Topia
1151.5
Supplementary
Fund Protocol
N.B. TOPIA to ease the
burdon on the oil importers
that fund the 2003 Protocol
(TOPIA
)
USD Millions
311.7
1992 Fund Convention
137.9
1992 CLC
STOPIA 7
0
N.B. STOPIA to ease the
burdon on the oil importers that
fund the 1992 Fund
20 40 60 80 100 120 140 160
Gross Tonnage (Thousands)
60
Pollution – sufficient coverage?
CLC / Fund Conventions
>95% of non-US spills would have been
compensated by CLC (shipowners) alone
All non-US spills would have been
compensated by CLC + Fund except ERIKA,
PRESTIGE and HEBEI SPIRIT
61
United States of America
Why USA?
- Importer of crude - steady rise over the last three decades.
The Clean Water Act (1974)
- The clean water act (CWA) was the most extensive legislation which
considered oil spills prior the Exxon Valdez spill.
The Trans-Alaska Pipeline Authorization Act (1973)
The Deep Port Act (1974)
- the major statute for deep water spill incidents. It addressed oil spills
clean up and liability at deep water oil ports.
The Outer Continent Shelf Lands Act (1978)
The Hazardous Liquid Pipeline Act (1979)
The Oil Pollution Act (1990)
- OPA is the primary legislation that governs oil spills in the U.S.
The Pipeline Safety Improvement Act (2006)
62
EXXON
United
States –VALDEZ
The Oil Pollution Act (OPA) of 1990
63
”EXXON VALDEZ” 24th of March 1989
Bligh Reef, Prince William Sound, 45,000 tons of crude oil
64
EXXON VALDEZ
Litigation
Litigation was filed on behalf of 38,000 litigants. In 1994, a jury
awarded plaintiffs US$287 million in compensatory damages and
US$5 billion in punitive damages. Exxon appealed and the Ninth
Circuit court reduced the punitive damages to US$2.5 billion.
Exxon then appealed the punitive damages to the Supreme Court
which capped the damages to US$507.5 million in June, 2008.
On August 27, 2008, Exxon Mobil agreed to pay 75% of the US$507.5
million damages ruling to settle the 1989 Exxon Valdez oil spill off
Alaska.
In June 2009, a federal ruling ordered Exxon to pay
an additional US$480 million in interest on their delayed punitive
damage awards
65
OPA - Clean-up operations
66
EXXON VALDEZ - Spill affected area
67
Pollution – OPA
 Strict Liability
 Limit of Liability
tankers
$ 1,900/GT or $M 16 (double hull)
$ 3,200/GT or $M 22 (single hull)
non-tankers
$ 950/GT or $ 800,000
A responsible party’s right to limitation under OPA 90 can be easily lost. This
can happen if the incident was caused by gross negligence or willful
misconduct, or if any applicable Federal safety, construction or operating
regulation is violated. The right to limit will also be lost through a failure or
refusal to report the incident, to provide all reasonable co-operation and
assistance requested by a responsible official in connection with removal
activities, or to comply with an order under certain sections of other Acts.
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Pollution - OPA
No liability is placed on cargo owners under OPA 90.
The owners of ships over 300 gross tons must obtain a Certificate
of Financial Responsibility (COFR) as evidence of their financial
capability to satisfy the maximum liability under OPA 90.
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Pollution – OPA
Emergency Response
 VRP filed with USCG
 Pre-arrangement of Oil Spill Response Clean-up
Contractor (OSRO’s)
 QI
Compensation
 Clean-up
 Third party
 NRDA
(Natural Resource
Damage Assessment)
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Pollution - OPA
Damages:
A wide range of damages are specifically covered by OPA. They
include:
- real or personal property damage;
- loss of profits or earning capacity;
- loss of subsistence use of natural resources;
- loss of Government revenues from taxes, royalties, rents,
fees etc;
- cost of increased public services;
- natural resource damage and the costs of assessing such
damage.
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US OPA – Oil Spill Liability Trust Fund
The Oil Spill Liability Trust Fund comes into operation when the responsible
party denies a claim or fails to settle it within 90 days, or when the first
level of liability is insufficient to satisfy all admissible claims for
compensation. In circumstances where the Trust Fund pays claims that
the responsible party has denied, it will later seek to recover the costs of
settling those claims from the responsible party.
The Trust Fund will consider claims for oil removal costs, third party
damages and NRDA (Natural Resource Damage Assessment) costs,
although there are a number of conditions which have to be satisfied, as
well as restrictions as to who is able to claim from the Trust Fund.
The maximum amount of compensation available from the Trust Fund is $1
billion per incident. It derives its money from a per barrel tax on imported
and domestically produced oil.
The Trust Fund is administered by the National Pollution Funds Center,
which produces a helpful Claimant’s Information Guide.
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Pollution – OPA 90
 Spill Fund;
 $1 Billion Oil Spill Liability
Trust Fund;
 Third Party Orphan (no one is
willing to assume
responsibility for creation or
remediation of the spill);
 Phasing out single skin by
2015;
 State preemption (i.e. Federal
law applies);
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Pollution Legislation
1992 CLC/Fund
OPA 90:
 Strict liability






 Compulsory insurance
(Blue Card)
 Two-tier system –
ship and cargo
 Limit
 Compensation
Strict liability
Compulsory insurance (COFR)
Spill fund
Limit (or unlimited)?
Compensation
Privately lead response
(lead by RP)
 Government/authority lead
response
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Offshore Installations
No truly international convention governing damages caused by
pollution from offshore installations – E.g. - The Association shall not cover:
a) liabilities, losses, costs or expenses arising out of pollution from the well which is being drilled or worked over
or serviced by the Vessel and measures taken to avert or minimise such liabilities, costs or expenses.
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Thank you for your attention!
The Nordic Association of Marine Insurers
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