The Merchant Shipping (Liability and Compensation for Oil Pollution Damage) (Transitional Provisions) Order 1996

Explanatory Note

(This note is not part of the Order)

This Order makes transitional provision for the period following entry into force of the 1992 Protocols to the International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC), and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971. This is one of two orders made to implement the 1992 Protocols in the UK. The Merchant Shipping Act 1995 (Appointed Day No.1) Order 1996 brings into force the provisions of the 1995 Act which implement the 1992 CLC and the 1992 Fund Convention (Chapters III and IV of Part VI of the Act respectively) on 30 May 1996. This Order provides that the equivalent Chapters in Schedule 4 to the 1995 Act (which otherwise cease to have effect following that Appointed Day Order) continue to have effect for transitional purposes.

The CLC and the Fund Convention ensure that compensation is available to victims of oil pollution from tankers and provide for the sharing of the costs of compensation between shipowners and cargo interests. Compensation is initially paid by the shipowner, whom the CLC makes strictly liable for oil pollution damage. Since the CLC also generally provides for limitation of the shipowner’s liability, additional compensation is available, if needed, from the International Oil Pollution Compensation (IOPC) Fund, established under the Fund Convention. The IOPC Fund is financed by contributions from receivers of oil.

The 1992 Protocols create a new 1992 CLC and a new 1992 Fund Convention providing for increased limitation amounts and more extensive liability. The new 1992 Conventions do not immediately replace the original Conventions. The Conventions of 1969 and 1971 (as amended by Protocols of 1976) and the 1992 Conventions co-exist for a transitional period. This transitional period begins on the date of entry into force of the 1992 Protocols (30 May 1996) and ends some 18 months after the date on which total reported receipts during the preceding calendar year of contributing oil in the states which have agreed to be bound by the 1992 Conventions exceed 750 million tonnes.

The effect of the Order is that if an incident occurs during the transitional period, compensation may, in principle, be available under both the original Conventions and the 1992 Conventions. Compensation could be paid successively from four distinct “tiers”:

1. The shipowner would initially meet the costs of compensation payments up to the limit on liability determined by the 1969 CLC.

2. If this is not sufficient, additional compensation would then be paid by the 1971 IOPC Fund up to a total amount of 60 million special drawing rights (equivalent at 17th April 1996 to approximately £57,000,000).

3. If this is still not sufficient, the shipowner would (unless the flag State is a Party to the 1969 CLC only) be liable for the balance under the 1992 CLC. The total compensation paid by the shipowner would not, however, exceed the limit on liability set by the 1992 CLC, since any compensation paid under the 1969 CLC would be considered to have also been paid under the 1992 CLC.

4. Finally, the 1992 IOPC Fund would pay additional compensation if, and only if, the shipowner had paid compensation up to the limit on liability set by the 1992 CLC and the 1971 IOPC Fund had also paid the maximum amount of compensation it was able to under the terms of the 1971 Fund Convention.

The Order also provides that ships registered in States Party to the 1969 CLC but not the 1992 CLC need only have insurance up to the 1969 CLC limits, so long as the United Kingdom remains a Party also to the 1969 CLC.

The Conventions and Protocols referred to in the Order are available from the International Oil Pollution Compensation Fund, 4 Albert Embankment, London SE1 7SR.