The IOPCFunds: Meeting of the Governing Bodies. (April/May 2024.)
International Maritime Organization.
Patrick Griggs[1]
The meeting of the Governing Bodies of the 1992 Fund and of the Supplementary Fund took place at IMO Headquarters between 29th April and 1st May 2024. The 1992 Fund Assembly Chair was Ambassador Antonio Bandini (Italy) and the Chair of the 1992 Fund Executive Committee was Ms. Malgorzata Buszynska (Poland). The Chair of the Supplementary Fund Assembly was Mr. Francois Marier (Canada). The meeting was attended by a quorum of signatory states to the 1992 Fund and to the Supplementary Fund and by numerous Observer Delegations.
Membership of the 1992 Fund and Supplementary Fund.
Current membership of the 1992 Fund stands at 121 States and the Director reported that on 9th April 2024 Mauritius had deposited its instrument of accession to the Supplementary Fund bringing the membership of the Supplementary Fund to 33 states.
Oil Reports and Contributions.
As at September 25th 2023 88 States had submitted their oil reports but 38 States had failed to do so. However, the reports received accounted for 95% of the expected total contributing oil. All members of the Supplementary Fund have submitted reports for 2022 and all previous years.
The issue of outstanding oil reports remains a matter of serious concern and the Director advised that he would be proposing Resolutions for approval which would enable him to invoice States for their contributions based on estimates if actual reports have not been submitted. These Resolutions, which included proposed consequential amendments to the Internal Regulations, were subsequently introduced and approved.
As to contributions the position as at September 2023 was that a mere 0.25% of total contributions levied since the creation of the Fund were outstanding. The Director will continue to chase up outstanding payments. As far as the Supplementary Fund is concerned a contribution from the Republic of the Congo is outstanding representing 0.05% of contributions levied.
The governing bodies of both Funds passed Resolutions back in 2016 which restrict the rights to claim compensation and vote in elections whilst oil reports and contributions are outstanding.
Budgets for 1992 Fund and Supplementary Fund – 2024.
The 2024 Budget for the Fund was agreed at £5,382,018 (a 5.7% increase on 2023) with retained working capital of £15 million. The Budget for the Supplementary Fund was agreed at £58,100 with a working capital of £1 million being retained.
The 1992 Fund levy to the General Fund will be £10 million with a zero levy for the Supplementary Fund. The Director advised that he would not be seeking to make a levy for the Major Incidents Fund covering the Prestige, Alfa 1, Agia Zoni II and Nesa 3 claims. However, he proposed a levy of £20 million for the Bow Jubail claims and £10 million for the Princess Empress case.
The 2010 HNS Convention. (IOPC/APR24/5/1).
With the recent deposit of an instrument of accession by Slovakia the number of State accessions has risen to 8 and there is now some confidence expressed by delegates at the meeting that we are within sight of the entry into force of this important Convention. The Funds’ Secretariat continues with its preparations for its role in the management of the HNS Fund.
Impact of sanctions on the international liability and compensation regime. (IOPC/APR/4/1).
Following the March meeting of the governing bodies a draft circular was issued containing guidance on the implications for insurance or other financial security documents of the situation in the Sea of Azov and the Black Sea. In December2022 further restrictions on the handling of Russian sourced crude oil were imposed by the European Union. As a result many providers of liability cover were unable to continue providing such cover.
Subsequently, the EU imposed a price cap on Russian crude which was designed to enable European operators to continue insuring and transporting Russian crude to third countries provided that its price was below the cap. This Price Cap Scheme has since been modified to permit the International Group to provide cover for shipments of Russian petroleum products in certain specific (and very limited) circumstances. It should also be noted that in late 2022 the Government of the United Kingdom issued an advisory document regarding the Oil Price Cap Scheme which outlines “best practice” in implementation of the Scheme.
A more worrying development has been the emergence of a “ghost” or “dark fleet”[2] consisting of aged tankers flying flags of convenience with (by implication) less good safety records. There is evidence that more than 600 tankers may be involved in this fleet which turn off their transponders so as to disappear from tracking.
Neither the Fund Convention nor the Supplementary Fund Convention contain exemptions from liability for the consequences of events involving sanction breaching activities. So, it remains possible that if, following an incident involving Russian crude, the shipowner/insurer fails to establish a limitation fund the Fund may find itself involved.
Another worrying development has been an increase in the number of ship-to-ship trasfers of sanctioned crude oil – many such operations have been reported in the Straits of Gibraltar off Ceuta. At the 110th Session of the IMO Legal Committee in March 2023 a document was submitted by a group of States requesting flag States to ensure that tankers under their flag follow measures to prohibit or regulate STS transfers.
The E.U. issued its 11th package economic sanctions whereby EU ports are no longer open to any vessel suspected of having illegally disabled its AIS or having been involved with ship-to-ship transfers (STS). The E.U. has now issued its 12th package of sanctions which makes it mandatory for any national Member State to notify the competent authorities of any sale or other transfer of ownership to any third country of any tanker engaged in the transport of crude oil or petroleum products falling under the HS Code ex 8901 20.
Finally, member states have been reminded that they have an obligation to verify the financial standing of any company outside the International Group of P. & I. Clubs offering financial security.
The delegate from the Russian Federation, in a brief intervention, suggested that the states imposing the sanctions could hardly complain about risks of oil pollution when those risks were an indirect result of the imposition of those same sanctions.
Risk of uninsured and unsafe ships (IOPC/ APR/24/4)
There have been an increasing number of incidents involving pollution where neither the carrier nor the cargo owner can be identified. One delegation proposed a Resolution which would highlight the importance of compliance with safety and environmental standards, enforcement of safety and liability conventions, co-operation between states and IOPC Funds in investigations and the identification of people involved in incidents. The Director was requested to draft suitable wordings for Resolutions for Fund and Supplementary Fund Conventions. On a subsequent review of the draft Resolutions it was agreed that further review and consideration would be necessary with the revised documents to be finalised at the November meeting.
New IMO Secretary General.
Mr Kitack Lim (Republic of Korea will step down as Secretary General at the end of 2023 to be replaced by Mr. Arsenio Dominguez (Panama).
Hybrid Meetings.
The decision whether to hold further meetings with some delegates joining on-line is still awaited from the IMO Council. The Director is monitoring the situation and will report further at the November meeting.
Incidents involving the IOPC Funds.
The Director provided an update on four of the incidents currently under active occupying the time of the Funds’ Executive.
Agia Zoni II. (IOPC/APR24/3/2).
Regular readers of these reports will recall that this small and very old tanker sank in mysterious circumstances in the northern part of Piraeus anchorage area. Serious pollution was caused by the 500 tonnes of oil which escaped from the wreck. Since then the wreck has been raised and placed in drydock. Two local investigations have reached different conclusions as to the cause of the sinking. One concluded that there had been an explosion on board but the other found that water had been deliberately introduced by opening ballast tank valves. This “scuttling” was planned, it is suggested, by the shipowner working in conjunction with the salvors and/or one of the clean-up contracting companies.
The ASNA report concluded that the accident should be attributed to the deliberate and negligent actions of the shipowner, two crew members who were on board at the crucial time, the shipowner’s General Manager and representatives of the Salvage/clean-up companies.
An investigation was undertaken by the Piraeus Public Prosecutor into the causes of the sinking and in June 2021 the Fund’s lawyer and a number of other parties were called and questioned by the Prosecutor. The Fund’s lawyer was questioned about the procedure which had been adopted for the payment of claims including those of the clean-up contractors.
The criminal department of the Piraeus court concluded that of those potentially involved in the deliberate sinking there were clear indications of criminal conduct on the part of the engine room foremaster, the AB seaman, the Master, the shipowning company representative and the representative of the first clean-up company. The decision has been made to prosecute the two seaman who remained on board for intentionally causing pollution by unscrewing the cargo tank covers and deliberately flooding the vessel causing it to sink. The Master, the representative of the shipowner and the representative of the first clean-up company will be charged with instigating the criminal activities which took place.
24th October 2024 has been fixed for the trial of these 5 defendants and the trial is expected to last 4-6 days.
Against this background the IOPC Funds had already decided that it was obliged to pay for the clean-up operations. The advice from the Funds’ Greek lawyers had been that Article 4(3) of the 1992 CLC required that compensation be paid to innocent victims regardless of the cause of the spill. Should there eventually be a finding of criminal activity by the shipowner or contractors recourse actions could be taken by the Fund.
As regards compensation, the Fund has received 424 claims in the amount of EUR 100.21 million and one claim for property damage in the amount of USD 175,000. 418 claims have been approved and EUR 16.88 million has been paid out. As for clean-up and wreck removal claims there are 34 claims amounting to EUR 83.54 million. A claim by the Greek State for oil waste disposal was paid in February 202
A number of issues (including one relating to the time bar for submission of claims) have arisen in connection with the assessment of the limitation fund and of the claims lodged against it. An appeal by the Fund was due to be heard in February 2024.
The Agia Zoni II was insured for oil pollution risks by Lodestar Marine Ltd. which is not a member of the International Group of P.& I. Clubs and the policy has a limit of EUR 5 million. However, the insurers have said that they will honour the Blue Card which they issued with its limit of SDR 4.51 million. Limitation proceedings were commenced by the insurers and a guarantee in the amount of EUR 5.59 has been lodged with the court. Claims against the limitation fund, including a subrogation claim from the Fund, were filed and assessed by the Administrator. His assessments were the subject of review by the Court of First Instance in Piraeus in June 2022 and the decision of the Court is subject to further appeals with the Fund challenging the ruling that because of late submission of some of the subrogated claims they had no right to appeal against the Administrator’s assessment. Proceedings continue and a hearing, originally fixed for February 2024, has now been adjourned until September 2024.
Bow Jubail. (IOPC/APR24/3/3)
This remains one of the most significant cases involving the 1992 Fund. On June 23rd 2018 the tanker Bow Jubail collided with a jetty at the LBC Terminal in Rotterdam resulting in a spill of bunker oil which caused pollution to property and to wildlife. At the time of the incident the tanker was unladen and the shipowner applied to the Rotterdam District Court for leave to limit liability under the provisions of LLMC 76/96 on the basis that the incident was covered by the Bunkers Convention 2001. The Court concluded that the shipowner had failed to prove the absence of oil cargo residues in the cargo tanks and that, for this reason, the tanker qualified as a “ship” under 1992 CLC. This decision was appealed to the Court of Appeal in the Hague where the judgment of the lower court was upheld on the ground that the shipowner had failed to established that the tanker did not contain any oil cargo residues – the onus in this respect being upon the shipowner.
The case was appealed to the Supreme Court and discussions took place at the Fund’s meeting in 2020 as to whether the 1992 Fund should seek to intervene in the Supreme Court appeal. All delegations recognised that it is very important that there should be a determination by a senior court of the definition of “residues” under the Convention and that there should be a consideration of what constitutes adequate cleaning of tanks to eliminate such residues. The Director recommended that the 1992 Fund should apply to join the appeal to ensure that the Court had all the assistance possible in reaching its decision. The Supreme Court granted permission for the Fund to be admitted to the proceedings as “an interested party”.
In a judgment dated March 31st 2023 the Supreme Court upheld the earlier decisions of the Rotterdam District Court and the Court of Appeal in the Hague finding that the shipowner had failed to prove the absence of cargo residues, that the tanker was therefore deemed to be a “ship” under the 1992 CLC and that the incident was not, therefore, covered by the Bunkers Convention.
At the meeting in November 2021 the International Group of P. and I Clubs had confirmed that the Group would continue to support owners in their efforts to prove that there was an absence of residues with the result that the Bunkers Convention 2001 would apply in this case rather than the CLC. It further suggested, at that meeting, that consideration should be given to developing a standard procedure or guidelines for determining when a ship, which can serve both as an oil tanker under the 1992 CLC and as a chemical tanker under the Bunkers Convention 2001, ceases to be a “ship” under the 1992 CLC. At its meeting in May 2023 the Fund Executive Committee asked the Director to explore the possibility of developing such guidelines. (See IOPC/NOV23/4/4).
Legal proceedings have been commenced by 57 claimants before the District Court in Rotterdam against the shipowners, insurers and the Fund (in some only of the actions). These claims are being monitored by the Fund’s lawyers.
In June 2023 the shipowner applied to the Rotterdam District Court for leave to limit liability under the 1992 CLC to be secured by an LOU provided by Gard P.& I. in the amount of the 1992 CLC limit. (It is anticipated that claims will exceed the 1992 CLC limit.) This application was rejected on the grounds that the amount covered by the LOU should include interest accrued over the period between the date of the incident and the date when the limitation fund was set up and secured. A further application to the Court has been made but a decision remains pending.
Incident in Israel (IOPC/APR24 /3/4).
In February 2021 the Israeli Government reported to the 1992 Fund that tar balls had been found washed up on the coast. The source of the oil was not established but it was thought likely that the oil had been discharged illegally from a passing tanker. This conclusion has since been endorsed by experts in the “fingerprinting” of petroleum products. Further investigations suggest that the likely source of the pollution was the MT Emerald, a tanker of 62,247 GRT, flying the Panamanian flag and registered in the Marshall Islands. However, it has been decided that the evidence is not conclusive and that the oil could have emanated from an earlier tank washing and discharge.
As at March 2024 a total of 470 claims had been submitted for clean-up expenses, property damage and economic losses totalling ILS 39.8 million (£8.7 million). Nineteen claims have been assessed and twelve have been paid out in the amount of ILS 4,630,043.87 (£1 million). 360 claims have been rejected for lack of information or lack of evidence of causation.
At its meeting in July 2021 the 1992 Executive had decided that a “mystery spill” of this sort was covered by the CLC and Fund Conventions and that compensation would be payable. The Director was instructed to settle claims arising.
Princess Empress (IOPC/APR243/5)
The Philippine flagged Princess Empress (508 GT) sank off the coast of Naujan, Oriental Mindoro in the Philippines on February 28th 2023. She was carrying 800,000 litres of fuel oil as cargo. An oil spill occurred causing widespread pollution damage. As oil continued to leak from the wreck it was decided to remove the remaining oil. This operation was completed in June 2023. Clean-up operations have now also been concluded and clean-up costs have been paid.
As at April 2024 38,675 claims had been received and PHP 117.7 million have been paid out to 8,825 fisherfolk. 2,557 claims from the tourism industry have been received. The Philippines is a party to the 1992 CLC and the 1992 Fund Convention. The Fund is therefore working closely with the Club and with the Philippine authorities. It is anticipated that the claims may well exceed the CLC limit which will mean that the Fund will be involved. The CLC limit is calculated at SDR 4.51 million but the shipowner is a party to the STOPIA Agreement with the result that the limit is increased to SDR 20 million. Under the STOPIA Agreement the fund can recover from the shipowner the difference between the CLC limit and the total admissible claims.
A central claims office has been set up in Calapan, Oriental Mindoro and smaller claims submission offices have also been set up. The Director and the Claims Manager visited the Philippines in April 2023and an illustrated report was given showing the claims handling arrangements which have included the setting up of local Claims Submission Offices.
The causes of the incident are still being investigated in order to determine whether there is any criminal responsibility.
Incident in Trinidad and Tobago. (IOPC/APR24/3/6).
In early February 2024 the 4,925 GRT articulated tank barge Gulfstream capsized and sank off Tobago whilst in tow of the tug Solo Creed. The barge, leaking oil, finally grounded about 200 metres offshore at Canoe Island. It is believed that tug and tow were in the course of a voyage from Venezuela to Guyana.
The Authorities in Trinidad and Tobago have, so far, been unable to identify the owners of the tug and barge. Further investigations have revealed that both tug and barge have an extremely dubious history. The barge was classed with ABS until December 31st 2018 but no further registration could be traced. Records revealed that it was docked in Colon, Panama in March 2023 in damaged condition and needed constant pumping to prevent it sinking. In June 2023 the barge was reported as having been sold and it then lay stranded for a period of 7 months on a beach. On December 30th 2023 the tug Solo Creed moved the barge initially to Colon and then to Venezuela. Tug and barge were reported to be in Pozuela Bay, Venezuela between January 27th and 31st. On February 3rd tug and barge were spotted heading northeast with the barge on a long tow and leaking an oily substance and from this it is assumed that the barge had taken on an oil cargo whilst in Venezuela. Later satellite imagery showed that the barge had capsized approximately 16 kms southeast of Tobago and that the tug had apparently fled the scene. No trace of the tug has since been found but it has since been discovered that the tug had put in a request for a pilot to take tug and tow into Guyana though the cargo receiver in Guyana could not be identified. Just to confuse things further a businessman in Nigeria has claimed to have bought tug and barge and that both were en route for Nigeria. Further investigations will continue but it is safe to assume that neither tug nor barge was insured.
Pollution of 15 kms of beaches, mangroves and the rocky shoreline has been extensive and clean-up operations have been co-ordinated by Tobago Emergency Management Agency (TEMA). Samples of the oil have been collected for analysis. Related pollution has been reported to have occurred 830 kms away across the Caribbean on the island of Bonaire. Two local salvage companies have since been engaged to remove oil remaining on the barge.
In a lengthy submission (IOPC/APR24/3/6/1) the Government of Trinidad and Tobago outlined its efforts to identify the owners of the tug and the barge. It provided details of the clean-up operations and estimated that the cost of spill response was likely to be in the region of USD 25.5 million.
With understandable reluctance delegates accepted the Director’s advice that tug and barge represented a “seagoing ship” within the 1992 CLC definition and that the Fund would therefore be obliged to pay compensation. The Director was authorised to settle claims as seemed appropriate.
The Republic of Korea made a statement (the text of which is included in full in document IOPC/APR24/9/1) stressing the significant implications of this case for 1992 CLC and Fund Conventions. This was an incident “linked to deliberate illegal actions such as intentional vessel registration avoidance.” The financial consequences for member states which will be obliged to pay substantial compensation are serious. The delegation made a plea to all member states to fulfil their obligations under the Conventions “including management and supervision obligations of the flag States, to protect the interests of the IOPC Funds and Member States.”
Several delegations spoke in support of this statement and expressed appreciation for the efforts being made to identify the owners of tug and barge and their concern at the threat to the environment and the stability of the compensation regime posed by substandard vessels sailing with insufficient or no insurance.
Patrick Griggs.
[1] Former President, Comite Maritime Int.
[2]The International Group drew attention to what it called a “parallel fleet” which is legitimately transporting Russian oil where neither the vessel owners nor service providers are connected with G7 or coalition countries.