5 ELR 50103 | Environmental Law Reporter | copyright © 1975 | All rights reserved

A Progress Report on the International Convention on Civil Liability for Oil Pollution Damage and Its Supplementary Fund Convention [5 ELR 50103]

I. Introduction

An important development in international environmental law was announced recently by the Inter-Governmental Maritime Consultative Organization (IMCO), a specialized agency of the United Nations. In April, 1975, IMCO revealed that the International Convention on Civil Liability for Oil Pollution Damage¹ now has been ratified by the required number of nations to bring that treaty into operation.

The "Civil Liability Convention" (or "Liability Convention") will enter into force on June 19, 1975, and immediately will govern claims for vessel-source oil pollution damage among many nations which register large fleets of oil tankers or which possess coastlines vulnerable to tanker oil spills. The following nations had ratified or acceded to the Liability Convention as of April 16, 1975: the United Kingdom, France, Sweden, Norway, Liberia, Lebanon, Algeria, Morocco, Fiji, Senegal, Ivory Coast and Syria.² Representatives of 29 nations, including the United States, have signed the Liability Convention. Since most signatory powers probably will ratify the Liability Convention, the eventual influence of the treaty is potentially great.³

The purpose of this note is to review the origins and the general characteristics of the Liability Convention. The author hopes that renewed interest in the treaty will lead to United States ratification of both the Liability Convention and its companion, the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (the "Fund Convention"),⁴ the origins of which are also discussed. This note is intended to provide background information for a more extensive article by the author which analyzes the Liability and Fund Conventions relative to a proposed United States domestic regime for oil pollution liability.

II. Origins of the Civil Liability Convention

Although the legal mechanisms for compensating public and private parties for vessel-source oil pollution have been inadequate for many years, the international community was not motivated to remedy this inadequacy until the Torrey Canyon disaster of 1967. The Torrey Canyon was a relatively small oil tanker by modern standards, registering 61,263 gross tons and carrying 880,000 barrels of crude oil.⁵ When the Torrey Canyon ran aground 15 miles off the English coast, it spilled more than 700,000 barrels of oil, contaminating 242 miles of English and French shoreline.⁶

Much international publicity was generated by the fouled beaches and dead seabirds which the grounding of the Torrey Canyon produced. No less disturbing were the extraordinary losses sustained by the British and French governments, which reportedly spent over $16 million to remove about 59,000 tons of oil from their nations' beaches.⁷

The necessity for the Liability Convention was most clearly demonstrated by the great difficulties encountered by the French and British governments when they sought to recover their "cleanup" expenditures from the owners of the Torrey Canyon. Inquiries designed to fix liability revealed that the tanker was registered in Monrovia and flew the Liberian flag. The vessel was owned by a Bermuda company, which was a subsidiary of a United States corporation. At the time of its grounding, the Torrey Canyon was on charter to the British Petroleum Company and was manned by a Greek crew. These legal complexities, not uncommon for the oil shipping industry, raised vexing problems of where liability rested, where a suit for damages could be filed, and whether any limits to liability applied.⁸

Following months of legal maneuvers, the owners of the Torrey Canyon settled out of court with the French and British governments, paying only a small fraction [5 ELR 50104] of the true costs of the pollution cleanup.⁹ Furthermore, no significant compensation was made for the many private and ecological losses caused by the oil spill.¹⁰

After the Torrey Canyon incident, the U.N.'s Inter-Governmental Maritime Consultative Organization (IMCO) established a working group to draft a convention to assure compensation for governments and private parties which sustain oil pollution damage. While the IMCO study was progressing, the Comite Maritime International, an influential organization of admiralty lawyers, was drafting its own proposal for a convention on oil pollution liability.¹¹

The International Legal Conference on Marine Pollution Damage was held in Brussels during November of 1969 under the auspices of IMCO. Sections from both proposed draft conventions were used by the Conference as models for the end product, the International Convention on Civil Liability for Oil Pollution Damage.¹²

III. An Overview of the Civil Liability Convention

The Civil Liability Convention places strict liability upon the owner of an oil tanker for damages caused by polluting oil discharged from the owner's vessel. A "ship" subject to the Liability Convention is defined as any sea-going vessel (including a barge) actually carrying oil in bulk as cargo.¹³ Oil is defined to include only "persistent oils" such as crude oil and heavy fuel oil, but not "light" distilled petroleum fractions such as gasoline.¹⁴ The scope of "pollution damage" compensable under the Liability Convention is still unclear, but it is defined as loss caused by "contamination," including both costs of measures taken to prevent damage and further losses caused by those preventive measures.¹⁵

Under the 1969 Convention, a shipowner is strictly liable for all pollution damage, except where the oil discharge was caused by (1) an act of war, hostilities, civil war, or insurrection, or (2) a natural phenomenon of an exceptional, inevitable and irresistible character, (similar to an "act of God"), or (3) an act or omission done with intent to cause damage by a third party, or (4) the negligence or malfeasance of a government in failing to maintain lights or other navigational aids.¹⁶ Also, a claimant is barred from recovery if the pollution damage resulted from the claimant's own negligence or from his own acts performed with the intent to cause damage.¹⁷

By posting a "limitation fund" in accordance with the Liability Convention, the shipowner can limit his liability to a set amount for any one pollution incident.¹⁸ The maximum liability is expressed in Poincare gold francs; their equivalent value in dollars is a matter of dispute, but shipower liability is probably limited to $160 per gross registered ton of the oil tanker or $16.8 million for any one pollution incident (whichever sum is smaller).¹⁹ Despite the limitation provisions, if the pollution incident occurred as a result of the "actual fault or privity" of the shipowner himself, his liability is unlimited.²⁰

By posting his limitation fund pursuant to the Liability Convention, the shipowner frees himself from any liability inconsistent with or in addition to the Convention's provisions.²¹ The shipowner's "servants or agents" are expressly granted immunity from claims for pollution damage,²² but the owner's general right of recourse against third parties is preserved.²³

Actions against a shipowner must be brought in the civil courts of some contracting nation in which pollution damage from the liable vessel was sustained.²⁴ Similarly, in cases where more than one party nation sustains pollution damage, the shipowner must constitute his limitation fund in one jurisdiction where such damage occurred.²⁵

To ensure financial responsibility, the owner of any ship which carries over 2,000 tons of oil as cargo and which trades with one or more nations which are parties to the Liability Convention must maintain insurance or other security for the amount of Convention liability.²⁶ A vessel's state of registry will issue a "Certification" to verify the financial responsibility of each oil tanker which satisfies the Convention's requirements.²⁷ If a tanker registered in a contracting nation of the Convention does not properly establish financial security, its country of registry must forbid that ship to trade.²⁸

Both private and public parties can present claims under the Liability Convention for a wide range of pollution damages.²⁹ These claims rank equally with [5 ELR 50105] claims of the shipowner for his expenses to prevent or minimize pollution damage after the pollution incident has occurred.³⁰

In addition to suit against shipowners, the Liability Convention permits a claimant to bring a direct action against an insurer or other guarantor of a vessel owner's financial security.³¹ However, such a defendant insurer can join the liable shipowner as a co-defendant in the proceedings.³²

The Liability Convention provides that judgments rendered by the courts of one contracting nation can be enforced in any other contracting nation, subject to certain safeguards.³³ Claims against shipowners under the Liability Convention must be brought within three years from the date when damage was sustained and not longer than six years from the first of a series of events comprising a single pollution incident.³⁴ If extensive pollution damage exceeds the Convention's limits on liability, the court which is administering the shipowner's limitation fund must distribute the available money among claimants in proportion to the amounts of their established claims.³⁵

IV. Background of the Fund Convention

Although the Liability Convention was generally recognized as a positive achievement, the member nations of IMCO soon concluded that it would not enter into force unless its deficiences were remedied by a supplementary convention. General dissatisfaction with the Liability Convention was exemplifed by the response of the U.S. Senate Foreign Relations Committee, which declined to recommend advice and consent to the Civil Liability Convention for many months, largely because the limits of compensation afforded pollution victims were deemed inadequate.³⁶ Eventually the Committee recommended to the full Senate that advice and consent to ratification be given, but that the Senate should delay final action until it could simultaneously approve a supplementary convention to augment compensation to damaged parties.³⁷

The representatives at the 1969 Brussels Conference had never regarded the Liability Convention as a complete solution to the problem of oil pollution liability, since that treaty places all liability on shipowners. A majority of Conference delegates had agreed that a supplementary convention should be drafted to charge some of the costs of oil pollution to the oil cargo interests. Thus the 1969 Brussels Conference directed IMCO to study the feasibility of a convention to create a supplementary international fund from a charge on oil imports, and another conference was scheduled for 1971 to draft such a supplementary convention.³⁸ At a second Brussels Conference held between November 29 and December 18, 1971, IMCO adopted the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, which supplements the Liability Convention by imposing a direct levy on the oil industry.³⁹ Although no definite date when the Fund Convention will enter into force can be predicted, international acceptance of that Convention seems probable. As of April 16, 1975 the following nations had ratified or acceded to the Fund Convention: Liberia, Norway, Sweden and Syria.⁴⁰ Seventeen nations, including the United States, are signatories of the Fund Convention. Japan, the United Kingdom, and other major maritime powers have reportedly announced plans to ratify that Convention.⁴¹ Thus the Fund Convention could enter into force relatively soon after the Liability Convention becomes effective.

V. Overview of the Fund Convention

Because the Fund Convention is designed to supplement the 1969 Convention on Liability, only nations party to the Liability Convention can be contracting parties of the Fund Convention.⁴² After entry into force of both the Liability and Fund Conventions, the operation of the latter treaty will be administered by an Assembly of all party nations, an Executive Committee and a Secretariat.⁴³

The 1971 Fund Convention is designed to establish a large compensation fund financed by a levy on oil imported by sea to contracting nations.⁴⁴ Each oil company which receives more than 150,000 tons per year of crude or heavy fuel oil would contribute directly to the International Fund on the basis of a fixed sum per ton of oil imported.⁴⁵ Alternatively, a national government [5 ELR 50106] can collect the appropriate fees from oil importers and make corresponding contributions to the International Fund.⁴⁶ To assure that the Fund Convention's levy on imported oil will not increase the price of petroleum greatly in any contracting nation, the Fund Convention will enter into force only when accepted by at least eight nations which have imported at least a total of 750 million tons of oil in the preceding year.⁴⁷

The 1971 Convention creates an International Fund to compensate for oil pollution damage which originated from vessels which carry oil in bulk as cargo.⁴⁸ Originally, the Fund is designed to pay for pollution damage up to $36 million, including payments made pursuant to the Liability Convention.⁴⁹ However, a vote of three-fourths of the Assembly of the Fund Convention can increase the total amount of compensation to $72 million.⁵⁰

The Fund Convention not only raises the total levels of compensation from those of the Liability Convention, but also pays claims which would be denied under the 1969 treaty. For example, if a claimant can prove that he was damaged by oil pollution from some vessel, but cannot specifically identify the vessel, he can receive compensation from the International Fund,⁵¹ though obviously not from a specified shipowner.

Similarly, the Fund Convention will pay claims even though pollution damage was caused by a natural phenomenon of an irresistible character, an act of a third person, or faulty government maintenance of aids to navigation (all shipowner defenses under the Liability Convention).⁵² The International Fund will compensate claims where the liable shipowner and his guarantor have defaulted on their obligations.⁵³ Also, where the shipowner has undertaken voluntary efforts to remove spilled oil the International Fund will reimburse him for his clean-up expenditures.⁵⁴

In addition to supplementing compensation to public and private parties which sustain oil pollution damage, the Fund Convention is designed to indemnify shipowners for a part of their expenditures made pursuant to the Liability Convention.⁵⁵ However, no indemnification can be paid if the shipowner is proved guilty of willful misconduct.⁵⁶

To expedite delivery of compensation to pollution victims, the administering authorities of the International Fund can make provisional payments⁵⁷ and can settle claims. The Fund would acquire by subrogation the rights of any party it compensates in this manner.⁵⁸

The contracting nations of the 1971 Convention agree to recognize the International Fund as a legal entity which can sue and be sued in courts.⁵⁹ Suits by claimants for pollution damage compensation or by shipowners for partial indemnification must be brought in a court competent to hear a suit against a shipowner under the Liability Convention.⁶⁰ The International Fund has the right to intervene in any suit brought against shipowners or their insurers.⁶¹

VI. The Advantages of Early United States Action on the Liability and Fund Conventions

In determining the priority of action on the two Conventions, Congress must consider that the entry into force of one or both treaties without United States participation could be prejudicial to American interests. For example, vital internal regulations and personnel appointments will be made during the first months of operation of the Fund Convention, whether or not the United States is a contracting party.

Similarly, the terms of United States domestic legislation can influence both the organizational structures of the two Conventions and early interpretation of their terms by national courts and by the Fund Convention's administrative bodies. American influence would enhance both the effectiveness of the Conventions and the prospects of United States interests. Thus the United States can best protect its interests during the organizational period of the two Conventions if the United States Senate grants advice and consent to ratification before or soon after the Conventions enter into force.

Clearly, the Liability and Fund Conventions will establish the basic international law on oil pollution liability even if the United States declines to ratify either treaty. Whether or not the United States ratifies the two Conventions, every United States flag vessel will be subject to certain terms of the Conventions if that vessel enters a port of any ratifying nation to take on or discharge an oil cargo. In all probability, the interests of the United States oil production and shipping industries will make United States ratification of the Liability and Fund Conventions highly likely.

One consideration which militates for United States ratification of the Liability Convention is the following. All oil tankers registered in the United States which will trade with nations which ratify the Liability Convention [5 ELR 50107] will be required to satisfy the financial responsibility requirements of the Convention whether or not the United States becomes a "Contracting Party" of that treaty. Each nation party to the Liability Convention requires proof of financial responsibility for every ship which carries 2,000 tons or more of oil as cargo, as a condition for such ship to use the ports or deepwater terminals of a ratifying nation.⁶²

If a vessel's state of registry is a party to the Liability Convention, that vessel's owner will demonstrate his capacity to pay damages under the Conventions with an official "Certificate" issued by his flag state.⁶³ However, if a vessel's state of registry is not a Contracting Party of the Liability Convention, that vessel's owner still must provide the insurance or similar guarantee required by the Convention's levels of liability.⁶⁴ Of course, the owner of an oil tanker registered in a non-ratifying nation probably would face added expense and administrative difficulties to establish financial responsibility without the certification process which ratifying states will provide to their flag vessels.

Furthermore, the insurance or other security required by the Liability Convention must be available exclusively for satisfaction of claims under the Convention.⁶⁵ Thus the overlapping requirements for financial responsibility of the United States Federal Water Pollution Control Act or the United States Deepwater Port Act would not satisfy the Liability Convention's terms for United States flag vessels.

Among the nations which already have ratified or seem destined to ratify the Liability Convention are states which import or export large quantities of petroleum. Because many American flag oil tankers will at least receive oil cargoes from ratifying states which export oil, United States ships will be forced to satisfy the expensive financial security requirements of the Liability Convention even if the United States fails to ratify that treaty. Nevertheless, failure to ratify would deny the many benefits of the Liability Convention to United States vessels. To obtain the limitation of liability and other advantages of the Liability Convention, the United States petroleum shipping industry doubtlessly will exert pressure for prompt United States ratification of the Liability Convention.

It also appears that a number of nations have deferred action on the Liability and Fund Conventions until the United States acts to accept or reject them.⁶⁶ Considering the difficulties encountered in the formulation and drafting of the two Conventions, and considering the the importance of United States ratification to protect United States interests and to promote international acceptance of the treaties, prompt ratification by the United States seems highly desirable.

Even though the Liability and Fund Conventions are commendable developments for the international law of the environment, the United States should enact domestic legislation to remedy many imperfections in those two treaties. The drafting of a United States implementing act for the Conventions and the proposed adoption of a United States domestic oil pollution liability and compensation bill will be considered in a subsequent article.

1. ELR 40306; 8 Int'l. Legal Materials 453 (1969); 9 Int'l. Legal Materials 45 (1970). For citation purposes the Civil Liability Convention will be designated CLC hereinafter.

2. Source: U.S. State Department, Office of the Assistant Legal Advisor for Treaty Affairs, April 16, 1975 (Ms. Fincher).

3. Id.

4. For the text of the Fund Convention, see Exec. K. 92nd Congress, 2d Sess.; or the Hearings before the Subcomm. on Oceans of the Sen. For. Rel. Comm. on Exec. K. 93 Cong., 1st Sess., Apr. 17, 18, 1973 (the Fund Convention is cited below as "F.C.").

5. Program of Policy Studies in Science and Technology, George Washington University, Legal, Economic and Technical Aspects of Liability and Financial Responsibility as Related to Oil Pollution, DOT Contract # CG-10255 A (1970), at appendix G, pp. 12-13.

6. Id.

7. Post, "Private Compensation for Injuries Sustained by the Discharge of Oil from Vessels," 4 J. of Mar. L. and Comm. 40 (1972).

8. See Report of the U.S. Delegation to the International Legal Conference on Marine Pollution Damage, Bruseels, Belgium, (Nov. 10-29, 1969), in Exec. G. 91st Cong., 2d Sess. at 36, 45 (1970), (hereinafter cited as Exec. G.).

9. See, e.g. Mendelsohn, "Maritime Liability for Oil Pollution," 38 Geo. Wash. L. Rev. 1 (1969).

10. Id.

11. See generally, Exec. G, Report, supra n. 8.

12. See generally, Exec. G, Report, supra n. 8.

13. CLC, Art. I (1).

14. CLC, Art. I (5).

15. CLC, Art. I (6).

16. CLC, Art. III (2).

17. CLC, Art. III (3).

18. CLC, Art. V (1).

19. CLC, Art. V (1). These dollar figures are based on the 1972 amendments to the Par Value Modification Act, Pub. L. No. 93-110, 87 Stat. 352, 31 USC §§ 449 et seq. (Supp. 1973). An explanation is found in H.R. Rep. No. 93-424, 93rd Cong., 1st Sess. (1973).

20. CLC, Art. V (2).

21. CLC, Art. III (4).

22. Id.

23. CLC, Art. III (5).

24. CLC, Art. V (3), (21); Art. VI.

25. CLC, Art. IX (1).

26. CLC, Art. VII (1), (2).

27. CLC, Art. VII (11).

28. CLC, Art. VII (10).

29. CLC, Art. I (6), II, III (1).

30. CLC, Art. V (8).

31. CLC, Art. VII (8).

32. Id.

33. CLC, Art. X.

34. CLC, Art. VIII. These periods of limitation apparently are designed to protect pollution victims who do not immediately discern their damages. Also, a stranded or sunken tanker can continue to discharge oil at intervals long after the original pollution incident.

35. CLC, Art. V (4). One might predict that this provision, coupled with the three or six-year limitation periods, might result in long delays in compensation.

36. Exec. Rep. No. 92-9, 92d Cong; 1st Sess. 507 (Aug. 5, 1971).

37. Id.

38. See Exec. G, supra n. 8. Also see Report of the U.S. Delegation to the Conference on Establishment of an International Compensation Fund for Oil Pollution Damage, Brussels (Nov. 29 to Dec. 18, 1971), of Exec. K, 92d Cong., 2d Sess.

39. Id.

40. Supra, n. 2.

41. Lettow, "Control of Marine Pollution," in Federal Environmental Law 624-5 (1974).

42. F.C., Arts. 37 (4), 41 (4), 4.

43. F.C., Arts. 16-34.

44. F.C., Arts. 10-15.

45. F.C., Art. 10, 1 (3).

46. F.C., Art. 14 (1).

47. F.C., Art. 40 (1).

48. F.C., Art. 1 (2).

49. F.C., Art. 4 (4). As under the Liability Convention, the Fund Convention's levels of compensation are expressed in terms of gold (see supra n. 19).

50. F.C., Art. 4 (6). See text accompanying n. 18-20, supra.

51. F.C., Art. 4.

52. Id.

53. F.C., Arts. 3, 4.

54. Id.

55. F.C., Art. 5.

56. Id.

57. F.C., Art. 18 (7).

58. F.C., Art. 9 (1).

59. F.C., Art. 7.

60. F.C., Art. 7 (1).

61. F.C., Art. 7 (4).

62. CLC, Art. VII (11).

63. CLC, Art. VII (1), (2), (6), (7), (11).

64. Id.

65. CLC, Art. VII (9).

66. Lettow, supra n. 41, at 624-5.

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5 ELR 50103 | Environmental Law Reporter | copyright © 1975 | All rights reserved