Original 1971 Oil Pollution Compensation Fund Closes

Maritime Activity Reports, Inc.

November 6, 2013

Photo: Danish Maritime Authority

Photo: Danish Maritime Authority

Several years ago, the 1971 Fund was replaced by the two subsequent Funds that pay higher compensations to the victims of oil pollution.

It was an international innovation when a global, solidary scheme on compensation for the victims of oil pollution caused by tankers was established with the 1971 Fund. It has proven to be such a great success that the system has been improved twice, and the model has been copied for other types of pollution from ships.

The 1971 Fund has been replaced by the 1992 Fund and the Supplementary Fund, allowing for greater compensation amounts and considering all new pollution incidents. Denmark was one of the first countries to accede to the higher compensation limits and, therefore, leaving the 1971 Fund 15 years ago.

Most countries agreed that now it was about time to wound up the 1971 Fund. Many of the original founders of the Fund, including the largest contributors, had also left the Fund. A few business affairs still need to be finalized. These cases have typically not been finalized because of disagreement between the Fund and the victims about the claims forwarded. Therefore, a winding up cannot be made without any legal and practical challenges. Efforts are being made to solve these before the IOPC General Assembly to be held in October 2014, when the final decision on the winding up is expected to be made.

At the meeting, the current compensation cases were also discussed. There was special interest in a judgment from the Venezuelan high court that the shipowner in a specific case (Nissos Amorgos) cannot limit his liability. The member States (except Venezuela) agreed that the decision was not in accordance with the international IOPC regulations. The consequence is that the shipowner's P&I insurance company must wrongfully pay the Venezuelan state $60 million as compensation for a claim that the Fund has already rejected to pay. At the meeting, it was debated whether the IOPC Fund is obliged to compensate the insurance company for this amount on the basis of the practice established between the Fund and the P&I insurance companies on the payment of compensation. A majority were of the view that this is not the case since the judgment is solely addressed to the P&I insurance company and not to the IOPC. Consequently, it was decided not to compensate the P&I insurance company. A few member States, including Denmark, found that the issue should be analyzed in more detail before making a decision. The P&I clubs, which disagreed strongly with the decision, will consider the situation.

A special consultative group chaired by Denmark met in connection with the IOPC meeting to consider more principle issues related to which types of ships are covered by the IOPC Fund system and how the victims of pollution can thus be covered for any oil damages suffered. The deliberations of the consultative group are to assist the working group established by the IOPC to solve the problem.

The next IOPC Fund meeting is to be held in May 2014.


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