International Oil Pollution Compensation Funds

Recent developments in oil spill compensation regime and case studies

Jose MauraDirector

Seminar on OPRC and CompensationEast Asian Seas Congress, Da Nang, Vietnam16-21 November 2015

Tanker oil spills do happenTanker oil spills do happen

Presentation outlinePresentation outline

1. Overview of the international compensation regime

2. Recent developments

3. Case studies

The international regime:The international regime:Why do we need it?

• Compensation to victims of pollution damage caused by spills of persistent oil from tankers

• Compensation through amicable settlement

• Uniform and consistent application of compensation regime

• Equal treatment of all claimants

The Compensation RegimeThree tier system

Oil receivers in Supplementary Fund

States Parties

Supplementary FundSupplementary Fund Protocol

3rd tier

Oil receivers in 1992 Fund States

Parties

1992 Fund1992 Fund Convention 2nd

Tier

ShipownerInsurance (P&I Clubs)

1992 Civil Liability Convention 1st tier

Claimants

Compensation regimeSource of money Paying organisation

Contribution

Contribution

Insurance Premium

Payment

Compensation limitsCompensation limits

Main types of claimsMain types of claims

•Clean-up operations and preventive measures

•Property damage

•Economic losses in fishery, mariculture and tourism sectors:

– Consequential loss– Pure economic loss

•Environmental damage– Reasonable costs for reinstatement of the

environment

The IOPC FundsThe IOPC FundsIts role

• Administer Fund Conventions

• Consist of Assembly, Executive Committee and Secretariat

• Establish criteria for admissibility of claims• Assess claims and pay compensation to victims when

applicable• Financed by contributions from oil receivers (industry) in

Member States

IOPC Funds Governing Bodies

How does the IOPC Funds work?How does the IOPC Funds work?Organigram

1992 Fund Assembly

1992 Fund Executive

Committee

Supplementary Fund Assembly

DirectorSecretariat

Investment Advisory

Body

Audit Body Local Claims Handling Office

Technical Experts

Fund Lawyers

The Member StatesThe Member StatesNovember 2015

1992 Fund Convention (114 Member States)1992 Civil Liability Convention (133)

Supplementary Fund (31)1969 Civil Liability Convention (35)

ContributionsContributionsFrom Member States’ oil industry

What we have paidWhat we have paid1978 - 2015

Presentation outlinePresentation outline

1. Overview of the international compensation regime

2. Recent developments

3. Case studies

Winding up of the 1971 FundWinding up of the 1971 FundSituation in 2013

•1971 Fund ceased to be in force in 2002•In January 2013, five incidents remained pending:

– Vistabella, France (1991)– Aegean Sea, Spain (1992)– Iliad, Greece (1993)– Nissos Amorgos, Venezuela (1997) &– Plate Princess, Venezuela (1997)

•Litigation likely to take many years•But 1971 Fund had no liability to pay for these spills •Difficulty in levying contributions for old cases

Winding up of the 1971 FundWinding up of the 1971 FundConsultation Group’s work in 2013

•Administrative Council decides to set up Consultation Group

– Representatives from: Japan, Italy, Mexico & Morocco

– Chairman: Canada•Consultation Group:

– Recommended Council to wind up 1971 Fund within the £5 million available & to set up a time table.

•Important decision by Administrative Council -October 2013:

– Accelerate winding up & set up time table – Director should provide a plan in May 2014 &

Council would decide to dissolve 1971 Fund in October 2014

Winding up of the 1971 FundWinding up of the 1971 FundWork carried out in 2014

•Vistabella & Aegean Sea incidents – Resolved and files closed

•Iliad incident– Global settlement agreed with North of England P&I Club.– Payment of €1 million

•Outstanding oil reports received•Outstanding contributions received (all but two) •Contributions from two contributors in Russian Federation

– £43 000 had to be written off.•But Plate Princess & Nissos Amorgos incidents were still unresolved.

Plate PrincessPlate PrincessVenezuela, 1997

• Maltese-registered tanker reportedly spilled 3.2 tonnes of crude oil in Puerto Miranda

• Experts found no signs of oil pollution 11 days after incident

• 1971 Fund was notified in 2005 and in 2007. Too late for the Fund to examine alleged damages

• In 2010, Supreme Court in Caracas orders compensation to be paid

• 1971 Fund Administrative Council decides:

due process of law had not been followed, judgement had been obtained through fraud & instructs Director not to pay compensation

Nissos AmorgosNissos AmorgosVenezuela, 1997

•All valid claims had been paid – US$ 25 million

•Two claims by Venezuela against shipowner and Gard Club remained pending

– US$60 million each•Attempt to settle claim between Gard & Fund failed•Gard took legal action against 1971 Fund

– March 2014•Freezing order granted against 1971 Fund

– May 2014•1971 Fund application requesting non jurisdiction of English Courts•High Court granted 1971 Fund’s application and concluded Gard had no case against 1971 Fund

– October 2014

Winding up of the 1971 FundWinding up of the 1971 FundDecision to dissolve the Fund in 2014

•Difficult situation•No consensus achieved•Strong opposition from shipping industry

– P&I Clubs, ICS, Intertanko, etc.•A number of Member States (led by UK) requested a delay in winding up•Many discussions between delegations but no agreement•Decision taken by vote (roll call)

– 29 voted in favour of winding up in 2014– 14 voted against– 03 States abstained.

Winding up of the 1971 FundWinding up of the 1971 FundDissolution of the 1971 Fund in 2014

•Balance as at 31 December 2013: – £4.7 million

•Payments - litigation & global settlement: – £2.3 million

•Reimbursement to contributors: – £2.38 million

•Contingency amount for unforeseen expenditure: – £29,117

•Contingency amount finally divided equally between:

– World Maritime University, Malmo (Sweden)– International Maritime Law Institute (Malta)– International Maritime Safety, Security and

Environment Academy, Genoa (Italy)

1971 Fund was dissolved on 31 December 2014

• A floating storage unit (FSU), converted from an oil tanker, explodes and spills 1 000 to 2 000tonnes of oil in Piraeus, Greece

• In 2000, Executive Committee decides Slops is not a ‘ship’ as defined by the 1992 Conventions

• Greek Supreme Court holds that Slops is covered under the 1992 Conventions

• 1992 Fund pays €4 million in compensation

• In 2008, 1992 Fund Assembly starts discussion on definition of ship

SlopsSlopsGreece, 2000

Is the regime applicable to floating storage and offloading units (FSOs or FSUs)?

Article I, 1992 Civil Liability Convention1.‘Ship’ means any sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo . . .

Working GroupWorking GroupDefinition of “ship”

Working Group conclusionsWorking Group conclusionsApril 2015 – Hybrid approach proposed

1. Crafts which fall within the definition - examples– Seagoing craft constructed/adapted for carriage of oil, including if:

• In ballast (if oil residues on board)• Being towed or at anchor due to exceptional circumstances

– Seagoing craft capable of carrying mixed cargoes, if oil or residues on board

– Offshore crafts carrying oil on a voyage under own power or towed

2. Crafts which fall outside the definition – examples– Barges certified for inland waterways only– Vessels not constructed/adpated for carriage of oil (cruise ships,

container vessels, etc.)– Crafts involved in offshore exploration and production or processing of

oil (rigs, FPSOs, etc.)

Working Group conclusionsWorking Group conclusionsApril 2015 – Hybrid approach proposed

3. “Grey areas” to be decided on a case by case basis – 1992 Fund governing bodies to decide using the maritime

transport chain test

• Definition of maritime transport chain– Starts when oil leaves the production, processing or treatment

plant until delivered at final destination– For the part of the voyage where oil is transported by sea– Further refinements of the concept to be agreed

• October 2015– 1992 Fund Assembly approved the Working Group’s proposal– Guidance document to be prepared for Spring 2016

Improved guidance for claimants and StatesImproved guidance for claimants and Stateswww.iopcfunds.org

•Guidelines for claimants– Claims Manual– Guidelines for claims in fisheries, mariculture and

fish processing sectors– Guidelines for claims in the tourism sector– Guidelines for claims for clean up and preventive

measures– Example Claims Form– Guidelines for claims for environmental damage -

DRAFT

•Guidance documents for Member States– Guidance for Member States– Guidance on fishing restrictions - DRAFT

Presentation outlinePresentation outline

1. Overview of the international compensation regime

2. Recent developments

3. Case studies

Hebei SpiritHebei SpiritThe incident

Date of Incident: 7 December 2007

Cause of spill: Collision

Oil cargo: 264 000 tonnes

Oil spilled: 10 800 tonnes

•345km of coastline in 3 provinces affected•21 private clean-up contractors used•Unprecedented public participation

– 2 million man-days of work in the first 3 months– 1 million man-days volunteers/military

•Clean-up operations finalised by summer 2008

Hebei Spirit Hebei Spirit Impact and response

Hebei SpiritHebei SpiritImpact on economic activities

• Fishing restrictions imposed on the entire west coast of Korea (4 provinces)

• Restrictions lifted gradually from April 2008

• Temporary impact on tourism businesses in the most affected area

• Special Law to aid the victims of the incident enacted by the Korean Government

Hebei SpiritHebei SpiritFund’s involvement

• Good cooperation between 1992 Fund and P&I Club

– Set-up of a joint Claims Handling Office– Joint experts– Join assessments– Joint costs

• Meetings with authorities, the public and the media

• Meetings with claimants

• Regular site visits

Hebei SpiritHebei SpiritClaims for compensation

Number of claims 127 483 Amount (in US$)

1992 Conventions (CLC & Fund) Available 322 000 000

Limitation Court Claimed 4 000 000 000

Hebei Spirit Centre Claimed 2 700 000 000

Limitation Court Awarded 738 000 000

Hebei SpiritHebei SpiritClaims in figures

MT Pavit MT Pavit incidentincidentVessel particulars

•Name: MT Pavit

•Built: 1990

•Gross tonnage: 999 GRT

•Flag: Panama

•Shipowner: M/s Pavit Shipping Lines Inc.

•Ship manager: Prime Tankers LLC owners

•Insurer: Unconfirmed

MT PavitMT Pavit incidentincidentIncident location

Mumbai

Vessel abandoned 29/06/11

Vessel grounded31/07/11

MT Pavit MT Pavit incidentincidentFacts

•Date: 31 July 2011

•Place: Juhu beach, Mumbai, India

•Cause: Grounding

•Quantity of oil spilled: None

•Cargo on board: No

•Previous cargoes: Marine gas oil (normally non persistent)

•1992 CLC Limit: 4.51 million SDR (US$7 million)

•CLC + Fund limit: 203 million SDR

•Claims submitted at court: 2 claims for US$1.8 million

MT Pavit MT Pavit incidentincidentFacts of the incident (1)

29 June 2011:

•Tanker abandoned by 13 man crew, 110 nm off coast of Oman

•Captain switches Automatic Identification System (AIS) to “not under command” (later AIS reportedly failed)

•6.30pm: Position of tanker - 675 nautical miles from Mumbai coast

30 June 2011:

•Rescue of crew completed – repatriated

•Naval area warning issued for last known position of tanker

MT Pavit MT Pavit incidentincidentFacts of the incident (2)

2 July 2011:•Tanker managers inform authorities, tanker has sunk•Naval area warning lifted

From 29 June to 31 July 2011:•Tanker adrift

31 July 2011:•Tanker grounds perpendicular to

Juhu-Versova beach, 18km North of Mumbai, after drifting 675 miles from position where abandoned by crew.

2 August 2011: •Due to wind and wave action, tanker pushed up beach, turns parallel to beach, sinks into sand, supported along length

MT Pavit MT Pavit incidentincidentQuestions to address

•Was MT Pavit a ‘ship’?

•Was she carrying persistent oil as cargo?

•Did she have residues of previous oil cargoes on board?

•Does a tanker sitting on sandy beach constitute a ‘grave and imminent’ risk of causing pollution damage?

•Questions for the 1992 Fund Executive Committee to answer

Jose MauraDirector

www.iopcfunds.org