EXPLANATORY NOTE

July 2018

INTRODUCTION

Compensation for pollution damage caused by spills from oil tankers is governed by an international regime
elaborated under the auspices of the International Maritime Organization (IMO). The framework for the
regime was originally the 1969 International Convention on Civil Liability for Oil Pollution Damage (1969 Civil
Liability Convention) and the 1971 International Convention on the Establishment of an International Fund
for Compensation for Oil Pollution Damage (1971 Fund Convention). This ‘old’ regime was amended in
1992 by two Protocols, and the amended Conventions are known as the 1992 Civil Liability Convention and
the 1992 Fund Convention. The 1992 Conventions entered into force on 30 May 1996.

The 1971 Fund Convention ceased to be in force on 24 May 2002 and the International Oil Pollution
Compensation Fund, 1971 (1971 Fund) ceased to exist with effect from 31 December 2014. A large number
of States have also denounced the 1969 Civil Liability Convention. Therefore, this note deals with the ‘new
regime’, i.e. the 1992 Civil Liability Convention and the 1992 Fund Convention.

The 1992 Civil Liability Convention governs the liability of shipowners for oil pollution damage. The
Convention lays down the principle of strict liability for shipowners and creates a system of compulsory
liability insurance. The shipowner is normally entitled to limit its liability to an amount which is linked to the
tonnage of its ship.

The 1992 Fund Convention, which is supplementary to the 1992 Civil Liability Convention, establishes a
regime for compensating victims when the compensation under the applicable Civil Liability Convention is
inadequate. The International Oil Pollution Compensation Fund 1992, generally referred to as the
1992 Fund, was set up under the 1992 Fund Convention. The 1992 Fund is a worldwide intergovernmental
organisation established for the purpose of administering the regime of compensation created by the
1992 Fund Convention. By becoming Party to the 1992 Fund Convention, a State becomes a Member of the
1992 Fund. The IOPC Funds headquarters is based in London.

As at 9 July 2018, 137 States had ratified or acceded to the 1992 Civil Liability Convention, and 115 States had
ratified or acceded to the 1992 Fund Convention. The States Parties are listed in the Annex.
 -2-

1992 CIVIL LIABILITY CONVENTION

Scope of application

The 1992 Civil Liability Convention applies to oil pollution damage resulting from spills of persistent oil from
tankers.

The 1992 Civil Liability Convention covers pollution damage suffered in the territory, territorial sea or
exclusive economic zone (EEZ) or equivalent area of a State Party to the Convention. The flag State of the
tanker and the nationality of the shipowner are irrelevant for determining the scope of application.

‘Pollution damage’ is defined as loss or damage caused by contamination. In the case of environmental
damage (other than loss of profit from impairment of the environment) compensation is restricted to costs
actually incurred or to be incurred for reasonable measures to reinstate the contaminated environment.

The notion of pollution damage includes measures, wherever taken, to prevent or minimise pollution damage
in the territory, territorial sea or EEZ or equivalent area of a State Party to the Convention (‘preventive
measures’). Expenses incurred for preventive measures are recoverable even when no spill of oil occurs,
provided that there was a grave and imminent threat of pollution damage.

The 1992 Civil Liability Convention covers spills of cargo and/or bunker oil from laden, and in some cases
unladen seagoing vessels constructed or adapted to carry oil in bulk as cargo (but not to dry cargo ships).

Damage caused by non-persistent oil, such as gasoline, light diesel oil, kerosene etc., is not covered by the
1992 Civil Liability Convention.

Strict liability

The owner of a tanker has strict liability (i.e. the owner is liable also in the absence of fault) for pollution
damage caused by oil spilled from its tanker as a result of an incident. The owner is exempt from liability
under the 1992 Civil Liability Convention only if it proves that:

(a) the damage resulted from an act of war or a grave natural disaster; or
(b) the damage was wholly caused by sabotage by a third party; or
(c) the damage was wholly caused by the negligence of public authorities in maintaining lights or other
navigational aids.

Limitation of liability

The shipowner is normally entitled to limit its liability under the 1992 Civil Liability Convention. The limits
were increased by some 50.37% on 1 November 2003 as follows. The increased limits apply to incidents
occurring on or after that date:

(a) for a ship not exceeding 5 000 units of gross tonnage, SDR 4 510 000 (USD 6.38 million) <1>;
(b) for a ship with a tonnage between 5 000 and 140 000 units of tonnage, SDR 4 510 000 (USD 6.38 million)
plus SDR 631 (USD 892) for each additional unit of tonnage; and
(c) for a ship of 140 000 units of tonnage or over, SDR 89 770 000 (USD 126.9 million).

<1>
The unit of account in the 1992 Conventions is the Special Drawing Right (SDR) as defined by the International
Monetary Fund. In this document, the SDR has been converted into US dollars at the rate of exchange
applicable on 9 July 2018 i.e. SDR 1 = USD 1.413781.
 -3-

If it is proved that the pollution damage resulted from the shipowner’s personal act or omission, committed
with the intent to cause such damage, or recklessly and with knowledge that such damage would probably
result, the shipowner is deprived of the right to limit its liability.

Channelling of liability

Claims for pollution damage under the 1992 Civil Liability Convention can be made only against the registered
owner of the tanker concerned. This does not preclude victims from claiming compensation outside this
Convention from persons other than the owner. However, the Convention prohibits claims against the
servants or agents of the owner, members of the crew, the pilot, the charterer (including bareboat charterer),
manager or operator of the ship, or any person carrying out salvage operations or preventive measures.
The owner is entitled to take recourse action against third parties in accordance with national law.

Compulsory insurance

The owner of a tanker carrying more than 2 000 tonnes of persistent oil as cargo is obliged to maintain
insurance to cover its liability under the 1992 Civil Liability Convention. Tankers must carry a certificate on
board attesting the insurance coverage. When entering or leaving a port or terminal installation of a State
Party to the 1992 Civil Liability Convention, such a certificate is required also for ships flying the flag of a State
which is not Party to the 1992 Civil Liability Convention.

Claims for pollution damage under the 1992 Civil Liability Convention may be brought directly against the
insurer or other person providing financial security for the owner’s liability for pollution damage.

Competence of courts

Actions for compensation under the 1992 Civil Liability Convention against the shipowner or its insurer may
only be brought before the Courts of the State Party to that Convention in whose territory, territorial sea or
EEZ or equivalent area the damage occurred.

1992 FUND CONVENTION

The 1992 Fund pays compensation to those suffering oil pollution damage in a State Party to the 1992 Fund
Convention who do not obtain full compensation under the 1992 Civil Liability Convention for one of the
following reasons:

(a) the shipowner is exempt from liability under the 1992 Civil Liability Convention because it can invoke
one of the exemptions under that Convention; or
(b) the shipowner is financially incapable of meeting its obligations under the 1992 Civil Liability Convention
in full and its insurance is insufficient to satisfy the claims for compensation for pollution damage; or
(c) the damage exceeds the shipowner’s liability under the 1992 Civil Liability Convention.

In order to become Parties to the 1992 Fund Convention, States must also become Parties to the 1992 Civil
Liability Convention.

The 1992 Fund does not pay compensation if:

(a) the damage occurred in a State which was not a Member of the 1992 Fund; or
(b) the pollution damage resulted from an act of war or was caused by a spill from a warship; or
(c) the claimant cannot prove that the damage resulted from an incident involving one or more ships as
defined (i.e. a seagoing vessel or seaborne craft of any type whatsoever constructed or adapted for the
carriage of oil in bulk as cargo).
 -4-

Limit of compensation

The maximum amount payable by the 1992 Fund in respect of an incident occurring before 1 November 2003
was SDR 135 million (USD 190.9 million), including the sum actually paid by the shipowner (or its insurer)
under the 1992 Civil Liability Convention. The limit was increased by some 50.37% to SDR 203 million
(USD 287 million) on 1 November 2003. The increased limit applies only to incidents occurring on or after
this date.

Competence of courts

Actions for compensation under the 1992 Fund Convention against the 1992 Fund may only be brought
before the Courts of the State Party to that Convention in whose territory, territorial sea or EEZ or equivalent
area the damage occurred.

Experience in past incidents has shown that most claims are settled out of court.

Organisation of the 1992 Fund

The 1992 Fund has an Assembly, which is composed of representatives of all Member States. The Assembly
is the supreme organ governing the 1992 Fund, and it holds regular sessions once a year. The Assembly elects
an Executive Committee comprising 15 Member States. The main function of this Committee is to approve
settlements of claims.

The 1992 Fund shares a Secretariat with the Supplementary Fund. The joint Secretariat is headed by a
Director, and has at present 27 staff members.

Financing of the 1992 Fund

The 1992 Fund is financed by contributions levied on any person who has received in one calendar year more
than 150 000 tonnes of crude oil and heavy fuel oil (contributing oil) in a State Party to the 1992 Fund
Convention.

Basis of Contributions

The levy of contributions is based on reports of oil receipts in respect of individual contributors. Member
States are required to communicate every year to the 1992 Fund the name and address of any person in that
State who is liable to contribute, as well as the quantity of contributing oil received by any such person. This
applies whether the receiver of oil is a Government authority, a State-owned company or a private company.
Except in the case of associated persons (subsidiaries and commonly controlled entities), only persons having
received more than 150 000 tonnes of contributing oil in the relevant year should be reported.

Oil is counted for contribution purposes each time it is received at a port or terminal installation in a Member
State after carriage by sea. The term received refers to receipt into tankage or storage immediately after
carriage by sea. The place of loading is irrelevant in this context; the oil may be imported from abroad, carried
from another port in the same State or transported by ship from an off-shore production rig. Also oil received
for transhipment to another port or received for further transport by pipeline is considered received for
contribution purposes.
 -5-

Payment of contributions

Annual contributions are levied by the 1992 Fund to meet the anticipated payments of compensation and
administrative expenses during the coming year. The amount levied is decided each year by the Assembly.
The 1992 Fund has a General Fund which covers expenses for administration. The General Fund also covers
compensation payments and claims-related expenditure, to the extent that the aggregate amount payable
by the Fund does not exceed a given amount per incident (SDR 4 million). If an incident gives rise to
substantial payments of compensation and claims-related expenditure by the 1992 Fund, a Major Claims
Fund is established to cover payments in excess of the amount payable from the General Fund for that
incident.

The Director issues an invoice to each contributor, following the decision taken by the Assembly to levy
annual contributions. Each contributor pays a specified amount per tonne of contributing oil received.
A system of deferred invoicing exists whereby the Assembly fixes the total amount to be levied in
contributions for a given calendar year, but decides that only a specific lower total amount should be invoiced
for payment by 1 March in the following year, the remaining amount, or a part thereof, to be invoiced later
in the year if it should prove to be necessary.

The contributions are payable by the individual contributors directly to the 1992 Fund. A State is not
responsible for the payment of contributions levied on contributors in that State, unless it has voluntarily
accepted such responsibility.

Level of contributions

Payments made by the 1992 Fund in respect of claims for compensation for oil pollution damage may vary
considerably from year to year, resulting in fluctuating levels of contributions. The following table sets out
the most recent contributions levied by the 1992 Fund to both the General Fund and Major Claims Funds,
covering the period 2013–2017. Further information and a detailed history of contributions levied by the
1992 Fund is available here.

Total Contribution per tonne

Annual
Date due Fund contribution of contributing oil
contributions
(£) (£)
2013 01.03.2014 General Fund 3 300 000 0.0021077
Prestige
2 500 000 0.0018429
Major Claims Fund
Volgoneft 139
7 500 000 0.0048892
Major Claims Fund

2014 01.03.2015 General Fund 3 800 000 0.0024779

2015 01.03.2016 General Fund 4 400 000 0.0029061

2016 01.03.2017 General Fund 9 700 000 0.0062582

Alfa I 6 400 000 0.0041634
Major Claims Fund
2017 01.03.2018 General Fund 1 500 000 0.0009734
Agia Zoni II 26 000 000 0.0168720
Major Claims Fund
 -6-

SUPPLEMENTARY FUND PROTOCOL

On 3 March 2005, a third tier of compensation was established by means of a Supplementary Fund under a
Protocol adopted in 2003. So far 32 States have ratified or acceded to the Protocol.

The Supplementary Fund provides additional compensation over and above that available under the 1992
Fund Convention for pollution damage in the States that become Parties to the Protocol. As a result, the
total amount available for compensation for each incident for pollution damage in the States which become
Members of the Supplementary Fund is SDR 750 million (USD 1060 million), including the amounts payable
under the 1992 Civil Liability Convention and the 1992 Fund Convention, SDR 203 million (USD 287 million).

The Supplementary Fund only pays compensation for pollution damage for incidents which occur after the
Protocol has entered into force for the State concerned.

Membership of the Supplementary Fund is optional and any State which is a Member of the 1992 Fund may
join the Supplementary Fund.

Annual contributions to the Supplementary Fund will be made in respect of each Member State by any person
who, in any calendar year, has received total quantities of oil exceeding 150 000 tonnes after sea transport
in ports and terminal installations in that State. However, the contribution system for the Supplementary
Fund differs from that of the 1992 Fund in that, for the purpose of paying contributions, at least
1 million tonnes of contributing oil will be deemed to have been received each year in each Member State.

The Supplementary Fund has a General Fund which only covers administrative expenses, and so a Claims
Fund will be set up for any incident for which the Supplementary Fund has to pay compensation. No incidents
have occurred which have involved the Supplementary Fund. The following table sets out the contributions
levied in 2006 to meet the Supplementary Fund’s administrative expenses:

Contribution per tonne of

Annual Total contribution
Date due contributing oil
contributions (£)
(£)
2006 01.03.2007 1 400 000 0.0017223<2>

The Supplementary Fund, which is administered by the 1992 Fund Secretariat, has its own Assembly
composed of representatives of its Member States.

<2>
Capping
Under Article 18 of the Supplementary Fund Protocol, total annual contributions in a Member State could not
exceed 20% of total contributions for that calendar year. When contributions were levied to the General Fund
in 2006, Japan reported 31.64% of the total contributing oil. A capping levy was therefore applied to reduce
Japan’s total contributions to 20% of the total and the difference was redistributed amongst contributors in
other Member States. Capping was also applied to the reimbursement of the 2006 contributions to ensure
that the reimbursement to contributors was in the same proportion to the contributions they paid. Article 18
ceased to have effect from 2010 when the total tonnage reported to the Supplementary Fund surpassed
1 000 million tonnes. It is no longer applied to Supplementary Fund contributions.

Details on the 2006 capping deduction and capping levy are set out below:

Levy per tonne £

Capping deduction per tonne for contributors in Japan -0.0006334
Capping levy per tonne for contributors in other States 0.0002931
 -7-

In April 2017, the Supplementary Fund Assembly decided to reimburse £830 000 to contributors in the
19 Member States who paid the 2006 contributions to the General Fund. They also decided to levy
contributions of £1.5 million to contributors in the current 31 Member States, as set out in the following table.

Contribution per
Total contribution
Annual contributions Oil Year Date due tonne of
(£)
contributing oil (£)
2017 2016 01.03.2018 1 500 000 0.0014891<3>
Reimbursement
2006 2005 01.03.2018 -830 000 -0.0010249

STOPIA AND TOPIA

The international liability and compensation regime, created by the 1992 Civil Liability and Fund Conventions,
was intended to ensure an appropriate proportion of the economic consequences of marine oil spills from
tankers between the shipping and oil industries. In order to address the imbalance created by the
establishment of the Supplementary Fund, which will be financed by the oil industry, the International Group
of P&I Clubs (a group of 13 mutual insurers that between them provide liability insurance for about 98% of
the world’s tanker tonnage) introduced two agreements, the Small Tanker Oil Pollution Indemnification
Agreement (STOPIA) 2006, and the Tanker Oil Pollution Indemnification Agreement (TOPIA) 2006.

These agreements are voluntarily concluded among shipowners and indemnify the compensation made by
the 1992 Fund and the Supplementary Fund in accordance with the Convention. Under STOPIA, the
1992 Fund will be indemnified by the shipowner of the compensation payments it has made to claimants up
to SDR 20 million (USD 28.3 million). Under TOPIA 2006, the Supplementary Fund will be indemnified by the
shipowner of 50% of the compensation payments it has made to claimants.

In 2016, these agreements were reviewed and amended based on the 10 years’ experience of claims since
the entry into force of the agreements. The new versions, the Small Tanker Oil Pollution Indemnification
Agreement (STOPIA) 2006 (as amended 2017) and the Tanker Oil Pollution Indemnification Agreement
(TOPIA) 2006 (as amended 2017), became effective on 20 February 2017.

<3>
At its April 2017 session, the Supplementary Fund Assembly decided to reimburse £830 000 from the General
Fund on 1 March 2018 to those contributors in the 19 Member States who contributed to the 2006 levy to the
Supplementary Fund. It was noted that a capping levy had been applied to the 2006 levy of contributions in
accordance with Article 18.1 (Transitional provisions) of the Supplementary Fund Protocol and the capping levy
would also be applied to the reimbursement of those contributions. The capping deduction and additional
reimbursement are set out below:

Levy per tonne £

Capping deduction on reimbursement for contributors in Japan 0.0003794
Additional reimbursement for contributors in other States -0.0001765
 -8-

CONCLUSIONS

The advantages for a State being Party to the 1992 Civil Liability Convention and the 1992 Fund Convention
can be summarised as follows. If a pollution incident occurs involving a tanker, compensation is available to
governments or other authorities which have incurred costs for clean-up operations or preventive measures
and to private bodies or individuals who have suffered damage as a result of the pollution. For example,
fisherfolk whose nets have become polluted are entitled to compensation, and compensation for loss of
income is payable to fisherfolk and to hoteliers at seaside resorts. This is independent of the flag of the
tanker, the ownership of the oil or the place where the incident occurred, provided that the damage is
suffered within a State Party.

The 1992 Civil Liability Convention and the 1992 Fund Convention provide a wider scope of application on
several points and much higher limits of compensation than the Conventions in their original versions. For
these reasons, it is recommended that States which have not already done so should accede to the
1992 Protocols to the Civil Liability Convention and the Fund Convention (and not to the 1969 Convention)
and thereby become Parties to the Conventions as amended by the Protocols (the 1992 Conventions).
The 1992 Conventions would enter into force for the State in question 12 months after the deposit of its
instrument(s) of accession.

States which are already Parties to the 1969 Civil Liability Convention are advised to denounce that
Convention at the same time as they deposit their instruments in respect of the 1992 Protocols, so that the
denunciation of that Convention would take effect on the same day as the 1992 Protocols enter into force
for that State.

As regards the Supplementary Fund Protocol, a State will have to consider whether, in light of its particular
situation, ratification of or accession to the Protocol is in the interests of that State.

***
 -9-

ANNEX

States Parties to both the

1992 Civil Liability Convention and the
1992 Fund Convention
as at 9 July 2018
(and therefore Members of the 1992 Fund)

115 STATES FOR WHICH 1992 FUND CONVENTION IS IN FORCE

Albania Grenada Philippines
Algeria Guinea Poland
Angola Hungary Portugal
Antigua and Barbuda Iceland Qatar
Argentina India Republic of Korea
Australia Iran (Islamic Republic of) Russian Federation
Bahamas Ireland Saint Kitts and Nevis
Bahrain Israel Saint Lucia
Barbados Italy Saint Vincent and the
Belgium Jamaica Grenadines
Belize Japan Samoa
Benin Kenya Senegal
Brunei Darussalam Kiribati Serbia
Bulgaria Latvia Seychelles
Cabo Verde Liberia Sierra Leone
Cambodia Lithuania Singapore
Cameroon Luxembourg Slovakia
Canada Madagascar Slovenia
China<4> Malaysia South Africa
Colombia Maldives Spain
Comoros Malta Sri Lanka
Congo Marshall Islands Sweden
Cook Islands Mauritania Switzerland
Côte d’Ivoire Mauritius Syrian Arab Republic
Croatia Mexico Thailand
Cyprus Monaco Tonga
Denmark Montenegro Trinidad and Tobago
Djibouti Morocco Tunisia
Dominica Mozambique Turkey
Dominican Republic Namibia Tuvalu
Ecuador Netherlands United Arab Emirates
Estonia New Zealand United Kingdom
Fiji Nicaragua United Republic of
Finland Nigeria Tanzania
France Niue Uruguay
Gabon Norway Vanuatu
Georgia Oman Venezuela (Bolivarian
Germany Palau Republic of)
Ghana Panama
Greece Papua New Guinea

<4>
The 1992 Fund Convention applies to the Hong Kong Special Administrative Region only.
 - 10 -

States Parties to the Supplementary Fund Protocol

as at 9 July 2018
(and therefore Members of the Supplementary Fund)

31 STATES PARTIES TO THE SUPPLEMENTARY FUND PROTOCOL

Australia Greece Poland
Barbados Hungary Portugal
Belgium Ireland Republic of Korea
Canada Italy Slovakia
Congo Japan Slovenia
Croatia Latvia Spain
Denmark Lithuania Sweden
Estonia Montenegro Turkey
Finland Morocco United Kingdom
France Netherlands
Germany Norway
1 State which has deposited an instrument of accession, but for which
the Supplementary Fund Protocol does not enter into force until date indicated
New Zealand 29 September 2018

States Parties to the 1992 Civil Liability Convention

but not to the 1992 Fund Convention
as at 9 July 2018
(and therefore not Members of the 1992 Fund)

23 STATES FOR WHICH 1992 CIVIL LIABILITY CONVENTION IS IN FORCE

Azerbaijan Indonesia Pakistan Togo
Chile Jordan Peru Turkmenistan
China Kuwait Republic of Moldova Ukraine
Egypt Lebanon Romania Viet Nam
El Salvador Mongolia Saudi Arabia Yemen
Guatemala Myanmar Solomon Islands

States Parties to the 1969 Civil Liability Convention

as at 9 July 2018

34 STATES PARTIES TO THE 1969 CIVIL LIABILITY CONVENTION

Azerbaijan Gambia Maldives
Benin Georgia Mongolia
Brazil Ghana Peru
Cambodia Guatemala Saint Kitts and Nevis
Chile Guyana Sao Tomé and Principe
Costa Rica Honduras Saudi Arabia
Cote d’Ivoire Indonesia Senegal
Dominican Republic Jordan Syrian Arab Republic
Ecuador Kazakhstan Turkmenistan
Egypt Kuwait United Arab Emirates
El Salvador Lebanon
Equatorial Guinea Libya