Civil Liability for Oil Pollution Damage (CLC) Lecture Slides

LECTURE 13  Civil Liability For Oil Pollution Damage (CLC, 1969)  INTRODUCTION In the shipping sector, one of the most important agreements is regarding pollution. There are different types of pollution at sea. Accidental grounding of vessels can lead to reef damage. This can alter the...

LECTURE 13  Civil Liability For Oil Pollution Damage (CLC, 1969)  INTRODUCTION In the shipping sector, one of the most important agreements is regarding pollution. There are different types of pollution at sea. Accidental grounding of vessels can lead to reef damage. This can alter the complete ecosystem of a region. Pollution due to discharge of fluids and hazardous material from a ship can affect the marine environment. A big concerns ship owners and operators is the risk of an oil spill. Oil spills are the persistent leakage or discharge of oil and its products (or derivatives) into the ocean. Numerous oil spills throughout the course of maritime voyages, have caused near irreparable damage. Oil spills may take anywhere from a few days to a few years to completely clean up. It has enormous consequences, in terms of economy, flora, fauna, and livelihood. Oil pollution through the Exxon Valdez incident, Deepwater Horizon incident, Kuwaiti oil fires, and the Black Sea spill have severely polluted the Earth.  BACKGROUND - STORY OF CLC In 1967, a ship loaded a cargo of crude oil from Mina-Al-Ahmadi and was bound for Wales. On the way, it got grounded. Abt 100, 000 tons of crude oil spilled and found its way on the coastal waters of two countries, UK and France. Millions of dollars were spent for clean up operation. Apart from the money required for clean up operation, there were number of people who lost their source of income. Fishermen could not go fishing. People who earn their living from tourism, were also hit by this incident. Apart from all this there is damage to the ecology which no one can measure in monetary values. Now the question is who would pay for all these damages? Ship owners ? The incident did not take place in the territorial waters of any country. Even if it did take place, the local laws for these cases are never so detailed to easily recover the money from ship owners. Even if ship owner had to pay the compensation, the amount of money may be so huge that a ship owner could loose entire business because of one incident. What is the solution WHAT IS THE CIVIL LIABILITY CONVENTION OF 1992? The 1992 Civil Liability Convention (CLC1992) governs the liability of shipowners for oil pollution damage. Under this Convention, the registered shipowner has strict liability for pollution damage caused by the escape or discharge of persistent oil from his ship. Administered by the IMO and was adopted to ensure that adequate compensation is available to persons who suffer oil pollution damage resulting from maritime casualties involving oil-carrying ships..  The Convention requires ships covered by it to maintain insurance or other financial security in sums equivalent to the owner's total liability for one incident. The Convention applies to all seagoing vessels carrying oil in bulk as cargo. However, only ships carrying more than 2,000 tons of oil are required to maintain insurance in respect of oil pollution damage. CLC does not apply to warships or other vessels owned or operated by a State and used for Government non-commercial service. However, it applies in respect of the liability and jurisdiction provisions, to ships owned by a State and used for commercial purposes.  ADOPTION AND EIF Adoption: 29 November 1969; Entry into force: 19 June 1975; Replaced by 1992 Protocol: Adoption: 27 November 1992; Entry into force: 30 May 1996  TYPE OF OIL CLC deals with oil pollution only. It deals with pollutions from persistant oil only. Persistent oils, as the name suggest are the one that persists longer in the environment. Whereas Non-persistent oils either evaporate easily or disperse easily. AREA OF APPLICATION The area to which CLC convention would apply is covered under annex II of the convention which are: Territory and Territorial waters of a contracting state. In simple words territorials waters is the area of 12 NM radius from the baseline of the contracting state. Exclusive economic zone (EEZ) of the contracting state. In simple words EEZ is the area of 200NM radius from the baseline of the contracting state. The CLC 92 does not cover the pollution incidents in the high seas. High seas pollutions were not included in the CLC convention because the pollution in high seas were considered to cause lesser damages. OTHER DAMAGES BECAUSE OF POLLUTION INCIDENT Even though the CLC convention deals with the pollution incidents, damage can be much more than the pollution itself. The compensation and liability of the owner of the polluting ship does not limit to the pollution alone. Damages include physical injury, psychological conditions and loss of income resulting from the pollution. Who need to pay in case of pollution incident?  Ship owner need to pay the full amount whatever damages are claimed by various claimants if it is proved that damages were the result of acts of ship owner committed with the intent to cause this damage damages were because of the acts of ship owners who knew that his acts would result in these damages  The Protocol of 1976, which entered into force in 1981, provided for the applicable unit of account used under the convention to be based on the Special Drawing Rights (SDR) as used by the International Monetary Fund (IMF), The Protocol of 1984 set increased limits of liability but was superseded by the 1992 Protocol. WHAT IS SPECIAL DRAWING RIGHTS (SDR) The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated. This includes the largest-ever allocation of about SDR 456 billion approved on August 2, 2021 (effective on August 23, 2021). This most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. THE COMPENSATION LIMITS ( ESTABLISHED IN 1992 PROTOCOLS) For a ship not exceeding 5,000 gross tonnage, liability is limited to 4.51 million SDR (US$5.78 million) For a ship 5,000 to 140,000 gross tonnage: liability is limited to 4.51 million SDR plus 631 SDR for each additional gross tonne over 5,000 For a ship over 140,000 gross tonnage: liability is limited to 89.77 million SDR Convert US Dollar to IMF Special Drawing Rights USD SDR 1 USD 0.717 SDR 5 USD 3.585 SDR  EXEMPTIONS TO SHIPOWNERS First point may not be difficult to prove, other two points are more difficult to prove. This means that ship owners have hardly any exception to the liability. In almost all the cases of oil pollution, ship  SUMMARY Ship owner is liable for the oil spills originating from his ship There are very few exceptions to this liability to the ship owners in case of oil spills from their ships There is a maximum limit of liability set out in CLC according to the tonnage of the ship. This limit will not be applicable if owner is at fault It is compulsory for the ship owners to take insurance to cover his liability in case of oil pollution from his ships The pollution from persistant oil is more serious when compared to non- persistant oils. Persistant oils require more resources and money for clean up operation.