How efficient can international compensation regimes be in pollution prevention? A discussion of the case of marine oil spills

Abstract

This article studies the deterrent effect of the specific liability and compensation regime defined by the CLC and FUND conventions in the field of marine oil pollution, taking into account its voluntary nature. The discussion is based on a model derived from the economic analysis of international environmental agreements, applied to the case of oil pollution damage compensation. We analyse the conditions under which a FUND-like international compensation scheme is self-enforcing. We then discuss the overall impact of a self-enforcing international compensation regime in terms of accidental oil pollution prevention. We show in particular that the deterrent effect of such a compensation regime is a negative function of (i) the number of countries at stake in the field of oil pollution and (ii) the level of financial caps limiting the compensation for damage.