CLC & Fund Convention

oil tankerThe international compensation regime for damage caused by spills of persistent oil from laden tankers was based initially on two IMO conventions - the 1969 International Convention on Civil Liability for Oil Pollution Damage (1969 CLC) and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1971 Fund Convention). This 'old' regime was amended in 1992 by two protocols, which increased the compensation limits and broadened the scope of the original conventions. In October 2000 agreement was reached on increasing the limits of the 1992 CLC and Fund Convention by a little over 50% with effect from 1st November 2003. In May 2003 a Supplementary (‘third tier’) Fund was established at the IMO through a new protocol that increases the amount of compensation in States that ratify it to about US$1.2 billion (including the amounts paid under the 1992 CLC and Fund Convention).

The 1969 CLC entered into force in 1975 and lays down the principle of strict liability (i.e. liability even in the absence of fault) for tanker owners and creates a system of compulsory liability insurance. Claims for compensation for oil pollution damage (including clean-up costs) may be brought against the owner of the tanker which caused the damage or directly against the owner's P&I insurer. The tanker owner is normally entitled to limit his liability to an amount which is linked to the tonnage of the tanker causing the pollution.

The 1971 Fund Convention provided for the payment of supplementary compensation to those who could not obtain full compensation for oil pollution damage under the 1969 CLC. The International Oil Pollution Compensation Fund (1971 IOPC Fund) was set up for the purpose of administering the regime of compensation created by the Fund Convention when it entered into force in 1978. By becoming party to the 1971 Fund Convention, a country became a Member of the 1971 IOPC Fund. Payments of compensation and the administrative expenses of the 1971 IOPC Fund were financed by contributions levied on companies in Fund Convention countries that received crude oil and heavy fuel oil after sea transport.

In 1992, a Diplomatic Conference adopted two protocols amending the 1969 CLC and 1971 Fund Convention, which became the 1992 CLC and 1992 Fund Convention. These 1992 Conventions, which provide higher limits of compensation and a wider scope of application than the original conventions, entered into force on 30th May 1996. As in the case of the original conventions, the tanker owner and P&I insurer are liable for the payment of compensation under the 1992 CLC, and oil receivers in countries that are party to the 1992 Fund Convention are liable for the payment of supplementary compensation through the 1992 IOPC Fund. As more States ratified or acceded to the 1992 Conventions, the original conventions rapidly lost significance and the 1971 Fund Convention was terminated altogether on 24th May 2002.

The Supplementary Fund Protocol entered into force on 3 March 2005 and will be financed by contributions payable by oil receivers in the States which opt to ratify it. However, for the purpose of contributions it will be considered that there is a mimimum aggregate quantity of 1 million tons of contributing oil received in each Member State.

Full texts of the Civil Liability and Fund Conventions & General Explanatory Note (source: IOPC Funds)

 

MAXIMUM AMOUNTS OF COMPENSATION AVAILABLE UNDER THE CONVENTIONS
(EXPRESSED IN US$ MILLIONS - rates as at September 2013)

TANKER'S
GROSS
TONNAGE
1969 CLC 1992 CLC
(post-Nov 2003)
1992 FUND
(post-Nov 2003)
Supplementary
FUND
5,000 1 6.6 299.7 1107
25,000 4.9 25.3 299.7 1107
50,000 9.82 48.6 299.7 1107
100,000 19.64 95.2 299.7 1107
140,000 20.7 132.4 299.7 1107

Note: The limits of liability under the various regimes are based on specified units of account (Special Drawing Right - SDR). The value of an SDR in terms of a national currency varies. For the purpose of this composition all the limits are expressed in US dollars, based on a rate of exchange of 1 SDR=US $ 1.48 (September, 2013, International Monetary Fund). The maximum amount of compensation potentially available under each of the various regimes is, in many cases, inclusive of amounts that would be payable under another regime. For example, the maximum amount of compensation available under the 1992 Fund Convention is inclusive of compensation payable by the tanker owner under the 1992 CLC. The maximum amounts listed above should therefore not be aggregated when determining the total amount of compensation which may be available in a specific incident.

Further sources of information

IPIECA/ITOPF Compensation booklet

A Joint IPIECA/ITOPF Briefing Paper: Oil Spill Compensation - A Guide to the International Conventions on Liability and Compensation for Oil Pollution Damage (2007) First published in 2000 and updated in 2004 and 2007, this 21 page Guide provides a summary of the fundamental features of the Conventions and comprises an explanatory text and a series of answers to commonly asked questions. Copies of the full report can be downloaded from IPIECA's website.