The Oil Pollution Compensation Mechanism : The Civil Liability Convention (CLC) / Fund Convention

CHIEF MATES 
PHASE 2 
SUBJECT : MARINE LAW 


TOPIC : The Oil Pollution Compensation Mechanism : The Civil Liability Convention (CLC) / Fund Convention




      i.         The Civil Liability Convention (CLC) IS THE first Tier of oil pollution compensation mechanism.

     ii.         CLC only deals with how much will an oil tanker owner pay, if his tanker is involved in a pollution incident. An oil pollution incident means when the oil has actually come out into the marine environment.

   iii.         This means, for example, if in a collision oil has come out only from one of the tankers, then the oil tanker owner from whose tanker the oil has come into the marine environment, will have to pay.

   iv.         Also, CLC is a compensation mechanism only and not a punishment or a fine.

     v.         This means that after an oil pollution incident, the oil tanker will only pay if there is a claim. If however, there is no claim, then the oil tanker owner does not pay.

   vi.         CLC is applicable to persistent oils only [oils, which have characteristics of persisting (floating) on the surface of water – meaning different grades of crude oil when carried as cargo, as well as bunker pollution from oil tankers only).

 

CLC requires the following:

 

Strict Liability

 

      i.         This means that when there is a claim, then the tanker owner has to pay without even waiting to find out who was at fault that resulted in the pollution incident. The oil tanker owner can later claim from the party at fault, but he has to pay now to settle the claims.

     ii.         Only in the following three cases the oil tanker will not have to pay anything:

 

a.     Act of God.

b.    Act of war or sabotage.

c.     When the relevant Government authorities have not acted responsibly in maintaining the navigational aids / depths of water within their area and this leads to a pollution incident.

 

Compulsory Insurance Cover

 

      i.         The oil tanker owner is required to maintain a compulsory insurance cover to cover his part of payment in an oil pollution incident.

     ii.         He gets this insurance cover from his P & I Club (liability insurance).

   iii.         After getting the required insurance cover, the oil tanker owner approaches the Flag State, who issues the oil tanker a CLC Certificate, which is always kept on board.

   iv.         The meaning of CLC Certificate on board is that the money is standing by with the P & I Club and will be paid by them to settle all claims after any oil pollution incident.

 

Maximum Liability of the Oil Tanker Owner

 

The maximum amount to be paid by the oil tanker owner is as follows:

 

Up to 5000 GT = 4.51 million SDR.

5001 GT – 140,000 = (4.51 million SDR + 631 SDR/GT) SDR.

> 140,000 GT = 89.77 million SDR.

 

Fund Convention

 

      i.         Two years after CLC, it was realised that there needs to be more money in case the oil pollution incident is so huge that the total claims amount to be greater than what the oil tanker owner pays under CLC.

     ii.         Member countries at IMO decided to involve the oil importers by asking them to make an annual contribution to a FUND so that additional money is always standing by and to be given to people who make a claim after an oil pollution incident.

   iii.         Therefore, the Fund Convention was created and this is known as the SECOND Tier of the oil pollution compensation mechanism.

   iv.         Fund Convention requires only the oil importers who import 150,000 MT or more of oil per annum to make an annual contribution to a Fund known as International Oil Pollution Compensation Fund (IOPC Fund with headquarters in London).

     v.         Therefore, any person / organisation who has imported 150,000 MT of oil in the previous year is called a ‘CONTRIBUTOR’ and therefore the ENTIRE amount of oil imported by him is used to calculate his contribution and this is known as the CONTRIBUTING OIL (for example, if a person has imported 175,000 MT of oil in the previous year then he qualifies as a contributor and the entire amount of 175,000 MT will be used to calculate his contribution to the IOPC Fund. His ‘contributing oil’ will be 175,000 MT. Please do not make the mistake by thinking that only 25000 MT will be used for calculation. 150,000 MT figure is used only to decide whether a person is a contributor or not).

   vi.         Also, the maximum amount available for EVERY INCIDENT PER YEAR is 203 million SDR and this includes the payment by the oil tanker owner under the CLC; therefore

 

CLC + FUND = 203 million SDR

  vii.         In 2000, the Fund Convention was amended to include a Supplementary Fund but it was kept OPTIONAL for countries to follow it and this forms the THIRD Tier of the oil pollution compensation mechanism [for example, INDIA is party to CLC and Fund (first and second tier) but NOT a part to the Supplementary Fund (the third tier)].

viii.         Therefore, if we include the Supplementary Fund also, the TOTAL amount available for EVERY INCIDENT PER YEAR IS 750 million SDR

 

CLC + FUND + Supplementary Fund = 750 million SDR

 

(One would appreciate that this will ONLY be applicable in the few countries who are party to the Supplementary Fund also).

 



 


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