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Compulsory Insurance and Compensation for Bunker Oil Pollution Damage

By: Ling Zhu

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Paperback | 3 November 2006

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264 Pages

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Oil tankers are not the only vessels that have caused oil pollution at sea. Numerous spills in the past have been of heavy fuel oil from non-tankers. However, the international liability and compensation regime covered only oil pollution damage caused by oil tankers. There was thus a need to bring the law on marine oil pollution responsive to oil pollution damage caused by non-tankers. In March 2001, the International Convention on Civil Liability for Bunker Oil Pollution Damage was adopted following a diplomatic conference at the International Maritime Organization. Though this convention has not yet come into force, its various aspects should already be considered as they will surely affect the maritime industry as a whole and the non-tanker sector, in particular. This book provides a timely and comprehensive study on the concept of compulsory insurance, its main purpose of ensuring compensation and its interrelations with other features such as the rule of strict liability and the limitation of liability under the convention.

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Non-Fiction Earth Sciences, Geography, Environment, Planning The Environment Law Laws of Specific Jurisdictions Torts Personal Injury International Law Jurisprudence & General Issues Comparative Law Constitutional & Administrative Law

Abbreviations	p. XV
Introduction	p. 1
The aim of the research	p. 3
The scope of the research	p. 3
Methods used for the research	p. 5
Pollution from Ships' Bunkers and the Advent of the Bunkers Convention	p. 7
A brief history of the development of the oil spill civil liability system	p. 7
Tovalop and Cristal	p. 8
International Conventions	p. 10
The need for the Bunkers Convention	p. 13
The scope of earlier conventions	p. 13
National legislation and the background work on the Bunkers Convention	p. 14
Risk and technical considerations	p. 18
The birth of the Bunkers Convention	p. 20
Overview of the Bunkers Convention	p. 20
Categories of ships	p. 20
"Ship"	p. 20
Does the Bunkers Convention apply to oil tankers?	p. 20
"Warships"	p. 21
"Oil"	p. 22
Scope of application	p. 23
Liability established by the Bunkers Convention	p. 26
Liable parties	p. 26
Channelling of liability	p. 27
Shipowners' liability is joint and several	p. 29
The basis of liability and exonerating circumstances	p. 30
Limitation of Liability	p. 32
Compulsory insurance and direct recourse	p. 33
Three prerequisite factors	p. 34
"Registered owner of a ship"	p. 34
"Gross tonnage" - insurance threshold	p. 35
"In an amount equal to the limits of liability..." amount of limitation	p. 38
Insurance certificate and its recognition	p. 39
Direct action against the insurer	p. 40
Time limit for bringing an action	p. 41
Jurisdiction, recognition and enforcement	p. 42
Other matters	p. 44
Adopted resolutions	p. 45
Concluding remarks	p. 47
The Birth of Compulsory Insurance for Oil Pollution Liability	p. 49
Introduction	p. 49
The concept of compulsory insurance	p. 50
Development of the concept of compulsory insurance	p. 50
The system of insurance	p. 52
Compulsory insurance as defined in international civil liability conventions	p. 52
Insurance or other financial securities	p. 53
The need for compulsory insurance for bunker-oil pollution liability	p. 53
Possible insurers	p. 55
The types of marine insurance and their coverage	p. 55
Cargo insurance and its coverage	p. 56
Hull insurance and its coverage	p. 57
Freight insurance and its coverage	p. 59
Protection and Indemnity Insurance	p. 59
Brief introduction	p. 59
The main risks covered by the P&I Club	p. 60
Insurance contract between the shipowner and the Club	p. 62
The International Group of P&I Clubs	p. 64
The insurers offering coverage for oil-pollution liability	p. 65
The P&I Clubs	p. 65
Pollution liability clause	p. 66
Limitation of liability terms	p. 67
The role of the P&I Club with regard to an oil-pollution incident	p. 68
Oil-pollution liability insurer	p. 68
Measures for an oil-pollution incident taken by the Clubs	p. 69
Clean-up or salvage operation	p. 69
Source of funding	p. 70
Providing legal advice	p. 70
Interaction with other international organisations	p. 71
The legal framework of the IMO conventions	p. 71
Cooperation with the IOPC Fund	p. 72
Technical assistance from the ITOPF	p. 72
Other insurers offering OPA insurance	p. 73
Financial responsibility requirement in the OPA 90	p. 74
The concerns of the P&I Clubs to be the guarantors	p. 76
Some alternative ways of meeting financial responsibility requirements	p. 77
Concluding remarks	p. 79
Strict Liability and Insurance	p. 81
Introduction	p. 81
The basis of liability in the Bunkers Convention	p. 82
The difficulties in applying the common law of torts	p. 82
Trespass	p. 83
Nuisance	p. 83
Negligence	p. 84
Fault-based liability leads to unfair results for pollution victims	p. 86
Strict liability and its application	p. 88
The main reasons for introducing strict liability	p. 90
Ensuring protection of and compensation for victims	p. 90
The impact on the industry	p. 91
The industry bears the cost of pollution damage	p. 91
Incentive to improve prevention of marine pollution	p. 92
Distribution of liability and exceptions to liability	p. 93
Who shall be liable?	p. 93
Provisions in the CLCs	p. 94
Liability of the cargo interest	p. 94
Liability of the ship	p. 95
The second-tier liability of the cargo-owner	p. 96
Liability rule under the Bunkers Convention	p. 97
Exceptions to liability	p. 97
Types of exceptions in general	p. 98
Exceptions available to the shipowner in the Bunkers Convention	p. 99
Channelling of liability	p. 103
Implementation of liability: insurance	p. 105
Proposals during the preparatory work of the Convention	p. 105
Two alternative means	p. 107
Separate insurance policies	p. 107
Co-assurance under one policy	p. 108
Concluding remarks	p. 109
Insurance and the Quest for Adequate Compensation	p. 111
Introduction	p. 111
Certification of insurance	p. 111
Basic requirements in the Bunkers Convention	p. 111
Administrative burden corollary to the issuance of the certificate	p. 112
The administrative burden of the flag States	p. 113
Port State control regarding the certificate	p. 118
Electronic means for the certificate	p. 118
The validity of the certificate	p. 119
Availability and capacity of insurance for bunker-oil spill liability	p. 121
Other related issues	p. 123
"Polluter pays" principle	p. 123
The significance of Art. 7(8) and financial standing of providers of insurance or financial security	p. 125
Mutuality	p. 128
The meaning of mutuality	p. 128
Role of mutuality	p. 129
The ability to absorb large claims	p. 129
Possible motivation for risk minimisation	p. 130
Liability insurance and compensation fund	p. 131
Adequacyand other types of compensation	p. 132
The willingness of P&I Clubs to increase their coverage limit	p. 133
The compensation paid by the cargo interests	p. 134
Compensation paid by other jointly liable persons	p. 136
"Joint and several liability" rule in relation to the compensation purpose	p. 136
Bareboat charterer	p. 137
"Demise charterer" or "bareboat charterer"?	p. 137
The insurance of the bareboat charterer	p. 137
Operator and manager	p. 139
Liability as the time or voyage charterer	p. 140
Definitions	p. 140
Compensation paid by the time or voyage charterer	p. 140
State liability and contributions	p. 141
Concluding remarks	p. 143
Limitation of Liability and the Limit of Insurance	p. 145
Introduction	p. 145
The global limitation of liability system in relation to ships	p. 146
Limitation of liability rule in general	p. 146
The 1957 Convention, 1976 LLMC and its 1996 Protocol relating to tanker-oil pollution liability	p. 150
Limitation rules in the Bunkers Convention	p. 152
Pollution damage eligible for limitation	p. 153
Pollution damage arising from a bunker-oil spill	p. 153
The claims subject to limitation under the 1976 LLMC and its Protocol	p. 154
The amount of the funds available under the LLMCs	p. 157
Other aspects relevant to claims for bunker-oil spill liability under the 1976 LLMC and its Protocol	p. 159
Conduct barring the right to limit	p. 159
Constitution and distribution of the limitation fund	p. 160
The right to limit liability	p. 161
The reasons for maintaining the right to limit	p. 161
Unsatisfactory outcome of the limitation regime	p. 162
The relation of limitation of liability and insurance	p. 164
The insurability and limitation of liability	p. 164
The possibility to have a unlimited liability	p. 166
Concluding remarks	p. 169
Direct Action against the Insurer and its Limited Effect	p. 171
Introduction	p. 171
Rights of a third party to claim on the insurance policy	p. 172
Assignment	p. 172
Direct-action statutes	p. 174
English law	p. 175
United States legislation	p. 177
The limited effect of direct action under P&I insurance	p. 178
Coverage and exclusions of P&I insurance	p. 179
P&I insurance is one of indemnity	p. 179
"Pay to be paid" rule	p. 181
Other defences of a Club against the claim from a third party	p. 182
Direct-action right under the Bunkers Convention	p. 182
"The defences...which the shipowner would have been entitled to invoke"	p. 184
Meaning of the phrase "wilful misconduct of the shipowner"	p. 185
Interpretation of "wilful misconduct" in relation to limitation of liability	p. 185
Interpretation of "wilful misconduct" in insurance law	p. 188
The determination of a competent court	p. 188
"Wilful misconduct in P&I insurance	p. 188
"Wilful misconduct" in Article 7(10)	p. 189
Scope of the claim: pollution damage	p. 190
The uncertain nature of liability for pollution	p. 190
"Pollution damage" in tanker-oil spill incidents	p. 191
CMI guidelines on oil-pollution damage	p. 192
The policy adopted by the IOPC Fund	p. 193
Viewpoint of the P&I Clubs	p. 195
Pollution damage under the Bunkers Convention	p. 195
Recourse action	p. 196
Concluding remarks	p. 198
Outlook on Insurance and Compensation for Bunker-Oil Pollution Liability	p. 199
Introduction	p. 199
Main interests in the insurance system	p. 200
Victims: "Loss of cover" and full compensation	p. 200
Loss of cover	p. 200
"Small ship" issue	p. 201
Adequate compensation	p. 201
The P&I Clubs: maintaining their sustainable development	p. 203
Shipowners: the central actor	p. 203
The comparison of the insurer's exposure to the CLCs and the Convention	p. 204
The types of ships involved	p. 205
The number of ships involved	p. 205
The limitation of liability	p. 205
Concluding remarks	p. 206
Summary of Study	p. 209
The concept of compulsory insurance and its compensation purpose	p. 211
Other features of the Bunkers Convention and their interrelations with compulsory insurance	p. 213
Bibliography	p. 215
Literature	p. 215
Documents	p. 223
Text of the Bunkers Convention	p. 227
Index	p. 239
Table of Contents provided by Ingram. All Rights Reserved.

Compulsory Insurance and Compensation for Bunker Oil Pollution Damage

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