1992 CLC And Fund - Increased Compensation Limits In Force

November 2003

New compensation limits for oil pollution disasters enter into force:

Amendments which raise by 50 percent the limits of compensation payable to victims of pollution by oil from oil tankers entered into force on 1 November 2003.

The amendments to the 1992 Protocol of the International Convention on Civil Liability for Oil Pollution Damage (CLC Convention) and to the 1992 Protocol of the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (IOPC Fund) were adopted in October 2000.

The CLC Convention makes the shipowner strictly liable for damage suffered as a result of a pollution incident and the amendments raise the limits payable to 89.77 million Special Drawing Rights (SDR) (approximately US$127 million) for a ship over 140,000 gross tonnage, up from 59.7 million SDR (US$85 million) established in the 1992 Protocol.

The IOPC Fund amendments raise the maximum amount of compensation payable from the IOPC Fund for a single incident, including the limit established under the CLC amendments, to 203 million SDR (US$289 million), up from 135 million SDR (US$192 million). However, if three States contributing to the Fund receive more than 600 million tonnes of oil per annum, the maximum amount is raised to 300,740,000 SDR (US$428 million), up from 200 million SDR (US$285million).

While the Civil Liability Convention regulates the shipowner's liability, the Fund is made up of contributions from oil importers. The principle is that if an accident at sea results in pollution damage which exceeds the compensation available under the Civil Liability Convention, the Fund will be available to pay an additional amount. In this way, the regime established by the two treaties ensures that the burden of compensation is spread more evenly between shipowner and cargo interests.

Background Notes:

CLC Compensation limits 

The compensation limits set by the 2000 amendments entering into force in 2003 are as follows: 

• For a ship not exceeding 5,000 gross tonnage, liability is limited to 4.51 million SDR (US$6.0 million) 

(Under the 1992 Protocol, the limit was 3.0 million SDR (US$4.0 million) 

• For a ship 5,000 to 140,000 gross tonnage: liability is limited to 4.51 million SDR (US$6.0 million) plus 631 SDR (US$898) for each additional gross tonne over 5,000 

(Under the 1992 Protocol, the limit was 3 million SDR (US$4.0 million) plus 420 SDR (US$598) for each additional gross tonne) 

• For a ship over 140,000 gross tonnage: liability is limited to 89.77 million SDR (US$128 million) 

(Under the 1992 Protocol, the limit was 59.7 million SDR (US$85 million)

Third tier of compensation

In May 2003, IMO adopted a Protocol establishing an International Oil Pollution Compensation Supplementary Fund. The aim of the established Fund is to supplement the compensation available under the 1992 Civil Liability and Fund Conventions with an additional, third tier of compensation. The Protocol is optional and participation is open to all States Parties to the 1992 Fund Convention.

The total amount of compensation payable for any one incident will be limited to a combined total of 750 million Special Drawing Rights (SDR) (US$1,067 million) including the amount of compensation paid under the existing CLC and Fund Conventions.

The new Fund will come into existence three months after at least eight States have ratified the Protocol, who have received a combined total of 450 million tons of contributing oil.

Status of Conventions

• The 1992 CLC Protocol has been ratified by 93 States, representing 91.54 per cent of world merchant shipping tonnage.
•  The 1992 FUND Protocol has been ratified by 86 States, representing 87.18 per cent of world merchant shipping tonnage. 
• The 2003 Fund Protocol has received one ratification. (As at end September 2003.)

The IOPC funds and IMO

Although the IOPC Funds were established under Conventions adopted under the auspices of IMO, they are independent legal entities.

Unlike IMO, the IOPC Funds are not United Nations agencies and are not part of the UN system. They are intergovernmental organisations outside the United Nations, but follow procedures which are similar to those of the United Nations. To become a member of the 1992 Fund, a State must accede to the 1992 Protocols to the Civil Liability Convention and the Fund Convention by depositing a formal instrument of accession with the Secretary-General of IMO. These Conventions should be incorporated into the national law of the State concerned.

Further information can be found on the IOPC Funds website at www.iopcfund.org

Special Drawing Rights Conversion Rates

The daily conversion rates for Special Drawing Rights (SDR) can be found on the International Monetary Fund website under "IMF Finances".

From IMO Briefing 24 2003 30 October 2003

NOTE:

This subject has been addressed in explanatory articles which appeared in Steamship's "Sea Venture", Volumes 20 and 21.