Change mooted on spill claims

Citation

Felsted, A. (2000), "Change mooted on spill claims", Disaster Prevention and Management, Vol. 9 No. 1. https://doi.org/10.1108/dpm.2000.07309aab.003

Change mooted on spill claims

Change mooted on spill claims

The International Group of P&I Clubs has put forward a proposal for changes to the way claims are paid under the International Oil Pollution Compensation (IOPC) Funds so that both clubs and the fund pay in parallel.

At present, ship-owners and their P&I clubs pay the first claims and then the Funds take-over.

Under the 1992 Civil Liability and Fund Conventions owners of the largest tankers are liable for the first $82 million of spill costs that would normally be paid by the P&I club.

The IOPC Fund is then responsible for meeting claims up to a limit of $185 million. However, the limits are tonnage related, so that for the smallest vessel under the 1969 Civil Liability Convention, the P&I club's responsibility could be significantly less.

Claims

When claims on IOPC Funds exceed the limit, all claims are pro-rated or cut by a certain percentage. This leaves the P&I club to make up the difference.

A paper has been submitted by the International Group to the IOPC Funds. It raises questions on how claims are paid by the IOPC Funds, when it was anticipated that the total eligible claims will exceed the funds available from an owner under his Civil Liability Convention. The paper questioned whether the fund should continue to become involved when the limits under the Civil Liability Conventions are exceeded. It also asks whether some procedure should be introduced whereby the fund provides part of the cash-flow at an earlier stage.

The circumstances under which such a scenario could arise are rare. This is particularly so under the 1992 Civil Liability and Fund Conventions, but not unheard of.

There is currently a moratorium on further claim payments from the Braer spill because of the risk of the limits being exceeded.

Spill

In the case of the Nakhodka spill, only 60 per cent of the value of the claims are being paid.

Some 40 per cent of claims are being paid in the Aegean Sea spill, and only 25 per cent of claims in the Nissos Amorgas.

The proposal is understood to have received a cool reception from the fund. One particular problem is that the IOPC Funds are established under two diplomatic conventions. They are therefore legally obliged to operate according to these documents.

A major overhaul of the claims payment system, as being proposed by the P&I clubs, could necessitate the conventions being modified by protocols. The International Group hopes, however, to have further discussions with the fund on this matter in the future.

Andrea Felsted(Lloyd's Casualty Week, Vol. 315 No. 10, 5 March 1999)