Compensation for Ship-source Marine Oil Spills

For spills under the Fund Convention, compensation above the tanker-owners' liability limit may be available from the International Oil Pollution Compensation Funds (IOPC Funds) secretariat based in London. When the HNS Convention comes into force, the second tier of compensation, for claims above the shipowner's liability, may be administered by a comparable secretariat under similar circumstances.

An agreement exists between the P&I Clubs and IOPC Funds to share information during an incident, allowing claims to be coordinated between the two organisations. The Small Tanker Oil Pollution Indemnification Agreement (STOPIA) and the Tanker Oil Pollution Indemnification Agreement (TOPIA) have been established to balance compensation between shipowners and oil receivers.

Under certain circumstances, compensation may be available from a national government fund, for example if the shipowner has paid upto the applicable liability limit or the international conventions do not apply.

Claims

Irrespective of the expected source of compensation, the procedure for dealing with claims will usually follow a series of steps. It is the responsibility of the claimant to provide adequate evidence of their loss. The assessment may take the form of iterative exchanges between the claimant and those responsible for settling the claim, until the process has been completed. Further information and evidence may be requested during the process. In most cases, agreement on the amount of compensation to be paid is reached on an amicable basis.

The type of information required to support a claim depends upon the type of loss, in particular whether the loss is incurred as a result of the cost of responding to the incident or as a result of the effects of the oil on, for example, tourism or fisheries businesses. However, the quality of this documentation and other information required depends to a large extent upon the measures taken to record and preserve this information at the time the loss is incurred. Experts, including ITOPF, appointed by the body paying compensation can advise on this matter and on measures to mitigate losses.

It is important to note that under the International Conventions, the losses claimed should be technically reasonable. As such, a claim should be based on the actual costs or losses incurred and should not result in an excessive level of profit to the claimant.

The aim of the conventions is to place the injured party in a position as close as possible to that prior to the incident. To enable this, four primary groups of claims can be submitted:

• Clean-up and Preventive Measures - for the costs of work to recover spilled oil from the sea and sunken wrecks, to protect sensitive areas from contamination, and to clean affected shorelines and wildlife;
• Property Damage - for the costs of cleaning, repair or replacement of oiled property;
• Economic Loss - for losses incurred as a result of spilled oil, either as a consequence of contaminated property or other reasons; and
• Environmental Damage - work undertaken to monitor and accelerate the natural recovery of damaged areas.
• Also, under the HNS Convention, claims for death and personal injury are allowed.

Costs of spills

The cost of oil spills varies considerably from one incident to another, depending on a number of interrelated factors. The type of oil, the location of the spill and the characteristics of the affected area are generally the most important technical factors. However, the quality of the contingency plan and of the management and control of the actual response operations are also crucial.