Liability and Compensation

(from AMSA Report 2009)

Should there be incidents resulting in oil or other hazardous substance spills that cause damage to the Arctic marine environment, property or economic loss, national and international systems of financial compensation for cleanup and losses sustained will become important. The current international system for compensation for pollution damage caused by ship-source pollution is fragmented and limited. Separate conventions address oil pollution liability and compensation from tankers; damages from the spill of bunker fuel carried in ships other than tankers, such as cargo ships; and hazardous and noxious substance spills from ships (Table 4.7). Compensation is only available to state parties to the respective conventions and to private bodies or individuals who have suffered damage as a result of the pollution. None of the conventions address damage to the high seas beyond national jurisdiction. In general, under the conventions, the shipowner is strictly liable for the loss or damage up to a certain amount. A supplementary fund may provide additional compensation when the victims do not obtain full compensation from the shipowner or the insurer.

The compensation regime for damage caused by persistent cargo and fuel (bunker) oil pollution from oil tankers is the 1992 Civil Liability Convention (1992 CLC) and the 1992 Fund Convention, as well as the 2003 Supplementary Fund Protocol. These conventions do not apply to spills of bunker oil from ships other than tankers. In the Arctic context, it is unclear if the conventions apply to floating production, storage and offloading units and permanently and semi-permanently anchored ships engaged in ship-to-ship oil transfer operations.

While seven Arctic states have adopted the 1992 Civil Liability and Fund conventions, the United States has established a separate regime under the Oil Pollution Act of 1990. The international regime limits compensation for environmental damage to actual restoration costs; U.S. regulations provide compensation for both diminution in value of natural resources and the cost of assessing such damages.

The International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996 (HNS Convention) also establishes a two tier international compensation regime for bulk solids (excluding coal and iron ore and radioactive materials), liquids including non-persistent oils, liquid gases such as LNG and liquefied petroleum gases (LPG) and packaged substances. Individual receivers of HNS by sea in state parties to the convention would contribute to the International Hazardous and Noxious Substances Fund. The HNS Convention is not yet in force. Among the Arctic states, only the Russian Federation is a party.

The 2001 International Convention on Civil Liability for Bunker Oil Pollution Damage, which entered into force on November 21, 2008, applies to pollution damage caused by the spill of bunker oil from a ship other than a tanker and makes the shipowner strictly liable. The Bunkers Convention preserves the right of the shipowner and insurer to limit liability under any applicable national or international regime. The convention is accompanied by a Resolution (Annex 1) that urges all states to ratify or accede to the 1996 Protocol to the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC 1976) thus increasing the funds available for bunker pollution claims. Among the Arctic states, the Russian Federation, Denmark, Finland and Norway are parties.

Arctic Council, 2009, Arctic Marine Shipping Assessment (AMSA), Arctic Council.©