International Oil Pollution Compensation Fund Research Articles

Analysing influencing factors of accidental oil spills under the IOPC Fund

Despite technological advancements and enhanced safety regulations by the International Maritime Organization, oil spill accidents continue to happen and pose a serious problem. For the prevention of these accidents, hence, it is of utmost importance to analyse them from different aspects exhaustively. Taking oil spill accidents falling into the International Oil Pollution Compensation Fund (IOPC Fund) scope into account, this paper attempts to investigate the influencing factors of spill accidents for tanker vessels comprehensively. For this goal, this paper utilizes the combination of the Classification and Regression Tree (CART) method and entropy-weighted Grey Relational Analysis (GRA) approach. The outcomes of this paper indicate that accident type and the flag of a vessel are the most influential variables that affect the size of oil spills. Shipowners, petrol importing companies and IOPC Fund officials can utilize the outcomes of this paper for mitigating oil spill risks stemming from tanker vessels.

Legal advice on the Chinese compensatory fund system for oil pollution damage caused by ships from the perspective of marine environmental governance

As one of the primary obstructive factors for marine environmental governance, the frequent occurrence of oil pollution damage caused by ships has resulted in the establishment of compensation funds, such as the Oil Spill Liability Trust Fund of the United States, Ship Oil Pollution Fund of Canada and International Oil Pollution Compensation Fund (IOPC). Frequently suffering from marine oil pollution, China has extended considerable effort in marine environmental governance. Following the introduction of the ‘green principle’ into the Civil Code, China attached increasing significance to the legislation including compensation for oil pollution damage caused by ships. China formally established a compensation fund in 2012, and the past decade has witnessed the burgeoning development of the Chinese Ship-source Oil Pollution Compensation Fund (CSOPC), in addition to several defects which impede the fund from achieving the goal of marine environmental governance. As a national fund that is independent of the IOPC, the CSOPC adopts several regulations that are distinctive from internationally recognized practice; for instance, not recognizing pure economic loss within the scope of compensation. Such unique parameters, though partially originating from the national conditions in China, have resulted in glaring defects, including incomplete compensation scope and inappropriate compensation measures. Given the above problems, this study endeavours to provide several legal recommendations from the perspective of macro policies for improving the top-level design of the system, enhancing oil pollution compensation capabilities, and promoting the internationalization process. The study proposes two potential regulatory paths for innovation; namely, enlarging the range of compensation and establishing an essential emergency fund. From the perspective of protecting the rights of the victims of oil pollution damage and safeguarding the public interests of the ocean, this study puts forward relevant legal suggestions, which are expected to make valuable contributions to improving the compensation system for oil pollution damage caused by ships in China and promoting the governance of the marine environment.

A Two-Dimensional Assessment of China’s Approach Concerning the Compensation Fund for Ship-Induced Oil Pollution Damage: Pollution Governance and Victim Compensation

China has adopted a domestic approach to the compensation fund for ship-induced oil pollution damage by establishing the Chinese Ship-induced Oil Pollution Compensation (CSOPC) Fund. After almost 10 years of practice, there are still opinions and questions regarding the rationality of China’s domestic approach. This study reassesses China’s domestic approach by a two-dimensional analysis of the current position and potential developments of the CSOPC Fund’s functions in pollution governance and victim compensation. At the present stage, the goal of adequate compensation to victims is not well achieved by the CSOPC Fund when compared to its other goal of ensuring a better oil pollution emergency reaction. Given that the International Oil Pollution Compensation (IOPC) Fund is unlikely to contribute much to pollution governance, and the current inadequacy and defects of the CSOPC Fund can be improved gradually, it is suggested that China should continue its domestic approach with necessary improvements. Using the CSOPC Fund’s practice as a case study, this research intends to explore the pollution governance side of the compensation fund that has not yet been fully addressed, demonstrating the key value of the domestic fund compared to the IOPC Fund.

Why nations join the International Oil Pollution Compensation Funds: Risk, transaction costs and democracy

Why nations join the International Oil Pollution Compensation Funds: Risk, transaction costs and democracy

Marine insurance claims analysis using the Weibull and log-normal models: Compensation for oil spill pollution due to tanker accidents

In marine insurance, the identification of the distribution of the claim size processes from given observations is of major importance. We evaluate the claim amounts due to accidental oil spill volume from tankers. Previous studies on oil spills were mainly concentrating on the relation between spill amounts and some accident factors. The trend of the spill claims is a major concern to the sustainability of insurance funds, tanker shipping and the whole oil industry. By analysing the real claim data series of IOPC (International Oil Pollution Compensation Funds), we identify the trends and reveal findings which enable policy-makers and insurers for the sufficient financial protection from oil spill damage. This study introduces the Weibull model and the log-normal model to the framework for oil spill claims. The Weibull model and the log-normal model are obtained with Markov chain Monte Carlo (MCMC) simulation method. The statistical properties of oil spill claims are determined in the time series of oil spill claims. Moreover, the relations among claim properties of different settings are examined. The log-normal of 3 groups of gross tonnage is found the best fit according to R-squared statistics and the mean squared errors.

Compensation for Environmental Damage: Progressively Casting a Wider Net, But What’s the Catch?

In the case Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua)–Compensation Owed by The Republic of Nicaragua to The Republic of Costa Rica (the Costa Rica case), the International Court of Justice (ICJ) had to ascertain the compensation amount due by Nicaragua for the environmental damage it had caused to Costa Rica. This was the first time the ICJ was asked to weigh in and settle an environmental damage compensation claim between two states. After a concise introduction in Part I, this Article will first review the distinction between state responsibility for wrongful acts (as applicable in the Costa Rica case) and the international liability of states in the absence of wrongfulness in Part II. In Part III a detailed analysis of the Costa Rica case will be undertaken, with as its starting point the explicit acknowledgment by the ICJ that compensation is, indeed, due for damage caused to the environment, in and of itself, even if that damage is caused to non-marketable components of the environment, such as damage to a wetland or damage to an ecosystem. Next, this Article will critique the absence of transparency in the ICJ judgment on the valuation method it applied to calculate the final compensation amount as well as the paltry sum which Nicaragua ultimately owed to Costa Rica in this case. The general reluctance by the ICJ to apply punitive damages, in principle, does open an interesting comparative law debate on how common law and civil law countries differ in applying punitive damages in environmental cases. Where punitive damages may not be uniformly applied in national jurisdictions, most domestic courts do readily appoint experts in environmental matters given the inherent technical and scientific nature of such disputes. Therefore, this Article suggests the view that moving forward the ICJ should more actively appoint its own independent experts in environmental disputes, rather than merely relying on the evidence brought forward by the parties. This would go a long way in arriving at more robust scientific conclusions which in turn would allow the ICJ to contribute in a more meaningful manner to the development of international environmental and climate change law. Part IV seeks to demonstrate how domestic responses by the judiciary or the legislature increasingly tend to go further and be more proactive compared to the approaches of international regimes and adjudicating bodies when addressing environmental damage claims. This is illustrated based on a brief analysis of both the Deepwater Horizon and Erika oil spill cases and contrasted with the cases handled and interpretation given by the International Oil Pollution Compensation Funds when interpreting terms such as “environment” and “environmental damage.” Part V offers some concluding thoughts on the overall contribution of the ICJ’s Costa Rica case, including the suggestion that the court could have adopted a more “proactive judicial policy” in such an important transboundary environmental dispute between states.

Natural resource damage assessment for the Hebei Spirit oil spill: An application of Habitat Equivalency Analysis

Sixteen oil spills occurred in Korea between 1995 and 2010, including the Hebei Spirit oil spill (HSOS) in 2007, the largest (77,857 barrels) in Korean history. Yet compensation for environmental damages has never been claimed under the International Oil Pollution Compensation Fund for any of these accidents, because there is no adequate natural resource damage assessment (NRDA) procedure and there are no internationally-admissible economic quantification methods established in Korea. The objective of this study is to propose a methodology to overcome these shortcomings. We propose the use of Habitat Equivalency Analysis, which has dominated the US NRDA process for oil spills, and apply it to the HSOS as a case study. A Base Case analysis estimates the compensatory costs of fishery habitat damages (34,703.5ha) with a 10-year recovery rate at $119.4 million. We also conduct sensitivity analyses under several alternative assumptions.

THE INTERNATIONAL LAW REGARDING SHIP-SOURCE POLLUTION LIABILITY AND COMPENSATION: EVOLUTION AND CURRENT CHALLENGES

THE INTERNATIONAL LAW REGARDING SHIP-SOURCE POLLUTION LIABILITY AND COMPENSATION: EVOLUTION AND CURRENT CHALLENGES

Acceptance of the international compensation regime for tanker oil pollution – And its implications for China

The international compensation regime for tanker oil pollution has been successful in providing adequate and prompt compensation to pollution victims in its member states. Nevertheless, the attitudes of different countries toward acceptance of this regime have varied considerably. This paper aims to explain three main factors in the acceptance of the regime, including: (1) The level of economic development; (2) the risk of exposure to tanker oil spills; and (3) the financial burden associated with adherence to the International Oil Pollution Compensation Fund (IOPC). Using both fuzzy-set Qualitative Comparative Analysis and an Ordered Probit model, this study found two patterns causing upper-middle and high income countries to have a high acceptance level: (a) Those facing a medium risk of oil spills and having a low financial burden; and (b) those facing a high risk of oil spills. The study reveals that, for a country with a high risk of exposure to tanker oil spills, such as China, with its improvement in economic status it is far better for it to join the IOPC Fund, so as to provide better protection both for potential pollution victims and for the marine environment. The results of this study can also be applied to other countries that are considering whether or not to accept the international compensation regime for tanker oil pollution.

Disutility analysis of oil spills: Graphs and trends

This paper reports the results of an analysis of oil spill cost data assembled from a worldwide pollution database that mainly includes data from the International Oil Pollution Compensation Fund. The purpose of the study is to analyze the conditions of marine pollution accidents and the factors that impact the costs of oil spills worldwide. The accidents are classified into categories based on their characteristics, and the cases are compared using charts to show how the costs are affected under all conditions. This study can be used as a helpful reference for developing a detailed statistical model that is capable of reliably and realistically estimating the total costs of oil spills. To illustrate the differences identified by this statistical analysis, the results are compared with the results of previous studies, and the findings are discussed.

Legal system of compensation for marine oil pollution in China

Compensation for vessel-source oil pollution is a key issue in protecting the interests of both victims and the marine environment, as well as in the prevention of oil pollution. International standards on compensation for vessel-source oil pollution have been established by various relevant international conventions. This paper investigates how China is implementing such international standards for vessel-source oil pollution compensation and reveals the potential problems on the way of improving its compensation standards. It is found that China is making efforts to enhance its compensation capacity, and is moving closer to the international standards. However, such compensation will not be adequate if a major oil pollution incident occurs in the Chinese sea areas, and becoming a member of the International Oil Pollution Compensation Fund may give stronger protection for victims in China.

China's 2012 Regime for Compensation for Vessel Source Oil Pollution: A Comparative Study

The International Oil Pollution Compensation Fund is a successful international scheme providing supplementary compensation for vessel source oil pollution damage. Some domestic schemes such as the Ship-Source Oil Pollution Fund in Canada and the Oil Spill Liability Trust Fund in the United States have also been successful. China established its Vessel-Source Oil Pollution Compensation Fund in July 2012. This article examines the international and domestic schemes that provide supplementary compensation for vessel source oil pollution and makes some suggestions for amendment of the newly established Chinese national compensation fund.

Marine traffic risk modelling – an innovative approach and a case study

This paper presents a model to analyse the risk of two common marine accidents: collision and grounding. Attention is focused on oil tankers since they pose the highest environmental risks. A case study in selected areas of the Gulf of Finland in ice-free conditions is presented. The model utilizes a formula for risk calculation that considers both the probability of an unwanted event and its consequences. The model can be decomposed into a block representation in which blocks for the probability of a collision, probability of a grounding event, and the consequences of an accident are linked. The probability of vessel colliding is assessed in terms of a minimum-distance-to-collision-based model. The model defines the collision zone using a mathematical ship motion model and considers the traffic flow to be a non-homogeneous process. Calculations are performed using data for traffic flows in the Gulf of Finland with particular attention being paid to the crossing of the channel used by scheduled ferries between Helsinki and Tallinn, and the main shipping channel. For the assessment of a grounding probability, a new approach is proposed, which utilizes a gravity-like model, where a ship and navigational obstructions are perceived as interacting objects and their repulsion is modelled by a formulation inspired by gravitational force. The considered situation in this case is the movement of oil tankers in the approach channel to an oil terminal at Sköldvik, near Helsinki. The consequences of an accident are expressed in monetary terms, and concern the costs of cleaning up an oil spill, based on the statistics of compensation levels claimed from the International Oil Pollution Compensation Fund.

Governance during Disasters: Intra-Governmental and Non-Governmental Coordination in the 2006 Guimaras Oil Spill

The responses of the Philippine Coast Guard (PCG), Petron, government line agencies, local government authorities and non-government organizations to the 2006 Solar I oil spill were moderated by their relative positions within overlapping and competing disaster-specific frameworks at the agency (PCG), local and regional levels. The regional Task Force Solar I Oil Spill (RTFSOS), once convened, overshadowed the other frameworks owing largely to national calamity funds channeled through its member line agencies. While the task force design allowed for better job delineation and horizontal coordination between a limited number of stakeholders, the framework nevertheless marginalized the PCG, local government authorities and NGOs while endowing Petron a legitimate basis for its involvement in response operations. The absence of a widely-accepted protocol for ameliorating the spill’s environmental and human health impact created tension between line government agencies and academic/research communities. Unlike other disasters, the prospect of financial largesse from the International Oil Pollution Compensation Fund, either as reimbursements for response activities and compensation for livelihood losses, animated stakeholder and local reactions.

An empirical analysis of IOPCF oil spill cost data

This paper reports on recent analysis of oil spill cost data assembled by the International Oil Pollution Compensation Fund (IOPCF). Regression analyses of clean-up costs and total costs have been carried out, after taking care to convert to current prices and remove outliers. In the first place, the results of this analysis have been useful in the context of the ongoing discussion within the International Maritime Organization (IMO) on environmental risk evaluation criteria. Furthermore, these results can be useful in estimating the benefit of regulations that deal with the protection of marine environment and oil pollution prevention.

The Cost of Oil Spills from Tankers in Relation to Weight of Spilled Oil

The purpose of this paper is to consider a practical way to estimate the cost of oil spills from ships within the framework of establishing environmental risk evaluation criteria in International Maritime Organization (IMO). Regression analysis between the cost of oil spills and the weight of oil spilled (oil spill weight) was carried out using historical oil spill data from tankers reported by International Oil Pollution Compensation (IOPC) Funds. A nonlinear regression formula between the cost of oil spills and the oil spill weight is estimated from the historical data, and a critical value of cost to avert one tonne of spilled oil (CATScr) is obtained. CATScr obtained by the present study is compared with that obtained by previous work. This study shows that the cost of oil spills estimated by the present regression formula is in fairly good agreement with the mean value obtained from historical data while the CATScr gives relatively larger costs and shows the upper bound of the cost of oil spills.

Resolving Disputes Involving Accidental Pollution by Oil: What are the Challenges?

This paper discusses disputes involving pollution and the questions of compensation and claims involved, particularly with the provisions for resolving maritime disputes under the United Nations Law of the Sea (1982 UNCLOS) and other conventions. The paper gives a detailed discussion of the provisions of the UNCLOS in respect of the options available to disputants and claimants for adjudication. It also explores the value of the International Oil Pollution Compensation Fund (1992 Fund Convention) as it relates to providing an effective and timely resolution of claims resulting from marine pollution and difficulties often involved in using national judicial options and contending interests of parties involved in the regulation of marine environment. Research results have confirmed that in spite of the many conventions, law and regulations available for regulating the marine environment enforcements compliance remained weak. Finally the paper suggests ways that disputes and claims involving accidental pollution might be better managed with the provisions of the (1992 Fund Convention) and other remedies.

Promoting the Integrity of the International Regime on Oil Pollution Compensation and Liability

The international regime on oil pollution liability and compensation was intended to harmonise national laws on this subject in order to ensure adequate compensation for oil pollution victims. The success of the regime depends upon both its effective implementation into national law and a consistent and uniform interpretation by national courts. In practice, the uniform interpretation of the international regime has proven to be a challenge because of the different approaches taken by national courts towards the interpretation of the treaties. It is argued in this paper that the contracting parties to the treaties underlying the international regime already have a power to adopt authoritative interpretations. Whilst some decisions of the International Oil Pollution Compensation Fund may qualify as authoritative interpretations, it has been suggested that this power is perhaps better exercised through the International Maritime Organization, given its broader membership. Where an authoritative interpretation has been adopted, states and their courts are under an international obligation to follow that interpretation. However, there is currently no mechanism at the international level to monitor and promote compliance by national authorities. It is therefore argued that tentative discussions on monitoring the implementation of the international regime should be stepped up with a view to creating a formal compliance mechanism.

The financial hedging of contributions by oil firms to the IOPC Funds

The liability and compensation for the damage caused by maritime oil spills have been regulated by the 1992 International Convention on Civil Liability for Oil Pollution Damage (1992 Civil Liability Convention) and the 1992 International Oil Pollution Compensation Fund Convention (1992 IOPC Fund). In this compensation regime, the contributions of oil firms to the IOPC Funds are based on the aggregate risk of the Funds and are assessed each time an oil spill is registered. In this paper, we present the main characteristics of such a compensation regime and explain why oil firms would benefit from hedging their contributions to the Funds through standard insurance combined with investment on capital markets. A simulation of a combined hedging strategy using stop-loss contracts is also proposed.

Conflicting Interpretations--The Slops Incident and the Application of the International Oil Pollution Liability and Compensation Regime to Offshore Storage and Transfer Operations

This analysis discusses recent developments in the international regime for oil pollution liability and compensation. It considers whether or not the regime is applicable to certain offshore storage and transfer operations. The analysis takes into account developments in the policy of the International Oil Pollution Compensation Fund on this topic, as well as the decisions of the Greek courts in the case of the Slops incident. It concludes that the current scope of the regime is unclear and there is a need to promote greater uniformity in the interpretation of the international regime.