INTERNATIONAL OIL POLLUTION COMPENSATION FUNDS MEETING 24 – 27 April 2012

The 1971 and 1993 Funds met at IMO Headquarters from Tuesday 24 through Friday 27 April 2012. The following is a short summary of points of interest emanating from the meeting:

• OVERVIEW – REPORT BY THE DIRECTOR. With respect to compensation matters, reference was made to a new incident ALFA 1 (Greece) in March 2012, also JS AMAZING in Nigeria first reported in October 2011 and for which time bar was approaching. The HEBEI SPIRIT incident continues to provide one of the biggest challenges yet faced by the 1992 Fund, with nearly 129,000 individual claims submitted so far, mainly from the Korean fishing sector and for which the recommended level of payment is 35% so as to avoid an overpayment situation. The Beijing Supreme Court had dismissed an action brought by the 1992 Fund against Samsung C&T Corporation (Samsung C&T) and Samsung Heavy Industries (SHI). However, the owner and the insurer of the HEBEI SPIRIT has concluded a settlement agreement with Samsung C&T and SHI for US $10 million , of which half will be recovered by the 1992 Fund. The most contentious reported incident concerned the vessel PLATE PRINCESS which spilled 3.2 tonnes of crude oil (equivalent to 20 barrels) at Puerto Miranda (Venezuela) on 27 May 1997. Two fishermen’s trade unions, FETRA PESCA and Puerto Miranda Union (PMU) presented claims in the Civil Court of Caracas against the Shipowner and the Master in June 1997, for US $10 million and US $20 million respectively. However, there were no developments in respect of the claims between then and October 2005 and in May 2006, so the 1971 Fund decided that both claims were time-barred. Both claims were nevertheless transferred to the Maritime Court of First Instance in Caracas which accepted, in April 2008, an amended claim by the PMU for £7.8 million. There followed a number of unsuccessful appeals by the Fund which was referred upwards to the Supreme Tribunal of Venezuela, again unsuccessfully (for the Fund) following which the file was returned to the Maritime Court of First Instance for quantum of compensation. Two appointed experts concluded in January 2011 that the Shipowner was liable for £424,000 and the 1972 Fund, £58.8 million. Following an appeal, two further appointed experts confirmed, in March 2011, the conclusions of the original experts. Since then, the case has bounced back and forth between the Maritime Court of Appeal, the Maritime Court of First Instance, (which previously had rejected FETRA PESCA’s request to ‘withdraw the claim’) and the Supreme Court. Currently, the 1971 Fund has appealed to the Constitutional Section of the Supreme Court against the judgement of the Supreme Court regarding the quantum of the loss and is currently awaiting further judgement.
• OUTSTANDING CONTRIBUTIONS. Three contributors within the Russian Federation were taken to Court by the 1971 and 1992 Funds, unsuccessfully, although an appeal to the Court of Cassation is being considered. Judgement on a fourth non-contribution is expected shortly. With respect to South Africa, a sum of over £1 million is outstanding from three out of six contributors who had questioned their obligation to pay contributions under the Convention as implemented in South African national law.
• CONTINGENCY ARRANGEMENTS FOR THE DIRECTOR AND SENIOR SECRETARIAT PERSONNEL. In the event that the Director is unable to exercise his functions, the Deputy Director, the Legal Counsel, the Head of the Claims Department/Technical Adviser to the Head of External Relations and Conference Department, in that order, will act on the Director’s behalf. In the event that none of these are available, the Chairman of the 1992 Fund Assembly will appoint a member of the Secretariat to carry out such function until the next Assembly.
• INTERNSHIPS WITHIN THE SECRETARIAT. Nine nominees from 1992 Fund Member States (the tenth had to cancel at short notice) participated in the pilot one-week programme which was supported by IMO, ITKO, IG and ITOPF. Adjudged highly successful, this self-financing ‘IOPC FUNDS SHORT COURSE’ will be repeated annually, noting that a geographical distribution of participants is desirable.
• DEVELOPMENT OF AN ONLINE REPORTING SYSTEM. As a way of tackling the problem of late and incorrect reporting of contributing oil, an online pilot scheme was conducted with Australia, Bahamas, China, Germany, Italy, Latvia, Malaysia, New Zealand and Turkey. Since some technical issues require further resolution, the online system will remain operating in parallel with the current paper-based system for the time being following which a further progress report will be made at the October 2012 session. Meanwhile it was noted that the revised oil reporting form developed in 2011 had been well received by the Member States.
• HNS CONVENTION AND HNS PROTOCOL. The 1992 Fund Assembly noted that the HNS website was redeveloped in 2011 to take into account the Protocol of 2010 to the Convention, also to enable users to monitor easily the status of the Convention and its implementation and thus provide them with simple access to all the relevant instruments, documentation and information required to ratify or accede to the 2010 Protocol. The website is accessible at www.hnsconvention.org. A consolidated list of HNS has been produced in the form of a database, accessible via the HNS website since January 2012. Formerly known as the ‘HNS Convention Contributing Cargo Calculator’, this new ‘HNS Calculator’ will allow receivers to select substances qualifying for contribution, add volumes and produce a report to send to their respective States. The objective of a simplified HNS Calculation is to allow States engaged in the ratification or accession process to assist its receivers of HNS with the preparation of reports on receipts of contributing cargo, as required by Article 45 of the 2010 Protocol. The Calculator is expected to be made available, free, during 2012. Finally, it was noted that many delegations at the Legal Committee had expressed firm support and preference for co-locating the headquarters of the HNS Fund with that of the IOPC Funds in London whilst noting that the ultimate decision falls under the purview of the HNS Fund Assembly at its first session.
• IMPACT OF THE EU RESTRICTIVE MEASURES AGAINST THE ISLAMIC REPUBLIC OF IRAN. On 23 January 2012, the EU Council adopted restrictive measures against the Islamic Republic of Iran that prohibits the execution of contracts relating to the purchase, import and transport of crude oil, petroleum and petrochemical products originating in Iran and the insurance and reinsurance thereof. Thus International Group Clubs and their reinsurers who are incorporated, domiciled or regulated in the European Union will be prohibited from providing P&I insurance cover to any ship carrying Iranian crude oil, petroleum or petrochemical products on any voyage anywhere in the world irrespective of whether the cargo was loaded in or outside Iran. Prohibition on cover will also extend to any ship carrying Iranian bunker fuel in its bunker tanks irrespective of where the bunkers are taken on board and irrespective of the type of ship or cargo carried and, again, this prohibition will apply globally. Blue Card certificates issued by insurers for the purposes of Article VII of the 1992 Civil Liability Convention (1992 CLC) and Article 7 of the Bunkers Convention, 2001, will be rendered ineffective if ships are engaged in prohibited activities. All International Group Clubs’ rules contain termination of cover or bar on recovery rights provisions which are triggered if shipowners carry out activities that are prohibited by sanctions legislation or which expose the Club to the risk of sanctions. States Parties that had issued Bunker or CLC Convention State certificates on the basis of receiving Blue Cards would be notified by the Club concerned if it was found that one or more of its ships had performed a voyage in breach of the sanctions legislation and this would result in termination of cover and cancellation of the Blue Card. It could be, however, that the Club concerned was unaware of the offending voyage until the voyage was being or had been performed. Thus States would not be able to rely on the ability of the underlying insurance to respond in the event of an incident occurring on a voyage which would place either the shipowner or his Club in breach of the measures. The three-month post-termination of cover provision established in paragraph 5 of Article VII of the 1992 CLC and paragraph 6 of Article 7 of the Bunkers Convention, 2001 would cease to have effect by virtue of the prohibition on insurance cover. The Small Tanker Oil Pollution Indemnification Agreement (STOPIA) 2006 and the Tanker Oil Pollution Indemnification Agreement (TOPIA) 2006 as agreed between the International Group and the International Oil Pollution Compensation Funds provide a greater sharing of liability in the event of a spill occurring in a State Party to the 1992 Fund Convention and 2003 Supplementary Fund Protocol. However such prohibitions on insurance would mean that after 1 July 2012 a spill from a tanker carrying Iranian bunker oil or Iranian persistent oil as cargo would not be covered. Whilst alternative insurers might be able to provide cover for the purposes of the 1992 CLC, they might not be able to replicate the very high limits and breadth and scope of the cover currently provided by the International Group. More importantly, the cover provided by such alternative insurers would not extend to include the voluntary additional compensation provided by shipowners who are members of the International Group pursuant to STOPIA 2006 and TOPIA 2006 and this potentially will leave the contributors to the IOPC Funds in a more vulnerable position, as the oil receivers in States Parties will be required to step in if the alternative insurer cannot pay claimants. States Parties to the Civil Liability and Bunkers Conventions will also need to ensure that ships on their shipping registers and foreign flagged ships entering their ports and terminals that engaged or had engaged in the carriage of crude oil, petroleum and petrochemical products originating in Iran, carry valid and adequate insurance cover and that their States certificates are valid and reflect the underlying insurance cover. Importantly, irrespective of EC Regulation, the CLC and Fund regime remain unchanged.
• CONSIDERATION OF THE DEFINITION OF ‘SHIP’. Professor Vaughan Lowe QC was engaged in 2010 to provide a legal analysis as to whether the interpretation of the definition of ‘ship’ might include (1) Floating storage units (FSU’s) under the 1992 (CLC). (2) An interpretation by reference to the 1992 CLC and 1992 Fund Conventions only and (3) A levy on contributions for oil carried by ‘mother’ vessels. The Fund seventh intersessional Working Group convened under the chairmanship of Mrs Birgit Solling Olsen (Denmark) and considered Professor Lowe’s legal analysis. The WG subsequently invited the 1992 Fund Assembly to:
(a) confirm its interpretation that floating storage and offloading units (FSOs) and FSUs do not fall within the definition of ‘ship’ under Article I.1 of the 1992 CLC;
(b) decide whether one year is a reasonable time period to allow for a vessel to remain at anchor prior to resuming its carrying voyage and still qualify as a ‘ship’ under Article I.1 of the 1992 CLC, but that, in any event, the decision as to whether the vessel is a ‘ship’ should be made in the light of the particular circumstances of the case;
(c) confirm also its decision, taken in October 2006, that oil discharged into ‘permanently or semi-permanently’ anchored vessels engaged in STS oil transfer operations should qualify as contributing oil for the purposes of Article 10.1 of the 1992 Fund Convention;
(d) decide accordingly, since the ‘mother’ vessels are not ‘permanently or semi-permanently’ at anchor, whether the oil onboard them qualifies as ‘received’ contributory oil for the purposes of Article 10 of the 1992 Fund Convention;
(e) decide whether one year is a reasonable time period beyond which a vessel should be considered ‘permanently or semi-permanently’ at anchor, and therefore whether oil received in such vessels should qualify as contributing oil for the purposes of Article 10.1 of the 1992 Fund Convention. At the same time, decide whether, in any event, the decision as to whether the vessel is ‘permanently or semi-permanently’ at anchor should be made in the light of the particular circumstances of the case.
Following much discussion, the 1992 Fund Assembly took note of the issues raised and will give them further consideration at the next meeting in October 2012.

Captain Paddy McKnight

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