European Courts Go beyond the IMO Conventions on Civil Liability for Oil Pollution Damage

The IMO Conventions on Civil Liability for Oil Pollution Damage

After the shock caused by the Liberian tanker “Torrey Canyon” accident in 1967 off the United Kingdom coastline, member States of the International Maritime Organization (IMO) established a special international regime aiming at ensuring adequate compensation for victims of pollution damage caused by oil spills from ships.

The first instrument concerning tanker pollution was the International Convention on Civil Liability for Oil Pollution Damage, adopted in Brussels on 29 November 1969 and entered into force on 19 June, 1975. Later on, the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage was signed in Brussels on 18 December 1971 and entered into force on 16 October 1978. After a failed attempt by the Protocols of 1984, the Conventions were amended by two Protocols adopted in 1992, which entered into force on 30 May 1996.[1] On 23 March 2001 the regime was completed with an International Convention on Civil Liability for Damage caused by pollution from bunker oil from ships which entered into force on 21 November 2008. In May 2003, a new Protocol to the 1992 Fund Convention was adopted, establishing a supplementary fund which provided for a third tier of compensation for damages, bringing the maximum amount currently payable to US$ 1160 million.[2]

This conventional package provides for a uniform international civil liability regime applicable to States parties irrespective of the flag State of the tanker and the nationality of the shipowner. It aims at ensuring that appropriate compensation is awarded to victims of pollution damage resulting from accidental escapes or voluntary discharges at sea from ships, caused by oil carried in bulk as cargo or in the bunkers of the ship. The resulting pollution damage must affect the territory of a State party, including the territorial sea or, following the amendments introduced by the 1992 Protocols, the exclusive economic zone or equivalent 200 mile area specified by the coastal State.[3]

The essential legal elements of the international regime established by the 1992 CLC can be summarized as follows. First, the Convention sets up an international civil liability scheme operating between the natural or legal persons affected whose claims for compensation of pollution damage, if not settled otherwise, should be submitted to the competent national court of the State where the polluting damage occurred or preventive measures were taken.[4] Secondly, it provides for a “strict”, no-fault or objective liability regime, arising from the mere establishment of a causal relationship between the tanker incident and the resulting pollution damage, thus excluding the need to prove fault or negligence on the part of the persons involved. Thirdly, the liability is “channelled” to the registered owner of the vessel, which becomes responsible ope legis for any pollution damage caused by the ship. The ship-owner’s liability can only be exonerated if he proves that the damage resulted from acts of war or similar force majeure situations, from wilful acts or omissions of a third party, or from negligence or other wrongful act of the authority responsible for the maintenance of navigational aids in the exercise of its functions.[5] Fourth, the owner’s liability is limited to a maximum amount established by the Convention which is linked to the ship’s tonnage, currently rising up to US$132 million for the larger tankers. The limitation of liability may disappear where it can be proved that the accident resulted from a personal act or omission of the ship-owner, committed recklessly or with intent to cause damage, and with knowledge that such damage would probably occur.[6] Finally, the liability shall be insured, as the owner of a ship carrying over 2000 tons of oil is required to maintain the appropriate insurance or other financial security to cover its liability for pollution damage. A certificate of insurance shall be carried on board.[7] In practice, this certificate is often required by ships flying the flag of a State not party to the Convention, when entering or leaving a port or terminal installation of a State party.

The 1992 Fund Convention established a compensatory regime supplementary to the Civil Liability Convention, operating under the same geographical and legal framework. Its aim is to ensure compensation for damage not adequately covered by the shipowner under the 1992 CLC. This may happen, either when one of the exceptions to the regime of “channelling” of the liability applies, when the owner’s liability insurer is unable to comply fully with its financial obligations, or when the cost of compensating pollution damage exceeds the liability limits set by the 1992 CLC. In such cases, the 1992 Fund Convention provides for a supplementary compensation scheme based on the establishment of an International Oil Pollution Compensation Fund (the IOPC Fund), which is financed by contributions levied on entities receiving an annual amount exceeding 150 000 tons of oil by sea in a State Party to the Fund Convention.[8]

After many years of activity, the international civil liability regime established by the IMO Conventions is generally considered as a model in the field. Indeed, its operational record shows that the system works efficiently in compensating pollution damage caused by minor accidents, settled through non-contentious arrangements between the victims and the IOPC Fund. However, the system is much less efficient in cases of major accidents in which claims for compensation give rise to legal proceedings before the competent national courts.[9] The main inherent limitations of the system are the narrow definition of pollution damage[10], the restricted scope of the losses qualifying for compensation which exclude environmental damage per se[11], the considerable number of parties involved in tanker’s navigation whose liability is excluded ope legis[12], and the relatively small amount of money available to pay compensation.[13] Finally, there is another major shortcoming of the CLC/Fund regime: it only covers pollution damage caused in areas under the sovereignty or jurisdiction of coastal States, thus excluding damages in areas of the high seas or its seabed.[14]

Actions before National Courts

In order to overcome the inherent limitations of the CLC/IOPC Fund regime, several attempts have been made to seek further compensation for damages before national Courts, mainly in the USA and in France. The actions introduced before the Courts of the US, which is not a Party to the IMO civil liability Conventions, have been in general unsuccessful.[15] In particular, US Courts have been reluctant to retain jurisdiction and apply the criteria embodied in the Oil Pollution Act of 1990 with respect to third party claims against involved American companies regarding pollution damages occurring outside the US.

A quite different outcome results from the judicial procedures following the “Erika” accident in 1999 off the coast of Brittany (France) which spilled some 31.000 mt. of heavy fuel-oil, causing major pollution of the Atlantic coast of France. A first lawsuit was filed on 9 June 2000 before the Court of Commerce of Saint Nazaire by the French Commune de Mesquer against the Total group companies, seller of the cargo and charterer of the “Erika”. The plaintiff municipality alleged that, in accordance with French law, the companies of the group were responsible for damage caused by pollutant waste spilled at sea. After the action was dismissed at first instance and on appeal, the municipality of Mesquer went before the Court of Cassation, which, considering that the dispute raised questions of interpretation of the EU Directive 75/442 on waste, stayed the proceedings and referred three questions to the Court of Justice of the European Communities (hereinafter ECJ) for a preliminary ruling.

The ECJ Judgment, rendered on 24 June 2008, held that the heavy fuel oil carried as cargo by the “Prestige” was not waste per se, but that once it was mixed with seawater and sediments, it could be classified as waste under European law. The Court also held that in the case of hydrocarbons spilled by accident at sea, the seller of such hydrocarbons and charterer of the ship carrying them might be considered by the Judge as the producer of such wastes within the meaning of the waste Directive, and therefore, the “previous holder”, for purpose of bearing the costs of disposing of waste in accordance with the “polluter pays” principle. Moreover, the Court held that if the cost of disposing of the waste is not or cannot be borne by the regime established under the CLC and Fund Conventions, by which the Community is not bound, the relevant national law will then have to make provision for that cost to be borne by the previous holders or the producer of the product generating the waste “if they have contributed to the risk”, and that national law and judicial authorities are obliged to do everything possible to achieve that outcome.[16]

In a parallel law suit, the Tribunal de Grande Instance de Paris (hereafter TGI), by a historic ruling of 16 January 2008[17], changed the status quo ante in applying the French “droit commun” in addition to the 1992 CLC/IOPC Fund regime. For the first time in national judiciary practice, the TGI Judgment by-passed the international regime established by the 1992 Conventions, until then considered as self-contained and exclusive, in additionally applying the civil liability scheme established by French law. The Judgment clarified that this was not a violation of the “special” international regime, since the French “common law” applied in tandem with the 1992 Conventions. Actually, the judicial charges against the natural and legal persons prosecuted were not based on the strict liability regime provided for in the 1992 Conventions, but rather on having committed crimes under French law (mainly the crime of pollution), entailing a corresponding civil liability.

As a result, the ruling by the Paris TGI expands the circle of persons liable for the pollution damage caused by the oil spill, by finding that several physical and legal persons, other than those exempted from liability under Article III, 4 of the CLC, exercised control over the activity of the tanker and may have incurred criminal responsibility, which in turn entails civil liability under French law. The list of liable persons includes: the ship’s “real” owner, Mr. Savarese (owner of shares in two Liberian companies who controlled the Maltese society appearing as formal owner of the “Erika”); the ship manager, Mr. Pollara; the classification society, the Italian company Rina; and the cargo owner, the French company Total SA. This last finding has attracted some controversy since for the first time in judicial history the company owning the oil transported has been held accountable for a tanker’s accident. However, the ruling bases its decision on the negligence of Total SA in approving the seaworthiness of the “Erika” through the vetting procedure, since this vessel was the subject of a prior negative vetting from other oil companies. In conclusion, all these natural and legal persons are declared guilty of the crime of pollution and sentenced to pay fines of various amounts. As to the subsequent civil liability, the ruling holds all involved parties jointly and severally liable for damage caused by the incident, ordering them to pay compensation totalling € 192.5 million.

The TGI judgment also goes far beyond the IMO civil liability regime in applying the French legal concept of compensable damage which includes not only material damage but also personal injury, moral damage and pure environmental damage. The Court, therefore, considers that the possibility of claiming for purely environmental damage belongs to the French State, to the competent local authorities (departments, but not regions or municipalities) and to NGOs   actually performing environmental protection activities. The ruling also gives relevant guidance concerning the methodology for assessing environmental damage caused by the accident, and the kind of remedial measures that can eventually be applied.

The judgment of the TGI was appealed by those convicted and certain civil parties. The Court of appeal of Paris, in a judgment of 30 March 2010, endorsed the compatibility of the French punitive legislation with the international conventions of the IMO, confirmed the guilt of the accused Savarese, Pollara, RINA and TOTAL, expanded the cast of parties entitled to obtain compensation (to include also the regions and municipalities), increased the compensation for damages (from € 192,5 milion to € 200.6 million) and maintained the compensation for ecological damage. However, to general surprise, the judgment in appeal exonerated Total SA from payment of compensation, by a somewhat surprising reasoning. The ruling confirmed that Total SA, which exercised control of the vessel, had actually committed a criminal fault of negligence in the “Erika” vetting procedure. However, considering that  Total SA, and not the subsidiaries of the group, was the true charterer of the vessel, its liability for damage should be excluded pursuant to article III (b) of the CLC because the fault committed could not be characterized as reckless and conscious (faute inexcusable).[18]

The judgment of the Court of appeal of Paris was appealed in cassation by the convicted persons and 36 civil parties. The Attorney General of the Court of Cassation, in its opinion of 24 May 2012, requested the irrevocable cancellation of all actions by estimating that, in accordance with international law, French jurisdiction lacked competence to decide on possible infractions committed by a foreign ship beyond the territorial sea.[19] However, the Court of Cassation, by a judgment of 25 September 2012[20], confirmed the findings of the lower Court except in one point: it declared Total SA guilty of alleged crimes and responsible for damage caused, including ecological damage. In its considerations, the Court of Cassation repeatedly evokes the IMO Conventions and the United Nations Convention on the law of the sea of 1982, which must be interpreted bearing in mind its “object and purpose” according to the provisions of the Vienna Convention on the law of treaties of 1969. Thus, after reading in a new (but ortodox) light the provison in article 221, paragraph 5, in combination with articles 220, paragraph 6 and 228 of UNCLOS, the judgment holds that, in case of serious damage to the marine environment, national courts may impose penalties in accordance with their legislation, to give effect to the provisions of the Marpol Convention. Likewise, and without the need to decide on which of the companies of the Group was the true charterer of the vessel, the judgment rules that, in any case, Total SA has committed a reckless and conscious fault in the vetting procedure and is not therefore exonerated of assuming civil liability in accordance with the CLC. Finally, the judgment confirms the compensable character of the purely ecological damage.

Conclusion

An examination of current international maritime practice shows that there are important gaps in the regulation and implementation of responsibilities relating to pollution by vessels, especially in cases of catastrophic accidents such as those of the oil tankers “Erika” in 1999 and “Prestige” in 2002.

The limitations of the international regime established by the IMO Conventions on civil liability for oil pollution damage, especially with respect to compensation for environmental damage per se, have prompted actions before national Courts seeking appropriate reparation from parties (other than the shipowner) involved in the operations of tankers in cases of catastrophic oil spills. In response to these actions, in contrast to US courts, the EU and French courts have taken a legal stand clearly committed to enhancing the effective protection of the marine environment and equitable reparation of damages suffered by victims of oil tanker accidents.

In light of this evolutionary trend, it will be interesting to see the reaction of the IOPC Fund and the eventual willingness of its members to reform the international regime on civil liability for oil pollution damage. And in the meantime, an intriguing question might be also raised: why don’t victim States ever invoke the responsibility of flag States that may have breached their obligations under UNCLOS regarding pollution damage caused by their vessels?

ENDNOTES

1. As of 31 January 2012, 130 States had ratified the 1992 Civil Liability Convention, and 111 States had ratified the 1992 Fund Convention.
2. The 2003 Protocol entered into force on 3 March 2005 and so far has 28 States Parties. In order to address the imbalance created by the establishment of the Supplementary Fund between the shipping and oil industries, two voluntary agreements where introduced by the International Group of P&I Clubs: the Small Tanker Oil Pollution Indemnification Agreement (STOPIA) 2006, and the Tanker Oil Pollution Indemnification Agreement (TOPIA) 2006, which entered into force on 20 February 2006. For a description of the functioning of these agreements see: The International Regime for Compensation for Oil Pollution Damage, Explanatory note prepared by the Secretariat of the International Oil Pollution Compensation Funds. July 2009, p. 6.
3. CLC, Art. II, and Fund Convention Art. 3.
4. CL Art. IX.
5. CLC Art. III.
6. CLC Art. V.
7. CLC Art. VII.
8. FUND Convention Art. 10.
9. This was stated by the French Senate report, prepared after the “Erika” accident, stressing that the limitations of the IOPC Fund system does not guarantee adequate compensation for victims in cases of major disasters (Richemond Report 2000).
10. CLC, Art. I, 6.
11. In the case of environmental damage, compensation is limited to reasonable measures of reinstatement actually undertaken or to be undertaken, other than the loss of profit from such environmental impairment and (arguably) the costs of “preventive measures” taken to prevent or minimize such environmental damage. See: Ibrahima, D. “Recovering Damage to the Environment per se Following an Oil Spill: the Shadows and Lights of the Civil Liability and Fund Conventions”, RECIEL, 14-1, 2005, p. 64.
12. Article III, paragraph 4 of the Convention provides that “no claim for compensation for pollution damage under this Convention or otherwise may be made against” a long list of physical and legal persons involved with tankers operations “unless the damage resulted from their personal act or omission, committed with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result.” See: Jacobson, M. “The International Oil Pollution Compensation Funds and the International Regime of Compensation for Oil Pollution Damage”. In Basedow, J. & Magnus,U. (Eds) Pollution of the Sea – Prevention and Compensation,  Berlin-Heidelberg: Springer. 2007 c, p. 138.
13. In cases of massive pollution disasters, such as the “Erika” or the “Prestige”, the aggregate sum payable by the owner and its insurer and by the IOPC Funds were € 185 million (“Erika”)  and € 171,5 million (“Prestige”), whereas the total cost of damages is far beyond these sums. After the 2003 amendments to the Fund Convention entered into force the compensation ceilings have been increased to around € 1.000.0000.
14. UNCLOS refers in Part XII to the protection and preservation of the “marine environment” which undoubtedly includes all marine areas both within and beyond national jurisdiction. More generally, the International Court of Justice has stated that the obligation to prevent damage to areas beyond national jurisdiction is part of contemporary international environmental law (Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion of 8 July 1996, I.C.J. Reports 1996. p. 242. para. 29).
15. Such as in the well-known cases of the “Amoco Cadiz”, in the nineteen eighties, and the “Prestige” in 2003-2012. In the latter case, the final decision of the Court of Appeals of New York in its Judgment of 29 August 2012 was that, even assuming arguendo that the US classification society ABS owed a legal duty to Spain, Spain’s evidence failed to create a genuine dispute of material fact concerning whether ABS recklessly breached such a duty.
16. Case C-188/07 Commune de Mesquer v. Total France SA and Total International Ltd.  para. 82-85
17. Tribunal de Grande Instance de Paris, 11eme chambre – 4eme section, Jugement 16 janvier 2008: http://www.dml-avocats.com/fre/actualites/fiches/proces-de-l-erika-le-jugement.htm.
18. CA Paris, 11e ch. Corr., 30 mars 2010, n? 08/02278. See : Le Couviour, K. « Erika : decryptage d’un arret peu conventionnel. – A propos de l’arret de la cour d’appel de Paris du 30 mars 2010 » La Semaine Juridique Edition Generale n° 16, 19 Avril 2010, 432.
19. The Attorney General opinion has been critiziced by several maritime law specialists: P. Bonassies, « Sur l’Erika, avant qu’il ne soit trop tard »  DMF 2012, n° 736 p. 403 ; J.-P. Beurier, « Une interpretation restrictive du droit » Le Marin 8 juin 2012, p. 6.
20. Cass. Crim., 25 sept. 2012, n° 3439, cassation partielle sans renvoi: JurisData n° 2012-021445