International Oil Pollution Compensation Funds

3rd ELD Stakeholder Workshop Handling of Environmental Claims by the IOPC Funds

Liliana Monsalve Head, Claims Department

Management Centre Europe Brussels 26 November 2014

Incidents do happen

The oil pollution compensation 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

• 1969 Civil Liability Convention

• 1971 Fund Convention (not in force since 2002) Previous regime

• 1992 Civil Liability Convention

• 1992 Fund Convention Current regime

• Supplementary Fund 2003 Supplementary

Fund Protocol

Legal framework The international compensation regimes

The compensation regime How does it work?

Levies on oil receivers in

Supplementary Fund Member States

Supplementary Fund

Levies on oil receivers in 1992

Fund Member States

1992 Fund

Ship owner

(Strict liability)

Insurance

(P&I Clubs)

Cla

ima

nts

Third tier

Supplementary

Fund

Compensation regime Source of money Paying organism

Second tier

1992 Fund

Convention

First tier

1992 Civil

Liability

Convention

1992 Civil Liability Convention First Tier

• Strict liability of registered tanker

owner

• Limitation of liability based on the

gross tonnage of the ship

• Shipowners required to have

compulsory, third party insurance

and certificate

• Few exceptions to liability

1992 Fund Convention Second Tier – The 1992 Fund

• Pays compensation when:

– Claims exceed shipowner’s

liability under the first tier (CLC)

– Shipowner financially incapable

of meeting its obligations

– Shipowner is exempt under the

1992 CLC

• Limit of compensation

– Maximum 203 million SDR,

including limit under CLC

• Contributions from oil receivers

in State Parties to the 1992 Fund

• Very limited exceptions

Supplementary Fund Third Tier

• Protocol establishing a

Supplementary Fund entered

into force in 2005

• Maximum compensation 750

million SDR, including

amounts payable under 1992

Conventions

• Contributions from oil

receivers in State Parties to

Supplementary Fund

Protocol

• Minimum contribution 1

million tonnes

Compensation limits

Pollution damage Article I.6 1992 CLC

• ‘Pollution damage’ means:

• Loss or damage caused outside the ship by contamination

from the escape or discharge of oil from the ship, wherever

such escape or discharge may occur, provided that

compensation for impairment of the environment other than

loss of profit from such impairment shall be limited to costs

of reasonable measures of reinstatement actually

undertaken or to be undertaken;

• The costs of preventive measures and further loss or

damage caused by preventive measures.

Preventive measures &

Incident Articles I.7 and I.8 1992 CLC

• ‘Preventive measures’ means any reasonable measures

taken by any person after an incident has occurred to

prevent or minimize pollution damage.

• ‘Incident’ means any occurrence, or series of occurrences

having the same origin, which causes pollution damage or

creates a grave and imminent threat of causing such

damage.

Main types of compensation

• 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

Environmental damage What the Conventions cover

• Loss of profit from the use of the environment

• Cost of studies to determine if remedial action is required.

• Cost of reinstatement of environment (factors to consider):

– Scientific analysis

– Reasonable

– Proportionate

– Technically feasible

– NEBA (Net Environmental Benefit Analysis)

– Possibility to accelerate rate of natural recovery

What we have paid in total 1978 - 2012

• No incident

• No compensation paid Supplementary Fund

• has been involved in 38 incidents

• paid about £330 million in compensation The 1992 Fund

• has been involved in 107 incidents

• paid about £237 million in compensation and/or indemnification

The 1971 Fund

• Incidents: 145

• Compensation paid: £567 million Total

Major incidents and compensation

020406080

100120140160180200

Braer (UK, 1993) Nakhodka(Japan, 1997)

Erika (France,1999)

Prestige (Spain,France and

Portugal, 2002)

Hebei Spirit(Korea, 2007)

Amount paid (and to be paid) in claims including shipowner’s contribution under 1992 CLC

£112m

To be paid

£141m

£111m

£52m

To be paid

£179m

• 1992 Fund Convention (113 Member States)

• 1992 Civil Liability Convention (133 States)

• Supplementary Fund (31 States)

• 1969 Civil Liability Convention (35 States)

The Member States October 2014

Liliana Monsalve Head, Claims Department

www.iopcfunds.org