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Compensation for loss or damage resulting from the escape or discharge of oil from ships is governed by two conventions. The first lays down a regime of civil liability for oil pollution. The second sets up an international compensation fund to cater for those instances where the civil liability regime does not afford compensation to the injured party.
The first Convention, the International Convention on Civil Liability for Oil Pollution Damage 1969, contains uniform international rules and procedures under which shipowners are made strictly liable for certain types of oil pollution damage. It imposes upon the bulk carriers of persistent oils the obligation to effect insurance against the liabilities imposed by the Convention. The Civil Liability Convention came into force in 1975 and there were amendments to its financial provisions by Protocol in 1976.
The 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage ('the IOPC Fund') provides for the payment of compensation to any person suffering oil pollution damage, as defined in the Civil Liability Convention, if that person is unable to obtain full and adequate compensation for one of the following reasons:
1 that no liability for the damage arises under the Civil Liability Convention, because the shipowner can invoke one of the exemptions from liability set out in that Convention;
2 the shipowner is financially incapable of meeting his obligations under the Civil Liability Convention and his insurance is insufficient to satisfy the compensation claims;
3 the damage exceeds the shipowner's limit of liability under the Civil Liability Convention.
The IOPC Fund also provides an indemnity to shipowners against a proportion of their liabilities under the Civil Liability Convention. It is financed by levies on oil importers. By Article 10 of the Fund Convention, contributions to the fund are levied on any person who has received 'contributing oil' (crude oil and heavy fuel oil) in a quantity exceeding 150,000 tonnes in one calendar year in a Contracting State.
Under Article 11 initial contributions are payable by such importers when a State becomes a member of the IOPC Fund. Annual contributions to the fund are levied to meet the anticipated payments of compensation and indemnity by the IOPC Fund in the ensuing year and to meet also the administrative expenses (Article 12).
The functioning of the IOPC Fund is controlled by an Assembly, an Executive Committee and a secretariat headed by a Director. The Assembly comprises representatives of the governments of all Member States. The Executive Committee is elected by the Assembly and must approve settlements of claims against the Fund. The amount of annual contributions to the Fund is decided annually by the Assembly.
Contributions are levied directly from and paid by the individual importers and not by the Contracting States, unless a Contracting State declares that it assumes that obligation (Article 14). The Contracting States are required to communicate annually to the Director of the IOPC Fund the name and address of any person in that State who is liable to contribute to the Fund as well as details of the quantities of 'contributing oil' received.
Contributing oil is counted for contribution purposes each time it is received at ports or terminal installations in a Contracting State after carriage by sea. The place of loading is irrelevant: the oil may be imported from abroad, carried from another port in the same State or transported by ship from an off-shore production rig. Oil received for transhipment to another port or received for further transport by pipeline is also considered as 'received' for contribution purposes. Fears expressed at the time the Fund Convention was adopted that the Secretariat would have difficulties in collecting contributions have proved to be unfounded.
In 1984 two Protocols were adopted amending the Civil Liability Convention and the Fund Convention. They increased the limits of the shipowners' liability and also increased the limit of compensation payable by the IOPC Fund in respect of any one incident from an aggregate amount of 60 million SDRs (Special Drawing Rights) to 135 million SDRs. This latter figure will be increased automatically to 200,000,000 SDR when there are three Member States of the 1984 Fund whose combined quantity of contributing oil received during a given year in their respective territories exceeds 600 million tonnes.
The Protocols also extend the scope of the Conventions to oil spills from unladen as well as laden tankers and redefined the term 'pollution damage'. The Protocols introduce the concept of compensation for impairment to the environment, although they provide that such compensation shall be limited to loss of profit and to costs to reasonable measures of reinstatement actually undertaken or to be undertaken.
The 1984 Protocols are not yet in force. The 1984 Protocol to the Fund Convention enters into force when ratified by at least eight States and when the total quantity of contributing oil received during a given calendar year in all the ratifying States is at least 600 million tonnes. As of 1 May 1991, forty-five States had ratified the Fund Convention.