INTERNATIONAL OIL POLLUTION COMPENSATION (IOPC) FUNDS MEETING AT IMO 15 – 19 October 2012

The IOPC 1971 Fund, the Supplementary Fund and also the 1992 Fund Assembly together with its Executive Committee met at the IMO Headquarters from 15 through 19 October 2012. There were many agenda items connected to good ‘housekeeping’ such as Procedural Matters, Financial Reporting, Financial Policies and Procedures, Secretariat and administrative matters, also Treaty and Budgetary issues, all of which were discussed in rigorous detail. However, of more interest to Intermanager are those incidents involving the IOPC Funds and compensation matters which are summarised as follows, with apologies for length:

1971 FUND

• VISTABELLA. It was recalled that the 1971 Fund had commenced summary proceedings against the shipowner’s insurer in Trinidad and Tobago to enforce the judgement of the Guadeloupe Court of Appeal and that the insurer had opposed execution of the judgement; also, in March 2008 the Court judged in the 1972 Fund’s favour but the insurer appealed in the Trinidad and Tobago Court of Appeal. Then in July 2012, the same court refused enforcement of the Guadeloupe Court judgement arguing that it would be contrary to public policy to enforce a judgement in which French courts had assumed jurisdiction. Following this, the 1971 Fund has requested the Court of Appeal leave to appeal the judgement of the Privy Council.
• AEGEAN SEA. On 30 October 2002, a global settlement was concluded between the Spanish State, the 1971 Fund, the shipowner and the UK Club whereby the Spanish State undertook to compensate all the victims who might obtain a final judgement by a Spanish court in their favour, which condemned the shipowner, the UK Club and the 1971 Fund to pay compensation as a result of the incident. A number of claimants from the fisheries and mariculture sectors did not reach agreement with the Spanish State on their losses and initiated civil proceedings against the Spanish Government and the 1971 Fund in the Court of First Instance in La Coruna, where one claim remains outstanding, that by a fish pond owner. The Court slashed the figure claimed of €799,921 to €181,873 for which the 1971 Fund was deemed liable but this is being appealed. The Spanish State will, under the agreement with the 1971 Fund, pay any amount awarded by the Courts.
• ILIAD. Despite the 1971 Fund’s request to the Liquidator in July 2010 to expedite the hearing of the limitation proceedings, nothing has happened. However, the claim amount approved by the Liquidator of €2,125,755 plus interest is well within the limitation sum of €4.4 million, noting also that roughly one third of the approved amount might be time-barred. Although the likelihood of the 1971 Fund having to pay compensation is slim, 446 claimants have filed appeals against the Liquidator’s Report claiming some €11 million. Thus the Fund will continue to monitor the legal proceedings.
• NISSOS AMORGOS. It will be recalled that on 28 February 1997, the Greek tanker NISSOS AMORGOS (50,563GRT) spilled an estimated 3,600 tonnes of crude oil, after running aground whilst passing through the Marcaibo Channel in the Gulf of Venezuela. Since then, Limitation of Liability has been established, overturned, then upheld in various Venezuelan courts culminating in an appeal filed to the Supreme Tribunal by the shipowner and the Gard Club. The meeting shared the view that there are no grounds to hold that the shipowner is not entitled to limit liability. Meanwhile, the Veneuelan government has claimed approximately US$60 million in the Criminal Court and a further US$60 million in the Civil Court for environmental damage. As to the criminal proceedings under civil liability, in February 2010, the Maracaibo Criminal Court of First Instance held that the Master, the shipowner and the Gard Club should pay the Venezuelan State in excess of US$60 million. This judgement was upheld by the Maracaibo Criminal Court of Appeal in March 2011 and has since been appealed to the Supreme Tribunal.
• PLATE PRINCESS. The PLATE PRINCESS spilled some 3.2 tonnes of crude oil contained within 8,000 tonnes of ballast water in Puerto Miranda (Venezuela) on 27 May 1997. In June 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 for US$10 million and US$20 million respectively. There were no developments in respect of these claims until October 2005 when the 1971 Fund was formally notified as an interested third party. The 1971 Fund Administrative Council decided in May 2006 that both claims were time-barred but seven months later, both claims were transferred to the Maritime Court of First Instance in Caracas. A second notification was made to the Fund by the Court in March 2007 and it accepted an amended claim by the PMU for £7.9 million in April 2008. Some six months later in November 2008, the Fund argued that the documents provided by the claimants did not demonstrate the damage and was in many instances falsified. Since then, judgement and counter-judgement have bounced between the Maritime Court of First Instance and that of Appeal together with the Supreme Court of Venezuela, including its Constitutional Section. Notable in this time was FETRA PESCA’s request to withdraw its claim from the Maritime Court of First Instance which was rejected. Most recently, in August 2012 the Constitutional Section of the Supreme Court rejected the 1971 Fund’s appeal against the judgement of the Supreme Court regarding the quantum of the loss. In an attempt to analyse the legal basis for the 1971 Fund to refuse payment under Article X of the 1969 CLC, the Fund Director engaged Dr Thomas Mensah, a distinguished maritime law expert who had also been Executive Secretary of the Diplomatic Conferences which resulted in the adoption of the 1969 CLC and 1971 Fund Convention. Dr Mensah, who was present at the meeting expressed his views that:
(1) The Venezuelan court interpretation on the issue of time-bar was incorrect;
(2) The judgement of the Venezuelan court relating to the quantum of damages was based on evidence that was known to be false and could be challenged; and
(3) The judgement of the Court could also be challenged by asserting that the Fund had not been afforded a fair opportunity to present its case before the Venezuelan Court.
It was thus decided that the Director should not make any payment in respect of this incident and to continue opposing the enforcement of the judgement in addition to defending the interest of the 1971 Fund in any legal court actions in Venezuela.
It is noted that, unlike the previous meeting, Venezuela was not represented.
• WINDING UP OF THE 1971 FUND. A small Consultation Group was established to examine the outstanding issues which need to be resolved before the 1971 Fund can be wound up, in particular with respect to pending incidents, outstanding oil reports and contributions in arrears following which, suitable recommendations can be made to the next session.
1992 FUND
• ERIKA. On 12 December 1999, the ERICA sank in the Bay of Biscay, some 60 nautical miles off the coast of Brittany, causing oil-pollution to 400 kilometres of shoreline and impacting heavily on businesses in the fisheries and tourism sector. Six actions remain pending against the 1992 Fund involving 20 claimants with a total claimed amount of €10.4 million. Of note:
(a) the representative of the shipowner and the president of the management company were found guilty of a lack of proper maintenance, leading to general corrosion of the ship;
(b) RINA was found guilty for its imprudence in renewing the ERIKA’s classification certificate on the basis of an inspection that fell below the standards of the profession; and
(c) Total SA was found guilty of imprudence when carrying out its vetting operations prior to the chartering of the ERIKA.

IACS pointed out that the principle of sovereign immunity for classification societies acting on behalf of the Flag State had by implication been accepted by the Court of Cassation in France

• PRESTIGE. On 13 November 2002, the Bahamas-registered tanker PRESTIGE (42,820 GT) carrying 76,972 tonnes of heavy fuel oil, began listing and leaking oil some 30 kilometres off Cape Finisterre (Galicia, Spain). On 19 November, whilst under tow away from the coast, the vessel broke in two and sank some 260 kilometres west of Vigo (Spain), the bow section to a depth of 3,500 metres and the stern section to a depth of 3,830 metres. The break-up and sinking released an estimated 63,272 tonnes of cargo. Over the following weeks, oil continued to leak from the wreck at a declining rate. It was subsequently estimated by the Spanish State that approximately 13,800 tonnes of cargo remained in the wreck. In respect of compensation, the claims handling office in La Coruna received 845 claims totalling €1,037 million including 15 from the Spanish government for €984.8 million. In France, there were 482 claims totalling €109.7 million, including €67.5 from the French government. Finally, the Portuguese government submitted a claim for €4.3 million, now assessed at €2.2 million. In July 2010, the Criminal Court in Corcubion decided that four persons should stand trial for criminal and civil liability resulting from the spill, namely the Master, the Chief Officer and the Chief Engineer of the PRESTIGE together with the civil servant who had been involved in the decision not to allow the ship into a place of refuge in Spain. The hearing was scheduled to start in the Audienca Provincial court in La Coruna on 16 October 2012, and is expected to continue until May 2013. Meanwhile, the Spanish State has until the end of November 2012 to appeal against the judgement by the New York Courts of Appeal that they had not produced sufficient evidence to establish that ABS, which classed PRESTIGE, had acted in a reckless manner. A similar legal action by the French State against three companies in the group of ABS was staged pending the outcome of legal proceedings in the other countries. The defendants had opposed the charges by relying on the defence of sovereign immunity.
Finally, the 1992 Fund Executive Committee recalled that the IOPC Funds’ policy in respect of recourse actions was to take such measures whenever appropriate to recover any amounts paid by them from shipowners or other parties on the basis of the applicable national law and that if matters of principle were involved, the question of costs should not be a decisive factor for the Fund when considering whether to take legal action and that the decision as to whether or not to take such action should be made on a case-by-case basis. Thus the Director was authorised to bring a recourse action against ABS in France prior to 13 November 2012 as an interim measure to avoid the action becoming time-barred under French law.
• SOLAR 1. On 11 August 2006, the Philippines’ registered tanker SOLAR 1 (998 GT) , laden with a cargo of 2,081 tonnes of industrial fuel oil, sank in heavy weather in the Guimaras Strait, some ten nautical miles south of Guimaras Island, Republic of the Philippines. At the time of the incident an unknown but substantial quantity of oil was released from the vessel after it sank and the sunken wreck continued to release oil, albeit in ever decreasing quantities. Following an operation to remove the remaining oil from the wreck it was found that virtually the entire cargo had been spilled at the time of the incident. The limitation amount applicable to the SOLAR 1 in accordance with the 1992 CLC is 4.51 million SDR, but the owner of the SOLAR 1 is a party to the Small Tanker Oil Pollution Indemnification Agreement 2006 (STOPIA 2006) whereby the limitation amount applicable to the tanker is increased, on a voluntary basis to 20 million SDR. However, the 1992 Fund continues to be liable to compensate claimants if, and to the extent that the total amount of admissible claims exceeds the limitation amount applicable to the SOLAR 1 under the 1992 CLC. Under STOPIA 2006, the 1992 Fund has legally enforceable rights of indemnification from the shipowner of the difference between the limitation amount applicable to the tanker under the 1992 CLC and the amount of admissible claims up to 20 million SDR. The Fund and the Shipowners’ Club agreed that the 1992 Fund would make compensation payments once the limitation amount under the 1992 CLC had been reached and that the Club would reimburse the Fund any payments made within two weeks of being invoiced by the Fund, an arrangement that has worked smoothly throughout the handling of the incident. Work on the assessment of claims was completed in August 2011 and no further payments have been made since October 2010, although it is expected that a claim by the Philippines Coastguard for £1.61 million will be paid shortly.
• VOLGONEFT 139. On 11 November 2007, the Russian-registered tanker VOLGONEFT 139 broke in two in the Kerch Strait which links the Sea of Azov and the Black Sea between the Russian Federation and Ukraine. It is believed that up to 2,000 tonnes of fuel oil were spilled at the time of the incident. Some 250 kilometres of shoreline both in the Russian Federation and in Ukraine were affected by the oil. The ship was owned by JSC Volgotanker which has since been declared bankrupt by the Commercial Court (Arbitration Court) in Moscow. The shipowner was insured for protection and indemnity by Ingosstrakh (Russian Federation), which does not belong to the International Group of P& I Clubs. The insurance cover is limited to 3 million SDR (RUB 116.3 million) which is well below the minimum limit under the 1992 Civil Liability Convention (1992 CLC) of 4.51 million SDR leaving an ‘insurance gap’ of some 1.5 million SDR. All claims with supporting documentation have been assessed and the total established losses have been determined as RUB 338.78 million (£6.7 million). In July 2012 the Court delivered its judgement on quantum which awarded claimants RUB 503.2 million (£9.9 million) including legal interest. In the judgement it was held that the insurers had a liability of 3 million SDR in accordance with Russian law as published in the official Gazette at the time of the incident, however, the 1992 Fund and a local authority have appealed against the judgement. In making its decision, the Committee noted that although a number of delegations had suggested that the 1992 Fund should try to pay compensation to the victims of this incident, the majority of delegations considered that the ‘insurance gap’ had first to be resolved before the 1992 Fund could start making payments. Accordingly, the Director was instructed to continue discussions with the claimants and the Russian authorities to explore a solution to the ‘insurance gap’ and revert to the Committee with a proposal at a future session.
• HEBEI SPIRIT. The Hong Kong registered tanker HEIBEI SPIRIT (146,848 GT) was struck by the crane barge SAMSUNG No 1 while at anchor about five nautical miles of Taean on the west coast of the Republic of Korea. The crane barge was being towed by two tugs (SAMSUNG No 5 and SAMHO T3) when the tow line broke. Weather conditions were poor and it was reported that the crane barge had drifted into the tanker, puncturing three of its port cargo tanks. The HEBEI SPIRIT was laden with about 209,000 tonnes of four different crude oils. Due to inclement weather conditions, repairs of the punctured tanks took four days to complete. In the meantime, the crew of the HEBEI SPIRIT tried to limit the quantity of cargo spilled through holes in the damaged tanks by making it list and transferring cargo between tanks. However, as the tanker was almost fully laden, the possibilities for such actions were limited. As a result of the collision a total of 10,900 tonnes of oil (a mix of Iranian Heavy, Upper Zakum and Kuwait Export) escaped into the sea. The HEBEI SPIRIT is owned by Hebei Spirit Shipping Company Limited. It is insured by China Shipowners Mutual Insurance Association (China P&I) and Assurancefӧrfeningen Skuld (Gjensidig) (Skuld Club) and managed by V-Ships Limited. The crane barge and the two tugs are owned and/or operated by Samsung Corporation and its subsidiary Samsung Heavy Industries (SHI) which belong to the Samsung Group, the Republic of Korea’s largest industrial conglomerate. It was noted that the total amount of assessed claims so far was £102.4 million, corresponding to 99.9% of all claims but excluding those of the Korean Government who had elected to ‘stand last’ in the queue. Given that the majority of claimants who had received interim compensation had not agreed to the quantum of their claims, it was decided to maintain the level of payment at 35% of the amount of the established losses, then review the figure at the Committee’s next session. Finally, the Korean delegation welcomed the efforts of the Secretariat to explore alternative methods of assessing small scale non-fisheries claims.
• INCIDENT IN ARGENTINA. Between 50 and 200 tonnes of oil impacted the shoreline in Caleta Córdova, Chubut Province, Argentina, on 25-26 December 2007. A total of 5.7 kilometres of coastline is reported to have been affected and an investigation into the cause of the incident by the Federal Court of Comodoro Rivadavia (Criminal Section) reached a preliminary decision that the spill originated from the PRESIDENTE ARTURO UMBERTO ILLIA (PRESIDENTE ILLIA). However, the shipowner and the insurer of the PRESIDENTE ILLIA contest liability. The shipowner argues that the oil which impacted the coast must have come from another source. The PRESIDENTE ILLIA was insured with the West of England Ship Owners Mutual Insurance Association (Luxembourg) (West of England Club), the limit of liability of the owner of the PRESIDENTE ILLIA for which under the 1992 Civil Liability Convention (1992 CLC), is estimated to be 24,067,845 SDR. It seems likely that the total admissible damage caused by the spill will be within the shipowner’s limit. Discussions were held between the 1992 Fund and the West of England Club and it was agreed that the shipowner and his insurer would pay claims for compensation assessed and approved in accordance with the principles laid down in the 1992 Civil Liability and Fund Conventions. It was agreed that, if it is finally established that the oil which impacted the coast did not come from the PRESIDENTE ILLIA but from another source, the shipowner and the West of England Club would attempt to recover the amounts of compensation paid from the party responsible for the oil spill. It was also agreed that if it is proved that the oil spill must have come from a tanker other than the PRESIDENTE ILLIA but it remains unknown which one, a so-called ‘mystery spill’, the shipowner and the West of England Club would recover the amounts of compensation paid from the 1992 Fund. In December 2010 the 1992 Fund, in order to protect its compensation rights, brought an action in the Court of Buenos Aires against the owner of the SAN JULIAN, another possible source of the spill, and against his insurer. Five persons including the master, officers and crew of the PRESIDENTE ILLIA have been charged with water pollution under Argentine environment law, also the shipowner’s representative for hiding information and evidence. Under civil proceedings, 22 actions representing 83 claimants remain pending against the owner of the PRESIDENTE ILLIA and the West of England Club which actions include the 1992 Fund either as a defendant or as an interested third party. In the meantime, all parties have agreed to stay the proceedings pending the resolution of the criminal proceedings.
• KING DARWIN. On 27 September 2008, the Marshall Islands-registered oil tanker KING DARWIN (42,010 GT) was reported to have released approximately 64 tonnes of bunker fuel oil into the waters in the Port of Dalhousie, New Brunswick, Canada. The 1992 Fund understands that this was a small operational spill and damage caused appears to be well within the 1992 Civil Liability Convention limit. It is therefore unlikely that the 1992 Fund will be called upon to pay compensation. In September 2009, a dredging company filed an action in the Federal Court in Halifax, Nova Scotia, against the owner of the KING DARWIN, Steamship Mutual and the 1992 Fund, claiming property damage and consequential losses for Can$143,417. This action is still pending in Court. Also there have been no developments in the proceedings since the October 2011 session of the 1992 Fund Executive Committee and no further claims for compensation are expected.
• JS AMAZING. In May 2011, the 1992 Fund was informed of a spill which had occurred in June 2009, when the tanker JS AMAZING spilled an unknown quantity of low pour fuel oil, into the Warri River, Delta State, Nigeria. The 1992 Fund was also informed that in May 2009, approximately two weeks prior to the spill from the JS AMAZING, an oil spill had occurred from a vandalised Nigerian National Petroleum Corporation (NNPC)/Pipeline Products Marketing Corporation (PPMC) oil pipeline, in the same area. Neither incident was widely reported outside Nigeria and preliminary investigations by the 1992 Fund failed to reveal a great deal of information regarding the spill from the JS AMAZING, or the identity of the shipowner. No records of any cover for the vessel could be found with a P&I Club from the International Group. In June 2012, the Director, who was the Claims Manager dealing with the incident and two Fund experts visited Nigeria and expressed their gratitude for the assistance offered to them by the Nigerian authorities. However, it was noted that there remained a number of issues which required further examination, including the fact that the owner of the JS AMAZING had not paid any compensation to claimants nor had the shipowner limited his liability by establishing a limited fund in accordance with Article V of the 1992 CLC. It was observed that there were a number of issues to resolve in the incident, including the apparent unwillingness of the shipowner to accept liability in accordance with the 1992 CLC and the absence of a proven link of causation between the incident and the alleged damages. The Executive Committee noted that any compensation would need to be based on established losses, before it could authorise the Director to make compensation payments. The 1992 Fund Executive Committee also noted that the Director intended to continue working with the Nigerian authorities and the claimants to examine the issues arising from the incident and that he would revert to them with a recommendation in the future.
• REDFFERM. In January 2012, the Secretariat was informed of an incident which occurred in March 2009 at Tin Can Island, Lagos, Nigeria. Initial reports of the incident reported that the tanker MT CONCEP was trans-shipping some of its cargo of low pour fuel oil (LPFO) into a barge, the REDFFERM, when at some point during the trans-shipment, a spill occurred. However, further facts have since been made available to the Secretariat which clarify that it was the barge REDFFERM which sank following the cargo trans-shipment and its cargo of between 500 and 650 tonnes of LPFO spilled into the waters surrounding the site, which then impacted upon the neighbouring Tin Can Island area. The barge was subsequently raised with the assistance of a crane barge. Clean-up operations were conducted by African Circle, as contracted by the Nigerian Ports Authority (NPA). In addition, other Government agencies including the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Oil Spill Defence Response Agency (NOSDRA) also attended the spill. In June 2012, the Director and members of the Secretariat visited Nigeria to ascertain further facts of the incident, meet with the shipowner and visit the affected area. A claim has been filed against the 1992 Fund by 102 communities allegedly affected by the incident in the sum of US$26.15 million, although no calculations or justifications have been submitted for the figures claimed. Following debate, the Director was instructed to establish whether the barge REDFFERM constituted a ‘sea-going ship or other seaborne craft’ as described in Article I.1 of the 1992 CLC, before any decision regarding payment of compensation could be taken. The 1992 Fund Executive Committee also noted that the director would continue to work closely with the Nigerian authorities and the claimants to ascertain the facts of the case and, if applicable, to determine the compensation due to the victims and would report back to the 1992 Fund Executive Committee at its next session.
• ALFA I. On March 2012, the tanker ALFA I hit a submerged object, most likely the marked wreck of the vessel CITY OF MYCONOS, while crossing Elefsis Bay near Piraeus, Greece. The impact punctured the bottom hull plating of ALFA I over a length of some 30 metres. Shortly thereafter, the ALFA I listed over onto her starboard side and sank, resulting in the tragic loss of the master with the ship coming to rest in 18 – 20 metres of water, her stern in contact with the seabed but the bow still visible above water. The ALFA I was built in 1972, a single hull tanker with 12 cargo tanks. At the time of the incident, ALFA I was said to be loaded with some 2,070 tonnes of cargo comprising 1,500 tonnes of fuel oil No 2, 300 tonnes of fuel oil No 1 and 270 tonnes of gas oil. The exact amount and specifications of the cargo and bunkers on board at the time of the incident are not known. After sinking, an unknown quantity of oil was released from the tanker through the manholes, vent pipes and sounding pipes on her deck. In consideration of the level of uncertainties in respect of contradictions in the terms of the insurance policy and the certificates, it was judged premature to take any decision at present. Accordingly, it was decided that further investigations into the incident were necessary prior to authorising the Director to start making payments and that any developments should be reported to the next session.

Captain Paddy McKnight

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