Basic elements of compensation for oil pollution damage caused by ships

CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018

BASIC ELEMENTS OF COMPENSATION FOR OIL
POLLUTION DAMAGE CAUSED BY SHIPS
PHAM VAN TAN1, BUI DANG KHOA1, NGUYEN THANH LE1, NGUYEN VAN TRUONG2
1Faculty of Navigation, Vietnam Maritime University
2PhD student, School of Law, Dalian Maritime University
Abstract
The satisfactory calculation of such claim for compensation for damage is difficult, complex
and involving many people. Therefore, we need to further analyze and understand thebasic
elements in calculating oil pollution compensation. This article will analyze somebasic
elements - these elements are the most basic and important keypoints to improve the
legislations of civil liability for ships’ oil pollution damage compensation.
Keywords: Compensation for oil pollution damage, civil liability, maritime law.
Tóm tắt
Việc tính toán thỏa đáng cho yêu cầu bồi thường thiệt hại ô nhiễm dầu tàu là khó, phức
tạp và liên quan đến nhiều người. Do đó chúng ta cần phải xác định được các yếu tố
trong việc tính toán bồi thường thiệt hại ô nhiễm dầu. Trong bài viết này các tác giả phân
tích một số yếu tố cơ bản - những điểm then chốt và quan trọng nhất trong việc xác định
trách nhiệm và đòi bồi thường thiệt hại do ô nhiễm dầu.
Từ khóa: Luật hàng hải; trách nhiệm pháp lý; bồi thường thiệt hại.
1. Introduction
Oil pollution from ships causes damage to the environment, assets, and human. And
according to the statistics of ITOPF of 10,000 incidents, the vast majority of which (81%) fall into
the small spills (<7 tons):
Table 1. Annual number of oil spills (7 tons and over) from 1970 - 2016
Source: www.itopf.org

Year
1970
1971

1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

7 -700 tons
7
18
48
28
90
96
67

69
59
60
52
54
46
52
26
33
27
27
11
33
51
30
31

> 700 tons
28
14
27
31
27
20
27
16
23
32
13
7

4
13
8
8
7
10
10
13
14
7
10

Journal of Marine Science and Technology

Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

2008
2009
2010
2011
2012
2013
2014
2015
2016

7 -700 tons
31
26
20
20
28
26
20
21
17
13
17
17
22
13
13
8
7
4
4

7
5
4
6
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> 700 tons
11
9
3
3
10
5
6
4
3
3
4
5
3
5
4
1
1
4
1
0
3

1
2
1

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CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018

Figure 1. Number of large spills (>700 tons) from 1970 to 2016
Source: www.itopf.org

From the oil spill statistics from 1970 to 2016, we can see that from 1970 to now, the oil spill
caused by ships also occur every year, especially in 1973, more than 30 large spills occurred,
however, in recent years the large spill has decreased significantly. The spill per years on average
of the last decade (2000 - 2009) is less than 8 times the 1970s, 2012 did not have the large spill,
2015 occurred two large spills, and 2016 occurred one large spill.
The compensation for oil pollution damage caused by ships is a complex issue and usually
involves many victims. In the field of marine environment tort law, the basic elements of civil liability
regime for compensation for oil pollution damage caused by ships includes the liable party, the
basis of responsibility for the liable party, the compensation scope of ships’ oil pollution damage,
the limitation of liability of the liable party, etc. These basic elements are stipulated by international
conventions, including the CLC, theFund Convention, theBunker Convention. National laws
embodied these contents as well. For Vietnam, these elements are the most basic and important
keypoints to improve the legislations of civil liability for ships’ oil pollution damage compensation.
2. Liable party for oil pollution damage
The subject who is responsible for compensation for victims of oil pollution damage is
regulated in the international conventions. The determination of the liable party will help victims of
oil pollution to find the right persons to bring the claim against. However, in different international
conventions, there are ununified provisions of the problem of the liable party identification.

According to the Bunker Convention 2001, the registered owner, operator and bareboat charterer
of ships are considered as the shipowners. While, according to the CLC regime, the registered
owner of ships is considered as the shipowners. Moreover,in all conventions related to liability for
pollution damage caused by ships, the liable party is the shipowners. As a result, according to the
Bunker Convention 2001, the liable party has a broader sense. Therefore, its scope of application
for the person who may be sued by the victims for pollution damage is wider.
There are different opinions on the issue of the liable party, some scholars argue that cargo
owners are responsible for compensation for oil pollution damage, with the argument that the
cause of oil pollution damage is not from ships but from the cargo (oil), therefore, the compensation
should be the responsibility of the cargo owner or the person who have interests related to such
cargo. However, some scholars maintain that the goods is wholly under the control of the
shipowners, employee or agent of the shipowners, pollution accidents involving the ships or cargo
on board can only arise from a fault in the handling of the cargo or operation of ships. Therefore,
the shipowners must be responsible for pollution damage. Besides, the identification of the
shipowners in the present oil shipping business is easier than the identification of the cargo owner.
It is also appropriate with the principle of “the polluter pays”. The principle of “the polluter pays” is
considered as an important principle in the compensation for oil pollution damage, it shows that
polluter must refund the victims of pollution damage. Under the principle of “the polluter pays”, it is
required that the costs of pollution should be borne by the entity who profits from the process that
causes pollution. More importantly, in order to satisfy the principle of “the polluter pays”, the entity who causes pollutes should provide full compensation to those who have suffered the pollution
damage caused by it. Likewise, the principle is considered to have relevance to types of damage
covered by the CLC regime and the Bunker Convention, specifically on compensation to persons
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CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018

and governments for clean-up costs and victims of oil pollution who have suffered property damage
or economic loss.
Another reason for such liable party identification is the issues related to the issuance of
insurance or financial security. When issuing the insurance certificate, the name of the insured
person will be displayed on the insurance certificate. And if it is not the shipowners, this name will
be constantly changed. This means that the competent bodies constantly have to cancel and
promulgate the insurance certificate. Thus, identifying the liable party as the shipowners avoids the
complexity of identification of liable party, as well as the diversity of liable parties. This is
appropriate with the intent of the convention to ensure maximum protection for victims of oil
pollution damage.
3. Compensation scope of oil pollution damage
In the world, there are two different connotations about damage caused by environmental
pollution or degradation. Firstly, damage caused by environment pollution or degradation only
includes damage to natural factors of the environment, such as fauna, flora, water, air, etc., without
damage to the lives; health of human. Secondly, damage caused by environment pollution not only
includes damage to the quality of the environment but also damage to the health or property of
individual that caused by environment pollution. However, at present, most countries in the world
consider that damage caused by oil pollution at the sea includes natural and environment damage,
such as damage to direct, indirect values of marine ecosystems and economic activities, as well as
damage to public health. Moreover, the cost of remedyingoil spills and restoration of the
environment; ecosystems are also calculated for the total economic loss caused by oil pollution.
These types of losses or damage are clearly explained in the Claims Manual of International
Oil Pollution Compensation Fund 1992, namely:
Clean-up and prevention measures: Compensation is paid for the costs of clean-up
operations and measures to prevent or minimize pollution in the Member States. Compensation is
also paid for efforts are taken to clean polluted animals, especially oiled birds, reptiles, and
mammals. For example, if a response were undertaken on the high seas or within the territorial
waters of a State that is not a Party to the Conventions in order to prevent or reduce pollution
damage within the territorial sea or exclusive economic zone of a State Party, the cost of the
response would in principle qualify for compensation. Expenses for prevention measures are

recoverable even if no spill of oil occurs, provided that there was a grave and imminent threat of
pollution damage.
Property damage: Compensation is paid for appropriate costs to clean, replace or repair the
property has been affected by oil pollution.
Pure economic loss: In the certain cases, compensation is also paid for loss of earnings of
persons whose property, due to oil pollution. Example, a fisherman be prevented from fishing
because the area of the sea where he normally fishes is polluted and he cannot fish elsewhere, or
economic loss in the tourist areas and marine aquaculture. Similarly, an owner of a hotel or a
restaurant located close to a contaminated public beach may suffer losses because the number of
guests falls during the period of the pollution.
Environment damage: Compensation is paid for the costs of appropriate restoration
measures with the purpose of accelerating natural recovery, and the costs of research after
occurring oil spill. Compensation is not paid in respect of claims for environmental damage based
on an abstract quantification calculated in accordance with theoretical models. Nor is compensation
paid for damages of a punitive nature on the basis of the degree of the fault of the wrong-doer.
Use of advisers: Claimants may use advisers to assist them in the claim for compensation.
Therefore, compensation is paid for appropriate costs of work made by advisers. The question of
whether such costs will be compensated is assessed in connection with the examination of the
particular claim for compensation. Account is taken of the necessity for the claimant to use an
adviser, the usefulness and quality of the work carried out by the adviser, the time reasonably
needed and the normal rate in the country concerned for work of that kind.
4. Limitation of liability of the shipowners
In the process of operating a ship, the shipowners shall be responsible for the risks and
losses caused to others. At the same time, the shipownersareresponsible for compensation for
damage arising from his ships.
Concerning institution of civil liability, in the maritime field, there is a rather special regime,
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CELEBRATE VIET NAM TEACHERS’ DAY 20/11/2018
that is the rule that allows the liable parties to limit their responsibilities according to the certain limit
levels for the loss or damage caused by severe maritime accidents. This regime is called limitation
of liability of maritime claims. That allows the liable parties in the case of their ships causing
damage to human or property are not necessarily to compensate full damage for the victims, they
are entitled to limit liability under the related legislation. In the CLC, the Bunker Convention 2001
and national laws, there is also limitation of liability for the shipowners for compensation for ships’
oil pollution damage.
There are two methods of limitation of liability: Limit civil liability of the shipowner saccording
to the value of the ships and limit civil liability of the shipowners according to the tonnage of the
ships.For the first method,it would not be beneficial to the complainant, especially for the old ships,
poor maintenance of the shipsor the ships sank after a collision.The second method overcomes
this disadvantage when determining limitation of liability based on the tonnage of the ships.
5. Compulsory insurance or financial security
Under current law, compulsory insurance is understood that the persons who are stipulated
by law must have insurance to cover their potential responsibility. And it includes two main
specificities. It is mandatory and it is more the public interest than the commercial gain. The nature
of compulsory insurance for civil liability for oil pollution damage is to ensure that the persons who
have suffered loss from oil pollution will be compensated. It always guarantees the availability of
indemnification to the victim of oil pollution.
TheCLC 1969 is the first convention to apply compulsory insurance for civil liability for oil
pollution damage caused by ships. The Torrey Canyon is the main reason for establishing the CLC
1969, namely on March 1967, the Torrey Canyon tanker was grounded in the southeast coast of
England, the consequence was about 110,000 tons of crude oil spilled out around the coast of
England and France, this is the largest oil spill in history until that time. This disaster showed
certain concerns about the rights of nations under international laws for accidents on the high seas.
Especially request coastal states can implement the necessary measures to protect their territorial

avoiding the oil pollution when accidents occur; measures affect the attention of all foreign
shipowners, shippers, and the nations that a ship carries their flag.
6. Concluding remarks
In order to study the issue about civil liability for oil pollution damage caused by ships, we
must study basic elements of compensation for oil pollution damage caused by ships.These basic
elements play an important role in determining liability and compensation foroil pollution damage
caused by ships.
REFERENCES
[1] IMO, International Convention on Civil Liability for Oil Pollution Damage.
[2] IMO, International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunker
Convention), 2001.
[3] Tumaini Shabani Gurumo, Review of implementation of international civil liability and
compensation regime for ships’ oil pollution damage, PhD Dissertation, Dalian Maritime
University, 2012.
[4] Muhammad MasumBillah, The Role of Insurance in Providing Adequate Compensation and in
Reducing Pollution Incidents: the Case of the International Oil Pollution Liability Regime, Sultan
Qaboos University, Oman, 2011.
[5] Hongyu Wu and Lixin Han, ‘Legal issues arising under the direct action framework in relation to
oil pollution damage’, Maritime Law in China, Edited by Johanna Hjalmarsson and Jingbo
Zhang, 2016.
Received:
Revised:
Accepted:

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09 January 2018
08 February 2018
02 March 2018

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