IOPC 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.

The Environmental Compensation Fund: Bridging Liability Gaps in the Deep Seabed Mining Regime

The current transition period from exploration to exploitation in deep seabed mining (DSM) has witnessed efforts on the part of the international community to draft regulations for the exploitation of mineral resources in the Area. The production of the “Draft Exploitation Regulations” has been a priority theme in recent International Seabed Authority (ISA) sessions. Although discussion in reducing environmental impacts has been central to the progressive instrument, some liability gaps and approaches to close such gaps have not come up with desirable solutions. Against this background, the paper underscores the need for an Environmental Compensation Fund (the Fund) to bridge these gaps under the DSM regime. The paper argues that the three provisions about the Fund envisaged in the Draft Exploitation Regulations fall short of adequate deliberation and operational details. To bridge up the liability gaps, some critical issues in operating the Fund need to be carefully considered regarding the establishment, purpose, contributions, and claims for compensation. The paper suggests that the ISA may take the key elements of existing compensation funds, inter alia, the IOPC Funds to improve the operation and function of this Fund.

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

The Role of IOPC funds in Establishing the Limits of Liability for Transboundary Sea Transportation of Oil Refined Products

The Role of IOPC funds in Establishing the Limits of Liability for Transboundary Sea Transportation of Oil Refined Products

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.

4. International / Civil Liability and Compensation

In October, the 1992 Fund Administrative Council, after appraising a legal opinion on the issue of the implementation of the conventions under national law, adopted the Decision on the Implementation of the Conventions under National Law, which outlined the approach it should follow in the event of the improper implementation of the conventions by a party (Record of Decisions of the October 2013 Sessions of the IOPC Funds’ Governing Bodies, Doc. IOPC/OCT/13/11/1, paras 8.5.1–8.5.22). While the decision stresses that the fund may take legal action against the state party for incorrect implementation of the conventions, claiming compensation for the loss it may have suffered, priority is given to the exchange of views and to the initiation of dialogue with that state. Moreover, the council noted that the director, in consultation with the Audit Body, examined the possibility of adopting a new policy so...

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.

SUNKEN OIL AND THE REMOVAL OF OIL FROM SUNKEN WRECKS

ABSTRACT Following the technical triumph of removing most of the oil from the sunken wreck of the PRESTIGE, interest and expectations have been raised in equal measure. Since 2005 there have been a number of incidents worldwide involving sunken wrecks containing oil, as well as a smaller number of pollution cases in which oil spilled from ships has sunk due to its high specific gravity. The response to such incidents poses unique challenges and reference is made to ITOPF'S database of historical spills in order to demonstrate how attitudes and the policies for dealing with these cases have changed. The problems posed by oil in wrecks or on the seabed straddle the disciplines of ship salvage and conventional spill clean-up. Whilst the technology used in recovering such oil differs, the rationale for determining whether or not certain measures have merit is in large part based on an assessment of what is technically reasonable. These principles are reflected in the development of the IOPC Funds’ technical guidelines for the removal of oil from sunken wrecks. This paper explores the evolution of response policy with reference to key shipping incidents involving sunken wrecks and sunken oil. In the course of this review, the conflicts between public expectations and technical limitations are highlighted.

TIER-2 IN EAST ASIA1: CHALLENGES AND ANSWERS

ABSTRACT On numerous occasions, East Asia has been affected by marine oil spills incidents, originating from tankers and other types of ships. Important spills incidents that involved the IOPC Funds in the last decade (e.g. Nakhodka, Evoikos, Natuna Sea and Solar 1 …) indicate an average occurrence of one spill per year. This figure remains significantly high when considering that some States in the region are still not parties to international compensation regimes. In addition, numerous incidents do not benefit of international media coverage, thus making them often unnoticed. Lower scale incidents (within the range of hundreds of tonnes) occur on a more frequent basis and may appear trivial to respond to. Nevertheless, they represent the same range of difficulties experienced during larger scale incidents (logistics, suitable means to apply dispersants promptly and effectively, availability of temporary storage, lack of plan and training …) In terms of response, the ultimate authority in the coordination of spill response activities is in the hands of Government Agencies. However, the equipment and manpower available belong in various proportions to both Government Agencies and the Oil Industry. The latter operates numerous oil terminals and offshore facilities and is responsible to respond to minor spills defined as Tier 1. In the case of a large spill that exceeds the on-site capability, Tier 3 Cooperatives funded by the vast majority of major companies were created to assist and complement the local response, by offering access to a large range of special supplementary resources and services, such as the Airborne Dispersant Delivery System. Whilst Tiers 1 and 3 are well defined and are respectively synonyms of small and huge oil spill incidents, there is a lack of clarity and consistency in-between, thus making the Tier 2 response difficult to define. This gap that is often underestimated and may result in a preparedness weakness leading to unfortunate consequences. The aim of this paper is to analyse the Tier-2 response requirements and to discuss on the challenges of implementing effective measures in a region where the only imports of crude oil of China have more than doubled in the past five years.

Lessons to be learned from past oil spills in Galicia (Spain)

The aim of this article is to analyse the possible consequences of the oil slick caused by the Prestige based on the lessons which can be learnt from past experiences in Galicia (Spain), and to stress the need to implement administrative and legal changes, within the European Union (EU) legal framework to allow for the inclusion of total environmental damages under IOPC Funds 1992. This paper concludes that the recent catastrophe of the Prestige, affecting an area already hit by previous oil spills, should encourage governments to set up initiatives designed to prevent similar incidents from reoccurring in the future.

The International Compensation Regime Revisited

ABSTRACT The international regime of compensation was established by two international treaties elaborated under the auspices of the International Maritime Organization (IMO), namely the 1969 Civil Liability Convention and the 1971 Fund Convention. These Conventions were revised by Protocols in 1992, and the revised Conventions, known as the 1992 Conventions, have effectively replaced the original ones. The 1992 Civil Liability Convention governs the liability of the shipowner, whereas the 1992 Fund Convention provides supplementary compensation through the International Oil Pollution Compensation Fund (1992), financed by a levy on oil receipts in member nations. The total amount of compensation under the 1992 Conventions is US$178 million per incident but will be increased to US$269 million from 1 November 2003. This paper describes briefly the scope and application of the Conventions with reference to specific incidents involving the IOPC Funds, focusing on developments over the past two years. In view of the experience of recent major incidents, the 1992 Fund has set up a Working Group to hold an exchange of views concerning the need for and possibilities of improving the international compensation regime established by the 1992 Conventions. As a first step, the Working Group prepared a draft Protocol establishing an optional third tier of compensation by means of a Supplementary Compensation Fund which would provide additional compensation over and above that available under the 1992 Conventions. The draft Protocol will be considered by a Diplomatic Conference to be held under the auspices of the IMO in May 2003. Certain issues relating to environmental damage have been considered. The Working Group continues its review of the 1992 Conventions and will examine a number of issues, inter alia, shipowners’ liability.

The problem of pure economic loss in the law relating to ship-source oil pollution damage

The discrepancy between some decisions of British courts and a number of decisions of the IOPC Funds raises a few interesting points, in particular the likelihood that there will be discrepancies between — on the one hand — decisions emanating from national courts implementing national legislation, in particular where courts in one state decide to apply general domestic law to the national law implementing the international conventions, and — on the other hand — courts in other states which may give a quasijudicial status to the decisions of the IOPC Fund and follow such rulings. This is a problem which may be very hard to solve. One solution may be the creation of an international adjudicating tribunal with exclusive jurisdiction to deal with claims for shipsource oil pollution damage.However, it is probably early days for states to be asked to give up their jurisdiction in relation to this subject. Another solution which has been suggested is for courts in States that are parties to CLC and the Fund Convention to attribute persuasive value to decisions of the IOPC Fund Executive Committee and Assembly. However, the latter suggestion is more illusory than real, because it is not compatible with principles of fairness and natural justice; effectively, it means the grant of the status of precedent to decisions of one of the parties to a litigation. Another possibility — which only partly solves the problem — is for the courts in one State to give at least persuasive value to decisions of courts in another State party to the Convention.

Overview of the Compensation and Liability Regimes Under the International Oil Pollution Compensation Fund (IOPC)

This paper focuses on the cost recovery issues arising through the operation of the International Oil Pollution Compensation Fund (IOPC) and administrative matters which arose following the Braer and Sea Empress oil tanker pollution incidents in the UK. Each of these oil spills brought very different problems. Any major oil spill will have prolonged economic and social consequences for the communities affected. Membership of the International Oil Pollution Compensation Fund (IOPC Fund) will do much to soften the impact as regards economic damage. However, the operation of the Fund brings difficulties which may not have been considered by the administration prior to the spill. Some of the difficulties are foreseeable. It covers details of the international compensation and liability regimes, it considers a number of administrative consequences and highlights seven lessons that have been learned in the UK in the light of recent experience. These lessons are: • Claims may not be paid quickly or in full. • Claimants will need advice and government involvement. • Action by the government may be needed to complement the IOPC Fund. • Governments have to balance their obligations as a member state with the needs of claimants. • It is better for claimants to keep matters out of court for as long as possible. • Administrative consequences will continue for a long time after the oil has been cleared from the shoreline. • Each major oil spill brings different cost recovery problems and will also bring demands ‘to learn the lessons’. In much the same way as contingency plans are regularly tested, each state party to the regime would be wise, from time to time, to think through the likely scenarios so as to better prepare themselves in the light of experiences elsewhere. The United Kingdom has had rather more experience in recent years than it would have wished!

The Cost of Oil Spills from Tankers: An Analysis of IOPC Fund Incidents

ABSTRACT The 1971 and 1992 International Oil Pollution Compensation Funds (IOPC Funds) provide compensation to the victims of oil spills from tankers in countries which have ratified the 1971 and 1992 Fund Conventions. Since 1978, they have dealt with more than 100 incidents, paying compensation in 68 of these. Details of the individual incidents are given together with the total cost for each, expressed in US$. The numbers, sizes and costs of the incidents are analysed in detail and compared with the incidence of all tanker spills in Fund countries, using data from the International Tanker Owners Pollution Federation's (ITOPF) Oil Spill Database. This analysis reveals a number of trends relating to the size of tankers; the amount and type of oil spilled; and the geographical location. The 1971 IOPC Fund has undoubtedly proved highly effective, but recent incidents have tested the limits of compensation available. The 1992 Fund Convention entered into force in May 1996, providing both higher limits and a broader scope. However, the threshold at which it comes into effect is also higher, thereby excluding many of the less expensive spills which would previously have been covered by the 1971 Fund Convention. The significance of this for the numbers and costs of incidents likely to be dealt with by both the 1971 and the 1992 IOPC Funds is examined.

Pigovian Taxation at the Supranational Level: Fiscal Provisions of the International Oil Pollution Compensation Fund

The International Oil Pollution Compensation Fund, viewed from the perspective of the public finance economist, encompasses a unique and little known effort to impose the generic features of a Pigovian environmental tax at the international level. The tax is part of an eclectic insurance and fiscal scheme for internalizing the negative externalities of oil pollution in international waters. Its link to the insurance component of the policy format tends to obscure its tax characteristics and to make it politically more acceptable as well. The IOPC Fund regime was established under the umbrella of two international treaties signed in 1969 and 1971 in the wake of the disastrous Torrey Canyon oil spill in British waters several years earlier. The tax may serve as a prototype for the use of economic incentive instruments in other international environmental problem areas.

GEOGRAPHIC INFORMATION SYSTEM (GIS) FOR IMPACT ASSESSMENT, ECOLOGICALLY SOUND MEASURES, AND DOCUMENTATION OF OIL SPILLS

ABSTRACT The geographic information system (GIS) is an objective and standardized oil spill impact assessment tool. In addition to the impact assessment, the GIS provides a helpful tool for judging the size of the impact, choosing environmentally sound cleanup techniques, and planning resources utilization. All information put into a GIS, including daily activity reports, will constitute the essential base for claims from the International Oil Pollution Compensation Fund (IOPC Fund). Impact assessment. Before cleanup activities start, an impact assessment is made. The impacted area is geographically defined in the field with the detailed geographic position system (dGPS) and maps. Type of coastline, spill volume, and type of oil are documented for each impacted area. If necessary, photos and other information concerning the impacted area are included in the GIS. Determination of cleanup method. Documented information from the impact assessment is analyzed together with databases containing ecological sensitivity maps, cleanup methods, and experience. The analysis made using the GIS will suggest what cleanup method/s should be used and how best to use resources. The cleanup method(s) chosen by use of the GIS is presented in digital maps and tables of resources needed. Daily activity reports. All daily activities are documented in the GIS. These include time spent, costs, site, amount of oil cleaned up and method used for cleanup, transfer of oil, and waste disposal. Total and specific cost for each impacted area is calculated daily. Commanders report. The GIS provides the commander with a total report of all actions taken during the cleanup operation. The report contains total costs, claims, experience, geographical location, date and time, and an impact assessment. Advantages of the GIS. The GIS provides a standardized and objective impact assessment for each contaminated area and at the same time suggests what cleanup method to use. The system can present daily reports of information and activities undertaken, and easily specify the cost for each activity. The GIS also can present a final report immediately upon completion of the work.

THE BRAER: LEGAL ASPECTS OF A MAJOR OIL SPILL

ABSTRACT The International Oil Pollution Compensation Fund (IOPC Fund), an intergovernmental organization with 58 member states, has recently been involved in a major oil spill of great interest both legally and technically, namely, the Braer incident, which occurred in January 1993 in the United Kingdom. The Braer was laden with approximately 84,000 metric tons (t) of crude oil when it grounded off the Shetland Islands. The ship broke up and the entire cargo escaped into the sea. The United Kingdom Government and Shetland Islands Council incurred expenses for cleanup operations, but these costs were fairly limited, estimated at not greater than US$6 million. The incident resulted in a very large number of claims from small businesses and individuals who suffered economic losses. A local claims office was set up on Shetland to handle these claims. So far, over 1,000 claims have been settled and paid for, representing a total of almost US$45 million. These claims cover losses suffered by fishermen, salmon farmers, crofters, and owners of houses that became polluted by wind-blown oil spray. Many of these claims have given rise to difficult legal problems regarding the admissibility of claims for compensation, in particular those concerning so-called pure economic losses. This paper addresses the practical problems that have arisen in handling the claims and analyzes some of the legal problems encountered.

Compensation for oil pollution damage caused by oil spills from ships and the international oil pollution compensation fund

Liability and compensation for pollution damage caused by oil spills from laden tankers is governed by two international conventions: the 1969 Civil Liability Convention and the 1971 Fund Convention. The Civil Liability Convention established a system of strict liability for tanker owners and introduced compulsory liability insurance. The Fund Convention created a system of supplementary compensation administered by an intergovernmental organization, the International Oil Pollution Compensation Fund (IOPC Fund), which at present has 56 member states (August 1993). The IOPC Fund pays compensation to victims of oil pollution in member states when the compensation from the shipowner and his insurer is insufficient. Over the years (up to August 1993), the IOPC Fund has been involved in 66 incidents and has paid US$92 million to victims. Only three of these incidents have been taken to court, whereas in all other cases claims have been settled out of court. The IOPC Fund has developed a policy on the admissibility of claims covering clean-up costs, measures to prevent pollution, damage to property and economic loss suffered by fishermen, hotel-owners and others who depend directly for their livelihood on sea-related activities.

THE RIO ORINOCO AND THE HAVEN—TWO MAJOR CASES FROM A LEGAL POINT OF VIEW

ABSTRACT The International Oil Pollution Compensation Fund (IOPC Fund), an inter-governmental organization with 49 member states, has recently been involved in two major oil spills of great interest from both a legal and a technical point of view. The Rio Orinoco incident occurred in Canada and the Haven incident took place in Italy. The Rio Orinoco was carrying asphalt when it grounded in the Gulf of St Lawrence. The grounding led to extensive salvage and cleanup operations carried out on behalf of the Canadian authorities. The claims for compensation, totalling 15 million Canadian dollars (12.5 million U.S. dollars), were settled out of court. This paper discusses the main legal problems that arose, for example, the reasonableness of certain operations and the relationship between pollution prevention and salvage. The Haven exploded off Genoa with 144,000 metric tons of crude oil on board. A large quantity of oil escaped, necessitating extensive cleanup operations in Italy, France, and Monaco. Over 1,300 claims for compensation have been submitted totalling US$1.4 billion. This paper deals with some of the main legal problems that have arisen as a result of this incident, for example, the admissibility of claims relating to non-economic damage to the marine environment and the method to be applied for the conversion of the maximum amount payable by the IOPC Fund into Italian lire.

Future of the International Conventions on Liability and Compensation for Oil Pollution Damage

ABSTRACT The international regime on oil spill liability and compensation is based on two international conventions, the 1969 Civil Liability Convention and the 1971 Fund Convention. The Fund Convention establishes an intergovernmental organization, the International Oil Pollution Compensation Fund (IOPC Fund), with the task of administering the regime of compensation set up by that convention. At present, 67 nations are party to the Civil Liability Convention, 45 to the Fund Convention. The United States is not party to either. In 1984, the conventions were revised by two protocols, which provide higher compensation limits and a wider scope of application than the original conventions. These protocols have not yet come into force. The future of the compensation regime established by these conventions is examined here, with special attention to the prospects for the entry into force of the 1984 protocols. At present, the United States will not ratify these protocols.