International Convention on

Civil Liability for Bunker Oil Pollution Damage;

2001

by Patrick Griggs[1]

 

At a Diplomatic Conference held at IMO headquarters in London between Monday March 19^th and Friday March 23^rd 2001 the final text of a Bunker Pollution Convention was agreed.  The Convention will be open for signature from October 1^st 2001 until September 30^th 2002[2].  Before the Convention can come into force internationally it will require ratification by 18 States including 5 States each with ships whose combined tonnage is not less than 1,000,000 gross tons[3].  Once these entry into force criteria have been met the Convention will come into force internationally 12 months later[4].

 

Background

During the negotiations leading up to the Civil Liability Convention of 1969 (CLC)[5] it was recognised that there was a gap in the pollution liability and compensation regime.  The CLC applied to tankers only and covered pollution from persistent oil carried as cargo and from persistent oil carried in the form of bunkers but only if the tanker was laden at the time of the incident.  The main reason for this was that it was always contemplated that the CLC (which produced compensation from shipowners) would be complemented by the Fund Convention[6] (producing compensation from the oil industry).  The CLC had to be tailored to the requirements of the major oil companies.  It was thought realistic to expect cargo to contribute to losses caused by the escape of cargo and also to losses caused by the escape of bunkers but only when the tanker was laden.  This on the basis that where a tanker is in ballast its bunkers are, by definition, being used exclusively for ship’s purposes.[7]  Bunkers on non-tankers continued to fall outside the compensation regime.

 

A draft Bunker Convention came back into the Work Programme of the IMO Legal Committee in 1996.  The Diplomatic Conference of March 2001 had before it a final text prepared by the Legal Committee at its 82^nd Session in October 2000[8]. 

 

This Convention therefore has to be seen as plugging a gap by addressing, for the first time, the problem of pollution caused by the escape of bunkers from general cargo ships.  Not surprisingly the Convention follows the CLC precedent in most respects.  There are, however, a number of notable differences and this paper will, in addition to summarising the main provision of the Bunker Convention,  seek to identify and explain those differences.

 

Definitions

For purposes of the Convention a “ship” is broadly defined as including “any seagoing vessel and seaborne craft, of any type whatsoever”[9].  This may appear to be a broad definition and to cover a large number of floating objects as well as traditional ships.  However, the Convention will not apply unless the vessel in question is carrying “bunker oil” which is defined as “hydrocarbon mineral oil, including lubricating oil used for the operation or propulsion of the ship, and any residues of such oil”[10].

 

It should be noted that in the CLC “owner” is defined as the “person or persons registered as the owner of the ship” thus channelling all responsibility under the CLC to that person[11].  On the face of it, it is therefore surprising to find that “shipowner” in the Bunker Convention embraces “the owner, including the registered owner, bareboat charterer, manager and operator of the ship” - a much more extensive group of persons.  It follows that wherever else in the Convention a liability is imposed on the “shipowner” (see in particular Article 3) all those listed in the definition of shipowner are embraced. 

 

The only other definition that calls for particular comment is the definition of “pollution damage”[12].  “Pollution damage” means “loss or damage … by contamination resulting for the escape or discharge of bunker oil”.  Compensation for impairment of the environment “other than loss of profit from such impairment” is limited to the cost of reasonable measures of reinstatement”.  (This definition accords with the redefinition of pollution damage found in the CLC 1992)[13].

 

The International Group of P&I Clubs, in a submission to the Diplomatic Conference, drew attention to the fact that when the 1992 Protocol to the CLC was drafted it was intended to exclude claims in respect of natural resource damage assessment i.e. claims that fell beyond recovery in respect of restoration or reinstatement.  The International Group argued that it was right to seek to exclude these claims on the basis that such claims would be likely to be speculative in nature.  Unfortunately the drafting of the 1992 Protocol is widely recognised as defective since Article III 4 of the CLC may give States the opportunity to introduce domestic legislation permitting recovery in respect of matters which fall outside the definition of “pollution damage”.  The International Group of P&I Clubs suggested that this defect should be put right in the context of the Bunker Convention.  Unfortunately, such was the pressure of time that the International Group was persuaded to withdraw this proposal.  An opportunity missed.

 

Scope of application

There are no surprises in Article 2.  The Convention applies not only to the territory and territorial sea of a State Party but also within its exclusive economic zone (or equivalent if there is no EEZ but not exceeding 200 nautical miles).  The Convention also applies to preventative measures taken to prevent or minimise damage in those areas.

 

 

Liability of shipowner

By Article 3 the shipowner (which includes the range of persons listed in the definition)[14] is liable unless it is established that the damage resulted from an act of war etc., was caused by the act or omission of a third party with intent to cause damage or was caused by the negligence or wrongful act of any government or other authority responsible for maintaining navigational aids.  These limited exemptions from liability match the exemptions contained in the CLC.  The shipowner may also be excused from liability where it is shown that the person who suffered the damage caused or contributed to it. 

 

Article 3 also contains a provision to the effect that where more than one person is liable the liability shall be joint and several.  Two further provisions of Article 3, which follow the CLC format, provide that claims for bunker pollution damage can only be brought against the shipowner under the Convention and not otherwise.  However, the right of the shipowner to recover from third parties is expressly preserved. 

 

The International Group of P&I Clubs, in a submission to the Diplomatic Conference, suggested that instead of leaving all those persons embraced by the wide definition of shipowner exposed to claims it would make sense to “channel” all claims initially to the registered owner.  If, and only if, the shipowner failed to satisfy the claim would the bareboat charterer, manager or operate be exposed to claims.  Again, time constraints prevented exploration of this practical proposal and it was withdrawn.

 

Exclusions

The exclusions[15] will come as no surprise to those familiar with the CLC.  The Bunker Convention does not apply to pollution damage covered by the CLC[16].  Nor does it apply to pollution from warships or ships on Government non-commercial service[17] unless a State Party decides otherwise[18].  On the other hand where State owned vessels are used for commercial purposes the Convention applies including the jurisdiction provisions of Article 9[19]. 

 

Incidents involving two or more ships

Article 5 provides that where an incident involving two ships occurs and it is not possible to determine from which ship the pollution came, both ships shall be jointly and severely liable. 

 

 

Limitation of liability

During initial discussions in the Legal Committee a number of States were keen to see a separate free standing fund provided by shipowners to be exclusively available to satisfy bunker pollution claims.  There was strong opposition to this proposal in particularly from the shipowning and insurance sectors and it was finally agreed that bunker pollution claims would be subject to existing laws of limitation of liability.  Thus, bunker pollution damage claimants will have to prove their claims against any available limitation fund alongside other property claims arising out of the same incident.

 

In a submission to the Diplomatic Conference the International Group of P&I Clubs ( and the BMLA[20] in a separate submission to the UK Department of Transport and the Regions) pointed out that there was a widespread assumption that in States where the LLMC[21] applies it provides a right of limitation for pollution damage caused by bunker spills.  It was suggested that this might well be an erroneous assumption.  The claims for which liability may be limited are set out in Article 2(1) of the LLMC and include claims for loss or damage to property and claims in respective of loss resulting from infringement of rights.  It is strongly arguable that the LLMC may give no general right of limitation for bunker pollution claims which do not involve physical damage to property or result in infringement of rights (for example economic loss arising from disruption to a business caused by an oil spill) because such claims cannot be brought within the existing wording of Article 2(1) of the LLMC.

 

Because of pressure of time the International Group was persuaded to withdraw this submission.  It is a matter of some disappointment that, the problem having been identified and a solution devised, it was not possible to add a few words to Article 6 which would have put the matter beyond doubt.

 

It should be noted that the Convention is accompanied by a Resolution[22] which urges all States to ratify or accede to the 1996 Protocol to the LLMC 1976 thus increasing the fund available for all claims – including bunker pollution claims.

 

Compulsory insurance or financial security

Compulsory insurance has become a feature of recent liability conventions (notably CLC and HNS) and is likely to feature in future liability instruments such as the proposed Protocol to the Athens Convention of 1974.  Article 7, therefore deals in considerable detail with this requirement and the necessary administrative systems which will have to be put in place. 

 

From the outset it has been recognised that requiring shipowners to insure their potential liability and also requiring each ship to carry a certificate attesting that insurance or other financial security is available would place additional expense on shipowners and their insurers as well as a considerable additional administrative burden.  The same goes for Flag State Parties.

 

Article 7 imposes the obligation to insure on the registered owners of ships having a gross tonnage greater than 1000 gross tons.  Not surprisingly shipowners and insurers were keen to set a high gross tonnage figure as a threshold at which the compulsory insurance requirement applies.  The lower the tonnage threshold figure the greater the number of vessels which would require insurance and certification.  On the other hand those States with vulnerable coast lines and few ships flying the flag of their State were keen to see the threshold figure as low as possible thus ensuring that as many potentially polluting vessels as possible come within the compulsory insurance requirement. 

 

Throughout the week of the Diplomatic Conference, both in the conference hall and in the corridors, discussions and negotiations continued.  In looking for a practical solution to the problem the secretariat of the IMO obtained and supplied delegates with statistics from Lloyds Register[23] designed to determine whether vessels below a particular tonnage tend to operate on the less polluting lighter oils such as diesel. 

 

Ingenious compromises were proposed but at the end of the day the threshold figure of 1000 gross tons was proposed by the Conference Chairman, Alfred Popp Q.C., as part of a package deal including entry into force criteria.  It is certain that, like all compromises, it failed to satisfy all delegations.  As indicated above the threshold argument became somewhat three dimensional when it was linked with the question of how many ratifications should be needed before the Convention comes into force and whether the number of States specified for entry into force should possess a certain minimum tonnage of registered vessels in order to trigger the entry into force requirements.

 

As part of the overall debate on the need for compulsory insurance it was proposed, for the first time, at the Diplomatic Conference, that State Parties should be free to declare that registered owners should not be required to maintain insurance or other financial security to cover bunker pollution claims where their vessels were engaged exclusively on “domestic voyages”. 

 

Debate developed as to whether domestic voyages should be defined simply as voyages starting and finishing within a State’s territory or territorial seas or whether it should be extended to include voyages beginning and ending in the much wider area constituted by a State’s EEZ.  A number of States with complex island or archipelagic waters (such as the Philippines and Indonesia) were keen to see the exclusion extended to the EEZ on the basis that many inter-island voyages go outside the 12 mile limit of the territorial sea.  On the other hand a number of Mediterranean countries (Cyprus, Malta and Italy) were keen to restrict the exclusion to territorial seas on the basis that the EEZ of adjacent Mediterranean States overlap and vessels belonging to neighbouring States and operating within their EEZ could represent a serious pollution threat.

 

In the event the Conference adopted a compromise proposal put forward by the Chairman[24] to the effect that exclusion would apply only to the territorial sea. 

 

Article 7 provides explicit requirements for compulsory insurance and the production of evidence of the existence and quality of such insurance or financial security. 

 

The registered owner is required to maintain insurance or other financial security in an amount equal to the limit of liability under the applicable national or international limitation regime applicable in the Flag State but not exceeding the limitation amounts contained in the LLMC 1976 as may be amended.  (See reference above to the Resolution relating to ratification of the 1996 Protocol to the LLMC 1976).

 

It should be noted that the obligation to obtain insurance rests upon the registered owner[25] to the exclusion of the other persons who come within the definition of shipowner in Article 1 (3) of the Convention.  This may appear anomalous  but it was clearly unsatisfactory for all those defined as shipowner to have to carry insurance in accordance with Article 7.  It was therefore agreed that with one compulsory insurance in place the probability was that in practice all claimants would seek to recover from the registered owner or direct from his liability insurer in reliance on Article 7 (10) and ignore the other potential defendants except in extreme cases.

 

The certification requirement is extensively described in Article 7.  It is clearly stated to be the Flag State’s responsibility to issue ships with a certificate confirming that appropriate insurance or financial security is in place.  This places an administrative burden on States which may not be particularly welcome.  Since in most instances the insurance will be placed with P&I Clubs the Clubs will also be involved in further paper work.  The extent of this additional work and the cost has not been calculated. 

 

Article 7 goes so far as to list the information which must be contained in the certificate and a proforma certificate appears as an Annex to the Convention.  It is worth noting that Article 7 provides that a State Party may authorise another institution or organisation to issue the certificates.  It will be interesting to see whether this power of delegation will be used in practice. 

 

Certificates must be in either English, French or Spanish[26] or, if in another language, must be translated into one of the three specified languages.  The certificate has to be carried on board at all times and Article 7 specifies in some detail what form of insurance or financial security satisfies the requirements of the Article.  Should these requirements not be met the certificate will be invalidated. 

 

The Article contains detailed provisions regarding international recognition of certificates and also provides for the holding of certificates in electronic format.

 

Direct action

Tucked away in Article 7 (10) is an important provision whereby a person claiming compensation for pollution damage may bring that claim directly against the insurer or other person providing financial security.  If the insurer is sued his right to limit in accordance with Article 6 is assured even where the registered owner, whose liability he insurers, has forfeit the right to limit by his conduct.  The insurer may also rely upon any defences available to the shipowner and may avoid liability if he can establish that the damage resulted from the wilful misconduct of the shipowner.  No other policy defences, which might in normal circumstances be available to the insurer, may be invoked in such a direct action.

 

Insurers are becoming used to the concept of the direct action even though it breaches old established concepts of indemnity insurance.  The concept of direct action having been conceded in the CLC and in the HNS Convention it was not strongly opposed by the International Group of P&I Clubs in the context of the Bunker Convention.

 

Time limits[27]

No particular surprises here.  Claims are extinguished if an action is not brought within three years from the date when the damage occurred but in no circumstances shall an action be brought more than 6 years from the date of the incident which caused the damage.  This double time provision allows for delay in the manifestation of a claim.

 

Jurisdiction[28]

The question of jurisdiction has been the subject of extended debate throughout the passage of this instrument through the Legal Committee.  It was clearly the desire of delegates to the Diplomatic Conference to give claimants as many options as possible when it comes to the pursuit of claims for compensation.  In the event no great choice is available, claimants may pursue claims before the courts of the State or States in which the pollution has occurred or where measures to prevent or minimise pollution have taken place.  Where security for claims has been posted by the shipowner, insurer, or other person providing security action may be brought where that security has been provided. 

 

Recognition and enforcement

Article 10 which deals with recognition and enforcement of judgements requires no particular comment, though a late intervention by Sweden on behalf of the European Union caused something of a stir (see hereafter).

 

Supersession Clause[29]

This is a standard clause now found in all International Conventions.  It gives the Convention precedence over any other existing Convention to the extent that there is a conflict between the two instruments. 

 

Signature, ratification acceptance approval and accession.[30]

The Convention will be open for signature at IMO from October 1^st 2001 until 30^th September 2002.  This is a formal requirement and whether or not the Convention attracts signatures during that year is of no great significance since it will remain open for accession following the expiry of the year. 

 

Otherwise this Article deals with the formal steps required in order to ratify or accede to the Convention. 

 

States with more than one system of law[31]

This provision was inserted at an early meeting of the Legal Committee at the express request of Hong Kong, China on the basis that Hong Kong, China is a separate territorial unit from China in which a different system of law applies.  Article 13 enables a State to declare that the Convention shall extend to all or only some of its territorial units and may modify the application of the Convention to suit each individual unit. 

 

Entry into force

Article 14 remained controversial down to the final day of the Conference when the Chairman put forward a compromise proposal[32] whereby, as mentioned earlier, the Convention will enter into force one year following the date on which 18 States, including 5 States each with not less than 1 million units of gross ships tonnage have ratified. 

 

The background to this compromise lies in the fact that a substantial number of, principally flag orientated, States where anxious that the administrative burden in relation to certification of insurance cover should only need to be put in place following the emergence of substantial support for the Convention.  The combination of the relatively high number of States of which 5 should be substantial ship operating States provides that comfort.  On the other hand it does extend the likely period of time to elapse between agreement of this Convention and its entry into force.

 

Denunciation, revision or amendment, depository, transmission to United Nations and languages.

Articles 15 to 19 deal with these traditional final provisions and require no particular comment.

 

Responder Immunity

A group of NGOs including ITOPF, CMI, Intertanko, IAPH, ICS, IG, ISU, OCIMF and BIMCO combined to submit a paper[33] to the Diplomatic Conference calling for the insertion in the Convention of a provision for the legal protection of persons taking reasonable preventative measures (including salvage) in response to a bunker oil spill.  The paper invited delegates to recognise that such legal protection would encourage prompt and effective response thereby minimising pollution damage.

 

Following the introduction of this paper a lengthy debate took place though the Chairman pointed out that this, so-called, “responder immunity” issue had been debated on a number of occasions within the Legal Committee and rejected.

 

In the event the proposal to include specific wording in the Convention was rejected and a compromise proposal[34] put forward by Australia, Denmark, Indonesia, Ireland, Netherlands, Switzerland, the UK and Hong Kong was adopted.  This involved a Conference Resolution to be attached to the Convention calling upon States Parties, when implementing the Bunker Oil Pollution Convention, to consider the need to introduce in its domestic legislation provisions for the protection of persons responding to a casualty and taking measures to prevent or minimise the effects of oil pollution.  This Resolution was adopted and it follows that all States implementing the Convention may make their own domestic arrangements in relation to protection for salvors and other responders.  Many States have already done this in the context of the CLC and are likely to extend that legislation to cover claims against responders arising out of bunker spills.

 

European Commission

On the final morning of the Conference, Sweden, which currently has the Presidency of the European Union, submitted a paper[35] in which it drew attention to the fact that on December 22^nd 2000 the European Community adopted Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters.  According to the submission, by adopting common rules on these matters, member States of the European Union had effectively transferred their national competence in this area to the Community. 

 

It was stated in the submission that Articles 9 and 10 or the Bunkers Convention deal with jurisdiction and recognition and enforcement of judgements which, since the adoption of Regulation (EC) 44/2001, were outside the competence of member States.  The submission proposed that a new Article 12 bis should be added to the Convention which would enable the European Community to become a party to the Convention thereby solving the lack of competence of member States.

 

A number of non-EU state delegations protested at the late submission of this proposal and were supported in this by the Chairman of the Conference.  In particular it was pointed out that this was a highly political issue and delegates would not have time to seek instructions from their Governments in the limited time available.

 

In the event Sweden withdrew the proposal but this must leave some doubts in the minds of delegates from EU States as to their ability to ratify the Convention.

 

At one stage this proposal was interpreted as a bid by the European Commission to deprive individual member States of the right to ratify Conventions of this sort on the basis that only the Commission was competent to do so.  In fact the submission appears to stop short of taking such an extreme position.

 

 

Patrick Griggs