Section 1 Pollution Liabilities
For a long time, pollution liabilities were a marginal risk for shipowners and of little concern to the P&I Clubs. The situation changed virtually overnight. The rapid escalation of pollution liabilities is marked with milestones bearing the names of ill-fated ships. A brief look into the history of oil pollution liability may further the understanding of the cover provided. See the comments under 6.1.2.
In accordance with Section 1 of this Rule, the cover is not restricted to pollution by oil. It applies to liabilities in respect of pollution of any kind such as by oil, chemicals, water, steam, smoke, sewage, or any substance that is released in an unauthorised manner. The pollution may originate from the vessel’s bunkers, supplies or cargo. Since pollution by oil and similar substances is the overriding international concern, the comments will be confined mainly to that. Indeed, Section 2 of this Rule deals exclusively with oil pollution. Most of the comments in respect of oil pollution and its avoidance set out here can be applied to other kinds of pollution.
The interest of the public and media in pollution has increased with a greater awareness of environmental issues. There is a widespread misapprehension that the taxpayers or the population in the coastline communities always have to pay the clean-up costs. Even among those who take part in the public environment debate, few seem to appreciate that insurance exists specifically aimed to cover a shipowner’s established pollution liabilities.
6.1.2 Pollution liability history
Shipowners originally had a traditional liability for pollution based on negligence (in tort). The burden of proof meant that the party who suffered damage from pollution had to prove that the shipowner was negligent. The liability was subject to the general provisions on global limitation. A large part of the pollution liabilities were covered under the Hull insurance.
The floodgates for pollution liabilities began to swing open when the TORREY CANYON hit the Seven Stones Reef on 18 March 1967, on her maiden voyage, laden with a cargo of crude oil, causing significant pollution in both the UK and France.
In the aftermath of the disaster, the British Government approached IMCO (The Inter-Governmental Maritime Consultative Organisation) which was later to become IMO (The International Maritime Organisation) for an international solution. In co-operation with the non-government shipping organisation CMI (International Maritime Committee), the text of a new international legal instrument was developed and was eventually adopted in November 1969 as the International Convention on Civil Liability for Oil Pollution Damage (the “CLC”). A further convention called the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (the “Fund Convention”) was adopted in 1971. These two conventions became effective in 1975 and 1978 respectively. The CLC and the Fund Convention apply to tankers carrying cargoes of persistent oil, i.e. heavier oils that are likely to persist in the wider environment once spilled.
After the occurrence of subsequent major oil spills, such as the AMOCO CADIZ off Ushant in North West France in 1978, voices were raised calling for an increase in the compensation available to pollution victims under the CLC and the Fund Convention. Further work at the IMO led to the 1992 Protocols to these conventions entering into force in 1996. These Protocols increased the amount and the scope of available compensation, for example, applying to certain tankers when in ballast. In 2000 the limitations for both the CLC and the Fund Conventions were further increased. In 2003 the IMO developed the “Supplementary Fund”, which entered into force in March 2005. The Supplementary Fund establishes a third layer of compensation above the CLC and the Fund Convention.
Some countries, notably Brazil, remain a signatory only to the ’69 CLC and have not ratified the ’92 CLC Protocol, meaning more limited compensation is available.
In order to address the threat of bunker spills from other vessels, including tankers without persistent oil on board, the IMO established the 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”). The Bunker Convention entered into force in 2008, see the comments under 184.108.40.206.7.5.
Many coastal states have also adopted domestic legislation that imposes liabilities on a marine polluter equal to or in excess of that provided by the CLC and the Fund Convention. The EXXON VALDEZ disaster in Prince William Sound, Alaska in 1989 caused the adoption of federal legislation in the U.S.A., the Oil Pollution Act of 1990 (“OPA 90”). This legislation is commented on under 220.127.116.11.
As the pollution liabilities increased, cover under the Hull insurance was restricted. As explained in the comments under 18.104.22.168, this meant that the liabilities were transferred to P&I Insurance. The only pollution risk left to be covered under The Nordic Marine Insurance Plan is expenses incurred to prevent pollution damage from a ship in drydock for survey or repairs of average damage together with the costs of cleaning the drydock internally after such a pollution (Commentary to Clause 12-1 of the Nordic Marine Insurance Plan of 2013 Version 2019).
6.1.3 International Conventions
22.214.171.124 The Civil Liability Convention (CLC)
126.96.36.199.1.1 Persistent oil from tankers
The ’92 CLC only applies only to tankers carrying cargoes of persistent oil, or with traces of persistent oil cargo on-board, in a country that has signed the convention. Persistent oil cargoes include crude oil, fuel oil, heavy diesel oil, lubricating oil, whale oil, asphalt and the like.
The ’92 CLC applies also to any spill of bunker oil from such a tanker, provided that the tanker has a persistent oil cargo on-board or traces of such a cargo. As such, the CLC may apply to certain tankers even in ballast condition.
For tankers carrying cargoes of non-persistent oil, for example gasoline, compensation will available under the 2010 Protocol to the HNS Convention when this comes into force. In the meantime, liability and compensation will be covered by domestic legislation.
A Member who is in doubt as to whether a certain type of oil is persistent or not should contact the Club for advice.
188.8.131.52.1.2 Geographical application
The only geographical criterion for the application of the CLC is where the pollution damage occurs. If the pollution occurs in the territory or within the territorial waters of a contracting state, or threatens such territorial waters, the convention applies. The flag of the ship and the nationality of its Owner are irrelevant.
184.108.40.206.2 Type of damage
The CLC is applicable to loss or damage caused outside the ship by the escape of oil from the ship. It includes the costs of clean-up, termed “preventive measures” under the convention, and further loss or damage caused by such preventive measures, for example damage to roads caused by increased vehicle movements.
The CLC applies also when no spill has occurred, providing there is a grave and imminent threat of a spill as a result of an incident.
The convention does not fully explain the words “pollution damage” but this applies usually to damage caused by the oil to property, fisheries, tourism and to the environment. Further interpretation is provided in the IOPC Fund Claims Manual and associated guidelines with the ultimate interpretation to be determined by any national courts involved.
The most obvious impact occurs when coastal resources, boats, mooring lines, piers, jetties, oyster beds or seaweed farms have been smeared with oil. The cleaning of such areas or articles constitutes preventive measures and is covered by the CLC. This includes the hire of personnel and suitable equipment, such as oil booms, skimmers, tractors, trucks, steam-producing or spraying devices and the consumption of rags, brushes, dispersants, sorbents and other articles used for cleaning.
Large spills may require ships or helicopters for co-ordination and surveillance and to assist with the response. Costs such as these also qualify as preventive measures under the CLC.
Compensation for consequential loss and pure economic loss are also covered under the CLC. Consequential loss is a financial loss that is a result of damage to property, for example a fisherman losing income as a result of his nets becoming soiled. Pure economic loss is a financial loss without such damage, for example a fisherman is prevented from leaving port because of oil in the waters outside the port.
Oil pollution may cause a shortage or loss for which the owner of the oil may claim compensation from the carrier. Liability for cargo damage is covered under Rule 4 Section 1 (see the comments under 220.127.116.11.2), for cargo shortage under Rule 4 Section 3 (see the comments under 4.3.3) and for bunker damage and shortage under Rule 7 Section 1 (see the comments under 18.104.22.168). Fines are covered under Rule 7 Section 6 (see the comments under 22.214.171.124).
126.96.36.199.3 Type of liability
The CLC imposes strict liability (see the comments under 188.8.131.52) for loss and damage resulting from the discharge of oil. The shipowner is, however, exonerated from liability if he can prove that:
a) the damage results from an act of war or a natural disaster
b) the damage is wholly caused by sabotage by a third party, or
c) the damage is wholly caused by the failure of the authorities to maintain navigational aids.
184.108.40.206.3.1 Act of war
A shipowner is not liable for oil pollution caused by acts of war. For comments on war and war risks, see the comments under 220.127.116.11 and 11.5.3.
18.104.22.168.3.2 Natural disaster
In situations of force majeure with no negligence on the part of the shipowner, there is no liability for pollution damage. See the comments under 22.214.171.124.
126.96.36.199.3.3 Intentional acts of a third party
There is no liability for pollution damage caused wholly by the intentional acts of a third party, such as terrorism or an act of sabotage perpetrated by a crew member.
188.8.131.52.3.4 Governmental negligence in the maintenance of navigational aids
Where a government or other authority has failed to maintain lights or other navigational aids through negligence or other wrongful acts, a shipowner cannot be held liable for any pollution damage resulting wholly therefrom. The authority must have failed in its duty by, for example, failing to repair or adjust a lighthouse or to replace a missing buoy. In one Swedish Supreme Court case, the failure to mark a known hazard on the chart was considered to constitute negligence in the maintenance of navigational aids.
184.108.40.206.4 Shared responsibility
In cases where oil escapes from two or more ships, for example following a collision, the Owners are jointly and severally liable for any pollution damage which cannot be reasonably attributed to one of the ships. An Owner who has discharged such a joint liability may include the expenses in the collision claim against the other party involved. See the comments under 7.2.3.
When pollution damage is caused or contributed to by a malicious act, omission or negligence on the part of the person who suffers the damage, the shipowner may be exonerated from liability in whole or in part.
220.127.116.11.5 CLC Limitation of liability
The limitation of liability under the 2000 amendment within the 2002 protocol is as follows:
- SDR 4.51 million for a ship not exceeding 5000 GT
- SDR 4.51 million + SDR 631 for each additional GT for ships between 5000 and 140000 GT
- SDR 89.77 million for a ship over 140000 GT or more
The right to limit liability under the CLC is denied in cases where the pollution is caused by the shipowner’s actual fault or privity. Privity means knowledge and consent in relation to any fault or misconduct. Situations where shipowners are denied the right of limitation under the CLC may be subject to the general exclusion of cover under Rule 11 Section 1. See the comments under 2.11.2-3 and 11.1.1-5.
For small tankers of 29,548 GT or less, involved in an incident in a State that is also a signatory to the ’92 Fund Convention, the Small Tankers Oil Pollution Indemnification Agreement (“STOPIA”) will increase liability to 20 million SDR. STOPIA is a voluntary agreement between the P&I Clubs and the IOPC Fund (see the comments under 18.104.22.168) to voluntarily increase the limitation amount.
22.214.171.124.6 Time bar
Claims for pollution damage under the CLC become time barred unless an action is brought against the shipowner within three years of the date when the damage occurred. Under no circumstances can an action be brought six years after the date of the incident which caused the damage.
126.96.36.199.7 CLC certificates
According to the CLC, a ship which is registered in a CLC state and carries more than 2,000 tons of persistent hydrocarbon mineral oil in bulk as cargo must maintain insurance or other financial security for the liabilities under the convention up to its limitation of liability as specified under comment 188.8.131.52.5.
As evidence of such insurance, the shipowner should obtain a CLC certificate issued by the authorities in the state in which the ship is registered. The CLC certificate confirms the existence of such insurance and contains certain details of cover.
184.108.40.206.7.2 1969 and 1992 Civil Liability Convention
In May 1998 State Parties to the 1992 CLC ceased to be party to the 1969 CLC. This means that there are now two separate regimes in force, those who are parties to the 1969 CLC and those who are parties to the 1992 CLC. For vessels registered in State Parties to the 1969 CLC, it will be necessary to obtain a 1969 CLC certificate from their flag state and a 1992 CLC certificate from a State Party to the 1992 CLC. The latter certificate will be issued by The Department of Transport in the U.K. Vessels registered in State Parties to the 1992 CLC need only obtain a 1992 CLC Certificate for their flag state. This should be sufficient evidence of insurance, even when calling at ports in a 1969 CLC State.
220.127.116.11.7.3 Blue Card and CLC certificate
To obtain a CLC certificate, Members should first make an application to the Club for a Blue Card, evidencing the ship’s insurance. When applying for a Blue Card, the following information needs to be provided:
- the name of the ship
- the Owner’s name and address
- port of registry
- call sign or IMO number
Based on that information the Club will issue a Blue Card which certifies that a policy of insurance is in force that satisfies the requirements of Article VII of the CLC. The member then presents that to the ship’s flag state. The ship’s flag state issues the certificate and sends it to the registered Owner.
18.104.22.168.7.5 The Bunker Convention – Certification requirements
The International Convention on Civil Liability for Bunker Oil Pollution 2001 (the “Bunker Convention”) entered into force on 21 November 2008, see the comments under 22.214.171.124.
Ships registered in a State which is not party to the convention and which require a certificate because they are calling at a port in the territorial waters of a State Party to the convention must obtain a State issued certificate from a State Party to the convention. A small number of State Parties have agreed to issue certificates to ships registered in non-State Parties irrespective of whether they are calling at a port in their territorial waters after the entry into force date.
For ships entered with the Club, the Club issues a Bunker Blue Card addressed to the flag state but sent to the Member. With that the Member will apply for a Bunker Certificate from the flag state.
126.96.36.199 The Fund Convention
As mentioned under 6.1.2, the 1992 Protocol to the International Convention on the Establishment of an International Fund for the Compensation for Oil Pollution Damage (the Fund Convention) entered into force in 1996. In 2000 the limitation amount was increased and entered into force in 2003.
188.8.131.52.2 The IOPC Fund
The IOPC is a worldwide inter-governmental organisation established to administer the regime of compensation created by the Fund Convention and Supplementary Fund. The main function is to provide additional supplementary compensation to victims of oil pollution damage in Member States, who cannot obtain full compensation for the damage under the applicable Civil Liability Convention. The IOPC Secretariat is located in London.
The Fund is financed by contributions paid by any person who has imported, by sea, in excess of 150 000 tonnes of crude oil in the relevant calendar year to ports or terminals in a State which is a member of the relevant Fund. The Supplementary Fund has an additional limitation, oil importers within contracting states will only have to contribute if the State’s aggregate annual receipt of oil is above 1,000,000 tonnes.
184.108.40.206.3 Compensation under the 1992 Fund Convention and Supplementary Fund Protocol
The 1992 Fund Convention provides supplementary compensation where
(a) no liability for pollution damage arises under the CLC, e.g. because the Owner can invoke one of the exemptions under that convention (see comments under 220.127.116.11.3)
(b) the Owner is financially incapable of meeting his obligations under the CLC and his insurance is insufficient to satisfy the claims for compensation for pollution damage
(c) the damage exceeds the Owner’s liability under the CLC.
Compensation under the 1992 Fund Convention can be claimed for pollution damage caused to the territory or territorial waters of a state which is a party to the CLC and the Fund Convention.
The cover under the Fund Convention is limited to SDR 203 million per incident. That amount is not placed on top of but includes any compensation paid by the shipowner under the CLC. Furthermore, if three contracting states receive more than 600 million tonnes of contributing oil, cover is raised to SDR 300.74 million.
The Supplementary Fund is a further layer in addition to the CLC and Fund Convention and will increase the total available compensation to SDR 750 million in States that are signatory to the Supplementary Fund Protocol.
Under the Tanker Oil Pollution Indemnification Agreement, (“TOPIA”) the Owner of a tanker involved in an incident in a signatory State to the Supplementary Fund is liable for 50% of the compensation paid under the Supplementary Fund Protocol.
18.104.22.168 The 2001 Bunker Convention
As stated in 6.1.2, the 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage entered into force in 2008. The convention does not establish a limitation amount per se, rather the limitation is in accordance with applicable national or international regimes, such as the 1976 Convention on Limitation of Liability for Maritime Claims and later protocols (LLMC). If a state has not ratified the LLMC or its protocols then the limitation cannot be higher than the national liability limitation regime.
The 2001 Bunker Convention applies to spills of bunker oil, i.e. hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of any type of ship. The Bunker Convention covers pollution damage similar to that described for the ’92 CLC.
22.214.171.124.2 Limitation under the LLMC
The limitation amounts under the 1996 LLMC Protocol that entered into force in 2004 and was amended in 2012 and in force since 8 June 2015 are as follows.
The limit of liability for property claims for ships not exceeding 2,000 GT is SDR 1.51 million.
For larger ships, the following additional amounts are used in calculating the limitation amount:
- For each ton from 2,001 to 30,000 tons, SDR 604
- For each ton from 30,001 to 70,000 tons, SDR 453
- For each ton in excess of 70,000 tons, SDR 302
126.96.36.199 The 1989 Salvage Convention
As regards cover for special compensation to salvors for services rendered to avoid pollution liabilities, see the comments under 188.8.131.52.
184.108.40.206 MARPOL 73/78
Whereas the CLC and the Fund Convention regulate pollution liabilities and compensation, the International Convention for the Prevention of Pollution from Ships 1973, and the subsequent Protocol of 1978 (MARPOL 73/78), focus on pollution prevention on board ships.
MARPOL 73/78 has been ratified by many states. It applies to ships which are either registered in a contracting state or operated under the authority of such a state. Many contracting states have enacted domestic legislation under which MARPOL 73/78 regulations apply to all ships within the territorial waters of that state.
MARPOL 73/78 regulates the design, construction and equipment of tankers and other ships. It contains provisions on the discharge of oil and noxious liquid substances.
It requires the maintenance on board of detailed oil and cargo record books and for all vessels over 400GT the implementation of a Shipboard Oil Pollution Emergency Plan (SOPEP) and the Shipboard Marine Pollution Emergency Plan for Oil and or Noxious Liquid Substances (SMPEP) for vessels over 150GT carrying noxious liquid substances.
It defines the obligations of the ship in case of pollution.
Violations of MARPOL 73/78 regulations are subject to fines. There may be cover under Rule 7 Section 6 depending on the reason for the fine.
ITOPF was established in 1968, initially to administer TOVALOP. TOVALOP, a voluntary oil spill compensation scheme funded by the world’s tanker owners, was terminated on 20 February 1997. ITOPF is now focused on providing technical advice on all aspects of pollution response and remains an important source of pollution know-how and on-site expertise for spills of oil, chemicals and other substances in the marine environment.
ITOPF is funded by dues from shipowners, paid according to the type and size of the entered ship. The Swedish Clubs pays these dues on behalf of Members. ITOPF staff are available on a permanent basis to respond to a pollution incident involving a Swedish Club Member’s ship.
The Club usually avails itself of ITOPF’s services when there has been a spill from an entered ship. ITOPF will work closely with government agencies, contractors etc. to promote an effective and efficient clean-up response. The Club’s staff, including local representatives, surveyors and lawyers co¬operate closely at the site of the accident with ITOPF’s experts. ITOPF is involved also in assessing the reasonableness of clean-up costs and the merit of claims for damage to economic resources, such as property or businesses, according to criteria established internationally and set out in the IOPC Funds’ Claims Manual.
ITOPF can assist Members in preparing contingency plans (see the comments under 6.1.5) and in undertaking training, exercises and other advisory assignments.
6.1.4 Domestic legislation
In addition to the Conventions, a number of states have their own domestic legislation. One of the most significant is that of the U.S.A. described below.
220.127.116.11 The U.S.A.
The liability situation in the U.S.A. reflects the traditional dualism with federal law applicable to the whole of the U.S.A., together with a variety of state legislation with only local application.
For Members, it is equally important to be familiar with both types of legislation applicable to oil pollution liabilities in states in which the entered ship may trade.
18.104.22.168.2 Federal law
The principal Federal law in the U.S.A. governing civil liability for pollution clean-up costs and damages is the Oil Pollution Act of 1990 ( “OPA 90”). In addition, civil penalties for oil pollution incidents may be imposed under the Federal Water Pollution Control Act.
22.214.171.124.2.2 To whom does OPA 90 apply?
OPA 90 applies to a “responsible party” in respect of the entered ship. The responsible party is defined as “any person owning, operating or demise chartering the vessel”. The act applies not only to tankers but to virtually all types of ship.
126.96.36.199.2.3 Nature of liability
Under OPA 90, the responsible parties are jointly, severally and strictly liable for the response costs and damages resulting from the discharge of oil or the imminent threat of a discharge of oil from their vessel. With regard to strict liability, see the comments under 188.8.131.52. A responsible party is, however, exonerated from liability if he can prove that the damage was caused solely by
- an act of God
- an act of war
- an act or omission of a third party
- a combination of the above-listed causes
184.108.40.206.2.4 What is the liability for?
Under OPA 90, the responsible party has a strict liability for:
- the costs for preventing, minimising or mitigating oil pollution from a substantial threat of a discharge of oil from the vessel upon U.S. navigable waters (extending seaward to the outer limits of the U.S. exclusive economic zone) or adjacent shorelines.
- all resulting response costs and damage where there is a discharge of oil from the vessel.
Liability for damages includes:
- injury to, destruction of, or loss of use of natural resources
- injury to or economic loss resulting from the destruction of real or personal property
- loss of subsistence use of natural resources
- loss of revenues to federal, state and local governments from injury or loss of real property, personal property or natural resources
- loss of profits or impairment of earning capacity due to injury to or loss of real property, personal property or natural resources
- costs of additional public services provided during or after removal activities.
The definition of “natural resources” is broadly defined to include land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States any State or local government or Indian tribe, or any foreign government.
220.127.116.11.2.5 Limitation of liability
Under OPA 90, the responsible party can limit its liability:
- for single hull tank vessels of less than or equal to 3,000 GT, USD 3,500 per gross ton or USD 7,048,800 , whichever is the greater (this includes tank vessels fitted with double sides only or double bottom only)
- for tank vessels of less than or equal to 3,000 GT with a double hull to USD 2,200 per gross ton or USD 4,699,200 , whichever is the greater
- for tank vessels over 3,000 GT with a single hull to USD 3,500 per ton or USD 25,845,600 , whichever is the greater (this includes tank vessels fitted with double sides only or double bottom only)
- for tank vessels over 3,000 GT with a double hull to USD 2,200 per ton or USD 18,796,800, whichever is the greater
- for other vessels up to USD 1,100 per gross ton or USD 939,800 whichever is the greater.
Note: these limits are subject to periodic review.
The right of limitation is lost where the accident is proximately caused by:
- gross negligence or wilful misconduct
- violation of any applicable federal safety, construction or operating regulations
- failure or refusal to report the incident as required by law
- failure to provide reasonable cooperation and assistance in responding to the incident, as requested by a responsible official
- failure or refusal without cause to comply with an administrative order regarding the response to the incident, issued under the Federal Water Pollution Control Act or Intervention on the High Seas Act.
Elements of a nature that risk breaking limitation will probably be found in most pollution situations. As a result, liability under OPA 90 can be considered as effectively unlimited.
18.104.22.168.2.6 USCG Certificates of Financial Responsibility (COFR)
The Coast Guard’s Interim Final Rule on Certificates of Financial Responsibility was published in the Federal Register on 1 July 1994. The Rule requires owners and operators of vessels over 300GT (except a non-self-propelled vessel not carrying oil as cargo or fuel) to establish and maintain financial responsibility sufficient to meet the limit of liability under OPA 90 and CERCLA (for hazardous substances). The Club will assist the Member with its application for a COFR.
22.214.171.124.3 State law
Several states in the U.S.A. have enacted legislation imposing strict and unlimited liabilities or obligations with regard to evidence of financial responsibility or contingency preparations upon ships calling at ports in those states, for example, Alaska and California.
It is neither practical nor possible to present a breakdown of existing or expected local regulations within the framework of these comments. Members are recommended to obtain the latest information through available sources such as their local agents or the shipowning associations.
126.96.36.199.4 Cover under these Rules
The Member is covered for liabilities, costs or expenses under any applicable legislation, which are incurred as a result of the discharge or escape from the entered ship of oil or other substances, or the threat of such discharge or escape.
As regards cover under the Hull insurance for certain pollution liability risks, see the comments under 6.1.2.
The cover under this Rule is related primarily to accidental pollution but may apply also to certain rare instances where oil has been discharged intentionally. The effect of intentional pollution is covered only when made reasonably in compliance with Rule 8 Section 2, to prevent or limit liabilities covered under these Rules. Jettisoning oil to save life, the ship and/or cargo or to prevent an even larger pollution may qualify for compensation, whereas the intentional discharge of slops or residues from tank cleaning is not covered under any circumstances.
The cover is not confined to oil or similar products: it applies to chemicals and all substances which may cause damage or which may require clean-up, removal or destruction.
The cover is also for measures taken to prevent or limit the consequences of a threatened pollution. Such cover follows also from Rule 7 Section 4 and Rule 8 Section 2.
As mentioned in the comments under 188.8.131.52, liabilities for obstruction to navigation caused by oil booms or other consequences of a pollution, are covered under this section.
The cover for pollution is subject to a limit as described in the comments under 6.2.2.
It follows from Rule 10 Section 1 that the Club may reject or reduce compensation to a Member who has failed to observe obligations imposed by competent authorities. In such circumstances the Member may also be unable to limit under the CLC Convention (see the comments under 184.108.40.206.5) and OPA 90 (see the comments under 220.127.116.11.2.5).
Fines for pollution by oil or other substances are covered under Rule 7 Section 6 (c). According to item (v) of the last part of that section, a Member will not be compensated for fines imposed because the ship lacks valid or prescribed certificates to provide evidence of financial responsibility. See the comments under 18.104.22.168.
The deductible for oil spills also applies to related fines as appears from the comments under 22.5.2.
Under the United States Ship Mortgage Act, a maritime lien arising from a claim in tort will normally have priority over a mortgage claim. Under Rule 35, a mortgagee is covered under the Member’s policy with the same exclusions and limitations as apply to the Member’s cover (see the comments under 35.2.1). As the Member’s cover for pollution risks is limited, as described in the comments under 6.2.2, a mortgagee may find that a large pollution claim pushes the priority of the mortgage over the edge of the insurance cover available. The mortgagee may, therefore, require a cover of his own to protect him against liabilities which may outrank the priority of his mortgage. This is even more likely as the ship may be detained after a pollution which may cause a loss of time, freight or other revenue excluded under Rule 11 Section 2 (j) which further affects the solvency of the mortgagor. Moreover, the ship may be forfeited and this in itself constitutes another risk for the mortgagee who is uninsured under these Rules.
6.1.5 Contingency plans
A contingency plan is an oil pollution emergency plan. A complete and adequate contingency plan should constitute a vital part of the ship’s documents.
The basic requirements of a contingency plan are that it is:
- realistic, practical and easy to use
- agreed and understood by all parties involved on board and ashore
- tested, evaluated and updated regularly
- adapted to the construction, equipment, manning and operation of the entered ship and to the structure and routines of the shipowning and management organisation, including the land-based facilities such as terminals.
22.214.171.124 Geographical application
Within the states that have ratified MARPOL 73/78, regulation 37 annex 1 makes it mandatory for all vessels over 400GT and tankers over 150GT to have a Shipboard Oil Pollution Emergency Plan (SOPEP). In addition there is the Shipboard Marine Pollution Emergency Plan for Oil and or Noxious Substances (SMPEP) which is mandatory for all vessels over 150GT carrying noxious liquid substances.
OPA 90 provides that owners or operators of tankers, defined as any vessel carrying oil or hazardous substances operating in U.S. navigable waters or transferring such cargoes in U.S. ports, must prepare and submit a contingency plan.
Some U.S. states have adopted state law containing local requirements on contingency plans and their implementation. Various states have looked to OPA 90 as a guideline for formulating their own contingency plan requirements. However, the states are free to enact and enforce different and more stringent requirements than those contained in the federal law.
All toll paying vessels travelling through the Panama Canal with an oil carrying capacity of over 400MT as cargo or as fuel require a Panama Canal Shipboard Oil Pollution Emergency Plan (PCSOPEP), which will need to be duly authorised by the Panama Canal Authority (ACP).
126.96.36.199 Appointment of responsible person on board
In the contingency plan, the Member should appoint and name one person on board the ship, as well as a substitute in case of absence, who is authorised to take decisions that are binding and urgent actions on the Member’s behalf in a pollution situation.
6.1.6 Charterparty clauses
A variety of charterparty clauses exist dealing with pollution liabilities directly as well as indirectly, for instance through provisions on trading.
Some of those clauses impose pollution liabilities and obligations on the Owner beyond the cover under this or any other applicable Rule.
If Members have any queries regarding proposed charterparty clauses on pollution liabilities and obligations, the Club may be contacted for approval in accordance with Rule 10 Section 2.
6.1.7 Oil pollution and 1994 and 2016 York Antwerp Rules
According to Rule C in the 1994 and 2016 York Antwerp Rules no allowance is made in General Average for losses, damages or expenses incurred in respect of damage to the environment or in consequence of the escape or release of pollutants. The exception to the above Rule is the cost of measures taken to prevent or minimise damage to the environment which are allowable in General Average under Rule XI (d).
Some Charterers have introduced clauses excluding from General Average any costs attributable to preventive measures taken to avoid or minimise pollution. These clauses should be firmly resisted.
6.1.8 MARPOL ANNEX VI Prevention of Air Pollution from Ships
1 January 2020 the amendments to Annex VI “Prevention of Air Pollution from Ships” entered into force. The Annex contains rules that set limits on the sulphur oxide (SOx) content in fuels and nitrogen oxide (NOx) emissions from ship exhausts. In addition it prohibits the deliberate emission of ozone depleting substances.
The Member should be diligent in complying with the regulations set out in Annex VI. It should be noted that in general the Club will not cover fines imposed due to non-compliance with national regulations.
6.1.9 Some practical observations
188.8.131.52 Pollution avoidance
Many pollutions occur during loading or discharging of cargo or during bunkering.
At most loading and discharging sites, the land installation provides written cargo handling plans or other instructions as to how the procedure should be carried out. Such instructions should be followed and filed on board as they may constitute evidence in case of a pollution.
Adequate communication, visually or by telephone or VHF between all individuals involved in the operation, is essential. There should be an unbroken line of communication all the way from the ship’s engine room to crew supervising the operation on deck to the pump station and final installation ashore.
Experience shows that many pollution incidents are caused by people along that line of communication who literally do not speak the same language. That can result in hoses bursting because pumps have been started before the lines have been opened up, or valves being closed before the pumps have been stopped.
Lines and hoses, regardless of whether they belong to the ship or the terminal, should be tested regularly and have prescribed and valid certificates. Pressure should not be allowed to exceed those prescribed limits.
The ship should be moored in such a way that hoses may not be caught between the ship and the quay or other parts of the mooring installation. Mooring line slack caused by tide or increased draft during loading should be taken up mechanically or by constant attention by the ship’s crew or linesmen to prevent hoses or lines from being ruptured in case the ship is exposed to interaction from a passing ship (see the comments under 7.1.4).
Topping off of tanks is a crucial moment. The final stages require on-line communication between persons reading the ullage on board and those operating pumps or valves ashore. Extra care is required to avoid exceeding the maximum tank capacity, especially if thermal expansion of the cargo is expected during transit.
During bunkering, loading and discharge the scupper holes should be plugged and there should be an adequate supply of rags and absorbent material available, as well as empty drums and shovels.
184.108.40.206 Steps to be taken when a pollution has occurred
The first and obvious step to take is to stop the source of pollution and to limit its extent. The successful result depends on good seamanship and on the adherence to suitably developed and well-trained routines as specified in the contingency plan.
The contingency plan should contain all the information necessary to enable those on board to establish rapid contact with all parties assigned to assist in reducing the actual and legal consequences of a pollution.
Of all the parties to be contacted after a pollution incident there is one whose exclusive task it is to defend and protect the Member, the ship and the people on board. That party is the Club’s correspondent. The Club’s correspondent should, therefore, be called in at the earliest possible moment and should be given full support in his attempts to assist the Club and the Member.
220.127.116.11 Information needed in defence of pollution claims
Even if pollution liability under the existing conventions and most domestic legislations is strict, which means that the shipowner is liable, regardless of the cause (see the comments under 18.104.22.168), the successful settlement of a pollution claim depends on full information from the ship. This requires the dedicated co-operation of the people on board with regard to fact finding. Relevant parts of the comments on the importance of evidence and the ways of collecting it under 4.1.4 apply.
The need for information from the ship is also obvious where pollution has occurred which is not subject to the CLC but to domestic legislation based on, or derived from, that convention. The burden then may be on the claimant to prove that the shipowner caused the pollution through negligence (see comments under 22.214.171.124).
In order to secure evidence in defence of the Member and his ship, it is of considerable importance that the initial report from the ship describes the pollution, its extent and cause in an adequate and realistic way. Too often the quantity spilled is grossly underestimated. Underestimation of the pollution tends to delay and hamper the pollution response. It may even constitute a violation of applicable regulations and result in fines being imposed on the ship in addition to the expenses which may already be significant.
The names, functions and whereabouts of all persons involved in the operation during which the pollution occurred, should be recorded in order for all witnesses to be identified and traced, even a long time after the incident.
Any possible involvement of the shore installation or of any other party should be closely followed up. The connection between the ship and the shore should be closely analysed and documented. The shore lines, valves, couplings, pumps and tanks used should be identified and accurately documented.
Pollution observed around or near the ship is sufficient to justify an investigation, even if it seems clear to those on board that the pollutant could not have come from the entered ship. In such a situation, samples of the pollutant should be taken (see the comments under 126.96.36.199.6). The direction and strength of the wind, the state of the tide and any prevailing current should be established and recorded, together with the location of nearby ships, installations and other possible sources of the pollution.
As regards bunkering, it is important that bunkering contracts are not entered into on terms which may be unusually burdensome and, therefore, prejudice cover under Rule 10 Section 2.
188.8.131.52 Liability under CERCLA
The second paragraph of Rule 6 deals with liabilities that can arise under The Comprehensive Environmental Response Compensation and Liability Act (CERCLA). This legislation became a very powerful weapon for the U.S. authorities in cleaning up existing hazardous waste dumps, landfills and disposal facilities where ships had discharged hazardous material, slops etc. CERCLA imposes a wide range of environmental liabilities for the responsible party such as clean-up costs, up to USD 50 million in natural resources damages and fines up to USD 25,000 for each day of violating the Act.
U.S. courts can levy punitive damages corresponding to up to three times the total cost of the clean-up if a person liable for a release or a threatened release of a hazardous substance fails without sufficient cause to comply with administrative orders to clean up or otherwise remediate the effects of such a release.
CERCLA was considered by the International Group Clubs who decided that a unified approach should be adopted by all clubs in relation to cover for the liabilities arising out of the escape of waste from landfill sites where the waste originated from a ship. The result was a decision that there should be no cover for CERCLA liabilities and that cover should be afforded only at the discretion of the individual club. Discretion may be exercised more favourably in cases where the ship was the sole responsible party under the Act rather than one of many ships involved.
The second paragraph of this Rule was drafted by the International Group and now forms part of all clubs’ rules.