Who's paying the oil pollution damages?
The recent oil slick in northwestern Estonia raises questions about who is liable for the damages, and how much.
As of Aug. 6, 2005 two conventions regulating compensation of damages caused by oil pollution originating from an oil tanker, including compulsory insurance of such damages, are valid in regard to Estonia: the International Convention on Civil Liability for Oil Pollution Damage as amended by the 1992 Protocol (hereinafter the "Liability Convention") and the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage ("Fund Convention").
Both conventions are applicable only if the oil pollution has been caused by an oil tanker 's i.e., a watercraft or floating vessel of any type, which has been built or adjusted for carrying oil in bulk. Pursuant to the conventions, the damages compensated are the damages caused by an overflow of both oil carried as cargo and oil from the tank of the ship.
Under the conventions the duty to compensate arises if the damage has been caused or discovered in the territory of any state being a party to the convention in question. The territory of the state is constituted by both the territorial sea and the exclusive economic zone or equivalent area. The conventions apply regardless of whether the country whose flag the tanker is sailing under is a party to the conventions or not.
A claim for compensation must be first submitted against the shipowner or its insurer (insurance of a shipowner's liability being mandatory) if the tanker carries more than 2,000 tons of oil as cargo. The shipowner is subject to strict liability for pollution damage, which means that it is liable even if it has not been negligent. Presently, the liability cap for both the shipowner and the insurer is $85.5 million per accident. After Nov. 1, 2003 the liability cap was increased to $128.6 million, but it is not yet applicable to Estonia, since it has not acceded to the relevant protocol. A shipowner is liable for the damages exceeding the liability cap if the damages have been caused intentionally.
If the damage has not been fully compensated under the Liability Convention, a claim may be submitted against the International Oil Pollution Compensation Fund created in 1978. This covers cases, for example, when the damage caused by oil pollution is bigger than the liability cap under the Liability Convention, or, when the shipowner and insurer do not have enough money to satisfy the claim. The Compensation Fund compensates the damages exceeding the compensation received under the Liability Convention, but not more than the limit stipulated in the Fund Convention. The Compensation Fund liability cap of $290.8 million, valid since Nov. 1, 2003 will apply to Estonia after accession to the 2003 Protocol.
The Compensation Fund has voluntarily consented to compensate oil pollution damages caused by an unidentified vessel. In October 2002 the fund adopted a fundamental decision that, in order to receive compensation from the fund, it is not mandatory to establish the exact vessel that has caused the pollution; it is sufficient to show that the pollution originated from a vessel. There already have been several cases when the fund acted according to that decision. For instance, the Fund compensated damages of the Sept. 29, 2002 pollution in the U.K. as well as in the March 15, 2003 case in the State of Bahrain. In both cases there was only reasonable doubt that the pollution had originated from vessels.
The ongoing investigation of the January pollution case in the Baltic Sea has not yet uncovered the guilty vessel. Some say it may be impossible to establish the vessel in question. Taking into account the Compensation Fund's practice, this will not impair the receipt of the compensation, though the investigating authorities will need to reach a conclusion that the vessel, which has caused the pollution, cannot be established.
is attorney-at-law at Teder, Glikman & Partnerid, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms which includes Kronbergs & Cukste in Latvia and Jurevicius, Balciunas & Bartkus in Lithuania, dedicated to providing a quality 'one-stop shop' approach to clients' needs in the Baltics.