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Gard News 191, August/October 2008

 
 


The Bunker Convention comes into force in November 2008.

On 21st November 2007 Sierra Leone became the last of the required 18 states to adopt the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunker Convention), 2001. At the time of writing (June 2008), other nations that have adopted the treaty are: Bahamas, Bulgaria, Croatia, Cyprus, Estonia, Germany, Greece, Hungary, Iceland, Jamaica, Latvia, Lithuania, Luxembourg, Marshall Islands, Norway, Poland, Samoa, Singapore, Slovenia, Spain, Tonga and United Kingdom. The treaty comes into effect on 21st November 2008. The Bunker Convention brings pollution from bunker spills within an international regime of liability, limitation and mandatory insurance that complements the regime that has been in place for many years with respect to spills of persistent oils from tankers, the International Convention on Civil Liability for Oil Pollution Damage, 1992 (CLC). While the CLC has always applied to bunker spills from tankers subject to it, until the entry into force of the Bunker Convention, bunker spills from dry cargo and other types of ships are subject only to national regimes.1

The United States is not signatory to the CLC and its national legislation, the Oil Pollution Act of 1990 (OPA90) was written to include bunker spills from virtually all ships. The adoption of the Bunker Convention brings signatory countries closer to the regime applicable in the United States.

A comparison of the Bunker Convention with the CLC
CLC applies to bunker spills from tankers subject to it.2 The Bunker Convention does not apply in circumstances where the CLC applies, so there is no overlap between the two and any vessel already subject to the CLC will not be affected by the Bunker Convention.3 The Bunker Convention applies to any sea-going vessel and seaborne craft, of any type whatsoever, which is carrying "bunker oil", defined as any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, and any residues of such oil.4 Unlike the CLC, the Bunker Convention is not limited to persistent fuel oils and will apply to any mineral oil used to operate the ship, including lighter marine diesel.

The CLC channels all liability to the “registered owner”. The Bunker Convention has a much wider scope as it defines “shipowner” as “the registered owner, bareboat charterer, manager and operator of the ship”. The intent is to broaden the scope of liability including scenarios where more than one party is responsible. Each is jointly and severally liable.5 Only the registered owner, however, is required to maintain the mandatory insurance. This broader approach with respect to responsible parties is similar to OPA 90.

Compulsory insurance and certification
The Bunker Convention imposes the requirement to arrange compulsory insurance or financial security on the registered owner of a ship of more than 1000 GT.6 The liability provisions apply to ships of less that 1000 GT, but these smaller ships are not required to have insurance.

The registered owner is required to obtain the cover for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime, but in all cases not exceeding an amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims, 1976, as amended.7

The insurance provider is subject to direct action which is intended to do away with “pay to be paid” provisions within P&I insurance.

Where a ship is registered in a state party to the Bunker Convention, a State Certificate must be obtained from the appropriate state authority (for example, the UK would look to MCA). Ships registered in non-signatory states will need to obtain a certificate from a state that is a party.8

The certificate shall be in the form of the model set out in the convention’s annex and shall contain the following particulars: (a) name of ship, distinctive number or letters and port of registry; (b) name and principal place of business of the registered owner; (c) IMO ship identification number; (d) type and duration of security; (e) name and principal place of business of insurer or other person giving security and, where appropriate, place of business where the insurer or security provider is established; (f) period of validity of the certificate, which shall not be longer than the period of validity of the insurance or other security. The certificates need to be in English, French or Spanish, or the text should be translated into one of these languages.9

P&I cover
Following consideration by the ruling bodies of the various members of the International Group of P&I Clubs (IG), it has been agreed that the IG Clubs will issue the required Bunker Convention “Blue Cards” to enable signatory states to issue certificates from August 2008. For more details see Gard’s P&I Member Circular No. 2/2008, “Entry into force of the Bunker Convention – certification requirements and issuance of Blue Cards and State certificates”, dated April 2008.10

Defences to liability
The Bunker Convention provides a complete defence if the shipowner proves:
the damage resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character; or
the damage was wholly caused by an act or omission done with the intent to cause damage by a third party; or
the damage was wholly caused by the negligence or other wrongful act of any government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.

The intentional act or omission of a third party would seem to include terrorist acts, although the burden of proof may be difficult to meet in that the cause has to be “wholly” attributable to the third party.

Limitation rights of shipowners and insurers
The Bunker Convention, unlike the CLC and OPA 90, does not itself contain any provisions entitling a “shipowner” to limit his liability. What it does say, however, is that if a “shipowner” has a right to limit his liability under the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC), that limit can be used in respect of claims made under the Bunker Convention. The Bunker Convention is based on strict liability and provides for direct action against the insurer who nonetheless maintains the rights and defences of the insured as well as a right to limit his own liability to the amount of the insurance certificate (the limit under the LLMC). This holds true even in circumstances where LLMC limitation is not available to the shipowner.

The convention provides that claims can only be brought in the state party where damage has occurred. This differs from the LLMC where the shipowner may set up a limitation fund in any jurisdiction in which proceedings under the LLMC have been commenced. In single event scenarios involving personal injury and property damage in addition to pollution from bunkers, the total limitation for all claims will be set by the LLMC, if applicable in the country in question, so all types of claims will compete for payment.

The LLMC limit is in two parts: a higher amount for personal injury and a lower amount for property claims. For property claims, including bunkers spills, the tonnage limits are determined as follows:

Vessels of 2,000 GT or less = 1,000,000 SDR
Each GT from 2,001 – 30,000 = 400 SDR
Each GT from 30,001 – 70,000 = 300 SDR
Each GT in excess of 70,000 = 200 SDR

For a vessel of 40,000 GT the limitation would be:
(1,000,000SDR) + (400SDR x 28,000) + (300SDR x 10,000) = 15,200,000 SDR
15.2 million SDR = about 24 million USD.11

For a vessel of 10,000 GT the limitation would be:
(1,000,000SDR) + (400SDR x 8,000) = 4,200,000 SDR
4.2 million SDR = about 6.65 million USD.

According to a consultation document prepared by the UK Department of Transport,12 in the event of a casualty involving both personal injury and property damage due to a bunkers spill, if the claims for death or personal injury exceed the limit of liability established for those claims, then the amount available for property claims can be used to provide additional compensation for loss of life or personal injury claims, although these claims will have to compete with any other eligible claims. This is not by virtue of the bunkers convention, but rather the LLMC.

The challenges ahead
The entry into force of the Bunker Convention is positive in that it establishes a clear international compensation and insurance regime for oil spills from non-tank vessels. Unfortunately, however, some of its provisions, notably in relation to the party(s) potentially responsible and limitation of liability, depart from the tried and trusted balance established in the CLC and followed in the Hazardous and Noxious Substances Convention. These differences may well result in time and money being spent unnecessarily in claimants deciding against whom they should bring their claim and in “shipowners” facing potentially unlimited liability in certain jurisdictions where the right to limit liability does not exist or can be broken easily. Such aspects are likely to pose significant problems to shipowners and insurers.

A further challenge ahead is to bring vessels into compliance with the insurance requirements by the time the convention enters into force. This is particularly problematic for those vessels that are flagged in a non-signatory state because, at the time of writing, there is no signatory state that has offered to “sponsor” the certification as has been the practice with respect to the CLC requirements. Gard will continue to keep its members advised as to the requirements and procedures for meeting them.

Footnotes
1 See also the article “The new Bunker Convention” in Gard News issue No. 165.
2 CLC convention applies to persistent oil and only to tankers that carry “oil in bulk as cargo, provided that a ship capable of carrying oil and other cargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo and during any voyage following such carriage unless it is proved that it has no residues of such carriage of oil in bulk aboard.”
3 See Bunker Convention Article 4.1.
4 See Bunker Convention Article 1.1, 1.5.
5 See Bunker Convention Article 3.2.
6 See Bunker Convention Article 7.1.
7 See Bunker Convention Article 7.2.
8 See Bunker Convention Article 7.2.
9 See Bunker Convention Articles 7.2 and 7.4.
10 Available at www.gard.no under Publications/Circulars/Gard P&I Member Circulars.
11 The International Monetary Fund has a conversion table for SDRs, available at www.imf.org/external/np/fin/data/param_rms_mth.aspx.
12 “Consultation on implementation of the Bunkers Convention”, dated 2005, available at www.dft.gov.uk/consultations/archive/2005/conimpbbc/consultationonimplementation1227?page=4#a1008.

 

 

Gard News 191, August/October 2008

Any comments to this article can be e-mailed to the Gard News Editor.

Gard News is published quarterly by Gard AS, Arendal, Norway.