Pollution history

TANKERS, BIG OIL & POLLUTION LIABILITY 1

Tankers, Big Oil &

Pollution Liability

Tormod Rafgard

Content from this book may be reprinted as long as it is quoted and author is notified.Author can be contacted at: [email protected]

2 TANKERS, BIG OIL & POLLUTION LIABILITY


Tankers, Big Oil &

Pollution Liability

Tormod Rafgard


Tankers, Big Oil & Pollution LiabilityTormod Rafgard

Foreword & Acknowledgements 8Glossary 10

1. The big bang i. Un-loved tankers 13ii. Industry response 15iii. Polluter pays? 16

2. Petroleum and tankers i. The emergence of the tanker 19ii. Oil company fleets 23iii. Coal or oil? 25iv. Independent owners 29v. Initiatives for safety and environment 33vi. The Second World War; the dependence on oil 37vii. Consumption growth and giant tankers 39

3. IMCO – Safety first! i. Early international initiative 46ii. Torrey Canyon 48

4. New conventions in 1969: Tanker owners face pollution liability & intervention of coastal states

i. Background 58ii. An industry divided 62iii. The Diplomatic Conference – Brussels 1969 64iv. The “cargo” resolution 73v. The intervention convention 75

5. Compensation for oil pollution damage introduced for the oil companies i. The 1971 Convention 78ii. New incidents 80iii. Brussels once more, but why relieve the shipowners? 85iv. Technical co-operation? 88

INDEX


v. The fee system 89vi. Interpretation 90vii. Role of the Fund: Substitution & supplementation 93viii. Conditional relief 99ix. The maximum amount 106x. Administrative matters 108

6. Tanker accidents accelerate – the Amoco Cadiz oil spill, 1972-1982i. Spectacular tanker accidents 109ii. Berge Istra 110iii. Argo Merchant 114iv. More accidents and reactions 115v. The Amoco Cadiz 117

7. Oil prices through the roof The huge tanker surplus – 1970-1990

i. The tanker surplus 124ii. Remedial measures 127iii. The crisis deepens 134iv. Counterproductive measures? 140v. Pricy fuel and dirty tricks 142vi. More spills to follow 146vii. The slow but strong recovery of the tanker markets 149

8. The 1984 Protocols – A stroke in the air? i. Setting the agenda 156ii. Chemicals 157iii. What ships, what oil? 159iv. Pollution damage – preventive measures 162v. Geographical scope 168vi. Exoneration 170vii. Channelling 173viii. Limitations & Limits 177ix. The fees to IOPCF 184x. Simplified updating of limits 185xi. Entry into force/ratification 186xii. Summary – Aftermath 187

INDEX


9. Exxon Valdez and subsequent incidents in US waters i. Exxon Valdez 195ii. Subsequent incidents in US waters 207iii. New radical legislation prepared after Exxon Valdez

– The tanker industry in despair 213iv. OPA90 & the IMO instruments 221v. Compensation for damage to natural resources 222vi. Responsible parties – Channelling of compensation claims 225vii. Certificate of Financial Responsibility (COFR) 229viii. Prevention is better than cure – Technical requirements 235ix. OSLTF in trouble 238x. Deepwater Horizon oil spill 239

10. IMO wakes up i. More OPA approaches? 244ii. The Salvage Convention 246iii. International Convention on Oil Pollution

Preparedness Response and Co-operation (OPRC) 248iv. Resurrection of the Protocols 248v. TOVALOP & CRISTAL out 254

11. New serious incidents at tanker terminals & in coastal waters around the globe, 1991–1992 i. Haven 257ii. ABT summer 262iii. Australia warns against “Ships of Shame” – Kirki 263iv. Aegean Sea 266v. Braer 268vi. Maersk Navigator 273vi. Sea Empress 274

12. Draconian measures required? The viability of IMO’s solutions questioned again i. Erika 280ii. Castor and Prestige – Place of refuge 300iii. Draconian measures required? 304iv. Compensation claims against classification societies 306v. IOPCF position 309vi. Greek master arrested 313

INDEX


13. Supplementary compensation funds formed – Private schemes to replace/delay IMO i. Review of the current system 316ii. Compensation increased 318iii. New Diplomatic Conference – Supplementary Fund

established 320iv. STOPIA & TOPIA 321

14. New big spills in 2007i. Volgoneft 326ii. Hebei Spirit 328

15. Tanker owners & their classification societies 330

16. On reflection 344

Appendices:

Hebei Spirit – Extract of IOPCF annual report, 2009 356

Message from INTERTANKO’s MD in the annual report, 1995, on his retirement after 25 years 371

Bibliography 376

Index of Ships 378Index of Organizations and Key Companies 380Index of People 382

INDEX


Foreword & Acknowledgements

In 1969, I was a member of the Norwegian delegation to the IMCOconference in Brussels to devise a new liability scheme on oil pollutiondamage. The conference was called in response to the Torrey Canyondisaster in the English Channel. This was the first of many oil pollutionaccidents that spurred significant, often contradictory, reactions fromvarious stakeholders with competing interests.

Later in my career, which included my time as the director of theinternational tanker owners’ association (INTERTANKO) and serving as ajudge in the Court of Appeals, I was well placed to witness the unwieldy andcumbersome development of an ever-more complex liability structure. Withso many parties involved, including governmental agencies, oil companies,environmental protection groups, classification societies, P&I clubs, coastalstates and the shipping industry, it is perhaps no surprise that every accidentseems to result in a scramble to pin the blame on one party, while everyoneelse seeks to disclaim responsibility.

Is this an effective and appropriate way of dealing with an importantmaritime safety issue? Is it to the benefit of safety at sea to assign blame toone party while exonerate the whole industry whenever an accident occurs?

When I retired from INTERTANKO in 1995 to become a judge, I began aproject to describe the process. Progress was slow until I was introduced tothe Leif Høegh Foundation, and to Ove - and his brother Westye Høegh, thetwo senior members of the Høegh shipping family. Ove Høegh is educatedas a naval officer and holds an MBA from Harvard Business School. WestyeHøegh holds a Bachelor of Law from University of Oslo, and an MBA fromWharton School, University of Pennsylvania. Both have been senior partnersin the shipping company Leif Höegh & Co., Oslo, Norway. Among manyother positions in maritime and industrial organizations, Ove Høegh hasbeen the vice chairman - and Westye Høegh the chairman ofINTERTANKO. Westye Høegh has, in addition, been president of TheNorwegian Shipowners' Association, and the chairman of the council of Detnorske Veritas. Our conversations led to a closer co-operation with the LeifHøegh Foundation, which generously has covered most of the project costs.

FOREWORD & ACKNOWLEDGEMENTS


The Foundation holds all copy and distribution rights to this publicationuntil all costs related to this project have been recovered, after which time Itake over all copy and distribution rights to the paper edition of thispublication.

I believe that this publication is a unique compilation of maritime history,case studies and anecdotes. I also believe that it is of value not just toseafarers, but all those involved with sea transportation who are committedto continuous efforts to reduce the risk of pollution at sea.

I am also grateful to Ove Høegh for introducing me to Dag Bakka Jr., anexperienced author of a number of maritime-related books, who offeredinvaluable insights on how to present complex material and contributedchapter 7vii, which describes the market fluctuations which occurred aftermy time in shipping.

I am also deeply grateful to Blue-C, who was responsible for the final reviewof my manuscript and to Sax Media & Design for the design and layout.Their input has helped to create a book whose content I hope does justice tomany contributors who have assisted me so admirably.

Finally I would like to express my gratitude to shipping adviser JarleHammer of HM Strategies for his supply of illustrative graphs on thedevelopments in the tanker market. Many thanks also to the seniorinsurance broker and jurist Sven Moestue for his reflections on explosions inlarge tankers and to Supreme Court Justice Lars Oftedal Broch, who hascommented upon chapters four and five.

I am furthermore indebted to the English shipping journalist Michael Greywho commented upon the very first draft many years ago and again beforethe book went to the printers. I am grateful for the participation of manyother people and institutions, who are too numerous to list here.

There is, however, one exception: Warm thanks to my wife, Anne Lise, forher patience during the years after 1996. I believe that I may have devotedmore time to pollution liability than to my family – a condition I hope toreverse in the years ahead!

Asker, May 2011

Tormod Rafgard

FOREWORD & ACKNOWLEDGEMENTS


GLOSSARY

GLOSSARY

ABS American Bureau of ShippingAPI American Petroleum Institute APOC Anglo Persian Oil Company CLC 1969 International Convention on Civil Liability for Oil Pollution Damage, 1969CMI Comite Maritime International CRISTAL Contract Regarding an Interim Supplement to Tanker Liability for OilPollution CVM Contingent Valuation Methodology DNV The Norwegian VeritasECJ European Court of Justice EEZ Exclusive Economic Zone EMSA European Maritime Safety Agency EPA Environmental Protection Agency FC 1971 International Convention for the Establishment of International Fund forCompensation for Oil Pollution Damage, 1971 FOBAS Fuel Oil Bunker and Advisory Service FOEI Friends of the Earth InternationalFPSO Floating Production/Storage/Offloading FSO Floating Storage/Offloading G.B.P British poundsHBLS Hydrostatically Balanced Loading Systems IACS International Association of Classification Societies IALA International Association of Lighthouse Authorities ICS International Chamber of Shipping IMCO Inter-Governmental Maritime Consultative Organization IMIF International Maritime Industry Forum IMO International Maritime Organization INTERTANKO International Association of Independent Tanker Owners ISM International Safety Management CodeITF International Transport Workers’ Federation ITOPF International Tanker Owners Pollution FederationIUCN International Union for Conservation of Nature and Natural Resources


GLOSSARY

IWF International Workers’ Federation LF Limitation Fund LLMC Convention on Limitation of Liability for Maritime Claims MEIF Mandatory Excess Insurance Facility MHPA Milford Haven Port Authority NOAA National Oceanic and Atmospheric AdministationNRDA Natural Resource Damage AssessmentNTSB National Transportation Safety Board OBO Ore-Bulk-Ore OCIMF Oil Companies International Forum OCS Outer Continental Shelf OPA90 Oil Pollution Act OPEC Organization of the Petroleum-Exporting CountriesOSLTF Oil Spill Liability Trust Fund PARIS MOU Paris Memorandum on Port State Control PLATO Pollution Liability Among Tanker OwnersQ.I Qualified IndividualRINA Registro Italiano NavaleSBT Segregated Ballast Tanks SDR Special Drawing Rights SF Supplementary Fund STCV Standards of Training, Certification and Watchkeeping for Seafarers STOPIA Small Tanker Oil Pollution Indemnification Agreement SUMED Suez-Mediterranean PipelineTAPAA Trans-Alaska Pipeline Authorization Act TOCA Transfer Of Class Agreement TOPIA Tanker Oil Pollution Indemnification Agreement TOVALOP Tanker Owners Voluntary Agreement concerning Liability for Oil Pollution ULCC Ultra Large Crude Carriers UNCTAD United Nations Conference on Trade and Development UNCITRAL United Nations Commission on International Trade Law USCG United States Coast GuardVLCC Very Large Crude Carriers


THE BIG BANG

1

THE BIG BANG

In March 1967, aircraft of the UK Royal Air Force and Royal Navy carriedout spectacular aerial bombing as a desperate last resort to stop massive oilpollution from one of the largest tankers afloat. The name of the groundedtanker was “Torrey Canyon.”

But bombs could in no way prevent her cargo from polluting the coast ofCornwall and – on the other side of the English Channel – the beaches of Brittany in France. More than 100,000 tons of Kuwaiti crude oil leaked out,oil that refused to catch alight, burn and disappear. Instead the accidentsparked media coverage beyond anything experienced in the shipping industry.The tanker fleet, which annually had provided consumers around the worldwith more than 1 billion tons of oil, came suddenly into focus.

The shipping industry had had its tragic moments and appalling losses of livessuch as the Titanic, but this accident in the spring of 1967 revealed an entirelynew and more damaging capacity for spoiling nature and the environment.

Torrey Canyon – the first “superspill” – ignited the formation of a new kindof international pressure group: The environmentalists. Changes in inter -national law and the emergence of environmental law as a new branch of maritime law followed in the footsteps of sudden public interest.

Ordinary people became concerned and angry as the oil spill began to pollutethe coasts. Contaminated coastlines and dying seabirds provoked public outcryand a demand for “justice.” But who was ultimately responsible?

Many parties were involved – not only the shipowner and the sea transpor -tation industry at large, but also cargo owners and the oil industry, as well as


THE BIG BANG

navigation safety agencies and local and national authorities that brought upthe issue with international maritime organizations.

The process Torrey Canyon ignited came – in time – to change the inter -national liability regime for sea transportation through a complex processdriven by a score of different agents. The evolvement of the liability regimechanged the conditions for the shipping industry, not always to the better andnot always with a fair distribution of responsibility.

How could this happen?

I. UN-LOVED TANKERSOil is the world’s main energy source, and the shipyards of the world havebeen furnishing shipowners and oil companies with a steady flow of largetankers for more than a century. The quantities of oil that they could carrymeant an increasing pollution potential. Not unexpectedly, a number of seriouspollution accidents followed. Television screens showed golden beaches turnedinto dirty, polluted seashores and birds covered by black, greasy oil.

Some tankers became notorious. Names like Torrey Canyon (1967), ArgoMerchant (1976), Amoco Cadiz (1978), Atlantic Empress (1979), ExxonValdez (1989), Haven (1991), Kirki (1991), Aegean Sea (1992), Braer (1993),Sea Empress (1996), Erika (1999) and Prestige (2002) are not easily forgotten. The largest tankers today can carry 400,000 tons of crude oil, a damage potential far beyond the Exxon Valdez spill of 36,000 tons. Still, Exxon’stanker caused the loudest reverberation ever experienced in the field of maritime transportation.

Pulitzer Prize-winning journalist Eric Nalder, an investigative reporter fromThe Seattle Times, published a terrifying portrait of the oil trade in 1994. Onereviewer of his book, “Tankers full of trouble,” wrote: “Get on board thisship with Eric Nalder, and you won’t get off until you are sea sick with anger.”

Without subscribing to that opinion, it is easy to agree with Mr. Nalder’s comments on p. 223: “Even people who hate oil tankers need fuel for theirautos, factories and furnaces. They would raise hell if he spilled any, and theywould be furious if he did not deliver.”

Twenty years before Nalder, another American reporter, Noel Mostert, woninternational praise for his book on the gigantic crude carriers that at the time


THE BIG BANG

had begun to ply the seas in growing numbers. A full cargo of crude oil onboard a medium-sized tanker was enough to supply the energy needs of a cityof 40,000 people for an entire year when his book “Supership” was published.

In his view, the coming of the large tankers would result in disasters on anunprecedented scale. But despite all the harsh comments, Mr. Mostert admitsthat the world cannot do without them. In “Supership,” published in 1974,he describes the situation on page 16. To paraphrase: Ships can impact howpeople fare in life. They connect people. If ships can make smooth, timely journeys can greatly impact the people depending on them: The ship’s suppliescan help them to survive. We saw this with oil tankers, getting the necessaryfuel that’s needed worldwide. If we didn’t have the oil tankers, then the worldcould grind to a halt. Nothing will change as long as we are so dependent onoil. But if that changes, then the ships will quickly disappear.

Much has changed since the publication of “Supership,” but oil as energy and tankers for transportation are as essential to the world today as they wereat that time. Neither has the threat that tankers are imposing on the fragilemarine ecosystem vanished.

Oil leaking from a punctured tank will spread rapidly, cause pollution andform a threat to the environment. The fact that crude oil is a product of natureand a part of the environment is of little comfort when birds and beaches aresmeared by ugly layers of oil and marine life is being laid waste.

Notes:What is referred to as a “tanker accident” need not necessarily relate to a tanker. Motor ships carry“bunkers” to fuel the ship’s own engine. This heavy diesel oil kept in designated tanks represents a pollution hazard if it leaks out. In March 1999, a woodchip carrier, New Carissa, stranded and pollutedthe coastline of Oregon, in the United States. The ship was a 44,500-tonner on her way to take aboarda mountain of timber off cuts. More than 1,000 tons of bunkers leaked out and menaced the oysters inthe Oregon waters as they fattened themselves for the tables of fashionable Seattle, Washington, USA.In the media, New Carissa was presented as a tanker. The public requested effective measures againstsuch nasty polluting “tankers.” Following the efforts of US authorities, an industry commentator, Alinede Bievre, claimed that the Torrey Canyon strategy of bombing polluting ships had come back into fashion. The US Oil Pollution Act of 1990 did not stop the US government from deploying torpedoesand napalm bombs. The attempts caused the vessel to break in two. In November 2002, a jury foundthe operators negligent and awarded the state of Oregon USD 25 million to cover removal expenses. The tragic saga of New Carissa was described by the exasperated local congressman Peter DeFazio as“a Stephen King novel.” Source: Lloyd’s List, March 8, 1999.


II. INDUSTRY RESPONSETwo years after the Torrey Canyon accident, a UN body, the Inter-Govern-mental Maritime Consultative Organization (IMCO), agreed to impose strict(no-fault) liability for damage polluting tankers caused. To ensure that pollution victims were compensated, compulsory insurance was introducedunder the terms of the new International Convention on Civil Liability for OilPollution Damage, 1969 (CLC 1969).

IMCO also looked into the role of the owner of the oil cargo. Should theoil companies contribute to the compensation for the damage caused to victimsof oil spills? In 1971, a supplementary international fund was set up. The Fundwas financed by the oil industry. The new treaty was named InternationalTanker Convention on the Establishment of an International Fund for Com-pensation for Oil Pollution Damage 1971 (FC 1971).

Over the 40 years since the Torrey Canyon disaster, a series of marine accidentshave produced an extensive international regime for the protection of the environment and the marine bio-diversity. In 2001, the International MaritimeOrganization (IMO), as IMCO had been renamed, agreed on a conventionfor compensation for pollution caused by bunker oil from all ships, not onlytankers.

Tanker accidents represent some three percent to four percent of the total marine pollution. Oil from leaking tankers equals about the amount of oil thatseeps to the surface from the bottom of the seven seas every year. The rest is mainly industrial waste or comes from refineries, terminals, offshore production and normal ship operation. And one should not forget that mostspills from the world tanker fleet are not the result of accidents, but from routine operations in connection with loading, discharging, bunkering in portsor tanker terminals where reception facilities are often lacking.

Statistics tell us that pollution from tankers is decreasing. Records the Inter-national Tanker Owners Pollution Federation (ITOPF) compiled disclosedthat, on the basis of accidental spills, oil lost from tankers in 2009 was at thelowest level since it began compiling such statistics in 1970. In the same period,the volume of oil carried by sea has doubled, according to Fearnleys, the Oslo,Norway-based shipping analysts.

Although we are striving for a zero-tolerance of oil spills, the overwhelmingpart of the world’s tanker fleet is operating along the strict regulations

THE BIG BANG

imposed by IMO and controlled by Port State Control agencies, charterersand classification societies. The tanker owners long ago saw the human factoras a crucial element in maritime safety and observing operational proceduresas paramount.

Notes:The outcry for compensation against pollution offenders at sea supersedes other types of industrial accidents. Nearly 3,000 people died during a night in 1984 and some 200,000 were injured in the townBhopal in India, where 43 tons of poisonous gas leaked out from a Union Carbide factory. Accordingto Amnesty International, there have been at least 15,000 related deaths since. The compensation thecorporation offered was a payment of about USD 1,200 to each family. This is a fraction of what Exxonspent in Alaska after Exxon Valdez. According to Eric Nalder, “Tankers full of trouble,” New York,1994, p. 222: “Exxon spent forty thousand dollars on the attempted rescue of each and every one of5,000 oiled sea otters found in Prince William Sound.” Despite the exceptional losses of lives UnionCarbide caused, the press coverage is not comparable with the publicity about Valdez, with no lives lost.See Dan Kurzman: “A Killing Wind: Inside Union Carbide and the Bhopal Catastophe,” New York,1987.

III. POLLUTER PAYS?Thanks to the position the US took, the international community has been unable since 1969 to agree on how to deal with victims suffering from damagespolluting tankers caused.

The following pages represent a personal journey in search of solutions thatbegan some 40 years ago. Can we attain cleaner seas, pay adequate compen-sation and still get cheap gas for our cars and heating oil for our homes?

Having worked with tanker owners from 1965 to 1995, I might seem presumptuous to believe that an objective picture can be presented. However,13 years’ work as a judge should hopefully provide sufficient distance to undertake a more unbiased re-examination. In any case, my ambition is onlyto bring to light commercial considerations which otherwise seem disguisedin legal and technical agendas. Sometimes, the forest might be hidden behindall the trees.

There is very little disagreement about the “polluter-pays principle.” In anideal world, a polluter should be easy to identify and be compelled to pay forthe damage with his own money. It seems logical that if the principle is notapplied to cover the costs of the environmental damage, either the environmenthas to cure itself by the process of nature, or the coastal state – and ultimatelythe taxpayer – has to pay for the damage caused.

In the real world, the situation is more complicated. Principles are fine, but


THE BIG BANG


the crucial test is their implementation in practice. In general, a major problemremains: To find – often hidden behind the curtains – the concurring polluters.

The tanker owner is the easy target. The standards of tankers vary fromvessel to vessel. Most of the tankers in the world fleet are well maintained.But not all. During the last decade, increased attention has also been paid tooil companies that select old, low-cost tankers to carry their oil. Thereby, financial results improve and shareholders are happy to see the dividend goingup. The story about the 24-year-old tanker, Erika, hoisting the flag of Maltaillustrates the role of the other participants involved in the game of marine oiltransportation.

Ship management, manning, operations, maintenance and cargo-handlingare closely interlinked functions that need to be considered in unison if tankersare to be operated in the optimum manner. A number of initiatives have beentaken to improve safety and avoid pollution. It may be fair to say that thetanker safety record has improved more or less steadily after the enforcementof the MARPOL Convention of 1973/78 and a series of mutually reinforcingindustry mechanisms introduced after 1980.

On the surface, the “polluter-pays principle” is just fine. But the quality of theclassification societies, the navigational aids governments provided, togetherwith the role of the insurers, the pilots and the terminal or harbour masters,as well as the charterers, are all relevant elements when considering the valueof the “polluter-pays principle.” As important links in the marine safety chain,they deserve proper attention.

This book seeks to show how the various actors are involved: Cargo owners,charterers, tanker owners, classification societies, port authorities, terminals,pilots and the salvage industry. Together, these groups form the links in whatmay be seen as the “responsibility chain.”

By focusing on the master of the tanker as the only accountable part, togetherwith the owner, one is running the risk of contributing to “a culture of blame”which might hide the real reasons for pollution accidents and the loss of lifeat sea. Each of the groups mentioned forms a part of the fabric that controlsa tanker, and it is essential that all parties involved follow up their obligationsof their contribution to the transport chain. If one or more links fails to per-form, a serious accident might occur. The Greek shipowner Philip Embiricos,who for several years was a major “safety spokesman” of the InternationalAssociation of Independent Tanker Owners (INTERTANKO), presented his

THE BIG BANG


THE BIG BANG

view in the association’s 1997 annual review of “The Chain of Responsibility.”It is shown below.

On the following pages, the focus is on oil tankers – ships that carry or aredesigned to carry oil as cargo. Prevention will always be better than cure, buteven so, the reader will find only minor references to the technical discussionsabout safety rules and pollution prevention. Information on that importantsubject will have to be sought elsewhere.

Instead, the intention is to review the “cure,” which on the following pages isthe development of compensation and liability rules in light of their origin anda number of spectacular tanker accidents.

Notes: A report, “Ships of Shame” from the Australian House of Representatives’ Standing Committee onTransport, sent to the Parliament in December 1992 states (paragraph 25): “While incidents involvingoil tankers have recently received publicity, the Kirki for example, the Committee has not received agreat deal of evidence concerning the operation of oil tankers. It is generally recognised that the con-dition of oil tankers are better than dry bulk carriers.”The “polluter-pays principle” is a cornerstone in environmental policies. Its first official mentioningseems to be in 1972 in a recommendation the OECD Council passed. It is later adopted by a numberof bodies such as IMO and the European Community. It is no legal rule in the strict sense, rather apolicy declaration or a slogan that appeals to common sense: “If you make a mess, it is your duty toclean it up. If there is damage, you should repair.” It says a lot, but lacks a clear definition and mayperhaps sometimes serve as a soporific for an impatient regulator.

Photographers have been listed whenever possible on photos used in this book. When photos came directly from a Website where the photographer's name was not available, we have attributed thephoto to that site.

CLASS SOCIETIESGOVERNMENTS

LAW COURTSP&I CLUBS, CARGO

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AUTHORITIES

PILOTS

CHARTERERCHARTERER SHIPOWNERSHIPOWNER

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PETROLEUM AND TANKERS

2

PETROLEUM ANDTANKERS

I. THE EMERGENCE OF THE TANKERThe 20th century was characterized above all by the introduction of petroleumas the main energy source. It became the foundation of modern society withrespect to lighting and heating, transport and travel – in other words, to thevery organization of our communities. The laden oil tankers were carriers of progress, bringing the essential source of energy that would make modern society function and revolve.

As with every blessing, there are also shadows – one being the emission ofgases that threaten to disturb the very ecological balance of our planet. Thisis a major challenge in our time – and as yet unsolved.

Another is the potential for pollution and local biological damage oiltankers cause. This challenge – perhaps of less importance than the emissionproblem – has been dealt with through a gradual process that has managed tocurb oil spills to a minimum and inspire a zero-spill objective.

For almost 150 years, ships have been carrying petroleum, and the storyof tanker shipping is riddled with geopolitical and logistical issues as it grewto become a global energy lifeline.

The origin of the tanker trade goes back some 150 years and is linked to thediscovery of oil in the US and the invention of paraffin lamps.

Three Americans: Yale professor B. Silliman and businessman George H.Bissel led by a retired train conductor, Edwin Drake, started the world’s first

oil company, The Pennsylvania Rock Oil Company, around 1855. After havingbeen the laughing stock of the people in the area, Mr. Drake struck oil bydrilling for it on Aug. 27, 1859, close to a small town named Titusville. Thiswas the first time in history that oil had been produced in this manner. Thedaily production was soon 25 barrels. The railroad conductor now becameColonel Drake and the oil was sold for USD 18 per barrel.

The paraffin lamps not only gave a clear bright light, they were also odour-less and smokeless. Furthermore, the petroleum used to fuel them was alsomuch cheaper than the disgusting, evil-smelling lamps fed by whale oil thatpreviously had been used. The new illuminator changed people’s way of lifeby extending the hours of daylight. Oil turned out to be perfect, not only forthe lamps, but also as lubricants, solvents and in other applications. The increasing demand for the product turned petroleum into an important newenergy source.

The key to further growth of the American oil industry was transportation.But to satisfy requests from overseas consumers proved problematic; oil wasa dangerous cargo. When carried in barrels and cases on board ships, it wouldoften leak out, causing a constant risk of explosion and fire.

The first full cargo of oil to cross the Atlantic was carried in the 224-ton(350 deadweight tons, or dwt) brig, Elizabeth Watts. An Englishman, Mr. E.A.Sanders, owned her, and the ship sailed her first voyage from Philadelphia toLondon in late 1861. The departure from the American port had difficulties.Crewmembers considered the new cargo with scepticism, and many deserted.The captain, Charles Bryant, had to resort to the local bars in Philadelphia,Pennsylvania, USA, to assemble men “willing” to take the brig to England.Despite the fact that the crew had been made up of several drunks from water -point bars, the passage went well and encouraged an increasing trade. Twoyears later, Mr. Gibson of the Isle of Man took a new initiative. He built aniron hull sailing ship, Ramsey. She could carry oil in bulk and was noted forher hollow masts which, connected with the specially designed iron tanks,served as expansion trunks. In addition, general cargo was carried on deck.

On the other side of the North Sea, Norwegian ship-owners entered thegame. The first primitive tanker might possibly have been the iron schooner,Risobank, built in Inverkeithing, not far from Leith, Scotland, in 1868. Theowner, Emil Salvesen, operated an oil refinery in the little town of Mandal atthe Southern tip of Norway. After some trips, however, the iron schooner disappeared with the Captain Edmund Eeg and his full crew in stormy winterweather somewhere off the Norwegian coast. Captain Eeg was the brother ofmy great-grandmother, and my one and only family relation in the story you




are about to read! The next Norwegian effort was undertaken in co-

operation with a group of French merchants in the1870s. Gustav Conrad Hansen of Tonsberg, togetherwith his captain, Even Tollefsen, had four sailing shipsrebuilt for transportation of oil in bulk by lining thewooden hull with cement or felt. They had the sides ofthe holds double-boarded and sealed. One of the shipsgrounded in Delaware River in 1879. Another left theUS with her first cargo, never to be seen again, but theconcept proved reasonably satisfactory.

A German, Mr. Heinrich Riedemann, ordered the firstdeep-sea steamship adapted to carrying oil in bulk, sim-ilar to the tankers we know today. Launched in June1886 in Newcastle upon Tyne for a German subsidiaryof Standard Oil, the ship was a significant breakthroughin the evolution of oil tankers. This true ancestor ofmodern tankers was about 3,500 dwt, given the nameGluckauf and was constructed with a centre bulkheadand a number of transverse bulkheads placed in pairs.A steam engine was fitted aft, where it would interfereleast with the cargo. The danger of sparks from the funnel falling on the deck was thereby somewhat mini -mised, and the explosion risk reduced. Nevertheless,German sailors claimed that the tanker rather deservedthe name “Fleigauf” (blow up). When Gluckauf arrived

Gluckauf

S.S. Gluckhauf is the ancestorof the modern tanker. She was about 3,500 dwt andconstructed with a centre bulk-head and a number of trans-verse bulkheads placed in pairs. A steam engine was fitted aft,where it would interfere leastwith the cargo. The danger ofsparks from the funnel fallingon the deck was thereby mini -mised, and the explosion riskreduced. Nevertheless, German sailors claimed that shedeserved the name “Fleigauf”(blow up).On her first arrival in NewYork, the longshoremen black-listed her. Oil company person-nel refused to supply her withbunkers. Nevertheless, shetraded for seven years until sheran aground.

© Furulund, Svein Erik / Aftenposten / Scanpix

Photo: www.aukevisser.nl


in New York to load, the longshoremen blacklisted her, and as oil companypersonnel refused to supply her with bunkers, she had to sail up to St. John to refuel. Three weeks later, she returned to Germany with her first cargo.Gluckauf traded until 1893, when she ran aground off New York.

When Gluckauf was launched, however, the Swede Ludwig Nobel – brotherof the famous Nobel Prize initiator Alfred Nobel – had already introduced arevolutionary single-purpose oil carrier. The introduction of the new designwas a consequence of the Nobel brothers’ purchase of land near Baku on theCaspian Sea, where huge fountains of oil were found in the ground. This madeRussia the world’s largest oil producer for several decades. In 1878, Zorasterwas delivered from Motala Shipyard in Sweden. Contrary to other “tankships” built at the time, she was not a dual-purpose ship, but a pure tankerdesigned to carry 250 tons of kerosene in 21 vertical cylindrical tanks withinher iron hull. Zoroaster was also unique in the sense that she burnt fuel oil,not coal, a feature that other tanker owners did not adopt until 40 to 50 yearslater. The Nobel design was improved several times and the cylinders removedso the oil could be carried directly in the iron hull. (“Gold ships,” pp. 18-23).

Tankers were for many years considered to be dangerous ships. A number oftragic losses occurred both because of design errors and operational errors.The English directors of the Suez Canal Company had, since the opening ofthe canal in 1869, denied the transit of tankers with oil in bulk. Only the transport of case-oil was permitted. This meant that any bulk oil from themain source of oil outside America – from Russia to the Far East – had to betaken all the way round the Cape of Good Hope. As late as 1890, the Suezmanagement turned down an American request to permit a Standard Oiltanker to transit the canal.

The leap forward came as a result of the initiative of Sir Marcus Samuel,the English founder of Shell Oil. Transit through the canal was vital to his planof shipping Russian kerosene from the Black Sea to Asia. The 5,000 dwtMurex-class tankers were constructed in West Hartlepool and built with spe-cial water ballast tanks to facilitate de-ballasting in case they went aground.Their design met all the stringent requirements of Lloyd’s insurers and wasaccepted by the directors of the Suez Canal. On her inaugural voyage in 1892,Murex carried over 4,000 tons of oil through the Suez Canal. Nine similar

Sir Marcus SamuelWhilst Shell for several years had successfully rejected the competition from Standard Oil, the tide turned in theearly 20th century against the founder, Sir Marcus Samuel. Perhaps preoccupied from his previous concentrationon the development of his oil business by the civic pomp in England after his knighthood and election as theMajor of London, he faced a new ambitious attack from Royal Dutch. This company originated in the West Indies and had prospered swiftly in the oil business. Dutch trader Jean Kessler developed it. Soon, the companycame up against both Shell and Standard Oil. After a horrendous and intricate struggle, Sir Marcus in 1906 wasforced to merge with Royal Dutch on humiliating terms: Forty-sixty in Dutch favour.




tankers soon followed. Now Mr. Samuel’s progress endangered the Ameri-

can global trade monopoly that was so cleverly built upby John Davison Rockefeller and his Standard Oil com-pany. Concerned about the competition from the up-start Shell, Mr. Rockefeller initiated a violent campaignin London to stop the passage of the Murex tankersthrough the canal to the Far East. His lawyers lobbiedthe Foreign Secretary, Lord Salisbury, and members ofParliament as well as some influential English news -papers. But all to no avail. The Rockefeller tankers werethereby left with a detour of the costly extra 4,000 milesaround Cape of Good Hope, and the Standard Oil’s monopoly was broken.

Notes:The size of a tanker is measured in tons. But the definition of tons differs.In the following, the most common indicator – deadweight ton (dwt) – isused. This will indicate the maximum number of tons of cargo and fuelthat the tanker in question can carry. An alternative measurement is grossregister ton (grt). Grt represents roughly the cubic capacity of the tanker.A variation is net register ton (nrt), which is the volume available for cargo(and passengers). Finally, lightweight ton indicates the weight of the steel.This measurement is most interesting when tankers are sold for demolition.

John Newton, “A Century of tankers,” published by INTERTANKO,2002, and Anthony Sampson, “The seven sisters,” Viking Press, 1975. OnRisobank, see A. Weyergang-Nielsen, “Skonnert Riiso-bank,” NorskSjofartsmuseum, 1988 and Rolf Kr. Danielsen, “Frakteskuter ogFraktemenn.”

Currencies are written with the USD or GBP equivalents in parenthesesbased on the exchange rate from the year mentioned.

II. OIL COMPANY FLEETSThe 20th century proved to be an age of petrochemicals,mass production and automobiles. By the turn of the20th century, in 1900, 51 percent of the crude oil wasproduced in Russia and 43 percent in the US, particu-larly Texas and California.

The new century produced only one major crisis, but

John Davison Rockefeller

Mr. Rockefeller was born in1839. At 33, he founded Standard Oil Company andthereby the American oil industry. At the turn of the century, he was seen as the richest man in the world, with a fortune exceeding USD 1 billion. He had expressed the hope toreach 100 years old, but thiswas one of the few ambitionswhich did not work out. He died at the age of 98 at his estate in Florida.

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several smaller ones. Among the industries that had toface the turbulence of capitalism and a number of crises– some of them self-inflicted – was the tanker industry.During the next hundred years, the tanker market reflected the fluctuation between periods of demand foroil transportation and periods of oversupply of tonnage.

In 1903, world trade slumped, and Mr. Samuel foundit impossible to resist the competition of a fast-growingDutch competitor, Royal Dutch. Mr. Samuel, who hadthen become Sir Marcus, was forced to swallow a bitterpill and agree with his major competitor in Europe, Mr.Henry Deterding, to merge with his company, RoyalDutch. Thereby, in 1906 a new oil giant was born in Europe: The Royal Dutch Shell group.

By 1901, the Russian oil fields around Baku at theCaspian Sea produced half of the world’s oil, and theNobel Prize, established that year, was founded on itsprofits. A pipeline was built to Batumi, a subtropicalport at the Black Sea, where the crude oil was refinedand exported in tankers. In the years to follow, the oilinstallations in the area became sabotage targets of thegrowing revolutionary forces including Bolsheviks andMensheviks, who fought each other, but both in deter-mined opposition against the ruling Tsar Nicholas II.

Ethnic killing, burning, raping, shooting and throatcutting were the order of the days. A ruthless youngGeorgian who called himself Soso or Koba – until afterthe Russian revolution in 1917 when he took the nameJosef Stalin – was in charge of the Bolsheviks. When theRed Armies seized all oil properties, Russia’s share ofworld oil production was reduced to four percent by1920. The violence had not scared the French Roth-schild family from investing heavily in oil production inBaku until the family in 1912, with huge profits, soldout to Royal Dutch Shell. A third of the production wasstill controlled by the Nobels, who in 1920 sold theirrights to Exxon, which had worked hard to negotiate adeal with the Bolsheviks. But the Russians succeeded togenerate chaos in the Western oil industry for several



Josef StalinBorn probably in Georgia in1879, Josef Stalin was electedSecretary General of the commu-nist party in 1922. From the endof the 1920s, he had gotten thebetter of all opponents withinthe party, not the least Mr. Trot-sky. Stalin became the undis-puted Dictator of the USSR untilhis death in 1953. In his youngeryears, from 1886, he was arevolutionary activist always onthe run; in and out of prison. Asa champion of armed resistanceagainst the Tsar across Georgia,he did his very best to sabotagethe oil production in the Bakuarea. Time and again the installations were in flames.

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years.Compared with Mr. Rockefeller’s Standard Oil Em-

pire, which controlled virtually all oil exports from theUS, Russian interests had a minimal stake in the world’stanker fleet. Foreign companies owned the tankers load-ing its oil at its terminals.

New oilfields were discovered around the world.First, in 1909 in the Middle East, in particular in Persia.Two years later, export was in full swing. Mexico became more and more important as an oil producerand climbed to the world’s third-largest producer in1912. By 1927, Venezuela had become the second-largest oil exporter in the world.

Shipowners in general had continuing reluctance towards the oil trade that was still considered danger-ous. On May 1, 1907, the Anglo-Saxon tanker Silverlipexploded while on passage from Singapore to the UKwith an oil cargo. Of the crew of 53, five died. The restsurvived and were saved by a nearby steamer. In 1909,a fatal tanker explosion occurred in the port of Mar-seilles when an underwriter representative accompaniedby the chief officer went onboard a three-masted oil carrier, Jules Henry, to examine the vessel and to ensurethat the tanks were empty. A terrific explosion followedimmediately after one tank was opened, and the menwere violently thrown backwards. They escaped death,but more than eight crew members were killed.

Note: See Mike Ratcliff, “Liquid: Gold Ships,” pp. 58, 60 and 66, Simon SebagMontefiore, “Young Stalin,” pp. 90-100 and Robert W. Tolfe, “The Russ-ian Rockfellers,” pp. 50-61 and pp. 150-164, Stephen Howard, “SeaShell,” p. 53.

III. COAL OR OIL?The tankers had up to the new century been suppliedwith steam from coal-fired boilers. However, oil couldbe used for firing the boilers, and the first oil-burningtanker, built in 1887, carried fuel oil in her double

Reza Khan Pevlevi Reza Khan Pevlevi seized powerin 1921 and became the Shah ofIran four years later. He startedas a private soldier and was succeeded by his son, Mohammed Reza, in 1941.Commercial oil production hadbegun in Iran at the turn of thecentury, initiated by British interest. It is claimed that this oilsaved the British naval fleet during two world wars. TheIranian oil was in the hands ofBP and made the company ascapegoat for everything thatwent wrong in the country. Froma turbulent political situationemerged in 1951 an exoticleader, Dr. Mossadeq, calling fornationalisation. The shah fledthe country but returned whenMossadeq resigned after interna-tional pressure. But the shah wasforced to flee for good when theIslamic revolution broke out in1978 and Imam Khomeini established the current Iranian Republic.


Rudolf Diesel

Rudolf Diesel was born in 1858 in Paris with German parents. Heinvented the diesel motor. The advantage of oil instead of coalwas gradually accepted by shipowners, and the first dieseltankers built used inexpensive refinery waste as fuel for theirauxiliary boilers. From the 1920s,the dominance in shipbuilding, including tankers, changed fromsteam-powered to diesel-poweredships. Oil was cleaner, easier tostore and much easier to handleby ship personnel. Any discussionof the potential oil pollution riskwas absent. In 1913, RudolfDiesel disappeared mysteriouslywhen crossing the English Channel.

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bottom. It proved to be no success, as she was converted to coal after hermaiden voyage.

The reluctance of shipowners to move from coal to oil was not based on higherprices or scepticism to quality; it was simply the availability. Coal was to behad everywhere. Oil was not. Oil-burning merchant ships could be used onlywhere they could re-fuel and were dependent on the growth of the fuel oil supply and depot network.

The German engineer Rudolf Diesel had invented an internal combustion engine that could operate on liquid fuel, and this technology was first used inocean-going ships in 1912, with the Selandia of the East Asiatic Company ofCopenhagen. Gradually, the advantage of oil was increasingly accepted, andthe first diesel tankers built used inexpensive refinery waste as fuel for theirauxiliary boilers. From the 1920s, the dominance in shipbuilding, includingtankers, changed from steam- to diesel-powered ships. Oil was, after all, muchcleaner and easier to handle. Additional benefits were lower manpower requirements and faster turnarounds in ports. Finally, the weight of bunkeroil compared with coal meant a savings of 25 percent.

Neither was it unimportant that the top executives in Shell had been cam-paigning for the Royal Navy to switch from coal to oil. A key man in the battlewas Winston Churchill, who arrived in the Admiralty in 1911. He was soonconvinced that oil was to be the fuel for the future. However, he regarded Shellas a foreign company due to the Dutch majority ownership, and to Sir Marcus’dismay, he convinced the Admiralty that the Government should buy 51 percent of the Anglo Persian Company in 1913. The price was a bargain: GBP2 million (USD 3.13 million).

The world tanker fleet was dominated by oil company ownership in thefirst decade of the new century. The Anglo American Oil Company, a Britishsubsidiary of Standard Oil, was a major tanker owner at the time. So was theAnglo-Saxon Petroleum Company, which had been formed after an amal -gamation of Shell and Royal Dutch Oil. At the time, the most economical sizeof tankers was thought to be around 9,000 dwt. But soon the size increasedto 12,000 dwt and then to 15,000 dwt. Independent tanker owners played amodest role in the tanker transportation.


Winston Churchill

Winston Churchill, born in 1874, became known as the man who stopped Hitler 70 years later. His first impor-tant commission in England came at a time when the international situation was pregnant with peril. In 1911,he was appointed Minister of the naval forces. Interested in new strategic ways to beat the enemy, he was -among other initiatives - eager to introduce oil as the alternative to coal for the English war ships. In WorldWar II, when England in 1940 was the only nation fighting against Hitler-Germany, Winston Churchill made a comeback as Prime Minister, leading the war against the Nazis.

He was defeated in the election after the war, but re-elected again in 1951. He died in 1965.

In 1912, the first independent tanker owner arrivedat the scene in great style. Halfdan Wilhelmsen of WilhWilhelmsen ordered four tankers, each 10,000 dwt, tocarry oil for Californian oil interests. In the years tocome, a number of other Norwegian shipowners fol-lowed. At the time of Wilhelmsen’s death in 1923, hiscompany owned 40 percent of the Norwegian tankerfleet.

On Aug. 15, 1914, the Panama Canal was openedfor navigation. A Shell ship, Eburna, was the first tocross from the Caribbean to the Pacific. On the verysame date, England declared war on Germany, and theFirst World War began. This soon showed how vital oiland tanker transportation were. Sailing ships were already outdated, and the British Navy had switchedfrom coal to oil when the war broke out. By 1914, thenavies and the motorised army would be helpless with-out oil. So was aerial warfare - still in its infancy - at seaand land, but observation and fighter airplanes werebuilt in increasing numbers.

Oil supplies became the essential ingredient of suc-cess. Their supplies were dependent on safe crossings ofthe oceans of a large fleet of tankers from the oil fieldsto manufacturers and battlefields at the other end. Thisproved to be a bloody business. The German Navyachieved success by mines planted in coastal fairwaysand particularly by use of its submarines. During thewar, nearly 2,500 merchant ships were destroyed, including a large number of tankers, and more than14,000 sailors lost their lives.

What in the end saved Britain and her allies was thatthe US entered the war in 1917 and introduced the con-voy system at sea. Tankers and other merchant shipswere sent across the ocean, in particular from the US,to Europe in convoys protected by warships. However,this slowed down the transportation and meant a further stimulus to tonnage demand. US yards enteredinto a massive construction programme to replace thelost fleet. Germany was at the time facing an accelerat-



Halfdan Wilhelmsen

Halfdan Wilhelmsen was bornin Tonsberg, Norway, in 1864.When he grew up, he witnessedthe stagnant and difficult marketfor sailing vessels. He bought hisfirst 1,800-ton steamer in 1886.The family company already operated a wide range of vessels,including liners. In 1912 and1913, Mr. Wilhelmsen becamethe first important independenttanker owner when he bravelyordered four tankers, each10,000 dwt, to carry oil for Californian oil interests. Moresoon followed. In the years tocome, a number of other Norwegian shipowners followedsuit. At the time of his death in1923, the family owned 40 percent of the Norwegian tankerfleet. The company is still one ofthe major Norwegian shippingcompanies, but has disposed ofits tanker fleet.


ing oil crisis, and their frightening U-boats were in desperate need of fuel. By far the biggest supply came from the US. A quarter of all oil came from

one source alone: Exxon. Britain had also access to oil from BP’s sources atAbidjan, whilst oil Shell supplies came from various supply depots around theworld. The ability to keep the tankers with their oil cargoes going was a majorfactor in the victory of the allies. After the end of the war, the British foreignminister, Lord Curzon, put it this way: “The Allies floated to victory on a waveof oil.”

An immediate trade bonanza followed the war, and the years 1916 to 1920had the highest tramp freight rates so far recorded. The bonanza collapsed inthe autumn of 1920, and the Great War turned out to be the divide betweenthe optimistic pre-war climate in industrial countries and the uneasy, econom-ically unstable, socially explosive and eventually depressive period of 1920 to1940.

The German fleet, which had been the second largest after the British, wasnow effectively destroyed. The Eagle Oil Transport Company operating inMexico ordered 25 new tankers to be built in 1919. This fleet included several18,000 to 19,000 tonners, the largest built so far. Through its tanker company,Anglo Saxon purchased 23 tankers in 1919. A further batch of 17 tankers wasbuilt from 1920 to 1922. Other oil companies followed suit.

Notes:Born in England, William Knox D’Arcy moved to Australia when he was 17. He returned to Englandin 1889. Through his representatives, he managed in 1901 to negotiate a concession for two years ofdrilling in Persia and has since been remembered as the father of the entire oil industry in the MiddleEast. The concession included areas that are now Iraq, but excluded the Northern Provinces to avoidRussian irritation. The Persians were given some shares, a cash payment and 16 percent of the net profit.Business went up and down until 1909, when the Anglo Persian Oil Company (APOC) was foundedand Mr. D’Arcy was made a director. APOC later became BP. See “BP Our Industry,” London, 1947,and “Adventure in Oil – the Story of BP,” London, 1959.

For a table including the historical currency exchange rates (except for Euros) used in this book, seehttp://fx.sauder.ubc.ca/etc/USDpages.pdf

IV. INDEPENDENT OWNERSThe new element in the post-war period was the entry of the independenttanker owners. So far, shipowners generally had been reluctant to order shipsfor the oil trade that oil companies fully controlled, from drilling rigs all theway to the petrol station. Tankers were expensive and confined to one cargo




only and at the mercy of a small number of charterers. In an otherwise stagnant world trade, oil was the

only commodity to show increasing quantities. Thisproved to be a strike of luck to the Norwegian shippingcommunity, where a great number of building contractshad been arranged from 1925 to 1930 and largely se-cured by a 10-year time charter to the oil companies. Fi-nancing was largely raised through starvingshipbuilders.

By 1932, the Norwegian tanker fleet had jumped to18 percent of the world fleet. Such strong growth wouldnot have been possible without a change of philosophyby Shell (The Anglo Saxon Petroleum Company) andother oil majors. Instead of building tankers for its ownaccount, it preferred to charter independent tankers tocover the peaks of transportation needs. Better to leaveit to the independent tanker sector to take the risk of asudden downturn than to run that risk for its own com-pany.

Shell came into the market with a chartering pro-gramme for 10 years, and practically the whole pro-gramme was taken by Norwegian owners. Leif Høeghwas one of the newcomers in the tanker market who –with the encouragement of the well-established Danishshipowner A.P. Moller – grabbed the opportunity whenmore oil companies followed suit. This demonstratedthat the oil industry was willing to pay for flexibilityand avoid the risk of having to lay up their own fleetswhen demand slumped. Other owners joined in, and extensive new building of tankers created a huge surplusof tonnage in the 1930s. Success leads to excess.

The Great Depression meant a terrible slump withfalling freight rates. By 1933, an estimated 15 percentof the world tanker fleet was laid up, with as much 40percent of independently-owned tonnage out of service.Action was needed for co-operation among tanker own-ers. In 1932, an enterprising British gentleman, HarryT. Schierwater of United Molasses (later Athel Line)

Leif Høegh

Educated as an economist, LeifHøegh found that the shippingindustry was the area for his interest in finance and economiccycles. He started his own company in 1927 at the age of31. Høegh then emerged as an en-trepreneur in oil transportation. He also took an active part in international shipping politicsafter the Second World War,promoting the views of Norwe-gian ship-owners. By his deathin 1974, Leif Høegh & Co. wasone of the largest privatelyowned shipping companies inEurope. Under the leadership ofhis two sons, the company remains a major marine trans-porter in a wide range of products including liquefied natural gas.


took the initiative to set up a tanker-pooling arrangement. He saw that the de-pressed rates were in the interest of neither the independents nor the oil com-panies, which controlled 55 percent of the tonnage supply. By introducing alevy on the employed tankers in the scheme, owners of laid-up tonnage couldbe given a subsidy in the best interest of all members.

The plan materialized in 1934. It was actively supported by Mr. Mollerand Mr. Dagfinn Paust, of Norway, who together with Mr. Schierwaterstressed that the moderate ambition of the scheme was to ensure survival ofthe tanker industry and not to strive for excessive freight rates that in any casewould be unrealistic. The scheme faded away at the time of the beginning ofthe Second World War, when economic activity recovered.

Opinions differ with respect to the impact of the scheme. There were constant discussions between members about how to organize the pooling

A. P. Moller

A.P. Moller established the company in 1904 together withhis father, and formally adoptedthe Maersk name for his ship-ping operations in 1928. Fivetankers soon joined the com-pany’s 35-vessel fleet. By theend of the 1930s, the fleet hadswelled to 46 vessels. His son Maersk McKinneyMoller joined the company in1940 at the age of 26 and wasnamed a company partner.Today, the company is knownthroughout the world as a di-versified conglomerate operat-ing in shipping, oil and gas,shipbuilding, super markets, ITand other industries. Unravel-ling the financial situation ofthe shipping giant is a formida-ble exercise. In our context, itmight be sufficient to state thatMaersk Tankers remains one ofthe world’s largest tanker oper-ators, with a fleet of some 100tankers. Maersk McKinneyMoller was a member of INTERTANKO’s ExecutiveCommittee during the first yearof its operation.

arrangement during its existence, not least about the sizeof the levy and the subsidies to owners with laid-uptankers. One other difficult question was how to dealwith new buildings. The Norwegians became increas-ingly unhappy, and when freights boomed in 1937, theysuggested suspending the whole plan; a proposal re-jected by 18 votes to six.

Greek owners did not participate in Mr. Shierwater’sscheme. Their fleet had lost more than two thirds oftheir tonnage by 1919. Nevertheless, from 1914 to1938, the fleet soared from 13th to ninth place amongthe maritime nations and represented the second-largestdry cargo tramp fleet after Britain. The dynamic Greekshad not yet taken an interest in tanker shipping. In anycase, the leading company, Rethymnis & Kulukundis(R&K), operated not only its own large fleet from itsbase in London, but also ships from other companiesbased in the UK as well as Greece. When the depressionwas at its deepest from 1932 to 1933, the global ship-ping crisis sent 27 percent of all dry cargo vessels intolay-up in 1932. In 1935, the Greeks established a mini-mum-rate-scheme for dry cargo ships with support fromshipowners of other nationalities. The co-operation sur-vived till 1939, administered by the Greek Shipping Co-operation Committee in London. The Committee hassince remained intact and played an important role inshipping policy matters to this day.

At the beginning of the century, the world tanker fleethad included about 145 tankers in international trade.The average size of tankers built at the time was some8,000 dwt, and the world total tonnage included half amillion dwt, no more than the carrying capacity of onlyone large super tanker built in the early 1970s.

By 1939, the tanker fleet comprised some 1,731 vessels of 11.4 million gross tons (16.1 million dwt).The oil companies possessed the most of the British andUS fleets, whereas the Norwegian held 18.5 percent and



John Kulukundis

A partner of Retymnis & Ku-lukundis Ltd., John Kulukundiswas the chairman of the GreekShipping Co-Operation Com-mittee (founded in London in1935) when INTERTANKOwas established in Oslo in thefall of 1970. He and other family members had left Greeceto establish their own shippingbusiness in London and soon became a solid part of the Greekcommunity here during the1930s. They became more prominent after World War II. Mr. Kulukundis volunteered tojoin an interim committee of thenew association and was a mem-ber of the first INTERTANKOExecutive Committee. He was abeliever in a closer co-operationbetween tanker owners, and didnot hesitate to stress the similari-ties in the background of Greekand Norwegian shipping, bothoriginating from modest placesat the coast or islands of the two countries.



were thus the largest group of independent owners. And in addition, tankershipping had proved the most profitable of all shipping segments between thewars. A well-managed tanker delivered in 1928 to 1930 on a 10-year timecharter at the going charter rate would yield an annual profit of 29 percenton the investment over the period, compared to the interest rate of three per-cent for bank deposits. No wonder other European owners were keen to jointhe tanker trade.

The main oil supplier to the international tanker trade at that time was theCaribbean area (predominantly Venezuelan production), with the US next andthe Middle East in the third place. Russia still had its huge oil reserves, buthad faded out as a participant in the international picture. The old sea tradesfrom the Black Sea had dried up and were replaced by greater volumes of export from the Americas.

V. INITIATIVES FOR SAFETY AND ENVIRONMENT Until the coming of steam power in shipping in the 19th century, protectionagainst wind and waves, losses of ships and men at sea had generally beenseen as beyond mortal control.

But some regulatory efforts had been made as early as 1288 by theHanseatic League. This league, which included some Germanic trading townswith branches all over the Baltic and North Sea, dominated European shippingat the time. To prevent unsafe overloading of ships, one of the most importantmembers, Visby, introduced load line regulations for every Hanseatic “cog”and imposed substantial penalties for any shipowner who ignored them. Some100 years later, the Venetians enforced similar load lines for every galley hoist-ing the flag of their Mediterranean republic.

The origin of modern safety regulations for shipping is, however, found inEngland. The Merchant Marine Act passed by Parliament in 1854 representedan attempt to regulate the liability of shipowners towards third-parties. Marinesafety issues were addressed when the act was amended in 1876.

Out of scandalous circumstances in the shipping trade in the UK and othermaritime countries, and as a mere reaction to the prevailing unfettered capitalism, time was finally ripe for the growth of social conscience. The introduction of genuine maritime safety regulations was promoted by a

Samuel PlimsollSamuel Plimsoll was born 1824 inBristol. He got involved in thecoal trade in London, where heprospered in business whilst he atthe same time passionately tookup the cause of the seamen.Elected to Parliament in 1868, hegave a people’s voice to the abusesthey suffered. Unscrupulous owners had forsome time bought up rotten shipsand insured them at the highestpossible level before sending themto sea with not much hope of asafe return. The first lines in thepreface of his famous book, “OurSeamen: An Appeal,” published in1873 reads: “Every-body knowsthat there is a great loss of life onour coasts annually, and nearlyeverybody deplores it. I am surethat if the English public equallyknew how much of this loss ispreventable, and the means of preventing it, no long time wouldelapse before means would betaken to secure this end.”

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shipbuilder and shipowner from Newcastle upon Tyne,James Hall. His expertise was unquestioned, andSamuel Plimsoll effectively lobbied his arguments withinand outside Parliament.

In the preface of his book, “Our Seamen – An Appeal,” published in London in 1873, Mr. Plimsollstarted out as follows:

“Everybody knows that there is a great loss of life onour coasts annually, and nearly everybody deplores it.I am sure that if the English public equally knew how

much of this loss is preventable, and the means of preventing it, no long time would elapse before means

would be taken to secure this end.”

Mr. Plimsoll and Mr. Hall fronted the efforts to protectseamen from a number of shipowners who at the timewere running “coffin ships.” Heavily over-insured, theships were sent to sea without much hope of a safe return.

According to “Our Seamen – An Appeal,” 1,333 sea-men lost their lives on British ships during short voyagesfrom domestic ports in 1867. In 1869, the number was933, and in 1871, 626 people died. Lives lost on thehigh seas were not included in these figures. There werenine sources of the disasters: Under-manning, badstowage, deck loading, deficient engine power, over-in-surance, defective construction, improper lengthening,over-loading and want of repair.

The Liverpool Shipowners Association readily sup-ported these points of view:

“While the constrictions upon loading will not affectthose who already load their ships reasonably, it will act as a decided check on the unscrupulous

Owner or Charterer and will tend, by the greatersafety which will follow, to reduce the general rate

of Marine Insurance.”

Coffin ships

Girl: “O, dear Jack! I can’t helpcrying, but I’m so happy tothink you’re not going in one ofthose dreadful ships!” Jack: “No, no lass – nevermore! – Thanks to our friendMaster Plimsoll, God blesshim!”

Sailors from other maritimecountries were less fortunate.Thus due to resistance fromship-owners including the Norwegian Veritas, it took 30more years before Plimsoll lineswere made compulsory in Norway. In the meantime, hundreds of seamen perishedwhile shipowners received generous compensation fromthe insurance industry for theirlost vessels.

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It would be an overstatement to claim that the bill was supported by theshipping industry as a whole. But with regard to the interpretation of the current slogan, “the polluter pays,” the 140-years-old reference to charterersis noteworthy.

Thus it was largely Mr. Hall and his spokesman, Mr. Plimsoll’s, doing thatthe amended Merchant Marine Act in 1876 laid down that any merchant ves-sel must bear a mark on her sides, indicating the maximum depth to whichshe might be safely loaded in salt water.

In our own time, we have seen that the result of strict national regulations isthe transfer of ships to other flags. The reaction of many British shipownerssome 150 years ago is therefore hardly surprising. Vessels were sold to ownerslocated in other countries where load line restrictions were still unknown. Itwas a golden chance for ambitious foreign captains to have a modest start ontheir own.

The 1890s saw a heated public debate on maritime safety and workingconditions for seafarers in other European countries, broadly inspired by thegeneral movement for social improvement. Marine safety bills arose from this,including provisions for load lines, which were introduced in Norway in 1910.

But a disaster was needed to bring about a break-through for internationalco-operation. In 1913, the year after the Titanic disaster, representatives of 13countries met in London to develop uniform standards for passenger ships andradio requirements for cargo ships. World War I prevented immediateprogress, but the work was followed up after the war and resulted in the 1929convention titled “International Convention for the Safety of Life at Sea”(SOLAS). It laid down rules and recommendations on ship strength, navigationand communication equipment, fire-preventing measures as well as port statecontrol. The convention entered into force in 1933 and still exists under thesame name, despite being subject to numerous changes and improvements dur-ing later years.

Mr. Plimsoll’s ground work was given the final stamp of approval whenmaritime governments agreed on the “International Load Line Convention of1930.”

The need to protect the marine environment was given no attention to speakof prior to the Great War. At best, it was regarded as a local problem. Thusthe efforts to avoid and minimise pollution risk can be traced back only some90 years, once again with the UK in the driving seat when Parliament passedThe Oil in Navigable Waters Act in 1922. The law forbade – under a penalty



of 100 pounds – the discharge of oil or oily water into its territorial waters. But the act of 1922 was an eye-opener for other countries. Four years later,

an international conference was held in Washington, D.C., to work out anagreement on marine pollution regulations, but with no success.

England, Belgium, Norway, Netherlands, the US and Sweden did, how-ever, agree to prohibit discharge of oil in a zone within 50 miles of shore. Aspecial committee was set up by the League of Nations and a draft conventionon pollution prevention came to light in 1935. At the time, oil accounted forapproximately 20 percent of total volumes carried at sea. Nevertheless,progress was slow. A planned conference to consider the draft had still notbeen held when World War II broke out in 1939.

Note:See the letter from Liverpool in the “Shipping and Mercantile Gazette” of June 7, 1870, printed in Mr.Plimsoll’s “Our Seamen – An Appeal,” pp. 70-71, published in London in 1873. See also Lloyd’s List250th Anniversary Special Supplement, pp. 93-100, on the development of safety regulations.

VI. THE SECOND WORLD WAR; THE DEPENDENCE ON OIL After the German war machine had crushed France in June 1940, the UK wasisolated from the rest of the world and faced a serious threat of invasion. Avail-ability of fuel oil to feed the Royal Navy and the Royal Air Force seemed evenmore important than during the First World War. Once more, tanker trans-portation became a most vital element in warfare. On every front, the war wasonce again fought and won on oil.

In 1939, the main oil supply to Great Britain still came from the Gulf Coastof the US. However, Iranian oil was rapidly becoming more important. Hugeoil reserves had also been found in several other countries around the PersianGulf, but development of the fields had been slow. By 1939, only Iraq, SaudiArabia and Bahrain were oil exporters of some minor consequence, represent-ing a few percent of the international seaborne trade.

Germany had relied on overland imports of Romanian oil and the domesticproduction of synthetic fuel. When Adolf Hitler’s armies – supported by Romanian troops – invaded the USSR in June 1941, one of the targets wasthe rich oil fields of the Caucasuses. When he one year later in desperate needof oil ordered his armies to push for the oil fields, the battle of Stalingrad wasin effect the battle for Baku.



Tankers in convoys crossing the Atlantic had so far been a relatively easytarget for German U-boats and aircraft. It became apparent that the menaceof the submarines was so scary that the shortest route for tankers was not onlythe quickest but also the safest. Thus Britain, later joined by its allies, decidedon a short-haul policy, meaning that oil for the war effort should come fromthe eastern seaboard of North and South America, rather than all the wayfrom the Persian Gulf.

At the beginning of 1943, Britain’s oil stock was at its lowest level ever. Thepeak of destruction of tankers was reached during the summer of 1942. Fromthen on, the loss-rate improved as the submarine menace was gradually mas-tered, thanks to the introduction of heavily guarded convoys and providinglong-range aircraft protection. Another factor of importance was the crackingof the U-boat radio codes.

During the 1940s, most of the leading Greek shipowners left Greece andbroke their relations with the Government at home. They left for London, butalso, increasingly, for New York. The Greek merchant navy – mainly dry cargoships – was reduced, with 72 percent at the end of the war. The exodus toother maritime centra did not come to an end after the war. Instead, the ownerssettled down and developed valuable contacts with charterers including themajor oil companies.

After the German invasion in 1940, the Norwegian Government escapedto London, and here requisitioned about 1,000 ships under the Norwegianflag in ports all around the world. In consultation with the UK Government,Nortraship – the acronym of The Norwegian Shipping & Trade Mission – wasset up in London and New York and assigned the task of operating the na-tional fleet for the duration of the war. At the end of the war, the Norwegianowners had lost about 40 percent of their tanker tonnage.

Merchant fleets under British and American command also suffered hugelosses. Thus the main priority for the shipbuilding sector in the free countrieswas to replace the huge quantities of tonnage lost without delay. The shipyardsin the US took the lead and were soon capable of replenishing the massivelosses sustained round the theatre of war. In 1942, the US government insti-gated an emergency building-programme. By 1945, about 500 units of a newtype of standard tanker – the 16,600-ton T2 – had been built.

Thanks to the large emergency shipbuilding programmes, the world tankerfleet by 1950 stood at 26 million dwt, significantly larger than the 16.6 milliondwt fleet of 1938.



Notes:A condition for an effective war machine was to keep the oil coming to the theatre of war. At a criticalmoment during the World War I, the Commander of the Allied Forces, Marshall Foch, declared: “Wemust have oil or we will lose the war.” John Newton, “A Century of Tankers,” p. 42.The Greek Shipping Cooperation Committee was formed in London in 1935, and includes shipownersof Greek origin with offices in London and New York. London was the shipping centre of the world.The infrastructure offered unique opportunities for personal contacts with charterers, countless insurers,banks, top law firms, good schools and brokers, etc. The meeting place for all was the Baltic Exchange,which after some years became open to foreigners. The Greeks that had set up their offices here weresteadfast in their position: Shipping regulations must be implemented in a uniform, non-discriminatoryway by all nations. See G. Harlaftis: “A history of Greek-Owned Shipping,” London & New York,1996.The Norwegian Shipping and Trade Mission (Nortraship) was set up ultimo April 1940 after the Germaninvasion of Norway. Most of the Norwegian fleet was outside the country’s territorial waters. The Britishgovernment wanted to bring the fleet under the British flag to avoid the Germans taking control. Rep-resentatives of the Norwegian government in cooperation with shipowners succeeded, however, in ne-gotiating an agreement under which a Norwegian state-owned company, Nortraship, was establishedwith offices in London and New York. The mission became a valuable partner in the allied efforts tobring about the capitulation of Nazi Germany.

VII. CONSUMPTION GROWTH AND GIANT TANKERS The post-war decades saw a strong growth in the consumption of oil and, withit, oil transportation. The volume of oil carried by sea was doubled in the1950s and again in the 1960s. From 255 million tons carried in 1950, the volume passed 1,240 million tons in 1970 and culminated at 1,625 milliontons in 1974.

From a minor share of the global trade volumes, oil and oil products grewto about 50 percent in the 1950s. However, the growth rate was even greaterin terms of ton/miles, driven by the longer distances involved from the PersianGulf and later to the US and Japan. From 1962 to 1970, the volume of oil carried grew by 122 percent, while the actual transportation in ton/miles grewby 174 percent.

When the war ended, the prospects for the tanker trade looked good, althoughmuch would depend on the realisation of the US T-2 tanker fleet. In 1947, theUS government agreed to confine the majority of the vessels to the reservefleet, while a number were offered for sale at reasonable prices. Owners withno relations to their national government, like the Greek Aristotle Onassis,were, however, not taken into consideration by the US authorities. Onassiswas furious when his father-in-law, Stavros Livanos, was offered seven ships.


In Norway, owners were frustrated in the early 1950swhen the socialist government intervened and placed aveto against further contracting of new buildings. For-eign currency should be used for “better purposes,”stated the government. However, after a few years theinterdict was lifted.

Brisk contracting by Scandinavian and Greek ownersled to a shift in the global tanker fleet. In 1938, inde-pendent owners had controlled 39 percent of the fleet;this share increased to 58 percent by 1968. In the mean-time, the US had for the first time became a net importerof oil in 1948.

The “seven sisters,” the five US major oil companiesChevron, Esso, Mobil, Texaco and Gulf, together withBP and Shell, were now firmly established throughoutthe Middle East. The oil reserves here were so huge thatnobody could have dreamed of what was hidden underthe sand before 1939. In 1960, Middle-East oil repre-

Aristotle Onassis

Born in Saloniki in 1906 butgrowing up with his family inSmyrna, Aristotle Onassis – dueto the political unrest – left forBuenos Aires as a youngster. He became a Greek shipping legend. He placed the Greektanker industry in the forefrontwhen he in 1953 launched asuper tanker of 45,230 dwt andnamed her Tina Onassis, afterhis wife. Sixteen years later, helaunched a super tanker fourtimes the size of Tina – theOlympic Athlete, weighing216,490 dwt. He became aworld celebrity until his death in1975, not only because of thehuge fortune he built up, butalso because of his relationshipswith famous women.

© Pressens Bild / Scanpix Sweden / Scanpix



sented 24 percent of the world oil production (four per-cent in 1940). The sisters dominated world production,distribution and sales.

Unable to operate profitably under the Jones Act provi-sions (requiring American crew and conditions forAmerican-flag vessels), the US oil companies began toregister ships under “free flags” in the 1930s. In the be-ginning, the Panamanian flag was the clear choice.Later, Liberia and Honduras offered their flags as well,and the PanLibHon fleet became a well-known concept.The idea was quickly adopted by Greek and other own-ers operating out of shipping centres like New York.Under a “free” flag, there would be no governmentaland labour union interference, nor any tax liability.

The International Transport Workers’ Federation(ITF) strongly opposed the new trend. In April 1958, aGreek owner of one of the largest tanker fleets in theworld, Stavros Niarchos, took the unusual step of send-ing a letter to the editor of The Times in London to de-fend the free flag policy. Some six months later, aNorwegian, Erling D. Naess, who had left his homecountry for New York in the 1920s, was elected chair-man of a new association, The American Committee forFlags of Necessity, to coordinate policies.

One of the supporters was the Texas oil magnateDaniel K. Ludwig, who became the world leader bybuilding the largest tankers afloat. His tankers werebuilt in Japan, whose terms were most favourable toforeign shipowners. In 1955, the Imperial JapaneseNaval Dockyard at Kure delivered a number of tankersto Mr. Ludwig. Among them were the 56,000 dwt Sin-clair Petrolore, and four years later, the 103,000 dwt Universe Apollo.

When the Suez Canal was nationalized by the EgyptianPresident Nasser in 1956, Britain and France did nothesitate to take military action to take in the waterway.The outcome was no success, because of the lack of

Stavros Niarchos

Stavros Niarchos was born in1909 in Athens. It was withhim and his compatriot andcompetitor Ari Onassis that the Greeks entered the tankerbusiness in a big way afterWorld War II. Niarchos builthis first super tanker in 1952and later operated more than80 tankers worldwide. By themid ’60s, the Greek-controlledtanker fleet was the biggest inthe world. Before he died in1996, he went through severalmarriages. He was also well-known as the owner of a largecollection of impressionist andpost-impressionist paintingsand for his highly successfulstables of race horses.

© Topham Picturepoint / Scanpix

Erling D. Naess (right)

Next to him is Jan Hudig of VanOmmeren, Netherlands – the firstchairman of Intertanko, Oslo

Erling Dekke Naess rose to promi-nence in shipping as a deputy direc-tor of the agency in New York whichoperated the Norwegian fleet duringWorld War II (Nortraship), and forinitiating the Federation of American-Controlled Shipping that enabledAmerican and foreign interests to register their ships in Liberia, Panamaand other low-cost countries. Thiswas, however, regarded as unfaircompetition by his fellow country-men, and he became unpopular athome. Nevertheless, he was morethan welcomed when he, during theshipping crisis in the 1970s, per-suaded the Norwegian governmentto establish a free registry for vesselsflying the Norwegian flag. Mr. Naessdied in his home in Bermuda in 1993at the age of 91. His company,Anglo-Norness Shipping Company,was sold in 1968 before the shippingmarkets collapsed.

Foto: Norsk Handels og Sjofartstidene



American support, and the waterway remained closed for about six months.The effect on European oil supplies was immediate. Shipments of Middle Eastoil had to be diverted around the Cape, tanker freight rates skyrocketed andthe Western economic dependence on Middle East oil became very apparent.Independent shipowners, however, enjoyed a tanker boom with ample oppor-tunities for profitable time charters for years ahead.

By 1961, the USSR produced as much as 60 percent of the oil produced inthe Middle East and had replaced Venezuela as the second-largest oil producerafter the US. Increased oil demand had driven the oil and tanker industries toplace building orders with European and Japanese shipyards for more andlarger tankers than ever seen before.

Between 1956 and 1958, the tanker fleet again grew through new buildingand led to a moderate-to-weak market for the first part of the 1960s. Technicaladvances in shipbuilding and deeper ports and terminals opened for largerships, creating economies of scale in shipping. In 1956, a tanker of 33,000tdw would be considered large; but by 1962 the Nissho Maru of 130,500 tdwset a new scale. In a rapid succession of larger vessels, the Idemitsu Maru seta world record of 206,000 in 1966. Two years later, Universe Ireland set anew record of 326,000 tdw. Other owners, notably aspiring Greeks, pickedup second-hand vessels from Scandinavians at low prices and extracted somemore profitable years from them. In 1960, Jacob Stolt-Nielsen acquired a con-ventional second-hand 13,000 tdw tanker and had her converted for the parceltrade: An embryo of what was to become the company Stolt Tankers.

There were other alternatives, as well. Some owners turned to smallertankers built to carry several cargoes on one keel, known initially as parceltankers, to serve the growing market for oil products, vegoil and chemicals.Of greater significance to the crude oil trade, however, was the trend for com-bined carriers – vessels capable of carrying dry cargo and oil in the same holds(or tanks). The Ore-Oil carrier had been in use since the 1950s, designed tocarry ore in the centre holds and oil in the wing tanks. In the early 1960s, theconcept was improved through the Class’ acceptance of gas-tight hatch sealing,allowing Ore-Oil carriers to carry oil in the centre compartments, as well.Opinion is divided as to the origin of the Ore-Bulk-Ore (OBO) carrier, but thepioneer role is widely attributed to Mr. Naess, who had the first OBO builtby AG Weser in 1965, the 71,000 tdw Naess Norseman. Scandinavian owners,in particular, came to invest heavily in OBO carriers.

As it was 12 percent to 15 percent more expensive to build than a tankerof the same size, the economic viability of the OBO largely depended on the



owners being able to utilize its flexibility and shift between dry and wet car-goes. By 1974, the OBOs comprised 22 million dwt, or 14.5 percent of thetanker fleet.

The tanker market remained at a low level from 1958, but firmed slowly withincreasing seasonal variation from 1962. Large and efficient ships were ableto show reasonable results, until the disappointing winter market of 1966 and1967. This was no wonder, as the tanker fleet was growing vigorously. From1960 to 1966, the fleet grew from 33.6 to 60.2 million dwt – by 79 percent.Even at a time when the Western economies were growing quickly, this supplywas outstripping demand.

Under these circumstances, a “Tanker Recovery Plan” – modelled after thepre-war Schierwater plan – was introduced in September 1962, after initiativesby Norwegian and UK owners in particular. This time, however, no supportfrom the oil companies was forthcoming, and the initiative faded away.

Just as the dismal summer market dipped to the lowest level in five years andseveral tanker owners were beginning to worry, Israel launched a surprise at-tack on Egypt on June 5, 1967. The ensuing closure of the Suez Canal led toan immediate demand for tanker tonnage as the seaboards from the ArabianGulf to the West became dramatically longer.

The spot market went from sky-high virtually overnight, as all excess capacity was absorbed. This time the Suez Canal remained closed; it was reopened only in 1975. Borne by a strong rise in oil consumption, the tankermarket remained buoyant from 1967 to 1974, broken by weaker periods in1969 and 1972.

In a tanker market without the physical restraints of the Canal, the largestvessels would offer the best economy. This led to a contracting boom for verylarge crude carriers (VLCCs) of more than 200,000 dwt. In December 1969,there were 90 VLCCs in service; in addition, some 200 were under construc-tion around the world. Independent tanker owners were responsible for two-thirds of the orders, and the financially much stronger oil companies for onethird.

The period from 1967 to 1973 was one of growth beyond precedent; theoil trade was doubled and so was the tanker fleet.

HM Strategies

TANKER SPOT RATES M.E.GULF - WEST 1967–1975Worldscale Points. Medium-size vessels Monthly Average

Note: 1967 and 1968 converted from Intascale Compiled by HM Strategies from Fearnley data

350

300

250

200

150

100

50

01967 1968 1969 1970 1971 1972 1973 1974 1975

TANKER SPOT RATES M. E. GULF – WEST 1967–1975 HM Strategies

Tanker freight rates multiplied six times over in just two months in connection with the closure of the Suez Canal in1967 and kicked off a strong rush in new tanker building orders. Some very turbulent years followed in the tankermarket. The reopening of the Canal had limited impact on a tanker market flooded by way too many vessels.



Notes:After World War II, the International Workers Federation (IWF) and European maritime nations at-tacked the practice to register ships under “Flags of Convenience.” It was seen as a way to avoid decentwages and working conditions. According to Naess, the battle reached a crescendo in 1958, when theAmerican Committee for Flags of Necessity was formed and in 1960, when the International Court ofJustice said that IMCO should recognize Liberia and Panama as full members. ITF suffered a furtherblow in 1963, when the US Supreme Court endorsed the principle that the law of the flag state shouldgovern the internal affairs on a ship. Currently, however, ITF, in cooperation with the UN and portstates, is represented worldwide and controls that international standards are complied onboard. SeeE.D. Naess, “The Great PanLibHon Controversy,” Gower Press Limited, Epping, Essex, 1972, and“Autobiography of a Shipping Man,” Seatrade Publications Ltd., 1977.Tankers “super sized” with the building in France at Chantiers de l`Atlantique of four 550,000-dwttankers delivered between 1976 and 1979 and scrapped between 1985 and 2003. Source: Lloyd’s List,May 13, 2009.At the time of writing (2010), it is reported the microstate Marshall Islands has passed the Bahamasand is now in tonnage terms the third-largest flag registry after the market leaders, Panama and Liberia.

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IMCO – SAFETY FIRST!

3

IMCO – SAFETYFIRST!

I. EARLY INTERNATIONAL INITIATIVEThe United Nations’ special agency, IMCO, was established in 1948. It wascharged with the international co-ordination and responsibility for maritimesafety and environmental protection of the seas. To get the organization onits feet took many years. In many quarters, there was considerable suspicionabout the role of a new international governmental organisation. What wouldhappen to the traditional freedom of the seas? An announced internationalmeeting in 1953 might have been the start, but a reserved attitude by impor-tant maritime nations, including Norway and Sweden, delayed progress. Finally, in 1959, the first IMCO Assembly met in London and could begin itswork with the Dane, Ove Nielsen, as the first Secretary-General.

In November 1950, a tanker named Inverpool stranded in the river Ribble inthe North West of England because of a steering failure under the force of avery heavy sea. The master discharged 400 tons of fuel oil into the sea tolighten and refloat the vessel. The result was serious pollution of the seaside.

The local authority sued the tanker owner, Esso Petroleum, for compen-sation for the pollution damage. The investigation revealed that the master ofthe tanker, whilst being aware of a steering gear failure at an early stage, nevertheless decided to proceed to port. In his view, the weather made it im-possible to anchor and to turn about. Such action – he claimed – would havebeen even more dangerous than to proceed. The judge found that the choiceof the lesser of two evils could not be considered to be careless.

Neither did the plaintiff succeed to prove that the captain had been negligent when he decided to jettison some of the oil cargo in order to try torefloat the vessel, which was in serious danger of breaking. The Court of Ap-



peal reversed the decision. The case went all the way to the House of Lords,who, five years after the event, ruled in favour of Esso. Here the plea of negligence failed and the question of unseaworthiness was not pleaded.

Other governments now recognized the potential pollution threat. In 1954,The International Convention for the Prevention of Pollution of the Sea byOil was adopted, once again based on an initiative of the UK. However, theagreed instrument did not focus only on tankers. It also applied to ships ingeneral and was aimed at the prevention and reduction of operational oil spillssuch as discharge of oily residues.

Priority was given to protect the marine environment with preventive meas-ures. These included new international rules to promote safer navigation, restrictions on discharges from ships, improved technical standards, as wellas instructions for – and supervision of – ship personnel. The first importantresult of IMCO’s work was visible in 1960, when the group reached a consensus on revising and improving the old SOLAS convention.

During the same year, the five-year-old tanker Sinclair Petrolore, built in Japanfor the account of Mr. Ludwig, exploded and spilled her entire oil cargo in theSouth West Atlantic Sea, off Brazil. This spill still figures in the list of the majortanker spills and may have caused far more concern in the US than in Brazil.In any case, the US Congress appointed a special committee to consider tankerhazards in general and to investigate this particular accident. However, fewrealized the potential pollution threat from tanker accidents, and the incident seemed soon forgotten.

Eight years later, IMCO sent a questionnaire out to member states to obtaininformation on their experiences regarding oil spills from tankers during thelast decade. Brazil said that there had not been any pollution event of impor-tance.

But in some quarters, there was concern. In March 1961, the chairman of IMCO’s Coordination Committee on Oil

Pollution at Sea complained about the general “indifference” to the potentialpollution problems. Some very important shipping nations, such as Liberia,the US, Panama and Japan, representing nearly 40 percent of the tanker fleet,had not even bothered to ratify the 1954 Convention for the Prevention ofPollution of the Seas. Strong-willed IMCO, however, continued its work andobtained increasing support. The results became apparent in 1962, when the1954 Oil Pollution Convention was improved. Then in 1966, a new Interna-tional Convention on Loads Lines (ICLL) replaced the 1930 rules to securesafer and better loading practices.

The oil and tanker industry seemed fairly relaxed. In its comprehensive



annual tanker reports in the early 1960s, the London tanker broker John I.Jacobs & Company Limited referred to the building of a number of largetankers in Japan. Many aspects related to the building orders were commentedupon in some detail. However, the pollution risk in case of a major accidentwas not given particular attention. Tankers were still not subject to specificrules with respect to liability for pollution damage potential.

Like the Titanic, it needs the catalyst of a major disaster to bring about aninternational response. Such an accident occurred in March 1967, with thestranding and loss of the Torrey Canyon.

Note:See John I. Jacobs Reports, Dec. 31, London, 1959, 1965, 1966 and June 30, 1968, and M. Ratcliff:“Liquid Gold Ships.”

II. THE TORREY CANYONThere is hardly any better illustration of the international dimension of thetanker trade than the Torrey Canyon.

The tanker hoisted the Liberian flag, but was named after one of threesmall oil companies, which in 1890 had been wedded into the Union Oil Com-pany of California. In 1967, this fast-growing corporation was the fourth-largest oil concern in the US. Formerly, the Liberian-flag tanker was ownedby a Bermuda company, the Barracuda Tanker Corporation, a financial off-shoot of Union Oil. The owner’s principal officers resided in New York. To-gether with two other large tankers, Sansinena and Lake Palourde, TorreyCanyon was built at the Newport News yard in the late 1950s. In 1965, thetwo last mentioned tankers were enlarged in Japan by widening and length-ening their hulls, thus doubling each original cargo-carrying capacity to nearly120,000 tons. In this operation the stern sections had been cut off and floatedinto a dry-dock, where they were welded to a new stretched hull, thereby cre-ating vessels of much larger dimension. Torrey Canyon was insured in Londonand crewed by 36 Italians, including Captain Pastrengo Rugiati and his offi-cers.

In early February 1967, Torrey Canyon was unemployed and had for sev-eral days been offered on the market at a low rate for a single voyage fromthe Persian Gulf to Europe. Finally on the suggestion of the London brokerfirm John I. Jacobs & Company, BP chartered Torrey Canyon.

The voyage that made the name of Torrey Canyon notorious began at

Torrey Canyon

The super tanker Torrey Canyonis shown here as the salvorsfound her in March 1967, whenthe British government faced aformidable situation. Two daysafter the grounding, a navalcommander in Plymouth sawthree choices: “We can blow thebastard up – We can empty her –We can salvage her.” Removingthe oil proved to be impossible.Then one pinned the hope onDutch salvage efforts only to ex-perience that the captain of theteam, Captain Stal, was killedfollowing explosions as sparkshad ignited the explosive mix ofcrude vapour in a tank. The salvage efforts were given up.The massive pollution thatfollowed represented a quantitynever envisioned before andsparked media coverage of a dimension never before experi-enced in the shipping industry.

© Science Photo Library / Scanpix



Kuwait’s Mena al Ahmadi terminal, where she loaded a cargo of 118,000 tonsof crude oil to be discharged in the UK at the tanker terminal in MilfordHaven. On her way to the terminal, the tanker passed the Canary Islands onMarch 14. That day, Captain Rugiati had plotted a course to take the tanker– which steamed on her automatic pilot – five miles west of a cluster of islands,the Scillies off Lands End in Cornwall. On Saturday, March 17, everythingwas in order. But then, the Captain received a radio message from BP’s agentin Milford that if he did not arrive at Milford Haven around 11 p.m. Saturdaynight, his deeply laden tanker would miss high water and be unable to enterthe harbour at the agreed time. Such delay would imply several days at anchordue to the considerable fluctuations of the tide.

In the early morning of the March 18, whilst the Captain was still in hiscabin, the chief officer, Silvano Bonfiglio, reported that the tanker had beenforced by wind and current to the east of the islands into confined, rocky wa-ters. On request, Bonfiglio confirmed that the present course, “would permitthe ship to pass eastward of the Scillies.” It was decided to not change thecourse. When the master arrived on the bridge around 7 a.m., the large tankerwas going full-speed ahead. A change at that stage could have delayed the shipand now, all being well, perhaps half an hour was saved.

But nothing went well. The tide in the passage rises and falls up to 16 feet,and some rocks were only a few feet below sea level at high water. When thecaptain an hour or so later regretted his decision and wanted to alter courseagain, it was too late; two or three fishing boats in the confined waters gavehim little choice. Signals and warning flares sent up from the Seven Stoneslight vessel seemed to be ignored.

The tanker ran aground in the morning around 9 a.m. Saturday, March18, 1967. At a speed of 17 knots, she struck hard on the Pollard Rock on theSeven Stones Reef, between the Isles of Scilly and Lands End. Oil immediatelybegan to spew out from the ruptured tanks. Not only was the ship agroundon a hard rock, but her hull had been deeply penetrated in a number of places.

Most of the oil spill damage affected the south western tip of Britain, but thefollowing week even the French coast became seriously polluted. In the con-fusion, the UK Government had failed to inform the French authorities. Here,information about the accident was obtained from the master of one of theFrench fishing vessels in the area.

Beyond all reasonable doubt, it was soon apparent that the liability rulesof maritime law were hopelessly inadequate to deal with the potential damagerepresented by the new generation of tankers.


BP requested local tugs, fishing boats and a smallcoaster to assist and arranged for the Grangemouth re-finery to provide large quantities of industrial deter-gents. Simultaneously, pumps, compressors and otherequipment were airlifted to Cornwall in order to refloatthe tanker. In the evening of the first day, naval vessels– joined by chartered commercial vessels – began tospray detergents in the hope that this would disperse theoil.

Within hours of the grounding, Dutch salvage firmN.V. Bureau Wisjmuller was rushing its tug Utrecht tothe area. The intention was to empty the damaged com-partments with pressurized air, thus reducing the levelof oil and water in each tank. The salvage expert, HansB. Stal, hoped that he could refloat the ship off the rocksnow that it had regained buoyancy. He had to take into

Torrey Canyon

As a desperate last resort to stopone of the largest tankers afloatfrom polluting the coast of Brit-tany in France and Cornwall inBritain, aircrafts from the UKRoyal Air Force and the RoyalNavy spectacular carried outspectacular aerial bombing. Butthe cargo onboard the Ameri-can-owned Liberia tanker wouldnot catch alight and disappear.Bombed and broken, showingthe explosion damage directlyforward of the funnel, the cargoof 118,000 tons continued toleak out. The “super spill” ignited radical changes in inter-national maritime law, in partic-ular with respect to liability foroil pollution damage.

© T. Haugen



account that sparks could ignite the potentially explosive mix of crude vapourin the tanks.

Captain George King, manager of BP’s shipping department in London,has in his book, “A Love of Ships,” (pp. 243-247) described the actions takenfrom that critical Saturday morning in March when a junior minister for theNavy, Maurice Foley, was ordered to Plymouth to coordinate the operationand to take political charge of admirals and generals. That same evening, Foleyasked the Prime Minister Harold Wilson for GBP 500,000 (close to USD 1,4million) to guarantee the supply of detergents and ships capable of sprayingit. King was requested to accompany the junior minister by helicopter to thewrecked tanker in order “to make a more accurate appreciation of the posi-tion.”

On Monday, two days after the accident, the 49-year-old vice president ofUnion Oil, Matthew Thompson, arrived in Plymouth and was also airliftedto the wreck.

In Parliament, the Minister of Defence Denise Healey assured the nation thatmore than 20 ships would be on the job on Tuesday.

That day, a heavy explosion in the stern was closely followed by a secondexplosion. At first, it seemed that the entire salvage crew had been miracu-lously saved. But then, Mr. Stal was found seriously injured in the water. Hehad been struck by wreckage that came like a projectile over the heads of thenearby crewmen to where he was standing. Thirty-six-year old Mr. Stal wasrushed to a hospital in Penzance, but died before arrival. It was decided toevacuate all hands to a standby tug.

The assisting vessels that were spraying detergents did some good, but not agreat deal. The press reported that officials in Whitehall had suggested thatthe tanker should be towed far out in the Atlantic and sunk. But the govern-ment maintained it had no such right without the owner’s consent, and UnionOil would agree only if the company was paid the value of the ship, whichwas still regarded considerable, perhaps USD 10 million.

The following Sunday, The Sunday Telegraph warned that the whole coast ofSouthern Britain was threatened by horrible, thick, black oil. The same day,cabinet members seriously discussed for the first time bombing the tanker.Such action had never before been taken in peacetime.

On Monday, March 27, despite all human effort, Torrey Canyon died on the



Seven Stones Reef, after breaking her back whilst four tugs were trying to pullher off the rocks. As the aft of the ship slided backwards, oil gushed from hertorn hull.

In the hope that the estimated 40,000 tons of remaining crude oil would beburnt off, eight Royal Navy Buccaneers and three RAF Hunters armed withbombs and rockets were despatched to destroy her. There was little success onthe first day. The cargo disclosed obstinate reluctance to catch alight. The nextday, napalm was used after some oil had been released by the high-explosivebombs. This worked better and managed to start a fire, which was visible fromthe mainland nearly 20 miles away. The fire was, however, extinguished a fewhours later when the weather cleared up. New attempts were made, but theship was now fast breaking up. On the Friday, the attacks were abandoned.Most of the oil left in the tanks had, by then, been burned.

In the meantime, naval forces continued to carry out extensive spraying ofthe oil slicks with chemicals. Chemical and mechanical means were also usedin an attempt to clean the large stretches of beaches in the area. According tothe subsequent report from the UK government, 80,000 to 100,000 tons ofthe crude cargo had leaked out and polluted beaches of Cornwall, Devon andthe Channel Islands.

It took time before the French government reacted. After all, the wreck was located about 180 kilometres from its shore. But when Torrey Canyon brokeher back and the hope of salvage was abandoned, the office of Georges Pom-pidou appreciated that a threat of serious pollution damage to French soilcould not be discounted. But all the efforts of the government, people andavailable equipment, as well as a massive turnout of volunteers, could not pre-vent the coast of Brittany from being seriously polluted.

BP, as charterers of the ship, had nominated Milford Haven as the terminalwhere the oil cargo should be discharged at an agreed time. The potential delaywould be for the account of the owners. Moreover, the owner would be unableto use his valuable asset for more profitable purpose. To get the tanker to thedischarging port on time and safely is what the master is paid for.

An investigation the Board of Enquiry performed, set up by the Liberiangovernment, ascribed blame for the accident to the captain. The investigatorsgave little attention to the possibility that there might have been somethingwrong with the ship itself and in particular with the steering mechanism. Cap-tain Rugiati was found to have set an imprudent course in an effort to save


San Pedro

1976: Sansinena – 9 people killed

1979: Betelgeuse – 50 people killed

1968: General Colocotronis – heavy pollution

1968: Ocean Eagle – heavy pollution

time and “he alone had made the decision to go between the Isles of Scilly andSeven Stones.”

By blaming him, the board absolved the owner of “actual fault or privity.”The report could not have served Union Oil better had it been written by thecompany’s own lawyer. Richard Petrow, in his book, “The Black Tide,” con-cludes that the Board thereby “helped the owners and insurers save more thanGBP 6 million (about USD 16,600,000).”

However, the captain had an outstanding record as a seaman. On that dayin March, he had been on the ship for one year without leave. Without hesi-tation, he had stayed onboard Torrey Canyon to the last moment despite beingpressed to leave earlier. He later explained that he was under pressure fromBP’s agents to reach Milford Haven as soon as possible. He had tried to alterthe course, but had to give up due to several fishing boats in the narrow waters. One may speculate whether the Master’s navigation error can be explained by fatigue or perhaps by stress to reach the terminal in time. In anycase, Captain Rugiati lost his license and never sailed again.

The oil spillage represented a quantity never envisioned before. The UK gov-ernment reported that claims had been entered against the owner for some

Major incidents 1968–1979


GBP 3.25 million (about USD 9 million) for the cost of preventive measures.But figures for the damages Torrey Canyon caused differ. A study issued bythe staff of the US General Accounting Office estimated the clean-up costs ofthe UK Government and France to be more than USD 16 million, and the estimated damage to private property, fishing and marine life exceeded thatfigure many times over.

It was claimed that 50 percent of the bird population on the northern coastof Brittany disappeared. The oil later disappeared both in the UK and inFrance. However, the detergents injected were regarded to be a more lastingproblem. Two and a half years after the accident, the International Group ofProtection and Indemnity Clubs (the insurers) claimed that the action takento stop the leakage was “fantastic and hopelessly inadequate” and increasedclean-up expenses out of all proportion.

The representatives of Union Oil had made every effort to save the ship andprevent the bombing. They had a responsibility to the underwriters and couldnot simply abandon the ship and claim full compensation. Later they arguedthat most of the damage was caused by the bombing of the stranded tankerby the Navy and the Air Force. The oil company had no assets in the UK andfailed to appear in court as defendant. However, the lawyer of the UK gov-ernment gambled that the company’s “sister ship,” Lake Palourde, might callthe port of Singapore. His legal mind opened a new jurisdiction when, by afatal mistake of the Union Oil management, the tanker arrived in that harbourin July. Now Britain had something at hand and Lake Palourde was promptlyarrested. The tanker was valued at some USD 17 million. The ship was re-leased when a bond of USD 8 million was put up to cover the damages TorreyCanyon caused.

The governments of the UK and France presented their claims in an Amer-ican district court that, however, applied the limitation provision in the anti-quated US Limitation of Liability Act of 1851. This meant that the exposureof Union Oil would be confined to the value of the vessel after the casualty.The tanker had sunk and the remaining lifeboat was said to be worth no morethan USD 100. According to the 1851 act, limitations would be broken onlyif the damage was found to be caused by “the shipowner’s privity or knowl-edge of negligence.” The European governments in no way accepted the find-ing of the court view and appealed to the US Court of Appeals for the SecondCircuit. Now they were more successful. Contrary to the findings of the Liber-ian Board, the appeal court concluded that the damages following the ground-ing were not necessarily caused by activities related to navigation, but could

San Pedro




be caused by Union Oil’s “involvement in the original design and manufactureof the vessel.”

This meant that the claim for compensation fell outside the jurisdiction ofthe US Limitation of Liability Act of 1851. However, no final verdict was ren-dered, as the litigation was settled in 1969. An agreed compensation of aboutUSD 8 million to 9 million was divided equally between England and France.The court proceedings were thereby discontinued. The owners had reason tobe satisfied; the Liberian Board had dismissed the idea that there was any per-sonal fault on their part, and the Court of Appeals had not reached any otherfinal decision. Moreover, the insurance disbursement they received from thehull insurers for the loss of Torrey Canyon amounted to USD 8.25 million,the largest amount for a single loss ever experienced by The American HullInsurance Syndicate. This amount equalled roughly the settlement agreed uponwith the two governments.

The only available asset from the ill-famed tanker is reported to have been oneof the lifeboats worth USD 100. This is almost true, though not quite. Whenthe pollution liability questions were discussed a year later, the representativesof the oil companies and the independent owners were unable to agree on anindustry recommendation. The sub-committee’s chairman, a lawyer from BP,found the situation so impossible that he decided to withdraw from the chair-manship. As a consolation and as thanks for his energetic efforts, he was givena ship’s bell – the bell of Torrey Canyon that had been recovered.

The killing of fish, fowl and marine vegetation, the polluted beaches, and thedamage on local economies started a discussion on liability for marine oil pol-lution damage. This would become a theme for discussions that would go be-yond the century. Torrey Canyon became the symbolic warning of the threatto the environment represented by large tankers. Statistically, every featureseemed to be on a record scale – the largest ship ever wrecked, the largest oilspill ever known, the largest hull claim ever presented. Subsequent to thegrounding on the Seven Stones Reef, tankers and the pollution risk werebrought into the public eye. For the first time owners of oil tankers were con-fronted with high-profile media attention – all negative. The industry wasmade to understand how such an accident could present sensational materialfor the media, significant enough to alarm public opinion. Environmental is-sues became a part of the political agenda, and the tanker and oil industryfound themselves in a new uncomfortable position.



Other incidents followed. In March 1968, two more tankers grounded, causedpollution and confirmed the potential threat from oil carriers. The Liberiantanker Ocean Eagle broke in two in the waters of Puerto Rico and causedheavy pollution of San Juan Harbour, whilst only four days later a Greektanker, General Colocotronis, struck a reef off the Bahamas and polluted recre-ational beaches. The oil penetrated deep into the sand.

Other tankers were disabled because of explosions. In the years that followed, it became clear that tankers were most vulnerable

when the cargo tanks were empty, because the fumes are more explosive thanthe liquid. To prevent explosions, inert gas – which contains less than five per-cent oxygen – should be ducted into the empty portion of the tanks to preventexplosion. There were no mandatory regulations at the time that required suchinert gas systems, and a number of tanker owners hesitated to spend moneyon such safety devices. One of them was Union Oil, which once more founditself in serious trouble when a stupendous explosion ripped its third tanker,Sansinena, apart and killed nine people and injured eight more. The fatal in-cident happened at the oil company’s berth in San Pedro, California, wherethe 13-year-old tanker was to discharge a cargo of Indonesian crude oil. Theship’s mid-deck cabin was hurled into the air together with the occupants: Themate and a radio officer. Windows were shattered two miles away. Togetherwith the unforgivable explosion of Betelgeuse in 1979, when 50 people werekilled, the two accidents were contributory to IMCO’s belated efforts to introduce mandatory requirements to install inert gas systems. The implemen-tation was delayed nearly a decade.

Notes:On Torrey Canyon, see Welty & Taylor: “Black Bonanza,” New York. 1950, Richard Petrow: “TheBlack Tide,” London, 1968; E. Covan: “Oil and Water London,” 1969; Plymouth Laboratory: “TorreyCanyon - Pollution and Marine Life,” London, 1969; Crispin Gill, Frank Booker and Tony Soper: “TheWreck of the Torrey Canyon,” N. Mostert: “Supership,” New York, 1974; E. Nalder: “Tankers Full ofTrouble,” New York, 1992; G. King: “A love of ships,” Hampshire, 1999; and Bradford Mitchell andRobert Dwelly: “Touching the Adventures and Perils - American Hull Insurance Syndicate 1920 –1970,”New York, 1970.


NEW CONVENTIONS IN 1969

4

New Conventions in 1969:

Tanker owners face pollution liability & intervention of coastal states

I. BACKGROUNDLimitation of liability has been regarded as essential to contain the exposurein potential risky business ventures. Ships and cargoes are exposed to weatherconditions which human beings have no control over, and transportation ofgoods at sea has always been a particularly hazardous profession.

It is arguable that limitation of liability has been a condition for growth ofinternational trade through generations. The legal position of shareholders injoint stock companies might be seen as the basis for our capitalistic businesssociety.

In shipping, the origin of the limited liability seems to go way back to an-cient Rome. Here, owners of ships trading to foreign shores often left it to atrusted person to take command of the ship and its crew. According to thelaw, the owner could be held liable for the damage caused by the master tothird-parties. If the master was his slave or a family member, the owner couldfulfil his obligations by abandoning the master to the damaged party. In doingso, he had honoured his obligation to pay compensation. This peculiar rulewas apparently based upon a notion that nothing could cause damage beyondits own value.

In the 11th century, an initiative was taken in France to collect judgements on



maritime legal disputes. The collection became known as “Rooles de Oleron.”It is not quite clear to what extent the shipowner’s liability was limited underthese rules. But 200 years later when the maritime law prevailing in theMediterranean was codified in “Consulato Del Mare,” the shipowner’s expo-sure was limited to the value of his ship. When Venice, as the first case of ex-treme capitalism, matured into decay, it was outranked by the Dutch Republic.But the respective codifications formed the basis for further development ofmaritime law in Europe together with the rules agreed later – just after theyear 1400 – by the Hanseatic League. In Denmark/Norway, the shipowner’sright to limit his liability was set out expressly in law from 1561.

In 1734, Parliament passed this principle as the first English Act. It con-tained in its preamble the consideration that “it is of the greatest consequenceand importance to this Kingdom to promote the increase of the number ofships and to prevent any discouragement to merchants and others from beinginterested and concerned therein.” A hundred years later, competition fromships under other flags was invoked as the main justification for the limitationprinciple.

On the other side of the Atlantic, support for “legal parity” with other mar-itime nations was growing. The limited liability principle for shipowners waslaid down in the US Limitation of Liability Act enacted in 1851. Absent fromany privity or knowledge of any specific damage potential of the ship in con-cern, the shipowner’s third party liability was limited to the value of his interestin the ship plus the pending freight. The act should “encourage shipbuildingand induce capitalists to invest money in this branch of industry.”

It would be to the benefit of the international shipping industry if the maritime law of the various seafaring nations could be harmonized and sim-plified. With industry support, an international group of respected maritimelawyers, the Comite Maritime International (CMI), founded in Belgium in1897, provided their governments with various draft conventions suggestingunification of several aspects of the legal systems. CMI believed that maritimelegislation should be declared with input from shipowners, merchants, under-writers, average adjusters, bankers and “other persons” engaged in the mar-itime trade.

Full recognition of the advantages of an international liability system, whichcould contribute to equal competitive conditions, took considerable time. Aquarter of a century passed before the first international convention onshipowners’ liability for damage to third parties was concluded in Brussels in



1924. The liability was based on the size/tonnage of the ship in question. Thelimitation amounts were some eight pounds sterling per ton or, alternatively,the value of the ship plus 10 percent. For damage to people, the liability wasset somewhat higher. The shipowner was exonerated of any claims if no faultor negligence could be shown on the part of the ship.

After World War II, renewed efforts resulted in the International Conventionon Shipowners’ Liability of 1957. This general convention on third-party lia-bility covers both compensation for personal injury and compensation fordamage to the property of third parties. Pollution damage as such was notspecifically addressed. The first treaty to introduce a dedicated regime for dam-age caused by pollutants came about in 1962: The Convention on the Liabilityof Operators of Nuclear Ships.

The 1957 convention continued to base the liability on negligence. The limi-tation rules could be invoked only when the damage was a result of the faultof master and/or crew. The compensation to be paid depended on the size ofthe ship and was limited to 1,000 Poincare francs (about USD 67 per net reg-istered ton). A net ton equals a gross ton minus the space for the engine room.For personal injury, the liability limit was doubled. Under French law, the li-ability was linked to the custody of the vessel rather than ownership alone.Inspired by the French delegation, it was also agreed that the charterer, themanager and the operator of a ship were exposed to the same liability rules.But if the damage was caused by the responsible party’s personal “fault orprivity,” he became, in principle, fully liable.

The Liability Convention of 1957 did not enter into force before May 1968.Thus, if a shipowner had failed to say that his vessel was not seaworthy ornot in class, he would also risk that his insurance cover was revoked. At thatpoint in time, the grounding of the Torrey Canyon had made it nonsensical asfar as compensation for pollution damage was concerned.

Following the Torrey Canyon disaster in March 1967, legal issues were in-cluded in IMCO’s working agenda and an extraordinary Council meeting wassummoned in May. It was decided to set up a Legal Committee to supply apaper on the traditional concept of the freedom of the seas with emphasis ona states’ access to intervene and protect their coastlines against a leaking tankeroutside their territorial waters. A large majority of governments were con-vinced that shipowners’ liability limits were far too low to cover third- partypollution claims and to compensate governments for the clean-up costs. Thus,



the committee should also reconsider the shipowner’s traditional legal rightto limit his liability – a principle confirmed in a convention passed only 10years earlier, but at a time when pollution damage problems were given littleor no attention.

Governments were requested to assist the new committee by providing asummary of relevant national legislation and regulatory practice that couldserve as a basis for future discussion. Furthermore, a questionnaire was sentto members to obtain information on major incidents of marine pollution intheir territorial waters in the period from 1959 to 1969.

But only a few governments replied. Even France, which had suffered badlyfrom the pollution the Torrey Canyon caused, did not respond. Denmark,India and the USSR were among seven other countries with nothing to report.Norway did not seem to answer the questionnaire at all. Greece reported sixminor incidents, four of which had caused no pollution damage at all. The in-terpretation of the term major incident obviously differed from country tocountry. The other 14 countries reporting back to IMCO were Belgium,Canada, Federal Republic of Germany, Hong Kong, Japan, Korea, Kuwait,Netherlands, Poland, Singapore, Spain, Sweden, Syria and the US.

Among the 47 reported incidents, 21 occurred between March 1967 and July1969.

However, the most notorious oil spill so far was not from a tanker, but fromthe offshore oil-drilling rig the Santa Barbara. In January 1969, the blowoutfrom the rig, operated by none other than Union Oil, spewed about a milliongallons of oil – about 3,250 tons – into the sea between five and six miles fromthe Californian shore. Another two million gallons were lost over the succeed-ing months. The oil was dispersed over 800 square miles of ocean and 100miles of coastline. Seepage was observed as late as October 1970, accordingto a report prepared for the US Federal Water Quality Administration.

The blowout caused the same anxieties about the effect on the environmentas Torrey Canyon. The same controversies about how to remedy the pollutiondamage came to light, including disagreement on the wisdom of applyingchemical dispersants to the slick. There were heroic attempts to save seabirds,of which a great number died – estimates vary between 4,000 and 6,000. Thisaccident, and other spills to follow in American waters, prompted high pres-sure on federal and state legislators to deal with the environmental problemon home ground, rather than wait for an international agreement. A marinemammal expert at the University of Guelph in Ontario, Mr. David Aubin,



noted the divide between public and scientific perceptions. He reported: “Stud-ies that found minimal effects (of the oil spill) were dismissed by the public asinadequate, whereas media reports were often overstated and sensational, andfound little favour with the scientific community.”

It soon became clear that the intensity of news coverage of an oil spill couldbe predicted by the proximity of media centres to the scene.

Notes:The first international efforts to introduce unified rules on shipowner’s liability were taken long before1957 and resulted in a convention of 1924. It entered into effect in 1931, but was not ratified by theimportant shipping nations and has been seen as a failure. There have been speculations that the reasonwas that it was conceived by France, not England – “the not invented here factor?” Liability rules perse were left to national law. It focused on the limitation aspect. See Wu Chao, pp. 33 and 62-65.

II. AN INDUSTRY DIVIDEDLooking to public demand that victims of oil pollution should be fairly com-pensated, the industry’s traditional limited liability system became full of peril.

The industry was composed of two groupings: The oil companies and theindependent tanker owners. In terms of economic strength, the many inde-pendent owners were not comparable with the major oil companies. Thelargest fleets owned by independent shipowners at the time included the Onas-sis group, Mr. Niarchos and Mr. Lemos representing Greece; Sigval Bergesend.y.; Hilmar Reksten and Anders Jahre from Norway; A.P. Moller from Denmark; Chee-Jva Tung from Hong Kong; and Mitsui OSK, N.Y.K andJapan Line from Japan.

Most independent owners, regardless of the size of their tanker fleets, camegradually to the conclusion that if no international agreement was reached onpollution liability, individual governments could be prompted to legislate uni-laterally. IMCO seemed the lesser of two evils.

The major oil companies were cargo owners, charterers and major tankerowners, as well. The policies of “The seven sisters” were traditionally againstintervention of governments in any sector of their global activities. They prepared a third alternative that could work only if it was supported by theoil and tanker industry as a whole.

Consequently, representatives of the independent tanker owners were invitedto take part in preparing a private alternative compensation scheme. After awhile, representatives of shipowner’s mutual insurance associations, the inter-



national P&I clubs, were brought into the discussion. The aim was to form avoluntary international agreement offering better compensation to pollutionvictims through increased insurance coverage.

The P&I Clubs presented their findings in a letter to IMCO from AnnarPoulsson, the managing director of the Norwegian club, Skuld. Here it wasstressed that the Torrey Canyon was the only major incident and that seriousoil pollution incidents caused by tankers were rare. Their arguments were confirmed by the replies from the various governments to the IMCO questionnaire. Furthermore, one would have to take full account of the limitedcapacity of the insurance market. It was also argued that the clean-up after anoil spill could be undertaken at far less cost than had been expended in theTorrey Canyon case. Reference was made to documentation that disclosedthat there were only two other tanker spills for which the cost had reachedthe liability limits of the International Convention on Ship-owners’ Liabilityof 1957. Out of 1,040 registered spills, the maximum oil spilled in any oneincident – except Torrey Canyon – was 20,000 tons. With the same exception,the maximum single clean-up cost experienced came to USD 800,000.

Against this background, tanker owners as well as cargo owners were inagreement that there was no reason to set aside the principles that shipowners’liabilities for pollution damage should remain limited and based on fault.

With the formation of IMCO’s Legal Committee, one wondered whether CMIwould play a less important role in the future.

CMI, however, lived up to expectations. One of its sub-committees, chairedby Lord P.C. Devlin, President of the British Maritime Law Association, hadin a relatively short time drawn up a new draft convention on compensationfor pollution damage. As could be expected, the draft was based on traditionalmaritime law. After having been approved in Tokyo in the spring of 1969, thedocument was submitted to IMCO and became a basis for its further work.

The International Chamber of Shipping (ICS) also had consultative status inIMCO. Members were national shipowner associations from a large numberof countries. By and large, ICS supported the principles CMI promoted. More-over, ICS had for many years contended that the larger tankers did not meanan increased pollution risk. Reference was made to the fact that most tankeraccidents had happened in congested waters. Practically all of the pollutioncases recorded had taken place at or very near port entries or near terminalfacilities. In 1971, ICS again argued that there was “no evidence that the increase in the size of tankers by itself has created a greater risk of polluting



accidents. Indeed, to increase the size of tankers means that fewer ships areneeded to carry the same amount of oil cargo and accordingly the risk is reduced.”

Among the independent tanker owners, there were strong voices claimingthat it was the oil cargo that represented the pollution risk and not the tankersas such. Moreover, the oil industry had far deeper pockets than the fragmentedtanker industry. ICS was therefore under obligation as a shipowner organiza-tion to promote the view of shipowners, it was argued.

The view of the oil majors was that the shipowner, who was in control ofhis ship, was responsible for safe navigation. Owners should live up to theirresponsibility and accept to compensate victims alone if and when a pollutionaccident occurred. Consequently, the oil companies argued that any form ofcargo liability should be rejected by ICS.

Under these circumstances, ICS seemed to be of little help to either party.Before long, two new industry organizations came forward. The oil industryestablished the Oil Companies International Maritime Forum (OCIMF), whilethe independent tanker owners set up the INTERTANKO in Oslo, Norway.

Note:The 1962 Convention on the Liability of Operators of Nuclear Ships sought to make the operator ofthe nuclear-powered ship liable for any release of radioactivity regardless of whether the ship was atfault or not. Britain was the driving force in the drafting, and legislation was prepared in February 1964.In the fall, the Conservative Government lost the election, and the matter was dropped. Neither the USnor Russia has ratified.

III. THE DIPLOMATIC CONFERENCE – BRUSSELS 1969In the meanwhile, deliberations in the IMO Legal Committee had producedtwo new draft conventions: One on the pollution liability problem, the otheron the coastal states’ right to intervene against polluting tankers on the highsea.

Following an invitation from the Belgium Government, a diplomatic con-ference convened at the Palais des Congress in Brussels from Nov. 10 to 28,1969. Albert Liar, head of the Belgian delegation and president of CMI, waselected president of the conference. Fifty-three countries were represented.Also present, as observers, were six governments and 11 organizations withconsultative status, including ICS, CMI and OCIMF.

A second committee, with the Secretary General of CMI, Dr. Walter Muller



(Switzerland), as president, should deal with liability for pollution damagecaused by tankers. This turned out to be even more controversial than thequestion of the intervention issue.

On the first day, Mr. Liar invited comments upon procedural issues. Howshould the conference organize its work? But the President could not stop thehead of the Canadian delegation, Donald Jamieson, Minister of Transport,who insisted to speak right away on the fundamental question for the confer-ence, “the responsible party.” Referring to the documents sent to and distrib-uted at the conference, Mr. Jamieson paid no attention to the plea from thechair that he was out of order. In his view, the documentation was off themark. It stated:

“The striking feature in the documents … was the lack of any allusion to theliability of the petroleum industry in Canada’s opinion, pollution was

mainly attributable to the nature of the substance carried and was only incidentally the carrier’s fault. Maritime law had always drawn a distinctionbetween the cargo and the ship. … the notion of joint enterprise applied alsoto marine pollution. Just as they shared the profits from carrying oil in bulk,charterers and oil companies ought likewise to share the liabilities inherentin that form of transport. The sharing of liability went hand in hand with

the sharing of losses resulting from a joint act that caused damage. According to the principles in Regulation A of the York Antwerp

Regulations, 1950, the cargo should contribute towards an adequate compensation for the losses suffered by the victim and that contributionshould also serve to make good the loss which the victim suffered owing

to the operation of the limited liability.”

His delegation accordingly proposed that liability for damage caused bypollution should be shared; the shipowner should be liable to a given figure,and the charterer liable for the balance.

During the subsequent discussion, the Irish representative, J.N. McGovernof Irish Shipping Limited, said that:

“In the opinion of his country, from the point of view both of expedienceand of principle, liability should be on the cargo. It was the cargo which

caused the type of damage, not the ship, as was clear from the TorreyCanyon case. … The cargo interest might include a variety of people – such

as the shipper, the receiver, or the owner for the time being of the cargo. The liability could not be placed on the owner, since ownership could



change during a voyage … The shipper, however, did not change and was aconstant factor. … The Irish Government had accordingly proposed an

amendment embodying the principle that the owner should either identifythe shipper or himself be deemed to be the shipper.”

The delegation of the Netherlands, Mr. van Rijn Alkemade, wished to associateitself with Ireland. In the paper submitted to IMCO prior to the Conference,the Netherlands had pointed out that the risk created by massive transport ofoil in bulk was not in the first place created by the carrier, but by the technicaldevelopment in transportation, made primarily in the interest of the oil indus-try as a whole. This “‘industrial risk’ should be borne by the oil industry ratherthan by the carrier.”

Mr. L.M.S. Rajwar of India pointed out that the big international oil compa-nies, which had the resources to build up a fund to meet the claims for oil pol-lution, had the maximum ability to shoulder the burden of liability. Hetherefore proposed that the major burden should fall on the oil companies.The carrier, of course, would continue to shoulder its limited existing liabilitybased on fault.

Mr. Ulf Nordenson of Sweden echoed the support for cargo liability. Hestated that oil pollution was not a typical maritime risk, but one created bythe vices of the product itself. Mr. M.J. Kerry of the UK eloquently presentedthe opposite view, that liability should be imposed on the shipowner alonewith no involvement of the owner of the oil cargo. He stressed that unlike theshipowner, the shipper and the cargo owner could not exercise any controlover the cargo while it was on the high seas. Furthermore, it was difficult toidentify the cargo owner, particularly as the cargo might change ownershipduring the voyage.

In any case, the preparatory work on imposition of liability on the cargo wasnot sufficiently advanced to make it possible for a convention based on thatprinciple to be drawn up in the short time at the disposal of the conference.The UK government did not however, “rule out the possibility of further investigation into potential ways of providing for damage not covered by maritime law as amended by the Convention. However, it regarded that assomething which might be done at a later stage.”

The US, France and a number of other delegations had strict liability on theshipowner as their first choice. The French delegation’s spokesman, Monsieur



Claude Douay, (Conseiller Juridique du Secretaire general de la MarineMarchande), became his country’s most active voice on legal matters inIMCO/IMO for many years. He strongly stressed that compensation must bemade available also in cases where the ship could not be blamed for the accident. If the liability continued to be based on fault, the shipowner mayclaim that no fault is committed, with extensive litigation as the result. Suchcost should not be borne by the victim. Thus: “It was essential to providehigher compensation which was guaranteed and always available. Liabilitymust therefore be based on risk, not on fault.”

Whilst identification of the operator could cause severe problems, the iden-tification of the registered owner was claimed to be unproblematic, and LordDevlin of the UK, also speaking as the chairman of CMI’s committee, favouredthe simple solution. In one intervention on the subject, he stressed that: “Thebest channel for providing compensation was one which was simple in appli-cation, made use of existing procedures and offered an incentive to preventcasualties.”

Mr. Douay, in a lengthy statement, claimed that: “Shipowners’ strict liabilitywould be in accordance with the ordinary law applied to carriage and withordinary maritime law, and would enable the Convention under considerationand the 1957 and 1924 Conventions to be applied simultaneously in caseswhere pollution damage was accompanied by ordinary damage.”

Several maritime countries, such as Japan, Liberia, Norway, the UK andthe USSR and others shared the view that liability on shipowners should bemaintained on the traditional fault basis.

In a vote on a provisional basis at the end of the first week of the confer-ence, a clear majority supported the view that the shipowner should be liablefor pollution damage. But the delegations of Belgium, Denmark, Finland,Greece, India, Ireland, the Netherlands, Portugal, Sweden and Switzerland allvoted in favour of the Irish view that strict liability on the cargo should be thefirst choice.

After three weeks of heated discussions and voting article by article, a com-promise text was worked out.

The traditional concept of liability based on fault was abandoned. Thusthe tanker owner became obliged to pay compensation for the damage caused regardless whether the pollution had occurred due to negligence on the partof his ship or not.

There were, however, a few exceptions. The most important were that the



owner was exonerated if he could prove that the damage was caused by: “an act of war” or wholly by “a natural phenomenon of an exceptional, in-evitable and irresistible character” or “damage caused with intent by a thirdparty” or “failure of governmental authority to maintain navigational aids.”(Article III 2)

On the other hand, shipowners were allowed to continue to limit their liability. The protection afforded to victims in terms of compensation, was –further to a proposal from France – set at 2,000 Francs per ton according tothe size of the tanker in question, or a maximum 210 million francs. Theselevels, which were agreed by 35 votes to three with three abstentions, corre-sponded to the capacity of the insurance market. The 2,000 Francs was twicethe amount available for property damage under the 1957 general liabilityconvention and the USD 14 million were estimated to be very close to the dam-ages Torrey Canyon caused. The right to limitation assumed that the pollutionincident was not a result of the shipowner’s personal fault or privity. If he waspersonally to blame, the shipowner would face an unlimited liability.

From day one, it was clear to everybody that a new instrument which imposeda strict and higher liability on the shipowner would not be workable unlessways were found to enable him to obtain insurance against the potential claimsfor pollution damage.

Norway had argued that insurance coverage differed greatly according tothe nature of liability. To get the highest coverage in the market, any new liability for pollution damage should be based on fault. But the spokesmen ofFrance and the US in particular insisted that the convention would be unacceptable and unworkable unless it was based on strict liability. Moreover,strict liability had to be combined with compulsory insurance coverage. Withno such principle, a victim might be faced with an insolvent debtor.

The French representative pointed out:

“There would also be such things as flags of convenience, and people using these would be able to evade their responsibilities, to leave

compulsory insurance out of the convention would be tantamount to saying there should be no convention.”

Also, Ireland maintained that compulsory insurance would be an indispen-sable ingredient in the liability system to be introduced. Compulsory insurancewas the second innovation of the new convention. By 30 votes to three withthree abstentions, it was decided that all tankers carrying more than 2,000



tons of oil in bulk as cargo should be required to take out insurance and carrya certificate to confirm that insurance was available.

Marine liability insurance had traditionally been placed by shipowners withtheir P&I clubs on a mutual basis. Cooperation with the clubs was accordinglyseen as a must, and the P&I representatives played a key role before and during the conference.

One insurance aspect of particular importance to the clubs was to maintainthe established “pay-to-be-paid” principle. The rules of the P&I clubs did notallow a victim to claim compensation directly against the shipowner’s club.The shipowner had traditionally been primarily liable to the claimant, but wasindemnified by the insurer in respect of claims he had paid. Indemnificationbased on this well-established principle, based on English common law, wasseen as a cornerstone for the whole mutual marine liability system. In the nextround, after the shipowner had paid up or satisfied the claimant in some otherway, the shipowner would turn to his club to be re-imbursed. In other words,there was no “direct action.”

Most P&I clubs were domiciled in London, and it was the UK delegation thatspoke most warmly in favour of “pay to be paid.”

Mr. Kerry of the UK stressed the importance of avoiding direct recourse to the insurer.

“That was not in order that the insurance company might avoid payment,but because if the claimant were to go to the insurer directly, the insured

party would lose all interest in defending the case, the result of which wouldbe to make it more difficult for the insurer to defend himself against

frivolous claims. Insurance would thus become much more expensive andthe capacity of the market would tend to shrink.”

Should “direct action” be adopted in other insurance markets, insurance costwould not only increase generally, but also make it more difficult to obtain, itwas argued.

Professor K. Spiliopoulos of Greece was one of many who could not acceptthis view. In his defence for the new principle, he pointed out that “in view ofthe fact that the Committee had accepted the principle of compulsory insur-ance, it must also accept direct recourse so that the victims could be adequatelyprotected.”

Mr. McGovern stressed once more that direct recourse was essential. Themain reason was that no funds otherwise might be available because of the



many “one ship companies” which had limited funds. He could not agree withthe view Mr. Kerry expressed that the insured party would take no interest in the claim, because that party would still have an interest in the cost of hisinsurance premiums, which was directly related to the claims he made.

The direct action principle was then approved. The victim’s right shouldnot depend upon the relations between the insurer and the insured.

Other insurance aspects were also discussed at length. The conference decided that the insurer could invoke the liability limits and the same defencesas the shipowner was entitled to. The insurers should be exonerated if thedamage was caused intentionally by the shipowner and, finally, they were entitled to limit their liability if the incident was a result of the owner’s actualfault or privity.

The victim of pollution damage had to claim compensation within threeyears of the date when the pollution damage occurred. His claim was other-wise extinguished. It was agreed that claims for pollution damage could notbe directed against servants of the owner or any of his agents. This means that“even when at fault, the servants and agents were immune against compensa-tion claims for pollution damage.” Such immunity was not provided for otherparties. Hence victims might pursue claims against such other parties – includ-ing charterers and cargo owners – outside the conventions under ordinary na-tional law. Finally, the shipowner’s right to recourse against third-parties andclaim compensation under general law was expressly confirmed in Article IIIin fine.

In summary, the liability deliberations may be said to have resulted in a compromise – tanker owners would have to face a strict no-fault liability, com-bined with compulsory insurance, but were allowed to limit their liability atfixed monetary levels. The USD 14 million ceiling obviously favoured thelargest tankers, as it meant that the liability increase – based on the tonnageof the tanker – stopped at approximately 200,000 dwt. But a large number ofdelegates realized that the compensation from shipowners now establishedprovided only insufficient compensation. These considerations would eventu-ally lead to a supplementary agreement regarding contributions from the cargointerests. But at this stage, the time for the conference was running out.

Aside from the key provisions on liability, the Convention needed a frame-work, meaning that certain key concepts had to be defined.

The target was oil tankers. Thus “ships” were defined as ships that actuallycarried oil in bulk as cargo. In other words, only loaded tankers. This meant



that a tanker on its ballast voyage with no cargo on-board was not covered by the convention. Pollutioncaused by leaking bunker tanks from a tanker in ballastwould be treated in the same way as bunker oil leakingfrom a dry cargo ship and would not entitle victims tocompensation under the new rules. Warships and non-commercial ships on governmental service were also ex-cluded.

The scope of the convention was further limited topersistent mineral oil, including the bunker oil in aloaded tanker (such as crude oil, heavy diesel oil, fueloil and lubricating oil). Non-persistent oil and lightproducts were excluded, as they were believed to evap-orate or be eliminated by nature itself. But whale oil wasincluded in the definition further to a proposal from theJapanese delegation. Rikiwo Shikama explained thatwhale oil was also carried in bulk and had the same per-sistence and viscosity as heavy oil.

The definition of oil is inextricably linked with the definition of pollution damage. Pollution of the environment affects everybody. It is an event wherebysubstances are introduced into the environment that adversely affect the balance of nature or the well-beingof people in general.

The draft definition of pollution damage submitted tothe Conference was narrower. Its aim was to provide aclear framework for compensation to be paid for thedamage caused by the escape or discharge of oil fromtankers. From recent experience, the delegates knewthat the spreading of chemicals to alleviate the effectsof an oil spill had caused considerable harm to life inthe sea. In the debate about an appropriate wording, theGerman delegation argued that the party responsible forthe pollution damage should also be made responsiblefor the loss of marine life caused by any preventivemeasures. This was agreed, and the resulting definitionof pollution damage read as follows:

Per Gram

Per Gram was the Managing Director of the Northern Ship-owners Defence Club in Oslo. He was an active participant inCMI, Bimco’s DocumentaryCouncil and Chairman of theDocumentary Committee of INTERTANKO from its incep-tion in 1974 until his death in1984. He was ahead of his timewhen he in this capacity initi-ated a close cooperation withChase Manhattan Bank to finda solution to the problem of missing bills of lading in ports; a problem which exposedshipowners to enormous finan-cial risks. An electronic solutionwas presented to the industrybut failed to obtain sufficientsupport. Also noteworthy is hiswork for Scandinavian tankerowners to present a solutionthat would enable governmentsto realize the resolution passedby the IMO Conference in Brussels in 1969 to establish aninternational Fund which couldtop up tanker owners’ liabilityfor oil pollution damage.

© Portrait



“Loss or damage caused outside the ship carrying oil by contamination resulting from the escape or discharge of oil from the ship wherever such

escape or discharge may occur, and includes the cost of preventive measuresand further loss or damage caused by preventive measures.”

By referring to “contamination,” the convention eliminated damage causedby an explosion or fire related to an incident. Some delegations felt that thislimitation was most unfair. France had, for example, in a submission to IMCO,stated that “It would be immoral … not to compensate victims in cases of ex-plosion or fire causing loss of life and resulting from an escape or discharge ofoil.”

In her book “Pollution from the Carriage of Oil by Sea,” (p.48) Wu Chao argued that the option clearly made pollution law look like an extravagance,because bodily injury suffered by man would be treated less favourably thandamage to the environment. It is difficult to not agree. With the new limits,CLC doubled the amount of compensation available under the 1957 conven-tion on the shipowner’s general liability. This meant that the compensationfor damage by oil would exceed the compensation for a dead seaman resultingfrom other shipping accidents. The fact that damage to the environment wasgiven such generous compensation compared with bodily injury has been explained by the intervention of the media and the resulting public pressure.Such considerations may, however, be rather rash, as catastrophic accidentsshould not be swept away, even if damage to people generally may be givenpriority.

CLC 69 would be applicable only when the territory (and the territorial sea)of a contracting state is contaminated. Pollution damage on the high seas wasexcluded despite the strong argumentation from Canada’s Mr. Max Wershof,who claimed that there were places outside the territorial sea where damageto fishing interests could be catastrophic. A clear majority agreed, however,with Mr. Douay, who reported that a working group, which had dealt withthe problem, did not want to reopen this question, as damage occurring onthe high seas was, as a rule, “relatively small compared with damage to national territory or in the territorial sea.”

The French spokesman was one of the leading and most engaged of those atthe Conference and had also been so in the preparatory discussions withinIMO’s Legal Committee. He spoke very fast but also very clearly. In the cor-



ridors of the conference hall, the discussion of possible compromises was theever-recurrent theme. In addition, the speech-making capabilities of Mr. Douaywere also frequently commented upon. Chatting over a cup of tea, a blond,robust, but smart interpreter was asked how in the world she managed totranslate Mr. Douay so efficiently. It sometimes even seemed that she wasahead of him, Captain Holt of the Norwegian delegation said to her. “Well,”she replied, “you know I have heard him so many times in London, that Ihave a pretty good feeling for what he is going to say!”

Notes:The Official Records of the International Legal Conference on Marine Pollution Damage, 1969, printedin London 1973, provide a comprehensive report (819 pages) on the participation, documentation anddeliberations by the IMCO Conference in Brussels from Nov. 10 to 29, 1969. See in particular the fol-lowing pages in the Report: pp. 7, 8, 49-52, 60, 79, 84, 85, 100, 102, 185, 198, 199, 439-40, 537, 623,624, 626, 632, 633, 635, 638, 639, 643, 647, 703-707, 713, 730-738, 748, 749 and 761. Ref Frenchcomments p. 446. The Records pp. 36-49 also contain the text of the IMCO questionnaire sent out to member states askingthem to report spills as well as the replies. See also the review of subsequent spills in “Tanker Spills -Prevention by Design” issued by the National Research Council, Washington, D.C., 1991, pp. 16-19.The dollar figures are the approximate equivalents of the CLC figures that were expressed in gold francs. The International Group of P&I clubs includes 13 underwriting clubs that provide liability coveragefor about 90 percent of the world’s ocean-going fleet. Each club is a non-profit entity providing coveragefor shipowner and charterer members against third-party liability. The members, who represent all mar-itime transport, control the club’s activities through a committee elected by the membership. The insur-ance coverage provides protection against a wide range of risks such as pollution damage, injury to thecrew and passengers, cargo loss and damage. The clubs also provide advisory services.

IV. THE “CARGO” RESOLUTIONWhat about the suggested supplementary regime sponsored by the cargo own-ers?

The United Arab Republic had prepared a draft resolution presented byMr. A.A.K. Mohamed suggesting that “some form of supplementary schemein the nature of a supplementary Fund is necessary to ensure that adequatecompensation will be available to victims of large scale pollution incidents…” but that the time available “did not make it possible to give full considerationto such a scheme. … A draft Convention to be submitted to an InternationalConference … to be convened, if possible, in 1973.”

Also, the Netherlands followed up the comments submitted to the confer-ence where it, amongst other things, was stated:



“A solution placing liability on the cargo, if this could be worked out satisfactory, would probably meet with less difficulties than one putting theburden of strict liability on the carrier ... Whereas it is generally accepted in

the nuclear field that liability should attach not to the carrier but to the operator of the nuclear installation who manufactured the obnoxious

material, it is equally appropriate that in the field of the oil industry, liabilityshould rest on producers, owners or receivers of potentially

obnoxious cargo.”

Because of the widespread sympathy for shifting the burden, or some of theburden of compensation to the oil industry, hectic meeting activity outside theconference rooms finally produced results.

In his capacity as a prominent figure both within CMI and the influentialUK delegation, Lord Devlin became the key person in the efforts to find a so-lution that the delegates could live with. Several suggestions were outlined tohim by Sweden’s Mr. Nordenson, who co-operated closely with ProfessorAllan Philip of the Danish delegation, as well as the delegations from Finlandand Norway.

On the Nov. 24, a draft resolution was presented by Denmark, Finland,Norway and Sweden proposing that an international oil pollution compensa-tion fund, financed by the oil industry, should be established. After consulta-tions, the draft was withdrawn and a new amended draft to the same effectappeared the following day. Professor Allan Philip, who introduced its text,explained that the sponsors had tried to combine their earlier draft with theone from the United Arab Republic. The new draft was meant to be a com-promise. The sponsors had voted for the introduction of strict liability on theshipowner, as the UK suggested, despite the fact that several other countrieshad disagreed. In an effort to obtain satisfaction for the victim of oil pollutiondamage, the sponsors hoped that other delegations would now reciprocate byvoting for the draft resolution. Mr. Scheffer, head of the delegation of theNetherlands, expressed his support for the precise text of the Scandinavianresolution. So did a number of delegations, including the USSR, Germany,Liberia, India and others.

The delegations of the US, France, the Federal Republic of Germany, the UK and others then expressed that whilst they all preferred the compromiseproposal from the United Arab Republic, they could also support the Scandinavian proposal. Lord Devlin went along and declared that: “On theunderstanding that the delegates were free to put forward any ideas for a solution and were at present committed to none, the UK delegation welcomed



the idea of entrusting the task to IMCO and hoped that its efforts would besuccessful.”

The resolution was thereby agreed on. IMCO was requested “to convene notlater than the year 1971” and the International Legal Conference to considerand adopt a compensation scheme to be organised by an international fund.

IMCO was charged with preparing a draft for a supplementary convention.In its work, one should take into account as a foundation that victims shouldbe fully and adequately compensated under a system based upon strict liability.The main function of the Fund should be to compensate victims who couldnot obtain full compensation for pollution damage under CLC 1969.

However, there was also an extra provision to the effect that the Fund“should in principle relieve the shipowner of the additional burden imposedby the present convention.” The implementation of this last part of the controversial resolution would prove to be strongly opposed by the interna-tional oil companies in the years ahead.

The Norwegian delegation to the 1969 Conference included representativesof the national shipowners’ association. On their return, the NorwegianShipowners’ Association decided to set up a committee to prepare the groundfor a realization of the Fund Resolution. The new committee was chaired byone of the delegates, Per Gram, who was an internationally recognized experton maritime law.

The committee, which after some time became known as the Fund Commit-tee, worked closely with its government and fellow associations in the otherScandinavian countries in order to present a viable scheme by 1971.

Note:The author was a delegate to the ’69 Conference, and later undertook the job as secretary to the committee mentioned.

V. THE INTERVENTION CONVENTION Whilst the discussion in Brussels in November 1969 on pollution liability inCommittee II of the Conference proceeded, Committee I considered the drafton the public law aspects. This draft was designed to permit Coastal States totake steps to combat the pollution of their shores even beyond the limits oftheir territorial seas.

Under international law, the right for the UK government to intervene



against a foreign tanker outside the three-mile territorial waters limit, includingbombing the wreck, had been questionable. In many quarters, it was felt thatthe action taken by the UK government in March 1967 could be seen to havebeen a radical departure from the traditional principle of freedom of the highseas and could establish a dangerous precedent in international law. But withthe growing number of large tankers, it was unlikely that the Torrey Canyonincident would be an isolated event. Soon there might be a need for a coastalstate to act against a foreign vessel to protect its shores against an imminentthreat of pollution. The catastrophe galvanised the desire for an agreement.

Prime Minister Wilson was at his cottage on the Scillies for his traditionalholiday that Easter morning when seas were rocky and Torrey Canyongrounded. He later warned the owner that the tanker would not be allowedentry in to UK territorial waters. Nor would other Channel States wish thegiant ships welcome. Wilson’s statement was widely interpreted as a strongsignal to the owners to give up the tanker to permit the Air Force and the Navyto destroy her. After eight days, it became clear that the ship had broken itsback. The subsequent decision made two days later to bomb the wreckedLiberian tanker was widely criticized. The shipping industry was concerned,and the French government made no secret of its view, that the bombing addedto further pollution of the French coast.

At the 1969 Conference, a special committee, with George Maslov of So-vinflot, USSR as president, had been given the task of working out an inter-national agreement embodying acceptable principles and ways for CoastalStates to prevent or mitigate oil pollution damage arising from a tanker in dis-tress. In this forum, the delegation of the UK argued that its actions in March1967 were justified because of the principle that every coastal state was entitledto exercise the right of self-protection. A clear majority of the governmentspresent supported this view, but considered it necessary that the right shouldbe most carefully worded.

After nearly three weeks of discussion, participants reached agreement.Governments should be allowed to take action to end serious pollution threatsto their coastline when the accident occurred outside their territorial waters.Measures could be taken “on the high seas as may be necessary to prevent,mitigate or eliminate grave and imminent danger to their coastline or relatedinterests from pollution or threat of pollution of the sea by oil, following upona maritime casualty or acts related to such casualty, which may reasonably beexpected to result in major harmful consequences.”

The scope of the new instrument named “International Convention Relating to Intervention on the High Seas in cases of Oil Pollution Casualties



of 1969” was not confined to tankers, but applied to all seagoing commercialvessels that represented “a grave and imminent” pollution threat. The Convention entered into force in 1975.

Notes:In 1973, IMO adopted a protocol for the Intervention Convention whereby the right to intervene wasextended to casualties involving substances other than oil when they are liable to create hazards tohuman health, to harm marine life or to living resources in the sea. To assist coastal states, a list of therelevant substances was worked out and agreed upon. The Protocol entered into force in 1993. In 1996,the list was revised and entered into force the following year. See Z. Oya Ocayir: “Liability for Oil Pol-lution and Collisions” pp. 175-177.


COMPENSATION FOR OIL POLLUTION DAMAGE INTRODUCED FOR THE OIL COMPANIES

5

Compensation for oil pollution damage

introduced for the oil companies

I. THE 1971 CONVENTIONIMCO’s Sir Colin Goad, who had become Secretary General in 1968, left Brussels with the challenge to work out a scheme that would provide an oilindustry-financed fund that would secure extra compensation for pollutiondamage. The Resolution required that the preparatory work had to be finalized within two years.

Since 1969, representatives of the industry had presented their private com-pensation schemes to IMCO that would, it was argued, serve as intermediatesolutions until the governmental instruments could be implemented. The P&Iclubs had been involved in the preparations. A most important participantwas the recently established Oil Companies International Forum (OCIMF).The ICS thereby soon came between a rock and a hard place as independenttanker owners had responded by setting up INTERTANKO.

Independent tanker owners with large fleets had one by one been subjectto effective lobbying by the major oil companies. They were persuaded to support a scheme called Tanker Owners Voluntary Agreement concerning Liability for Oil Pollution (TOVALOP), to be administered by the Inter -national Tanker Owners Pollution Federation, Ltd. in London. The schemewas signed in March 1969 by the seven major oil companies (“the seven sisters”) and was meant to provide compensation to governments for clean-



up costs and damages tankers caused. The liability was based on fault in linewith traditional maritime law.

Shipowners recognised that the governmental procedures to ratify inter -national instruments were slow. Such delays might result in worldwide frustration and lead some governments with long coastlines to work out theirown legislation. The consequence of this scenario would be most uncertain.Hopefully the private schemes would prevent unilateral action.

The shipowners’ liability under TOVALOP was originally limited to thelesser of USD 100 per gross ton or USD 10 million per incident. The resource-ful oil industry was moreover in a position to present a new supplementaryscheme, Contract Regarding an Interim Supplement to Tanker Liability forOil Pollution (CRISTAL).

The signatory oil companies that represented most of the oil transportedby sea agreed to provide supplementary compensation. The oil scheme inter-vened, however, only in very few cases, and the compensation paid never exceeded USD 30 million per incident, i.e., the difference between the aggre-gate amount of compensation available from TOVALOP and all other sources.One of the many conditions for rendering compensation was that the tankerthat caused the spill was a member of TOVALOP and that it carried a cargoa CRISTAL member owned.

According to one oil industry official, the intention was: “to defer govern-ments from legislating unilaterally in the first place, but, if this could not bedone, then at least to try to persuade them by example to legislate sensibly.”

Notes:Many documents used as sources for this book use only first initials for people’s names. Thus, firstinitials were used here when the full first names were not available. The International Chamber of Shipping (ICS) is based in London and is the association of nationalshipowner associations around the world. It represents the interests of all forms of shipping: Dry bulkcarriers, tankers regardless of whether the owner is an oil company or independent, passenger ships,container ships and liner ships. A major focus of ICS is IMO’s work to promote safety and protect themarine environment. It has had consultative status in IMO since this organisation was set up in 1958.The “seven sisters” was the popular name for the major oil companies at the time. These giant corpo-rations included Exxon (or Esso), Shell, BP, Gulf, Texaco, Mobil and Chevron (Socal). See AnthonySampson: “The Seven Sisters,” 1975.Wu Chao, pp. 115-128, sets out an historical introduction to CRISTAL.See the oil industry representative’s comments on TOVALOP/CRISTAL in the US General AccountingOffice’s “GAO/ID-83-19,” Feb. 3, 1983, pp. 7 and 9.



II. NEW INCIDENTSWhilst the preparations for the next IMCO conference went on, the mass pro-duction of super tankers continued, and new oil spills caught the attention ofthe media.

In 1970, the tanker Antonio Lavalleja grounded and spilt 38,000 tons ofcrude in Algerian waters, whilst the Norwegian five-year-old tanker Poly-commander burst into flames, spilling 16,000 tons of oil in Spanish watersand killing 23 crewmembers. After a collision the same year between two othercrude carriers - Allegro and Pacific Glory in the British Channel - the clean-up operation was undertaken at low cost and claimed to be perfect. But the liability limitations of CLC69 were exceeded when a third tanker, theArrow, stranded in a cold-water environment off Nova Scotia. The belated at-tempts were not more effective than in the Torrey Canyon case.

The most serious incident happened, however, in February 1971 when theLiberian tanker Wafra grounded and spilt 62,000 tons of crude due to engineroom failure off Cape Algulhas, the southernmost point of Africa. A singletank in a super tanker had a larger cargo-carrying capacity than an old-fash-ioned T-2 tanker could hold all together. Moreover, because of economic con-siderations, the super tankers were built with a thinner and less robust steelskin than in the past. Wafra was owned by an American oil company affiliatedwith Getty Oil and caused the largest spill since Torrey Canyon. The crewpiled mattresses, planks, etc., into the cracks in the hull in a desperate effortto stop the leaks, but in vain. The water rose and destroyed the tanker’spropulsion power. The area where the accident occurred was one of the prin-cipal breeding grounds for birds and penguin species of the Antarctic. Volun-teer workers from Cape Town saved 1,000 penguins cleaning the sea birds ofthe oil that clogged their feathers.

The public as well as the industry had then already been rocked by mysteriousexplosions on board three new VLCCs all within a period of 18 days.Marpessa, the largest vessel ever lost – owned by Shell, London – explodedand sank off Senegal on her maiden voyage. Two men were killed. Two morelives were lost when a second Shell tanker, Mactra, exploded in the Mozam-bique Channel. Finally, the Norwegian super tanker, Kong Haakon VII, ownedby Hilmar Reksten, met her destiny after an explosion off Monrovia onAfrica’s west coast, but with no loss of life. These two disabled tankers black-ened by fire nevertheless managed to reach port having suffered less criticalweakening of their structures than the Marpessa.



The tankers in question were all returning to the loading area in ballastcondition, and the explosions seemed to have occurred whilst their tanks hadbeen cleaned by mechanical rotating water guns. Whole deck areas of thetankers, 400 metres long, were ripped off by the explosions as though attackedby a giant can opener. Questions were asked about whether the explosionswere connected with discharge of static electricity caused by the cleaning pro-cedures.

Within the industry, every effort was made to find the reasons for the disasters, and IMCO was presented with new problems to be studied in itstechnical bodies. Eventually the discussions resulted in requirements for theinstallation of inert gas systems in the tanks for tankers over a certain size.

Explosion in large tankersA personal experience by Sven Moestue:

“In the summer 1969, the Norwegian tanker Silja, 95.000 dwt, collided out-side Genova, Italy, with the French liner vessel Ville de Majunga. The collisioncaused a series of explosions onboard the Norwegian tanker; she sunk six min-utes afterwards with the loss of most of her crew.

I wondered what caused this. Did it mean that all large tankers were danger-ous? I had several clients with similar and even larger tankers.

As claims a representative in Norway for the UK Club, I became involvedin the settlement for loss of lives. Ville de Majunga was entered in the UK Cluband Silja in Gard. The French vessel did have the right of way, but was heldpartly to blame for having failed to blow a warning signal, as required by thenavigation code. According to an international agreement, each vessel had topay 50 percent of the loss of lives, regardless of the degree of blame. A settle-ment was agreed amicably.

I started to study the possible cause of these dramatic explosions. My brother,an oil engineer with the Esso (Exxon) refinery in Norway, gave me some valu-able information: He explained that there must have been an explosive atmos-phere in the tanks after discharge in Genova. To create such an atmosphereyou need only four percent to six percent oil or gas. The rest is air. Emptytanks are especially dangerous with larger tankers, as the larger content of airmakes them prone to having an explosive atmosphere.



I learned about the fire triangle: To create a fire or explosion (rapid fire),you need three elements:1) oil2) air3) ignition source

Loss prevention onboard tankers had focused on eliminating the ignitionsources, but what if a collision caused the ignition?

Did this mean that large tankers could not collide with empty tanks? Obvi-ously. This was clearly demonstrated by the Silja accident.

How could we eliminate this risk? We cannot take the remaining oil awayfrom the tanks, so the answer must be to take away the air. It turned out thatthe industry had already found a system for blowing air out of the tanks andreplacing it with inert gas – nitrogen – from the exhaust boilers or from sepa-rate inert gas boilers. BP used this system on all their tankers.

This was the obvious answer to eliminate the risk.I proceeded to warn all my clients with large tankers, explained my findings

and urged them to put in the inert gas system. The response was good every-where except with my biggest client: Hilmar Reksten.

The ownership had recently changed Hilmar’s technical director. The out-going director had ordered the inert gas system for all the ships, but the newdirector had cancelled the order. My message was most unwelcome. We wereon collision course, and I had to tread very carefully. He decided to eliminatethe collision risk by filling the wing tanks with ballast water.

Early in December 1969, Shell’s Marpessa, 235,000 dwt, exploded and sank.The vessel was doing tank washing at the time. High-speed water hoses wereused to clean the tanks for remaining oil. It was a common procedure at thetime.

I got in touch with my brother again: Could the tank washing create an ignition? Yes, the oil industry had a long experience with static electricity. Sudden explosions had occurred when oil was pumped too rapidly throughthe line. Bombarding the remaining oil with high-speed water could very likelybe the cause of the explosion.

My principal client, Hilmar Reksten, called. He was quite upset by the loss of



Marpessa. He had several similar ships. What was happening? I had to givehim the story.

Had I written a letter on the subject? No, I explained that the matter was a bit delicate in-house. He ordered me

to write a letter explaining everything I knew about this matter, which I did.

Ten days later, his own Kong Haakon VII and Shell’s Mactra exploded on thesame day, both doing tank washing at the time.

Kong Haakon VII was saved because the first explosion came in the centretank and spread to the wing tanks when the ballast water had been emptied.Thus she was not cut in two pieces, but the damage was extensive.

I was called in together with the shipbuilder to discuss the matter and the repairs. The shipbuilder told me that the owners of Silja, having two largetankers on order, had turned down the inert gas system. After hearing my story,he said he would order the inert gas system for all the new buildings at hisyard.

The international press was alerted, and Shell called a meeting at the ShellTheatre in London. Hilmar Reksten asked me to attend together with its tech-nical staff. Prior to the meeting in Shell Theatre, we had meetings, first withBP alone, and then jointly with Shell and BP.

During the first meeting, there was total agreement about the cause of theaccident and the remedy to eliminate the risk. During the Shell meeting, it wasdifferent. Shell said that they had developed a blowing air system to avoid having an explosive atmosphere. The explosions on Marpessa and Mactrawere caused by the crew not following their instructions. I said this theorycould not be right and urged them to convert to the inert gas system. This wasa question of pride and money. They had 20 ships that needed the system in-stalled. They elected to stick by their blowing system. BP said nothing. Afterthe meeting, I asked BP why they had not supported me. They replied likewell-behaved civil servants: “Shell has lost two of their ships. We did not wantto put salt into their wounds.”

The meeting in Shell Theatre was a big to-do, where Shell explained to theworld press that they had done nothing wrong. Their blowing system wasgood if operated properly by the crew. They would now give more specific instructions to avoid similar accidents.

Quite a number of tanker owners understood that the inert gas system was



the right answer and acted accordingly. One leading underwriter in Londongave a premium rebate for tankers with the inert gas system. He was highlycriticized by his colleagues. The feeling was that this was a matter for ownersand classification societies.

The matter was discussed in the International Chamber of Shipping withan opinion of making the system mandatory. Shell refused to agree, and themandatory requirement was delayed for 10 years, up to 1980.

My relations with the Hilmar Reksten ownership soured after the KongHaakon VII accident, and two years later I lost contact with them. (For methis was an element of luck. I developed other business, whilst the ownershipwent bust after the oil crisis in 1973.)

Several years later, the Norwegian owner Sigval Bergesen d.y. lost contact withthe 230,000 dwt ore/oil carrier Berge Istra. Two survivors were picked upfrom a raft weeks later. They reported that the vessel had exploded. Ladenwith iron ore, she went straight down. The two survived because they werepainting on deck near to the life raft. The vessel had the inert gas system installed, but this had been turned off as they were doing some welding onpipes in a so-called “gas free” wing tank.

Some years later, Sigval Bergesen d.y. lost contact with the sister ship BergeVanga, also carrying iron ore at the time. Here there were no survivors. Wecan only assume that the story is the same, because the vessel went down soquickly that no signal was given. When London underwriters heard that theyhad been doing welding onboard, one of them refused to pay for this secondcasualty, but he gave in later.

I think it was a mistake for shipowners, engineers and classification societiesto treat this as a steel matter. Had they consulted with the oil industry, theywould have been given a quicker answer to the problem. It is indicative thatthe Silja owners did not want the system on their new buildings, also that theBerge Istra crew turned off the system that could have saved their lives. Obviously, the value of the system was not well understood until years later.

We have had no ugly tanker explosions since 1990, but the airline industryhad one some years ago, when TWA 800 went down. After nine months ofresearch the conclusion was that faulty wiring in an empty fuel tank causedthe explosion. Here we go again, searching for the ignition source. It is no surprise that the wiring on an older aircraft might be faulty; but the emptyfuel tank was the real cause of the accident.



Notes:“Arrow” was owned by Aristotle Onassis and had – according to Noel Mostert’s “Supership,” NewYork, 1974, p. 59, been operating “with almost none of its navigation equipment serviceable.” See alsoMr. Mostert’s comments on “Wafra,” pp. 164 and 165. On “Marpessa,” “Mactra” and “KongHaakon,” see “Anchor and Balance - The Norwegian Veritas, 1864-1989,” pp. 265-268, S. Howarth:“Sea Shell,” pp. 153-158 and Audun Reksten: “Slik var det,” Oslo, 1983, pp. 88-89.Sven Moestue is a lawyer by education and was a leading insurance broker and adviser to several majortanker owners, including Mr. Reksten. Later he also served as an insurance expert for owners of king-size passenger vessels such as the Royal Caribbean Cruise Lines.

III. BRUSSELS ONCE MORE, BUT WHY RELIEVETHE SHIPOWNERS?Within IMCO, top priority was given to the establishment of an oil pollutioncompensation fund. When delegations in late November 1971 returned to themeeting rooms in Palais des Congres in Brussels, the majority of the delegateswere still of the legal profession with an agenda confined to seek compensationfor oil pollution damage.

The conference was scheduled to last from Nov. 29 to Dec. 18. Forty-ninestates were represented. A great number of the delegates had been present inBrussels in 1969. In addition, “new” countries such as Iran, Kenya, the Philip-pines and Thailand were present as observers.

Imagination was needed to reconcile the legitimate interests of the oil com-panies and to protect the interests of shipowners at the same time. The maintarget was, however, to provide effective protection for the society at large,taking into account the point of view of the insurance companies whose co-operation would be essential.

Sir Colin Goad paid special tribute in his introduction to OCIMF and CMIfor their assistance with the preparations of the draft articles. A draft for aFund convention erecting an international fund financed by oil importers andorganized by governments was on the conference table, drawn up by theIMCO’s Legal Committee.

According to the compromise from 1969, the Fund would fulfil two condi-tions: It would improve the position of the victims of oil pollution damagethrough better compensation and secondly provide relief to the shipowner bybringing the cargo interest into play as a provider of additional compensation.

It was clear from the start that delegations faced two major difficulties:The oil industry had made representation to a number of governments whichnow were convinced that they should not support the principle that shipown-ers would be relieved. Secondly, a number of delegations had ambitions to



introduce “improvements” which went beyond the compensation issue.

In his opening remarks, the elected chairman of the Committee on the Whole,Dr. Walter Muller of Switzerland, expressed his gratitude to Mr. Nordenson,who in 1970 had prepared the first draft that had served as a basis for all sub-sequent deliberations.

Already during the first debate, it became clear that one faced a new situ-ation. Whereas the proposal to establish a compensation fund was generallyapproved of, the “relief function” was met with strong criticism. Netherlands’Mr. Rijn van Alkemade explained that his Government previously had beenin favour of cargo liability, but now had doubts about “the need to shift thelines between the ship’s part and that of the cargo.” If it was found possibleto dispense “relief,” his delegation would support such simplification.

Mr. G.R.W. Brigstocke of the UK looked forward to the establishment ofa Fund, but he saw no reason for the oil industry to take over the burden already imposed on the shipowners.

The American representative Mr. A.L. Doud shared the view of the Nether-lands and the UK and others who saw no reason to give shipowners “relief.”Mr. Doud praised CLC69 as a first constructive step and said that his govern-ment “was anxious that it should come into force.” However, there were fivebasic shortcomings in the convention: The geographical coverage was too re-stricted because a victim of pollution damage deserved compensation whereverthe damage occurred. The shipowner had too many defences – “to the greatestextent possible, these defences should be eliminated from the Fund.” Victimswould be indemnified whether they could identify the polluting tanker or not.The amounts of compensation were too low and finally, the convention “failedto offer sufficient inducement for the adoption of measures for the preventionof oil pollution.”

Lars O. Broch of Norway, Ms. B. Blom of Sweden, Professor K. Spilioplousof Greece and Mr. B.H. White of Liberia all spoke in favour of implementingof the Resolution of 1969, including the provision on “relief.” Norway attached great importance to this function, chiefly as a prerequisite not onlyfor the widest possible acceptance of CLC69 but also for the supplementaryconvention to be concluded. The economic burden would, Mr. Broch pointedout, ultimately be passed on to the consumer. As a response to Mr. Doud, headded that shipowners would be encouraged to comply with minimum safetystandards and be granted “relief” only in such cases when this condition wasmet.



Also other delegations including Denmark, Japan, France, Finland and theUSSR stressed the need to comply with the compromise agreement achievedin 1969.

Canada was now rather vague; the previous frank position calling for cargoowner liability had obviously evaporated, as its representative, J.C. Langley,said diplomatically that it had been apparent to his delegation that the mostequitable distribution of costs should be found.

Mr. McGovern of Ireland recalled that CLC69 would not have been concluded if it had not been for the clear understanding that the Fund wouldalleviate shipowners of the additional burden imposed upon them in 1969.But there should be no relief for the negligent shipowner. His government believed that the implementation of the ’69 Resolution would materially increase the number of contracting states that would accept both conventions.

The fact that the Resolution clearly stated that the Fund envisioned would inprinciple relieve the shipowners of the additional financial burden imposedupon them by the CLC69, and that this terminology meant the full burdendid not even come to light in the meeting room.

In 1992, 21 years after the Conference, Måns Jacobsson – the then-futureDirector of the Fund – explained why. The “relief” “was part of a political compromise at the 1969 Conference as a quid pro quo for ship own-ing nations accepting strict liability, higher liability limits and compulsory insurance. As is often the case in this world, promises are not upheld, and inparticular not political promises. This was also the case here.”

Mr. Nordenson, who was one of the architects behind the Resolution as wellas the driving force behind the draft on the table, had in good time before themeeting learned that – further to the oil company lobby - any efforts to obtainfull relief would be in vain and perhaps result in no agreement at all.

Notes:The Official Records of the Conference on the Establishment of an International Compensation FundFor Oil Pollution Damage 1971, printed in London 1978, provides a comprehensive report (742 pages)on the participation, documentation and deliberations by the IMCO Conference in Brussels from Nov.29 to Dec. 18, 1971. See in particular the following pages in the Report: pp. 61, 191, 249, 250, 260-263, 273, 284, 309-314, 320-327, 330, 332, 333, 340, 356, 361-374, 390-392, 395, 404-409, 432-449, 451, 453, 456, 462, 479-489, 493-498, 501, 621, 661-663, 675, 687 and 688.M. Jacobsson’s presentation on the Conference is found on pp. 39-55 in a CMI publication “Liabilityfor Damage to the Marine Environment,” issued by Lloyd’s of London Press Ltd., 1993, edited by ColinM. de la Rue.



IV. TECHNICAL CO-OPERATION?The question of other future tasks was brought up on the first day of generaldebate. The most interesting proposal came perhaps from Mr. Y.K. Quarteyof Ghana, who said that his government was eager that the Fund could takeon a more active role. In case of a serious pollution incident, it would be ableto come to the aid of coastal states, especially in developing countries. Rescuesquads could be organized and be ready to assist any country threatened byserious pollution damage. He illustrated his intervention by referring to atanker containing 600 tons of oil that had just stranded near the coast ofGhana. The tanker was presently in danger of breaking up, but his countryhad neither the men nor the equipment to deal with the situation.

Ghana’s proposal – as discussions proceeded – received strong support fromrepresentatives of the developing countries and the US’ representative. The US’representative reminded the Conference that his delegation had repeatedlystressed that they considered the Fund was intended to supplement CLC69and provide means for the protection of the environment. Also the delegationsof Australia, Canada and the USSR argued that the Fund would not serve auseful purpose if its role were restricted to intervention only after the damagewas done. Very often damage would be irreparable in nature, and in such casescompensation in terms of money alone would be inadequate.

Mr. P.A. Medcraft of OCIMF voiced a strong protest against the proposalto introduce extra burdens on the Fund. He pointed out that to keep suchequipment on stand-by at various stations around the world would incur enor-mous costs for the Fund. He respectfully suggested that the oil companies lo-cated where the pollution occurred could better deal with the type of pollutionthat concerned Ghana.

The delegation of the UK strongly backed up the view of the oil compa-nies, saying he could not imagine that the Fund would have at its disposal theexpertise and equipment required to carry out an operational role as Ghanaimagined. But the proposal deserved further study, he said.

On Dec. 10, the Chairman, Mr. Muller, invited the Committee to vote onthe Ghanaian proposal. A roll-call vote was taken and resulted in 34 votes infavour, none against but with abstentions from Belgium, Italy, Japan and theUK.

Despite its scepticism, the UK volunteered together with the Netherlandsto work out a draft that would include the proposed principle. With someamendments suggested by the Nordic countries, the draft was accepted.



Twenty years later, IMCO adopted the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC) 1990. The OPRCmay well be seen in the light of Ghana’s initiative, but was one of several measures adopted as a response to the Exxon Valdez oil spill in 1989.

V. THE FEE SYSTEMThe oil industry financing of the new international compensation fund causedlengthy discussions. In what way should the payments be arranged, and whoshould be directly responsible for the funding?

The Legal Committee had suggested that oil importers in each contractingstate should pay the operation of the Fund. The Spanish delegation had at thevery outset argued that such a system would destroy the balance and impairthe equity of the convention. If the financial burden of contributions wereplaced only on the countries importing oil, the oil-exporting countries wouldnot contribute, but would still enjoy all the benefits. Yet these countries weresubject to great risks of incidents at their own shores, and it would be logicalthat they should contribute, as well.

Neither was the representative of India, Mr. R. Doraiswamy, happy. Heproposed instead that one should take into account not only the quantity ofoil imported, but also the distance the oil was carried. This would be fair andlogical because the risk of pollution increased with the distance over whichthe oil was carried. His proposal was therefore to base the calculations onton/miles instead of tons only. Spain and Indonesia supported him.

Other delegates agreed with the representative of OCIMF, who pointed outthat the proposal of the Legal Committee represented the best practical solu-tion, as import figures were ready available in the form of Customs statisticsand would not involve governments in any additional work. The ton/mile con-cept would, on the other hand, complicate the system enormously. Also theadviser on insurance matters to the Norwegian delegation, Mr. Poulsson, supported this view by informing that in the experience of the P&I clubs, practically all cases of pollution incidents recorded had occurred near port entries or near terminals. Distance had therefore nothing to do with the number or size of pollution incidents.

After an exchange of view, the Indian delegate withdrew his proposal.The Egyptian representative, Mr. E.E. Issa, was, however, still in doubt aboutthe “quality” of the proposed contribution system. He was in particular



concerned about the ambiguity of the term “terminal installations.” Some ofthe oil transported from the Persian Gulf in tankers was in his country dis-charged in the Port of Suez, for transhipment by pipeline to Alexandria. Thenthe oil was subsequently re-loaded in other tankers and transferred by sea toports in Europe. If this oil should be considered “contributing oil” in Egypt,the situation would be illogical and irrational because the same oil would prob-ably be subject to taxation also at the European destination.

The Chairman replied that since no such amendment had been submittedin writing by Egypt, the rules of procedure did not permit a vote.

At the end of the Conference, Mr. Issa once again raised the matter, intro-ducing a paper with a proposed amendment submitted in cooperation withIraq, Libya and Syria. Contributions ought to be paid only at the final terminalof destination. Reference was made to the generally accepted principle thattaxes should not be levied twice on the same goods, and to introduce any suchprovision would be in flagrant contradiction with the principles of equity andequality.

The US pointed out that the matter had been discussed fully in the LegalCommittee. Moreover, the risk of pollution was connected with every entryand exit from ports. Thus, there was some merit in requiring a double contri-bution. In any case, the contribution would be at a minimal rate; somethingin the order of at most one-tenth of a cent per ton. The Plenary finally rejectedthe Egyptian proposal by a very narrow margin.

Then, with 32 votes to none (five abstentions) it was decided that the Fundshould be financed by a levy on the oil received by importers in a port or terminal of contracting states, provided the quantity was 150,000 metric tonsor more per calendar year. Oil importers, not the governments, were made re-sponsible for the payments, unless they explicitly had assumed this responsi-bility. Their normal role was to take appropriate measures under domesticlaw, to ensure that the contributions were paid.

VI. INTERPRETATIONUniform interpretation of the definitions in respect to CLC69 and the newFund Convention was required if the two instruments should work successfullytogether. Whereas this principle was generally agreed on, its implementationraised several questions. Already during the discussions in the Legal Commit-tee, there had been suggestions to go beyond the scope of CLC69.

The discussion about the definition of oil gave rise to a considerable debate



that illustrates the problem. In general, it was felt that the notion “persistent”referred to oils which represented a danger to the environment either becausea proportion will remain in nature after evaporation has ceased, or becauseof the time it takes for such oils to dissipate naturally. In CLC69, “oil” wasdefined as any “persistent oil such as crude oil, fuel oil, heavy diesel oil, andlubricating oil.” The only non-hydrocarbon oil included was “whale oil.”

Release of lighter fractions of petroleum products were, in the opinion of theCanadian delegation, equally damaging in given circumstances, although lessapparent than those emanating from the black oils. Thus it was felt necessaryto fill the gap in CLC69. This proposal was, however, met with protests froma number of delegates who stressed the need for consistency between the twolegal instruments and in the end, Canada withdrew the proposal to includepetroleum products.

For practical reasons, it was decided to exclude petroleum products andother hazardous substances and leave any appropriate compensation questionsin this respect to be dealt with by IMCO at a later stage and in a special con-vention.

Despite that delegates apparently were on guard against any deviation fromthe established definitions in CLC69, two variations were nevertheless agreedon after some debate. Both proposals were initiated by the delegation of theUK. Mr. Brigstocke stressed that the oil that the Fund should deal with wasclearly persistent “mineral hydrocarbon oil.” The oil companies were not inthe whale oil business and could not be expected to pay for damage whale oilcaused. If such oil should be included, then the whale oil industry would alsohave to contribute. But to bring in this industry as a contributor to the newFund would in his opinion, as well as in the opinion of Mr. Claude Douay,serve no practical purpose and would only complicate its machinery. In support of this view, the USSR pointed out that the amount of whale oil carriedat sea was very small; in the region of some 100,000 tons out of a total of onebillion tons. As whale oil was carried in very small shipments, it therefore wasunlikely to cause damage in excess of the limits in CLC.

However, Mr. M. Date of Japan, backed up by Ghana and Portugal,protested against the deletion of whale oil on the grounds that this would beunfair for possible victims of such pollution. Moreover, the definition in thetwo legal instruments should be consistent. His efforts were in vain. A clearmajority decided to exclude whale oil.

As a consequence of the majority view, the UK delegation then suggestedthat it should be spelt out quite clearly that the term oil should be confined to



persistent hydrocarbon mineral oil. The proposal was meant solely to eliminateany ambiguity in the definition and was adopted with an overwhelming majority.

The nature of pollution damage turned out to be one of the most difficult challenges to cope with – not only in 1971, but also for many years to come.

Mr. Langley of Canada introduced a proposal to make it quite clear that astate that undertook preventive measures on the high seas in order to avoidpollution damage to its territory should recover its expenses from the Fund.

Furthermore, “all direct and indirect costs incurred” should be accepted asrecoverable expenses. For example, the cost of using men and materials alreadyemployed on government service in connection with a particular incidentshould be compensated even if some of the expenditure would have been sus-tained in any case.

Mr. Nordenson, who had been elected as Rapporteur, reminded delegatesthat it was agreed in 1969 that pollution damage on the high seas remainedoutside the scope the convention agreed on. But the report of a working partythat had dealt with the issue at that time included a reservation that the costof the protective measures outside territorial waters undertaken to protect thecoast of a contracting state should be recoverable.

The general feeling of many delegations was that the effect of pollution on thehigh seas normally was less important and should not require the involvementof the new Fund. Nevertheless, Mr. Nordenson’s reference to a reservation in a nearly three-year-old report was not found to be quite satisfactory. Mr. R. von Keeler of the Federal Republic of Germany agreed with Canadathat a clarification was required.

Mr. Doraiswamy of India suggested that because the proposal was relatedto the question of the territorial scope, a decision should be postponed untilArticle 3 on the geographical scope came up for discussion.

Mr. L.N. Etherton explained that outside Australian territorial waters, theGreat Barrier Reef was a most sensitive area, and it was under constant threatfrom oil spills from tankers. He introduced an amendment to ensure that expenses incurred in dealing with such pollution damage should be covered,even if the measures were taken outside the territorial sea.

The principle was advocated by the American and French delegations, aswell. They stressed that the objective of the Fund was to rectify the inadequa-cies of CLC69, one of which was indeed its limited geographical scope.



Mr. Kerry of the UK repeated the points made previously by his delegationas well as by Mr. Nordenson, and stated once more that claims for the cost ofpreventive measures in respect to incidents on the high seas could be enter-tained under the CLC69 as already agreed. Moreover, it would be a mistaketo be seen to give the Fund Convention wider application than CLC69. Hisconcern was that it would run the risk of being flooded with claims for triflingsums, which would render administration unnecessarily difficult.

The discussion continued outside the meeting room. After initiatives fromCanada and Australia, a renewed debate started at the morning session of Dec. 13.

At the end of the session, the Chairman felt compelled to invite the Committeeto vote on the inclusion of the “Canadian principle.”

The outcome of the vote was a surprise. It was decided by 18 votes infavour to 15 against (six abstentions) to include the “Canadian principle” inan article in the Convention. Nevertheless, the Norwegian and Dutch delega-tions continued their opposition and claimed that the voting had been quite“confused,” as Canada had been willing to accept that the mentioned principlecould be included in only the Preamble instead of the text of the new instru-ment. By 29 votes to two, the previous decision was then cancelled. The principle would be included in the Preamble, which thereby stated that theagreed instrument would provide “a regime for compensation for pollutiondamage in Contracting States and for the cost of measures, wherever taken,to prevent or minimize such damage.”

By including the words “wherever taken,” it was felt that any ambiguity wasremoved. That may be so, but what the delegates really did was to add an explanatory note how the other Convention, CLC69, should be understood.

VII. ROLE OF THE FUND: SUBSTITUTION ANDSUPPLEMENTATIONWhen no liability arose under CLC69, victims of pollution damage were notleft empty-handed. The Fund had to fill the gap, substitute the shipowner andpay compensation. The Fund had to also compensate pollution victims if they were not fully indemnified under CLC69. It had a role to play either if the shipowner was not liable, or if neither he nor his insurer were able tomeet their obligations. Thus, two clear roles of the Fund were established:Substitution and supplementation.



The need for substitution became visible when a shipowner was exonerated,because he could prove that the damage was wholly caused by an act of war,hostilities, civil war, insurrection or a natural phenomenon of an exceptional,inevitable and irresistible character, or the damage was wholly caused with in-tent by a third party or by a wrongful act of a governmental authority to main-tain navigational aids (CLC69 Article III 2).

Moreover when pollution occurs at sea, the culprit may be an unidentifiedship and despite further investigation, it may still be difficult to establish theidentity of the ship that has caused the damage. The oil may well have someother origin. It could e.g. be caused by the bunker fuel from a dry cargo ship,or emanate from some offshore oil drilling installation or from a land-basedsource.

In its draft, the Legal Committee had proposed that knowledge of thesource of the polluting oil was the first requirement for compensation. Thusthe Fund would be exonerated if “the identity of the ship that has caused thedamage has not been established.”

The consequence of this suggestion seemed to be that when two tankerswere involved in a collision, the claimant would – in order to obtain compen-sation from the Fund – have to prove exactly which of the two tankers pollutedhis property.

Mr. Brigstocke saw no need for changing the draft and explained that itwas highly improbable that the identity of a tanker causing a large oil spillwould not be known. Possibly there could be many small spills from uniden-tified ships, but if the damage in such cases should be paid for by the Fund,the result would be a very heavy administrative burden. He also argued thatto include unidentified spills would mean that there would be no incentive forcoastal states to ascertain the origin of spills.

The observer of OCIMF complained that it would be unfair to the oil compa-nies if they also should pay for unidentified spills. This would mean that thecompanies would be asked to pay while the shipowners went scot-free. Mr. White, Liberia, agreed that involvement of the Fund in such cases couldlead to lengthy recovery procedures against the interest of the victim. The Fundshould, in his opinion, primarily compensate for serious disasters like the Torrey Canyon and not for any kind of spill at sea.

The US did not agree. Mr. Massey wanted to see the Fund play a role. Itwould, in other words, substitute the missing shipowner. There were a numberof gaps in CLC69, which it was important to fill as quickly as possible if a



fair system would be established. The objective of the work undertaken wasnot merely to prepare an instrument that would enable CLC69 to enter intoforce. It seemed inequitable to deny relief to victims merely because the identityof the ship was unknown. If it was proved that the pollution was a result ofoil escaping from a ship “carrying oil in bulk as cargo,” the victim should notsurmount the additional burden of proving what particular tanker was toblame, particularly if more ships had been in the area at the critical time.

His point of view had the strong support of Australia. Mr. W.B. Nicholsonsaid that when it had not been possible to impose liability on the shipownerto cover the damage an unidentified ship caused, the Fund should certainlyprovide such coverage.

Mr. Broch of Norway, supported by Scandinavian delegations, feared thatcourts dealing with damage claims would face serious difficulties in decidingthe validity of a claim where the offending ship was not identified.

On the other hand, it would be unreasonable that the victim was left un-compensated in particular when the damage amounted to a substantial sum.Thus, Professor Philip introduced a compromise proposal on behalf of theScandinavians to the effect that the Fund would come in operation only if thedamage exceeded – for example 15 million Francs (approximately USD 2.9million) – or such a significant amount which delegations would find appropriate.

The temperature in the meeting room increased when Mr. Douay repeat-edly made it clear that he wholeheartedly disagreed with the suggested com-promise. He felt very strongly that by asking the Fund to cover damages froman unknown source, one would thereby make it a relief institution to bebrought into play in a multitude of minor incidents. If the Conference wishedthe Fund to meet all requests for compensation for damage by persons un-known “which was another way of saying that no action would be takenagainst such ships and that any attempt at prevention was being abandoned,then it might just as well tear up the 1969 Convention right away.” Later headded that if such a proposal were accepted “his government would be obligedto reconsider its position with regard to ratifying the 1969 Convention.”

It was finally agreed that the Fund would incur no obligation if: “The claimantcannot prove that the damage resulted from an incident involving one or moreships.”

This meant that if the damage was caused by one of several tankers in thearea where the spill occurred, the victim was not obliged to identify whichtanker caused the pollution damage. To obtain compensation it would be



sufficient to prove that one of the tankers involved must have caused the pol-lution damage.

The Legal Committee had suggested by a narrow majority that it would beinequitable to deny compensation when the damage resulted from a naturalphenomenon beyond the victim’s control.

In a submission to the Conference, the US had argued that the new compen-sation scheme should have the broadest possible scope and, to the extent pos-sible, one should avoid that the injured party was denied relief. The US,supported by a number of delegations, was opposed to introducing any defence similar to the one in CLC69, if the pollution damage was caused by“natural phenomena of an exceptional, inevitable and irresistible character.”

On the other hand, a submission from France had suggested a natural phenomena of an exceptional character was a classical case for exoneration.Reference was made to the Paris and Vienna Nuclear Conventions. Severalother delegates supported this view including the UK, who in its submissioncontended that such damage would be rare and “it is not considered equitablethat the oil industry should bear the this risk, any more than do the shipown-ers, who are given an exception.”

Also, Mr. Spilliopoulos proposed that in a given situation it would be quiteunfair to give victims of tanker spills an advantage over victims of pollutionfrom other sources. Greece therefore suggested exonerating the Fund if thepollution damage was caused by “a natural phenomenon of an exceptional,inevitable and irresistible character.”

By an indicative vote, the Greek proposal was rejected by 19 votes to 14with eight abstentions. The Legal Committee’s proposal was accepted, andthe Fund filled a new “gap” in CLC69.

Another “gap” in CLC69 was the exoneration of shipowners when the pollu-tion damage was caused by “an act of war, hostilities, civil war or insurrec-tion.” The Legal Committee had concluded that exoneration in such cases wasa normal feature of other liability conventions and would therefore also applyto the Fund. Moreover, if a warship or a ship owned/used in non-commercialservice should cause the pollution, the Fund would incur no obligations.

Mr. Douay again underlined that the Fund would not be a charity instituteto compensate all victims of pollution. Damage arising as a result of acts ofwar would be excluded as in other conventions. Not only would such coverageplace an intolerable burden on the Fund, but also it would be excluded on



moral grounds since the shipowner was under no obligation to pay compen-sation, so why should the oil industry pay?

Mr. Massey of the US repeated that there were a number of gaps in CLC69that needed to be filled as quickly as possible if a fair system of compensationscheme should be established. The Fund Convention would enter new areasof law, and would adopt new principles of compensation and new approachesto environmental problems. A century ago, both governments and the industrywould have denied all responsibility towards victims of oil pollution. Sincethen, great efforts had been made to alleviate the problems by legal means.He stressed that: “The Conference should not look back towards the past, butuse the opportunity offered by the Fund Convention to take a step forward,thus bringing nearer the day when redress could be provided for injustices ofall kinds.”

His delegation therefore suggested that the exception for an “act of war,hostilities, civil war or insurrection” should be deleted so that the Fund couldplay its proper role. The deletion would not add much to the cost, in view ofthe fact that these cases in any event would be rare.

“The only way in which society at large could cover the costs of pollution damage in such cases was for those costs to be spread over all the countries

which benefited from the transport of oil at sea; otherwise the full costwould fall on the individual.”

Mr. A. Makowsky of the USSR shared the view that it was not equally defen-sible to cover risks related to war. That would be to shoulder an unreasonableadministrative burden. In the view of his delegation, the state responsibleshould be held liable to pay compensation in such cases. Mr. Amoroso of Italyagreed; the Fund was made up of contributions from the private sector, and itwas for the state, not for the private sector, to provide protection under its do-mestic law for any of its citizens who suffered from pollution incidents causedby acts of war or hostilities. His view was shared by Mr. Brigstocke of the UKand Mr. van Alkemade of the Netherlands, who both expressed that their gov-ernments “would find it very difficult to ratify the Convention” if the Fundwas not exonerated in such situations. Thus, the majority view was that itwould be wrong to impose upon the Fund the obligation to cover war risks. The American proposal was defeated.

A related “gap” in CLC69 was the exoneration of shipowners when the pollution damage was caused “wholly or partially” by a person who suffered



the damage either intentionally or by negligence. The proposal by the LegalCommittee was that also the Fund should be exonerated in the same way andalways when the ship owner was exonerated under CLC.

Mr. Alkemade supported the proposal that the Fund should be relievedfrom liability in such cases, and the same principle should apply when thedamage was caused by the wrongful act or negligence of governments them-selves. But his government had submitted an amendment that would modifythe rule. “Where a party suffered damage as a result of the negligence orwrongful act of a government other than its own government, then it wouldbe reasonable for the Fund to provide compensation,” he said.

Mr. I. Perrakis of Greece supported Mr. Alkemade and argued that failureto take adequate security measures to prevent sabotage against tankers shouldbe treated as negligence. Hence in such cases, the state in concern should notbe entitled to claim compensation from the Fund.

But Mr. C.K. Kennedy of Canada and Mr. Massey disagreed. They wouldboth be sorry if the Fund was exonerated and the innocent party not entitledto compensation. The society at large should cover the costs of pollution damage in such cases by spreading the costs over all countries that benefitedfrom the transport of oil at sea.

The result of a prolonged discussion was that the draft from the Legal Committee suggesting a qualified exoneration of the Fund was approved. If it is proved that the damage was caused wholly or partly either from an actor omission done with the intent to cause damage or due to negligence by theparty that suffered the damage, the Fund may be exonerated partially orwholly. Moreover, it was agreed that the Fund should be exonerated in anyevent to the extent the shipowner would be exonerated under CLC69.

The Fund’s supplementary role was to pay compensation when the recoverableamounts from the shipowner proved to be inadequate. If the owner and hisinsurer were not financially capable of meeting their obligation, the Fundwould provide compensation on the condition that the victim - after havingtaken all reasonable steps - had not been able to obtain satisfaction of theamount due under CLC69. The Legal Committee realized, however, that itmight take years of legal proceedings to establish whether a shipowner in agiven case was liable or not. In order to avoid undue delay, the Fund shouldbe authorized to pay compensation and simultaneously acquire by subrogationthe rights that the person compensated had against the ship owner underCLC69.



But Mr. Kennedy of Canada went one step further and proposed that if“a Contracting State, which under a national scheme paid compensation to avictim of pollution liability in advance of any adjudged liability of theshipowner under the 1969 Convention or the Fund, should acquire by subro-gation the same rights as the victim would enjoy under the draft convention.”The proposal was approved after being supported by Norway, Greece and theNetherlands.

Notes:In her book: “Pollution from the Carriage of Oil by Sea,” Wu Chao, p. 80, opines that article 4.1a inthe 1971 Fund Convention must be understood to the effect that the Fund nevertheless substitutes forthe shipowner if a pollution incident is caused by “an act of war, the intentional act as a third party orthe negligence of a government.” But this may be right with respect to costs for preventive measuresonly.

VIII. CONDITIONAL RELIEFMuch more controversial was – as already mentioned – the Fund’s “relief function.”

In accordance with the ’69 Resolution, the Fund “should in principle relievethe shipowner of the additional financial burden imposed by the present convention.” Tanker owners had been allowed to limit liability at levels corresponding to the full capacity of the insurance market; 2,000 Poincarefrancs (USD 134) per ton of the tanker in question subject to a maximum of210 million francs (about USD 14 million). This was seen as an “additionalburden,” as it was twice the compensation amount available for property dam-age under the 1957 General Liability Convention. Since then, the deliberationsin the Legal Committee proved it impossible to agree on the implementationof this part of the Resolution.

The draft submitted by the Legal Committee revealed that the compromiseagreed on in 1969 had been subject to a new compromise in the time that hadpassed. According to its wording, the Fund should only indemnify theshipowner for a part of the liability imposed by CLC69.

The world tanker fleet had in the meantime grown to some 3,200 units capable of carrying 10,000 tons or more of oil. The total fleet in terms of dead-weight (dwt) or carrying capacity was close to 170 million dwt. Independenttanker owners represented about 110 million, the oil industry nearly 60 milliondwt. The “seven sisters” owned most of this tonnage.

Whilst many independent tanker owners regarded the proposal as inferior to



the intent and text prepared in 1969, the oil industry claimed “relief” wasmeaningless, “at least in the present climate.” In its submission to the Confer-ence, OCIMF stated: “… no case has been made out whereby there is any necessity for the relief in principle of the ship-owner from the additional bur-den imposed by the Civil Liability Convention. We suggest that the basis forthe Resolution requires reconsideration in the changing climate of opinion andthat there are no grounds for relief to ship-owners.”

Due to the over-supply of tonnage in the market, the prospects for the inde-pendent tanker owners looked bleak. The tanker fleet had increased by morethan 11 percent in 1971, whilst the increase in oil consumption had declined.Viewed against the background of more than 100 million dwt tankers andcombined carriers on order at the shipyards around the world, the trade developments were disturbing.

The major oil companies had convinced a number of influential tanker ownersthat it would be in their interest “voluntarily” to assume the responsibility forgovernment’s clean-up costs after pollution incidents and join TOVALOP.

Several owners had been seen to believe that the oil charterers were prepared to pay a freight surcharge to meet the added insurance premiumsconsequent of higher liability exposure. In hindsight, this was too good to betrue, and the oil companies after a while saw no reason to take on extra costs.The oil industry – and not least Shell – had always maintained a lofty andsceptical attitude towards governments and was convinced that privatearrangements would be far better than governmental interference.

Governments were informed that the private scheme had come into forcein October 1969 and that it was meant as a stopgap until CLC69 was imple-mented. Thanks to the efforts of coordinator John Kirby, president of ShellInternational, owners representing some 90 percent of the world tanker fleethad accepted the scheme at the time the conference convened in Brussels inDecember 1971.

As mentioned above, the oil industry had also gone one step further andoffered to provide additional compensation to victims of oil pollution by top-ping up the shipowner’s liability through an oil company-financed scheme,CRISTAL. It was “advertised” as a solution to bridge the gap until the FundConvention came into force.

Prior to the Conference, Mr. I. Nomura of Japan had no problem with theinterpretation of the wording of the ’69 Resolution; the “additional financial



burden,” would be the difference between the figure of 1,000 francs per tonstipulated in the 1957 Convention and the figure of 2,000 francs per ton stipulated in the CLC69. On the other hand, his delegation was prepared totake a flexible approach to the question, provided that the amount of indem-nification was a figure substantial enough to be meaningful to shipowners.

Several other delegates, including the UK, were far from convinced thatthere was a need to provide relief in accordance with the Resolution. Also theDutch delegation, which had spoken frankly in favour of cargo liability in1969, now supported the view of the oil industry. Mr. Alkemade declared thatthe situation had changed since 1969. This brought the question of relief in anew light. He referred to the TOVALOP plan now in operation and to the insurance market that now seemed prepared to accept risks that it had refusedat the time.

Mr. Broch of Norway stressed that the introduction of “relief,” as suggestedby the Legal Committee, would be required to make CLC69 generally accept-able by maritime governments. Several governments had in the preparatorydiscussions in IMCO been in favour of a close link between safety standardsand relief. According to the draft presented to the Conference, the Fund shouldincur no obligation to indemnify the shipowner if the pollution damage re-sulted from the wilful misconduct of the owner himself. Those shipownerswho failed to observe safety standards should rather be penalized. His colleague, Mr. Poulsson, added that excess insurance offered in the privatemarket would be more expensive than through the Fund, which would be ableto offer substantial savings and would be in a distinctly better position thanan ordinary insurer.

Professor Philip pointed out that “the additional burden” not only embraceda higher limitation figure for the shipowner, but also a new principle of strict liability which replaced a liability system based on fault. The Resolutionwas a compromise agreed on in 1969. What one now was faced with was a proposal to reach a new compromise on what already was a compromise. He explained:

“Some people said there was no longer any need for relief of the ship ownerby the Fund because he was covered by the TOVALOP plan which had

come into force after the 1969 Conference. This view was quite unfounded,because the TOVALOP plan had in fact come into force before the 1969Conference and the participants in the Conference had been aware of its



existence; in particular they had known that it was a provisional system. In1969, a compromise had been reached on the question of who should bearthe additional financial burden; they had not wanted to change the wholedraft in order to shift the burden from the owner to the oil industry; it hadtherefore been decided to lay the burden on the owner subject to his beingrelieved above a certain figure. It would be going back on that compromise

if they were to raise considerably the figures suggested by the Legal Committee; the higher the figures, the fewer pollution cases the oil industrywould have to cover, because few cases of damage would reach the lower

limit, so that in the end the owner would have to carry the financial burden alone.”

Also, a number of other delegations expressed that they supported “relief”but on the condition that there was no wilful misconduct or negligence attached to the shipowner himself when the pollution accident occurred. Somewent further and agreed with the Canadian view that compliance with environmental safety standards in general should be a condition for indemni-fication.

Canada now argued that to be socially acceptable, relief had to be linkedwith the tanker owners’ application of safety standards:

“In face of the failure to make provisions for full and adequate compensa-tion of the victim in the case of a massive oil spillage, the only way remain-

ing to redress the balance would be to introduce measures designed toreduce the probability of such disasters as far as humanly possible. … The

draft Convention should have a preventive as well as remedial character andshould seek to promote multilateral as opposed to unilateral action on the

preventive side. …”

The UK had, as the discussion went on, understood that some sort of “relief”could not be avoided. When Mr. Brigstocke withdrew his delegation’s oppo-sition, he stressed that the question would in any case have to be seen in thelight of the TOVALOP plan. He found, however, the proposed “conditionalrelief” problematic. Whereas at first sight the idea was an attractive one, itgave in reality rise to so many objections that it was doubtful whether it shouldbe pursued. He reminded delegates that shipowners already had a substantialincentive to observe recommended safety practices because their records weretaken into account in assessing the cost of insurance premiums:


TANKER ACCIDENTS ACCELERATE – THE AMOCO CADIZ OIL SPILL, 1972–1982

“In any case, the idea that the Fund should set itself up as a regulatory orregulation-making body, as contemplated under Alternative I in footnote 10,would if implemented, convert it into a completely different body – almost a rival to IMCO – for which it was not suited. Instead of the simple and

economical organization hoped for, a much larger and more complex set-up would be needed.”

The major oil companies’ assets at the time ranked from USD 8 to 21 billion.Japan and Liberia considered it fair to ask the oil industry to pay its propershare. After all, it was the consumer who paid in the long run. Because the oilcompanies were closer to the consumer than the shipping companies, theycould more easily pass on the burden. Hence they agreed with the Legal Com-mittee’s draft but doubted the practicality of a proposal that meant that theFund should be a body to enforce IMCO conventions or recommendations.

Among the delegates who supported the Canadian view were India, Italy andthe US. Mr. C.R. Hallberg said that the US delegation had consistently main-tained that the relief in some way had to be coupled with measures for prevention of pollution. He pointed out that pollutants had a fine disregardfor political boundaries, the “only answer, therefore, lay in international legislation and in the case of marine pollution that was particularly true.”

Mr. Douay, on the other hand, maintained that the Fund should not beturned into a technical body. But, nevertheless, his delegation sympathizedwith anything that could be done to reduce pollution and was prepared tostudy any formula that would not distort the aim of the Convention and atthe same time implement the principle of conditional relief.

Mr. Nordenson as “Rapporteur” summarized the discussion by concludingthat a majority of the delegates would like to link the relief to certain safetystandards. He suggested that a small working party should be set up to studythe matter further. This was agreed. Many delegations wanted to participate.The group finally numbered 14 countries, and Mr. Broch was selected as chairman.

In the morning of the Dec. 14, the group reported that its deliberations hadresulted in a proposal based upon two basic principles. The first principle wasthat the safety measures should be considered as applicable to the ship ratherthan its flag state. Secondly, the conditions should refer to the mandatory ruleslaid down in four safety conventions that had already entered into force. These

Conventions were: The Convention for the Prevention of Pollution of the Seaby Oil, The SOLAS Convention, The Load Line Convention and the Interna-tional Regulation for Preventing Collisions at Sea. The Fund would be exon-erated from the relief function wholly or partially if it was proved that thepollution was a result of “the actual fault or privity of the owner” providedthere was a causal link between non-compliance of the mentioned regulationsand the incident.

The report was in general well received, but Mr. Brigstocke was still scepticaland reserved his position. Mr. Langley felt that the scope was too limited andrestricted to a few conventions, none of which had been designed to cope withaccidental pollution. When the Chairman called for a vote on “conditional relief” as set out in the report, it was approved in principle by 33 votes to nonewith seven abstentions.

The next question was to what extent the shipowner should be relieved. TheLegal Committee had suggested for the moment that the relief should startabove the shipowners’ liability under the 1957 convention. In other wordsabove 1,000 Poincare francs per ton or more than 105 million francs (aboutUSD 7 million). This meant that if the damage exceeded any of these amounts,the balance paid by the shipowner – or his P&I club – would be indemnifiedby the Fund.

Mr. Brigstocke and Mr. van Alkemade were both of the opinion that thementioned figures were unacceptable. There was no justification for imposingsuch an additional burden on the oil companies. The situation was not anylonger what it had been in 1969, and the Conference should not be tied downby the letter of the Resolution.

Mr. Medcraft referred to OCIMF’s information paper that pointed out thatit was possible for shipowners to insure the whole liability arising under theCLC69. The cost of that insurance would be an element in the freight rate thatwould be passed on to the oil companies. Thus, in his mind, the additionalburden “was not necessarily borne by the shipowner. In the light of the TO-VALOP plan, it would be reasonable to take the amount therein as a basis.”

With no solution in sight, the atmosphere was perplexed. The discussion waspostponed to the next day. The next morning Mr. M.R. Jeannel of France saidthat his delegation in the interest of a much-desired compromise would be prepared to propose a figure of 1,250 francs per ton as the limit above whichthe relief should come into effect. Several delegations supported the proposal.





Once again, strong opposition came from the UK, the Netherlands, the US,Australia and Canada.

In the midst of the discussion, Mr. P.C. Goh of Singapore found reason todeplore the element of haggling in the debate. He regretted that many delega-tions seemed to believe that the intention of the Fund was merely to relieveshipowners. No, it was for compensation of victims, and coastal states hadmade considerable gestures of compromise.

Mr. Medcraft then said that the oil industry was ready to contribute above100 USD per ton or a maximum of 10 million USD “provided that paragraph2 was so worded as to leave the option open to the Fund of acting as an insurer.” After this intervention, the meeting was suspended. When resumed,Professor Philip reported that the Danish, Norwegian and Swedish delegationhad agreed that the furthest concession they were prepared to make was tobase the relief figures on 1,500 francs per ton (as suggested by OCIMF), butwith a maximum of 125 million francs. It should be left to the Fund to decidewhether it would act as an insurer.

The expectation that the shipowner would be relieved of his liability exposureabove the amount laid down in the 1957 Convention would not be fulfilledby Mr Philip’s formula. Greece, Liberia and the USSR made it clear that theywere unable to support the compromise. Even though the compromise gainedbacking from other influential delegations and six different proposals werevoted upon, there was still no clarification.

Following hectic consultations, more support for Professor Philip’s formulaemerged, and Mr. Brigstocke – now in favour – suggested that an indicativevote should be taken by roll call. The compromise was then approved by 18votes to 11. Hence, during the last day of the Conference, article 5 wasadopted by the Plenary, including the part on indemnification by 27 votes tothree with 12 abstentions.

In practical terms, the owner’s P&I club would pay up to the maximum limitof CLC69. But taken account of the relief conceded, the clubs would be re-imbursed by the Fund according to the agreed formula. To round off twoweeks’ hefty debate on indemnification, the following additional paragraphswere included in the Preamble:

“…Considering further that the economic consequences of oil pollutiondamage resulting from the escape or discharge of oil carried in bulk at sea

by ships should not exclusively be borne by the shipping industry but should



in part be borne by the oil cargo interest, Convinced of the need to elaboratea compensation and indemnification system supplementary to the Inter -national Convention on Civil Liability for Oil Pollution Damage with aview of ensuring that full compensation will be available to victims of oil

pollution incidents and that the shipowners are at the same time given reliefin respect of the additional financial burden imposed on them by the

said Convention.”

Note:Two thousand Poincare francs were in 1969 equivalent to USD 134. See Colin de la Rue and CharlesB. Anderson: “Shipping and the Environment,” London, 1998, p.18. For more information about Poincare francs exchange values, see http://www.jus.uio.no/english/ser-vices/library/treaties/07/7-04/hague-rules.xml

IX. THE MAXIMUM AMOUNTThe maximum amount that the Fund would be requested to contribute – in-cluding the liability of the shipowners – had been one of the main topics duringthe preparatory discussions in IMCO since 1969.

An information paper OCIMF submitted said that – apart from TorreyCanyon – the only other incident where the CLC69 limits had been exceededwas the Arrow stranding in 1970 off Nova Scotia in Canada. Reference wasalso made to a recent collision between two tankers; the Allegro and the PacificGlory in the British Channel. The incident was seen as an example of a well-organized clean-up operation in which modern techniques were used. As a re-sult, the total claims were only USD 500,000, including the cost of standbytugs, but excluding the salvage operation. OCIMF’s conclusion was that amaximum compensation of USD 30 million for pollution victims was morethan sufficient to meet future needs:

“any suggestion that future incidents may involve greater cost due to the increase in size of ship ignores the improvement in ship design and in clean-

up techniques which are available for use and in salvage methods which restrict loss of cargo.”

Mr. Nordenson explained that the Legal Committee had found it necessary torestrict the maximum amount, but had suggested for further consideration themaximum amount of 450 million Poincare francs per incident as suggested byOCIMF (about USD 30 million at the time). This figure would be reduced byany sum recovered from the shipowner under his obligations in CLC69. If the



aggregate amount of damage exceeded 450 million francs (about USD 30 million), the amount available should be distributed among the claimants insuch a manner that their proportion was the same for all. The amount might,however, prove inadequate in the future due to the cost of future incidents andto changes in the monetary values. Thus the draft suggested that the Fund Assembly should be empowered to raise the mentioned figure to say 900 mil-lion francs.

The amount of 450 million francs was “twice the cost of the damage laidat the door of Torrey Canyon,” according to Mr. Douay and Mr. Broch. Theyfelt this amount would be appropriate. Also, Mr. J. Djavad of the USSR, Professor Spiliopolos and Mr. Date as well as other delegates opined that therewas no justification at present for higher figures.

Mr. Brigstocke opposed, however, the proposal that the Fund should beempowered to raise the maximum level as suggested by the Legal Committee.It was for the present conference rather than the Assembly of the Fund to makea definite decision on the amount of the compensation. The amount shouldrather be 750 million francs. This would be more than three times the maxi-mum liability in CLC69 and should be sufficient to cover any damage thatwas likely to occur, “Even, if the size of tankers continued to increase, and thevalue of money to fall, the new limitations on tank size and improved tech-niques for cleaning up oil spills tended to counteract these effects. Moreover,the Fund should have something in reserve; that was why the UK proposedthat the figure of 450 million francs given in the draft, should be increased.”

The rapporteur, Mr. Nordenson, explained that if the Fund was not allowedto raise the maximum figure, then it would be necessary to embark on a fullprocess of revision of the Convention, which would take several years.

After considerable debate, the UK proposal was rejected. The 450 millionfrancs suggestion was approved by 33 votes. The proposal to allow the Fundto increase the 450 million francs to 900 million was thereafter approved by18 votes to five with 12 abstentions.

Notes:A list of the major oil company assets at the time is found in A. Sampson: “The Seven Sisters,” NewYork, 1975, p. 226, and in Fortune magazine for May and September 1973.In 1979, the Fund Assembly raised the maximum Fund limit to 45 million Special Drawing Rights(SDR), and in 1987 the maximum amount was increased to 60 million SDR. See “IOPCF 25 years,”pp. 10, 11. Note that the official figures in the Protocols are related to SDRs. Dollar figures can thereforebe confusing depending upon the exchange rate used. Here, 1 SDR = USD 1.3.



X. ADMINISTRATIVE MATTERSAt the end of the Conference, a link was established between CLC69 andFC71. The new Convention could be ratified or approved only by States thathad given the same support to CLC69. It was agreed that “The InternationalConvention on the Establishment of an International Fund for Compensationfor Oil Pollution Damage of 1971 (IOPCF)” should enter into effect as soonas at least eight states had ratified, provided that “persons in such states” hadreceived during the preceding calendar year a total quantity of at least 750million tons of “contributing oil.” The work would be administered by IOPCF,whose highest organ, the Assembly, would meet once a year to supervise theproper execution of FC71 and decide on the budget as well as the contribu-tions and approve settlements on compensation claims. The election of an ex-ecutive committee and the appointment of the director were included amongother functions.

The choice of the headquarters location stood between London and Paris. Mr.Jorgen Bredholt, who later became the Chairman of the Assembly, reportedin the Fund’s 25-year jubilee book that the legendary French delegate, Mr.Douay, made an eloquent speech explaining why London was the best solu-tion.

It took seven years before the 1971 agreement entered into force. Onceagain a serious accident was required. In March 1978, a large tanker groundedon the French coast, causing a major oil spill. Six months later, support fromseveral governments enabled the Fund Convention to enter into force. IOPCFstarted its operations the same year with the support of 15 members, includingJapan.



6

Tanker accidents accelerate

- the Amoco Cadiz oilspill, 1972-1982

I. SPECTACULAR TANKER ACCIDENTSDuring the 1970s, the world witnessed more serious oil spills than ever sinceWorld War II.

The first spectacular pollution incident occurred in December 1972, whenthe Korean 120,000-ton tanker, Sea Star, spilled her entire cargo after a collision in the Gulf of Oman. A massive fire broke out and the following explosions killed 12 crewmembers. The fire immediately spread to the othertanker, Horta Borbosa (Brazilian flag), which was in ballast, but here the crewsafely abandoned the ship.

Nearly two years later, Shell’s Metula, 206,000 dwt, suffered serious bottomdamage in the Strait of Magellan. Some 45,000 to 50,000 tons of light crudeoil leaked out in the cold water off the coast of Chile. In cold climates the oilwill evaporate and disperse much slower than if spilt in waters with highertemperatures. The oil from Metula covered 1,000 square miles of water andseemed to cause serious environmental damage. The remaining cargo – some140,000 tons – was transferred to other tankers whilst Metula was towed toBrazil and eventually sold for demolition.

Despite the light grade of her oil, studies at the scene 12 years later found“asphalt pavements” with a weathered crust of low-viscosity oil. Nevertheless,



it is claimed that the fishery in the area was not damaged for more than a year.

On Jan. 29, 1975, another well-established tanker owner, Maersk Line of Denmark, lost a large tanker, Jacob Maersk, built in 1966. It carried 88,000tons of crude oil when she exploded in Portuguese waters. Most of the oil wasconsumed by fire, but according to estimates, 41,000 tons were spilt and sixcrewmembers were killed.

Notes:See “Tanker Spills - Prevention by Design” issued by the National Research Council, Washington, DC,1991, pp. 16-19 and Lloyd’s List Tanker Safety Supplement, May 2000. The long-lasting pollution damage caused by Metula’s light oil cargo in the frosty weather at the coastof the Magellan Strait may be seen in contrast to the rapid dispersal of crude oil released in the PersianGulf during the Iran-Iraq war. Metula is, however, not worthy of comments in Stephen Howarth’s book,“Sea Shell.”

II. BERGE ISTRAAt the end of 1975, a large Liberian flag combination carrier, Berge Istra, dis-appeared in the Indian Ocean on her way from Brazil to Japan. Three weekslater, two of the 32 crew were picked up from a raft north of New Guinea.Their story was simply that the ship had sunk after two big, sudden explosions.

Berge Istra was an Ore-Oil carrier with a cargo-carrying capacity of224,000 tons in five central cargo holds and 20 side tanks. She was owned 80percent by an American investor, Hugo Neu Corporation in New York, and managed and 20-percent owned by a well-known shipping company inNorway, Sigval Bergesen d.y.

Her sister ship, Berge Vanga, was also lost three years later with 40crewmembers onboard, probably because of a similar explosion. There wasno survivor who could tell. These tankers were two of four similar ships builtfor Bergesen at the Uljanik shipyard in Pula, Yugoslavia, from 1972 to 1974.The yard had in the past built medium-size tankers, but had no previous ex-perience in building ships of this dimension. The owners had been pleased tonegotiate a good deal, although delivery was 14 months late.

The ship was employed carrying ore from Brazil to Japan and oil from theArabian Gulf to Europe. After the Berge Vanga disaster in 1978, the ownersdecided to convert the two remaining sister ships, Berge Brioni and BergeAdria, to pure dry bulk carriers – no more oil. Other explosions causing lossof life also occurred in other combined carriers within the Bergesen fleet.

Berge Istra survivors

The two Berge Istra survivors,Imeldo Barreto Leon and Epifanio Lopez, are now in theirseventies and live on Tenerife, in the Canary Islands. They areshown here pointing at the raftthat saved their lives. They stillkeep the raft in a garage in thevillage where they live.

© Nina Ruud/Dagbladet Magasinet



It was on Dec. 30, 1975, whilst sailing from Tubarao, Brazil, to Kimitsu,Japan, that Bergesen’s office in Oslo lost connection with Berge Istra. A num-ber of theories about the disappearance were launched in the internationalmedia whilst American, Japanese and Norwegian craft searched in vain thevast area where she was believed to be lost.

Shipping people know that tanks with oil residues contain a mixture ofdifferent levels of hydrocarbon gases dependent upon the grade of the oil cargopreviously carried. The mixture of air and gas must be kept within certain limits, otherwise it will be flammable and can be ignited. To maintain a safeproportion, the tanks should be properly cleaned after the discharge of the oilcargo. According to Norwegian journalist Otto Risanger, who wrote a bookabout the accident published in June 1975, a spokesman for Bergesen contended after the accident that the big centre tanks had been thoroughlywashed after the discharge of the oil cargo and then provided with inert gasto keep the mixture within safe levels. The wing tanks which would not beused for the ore cargo had, however, not been fully cleaned, but inert gas wasinjected. This was standard procedure within the industry, he claimed.

In the report on the Berge Istra hearing conducted on Jan. 28, 1976, in NewYork, Bergesen’s Captain Gudmundsen testified and confirmed the companypractice with respect to the wing tanks “There would always be some residues.We never take up the residues.”

If so, it may seem that the recent introduction of inert gas systems has in-spired some misplaced confidence.

In the wing tanks, one finds additional complicated structural parts requiredfor the strengthening of the entire hull. Under the centre tanks, there arepipelines connected with the wing tanks. The wing tanks are not easy to clean.Today, nearly 35 years after the accident, it is well known that the sludge –that is, the oil residue – is thickest in the wing tanks and possesses additionalgas content. Sludge represents an unnecessary weight for the ship that eventu-ally would reduce payload. Non-removal of sludge would in the long run alsocause corrosion of the hull. Whereas the cleaning of the wing tanks was notmandatory at the time, such rules were in the offing.

Safety is important, but time is money. In the long run safety also is –should be – profitable. The International Safety Guide on Oil Tankers and Ter-minals worked out by ICS and OCIMF recommended in 1978 that “Beforeloading a dry bulk cargo, all holds that have been used for the carriage of oilcargoes should be washed, gas freed and vented.”

The Liberian report on Berge Vanga pointed out “the one distinctive difference in the case of Berge Vanga was that she had a riding crew on board



to do hot work at sea in the process of installing COW machines and piping.”

In 1979, a professor at Norges Tekniske Hoyskole (the Norwegian TechnicalUniversity) was asked to compile relevant information on the background ofthe explosions on board the “Berge ships.” In his report on Nov. 28, 1979, herevealed – referring to Det Norske Veritas (DNV) – that because of difficultiescleaning the wing tanks, a reasonable estimate seemed to be that the wingtanks during carriage of ore still might contain about 500 tons of oil. Ten yearslater, “Anchor and Balance” (p. 267), was published by DNV in connectionwith its 125-year jubilee. Commenting on the Berge explosions, DNV refrainsfrom criticizing its paying client, and explains that “a change of cargo as oftenas each trip sometimes made it impossible to carry out sufficient cleaning inall spaces other than the cargo tanks.” Impossible is a very strong word. Butcleaning takes time, and time is money. There can be little doubt that the clas-sification society with its central role in international tanker shipping was wellaware of the ICS/OCIMF recommendation industry practice. In any case, itmay be telling that combined carriers managed/owned by other Norwegiancompanies did not experience the same explosions.

To this day, no one can say with certainty why Berge Istra exploded and killedall the crewmembers with the exception of two survivors. The ships were op-erated by a reputable shipowner and manned by officers of professional com-petency. According to the chief investigator, Captain Alister Cromble of theMarine Safety Department Bureau of Maritime Affairs, it would be acceptedthat an explosive atmosphere had developed in the wing tanks in spite of theintroduction of inert gas in these compartments. Due to the complicated in-ternal structure of the wing tanks, flammable gas pockets might have remainedthere, and if the pipeline system was not tight, explosive gas from the wingtanks may have leaked into the pipeline system below the centre tanks.

Cleaning machines are inserted into the tanks from the main deck, known uni-versally as Butterworth machines after the brand name of the leading manu-facturer. From the documents available today, the number of washingmachines differs. On the sister ship Berge Brioni, an inspection the NorwegianMaritime Directorate carried out in November 1979 reveals that eight Butter-worth cleaning machines were in use and did the job. In a paper on Berge Istrasafety routines and equipment worked out by the managers, 12 transportablewashing machines were referred to. How many were in use, we do not know.It has been claimed that the number of such machines on board the Berge shipswas modest compared with comparable combination carriers operated by



other owners, but the author has seen no such evidence. But as expressed byan old schoolmate who followed the construction of Berge Istra as a technicalengineer for DNV in Yugoslavia: “It is not here the problem lies.” He mightbe right.

Bergesen’s two other combined carriers were converted to dry cargo bulkcarriers after strong pressure from a senior captain who told the old ownerthat he would inform the media about the risks these ships represented whencarrying oil.

When the inert gas plant was last surveyed in September 1975, there wasan outstanding recommendation requiring the alarm device for the inert gasplant to be brought in order. In Rotterdam, where the last oil cargo was dis-charged, such a device (Servomex) was taken ashore for repairs. It is notknown if it was repaired on the spot, but it is possible that it was not and thatportable instruments had checked the oxygen.

The mentioned reports stress that both carriers were well-run ships oper-ated by a reputable shipowner. But nevertheless, circumstantial evidence indicates that the efficiency of the inert gas plant had fallen below the level required to protect the wing tanks. The gas might have leaked out from thewing tanks into the piping system, which went all the way below the centretanks. But what caused the ignition?

No one knows for sure. A senior technical director within the Bergesengroup has said that no operational routines were changed on board the Berge-sen combination carriers after Berge Istra’s disappearance. In the report onBerge Vanga, it is noteworthy that the Liberian Marine Board of Investigationconcluded “The most likely source of ignition was hot work below deck.”

Notes:On Berge Istra, see Otto Risanger: “Skipet som ikke kunne synke” (“The ship that could not sink”),Oslo, 1976, and the Preliminary report on Berge Istra conducted in accordance with the Maritime Reg-ulations of Liberia after hearings in New York, Jan. 28, 1976, and Report of the Marine Board of In-vestigation on Berge Istra, published March 31, 1978.On Berge Vanga, see the Report of the Liberia Marine Board of Investigation, Monrovia, Nov. 18, 1981.Other sources are various files deposited at The Norwegian Maritime Directorate, a letter from Aug.20, 2008, from Hans Kristian Ovstaas, previous Project Director with Bergesen; interviews in 2008with Thormod Holt Hansen, a naval architect who on behalf of DNV followed the building of BergeIstra in Yugoslavia; Arne Sagen, a naval architect and researcher; and with Kaare Kopperud, NorwegianGeneral Counsellor who had administered the marine investigations relating to explosions and loss oflife in two other Bergesen tankers, Berge Edda (83,000 dwt) which exploded in April 1980 and cost thelives of two crewmembers and Berge Septimus (280,000 dwt) in August 1983, when three more peopledied. Both explosions occurred at sea on the ballast leg. Thus in an eight-year period, Bergesen’s com-bined carriers and tankers cost the lives of 75 crewmembers.On Berge Istra, see Dagbladet/Magasinet primo February 2011.DNV comments on the explosions onboard combination carriers are found in “Anchor and Balance,”Oslo, 1989, pp. 265-267, published by the society in connection with its 125-year jubilee.



III. ARGO MERCHANTIn addition to highlighting the threat from new super tankers, the media fo-cused equally critically on old, obsolete tankers, now named the “rust buckets”of the seas. Both types were seen as major potential polluters.

No “rust bucket” raised more public alarm than Argo Merchant. She wasa “small” 28,000 dwt Liberian flag tanker built in 1953. Between 1964 and1973, the ship was involved in 14 casualties, including one collision and twogroundings. It was revealed that the ship had changed names several times.Before her final voyage from Venezuela with a cargo of heating oil to Salem,Massachusetts, USA, she had come off a charter with one of the Americanmajor oil companies. In the early morning of Dec. 15, 1976 – close to themedia centres of the world – she grounded in international waters off Massa-chusetts and started to spill oil. The 45-year-old captain, Georgios Papadopou-los, had served as master since 1969, and had never before been involved in agrounding. The owner was a Greek company in New York. Despite pressurefrom the US Coast Guard, the shipowner refrained from involving assistanceto minimise the oil spill. In the meantime, under very severe weather condi-tions, the 38-member crew was evacuated. After a few days, the ship sankwhilst her cargo of 28,000 tons of fuel oil drifted out to sea. The shallow wa-ters and weather conditions made it impossible to offload the oil or salvagethe ship. Thanks to the currents and a north westerly wind, the fear of a mas-sive injury to the environment on the US North East Coast never occurred.

It later appeared from a report published by the Liberian Bureau of Maritime Affairs in October 1977 that the tanker was six months beyond thedate of her annual inspection by the classification society. The compass wasold and did not work well and the crew comprised a number of nationalities,including two unqualified helmsmen. Several of the seamen spoke neither English nor Greek. Whereas some of these failures may not have been veryunusual at the time, more noteworthy was that the charts on Argo Merchantwere outdated. The master explained that he had been without authority tobuy new ones. Some crewmembers had been discharged in Venezuela andagain the captain had been without authorisation to engage new hands.

Because of the extremely poor freight market prevailing, the investigatorsspeculated whether the management would sooner sink the ship than continueto operate it and thereby obtain the insurance money. No direct evidence wasfound, but the delay in efforts to salvage her was unexplained and inexcus-able.

Note:On Argo Merchant, see de la Rue and Anderson: “Shipping and the Environment,” London, 1998, pp.53-54, 777, 837 and Jack Devanney: “The Tankship Tromedy,” Florida, 2006, pp. 34-35.



IV. MORE ACCIDENTS AND REACTIONSArgo Merchant, hoisting the Liberian flag, was in international waters whenshe grounded. In accordance with traditional international law, the flag statehas exclusive jurisdiction over violations. Now the “Intervention Conventionof 1969” had entered into effect, and not surprisingly the Coast Guardboarded the vessel, taking control of the salvage attempts that proved to be invain. In 1980, the exclusive economic zone was included in the national planto prevent marine pollution.

The accident led to proposals for new regulations governing tanker oper-ation and construction. Moreover, international initiatives on these aspectswere taken in order to secure support for new safety rules in IMO, includinga requirement for tankers to be constructed with double bottoms. No agree-ment was achieved on this proposal and the US – disappointed with the reac-tion – started the unilateral legislation process that culminated in 1990 afterthe Exxon Valdez catastrophe.

With President Jimmy Carter in the White House, bill HR 1023 was intro-duced in Congress to preserve a part of the oil import to the US for domestictankers. Reference was made, perhaps for the first but certainly not the lasttime, to the threat to the environment foreign tankers presented. The fact thatthe same tankers were chartered by US oil companies to carry their oil, andthat the worst polluter ever, Torrey Canyon, was owned and operated by a USoil company, did not seem to get any particular attention.

Further to the substantial tonnage surplus, the highest volume of tankertonnage ever was scrapped during the first six months of 1976. Some 160tankers were sold for demolition or converted for other uses. The number ofidle tankers had increased rapidly. In 1974, the whole tanker fleet – with veryfew exceptions – had been fully employed. But during the first half year of1976, an armada of 534 unemployed tankers had been sent to lay-up. Thesetankers represented more than 14 percent of the total world tanker fleet.

Also, total losses of tankers had increased during these six months and aggre-gated nearly half a million tons. This number included new tonnage. The verylarge crude carrier, Olympic Bravery (273,600 tons) may serve as an illustra-tion. The VLCC had been delivered from a French shipyard to her Greekowner. In January 1976, with no employment in sight, she was on passage offthe French coast to a Norwegian fjord to be laid up when she developed enginetrouble and grounded. All attempts to re-float her were unsuccessful. Shebroke in two and was eventually declared a total loss. With no cargo onboard,the resulting pollution was, however, minimal.



In May the same year, Urquiola (111,000 dwt) spilt 91,000 tons off the north-western coast of Spain when she struck the bottom as she was entering theport of La Coruna. All but the master and the pilot abandoned the tanker before explosions ripped through the forepart, followed by a major fire. Themaster was killed, but the pilot managed to swim to shore. Thick black smokesoon covered the port, and the tide spread the crude cargo throughout the portarea, to the shores and out to sea. Helicopters and vessels dumped detergentsin large quantities in the hope of containing the spill that threatened to destroythe shellfish industry.

Then in February 1977, a new major spill occurred near American waters.The Liberian-flag tanker Hawaiian Patriot sustained a huge crack in her hullduring a storm 330 miles west of Honolulu. She was loaded with 95,000 tonsof crude oil, of which more than 17,000 tons leaked out before it was ignitedin an enormous explosion. Hawaiian Patriot broke in two and sank. One lifewas lost. The currents carried a 50-mile oil slick away from the shores.

Changes in tanker design to protect the marine environment and prevent oilspills were introduced in 1978, when the MARPOL Convention was revised.Requirements for segregated ballast tanks (in new buildings) located in placeswhere they could protect the most exposed cargo tanks were introduced andagreed upon. But despite the huge tonnage surplus, the voices raised to makethese arrangements applicable also for existing tankers were ignored. Imple-mentation of such rules would not only have enhanced the environment, butwould at the same time have reduced some extra carrying capacity of thetanker fleet. The exact reverse occurred in 1966 – prior to the closure of the Suez Canal – when new load lines were introduced to allow large tankersto have a deeper draft and carry more oil. Thereby the tonnage supply was increased, to the benefit of the world’s oil industry.

Also, the US proposals for double bottoms and double sides were stronglyopposed and rejected in IMCO without much opposition from theAmerican delegation’s spokesman, a USCG admiral.

The new “MARPOL tanker” became the standard against which any furtherdesign changes would be measured. Operational procedures were standard-ised. Among the other safety conventions agreed upon, perhaps the most important was the revision of SOLAS - the International Convention forSafety of Life - in 1978. Its overall objective was to assure the safety of thecrew, ports, passengers, ships and cargo. Now, SOLAS mandated the incor-poration of inert gas systems to counter the risk of explosion in the cargo tanksthat had resulted in so many serious accidents.

The Amoco Cadiz oil spill

The US oil company Amocogroup owned the Amoco Cadiz.The oil spill in 1978 representsone of the worst catastrophes everseen. In hindsight, it is easy to seethat it could have been avoided orsubstantially reduced if the masterof the super tanker had theauthority to engage professionalsalvors to assist the vessel at anearly stage. Instead, a lengthy discussion with the managementin Chicago went along whilst thetanker drifted into dangerouswaters. The pollution victims latersued the oil group in the UnitedStates for a huge compensation.The subsequent litigation lasteduntil 1992, when a Federal Courtdecided they were entitled to anaward of USD 61 million plus interest. The judge expressed that“Amoco has little reason to shedcrocodile tears.”

© Benoit Gysemberg / CAMERA PRESS / Scanpix


CHAPTER

Notes:On the market conditions during the ’70s and ’80s, see John A. Jacobs’ semi-annual World Tanker Reviews.On the US position on double bottoms in IMCO, see E. Nalder, “Tankers Full of Trouble,” pp. 214-215, New York, 1992, where he quotes the remarks of an American “double-bottom advocate” afteran IMCO-meeting: “Sometimes I wonder if the US Coast Guard is really a subsidiary of the oil industry.”Whether this is a fair remark, one may doubt. But it is a fact that the admiral, who was head of the USdelegation, later was appointed managing director of AIMS, the American Institute of Merchant Ship-ping, which the US oil companies dominated.

V. THE AMOCO CADIZBut again, a long time passed before the new legislation entered into force. Inthe meantime, more serious accidents occurred and additional tankers wereadded to the long list of total losses. On March 16, l978, more oil was spilledoff the windy coast of Brittany, France, than the world had ever seen.

The 240,000 dwt Liberian flag super tanker Amoco Cadiz was owned byAmoco Transport, an offspring of Amoco International, whose parent com-pany was in turn the old Rockefeller Standard Oil of Indiana, with an officein Chicago. The grounding occurred in French waters on her voyage from thePersian Gulf bound for Rotterdam. The large tanker, fully laden with a Shellcargo of 220,000 tons of heavy crude oil, got out of control because of a failureof the steering gear. All attempts to repair the hydraulic gear proved unsuc-cessful. Despite the problems with the steering gear, Captain Pasquale Bardarihesitated to accept salvage assistance pending a green light from the owner.The master of the West German salvage tug that had arrived wanted the salvage operation performed on the common contractual terms of Lloyd’sOpen Form - the standard form used in such cases. But acceptance of theseterms meant that the salvage master would take over the command of the shipand that the salvage company, if it was successful, would be entitled to a substantial salvage award from Amoco. The accident, however, revealed ananomalous position of a master who felt it to be his duty to minimise hisowner’s costs by avoiding salvage and instead try to obtain assistance under aless expensive towage contract.

From the start, the disaster has been described as a black comedy of errorswhen commercial pressures were followed by physical failures. The master ofAmoco Cadiz later explained that he had no authority to expose his superiorsto the costs of salvage. Whilst the captain discussed with his Chicago head-quarters, the weather worsened. After long negotiations on the financial termsbetween Captain Bardari and the master of the tugboat, the Captain agreedto receive a towline. This, however, broke during the discussion, and the huge



tanker drifted towards the rocks. When he finally got a green light fromAmoco to agree to the Lloyd’s Open Form, it was too late. The tanker driftedaground and soon spilled a quarter of her Iranian crude cargo into the sea.Twelve days after the grounding, the fore part broke in two, and the rest ofthe cargo went into the ocean.

Clean-up operations took months, and an estimated 10,000 people tookpart. The French Government decreed a national disaster and called in thetroops, but could not do much to prevent that more than 300 kilometres ofcoastline were badly polluted. Again, an ugly thick layer of oil coveredbeaches. The wreck could be bombed in an effort to ignite the oil and sink theship. Pungent fumes would blow inland and taint the farmland. Thus, Frenchfarmers protested because they feared that the soot would ruin their crops.

On the windy coast, waves washed off more than half of the spilt oil in fourweeks. The clean-up operations led by the Government continued for a fullyear after the grounding. The fishermen, farmers, hoteliers and other victimsdid not find much comfort in the fact that France had ratified CLC69, whichwas now in force. Unless the claimants were able to prove that the spill wascaused by “actual fault or privity” of the owners, the limitation rules wouldonly allow a compensation of no more than a fraction of the amount claimed.

Even if such a compensation claim based upon the owners’ “fault or privity” would be successful, it was more than doubtful that a French judge-ment could be effectively enforced against a Liberian company, with or with-out assets. On this background, the French government and other claimants,including representatives of some 90 French towns and villages, chose topursue the claims in the US and brought suit in the Federal District Court

of Chicago against Amoco Transport Company, the registered owner, the operator; Amoco International Oil Company and the parent company, Standard Oil Co. of Indiana.

A legal battle started which would last for years. In the end, the court heldboth Amoco International and Standard Oil Co. responsible. It turned out thatthe maintenance of the tanker had been postponed to avoid disturbance in thecommercial operation. Hence the management had also failed to carry outmaintenance of the steering gear.

The judge “pierced the corporate veil” and found that the parent companyhad been so substantially involved in the operation that both companies hadto answer for their negligence. Amoco Transport Company, the registeredowner, was found to have to have failed to remedy the deficiencies on board


its tanker despite having actual knowledge of them. The US Limitation of Liability Act of 1851 was not applicable.

The two mentioned oil companies were not the registered owners of thetanker. Neither were they immune if CLC69 had been applicable. There wasno inhibition in the text that precluded victims from claiming compensationoutside the convention against persons other than the owner, his servants oragents. According to the judgement, the legislative history of the CLC alsoclearly showed that it was meant to immunise the master and the crew but inno way the operators of a vessel.

By 1982, USD 2 billion worth of writs had been filed. The claims exceeded byfar anything seen in the past for pollution damage. For two to three years, the

Morlaix

Lannion

Douarnenez

St. Brieuc

Amoco Cadiz oil spill

© T. Haugen



public outcry against the oil company prevailed and its sale of oil productswas reported to have fallen by about 15 percent p.a. Litigation took a longertime. The appeal that followed was in vain. In 1992, the claimants receivedan award of USD 61 million plus interest as the Federal Court of Appeals confirmed the lower court’s decision and severely reprimanded Amoco for itsnegligence:

“Amoco has little reason to shed crocodile tears. Exxon reportedly spentUSD 2 billion to clean up the oil Exxon Valdez spilled off Alaska, it hasagreed to pay another USD one billion as damages and to pay a criminalfine of USD 125 million. Amoco will be called on to pay only USD 61 million plus interest to redress a spill that not only was larger but also

occurred in a more densely populated area. Calling the USD 61 million the result of inflated or fraudulent claims taxes credulity.”

The international salvage rules in 1978 were based on an old convention from1910. Amoco Cadiz became an impetus to re-examination of these rules, andIMCO eventually adopted a new International Convention on Salvage in1989.

Its most important feature was that it provided for compensation for salvorswhen they managed to prevent or minimize pollution, even if the ship was notsaved. After the grounding of Amoco Cadiz, it took only a few months beforeIMCO had sufficient ratifications of FC71. This process would in all proba-bility have been further delayed if the catastrophe had not happened.

In March 1980, the worst affected districts in Brittany were just beginningto recover from the damage the Amoco Cadiz caused when the Malagasytanker Tanio broke up in heavy weather and spilled 13,500 tons of heavy fueloil. More than 125 miles of shoreline were polluted.

Once again, there was serious concern about the economic losses. France hadjust ratified FC71, and the Fund now had to consider the admissibility for economic losses for the first time. The Fund took the view that such claimswere admissible in principle provided the claimant depended directly on earn-ings from coastal or sea-related activities. Claimants were required to describethe nature of the loss and to provide documentation to prove that their claimsresulted directly from the accident. Apart from clean-up costs, considerableexpenses were connected with the removal of oil in the wreck, which had sunkin deep water. The pumping operations lasted 16 months. Upon examinationof claims, some GBP 32 million were deemed to fall within the criteria of



recoverable loss under FC71.After interim payments, the claims were settled without litigation against

the Fund for some 70 percent of the established amounts. Despite the claimsexceeding the maximum amounts available under the two internationalregimes, ways were found to compensate victims in less than five years afterthe incident. This contrasts with the 14-year period that elapsed before thelegal struggle about the Amoco Cadiz compensation came to an end. To theclaimants’ satisfaction, supplementary compensation was recovered againstother parties involved, including the vessel’s bare boat charterer and classifi-cation society. The public reaction was this time far less vigorous, not becauseof indifference, but the parties involved learnt lessons.

Notes:On Amoco Cadiz and (Tanio), see Jeff Wheelwright: “Degrees of Disaster,” New York, 1994, p. 85,Norman Hooke’s article on tanker accidents in Lloyd’s Safety Supplement, May 2000, an article byEmanuel Fontaine in a CMI publication “Liability for Damage to the Marine Environment,” issued byLloyd’s of London Press Ltd, 1993. See also “IOPCF 25 years,” Kent, 2003, Jack Devanney: “TheTankship Tromedy,” Florida, 2006, pp. 36-42, M. Rafcliffe: “Liquid Gold Ships,” p. 149-150 and dela Rue and Anderson: “Shipping and the Environment,” London, 1998, pp. 31-33, 97-98 and 657. The 1969 Convention (CLC69) was changed by the 84/92 Protocols, which now provide that the exclusive remedy lies against the owner.


OIL PRICES THROUGH THE ROOF – THE HUGE TANKER SURPLUS,1970-1990

7

Oil prices through theroof – The huge tanker

surplus, 1970-1990

I. THE TANKER SURPLUSBrisk industrial growth and improved standards of living in the Westerneconomies led to a strong growth cycle in oil transportation from the mid-1960s. Over the 10 years from 1964, crude oil carried by sea increased by 182percent. The growth was even stronger in ton-miles, which grew by 350 per-cent because of the longer transport distances.

The strong demand produced a firm tanker market with lofty expectationsfor continued growth in consumption. This produced a contracting surge forlarge tankers in the 200,000 tdw class. Swedish and Japanese shipbuilderswere offering vessels of 500,000 tdw, and Mr. Kirby, the president of Shell International, envisaged even larger vessels: “We are reaching a plateau. Thenext increase should be 1,000,000 tons deadweight.”

When the US by and by became convinced that its domestic productionwould be far less than demand and decided to remove the import quotas inApril 1973, inquiries for tonnage accelerated in the fall of 1973 when tankerfreight rates reached the highest level seen since the closure of the Suez Canalin 1956.

On Oct. 6 that year, the fourth war between Israel and Egypt – the Yom Kip-pur War – started. Supported by most other Arabian states, Egypt attacked Is-rael. In the wake of the war, the Arabian oil-exporting countries imposed anoil embargo on most Western nations. The Organization of the Petroleum Ex-porting Countries (OPEC) utilized its market position by a substantial rise in


oil prices, as seen by the price of Arabian Light, the“marker” crude, soaring from USD 2.90 a barrel toUSD 13. There had been underlying weaknesses in theWestern economies as private consumption had out-grown productivity gains, as already seen by the col-lapse of the fixed currency system. Now, the oil pricehike contributed to inflation and economic stagnation.

At a time when the order book for tankers amounted to196.9 million tdw, equivalent to 91 percent of the trad-ing fleet, the consumption of crude oil stagnated. Overthe years 1974 to 1978, the world tanker fleet grew by54 percent, whereas the tanker trade remained stagnant.At the end of 1978, more than 100 ultra large crude car-riers (ULCC) were constructed. This gross imbalancebetween tankers and trade brought about an overcapac-ity of vessels and a long and painful crisis for the tankerindustry.

OPEC meeting 1973

1973 was the year that turnedthe tanker business upsidedown, partly because of theprice-increase decisions themen shown here made. Centrally placed, we find theleading figure of OPEC, H.E.Sheik Zaki Yamani of SaudiArabia. OPEC had now be-come well aware of using theoil as a weapon to promote itscause. The Sheik expressed,“The world needs our oil andwe in our turn need the world.In other words, we are all likethe human body; when onepart of it is hurt all the otherparts are affected.”

© Portrait



Many tanker owners tried to cut back in their build-ing programmes, and about 70 million tdw of largetankers were cancelled from 1974 1976. Still, the fleetcontinued to grow, as the volume of laid up tankersreached 50 million tdw in 1975. By mid-1978, the research department of the London shipbrokers John IJacobs estimated the tanker surplus to some 142 milliontdw, or 43 percent of the total tanker fleet.

The financial effects on the shipowners were severe.Freight income was severely reduced, or even reversedwhen trading below breakeven. Ships’ values plum-meted. A 280,000 tdw tanker delivered in 1973 at USD50 million saw its value drop to USD 15 million by1976 and USD 9 million two years later. Shrinking values would frequently bring owners to default on financing terms, and a large number of modern tankerswere put on the market at bargain prices to be pickedup by new owners.

In established maritime communities in Europe,traditional shipowners were forced out of business.

In Norway, shipowners such as Hilmar Reksten andHagb. Waage went bankrupt, despite saving efforts, as did Swedish owners such as Malmros, Greeks likeColocotronis, and so on.

From the time OPEC turned the price squeeze, miseriesbegan for the tanker industry.

Everything that could go wrong did go wrong.Higher oil prices meant that the industrial world lookedfor other fuels, and fuel-saving technologies were devel-oped. The depression following the increased oil pricesin 1974 was reinforced by the Iranian revolution, whenoil prices in 1979 and 1980 once more went throughthe roof. The situation was further worsened by the in-creased production of oil in the North Sea located closeto the consumers in Europe and the US. The start-up ofoil production in Alaska made an impact by cutting USoil imports.

Hilmar Reksten

Hilmar Reksten was born in1897 in Bergen. He started as ashipowner in 1929 and contract -ed his first tanker in Sweden in1941. During World War II, heworked for the Norwegian Government in London andNew York. After his return toNorway, his tanker fleet madehim a huge fortune connectedwith the unrest in the MiddleEast in the late ’50s and ’60s.His policy was to refuse to charter his tankers on “safe”long-time charters, but playedinstead in the “spot market.”His fantastic profits were im -mediately pumped into the pro-curement of more and moreships. But what went up had tocome down. His fleet was takenover by the Norwegian Govern-ment’s “Garantiinstitutt” afterthe market crashed 1973/74.His last years, up to his death in 1980, were darkened by accu sations of tax evasion andmanipulation of the nationalcurrency regulations. Not manyof the accusations were laterconfirmed.

© Scanpix



The re-opening in 1975 of the Suez Canal, which had been closed since1967, was a triumph for those involved in its clearance, but reduced the dis-tance from the producer countries to the consumer and was hence anotherblow for the owners of oil tankers. Other negative factors included the in-creased building of pipelines to transport oil, notably the opening of the Suez-Mediterranean (SUMED) pipeline in 1976. The pipeline began running on anannual rate of 20 million tons, only a quarter of its full capacity.

The result was shorter tanker hauls and less demand for tanker transpor -tation. The masters were ordered to cut costs and sail at slow speed to reducefuel consumption. And, ironically, it was mainly the modern, well-equippedtankers that were laid up. The older tonnage could offer lower freight rates,and the charterers looked for the cheapest ships.

Notes:In March 1968, the Nagasaki shipyard of Mitsubishi Heavy Industries launched the biggest tanker atthe time – 276,000 dwt – for Daniel Ludwig. If placed upright on its stern, it would reach the 100th

floor of the Empire State Building in New York. Esso was at the time looking into the possibility ofbuilding 800,000 tonners, whilst John Kirby of Shell had even more ambitious dreams. See R. Petrow:“The Black Tide,” London, 1968, pp. 26-27.OPEC was started in 1960 with only five members: Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.Among the objectives was “the stabilization of prices in the international oil markets with a view toeliminating harmful and unnecessary fluctuations.” Source: A.A. Kubbah, “OPEC - Past and Present,”Vienna, 1974.

II. REMEDIAL MEASURESThe massive overcapacity of crude-oil tankers became an important issue forthe tanker owners and hence for INTERTANKO. The organization had seena strong beginning with a listed fleet of 160 million tdw by 1975, and with industry leaders such as Mr. Jahre, Peter George Goulandris, Mr. Naess, Yue-Kong Pao, Ali Khasawneh, Sven H. Salén, Carl Rentz-Petersen, Francis Ravano and Mr. Tung on its executive committee.

INTERTANKO explored every possibility to reduce the over-capacity.Shipowners were encouraged to cancel new building contracts without employment and to scrap older vessels. The organization helped locate lay-upfacilities around the world, promoted tankers for oil storage, looked into newdesign concepts that were environmentally safer and also cut down on capac-ity.

Through their organization, independent tanker owners consistently strivedto persuade other parties in the industry that the only way out of the disastrous

Jorgen Jahre, Tormod Rafgard and Thor Heyerdahl (from left)

Jorgen Jahre was born in 1907. Hewas active in Norwegian and inter-national tanker shipping until hisdeath in 1998. Apart from being apartner in his uncle’s whaling andtanker company Anders Jahre &Co, his many commissions of trustincluded the chairmanship of theNorwegian Ship-owners’ Associa-tion from 1960-62, the NorwegianOlympic Committee from 1963-65and INTERTANKO from 1972-1975. During the miserable marketin the 1970s, he - thanks to his remarkable diplomatic skills - succeeded in establishing the International Maritime IndustryForum in London, bringing togetherthe four major actors in the tankerindustry: Banks, European oil com-panies, shipyards and tanker own-ers. The aim was to alleviate andreduce the enormous tonnage sur-plus in order to expedite a balancein the market through cancellingshipbuilding orders and scrappingobsolete tonnage.

© Private photo – T. Rafgard



situation was to cut down the tonnage supply in order to narrow the gap between supply and demand. One of the astonishing aspects of the situation,however, was that governments and bankers seemed to deny any long-timeproblem caused by the massive overcapacity.

Thus, in December 1975, INTERTANKO, on the initiative of its chairman,Mr. Jahre, was instrumental in setting up the International Maritime IndustryForum (IMIF) to take remedial action to try to alleviate the tonnage surplus.IMIF drew together tanker owners, European oil companies, shipbuilders andbankers. The steering committee was comprised of Robert B. Horton, directorof BP Tanker Co., Otto Norland, executive director of Hambros Bank and L.A. Vernede, managing director of the AG Weser shipyard, as well as Mr. Jahre.

The aim was to promote market recovery. Among the most important targets were to convince shipyards to accept that a number of new buildingcontracts had to be cancelled. Likewise scrapping of obsolete and surplustankers had to be accelerated if market balance should be pushed forward.

Whether it could be credited to IMIF and INTERTANKO or not, the volumeof scrapping amounted to 45 million tdw from 1975-78, in addition to 20 million tdw temporarily withdrawn from the market to serve as storagetankers.

Jan Erik Dyvi of Norway sent the first undamaged VLCC to the scrap yardfor demolition in 1978. The Dyvi Nova was only 10 years old and was fol-lowed by six oil company-owned super tankers of the same vintage. The firsthalf of 1978 saw the greatest volume of tanker tonnage scrapped in any previous six-month period. Between 1974 and 1986, a fleet representing acarrying capacity of more than 200 million dwt had been sold for demolition.

In its June 1975 report, John I. Jacobs recalled the tonnage shortage in 1968after the closure of the Suez Canal when the Load Line Convention wasamended. This had allowed for deeper loading and increased capacity by fivepercent. Now, the idea of reversing to the original load lines might give somesmall alleviation. The oil industry, however, did not favour such a scheme.

INTERTANKO brought up several other ideas for curtailing the tanker surplus, some of them more viable than others.

The oil industry was opposed to a proposal discussed in IMO that would –also in the interest of a cleaner marine environment – introduce rules requiringexisting tankers over a certain size to be equipped with segregated ballast tanks(SBT). This would cut the cargo capacity and reduce the desperate need for



reception facilities in loading ports and terminals for the dirty ballast carriedin the cargo tanks. Opposition also came from tanker owners who were in thelucky position to have their tankers fixed on long-term charters, as it was un-thinkable that they would be paid the same freight rate for less transportationcapacity. For tanker owners in the spot market, the intention seemed grand,but there was little capital to finance costly conversions to SBT. The discussionwithin the industry and even more so within IMO lasted for much too long tohave any meaningful effect on the surplus situation.

A viable alternative use of tankers was for floating oil storage. The JapaneseGovernment initiated a floating storage programme in 1980. It was expandedto involve around 30 super tankers. US oil companies built up a fleet of float-ing storage in the US Gulf and the Caribbean. Floating storage reached itspeak in October 1981, when nearly 150 tankers representing about 35 milliondwt were used for that purpose around the world.

No stone was left unturned in the efforts to reduce the tonnage surplus.Tankers were converted and used for cement storage, harbour constructionfacilities and at least in one case as a reception facility for oil slops receivedfrom other ships. Moreover, in the period from 1973 to 1982, 12 tankers totalling about half a million dwt were converted to sheep or cattle carriers.In 1982, it was reported that a super tanker, World Saga, had been purchasedand converted to an “ice island” drilling vessel in the Beaufort Sea. The use ofolder tankers for oil production and trap/storage/offloading (FPSO) vesselswould become common at a later stage.

In 1977, INTERTANKO suggested to the US Department of Energy that therewere substantial savings to obtain if Alaskan oil was transported to the USEast Coast and Caribbean the long way around Cape Horn instead of beingtransferred to smaller units and sent through the Panama Canal. Costs wouldbe reduced and some of the tonnage surplus would be absorbed. The calcula-tions were straightforward, and after a while some VLCCs traded around theHorn. During the Falkland War, one of them, the US-owned Hercules underLiberian flag, was attacked and struck by a bomb when she was in ballastfrom St. Croix to Valdez in Alaska. Because of the hazard of the unexplodedbomb, it was decided to scuttle the vessel off the Brazilian Coast.

Notes:In 1983, some 372 tankers were laid up at the end of the year with an all-time high during the summer,whilst 75 tankers were employed as floating storage. Further information on the massive disposal oftonnage is found in the reports of major tankers brokers like John I. Jacobs, Fearnleys, etc., and in the



annual reports of INTERTANKO, where an oversight of alternative use is given in the annual reportfor 1982, pp. 38-42. See also John Newton: “A century of tankers.”In INTERTANKO’s annual report for 1975, p. 10, readers are reminded of tanker owners’ understand-ing of oil companies’ problems in 1967 and 1968, when the closure of the Suez Canal created a tonnageshortage. Owners then voluntarily agreed to deeper drafts before the new load line rules were imple-mented. John I. Jacobs comments in its review, June 1975, p. 24: “One remedial measure which couldbe implemented quickly provided governments can be persuaded to provide prompt ratification wouldbe a return to the pre-1966 situation regarding load lines. It will be recollected that on ratification inJuly 1968 the 1966 Load Line Convention allowed decreased freeboards and the consequently increaseddeadweight for tanker amounted to about 5 percent … To put the clock back to 1968 could reduce theexisting and future tanker availability by nearly 20 million tons, which would be a worthwhile pallia-tive.” On transport of Alaskan oil, see INTERTANKO annual reports 1978, p. 8, where it is reported that ithad been proposed to the US Energy Department that transport of oil in VLCCs around Cape Hornwould cost about USD 10 per ton, whilst the traditional transportation costs through the Panama Canalin smaller tankers were more than double that amount. On water transportation, see Seatrade, June1979.

Slow steamingThe masters on board tankers were ordered by their principals to cut lossesand sail at slow speed to reduce fuel consumption. The oversupply of oil-car-rying tonnage at the end of 1975, as estimated by John I. Jacobs, was morethan one third of the total oil-carrying fleet.

Owners of some 450 tankers provided data to INTERTANKO relating totonnage operating both on the spot market and on period charter during theperiod from July to October 1976. The information indicated that for thetankers below 100,000 dwt, the average speed reduction was equivalent to aloss of six and a half percent of total carrying capacity. The larger tonnagegroups showed nearly a 12 percent reduction, equivalent to about two knots.The tonnage actually trading in oil at the time was about 300 million tons, al-lowing for at least 34 million tons in lay-up. Because oil-company owned ton-nage was also operating at similar reduced speeds, the total reduction in globalcargo carrying capacity was estimated to have been about 30 million tons atthe time.

The man behind the estimates was a young economist who 40 years laterwould become one of the leading European tanker owners, Herbjorn Hansson.



Bringing fresh water to MEGA fascinating proposal to alleviate the weak market was to carry fresh waterin tankers on their ballast voyage to loading terminals in the Middle East. Theplan was launched by INTERTANKO at the “Environment and PollutionSeminar” in Kuwait in April 1979. Reference was made to the fact that everyyear some 400 million tons of water were carried as ballast to the Middle East.Water transported in tankers for drinking and industrial use had in the pastbeen carried by tankers to destinations that had been short of rainfall, e.g. toPeru and from Chinese rivers to Hong Kong. Why not use the fresh ballastwater for agricultural irrigation in loading ports in areas where water wasbadly needed? Supplies by tankers could be supplementary to methods usedlocally in the Middle East countries to overcome chronic water scarcity. Notonly would such a scheme help to make the desert bloom and increase foodproduction, it could also help to defray the operating costs of desperate tankerowners.

Commander Trygve Meyer, INTERTANKO’s technical expert in cooperationwith the Kuwait Institute for Scientific Research and the Agricultural Univer-sity of Norway, had researched plants watered by cleaned ballast and grownin Gulf sands. They proved successful “in that all those involved have eatenhappily of the fruit and lived to tell the tale!”

Parallel to these experiments, the Water Supply Team of Mitsui Japan’s Shipand Project Division worked with a similar project to make use of the ballastwater in tankers. In 1982, the Arab Gulf Cooperation Council which includedSaudi-Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emiratesdecided to look into the feasibility of importing water in incoming tankers.Also, IMO initiated studies on the provision of dual-purpose reception facili-ties where fresh water ballast would be treated and used ashore for industrialand agricultural purposes.

But sadly, when the Iran-Iraq War entered into a new phase in 1984 throughnumerous assaults on tankers, placing oil transportation and the lives of sailorsat risk, there was little priority left for new schemes like water transportation.

Note: Source: Seatrade, June 1979, p. 82 and INTERTANKO Annual report 1979



Heads that had never been usedIn the midst of a dismal freight market and a poor image, there was, however,still room for an ironic twist. INTERTANKO chairman Mr. Naess, who wasno longer a young man, demonstrated that superbly in his eloquent annualdinner speech in Eastbourne in 1978. In his well-drawn and witty presentation,he admitted that he suffered from a strange head ailment commonly knownas vertigo and had consequently been hunting for a new head:

“Being in London, I therefore used the opportunity to visit the Caledonianmarket where as you know you can buy all kinds of second-hand articles verycheaply.I told the salesman that I was in the shipping business and needed a second-hand head to replace the one I was now carrying, which was no good.Being in the shipping business, he suggested that perhaps I would like a shipbuilder’s head. I could have a European shipbuilder’s head very cheap. Iwas delighted, and he showed me several, but alas, they all had their throatscut. The salesman said this was unfortunately so because of the competitionwith the Japanese.I was certainly not going to buy a head with its throat cut, so I asked him toshow me some other heads. He suggested that perhaps some banker’s headmight interest me. I said it would, and he showed me several. But they all hadtheir eyes wide open and looking scared. I asked if they could not shut theireyes, but the salesman said they had lost the ability to shut their eyes and sleepbecause of anxiety over their ship loans.

I said this would be no good to me and asked for other alternatives. Brightly,he suggested some oil company heads. I was enthusiastic, and he brought outseveral from the cold store. But they were all squinting. He explained that theyall did because they for so long had one eye on the US Department of JusticeAnti-Trust Department and the other on their business. All oil company headssquinted.

I said that did not want to go through the rest of my life squinting, so he hadto get me something else. Yes, I could get a shipowner’s head, but that wouldbe much more expensive. He had several good ones, but they cost several thousand dollars. Why so expensive, I asked. Ah, he said, the reason for thatis that they have never been used. I replied that unfortunately this would beno good, because why should I swap one head that has never been used for



another which was never used. That was the end of my visit, and unfortunatelyI still have my old head.”

It is not what you preach; it is the way you preach. The joke being full squareon the owners themselves had them falling about in laughter.

III. THE CRISIS DEEPENSThe oil price shock of late 1973 was followed by new shocks in 1979 and1980, when the depression was reinforced by the Iranian revolution, the removal of the Shah and the arrival of the Ayatollah Khomeini. In September1980, the eight-year-long war between Iraq and Iran began.

The glimmer of hope for a more healthy tanker market was overtaken bynew price panic, as oil prices once more went through the roof and jumpedfrom USD 13 per barrel to over USD 40. Several Arab governments, inspiredby the boom in 1973, realized that they had invested in tankers much too lateand became the victims of their own oil prize policies.

Apart from the industry’s unfounded optimism, other important reasonsfor the development of the disastrous tonnage surplus were the bankers’ readi-ness to provide soft loans and the desire of many governments to keep theirshipyards alive and the workers fully employed through heavy governmentsgrants.

Despite all the negative aspects, the fleet of VLCCs, tankers above 200,000tdw had continued to grow as the shipyards delivered an increasing numberof super tankers. Thus the world tanker fleet at the end of 1978 included some700 big units. Thirty of these super tankers could each carry a cargo of400,000 tons or more. By now, however, further ordering had ceased and atthe end of 1978, the order book was confined to only 16 VLCCs. The researchdepartment in the London shipbroker firm John I. Jacobs estimated that thesurplus of tankers amounted to some 116 million dwt, or 31 percent of thetotal tanker fleet. The VLCC sector was hardest hit; the value of a three-yearold, 250,000-ton turbine tanker had plummeted from USD 70 million in 1973to USD 10 million in 1978.

After a passing market improvement in 1979 and 1980, decreasing oil trans-portation once more deflated the rate levels. From 1978 to 1985, crude oiltransportation shrank by incredibly 61 percent, expressed in ton-miles. Sucha collapse of the market was only aggravated by the already massive oversup-



ply of tankers. The long and painful adjustment of fleet to trade caused thesecond – and most vicious – part of The Shipping Depression, the structuralchanges which came to affect the shipping industry.

The bottom was reached in the summer of 1983, when a fleet representing73 million dwt, more than 400 tankers, were without employment and laidup around the world. This oversupply caused a trading environment whereonly the cheapest operation could survive.

For the tanker industry, it was nothing less than a massacre. By 1990, a fleet of tankers representing nearly 200 million dwt had been

removed since 1974 and was sold for demolition mainly to scrap yards in theFar East. That amount of tonnage corresponds to no less than some 400 verylarge crude carriers.

The painful adaptation of supply to demand, or tankers to trade, led to a rangeof cost-cuts. Maintenance was in many instances reduced to the minimal ofsurveys and what the classification society required. Replacing trained crewswith cheaper maritime labour from developing countries cut manning costs.Management and crewing were often sourced out to third-party contractors,while the commercial control of the vessel remained with the owners in thetraditional shipping centres.

Dr. Martin Stopford, managing director of H. Clarkson & Co. Ltd. in London and a respected shipping economist, stated at a shipping conferencein Hong Kong that during the “survival period” routine maintenance oftankers became a thing of the past. He reported: “major inspections were reduced to a few hours’ paperwork in the office.”

Together, these factors led to a restructuring of the shipping industry, the movefrom integrated shipping companies under national flags and national crewsto a globalized industry based on minimum standards and low-cost labour.

The cumulative effects of these changes took time to show. But from 1987,the International group of P&I clubs began to receive claims that turned thepool claims for the successive years from 1987 to 1992 into all-time records.For the P&I club Gard, 1986 was closed with claims of USD 55 million, whichwas the lowest in a decade. The following years, however, came to run poolclaims of a staggering USD 1.013 billion by 1994. The shipping industry hadbeen hit by a monster wave of calamities.



The years of gloom finally drew to a close in 1986,when time charter earnings for tankers were up notice-ably from USD 4,000 to 5,000 up to 15,000 per day.From 1985 to 1990 the tanker trade picked up by 56percent, expressed in ton-miles, whereas the fleet continued to shrink by nine and a half percent.

This produced a long-awaited improvement. It wastime to pocket sale profits and look for new and competitive tonnage as new opportunities opened.

Declining fleet of combinedcarriersFrom 1979 to 1980, the combined carrier fleet began todecline from the peak of 47 million tdw. The loss offaith in this sector seems to be a combination of variousfactors, one of which is that the operation of such shipsis far more complicated than the operation of a straightbulk carrier or crude tanker. According to SSY Consult-ants, the biggest hurdle for these ships has been the policy of many oil companies to not charter this type ofvessels. The fate of Derbyshire and other mysterious disappearances might also have been a contributing factor. By the year 2000, the combined fleet remained a third of its former extent.

The first Gulf WarDuring these dismal years, an opportunity appeared forprofitable tanker trade in the war zone in the MiddleEast Gulf during the Iran-Iraq war which began in August 1980.

Freight premiums were offered for owners who tookthe risk and sent their tankers for loading in places suchas Kharg Island in Iran. The war initially created a short

Saddam Hussein

The president of Iraq started awar with Iran in 1980 with tacitsupport from the United States.When the US eventually lost patience with Saddam andbombed Southern Iraq in January 1993, US PresidentGeorge Bush explained that hehad ordered the attacks to teachSaddam a “short, sharp lesson.”No result. When the US invadedIraq in 2003, Rumsfeld was USSecretary of Defence and in theforefront of the campaign whichended with the capitulation ofIraq and the hanging of Saddam. The fight with Iraqiterrorists still continues.




fall in crude oil supply as bombing damaged export terminals. However, revenues for owners of VLCCswere further depressed by an increase in bunker pricesof some 30 percent. USD 2 million was now required tofuel a VLCC for a round-trip voyage from the MiddleEast to Europe.

In 1984, the war entered a new phase, as neutral ship-ping became military targets, both for the Iraqis and Iranians, what was to be called The Tanker War.

This began when Iraq attacked Iranian tankers andthe oil terminal at Kharg Island in 1984. Iran struckback by attacking tankers carrying Iraqi oil fromKuwait and then any tanker of the Persian Gulf statessupporting Iraq. The attacks by air and small boat didvery little damage to Persian Gulf state economies. Iranmoved its shipping port to Larak Island. No less than343 tankers had been hit in the war, resulting in morethan 60 total losses and about 250 sailors being killedin the straits of Hormuz.

On Nov. 1, 1986, Kuwait formally petitioned foreignpowers to protect its shipping. The following year, theUS Navy was brought in to protect US interests and alsoneutral ships bound for Iraqi ports.

Lloyd’s of London estimated that the Tanker War damaged 546 commercial vessels and killed about 430 seafarers.

The work done by INTERTANKO towards sensitiz-ing public opinion to the importance of this matter wasapparently not lost on the United Nations. Recognitionby the Security Council of the legitimacy of the associ-ation’s concern and initiatives – as expressed at the May1988 meeting in New York between representatives ofthe Security Council and INTERTANKO under itschairman Mr. Papachristides – augured for an awaken-ing of international conscience on a most critical issue.

Basil Ph. Papachristidis

Basil Ph. Papachristidis is theChairman of HellespontSteamship Corporation and var-ious shipping groups. His fatherfounded Hellespont in 1946and became a member of Inter-tanko’s Executive Committee.Basil Papachristidis become itschairman in 1981. In 1987-1989 as chairman of INTER-TANKO, he placed the warbetween Iraq and Iran on thetop of his priority list. He urgedmaritime actions to providenaval escorts to protect inno-cent passage in the Gulf andstarted a tour of meetings withpolitical leaders to whom hismessage was clear: The attackon shipping and the killing ofseamen in breach of interna-tional law had to be stopped.At the time he retired as a chairman, the combatants hadagreed on a cease fire.


Mohammad Souri

Mohammad Souri has served as Chairman and Managing Director of NITC since 1986. He is a Howard University(USA) graduate with 30 years'experience in shipping. In 1982,he joined the Islamic Republic ofIran Shipping Lines and servedas Chairrman and Managing Director until he joined NITC in 1986.

NITC tanker, Barcelona

The National Iranian TankerCompany continued its servicesduring the war with Iraq. Thisphoto depicts the tankerBarcelona ablaze in the PersianGulf.



Notes:In his article, “Tanker Industry Overview,” Martin Stopford commented on tanker owners’ strategiesin the survival period. See INTERTANKO, “The first 25 years,” Oslo, 1996, pp. 91-101. Out of a totalnumber of 567 VLCCs in the market by the end of 1983, as many as 332 units were estimated to rep-resent surplus tonnage (slow steaming taken into account). Sixty-five VLCCs were sold for scrappingthat year, including the largest tanker ever built, the 546,000-dwt PierreGuillaumat. See J.I. Jacobs’ re-ports from December 1980 and 1983 and INTERTANKO’s annual report for 1983.Today, the VLCC fleet includes about 550 units. See Erik Ranheim’s article in Kapital no. 2, 2010. On the development of the combined carrier fleet, see SSY Consultancy & Research Ltd., London, Vol.2, 2000.On the Gulf War and the cost of a round-trip voyage from the Middle East to Europe, see StephenHowarth “Sea Shell,” pp. 176-177 and Jack Devanney: “The Tankship Tromedy,” Florida, 2006, pp.31-32, where he describes the attack on the 412,000 dwt storage tanker World Petrobas, which wasbombed by Iraqi jets whilst transferring oil to another tanker. The captain reported: “Since we wereboth inerted and had our inert gas plants running, an explosion was avoided.” Devanney opines thatinert gas was “a tremendous step forward in tank ship safety – the single most important step of alltime.”

IV. COUNTERPRODUCTIVE MEASURES?The groundings in 1976 of old Argo Merchant and two years later the recentlybuilt Amoco Cadiz caused pollution from ships as different as two crude car-riers could be. But yet their negative effect on the image of the tanker and oilindustry was much the same. Ironically, the Amoco Cadiz accident happenedat the same time as the annual INTERTANKO meeting on the other side ofthe English Channel in Eastbourn. The independent tanker owners had gath-ered its members to discuss the public perception of tankers and the perceptionof the new giant tankers that during the last years had been delivered by theship yards to carry oil cargoes over 300,000 tons.

In Eastbourne the press was told that as most accidents happened in con-gested waters, in and out of ports. According to both the oil industry and theindependent tanker owners, larger units would mean less traffic, less controlproblems and safer transportation.

The environmentalists had long argued that the increasing number ofVLCCs was bound to result in more disasters. Thus the answer from the environmentalists was: “No way, the bigger the tankers are, the bigger the disaster will be.”

Few tanker owners found much comfort in the Greek proverb: “The sea getssick, but it never dies.” In this crisis, most tanker owners felt that the currentmass production of new rules was counterproductive. Strict implementationof current rules would be far better than the production of new measures, that


governments seemed to neglect and which a large num-ber of owners could not afford to implement in anycase.

The problem for those owners who tried to followup the new regulations was further increased by the oil companies’ preferences for cheap transportation. Despite the public declarations from their top men, theirchartering departments continued to prefer the lowestbidder.

In September 1981, INTERTANKO’s chairman, SirPao, sent a message from Helsinki which included thefollowing passages:

“Intertanko particularly endorses the current effortsof IMCO to obtain ratification of international

conventions … . The delay among some IMCO mem-ber states … gives rise to concern. INTERTANKO isapprehensive that over-ambitious goals set by IMCO

Sir Yue-Kong Pao

Born in 1918 in Ningbo, China,Sir Yue-Kong Pao trained as abanker. He moved to Hong-Kong in 1949 and establishedhis own shipping company.Over the next 25 years, he as-sembled the largest privatelyowned ocean-going fleet underone house flag – over 20 milliondwt including tankers and drybulk carriers. He was the re-sourceful chairman of INTER-TANKO from 1979-1982 withdirect access to world leaderssuch as Britain’s MargaretThatcher, America’s RonaldReagan and Germany’s HelmutSchmidt. Before his death in1991, he was knighted byQueen Elisabeth of England.



may result in difficulties experienced by individual governments … This might in turn, injure IMCO’s image and effectiveness ... a need existsto consolidate present efforts with the aim of inducing governments to givepriority to the ratification and enforcement of conventions already agreed.INTERTANKO believes that amendments approved prior to ratifications

of conventions very often raise … uncertainty among administrations and tanker owners. This can only be harmful to IMCO’s efforts to

achieve early ratifications … INTERTANKO, therefore, urges IMCO toconsider this aspect fully before considering further amendments to conven-

tions awaiting ratification.”

IMCO took the point, and two months later its Assembly decided that the organization should:

“entertain proposals for new conventions or amendments to existing conventions only on the basis of clear and well-documented demonstrations

of compelling need, taking into account the undesirability of modifying conventions not yet in force or of amending existing conventions unless such

later instruments have been in force a reasonable period of times, and experience has been gained of their operation, and having regard to the costof the maritime industry and the burden of the legislative and administrative

resources of member states.” (Source: Resolution A-500).

European ministers responsible for maritime safety met in Paris in 1982 andagreed on a Memorandum on Port State Control, which committed them toinspect 25 percent of all foreign ships entering their ports every 12 months.Moreover, it was agreed to develop common inspection standards.

V. PRICY FUEL AND DIRTY TRICKSDuring the years since 1973, soaring oil prices and reduced supplies of oil hadresulted in demand for higher yields from every barrel of crude. At an IMIFmeeting in London in June 1977, a prominent tanker owner from Norwayillustrated the huge operating losses owners of VLCCs were suffering.

He pointed out a 250,000-dwt tanker, burning 165 tons of bunker oil a dayat the speed of 16 knots, which would earn on a voyage from Kuwait to Rot-terdam some USD 820,000 at the current freight level. The cost of the bunkeroil alone would come to about USD 800,000, and port fees accounted for a



further USD 115,000. Daily running costs under the Norwegian flag for the63-days-long round trip represented about USD 7,000, totalling USD 440,000.Even if depreciation and interest on capital were ignored, expenses exceededincome by around USD 8,500 every day. Few owners could afford to continueeffectively subsidizing the oil companies and other charterers in this mannerfor long.

The poor quality of fuel the shipowners would receive from their suppliersmade the increasing fuel prices problem worse. This was related to the oil industry’s introduction of a new separation process: Catalytic cracking. Bythis process, the crude oil achieved higher yields of lighter distillates from eachbarrel. The residual oil left at the bottom of the barrel was sold as fuel oil forships called “bunkers:” An extremely poor product for which there was littlemarket elsewhere. Still, bunker oil remained without comparison the singlemost expensive part of a tanker’s operating costs.

The quality of the residues at the bottom of the barrel declined gradually toan all-time low, whereas prices accelerated to an all-time high. It did not helpthat the oil industry left it to the shipowners to separate and dispose of abrasive sediments as aluminium and silicate particles, which might tear upthe cylinders and the fuel pump in a short time.

Refineries would easily be in a position to remove the sediments. Tanker own-ers and other shipowners were under international law in duty bound to ensurethe seaworthiness of their vessels prior to the commencement of the voyage.This meant that the fuel must be good for the engine, good enough to enablethe tanker to reach its destination safely. Engine breakdowns because of infe-rior bunkers were experienced, but not yet in narrow and heavily traffickedwaters. The industry could not afford another Amoco Cadiz.

Neither did it help that the business ethic of an increasing number of bunkersuppliers became more and more questionable. Excess water was blended into the bunkers sold to shipowners. Seeing that as a business opportunity, somebunker suppliers were even more inventive and provided reception facilitiesfor the oil slops that remained after the discharge of cargo. As discharging ofthe tank residues in the sea was illegal and no alternative for the prudent operator, his best alternative was to pay a price at the bunkering station to getrid of the cargo residues. But then, a “clever” bunker supplier would mix theslop into the bunker oil that he sold back again to shipowners – and hocus-pocus, the supplier was paid twice. The reception facilities dreamed of inIMO’s meeting rooms did not exist in the real world.



In ancient China, mixing sand and gravel in rice was acrime punishable by death. The major tanker owner ofthe world, the Mr. Pao, put the problem on INTER-TANKO’s agenda. At the annual meeting in Manila in1980 attended by Dr. Carsten Boe – who spoke for theDNV – together with representatives of Chevron, it wasdecided to establish a closer cooperation to find reme-dial measures to improve the situation. Shortly after themeeting, tanker owners were offered to send samples ofthe fuel bunkered by express airmail to the laboratoriesof DNV that developed a fuel-testing programme. The ships would receive test results within four to eightdays. Reports were issued monthly showing the mostimportant parameters for each bunkering station to allsubscribers.

At the instigation of The General Council of BritishShipping, the British Standard Institute introduced marine fuel standards in January 1983.

Moreover, in close cooperation with Dr. Carsten Boe,INTERTANKO provided from that time on a bunkerinformation letter – called the White List – which became popular for reporting names of reliable bunker suppliers around the world. In the same spirit,the International Chamber of Shipping succeeded topersuade its oil company membership to accept a standard delivery note to be used by suppliers for somespecifications of the fuel delivered.

When receiving reports on the most important parame-ters for each bunkering station, buyers could make moreinformed decisions on the fuel-quality standards of dif-ferent suppliers. A minimum requirement was, however,that the chief engineer onboard knew more about thefuel he received from bunker suppliers. It would be oflittle help if the chief engineer and his assistants onboardwere not capable of understanding what the specifica-tions meant. But as Moses descended from Mount Sinaiwith 10 “guidelines” to his people, the organization oftanker owners descended into the engine rooms of its

Dr. Carsten Boe

Dr. Carsten Boe was born in1944 in Bergen. A few yearsafter he earned his doctorate, he joined Det Norske Veritas,where he became a director anddeveloped a special interest inthe field of bunker economy forships. At a General Meeting ofINTERTANKO in Manila in1980, he presented his views onthe prevailing quality problemstogether with Mr. F.B Ashlock,Vice President for navigationand marine sales of Chevron.Dr. Boe suggested a closer co-operation between tankerowners and the classification societies to provide informationon bunker qualities in the various ports of the world. Afterthe meeting, chaired by Sir Yue-Kong Pao, several constructivemeasures were initiated to alleviate the problems. Dr. Boealso set up his own business inOslo to provide expert advice.




membership with 10 commandments for the chief engineers to ensure thatthey were up to par.

A fuel focus report published and distributed by CBC Marine Publications (setup by Dr. Boe) complemented the White List. Both were based on the analysisof data supplied by Lloyd’s Register’s respected Fuel Oil Bunker and AdvisoryService (FOBAS). In July 1992, the port of Singapore clamped down on bunkerfraud as the Port instituted a new bunkering procedure in order to eliminatefraudulent practice in the largest bunker port in the world. By and by, otherports also took similar action. After some years, an organization of bunkeringports was set up to improve the image of this industry.

Not all tanker owners seemed “clean” either, and some appropriated quantitiesof cargo oil to fuel the ship. Control was not easy. Some cargo loss had, afterall, always been accepted by the cargo-receiver as measurement was no exactscience, and human failure had to be taken into consideration. Thus, cargoinsurers had for a long time accepted about a half percent cargo loss as a standard insurance deductible.

As cost-cutting was a condition for continued trading, the less honest ownersfound that one way to survive was by bunkers cheating. Pressed by soaringbunker prices, low-quality bunkers and the lowest freight market ever seen,cargo losses were turned to account by some ship-owners.

By manipulating the positioning of the tanker just after loading, it was possibleto trick the terminal inspector to believe that less cargo was loaded than wasthe case. One step further was taken when the idea struck the even more inventive ones that a good deal of money could be saved simply by pinchingsome tons of crude from the cargo tanks and using it as bunker oil. By installing a hose from the cargo tanks over to the bunker tanks connected withthe engine room, “good” money could be saved. Regrettably, more than oneowner abused this opportunity to reduce their losses.

It was a highly dangerous practice, as the transferred crude contained the gasnaphtha and other flammable gases that increased the risk of explosion andendangered the lives of the crew. Similarly, the use of oil slops (residues in thetanks) as bunker oil was a dangerous practice, as the slops contained explosivegas. But key officers were rewarded for performing this risky operation. It isalleged that rewards in the form of travellers cheques were contributory to theunveiling of a celebrity case that related to a Norwegian tanker owner wholater acquired one of the world’s largest tanker fleets.



The details were presented in an unauthorized biography published in 1991and go as follows:

The shipowner’s P&I club had received more claims than average for cargolosses onboard his tankers. Suspicion raised, the insurers managed to find adismissed captain who put the cards on the table and confessed. He was more-over in a position to name other officers who could confirm his story. A pro-fessional insurance investigator got – after some pressure – the information hewas after. Further supporting witnesses appeared from other quarters.

Unveiling documentation was, however, never confiscated. It was believedto have been burnt as soon as the ship owner’s directors understood the seri-ousness of the case. But the Norwegian Police concluded they had gotten suf-ficient evidence and arrested some executives while they searched after the topman. In June 1986, the shipowner gave himself up. Subsequent to countlessexaminations, he was released after several months in jail.

The case came never up for trial. It was postponed time and again. In themeantime, lawyers unveiled the amateurish investigation by the police whohad no knowledge of maritime matters. It did not help, either, that elementaryrules of procedure in the penal code seemed to have been overlooked in therush. Some of the confessions given by the executives were withdrawn. Thedrama ended in September 1989, when the parties settled the matter. Accord-ing to the unauthorized biography, the shipowner accepted to pay his insurerUSD 800,000, and some of the money that had been seized. He also acceptedto pay a heavy fine for endangering the lives of the crew. All other chargeswere withdrawn.

Notes:On owners operating losses because of bunker prices, see the report of J. I. Jacobs, June 30, 1977, p.22. On the general bunker problems, see a presentation by T. Rafgard for DNV Forum, May 6, 1982,in New York; Lloyd’s List, March 10, 1986 and Jan. 21, 1987; Hauge & Stavrum: “John Fredriksen –an unauthorized biography,” Oslo, 1991; Tradewinds, July 31, 1992; Seatrade Review, August 1993.

VI. MORE SPILLS TO FOLLOWOn Jan. 8, 1979, the corroded structure of a large French oil company-ownedtanker, Betelgeuse, blew up whilst discharging at Bantry Bay in Ireland. Fiftypeople were killed. Findings by an Irish tribunal under a High Court judgeplaced the responsibility at the feet of the owners, the Total Oil Company, butalso apportioned blame to Gulf Oil, which managed the terminal, because ofits failure to ensure the safety of personnel at the offshore jetty. An inspection



of the tanker, nine months before the explosion, revealed 37 cracks in its cargotanks. The ship’s classification society, Bureau Veritas, knew that the ship wasin an inferior condition, but did not interfere, as Total intended to sell the ship.The oil pollution caused is not reported.

The Tanio case had served to show that the principles in CLC/FC were reasonably well-adapted to cope with pollution incidents of large magnitude.But the Amoco Cadiz disaster, where the real damages had been estimated tobe well over USD 1 billion, had made it abundantly clear that the liability limits for pollution damage were hopelessly out of date and were far too lowto provide fair compensation to pollution victims.

Both the oil industry and the tanker owners recognized the need to provideincreased compensation to pollution victims. But the opposing views on whoshould pay up delayed the progress. It took more than five years of prepara-tions before IMCO, with some hope of success, once more could invite delegations to London to revise CLC69/FC71. In the meanwhile, IMCO hadin 1978 taken steps to revise the MARPOL Convention of 1973.

Whilst fresh amounts of documents were produced in preparation for a newconference, new serious tanker accidents occurred. According to statistics provided by the US Coast Guard, an oil spill larger than the one caused byAmoco Cadiz occurred on the July 19, 1979, 10 miles off Tobago in the WestIndies. The 292,000-ton Greek super tanker, Atlantic Empress, caught fireafter having collided with a large Liberian tanker, Aegan Captain. The oil spiltthreatened not only Trinidad and Tobago, but the South American mainland,as well.

With oil leaking out, Atlantic Empress became completely engulfed inflames. Instructed by the local government, salvors managed to tow the wreckfurther out to sea, whilst at the same time striving to extinguish the fire. Butto no avail, an enormous explosion ripped the tanker apart and she sank withmost of her 257,000 tons of oil cargo still on board. Twenty-nine of her 34-man crew were killed. The Aegan Captain was towed to Curacao, whereher remaining cargo was discharged before she was sold for demolition.

Atlantic Empress is still listed as having caused the largest oil spill ever.Thanks to the salvage operation, the cargoes did not cause pollution ashore.An environmental catastrophe had been avoided. But the weakness of the oldinternational salvage rules was once again unveiled; as salvors had failed tosave any property, they had no right to any award for their services rendered.



Some months later, on Nov. 15, 1979, south of the Strait of Bosporus, the Romanian tanker Independenta (147,631 dwt) exploded after a collision witha dry cargo ship. All but three of 45 crewmembers died. The force of the explosion smashed windows up to four miles inland. The tanker continued toburn for weeks. From the breached tanks, 95,000 tons of oil poured out, whilea blanket of thick acrid black smoke hung over Istanbul. After a month, thefire burnt itself out. In the meantime, navigation in the strait was halted.

The next year, 1980, the tanker Irene’s Serenade exploded and spilled 82,000tons of oil in Greek waters.

Even if no pollution damage was traced, the picture of 1980 would not be complete without mention of the mysterious disappearance of the largestUK-flag ship ever to have vanished at sea, the 170,000-ton ore/oil carrier, Derbyshire. She was built by Swan Hunter’s shipyard in the UK and launchedin 1976. On her final voyage, she was bound for Japan carrying dry cargowhen she was lost with 42 British officers and crew and two wives. The subsequent formal investigation concluded that one could never with any certainty find out what happened during the last minutes before the vessel dis-appeared, leaving no trace. The most likely explanation could be that it wascaused by a violent typhoon.

This conclusion was, however, not generally accepted by the InternationalTransport Federation and other parties, as findings of what is believed to bethe stern section and hundreds of small pieces of wreckage indicated an extremely violent break-up of the hull in a very short time - perhaps only seconds or minutes. One may also wonder whether this combined carrier collapsed, due to an explosion in the same way as the two “Berge-ships.”

The years 1981 and 1982 went by without serious tanker spills. In 1983, how-ever, one of the major oil spills so far occurred.

Thanks to the weather, what could have become one of the worst pollutioncatastrophes ever was avoided when the Spanish super tanker Castillo De Bel-lver, laden with 250,000 tons of light crude oil, burst into flames in 1983 offSouth Africa. She came from Jebel Dhanna, United Arab Emirates, bound forSpain. After huge explosions, she started to burn, broke in two and sank withsome 100,000 tons of crude oil still in her tanks. Three crewmembers werekilled. More oil escaped into the sea from Castillo De Bellver than fromAmoco Cadiz, but an offshore wind pushed the 60-square-mile oil slick outto sea and away from the nearby beaches. A black oily rain - from smokecaused by the oil on fire - fell upon the farmland, damaging wheat crops and



harming flocks of sheep in the land around Saldanha Bay. In 1994, SouthAfrica’s Cape peninsula beaches were polluted again. Oil seen bubbling up tothe surface in the same region was believed to have come from the Spanishtanker that had gone down there 11 years earlier.

VII. THE SLOW BUT STRONG RECOVERY OFTHE TANKER MARKETSTroubled tanker owners began to see a silver lining in 1986, when the freightrates showed signs of improvement. The trade decline had bottomed out theprevious year and from there begun to climb, driven by a general economicrecovery and a shift in manufacturing from Western to Far Eastern economies.

The tanker market went into a healthy recovery in 1988-1991, as reflectedby long-awaited revival of ship values. From 1986 to 1991, crude oil trans-portation grew by 11 percent per annum, while the fleet continued to shrinkuntil 1988 and from there pick up slowly. By 1991, the world tanker fleetstood at 246.4 million tdw; 18 million tdw less than in 1985.

The phase of recovery passed into a slower pace in the 1990s, with a 14 per-cent increase in crude oil transportation from 1991 to 1999 and a marginallyhigher increase in vessel capacity. The decade ended on a negative note, astransportation decreased by 12 percent until 2002, while the fleet continuedto grow by five percent.

The progress of the globalized economy and the “China boom” made theperiod from 2002 one of rapid growth. In six years, the world seaborne tradeshowed an increase of 39 percent; six and a half percent per annum. Thegrowth in crude oil transportation, however, was barely half that rate, 18.5percent, or three percent per annum. Additions to the tanker fleet could notkeep pace with the growth, but left an order book at the end of 2008 of 164million tdw, corresponding to 43 percent of the trading fleet of large tankers.

Relations may be put into perspective by looking back: The crude oil tradein 2008 of 9.3 billion ton-miles was about the same level as 1973, while thefleet was more than doubled, 101.5 percent larger to be exact.

Behind the dry statistics we find a dynamic and dramatic story. The revival ofthe industry in the late 1980s brought several ailments to the surface; moreon these later. The 1990s were largely disappointing to the shipping industry,with weak periods from 1991 to 1993 and 1998 to 1999. Shipping was still



considered to be “high risk and low profit.” Yet, thetrading environment changed with stricter regulationsand operations requirements, brought about by OPA’90, the ISM code and stricter practices by the oil com-panies. And at the same time, a consolidation processbegan which also altered the structure of the industry,with large fleets built up in specific segments by playerssuch as Teekay, the Tankers International pool and oth-ers.

Those who remained in the market were to be richlyrewarded by the “China boom.” The boom was pre-ceded by a strong upturn in the autumn of 2000 thatsaw freight rates unseen for decades. From 2003, rising demand came to maintain a firm market with pronounced contractions to all-time high levels. In gen-eral, tanker values doubled from 2002 to 2006.

The recovery from 1986 was followed by an unexpectedsurge in damages; in small incidents like collision,groundings and cargo contamination, but also humanand environmental disasters. Ferry tragedies such as theHerald of Free Enterprise, Scandinavian Star and Estonia contributed to a new focus on stability and fireprotection, while Exxon Valdez, Mega Borg and othersled to a new round of pollution liability.

It all turned into a disaster tsunami of excessive dam-age claims. The P&I pool claims went from a quiet period in the mid-80s into a wave of claims in 1987 to1991. For the period from 1982 to 1986, annual claimscame out at USD 59 million after eight years, rising to209 million per year for 1987 to 1991. An analysis theP&I club Gard carried out in 1992 showed that slightlyover half of all major claims resulted from human errorby crew, officers or pilots. Thirty-five percent were re-lated to structural, mechanical and equipment failure.Pilot error was the main cause in 50 percent of all majorproperty damage cases, with officer error accounting fora further 25 percent and crew error 12 percent. Moremajor claims arose in the US than in any other jurisdic-

Herbjorn Hansson

Herbjorn Hansson was born in1948. In 1974, the NorwegianShipowners' Association hiredhim. From 1975 to 1980, hewas chief economist and research manager of INTER-TANKO. During the 1980s, hewas Chief Financial Officer ofKosmos. In 1989, Mr. Hanssonfounded Ugland Nordic Shipping AS, or UNS, whichbecame one of the world'slargest owners of specializedshuttle tankers. Mr. Hansson isalso the founder and has beenChairman and Chief ExecutiveOfficer of Nordic AmericanTanker Shipping since its establishment in 1995.

© Furulund, Svein Erik / Aftenposten / Scanpix



tion: 42 percent of the number and 50 percent of the value. Vessels in the 10-to 14-year-old range were the most liable to claims.

There were reasons, effects and consequences. The shipping industry had come to face the bill for 12 years of depressed

markets, the combined effects of low-cost operation, neglected maintenance,faulty technical equipment, human error, cultural clashes and also the emergence of a new breed of players. The drive for cost-cutting in order tosurvive had brought in a new manning structure largely based on third-worldseafarers, not all of which were properly trained and qualified. Even the standards of classification societies were slipping. There were losses and pollution where the owners of the incumbent vessel were impossible to trace,hidden behind a free flag register and a post office box address in a tax haven.

Disasters such as Exxon Valdez and Herald of Free Enterprise attractedgreat public outcry and political concern. When also the US Coast Guard andthe Paris MOU port state control agencies revealed more vessels with technicaldefects or not compliant with regulations, the shipping industry at large cameunder scrutiny.

The industry was to be taken to task. The European nations and Japan were pressing for IMO solutions rather

than unilateral steps like the OPA’90. It was not the lack of rules and regula-tions, but rather the lack of implementing them that had caused the accidents.Consequently, a safety management system was needed. IMO agreed on theInternational Safety Management (ISM) code in May 1994, to be implementedby 1998 and 2002. This also included external audits of ship and shore or-ganizations. The human factor was dealt with in a new Standards of Training,Certification and Watchkeeping for Seafarers (STCW) code with stricter requirement for seafarers’ training and qualifications in 1995.

The charterers, the oil companies, instigated their own quality control systems, based on regular control of management, operational procedures,contingency plans, etc. These “vettings” became a new control burden on thevessel and the officers, along with Port State Control and Class.

Neither ISM nor the Port State Control could prevent the Italian-ownedtanker Erika from breaking up in heavy weather off Brittany in 1999. Themeasures laid down by the EU Commission in the Erika packages the follow-ing year laid a time-table for phasing out single-hull tankers. More ominouswas the lack of continued efforts to include other actors in the safety chain aspotential responsible parties for pollution damage.



Notes:The Betelgeuse salvage operation lasted for more than a year. Total claims for the incident amounted toUSD 120 million. The West of England P&I club paid for the pollution response costs and the removalof the wreck. Independenta closed the Istanbul Strait for weeks. The wreck remained in the area for several years be-fore it was removed. According to ITOPF, the incident in 1979 is in 2010 still listed as the 12th largestoil spill. See also the UK P&I club 125-year anniversary report. On the mysterious sinking of Derbyshire, see Lloyd’s List on April 11, 2000. The relatives of the 44people who died had formed the Derbyshire Families Association to try to prove that the vessel sufferedstructural failure rather than being overcome by the forces of nature. In January 2010, it was reportedthat the chairman of the Families Association was appointed Member of the Order of the British Empirefor his continued efforts to campaign for better shipping safety regulations, Lloyd’s List, Jan. 5, 2010.Derbyshire was owned by Bibby Line in Liverpool and built by the Swan Hunter shipyard.On Castillo De Bellver, see Lloyd’s List June 27, 1994, and Norman Hooke in Lloyd’s List Safety Sup-plement, May 2000. According to ITOPF, the spill still ranks as the third-largest oil spill.The fleet and trade statistic is based on information published by Fearnleys and RS Platou, Oslo, andInstitut fur Seeverkehrswirtschaft und Logistik, Bremen.Herald of Free Enterprise was a car/passenger ferry which capsized outside the Belgian port of Zeebruggein March 1987. The ferry with 650 passengers was bound for Dover when hundreds of passengers weretrapped onboard. The final death toll was 193. The owner was Townsend Thoresen.The Scandinavian Star caught fire in April 1990 while carrying 439 passengers and 268 crewmembersbetween Oslo and Fredrikshavn, Denmark. One hundred fifty-eight people were killed. During the in-vestigation, there were great problems with identifying the real owners of the vessel.Estonia was a passenger ferry with 989 people on board when she sank en route from Tallinn to Stock-holm in September 1994. Only 137 people survived. The owners were EstLine Maritime Company ofEstonia and the Swedish company Nordstrom & Thulin. The three tragedies resulted in a new focus onpassenger ferries within IMO in order to improve stability and fire protection.


HM Strategies

SEABORNE OIL TRADE

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© Fearnleys

HM Strategies

OIL PRODUCTS BY AREA 1960–2010

MILLION B/D incl. NGL & Condensates Sources: BP/OPEC/IEA30

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TANKER MARKET – SELECTED GRAPHS – by Shipping Adviser Jarle Hammer

OIL PRODUCTION BY AREA 1960–2010 HM Strategies

Here, production developments since 1960 are shown. Middle East OPEC’s role as a swing-producer is clearly displayed. So is depletion in some areas, like North America (USA, Canada and Mexico) and the North Sea. The former Soviet Union has managed to get back to pre-collapse levels. As for areas not included in the graph,Brazil has enjoyed substantial offshore success, whereas China and the Far East show fairly stable or stagnant output levels.

SEABORNE OIL TRADE HM Strategies

This slide shows the phenomenal growth in oil ton-miles due to strongly increased oil usage and longer shipmentdistances because of the increased role of the Middle East and in particular the closure of the Suez Canal from 1967to 1975. The strong decline in the late 1970s and up to the mid-1980s can mainly be ascribed to the North Sea offshore expansion and the war between Iran and Iraq. This war led to severe oil-production cuts and strongly increased oil prices, spurring the search for alternative oil and favouring other types of energy. An increasing shareof seaborne oil trade is shipped as oil products following increased downstream involvement in oil-exporting countries in order to get higher value added. The growth in world oil consumption has tapered off significantly.Total seaborne oil trade measured in tonne-miles in 2009 was only about 2 percent higher than in 1977.

HM Strategies

SEABORNE OIL TRADE


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HM Strategies

OIL PRODUCTS BY AREA 1960–2010

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HM Strategies

CRUDE OIL EXPORTSMILLION B/D Source: OPEC

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HM Strategies

OIL TANKER DELIVERIES & DELETIONSVESSELS OVER 10 000 DWT

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© Fearnleys


OIL TANKER DELIVERIES & DELETIONS [Vessels over 10,000 dwt] HM Strategies

In this graph, deletions include scrapping, losses and conversion to offshore units, heavy-lift vessels and bulk carriers. In recent years, many more tankers have been converted than actually scrapped.Old, solid single-hull vessels constructed with mild-steel skin, which is thicker than the high-tensile skin used inmodern vessels, provide a favourable alternative compared to construction of purposed-built offshore units and various vessel types starting from scratch.

CRUDE OIL EXPORTS HM Strategies

OPEC’s crude oil exports were in 2009 lower than in 1972. However, OPEC’s oil pro duction was significantlyhigher. OPEC’s domestic oil consumption has increased strongly, and more oil is exported as oil products. Non-OPEC exported more crude oil than OPEC in 2002, but has since seen a continuous drop due to depletion of resources.

HM Strategies

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HM Strategies

OIL TANKER LAY-UP. Yearly averagesMILLION DWT

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01970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Source: Fearnleys

HM Strategies

OIL CARRIER FLEET 1960–2010VESSELS OVER 10 000 DWT

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1960 1970 1980 1990 2000 2010

OIL TANKERS

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© Fearnleys


OIL CARRIER FLEET 1960–2010 [Vessels over 10,000 dwt] HM Strategies

This shows the fleet development for oil tankers and combined carriers. The tanker fleet peaked at 331.8 milliondwt at the beginning of 1978. The combined carrier fleet peaked at 48.7 million dwt one year later. It took 29 yearsfor the tanker fleet to become larger than in 1978. It stood at 410.1 million dwt at the beginning of 2010. The combined carrier fleet has seen a continuous decline to only 4.7 million dwt.The serious disasters of “Berge Vanga” and “Berge Istra” in the 1970s illustrated the risk of combining oil cargos -with possible gas leaks - and iron ore, with possible sparks in connection with cargo handling. Combined carriersare more expensive to build than plain tankers and bulkers. They are either suboptimal tankers or suboptimal bulk-ers. However, the few still around benefit from nice combination trades in wet and dry and modest ballast distances.In protracted periods of tonnage oversupply, cargo owners were in a pick-and-choose position, and the popularity of combined carriers has faded away.

OIL TANKER LAY-UP – YEARLY AVERAGES HM Strategies

HM Strategies

SEABORNE OIL TRADE


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© Fearnleys


THE ’84 PROTOCOLS – A STROKE IN THE AIR?

8

The ’84 Protocols – A stroke in the air?

I. SETTING THE AGENDAIn 1984, IMCO changed its name to the International Maritime Organization– IMO. The number of parties to the 69CLC was now twice the number ofstates that had ratified the 71FC.

One particular weakness of CLC69 had been that the compensation figurescould not be adjusted without the blessing of a diplomatic conference. Thispractical problem had been foreseen in 1971, and hence FC71 included a stipulation that enabled the Fund Assembly to raise the limit. In 1978, thecompensation available from the Fund had been increased by 50 percent toUSD 54 million.

Shipowners had in this connection pointed out that the Fund already hadpower to raise compensation further to USD 72 million but had failed to usethis option. The Assembly had instead passed a resolution asking IMO to revise CLC69. The two conventions were regarded as one package, and theoil-importing member states claimed that it now was time to re-establish thebalance between the two instruments.

IMO’s Legal Committee had, after lengthy discussions, prepared a number ofsuggested amendments. These suggestions were discussed with interested par-ties at a number of meetings during 1983 and 1984 in London, Stockholm,Brussels, Djakarta and other locations in between the sessions of the LegalCommittee.

No agreement had been reached on the future sharing of pollution liability.The definitions of ship, oil and pollution damage had been discussed but required further critical examination. Other important issues were the



channelling provision, the geographical scope and theexoneration question as well as the future amendmentprocedures.

All these questions were still unsolved when the ’84Conference convened. In addition, the Conference hadto solve problems related to what rules should apply inthe transitional period until the new set of rules had replaced the old instruments. What the parties seemedto agree on was that only the new texts should take theform of Protocols to the ’69 and ’71 Conventions. When the Conference finally convened in May 1984,delegates met in the new headquarters on Albert Em-bankment in London. The delegations elected a youngSwedish lawyer, Mr. Jacobsson, as chairman for the de-liberations on how to update CLC69 and FC71.

Notes:For further information on the ’84 Protocols, see the official records ofThe International Conference On The Revision Of The 1969 Civil Liabil-ity Convention (69CLC) and The 1971 Fund Convention (71FC). See alsothe records on The International Conference On Liability And Compen-sation For Damage In Connection With The Carriage Of Certain Sub-stances By Sea. Both reports were printed in London in 1993 in fourvolumes. Volume 4 contains the report on the subsequent Conference in1992 on 69CLC and 71FC. The ’92 Conference was initiated when it became clear that the ’84 Proto-cols would not enter into force in the foreseeable future and was intendedto maintain the substantive provisions in the 1984 Protocols but withlower requirements for entry into force. The four volumes provide comprehensive reports on the participation, doc-umentation and deliberations by the IMO Conferences in London fromApril 30 to May 25, 1984, and from Nov. 23 to 27, 1992. See in particular the following pages in Volume 1: pp v) – viii), pp. 132-214 and 321-372, Volume 2: pp. 3-150 and 311-629, Volume 4 (a reporton the Conference held in 1992): Refer in particular to pp. 78-87, 94-96and 149-154.

II. CHEMICALSCLC/FC applied to only the pollution damage caused bypersistent oil. Despite all the difficulties ahead, the ambi-tions of IMO went even further. Certain toxic substances

Måns Jacobsson

Mr. Jacobsson was the Director of the InternationalOil Pollution Fund from 1985to 2006. Before his appoint-ment, he had represented theSwedish Government on fre-quent occasions, not least withrespect to the preparatory workto reconsider the text of the oilpollution liability regimes. Hewas elected chairman of theIMO Diplomatic Conference in 1984. Thanks to his ablechairmanship and personaldiplomatic skill, the ’84 Proto-cols were agreed with great majority. Several later develop-ments – not least the ExxonValdez accident – delayed, however, the implementation ofthe Protocols. But in 1992, thetext agreed on in 1984 wasadopted with two minor adjustments, and the instru-ments went into force after a few years.



tankers carried could, in the event of a spill, have the same damaging conse-quences as those caused by crude oil.

In 1969, a resolution had recommended that IMCO should intensify its workon all aspects – including liability – of polluting agents other than oil. The chem-ical tankers or parcel-tankers were equipped with a number of separate tanks,one for each type of the liquid hazardous cargo that the tanker carried. Notwith-standing IMCO’s work to improve safety of tankers carrying such dangerouscargoes, accidents of a catastrophic nature could not be ruled out. Transporta-tion of such cargoes had grown considerably, both in volume and in frequency.

The convention on shipowner standard liability of 1957 had been revised in1976 and the liability limits were increased considerably, at least in percentageterms. But the environment is not restored by percents. Several governmentsconsidered the general limits to be far too low for potential claims for damagecaused by chemical tankers. Time had come to find a better solution.

Thus the “International Conference on Liability and Compensation forDamage in Connection with the Carriage of Certain Substances by Sea” was tobe arranged at the same time in 1984. A separate committee should undertakethe work, basing its work on a draft prepared by the secretariat in cooperationwith the Legal Committee. The draft convention’s scope of application was defined by referring to lists of various “hazardous and noxious substances”(“HNS”) in other IMO conventions.

IMO failed to realize that many governments lacked interest in the matter.After all, no record of serious incidents could be tabled. Moreover, the chemicalindustry declined to contribute to an instrument similar to the model CLC/FCprovided. Suffice to say that the Conference did not manage to reach any agree-ment on chemical tankers. Further elaboration in IMO lasted 12 more years be-fore finally in May 1996, the convention on Liability and Compensation forDamage in Connection with the carriage of Hazardous and Noxious Substances(HNS) was adopted. The subject had then been on the agenda for 25 years. In 2010, the convention was still not in force. A new diplomatic conference con-vened in April that year addressed several practical problems that had preventedmany states from ratifying the Convention agreed on in 1996.

Under the new Protocol, damage caused by chemicals carried in bulk wouldfirst be sought by the shipowner, up to a maximum Special Drawing Rights(SDR) of 100 million (USD 130 million) whilst damage caused by packagedHNS could be compensated by SDR 115 million (USD 149.5 million) from theowner. Once these limits are reached, compensation would be obtained from asecond tier, the HNS Fund, up to a maximum of SDR 250 million (USD 375million) including compensation paid under the first tier. This seems to mean



that in the best case the HNS liability convention can enter into force about 45years after IMCO’s Resolution of 1969, which recommended that the organi-zation “should intensify its work, in collaboration with all interested interna-tional organizations, on all aspects of pollution by agents other than oil.”

IMO had more success when the Legal Committee in 2000 completed a draftconvention regarding liability for bunker oil pollution damage. Together withthe HNS Convention, the plan was to provide a comprehensive set of unifiedinternational rules governing compensation to all victims of pollution damagefrom ships. As the International Convention on Civil Liability for Bunker OilPollution Damage was closely modelled on CLC69/84/92, without the need forany contribution from the oil industry, the ratification process was simpler. It entered into effect in the fall of 2008. It makes the shipowner, bareboat char-terer, manager and operator strictly liable for such damage, up to a certain limit,and his responsibility is backed up by the requirement of compulsory insurance.

Note:For a full review of the Bunkers Convention, see Maans Jacobsson’s article in the Journal of International Maritime Law, 2009, p. 21.See Mr. Jacobsson’s two articles; “The HNS Convention – Prospects for its entry into force” – CMI yearbook 2009” and “Diplomatic Conference adopts Protocol to HNS Convention” – Shipping and Transport International 2010, no 2, p. 8.

III. WHAT SHIPS, WHAT OIL?Two essential questions were: What ships and what oils should be covered bythe new instruments?

The 1969 and 1971 regimes covered only pollution laden tankers caused.The potential danger from the oil residues and from the fuel (bunkers) kept indesignated bunker tanks had become apparent when the Greek tankerOlympic Bravery grounded off the French coast in late January 1976. (Chao,p. 130) Two months later, a storm broke the wrecked tanker in two and 1,200tons of fuel oil leaked out, with some environmental damage as a result. Theaccident demonstrated that even if a tanker was in ballast with no cargo, theremight still be plenty of oil onboard to cause pollution should an accident occur.

Although many delegates surely knew that also dry cargo and other ships carrybunker oil and are capable of causing serious pollution damage, nobody sug-gested that oil spilt by such ships should be dealt with. The general feeling wasthat the general liability rules of the revised 1957 Convention would normally

be sufficient to cover pollution damage caused by dry cargo and passengerships.

If a tanker with an oil cargo onboard spilled persistent bunker oil and no cargooil, CLC69 would still cover the spill. In 1984, it was suggested to extend CLCand FC to provide compensation also for pollution damage caused by unladentankers. This meant that when a tanker had discharged her oil cargo and beganthe ballast voyage back to the next loading port, pollution damage caused byspills of cargo residues or bunker oil should in principle be covered. It wasalso suggested to extend the coverage in the same way to the first ballast voyage undertaken by a combination carrier – or any other vessel capable ofcarrying oil. Emphasis was placed on whether the ship “was constructed oradapted for the carriage of oil in bulk as cargo.”

The total combined carrier fleet of the world included at the time some337 vessels above 10,000 dwt. Because of the oversupply of tankers, most ofthe combination carriers were employed in dry trades such as grain, coal etc.Thirty units were laid up and nine arrested by creditors. Only about 100 combination carriers were actually employed in the oil trade.

OCIMF had pointed out that it was not logical to make the cargo interest co-responsible for damage caused by oil from unladen tankers. Such damagewould arise from the bunker oil, not from the cargo. Moreover, provided thenew liability limits were raised to a realistic level, the potential damage wouldbe limited and would be well covered under CLC in the future.

The other view was that the cargo residues reflected the cargo interest be-cause the ballast voyage was as much a part of the venture of transporting oilas the loaded voyage was. Consequently, it was logical that the Fund shouldbe available in the normal way. Hence, a substantial majority of the LegalCommittee had been in favour of applying both conventions to unladentankers and to apply the same rules to combination carriers.

Dr. Kalpin (USSR) stressed that his delegation felt that any extension to unladen tankers should be confined to tankers having oil cargo residues onboard from their previous voyage. This view was generally accepted.

The new instruments should apply also to combination carriers on the bal-last voyage – following a voyage with oil cargo onboard – unless it was provedthat there had been no oil residues onboard from the previous voyage. Becausethe claimant, in most cases, would not have the means of proving what thesituation was, Dr. N. Trotz of the German Democratic Republic and Dr. Hisashi Tanikawa of Japan, among others, suggested imposing the burdenof proof on the shipowner. This was agreed.





Both instruments applied to persistent oils. Neither of them defined the mean-ing of this term. Some 80 percent of the oil transported at sea was crude oil.Crude carriers caused the major accidents experienced. Persistent indicates towhat extent oil residues remains in the marine environment after evaporation.The general notion was that persistent oil included “crude oil, heavy andmedium fuel oil, heavy diesel oil and lubricating oil,” whilst damage that gaso-line, light diesel oil and kerosene caused was not covered.

At the 1971 Conference, a Canadian proposal was presented intending to enable the Fund to fill the gap in CLC69. Mr. Langley had then drawn atten-tion to the potential damage that could result from the release of the “lighter fractions.” Such releases, although less apparent than those emanating fromthe black oils, were equally damaging in given circumstances, he argued.

In the meantime, there had been considerable debate in the Legal Commit-tee whether to extend the scope to damage caused by non-persistent oils ornot.

At the ’84 Conference, Admiral B.F. Hollingsworth of the US recom-mended that incidents non-persistent oils caused should be covered. The envi-ronmental effect of such oils was under certain conditions – for example, in cold or shallow waters – similar to the damage caused by crude oil. Hence,any required response action should be covered by CLC and not left to be paidby the Government the oil spill affected.

In the view of Mr. J.R. Perrett of the UK, it was tempting to extend the scopeas suggested, but in his mind this meant that some serious difficulties wouldarise. CLC was concerned with contamination, and it would not be logical toinclude toxic non-persistent oil. Furthermore, the potential damage was lessserious; often nature alone would solve the problem. When damage occurred,the Convention on shipowners’ general liability, revised recently in 1976,would be sufficient to cover the claims. Moreover, an extension would meanthat a great additional number of vessels of different types would be included.

This implied an administrative challenge to enforce certification and com-pliance with the compulsory insurance requirements. Thus the administrativeburden to extend the application to non-persistent oil would be heavy andquite out of proportion to any possible benefit. Furthermore, the cargo interestrepresented in the transport of non-persistent oil tended to be more fragmentedand differed from the ones engaged in the transport of persistent oil. The contribution system to the Fund was already the subject of some criticism. To extend the definition to non-persistent oil, without at the same time



extending the duty to contribute, would make the current scheme unworkable.Experience in no way supported the need to include such spills.

Mr. Douay said that his delegation was strongly in favour of including non-persistent oil in CLC69, whilst there was no need to include such oils in FC.Ms. K.M. Bruzelius of Norway agreed and pointed out that when incorporat-ing CLC69 into its domestic legislation, Norway had extended the concept ofstrict liability to include damage also from non-persistent oils.

The USSR gave the UK view strong support, as did the Federal Republic ofGermany, Greece, Japan and India, among others. The Director of the Fund,Dr. Reinhard Ganten, also warned against the consequences of including non-persistent oil in FC:

“… it would be necessary to decide whether receivers of it were also to contribute to the IOPC Fund. … the number of contributors was likely to

increase, … from some 350 to probably more than 1,000. … The infrastructure of those small contributors often did not allow them to have

experts understanding the system of the Fund Convention, and thus the collection of monies from them could cause a great deal of

additional work …”

The Chairman noted that 21 states had spoken against the inclusion of non-persistent oil, with only 16 in favour. On this basis, the suggested change couldnot be introduced. Instead, the CLC definition of oil was somewhat narrowedin line with the definition of oil in FC71. Whale oil was not carried in suchquantities that it had to be covered. For clarification, the words “hydrocarbonmineral” were inserted in the new definition of oil.

IV. POLLUTION DAMAGE – PREVENTIVE MEASURESThe definitions of pollution damage, preventive measures and incidents werethe pillars of the entire compensation system. The long time the Conferencespent to find acceptable solutions reflected their importance.

In CLC69 and FC71, the definition of pollution damage referred to loss ordamage caused outside the ship by contamination. Contrary to a proposal



from France, it had been agreed that damages caused by fire or explosionshould not be covered. It followed that the impact sustained in a collision witha ship or other object also fell outside the definition.

But the definition was not at all clear with respect to environmental damage.Should such claims be covered? As the text stood, they were neither allowednor expressly excluded. Many delegates felt that the old definition could leadto speculative claims, whilst one on the other hand risked rejection of justifiedclaims.

The Legal Committee had concluded that the concept should be clarified,but was unable to draw the line of demarcation, which was no easy task. Asno consensus had been reached with respect to a new wording, the Committeehad instead presented a proposed CMI text and listed several questions, whichdelegates were invited to address:

“Whether the definition should include personal injury and loss of life,whether it should stipulate that recovery would be limited to costs actually

sustained, whether it should be restricted to loss resulting directly from contamination, whether the reasonableness of costs incurred should be a

condition of recovery, and whether there should be a reference in the definition to restoration of the marine environment.”

Allowing the national courts wide margins of interpretation would lead to unfair differences in terms of compensation. The challenge was to find a solution that ensured compensation for persons earning their living fromtourism, such as hoteliers and restaurant owners, but at the same time excluding those who were not directly dependent on such activities.

In connection with the publication of the book on the 25th Jubilee of IOPCF,Dr. Ganten commented in 2003 on how the interpretation of the definitionhad caused working problems:

“With all due respect to the drafters of CLC (in those days greater clarityhad not been possible), this definition was a totally inadequate yardstick

for deciding whether the damage could be regarded as “pollution damage.”“Clearly, clean-up costs would normally be covered, but what about loss

of income by fishermen making a living in a polluted area or losses suffered by hoteliers, petrol stations or tourist shops close to a pollutedbeach, damage caused by an accident involving vehicles taking part in

clean-up operations or loss of tax revenues suffered by local authoritiesowing to a decline in tourism?”



When it turns out that a definition in a treaty requires further interpretation,such problems could usually be left to national courts. However, in this particular case, most delegates felt that different consideration should apply.As the members of IOPCF shared the cost of pollution claims, it was impera-tive that all states admit claims on the same basis, otherwise serious inequitywould occur. For the purpose of uniformity, it seemed necessary to reach adefinition as detailed as possible.

Mr. E. Klingsborn of the Federal Republic of Germany stressed that only“reasonable” costs should be compensable. Reasonable claims based on estimates of future costs of reparation should also be compensable even if thecosts had not yet materialized. Finally, reasonable costs borne to restore themarine environment should be covered.

Ms. A. de Bievre of Friends of the Earth International (FOEI), an environ-mental group, argued that it was important to include expenses arising fromthe restoration of the environment. A second valuable element was providingcompensation of costs expected to be incurred to restore the marine environ-ment. Together with Dr. V. Sebek, observer for the Advisory Committee onPollution of the Seas, she supported the German intervention.

Several delegations supported by the observers from the oil and tanker industrywere concerned that if measures that had been undertaken should be covered,as well as measures that should be undertaken, this could invite speculativeclaims. Admiral Hollingsworth underlined the importance of limiting compensation to claims for costs that had been incurred and economic lossesthat had been sustained, and to exclude such claims that were speculative innature. In his view, courts should approve claims only accompanied with firmplans and make sure that such plans were carried out.

What delegates had in mind when referring to speculative claims may be illus-trated by the “restoration calculation” that had been based on a mathematicalmodel the USSR applied in the Antony Gramsci case. In February 1979, thistanker had grounded in the Baltic Sea. Fifty-five hundred tons of crude oil hadleaked out and caused damage to the coastlines of Sweden, Finland and theUSSR. The USSR, which at the time had ratified CLC69, but not FC71,claimed compensation for ecological damage. Based on domestic legislation,the USSR authorities claimed compensation according to a formula whoseonly variable was the amount of oil spilled; two roubles per cubic metre ofpolluted water for restoring the water to clean condition. Although compen-sation could not be sought from the Fund, as the USSR was not a member, the



claim was of considerable interest to the Fund because it competed with aclaim put forward by the Swedish government (which was a Fund member)for the amount payable by the shipowner. The Fund Assembly reacted byadopting a unanimous resolution stating that the assessment of compensationfor environmental damage to be paid should not be made “on the basis of anabstract quantification of damage calculated in accordance with theoreticalmodels.”

Following the adoption of the Resolution, the Fund decided that compensationfor environmental damage could be granted only if a claimant had a legal rightto claim under national law and had suffered a “quantifiable economic loss.”

The Gramsci case (which was settled out of court) was of considerable in-terest when the Conference set up a working group – chaired by Dr. Trotz –to find an acceptable text. It was realized that what was reasonable had to beconsidered on the facts available at the time of decision. The group could notagree on one single proposal and presented two alternative definitions of pollution damage. The first alternative contained more specific guidelines forthe national courts, whereas the second alternative gave them more freedomof action. Contrary to the view of the P&I clubs, both alternatives allowedcompensation to be granted for future expenses referring to measures to beundertaken.

Dr. A.B. Jaafar of Malaysia found that the proposals tabled were not satis-factory, as both the suggested alternatives referred to “loss of profit,” whichin his mind was too restrictive. “In many societies, including his own, the losswould bear on income rather than on profit; fishermen, for example made no actual profit but still had to pay their overhead expenses and to hire orpurchase boats and other equipment.” The next day, however, he left thissomewhat subtle point in the hands of a drafting committee.

Finally, a clear majority agreed on the following definition of pollution:

a) “loss or damage caused outside the ship by contamination resulting fromthe escape or discharge of oil from the ship, wherever such escape or

discharge may occur, provided that compensation for impairment of theenvironment other than loss of profit from such impairment shall be

limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken”

b) “The costs of preventive measures and further loss or damage caused by preventive measures.”



The Fund had on several occasions paid compensation to hotel owners, restau-rant owners, shopkeepers and others who were conducting their business atbeaches and living from tourism. There had been voices claiming that some-times the damage suffered was too remote to be directly caused by the pollu-tion incident. The new definition did not require a direct cause. Hence, IOPCFwelcomed the wording, as it confirmed the legality of the internal guidelinesfor granting compensation. The decision on whether fishermen, businessmen,etc., living from tourism or involved in related industries suffered a compen-sable loss would be based on the same explicit evaluation as before.

It is somewhat unusual to award compensation for measures to be undertakenin the future. So when the majority favoured that “cost of measures to be undertaken” should be included in the definition and be compensable, thiswas a clarification of importance. As set out above, several delegations hadpreferred that compensation was restricted to proven damages actually sustained and preventive measures actually taken.

Most delegations were comfortable with the change that allowed compen-sation for costs of future measures, e.g. to reinstate the environment. It shouldbe kept in mind that such claims would be compensated only if they werefound to be reasonable, which meant that claims based upon theoretical cal-culations like in the Gramsci case would not be honoured. Nor would it bepossible to obtain compensation if it was found that there was no real inten-tion or possibility of actually restoring the environment in question.

Moreover, money up front was clearly important to poor countries. In a num-ber of developing countries, the clean-up measures could not be undertakenuntil compensation was readily available. Efforts to clean up or re-instate theenvironment should not be postponed until a settlement had been reached between claimants and the shipowner and his P&I club. Behind the new definition, one may assume that also the experience gained from the Tanioaccident played a part. The Fund had in that case paid out compensation onthe basis of an estimate and thereby avoided the ludicrous result of not payingcompensation because the costs had not actually been incurred, because therehad been no money available to pay for the measures.

The expenses from a successful operation to prevent pollution are often sub-stantial. But the operation might be so successful that no pollution damageoccurs; should the expenses thereby connected be recoverable?

The question was raised after Tarpenbeck – a small tanker – collided with



an auxiliary vessel and capsized off the coast of England in June 1979. Thesalvors agreed with owners to strive to avoid/minimize pollution at a dailyrate instead of the usual “no-cure, no-pay principle.” The measures taken weresuccessful. The contractors towed the tanker into sheltered waters and pumpedthe cargo over to safer storage. Considerable expenses were thereby incurred.The owner claimed compensation from the 71Fund for the amount that exceeded his modest liability limits under CLC69.

IOPCF, however, was of the opinion that pre-spill costs were entirely irrev-ocable and refused to accept the claims for compensation from the shipowner,the UK government and the local authorities. The refusal was based on thefact that there had indeed been no escape of oil. Thus it was argued that whenno pollution occurred, the Fund did not come into play.

At the ’84 Conference, it was agreed that it would not be reasonable to granta right of recourse to anyone who had partially succeeded to prevent pollution,but refuse to provide compensation to someone that had been completely successful in his efforts. Hence, it was concluded that measures taken after anaccident but prior to the threat of an oil spill, which prevented spills, shouldbe covered.

To avoid any misapprehension, the Conference had to introduce a new defi-nition of incident that was interlinked with the definition of pollution damage.In the original version of the two conventions, the incidents to be taken intoaccount were “any occurrence or series of occurrences having the same origin,which causes pollution damage.” It was decided that if no pollution damagewas caused, compensation for clean-up costs should also be obtained if theincident “creates a grave and imminent threat of causing such damage.”

Before this conclusion was reached, a long debate went on. It was arguedthat a threat could be very serious in the long-term, even if there was no im-minent danger. A sunken tanker could cause substantial pollution damagemany years after the incident, and it would be reasonable to cover expensestaken to prevent such damage right away. Attempts to remove the oil shouldnot be discouraged under such circumstances, and several delegates felt that itwould be sufficient that there had been a “serious threat” of pollution damage.The majority, however, preferred to refer to a “grave and imminent threat.”In such cases, expenses incurred to undertake preventive measures would becovered, even if no oil spill occurred.

The words “grave and imminent” also appear in a parallel section of TheInternational Convention Relating to Intervention on the High Seas in Cases



of Oil Pollution Casualties of 1969, and are a condition for governmental authorities’ intervention on the high seas in case of pollution incidents. More-over, the new definition of incident adopted the same wording as laid downin the TOVALOP agreement.

Note:On the admissibility of claims, see Dr. Ganten’s article, pp. 59-61, and Mr. Joe Nichol’s article, pp. 103-118, in “IOPCF 25 years,” Kent, 2003. See also de la Rue and Anderson: “Shipping and the Environ-ment,” London, 1998, pp. 419-431 and 503-558, and W. Chao: “Pollution from the Carriage of Oil bySea,” pp. 146-156 and 361-382. See also Maans Jacobssons article; How clean is clean? - The concept of reasonableness in response totanker spills. Ref. Scritti in onore de Francesko Berlingeri.

V. GEOGRAPHICAL SCOPECLC69 restricted its application to pollution damage caused on the territoryincluding the territorial sea of the contracting states and to preventive meas-ures taken to prevent or minimize such damage. This could be understood tothe effect that the costs of preventive measures taken outside the territorialwaters were not recoverable.

Contrary to this interpretation, the Preamble of FC71 implied that CLC69was “a regime for compensation for pollution damage in Contracting Statesand the cost for preventive measures, wherever taken, to prevent or minimizesuch damage ...”

Canada had in the past strongly criticized this approach. In the representative’smind, it was not at all clear that the connected costs were compensable whena state undertook preventive measures on the high seas in order to avoid pol-lution damage to its territory. Now, in 1984, Canada wanted to repair the mis-take and clarify what may have been an oversight in 1969.

In the years to come, it was realized that what the Canadians had suggestedin 1971 was common sense. During the preparatory work, there was generalagreement that one had to spell out clearly that measures to minimise or pre-vent pollution damage should be compensated also if these measures weretaken outside the territorial waters. Thus the revised text of CLC article IIband FC article 3b made reference: “to preventive measures, wherever taken.”

Representatives of Australia, Canada, New Zealand, the US and severalSouth American countries advocated further extension. In the view of thesegroups, the new protocols should allow for compensation when pollutiondamage resulted in loss of income in the Extended Economic Zone (EEZ), a



zone which together with the territorial sea covers a surface greater than thecontinents.

Mr. L.J.W. Ludbrook of New Zealand emphasised that “Coastal states pos-sessed sovereign rights in respect of natural resources in the EEZ and on thecontinental shelf. Those natural resources required protection from pollutiondamage. Activities, installations and structures connected with the exercise ofsuch sovereign rights also required protection.”

The same opinion had been strongly voiced and elaborated in a submissionfrom the FOEI. One of the arguments was based on the Law of the Sea Con-vention, under which contracting states had a duty to co-operate to ensure ad-equate compensation in respect of all damage caused by pollution to themarine environment including the EEZ.

Mr. M.R. Carly of Belgium opposed, arguing that “Extension of the Con-vention’s scope to areas beyond the territorial sea would incur the risk that,in subsequent years, some countries might claim that those waters were theirproperty, since they could obtain compensation for damage occurring therein,they might indeed claim that the 200-mile zone comprised territorial waters.Belgium attached great importance to the freedom of the seas. …”

Other opponents referred to the fact that the concept of the territorial sea wasnow much wider than it had been in 1969. Furthermore, the legal rights andobligations of states with respect to the EEZ were not at all clear in interna-tional law. The various national zones were very different in nature, and someof the potential contracting states had not even established such a zone. Thusit was claimed that the only link between the various national zones was thename by which they were described.

Mr. Aage Os of Norway pointed out that for some states which were sit-uated very close to their neighbours, it was impossible to allow for a zone of200 nautical miles. The distance envisioned should not exceed 10 nauticalmiles.

The opposition was supported in a submission from the P&I clubs that haddealt with 17,000 claims for oil pollution damage throughout the last 13 years.Their experience was that a number of claims had been grossly inflated. Thus,the insurance industry felt strongly that the EEZ question should not be seenin isolation, because the cumulative effect of widening the conventions couldinvolve a dramatic increase in the exposure both of the Fund and the shipowner without any corresponding benefit. Each proposed extension had to bevery carefully considered on its merits to avoid “contentious or speculativeclaims and an unacceptable aggregation of risk,” it was argued.



The discussion continued for five to six days till a compromise finally wasachieved. The agreed text extended the geographical scope to include the EEZ,provided that the zone was “established in accordance with international law.”If no such zone was established, it was decided that in no case should suchzone extend beyond 200 nautical miles “from the baselines from which thebreadth of its territorial sea is measured.”

The extension of the geographical scope was seen as one of the main changesundertaken by the ’84 Conference to improve the position of the potential vic-tims for pollution damage. Arguably, it also seems to favour the party poten-tially liable, the shipowner. He now acquired the right to limit his liability ifthe pollution damage occurred in the EEZ outside the territorial waters. Withno such extension, he could have been subject to national laws that may nothave entitled him to limit his liability.

Note: On the geographical scope, see Dr. Thomas Mensah’s article in “IOPCF 25 years,” pp. 48-49, and W. Chao, pp. 153-156.

VI. EXONERATIONThere was no proposal put forward to the ’84 Conference to turn the clockback and re-introduce the traditional maritime principle that the liability ofthe ship-owner should be based on fault. The strict liability under CLC69 hadcome to stay. The question was rather whether the exceptions to the strict liability agreed on in 1969 should survive.

According to CLC69, the shipowner was obliged to insure his potential li-ability, and the majority of governments had found it appropriate to exoneratehim for such risks which marine liability insurers normally were unwilling tobear. To be exonerated, the owner had to prove that the pollution damage wascaused by certain extraordinary events listed including “act of war,” “a naturalphenomenon of an exceptional and irresistible character,” or wholly causedwith “intent of a third party” or “failure of governmental authority to main-tain navigational aids.”

The preceding discussions in the Legal Committee had revealed that a numberof delegations were of the opinion that the current system deviated too muchfrom the principle of strict liability on which CLC69 was based. No agreementhad been reached. A particularly difficult question was whether the shipowner



should continue to be exonerated when the pollution damage was whollycaused by the negligence of any governmental authority responsible for lightsor navigational aids.

Such governmental failures did not constitute force majeure in the usualmeaning of the term, it was argued. Moreover, the exception compelled victimsto sue governments and prove negligence to obtain compensation. This wasfelt to be an unfair burden, because most victims would – contrary to shipown-ers – have little or no knowledge on how to go about proving the insufficiencyof navigational aids.

Other delegations concluded that the reference in the text to “whollycaused” was too restrictive, as exoneration did not clearly result, for example,when a ship relied on faulty navigational charts.

The problem was illustrated by a case that had been considered at length bythe Swedish Supreme Court. Tsesis, a USSR tanker laden with about 16,000tons of oil, grounded in October 1977 on a submerged rock in the sensitivewaters off the Swedish coast. Five hundred tons of heavy fuel oil escaped. Therock was not marked on the chart, and a majority of the judges concludedthat navigational aids must include marine charts. There had been no negli-gence, and the shipowner was not held liable from the resulting oil pollutiondamage. The difference of opinion among the judges showed that the provisionin CLC69 with respect to navigational aids was in no way clear, and courts inother countries could have reached the opposite conclusion.

The representative of the International Association of Lighthouse Authorities(IALA) pointed out that mariners learn to not rely 100 percent on navigationalaids, but have to use all available means to ensure safe navigation. If negligencein the maintenance of aids is claimed and the innocent victim should sue thegovernment responsible directly, he would be put in a very unfavourable position. On the other hand, nothing would prevent the owner from suing thegovernmental authority responsible for substandard aids of navigation in orderto recover any compensation paid. The International Association of Ports andHarbours put similar arguments forward.

Dr. Jaafar of Malaysia, together with other delegates including Major Bernardof Trinidad and Tobago and Mr. Douay of France, argued that maintainingnavigational aids had never been a legal obligation of coastal states, but wasmerely a moral obligation. The basic concept of the 1969 Convention was oneof strict liability; in exchange, the owner was allowed to limit his liability.



To make maintenance of the navigational aids legally mandatory, would, intheir minds, destroy the whole basis of the Convention.

On the other hand, a lengthy submission from FOEI pointed out that chartsand other navigational documents clearly were the responsibility of public authorities, and it would be most unfair to make shipowners liable for any resulting damage.

Several delegations supported this view, including the UK and the Scandi-navian countries. The Conference was reminded that the wording adopted in1969 was a part of a compromise package. Deleting the provision would putother elements of the compromise at risk, according to Dr. Kalpin of the USSR.He rejected the argument that the victim would have great difficulties in bring-ing claims against the authorities. He suggested “in fact in most cases it wasthe Government or authority itself which was the victim and which made theclaim.” In his mind, to excuse Governments from their responsibilities “wouldhave catastrophic consequences, since it would lead to a situation in whichthey could rely on being free from liability whatever might occur.”

INTERTANKO argued that the direction of a cleaner environment had emphasized the need for closer co-operation between sea and shore interests.In this respect “to delete par. 2c would seem extremely odd in the light of Assembly Resolution A.500 (XII) which stipulated that existing instrumentshould not be altered except where there was a compelling need.”

After a lively discussion it was decided by simple majority to delete the exoneration of the shipowner when an accident was wholly caused becauseof failure of navigational aids (article III c). However, at the Plenary a two-thirds majority was required to alter the text, and the majority 38 votes infavour of deletion and 20 against was insufficient. The exoneration of the ship-owner when the damage was wholly caused by negligence of a Governmentalauthority responsible for navigational aids very narrowly survived.

The cases in which the Fund was exonerated raised little discussion at the ’84Conference. There was one exception.

According to Article 4.3, the Fund was wholly or partially exonerated if itwas proved that the pollution was caused by the claimant’s own negligence orwith his intent to cause damage. But it was also stated that this exonerationdid not apply with regard to claims for recovery of costs related to preventivemeasures. In this regard the chairman raised the questions of whether the Fundshould always be exonerated only to the extent that the owner was fully



exonerated, or if there should there be special treatment with respect to preventive measures irrespective of who took them.

To encourage rapid clean-up operations, no delegation wished to cover lessthan the costs of preventive measures taken by the shipowner. Mr. E. Gesmarof Denmark was of the opinion that as a general rule, preventive measuresshould always be compensated. Mr. Douay agreed that preventive measuresshould be treated as a special case and pointed out that in any case, it wasonly reasonable preventive measures that would qualify for compensation.

To encourage all victims to take preventive measures, it was agreed to inserta new stipulation in article 4.3 of the Fund Protocol: “However, there shall beno such exoneration of the Fund with regard of the preventive measures.”

Later, it was pointed out that introducing this stipulation contradicts the otherprovision in the very same paragraph, reading, “The Fund shall in any eventbe exonerated to the extent that the ship-owner may have been exoneratedunder Article III, paragraph 3, Liability Convention.” There is no need to seethis as a contradiction. The article imposes a heavier burden on the Fund; otherwise it is exonerated in the same way as the shipowner.

Note: On the Thesis case, see de la Rue/Anderson, pp. 89-90 for details. CLC69, article III 2.

VII. CHANNELLINGAccording to article III in CLC69, the shipowner was liable for any pollutiondamage the ship caused. Only the owner’s “servants and agents” were explic-itly excluded from liability. No other parties were excluded. The text therebyopened up the possibility that parties other than the owners (charterers,salvors, cargo-owners, shipbuilders or other interests) might incur liability foroil pollution damage under national law.

Clarity and simplicity are essential elements in a provision on channelling,and the registered owner was the most easily identifiable party to assume responsibility. It was generally agreed upon that the need to encourage salvageoperations and preventive measures required a change in the text so that theseparties were protected against claims from pollution victims. But the LegalCommittee went several steps further and presented a proposal to the Confer-ence that directed all pollution damage claims against the registered ownerand explicitly barred claims against a number of parties listed.



In the same way as under CLC69, “servants or agents of the owner or themember of the crew,” were protected. Now the exception was extended tosalvors and “the pilot or any other persons … performing services for theship.” Moreover, no such claim could be directed against other parties suchas “charterers (howsoever described) … manager or operator of the ship,” aswell as people taking preventive measures or servants or agents of the peoplementioned.

P&I clubs supported this solution. Their argument was that such eliminationwould increase the capacity of the insurance market and reduce the need foroverlapping insurance coverage. Moreover, rather than chasing other partiesthat might be involved in the pollution incident, it was normally easier for vic-tims to sue the owner and benefit from his compulsory insurance.

For obvious reasons, the international oil industry, which otherwise couldbe exposed as charterers of tankers, also wanted a new wording. By and by, a majority within the Legal Committee was convinced that adopting a proposal to exclude charterers and other parties was the best option for thevictims under the revised instruments. Others would agree with The Inter -national Union for Conservation of Nature and Natural Resources (IUCN)and the European Council of Environmental Law, who opined “that strictchannelling should not permit persons who cause damage to escape liability.”

The proposed text precluded victims to claim compensation outside theConvention against the parties listed, unless the parties were reckless or hadintended to cause damage. Other parties (not listed) in control over the oiltransport or the handling of the oil which were in a position to minimize thepollution risk consequently remained a potential responsible party under national law if an incident causing pollution damage was because of their neg-ligence. Thus shipyards, tanker terminals/cargo owners (unless the cargo isowned by a party explicitly excepted), classification societies or an owner ofa colliding vessel, had – according to the proposal – no absolute protectionagainst compensation claims pursued by victims under national law.

In view of this possibility, OCIMF had submitted a paper proposing a wordingthat precluded potential liability for all parties except the ship owner. Thisproposal did not get any support. The effect would have been that companiesbehind the registered owner as an “alter ego” could not have been held liableas in the Amoco Cadiz case. At the preparatory stage, the association had alternatively suggested that “shareholders” should be included in the list ofexempted persons. This proposal was rejected, and one delegation observed:



“that if a corporation was a ship-owner and was sued for pollution damage,it was because it was a shipowner, not because it was a corporate shareholder.”

However, several delegations questioned the proposal of the Legal Committee.The adoption of a provision disallowing claims against certain parties directlyinvolved in the operation of the tanker was a considerable step from the tra-ditional legal system in many countries. The litigation following the AmocoCadiz incident in 1978 had demonstrated the need to seek compensation forpollution damage against other parties than only the shipowner. In an effortto avoid the modest compensation CLC69 offered, action was brought in theUS not only against the owner Amoco Transport Corporation, an offspringof Amoco International, but also against the operator, Amoco InternationalOil Co. and the parent company, Standard Oil Co. of Indiana. If the US hadbeen a party to CLC69, such litigation would also have been permissible ac-cording to the 1969 wording where only the agents or servants of the ownerwere excluded.

The representative of the US, Admiral Hollingsworth, stated that the chan-nelling question represented one of the elements crucial for the US. The concept, however, “was unfamiliar in the US law and his country could onlyaccept the concept if the ship-owners’ liability was set at a sufficiently highlevel and provision made to protect the subrogation rights of the Fund.”

Also, Alfred H. E. Popp QC confirmed that the concept was foreign to hiscountry’s legal system, “and could only be applied if the compensation offeredby the Convention, as supplemented by the Fund Convention, was satisfac-tory.” The definition of owner in the Canadian Shipping Act could cover theregistered owner, the operator or the charterer.

Mr. Douay was also sceptical to the proposed text of the Legal Committee.Favouring retention of the present text, he objected strongly, because it wouldprovide virtual immunity to the parties listed. This was quite excessive. Thusthe exception of potential liability for the parties listed in the draft’s subpara-graphs a to f should be deleted. The formulation in its present form seemedunacceptable “all the more so if inadequate amounts of liability wereadopted.”

Several speakers, including Mr. I. Petrakis of Greece, Mr. P. Anders ofPoland and the representative of The International Chamber of Shipping supported Mr. Douay.



Also Mr. Perrett of the UK questioned whether an exhaustive list of parties tobe exonerated was a good solution. Some parties might be left out, which, inretrospect, should have been included. Moreover, CLC69 had proved to bereasonably satisfactory. One should remember that it was not a question ofattributing blame but of organizing compensation in the best practical way.Only salvors might be considered added to the parties already exempted inCLC69.

What the UK delegation argued might on reflection seem to be commonsense. However, more enthusiastic support for the proposal of the Legal Com-mittee was voiced by the representatives of the Netherlands and the GermanDemocratic Republic, who both explained that they favoured the suggestionof the Committee because “it had the advantage of avoiding overlapping insurance cover of persons connected with the operation of the ship.” Manyother speakers also supported the proposal obviously for the same reason, butwith no further argumentation. Thus, if the total compensation to be providedwas sufficiently increased, the majority of delegations were prepared to disre-gard established legal principles and provide a sanctuary for most other partiesinvolved in the operation of tankers – including the charterers. The Legal Com-mittee’s formula was in the end accepted with 29 votes to 13 and five absten-tions.

The exclusion of liability for the parties listed, including charterers, operators,pilots, salvors – and their servants – required, however, that the damage didnot result “from their personal act or omission, committed with the intent tocause such damage, or recklessly and with knowledge that such damage wouldprobably result.” In such situations, a claim may be brought against themunder national law. Consequently, it is arguable that the position for servantsand agents of the shipowner thereby became less favourable than under theoriginal text of CLC, because under that instrument their immunity was ab-solute.

The shipowners’ right to recourse against third parties, Article III 5, was retained. Here it was stated: “Nothing in the Convention shall prejudice anyright of recourse of the owner against third parties.”

Note: On channelling, see Dr. Ganten’s article in “Oil & Petrochemical Pollution,” 1985, p. 93-107. Regarding the various problems with respect to the interpretation of “actual fault or privity,” see W.Chao, pp. 174-183.



VIII. LIMITATIONS & LIMITSUnder CLC69, the shipowner lost his right to limit his liability if the pollutiondamage resulted from his “actual fault or privity.”

Within IMCO, it seemed to be general agreement that the existing text hadled to wide differences in its application by courts in the various countries.Furthermore, it was not clear who had the burden of proof. The P&I clubshad in a submission to IMO expressed that one of the most glaring defects inCLC was this very provision. Settlement of many claims had been delayed inmany cases until the issue of limitation was clarified.

The Conference accepted that the legal interpretation could cause serious difficulties and that divergences might emerge as a result of inconsistent judge-ment, depending on which national law was applied. In the 1976 Conventionon Limitation of Liability for Maritime Claims (LLMC) the provision on con-duct barring limitation read: “A person liable shall not be entitled to limit hisliability if it is proved that the loss resulted from his personal act or omission,committed with the intent to cause such loss or recklessness and with know -ledge that such loss would probably result.”

After an informal meeting of all interested parties in Stockholm in Decem-ber 1981, general agreement had been achieved to delete the reference to“actual fault or privity” and to replace it by a new clause in line with the pro-vision in LLMC. The type of conduct barring limitation described here wasgenerally believed to be graver than under the previous wording.

CLC69 also contained another provision in article V.3, which had preventedquick settlements. In the view of many delegations, the compulsory establish-ment of the Limitation Fund (LF), which shipowners had to set up after anincident as a pre-condition to limitation, should be discontinued. The aim ofthe LF was to make adequate compensation available to victims promptly, butin practice the procedures had proved to be very time-consuming and delayedthe payment of compensation. P&I clubs usually arranged the compulsory insurance requirements in CLC69. This meant that there was very little riskof compensation not being paid. Thus, in the experience of IOPCF, the dutyto set it up might in some cases impose a disproportionate burden on theshipowner. If the claim was small compared to the substantial legal cost required, the requirement had therefore in some cases been waived despite thestringent wording.



Nevertheless, the obligation to constitute a Limitation Fund was retained inthe new text. Its survival has been explained by reference to financial consid-erations; the Fund might accumulate substantial interest between the point intime when it was set up and the time when compensation was paid. It is shownthat in the Tanio case, the LF nearly increased 100 percent in this period.IOPCF was, however, according to an additional provision now introduced,expressly empowered – in extraordinary cases – to decide that compensationcould be paid even if no fund was constituted.

The limitation figures and the amounts of liability constituted the heart of therevision work. The figures laid down in the two instruments were the primereason for the revision work.

Neither the shipping industry nor the oil industry objected in principle toan increased liability. But their views collided on the question of how the futureliability system should be structured. Whereas most governmental delegationsconsidered that an upward revision of the limits was essential, they were di-vided with respect to the way the increased liability should be shared betweenshipowners and the oil industry. Moreover, several delegations had emphasizedthat some of the new proposals would be acceptable only if the liability of theshipowner was set at a sufficiently high level. Thus France, the US and Canadahad accepted only the new channelling provision on the condition that thecompensation amounts would be substantially increased.

Japan, the USSR, Greece and other governments felt, on the other hand,that the experience from recent years could justify only a moderate revision.Despite a number of informal meetings attended by representatives of govern-ments, various industry groups and other interested parties arranged aroundthe world, no agreement and nothing close to a compromise was in sight priorto the ’84 Conference.

The Chairman, Mr. Jacobsson, reminded the delegations of the remaining basicquestions:

Should there be a tonnage link on the shipowner’s liability or

a flat amount for all ships? Should there be a specific minimum amount for small ships?

What amounts should be inserted? Regarding the Fund; what amounts should be fixed?

Should there continue to be some system of roll-back/relief for the owner?



Regarding the last question, the shipowners had, on the presumption that theliability should continue to be shared with the cargo interests, already acceptedthat time was ripe to abolish “a roll-back system” introduced in 1971 to pro-vide for “shipowner relief.” This question no longer represented any problem.

In principle, it was agreed in the Legal Committee that a minimum liabilityfor small ships should be introduced. The shipowners accepted that a mini-mum limit was required in order to reduce the workload for the Fund. The oilindustry argued that the gap between the liability of the ship and the cargohad to be tightened, and one way to do it was to impose a high minimum lia-bility on shipowners. No agreement had been reached on the question wherethe limit should be drawn. What tanker should be considered a small shipunder CLC, and what should the limitation amount be?

In OCIMF’s submissions to the Conference, it was argued that there wasno correlation between the size of a vessel and the amount of the damage itcaused. The continued use of the ship’s size as the basis for the limits wastherefore no longer sound. An analysis of the serious pollution claims showedthat most of the significant casualties involved tankers of less than 40,000tons. The vast majority of pollution incidents occurred in a harbour or otherestuarial or coastal waters where the smaller tankers trade.

Establishing a high minimum in the revised CLC would result in smallervessels having to carry responsibility more appropriate to the risk they posed.In OCIMF’s view, the limitation figure for the tanker owner should cover allclaims except the catastrophic incidents for which the Fund would providesupplemental coverage.

It was also pointed out that contributions to the Fund were made by indi-vidual companies in separate states. This resulted in an uneven balance be-tween contracting states and created problems. Three nations – Japan, Italyand France – provided almost 60 percent of total FC obligations. Moreover,the capacity of the insurance market had markedly increased since 1971, anda way to avoid the imbalance was to increase the CLC limits substantially, asshipowners now had the possibility to cover themselves through their insur-ers.

OCIMF had suggested that the shipowner with tankers up to 50,000 grossregister tons (grt) should take responsibility for the first USD 50 million ofpollution damage per incident, with a supplemental coverage from the Fundof USD 75 million per incident. For vessels above this size, USD 10,000 pergrt up to a limit of USD 100 million should apply. FC supplementary coveragewould provide a total compensation per incident of USD 250 million. If it was



agreed to continue the old linkage system between limits and tonnage in CLC,Mr. Blackwood, on behalf of OCIMF, appealed to delegates, to establish thesame linkage in FC.

INTERTANKO had persistently rejected the arguments OCIMF put forward.The mentioned proposal would, if accepted, mean that the oil industry con-tribution would come into play only in very rare cases and thereby in practiceabolish the principles on sharing as agreed in 1969 and 1971. Oil was a veryspecial cargo, and its transportation at sea represented a very special and serious pollution risk. Both the owner of the ship as well as the owner of thecargo should consequently accept a fair share of the financial burden in caseof pollution incidents.

IMO was reminded that the inherent particulars of the cargo had not changedits characteristics since 1971, but the value of oil had increased dramatically.Whilst the oil industry had prospered during the last years, the tanker industryhad suffered from a continued depression since 1974. According to figures recently presented by OECD, the transportation cost was about 40 percent ofthe price of the oil in 1969-1971, whereas this element in 1984 had decreasedto about two percent. Contrary to the oil industry, owners of oil tankers couldnot pass on the increased costs to the consumer. In the light of the principlelaid down in IMO Assembly Resolution A. 500, it would be paradoxical tochange the rules of the game in the current situation. The resolution made itclear that IMO should entertain only proposals for amendments to existingconventions “on the basis of clear and well-documented demonstration ofcompelling need …”

Under these circumstances, INTERTANKO suggested that the minimum lia-bility of USD 1 million laid down in the private compensation scheme, TO-VALOP, should be included in the revised CLC. From that level, theshipowner’s liability should increase on a ton basis, up to a maximum of USD30 million. With supplementary compensation from the cargo through theFund, the total compensation package should be USD 150 million.

Japan – a major importer of oil and thus also potentially a major contributorto the new Fund – had during the preparatory talks stressed that radically increased compensation levels would discourage participation from oil-importing countries. Thus, the view of Japan had been that the maximum limitof compensation for one incident should not exceed USD 100 million, includ-



ing the amount payable via CLC. The Japanese representative, Dr. Tanikawa,on behalf of several delegations stressed that adjustment should be done insuch a way that the inflation since 1969 and 1971 was reflected. The averageinflation rate had been calculated as approximately three times the originalfigure. The delegations considered it essential that the balance between the ex-posure of the ship and cargo was maintained. The economic burden shouldbe spread fairly between shipping and oil-importing interests. USD 30 millionavailable under CLC would be acceptable.

Canada, on the other hand, wanted to see a high minimum level of some USD15 million to 20 million on the shipowner with an upper limit of about USD70 million, based on a tonnage-related progression. The maximum exposureof IOPCF should be in the range of USD 200 million to 225 million.

The French delegation argued that new opportunities were afforded by the in-creased capacity of the insurance market. This meant that it would be no dif-ficulty for the shipowner to obtain insurance coverage for up to USD 100million at an acceptable premium. There was no doubt that compensation hadbeen reduced in real terms in light of the inflation. Mr. Douay concluded thata minimum level of USD 5 million to 8 million should be imposed on theshipowner with a maximum limit of USD 60 million to 100 million. Addingthe contribution from the Fund, a compensation package of USD 250 millionto 300 million would then be available to pollution victims. Finally, he rec-ommended that the Fund Assembly should be authorised to increase thatamount further.

The representative of the P&I clubs, Mr. J.C.W. Riley, maintained that tonnageremained a rational basis for limitation. The statistics of the P&I clubs revealedthat in the period 1970-82, the fleet of small tankers had over the last 12 yearsproduced less claims and that the average costs per incident not surprisinglyincreased with the ship’s size. Statistics also revealed that the growth in costof incidents had not kept pace with inflation, which could partially be ex-plained by improved technology in fighting spills.

Reference was also made to an extensive submission to the Conference inwhich the argument that an insurance coverage of USD 300 million was avail-able in the market and was rejected. The suggestion was ill-founded, “sinceany radical change in limits could seriously affect the confidence of underwrit-ers to provide protection not necessarily at the top range of risk but at the



lower levels of re-insurance where their funds are more likely to be exposedto regular rather than infrequent claims.”

It would be unrealistic to impose a higher liability upon the shipping in-dustry than what could be insured by their P&I clubs. A major claim wouldthen prove financially disastrous.

Ms. De Bievre of FOE stressed “it did not seem fair to impute all the liabilityto the shipowner.” FOE was opposed to any system that set the amounts in-dependently of the ship’s size and recommended that a criterion based on ton-nage be adopted instead. The compensation should be shared between theshipowner and the cargo.

Chris Horrocks of ICS said that the majority opinion within the shippingindustry was in favour of sharing. Being in a difficult as well as delicate posi-tion, he added that some of the views expressed in the submission from ICSto IMO were not “necessarily shared by the oil company-owned fleet withinits membership.”

There was no compelling need for experimentation, claimed Mr. ShenZhaoqi of China, who presented a joint proposal from China, Cyprus, Greece,India, Italy and Poland. According to the proposal, a USD 3 million minimumlimit on the shipowner and a maximum contribution of USD 30 million wouldbe appropriate. Adding to the Fund’s contribution, the total compensationcould be between USD 100 million and 120 million.

Mr. Douay now surpassed all previous frank statements and declared that heconsidered the proposal China presented to be misleading and as such it didnot provide a valid basis for discussion.

Whilst the originators of the proposal China presented may have been sur-prised by the patronizing tone of the French spokesman, consolatory supportcame immediately from other delegations who saw no reason for the proposalto be ignored, and Mr. Perrakis of Greece questioned how it could be claimedthat a document, expressing the views of important regions, was not a basisfor a serious discussion.

The temperature in the meeting room increased. Delegates asked themselveswhether the deadlock could be overcome only by an entirely new concept.Time was short. Acceptance for innovations would require the maximumamount of tact and diplomacy.

Admiral Hollingsworth found that the time had come to clarify the inten-tion of his country because he was aware that some delegations seemed to be-



lieve that the US had no intention to ratify the new instruments. However:“The US ratification … process was … complicated and full of impediments.…, it required the approval of the Administration followed by … the Senateand, finally the adoption of … both Houses of Congress.”

He appreciated: “… considerable scepticism among other delegations regarding … American ratification – if an agreement was reached. But on theassumption that the outcome would be acceptable the ratification process …had already begun. The Administration had ... announced its support. A Billwas before Congress enabling the United States to ratify. …”

Furthermore the Senate Committee had participated in formulating the USpositions and was represented in his delegation. Of course, … no guarantee…, but he doubted that any other delegation … was in a position to providesuch an assurance. … a compensation ceiling of some 225 million to 250 mil-lion dollars would ensure adequate compensation … time may have come todiscuss this in smaller groups which should include insurance experts.

After several more days of group discussions, there were indications that thedeadlock could be overcome when the US, Canada, France, Gabon, the FederalRepublic of Germany, Ireland, Malaysia, Netherlands and Zaire presented afresh approach with respect to the role of the Fund: The maximum compen-sation – including the shipowner’s contribution – could start at a relativelylow level.

This “basic coverage” could enter into effect quickly as soon as a limitednumber of oil-importing governments had ratified. The new element was theapplication of a “trigger mechanism” which would provide “expanded coverage” when contributing oil received in three member states reached atleast 600 million tons. This figure would be reached when the US had becomea party to the Fund. In other words, the Fund would first operate providing amoderate level of compensation. But as soon as the US joined, the level ofcompensation would go up.

In an effort to circumvent the impasse, Mr. Jacobsson embarked upon privateconsultations. He succeeded. A majority of delegations agreed to support aSDR 3 million (about USD 4.1 million) minimum liability on ships up to 5,000gross tons. From every ton above, the limit would increase on a linear scaleby SDR 420 per ton up to 140,000 gross tons (equivalent to a tanker of some280,000 dwt.) to a maximum amount of SDR 59.7 million (about USD 82million).



As suggested by the US and eight other delegations, contributions from thecargo would be set at two levels. The first would give a total compensation ofSDR 135 million (around USD 186 million), including the liability exposureof the shipowner. This amount would increase to SDR 200 million (about USD275 million) “when there are three Parties to this Convention in respect ofwhich the combined relevant quantity of contributing oil received by personsin the territories of such Parties during the preceding year, equalled or exceeded600 million tons.”

Many delegations supported the proposal of the Chairman whilst others – including the US and France – were not entirely satisfied, but accepted the proposal under the circumstances in the spirit of compromise.

Mr. T. Yamada made it clear, however, that the compromise was not acceptableto Japan. The compensation limits were far too high and the balance betweenship and cargo were destroyed.

Mr. I. Blackwood wished to state how disappointed OCIMF was. He fore-saw that a number of states “would have to reconsider whether it was wise toaccept such a financial burden.”

After the interventions, the chairman, Mr. Jacobsson, suggested that the newlimitation figures would be considered adopted, and it was so decided.

Notes:For Mr. Yamada’s comments, see Conf. rep. vol. 2, pp. 615-616. About the USD 30 million available,see Conf. Rep. vol. 1, p. 381.IOPCF Annual report 1992.

IX. THE FEES TO IOPCFIn the consolidated text forwarded to the Conference, the annual contributionsystem was retained. Thus the Fund would continue to be financed by im-porters of oil in the contracting states provided that they individually receivedmore than 150,000 tons during a calendar year. This meant that states thatpaid nothing or very little had precisely the same benefits as major oil-import-ing countries if an accident occurred.

But Mr. H. Sinaga of Indonesia referred to a paper submitted by his delegationand appealed to all delegations to take a fresh look at the system and providea better balance between the obligations and the potential benefits. He stressed



that the level of risk of massive marine pollution of the individual country wasinfluenced not only by the quantity of imported oil, but by many other factors,as well. These factors included geographical features, weather conditions, thedensity of tanker traffic and the availability of national resources. Even if Indonesia, geographically, was vulnerable, he argued that the most serious pollution incidents occurred in the western world. Moreover, the ability to payshould also be taken into consideration as the present obligations representeda heavy burden, in particular on developing countries. Whilst some delegationshad expressed sympathy for the Indonesian proposal, the general feeling wasthat the present system might not be perfect, but it had, after all, proved work-able and reasonably fair. After consultations with other delegations, Mr. Sinagasaid he felt compelled to withdraw his proposal.

The Legal Committee had suggested that the initial contributions for newmembers should be abolished. These levies were originally meant to providea working capital and were no longer required. Moreover, it had been agreedthat these contributions represented an obstacle for ratification.

Dr. Tanikawa opposed the proposal, pointing out that when a new fundwas set up, initial contributions would again be necessary. However, after theproposal to abolish the initial contributions had been supported by most otherdelegates, he accepted the majority view.

X. SIMPLIFIED UPDATING OF LIMITSExperience had shown that a serious defect of CLC69 was the lack of a pro-vision authorizing IMO to update the limits of compensation without arrang-ing a Diplomatic Conference. Such amendment procedure had been securedwhen FC71 had been agreed upon. A text the Legal Committee had preparedwas on the table. The document ensured that the shipowners’ liability amountscould be updated and thereby maintained in real terms without the need forcumbersome summoning of another conference.

Most delegations agreed that such a stipulation was essential to ensure thatthe conventions could be kept viable for a long time. However, other delega-tions feared that a simplified amendment procedure could create constitutionaldifficulties. But an alternative proposal to convene a Diplomatic Conferenceevery five years to discuss the matter had little support.

Admiral Hollingsworth said that: “the establishment of effective procedures



for periodically updating the liability limitation amounts in the Conventionswas almost as important as fixing the limits themselves. …”

It was found essential that limits in both instruments were revised at the sametime and according to the same rules. Thus, detailed conditions for amend-ments were introduced in both protocols; CLC article 15 and FC article 33.In short, any request to amend the limits had to be supported by one-quarterof the contracting states and should be sent to members of the Legal Commit-tee with six months’ notice. All contracting states were entitled to participatein the Legal Committee when such a request was on the agenda. Any amend-ments required a two-thirds majority to be recommended, with at least halfof the contracting states present in the committee. No amendment could beconsidered before five years had passed from the entry into force of the Protocol or any later amendment of the limits. No increase should exceed sixpercent per year, “calculated on a compound basis from 15 January 1993,”and should not exceed three times the original limits.

With all the safeguards, including those mentioned above, the amendmentprocedures were found acceptable, also to the delegations that had constitu-tional reservations to the first proposal.

XI. ENTRY INTO FORCE/RATIFICATIONIn order to secure a worldwide acceptance, a number of delegations werefronted by Captain Zhuanghuai of China, who advocated that the entry intoforce of CLC should require ratifications of governments that represented adefinite percentage of the world tanker fleet.

Mr. Perrakis of Greece argued that this principle would be fair and facilitatethe new instruments’ entry into force. G. Ivanov of the USSR supported theproposal, but was in favour of an increased number of signatures to allow theProtocols to enter into force.

Mr. Perrett of the UK disagreed “due to the disparity of tonnage of nationalfleets.” The proposal from China and other delegations overlooked that theexisting system had worked extremely well. He pointed out that the suggestedsystem would mean that “a convention could enter into force simply becauseone or two countries with large fleets had ratified it; and conversely that thosecountries could delay or even prevent its entry into force.” Several other speak-



ers, including those from France and Norway, supported him. The opinion was evenly split. After a vote resulting in the rejection of the

proposal put forward by China, the Chairman tabled a compromise packagethat was adopted. The entry into force of the CLC Protocol should be depend-ent upon the ratification of 10 states, including six states with a tanker fleetof not less than one million gross tons.

The proposal for the Fund Protocol proved less controversial. It was decidedthat the Fund Protocol could not enter into force before the CLC Protocol.Subsequent to a proposal from the UK, it was agreed that it should enter intoforce when eight states representing a total of 450 million tons of contributingoil had ratified.

When three of the ratifying states in the preceding year together had receiveda total quantity of 600 million tons, it was agreed that the compensation avail-able to victims would be increased to SDR 200 million (USD 260 million).When the Plenary finally voted on the adoption of the two ’84 Protocols, nodelegation voted against. There were, however, several abstentions: 16 for theCLC Protocol and 21 for the Fund Protocol.

Note:The background for the entry into force provisions is outlined in a presentation by Mr. Magnus Gorans-son in the CMI publication, “Liability for Damage to the Marine Environment,” London, 1993, editedby Colin M. de la Rue.

XII. SUMMARY – AFTERMATHThe definition of pollution damage was clarified, and expenses incurred forreasonable preventive measures became recoverable. For the oil and tanker in-dustry, other important changes were that a minimum liability limit of SDR 3million was introduced, and the maximum liability was increased dramatically.Moreover, the system that provided indemnification of shipowners (roll-back)was abolished, and a simplified procedure for updating the amounts was in-troduced. The immunity of the master and the shipowner’s servants and agentswas extended to pilots, managers, charterers, operators and salvors.

The destiny of the agreed instruments was now to a great extent in the handsof the largest oil-importing nation, the US. But the record of this country –when it came to ratification of international conventions in the field of mar-itime law – was not particularly impressive. In hindsight, it seems that manydelegations based their optimistic attitude with respect to ratifications upon



the fact that the liability levels was close to the agreed compromise proposalput forward by the US. One overlooked the facts: The definition of pollutiondamage, the new channelling provisions, the geographical scope and the limitations all differed a great deal from the position of the US at the openingof the Conference.

The US Secretary of Transportation, Elizabeth H. Dole, arrived in London afew weeks after the IMO Conference to sign the ’84 Protocols. Even if her signature had no legal significance, it was a clear token of goodwill, the moreso as she used the opportunity to declare that she and Secretary Schultz (StateDepartment) had agreed that the process should proceed without delay.

In vain, the IOPCF Director, Dr. Ganten, testified in Congress (House Sub-Committee on Coast Guard and Navigation). He argued:

“From the US’ point of view, the results is (sic.) in my opinion quite satisfactory. This is due to the fact that a two-tier system was adopted which

allows for a 48-percent increase of the IOPC Fund’s limits when the USjoined the Fund Convention. This achievement was due to the efficient wayin which the US delegation at this Conference lobbied other delegations …as a result of this, considerable concessions were made … many of the U.S.objectives were largely achieved. … Should the US decide not to ratify … ,the enormous amount of goodwill built up … would not only be lost …,

but could have the contrary effect of delegations becoming unwilling to …accommodate wishes of the US at Diplomatic Conferences …”

President Reagan’s message to the Senate in November 1984 was clear, butproduced no results:

“I transmit herewith, for the advice and consent of the Senate to ratification, the Protocol of 1984 to amend the International Convention ofCivil Liability for Oil Pollution Damage, 1969 (Civil Liability Convention)

and the Protocol of 1984 to amend the International Convention on the Establishment of an International Fund for Compensation for Oil

Pollution Damage, 1971 (Fund Convention). …”

By 1985, the ’84 Protocols were signed by the UK, Sweden, Portugal, the Federal Republic of Germany, Poland, Morocco, France and the US.

As late as 1988, the US Secretary of Transportation, Samuel S. Skinner,



confirmed the administration’s intent to ratify. He outlined the advantages ofthe Protocols at the same time as he stressed that within 10 years, the oil im-ported on foreign keels would increase to 65 percent. At the time, the majorityof the House of Representatives were in favour of ratification.

However, the US oil companies had continued their opposition. They arguedthat consumers would have to pay far more than they were likely to receive incompensation. Thus when the oil industry testified before the Merchant Marine and Fisheries Committee’s Coast Guard Subcommittee, the oil repre-sentative called for careful revaluation of what would best serve American interests. According to an anonymous analysis of the 1984 Protocols con-ducted pursuant to memos prepared for the Oceans and Fisheries Committeeand Assistant Secretary Malone “Congressmen Young (Alaska) and Breaux(Louisiana) found it politically difficult to express support for the internationalsolutions. How do we justify exposing American citizens to paying 30 to 45percent of the damages and cleanup costs if an oil spill finds its way to theSheik of Sharjah’s beachfront villa? One is left with the picture of America’scompensating the Ayatollah Khomeini if Iran joins the Fund. While this is asomewhat melodramatic picture, it could happen.”

The US Senate, which had the final say, was negative from the start, and the1984 Protocols formally never entered into force. Their resurrection was, how-ever, secured when IMO eight years later – subsequent to the US Congress’adoption of the Oil Pollution Act of 1990 – modified the entry into force provisions and introduced them as the 1992 Protocols.

The oil industry, which felt that compensation for pollution damage was best,dealt with by the private industry, made no secret of its position. In a memo-randum to its shareholders: CRISTAL set out the “shortcomings” of the Protocols in clear language. The most important failures were that IMO shouldhave imposed a substantially higher liability on the tanker owner in particularfor spills from small- and medium-size tankers and thereby neglect the finan-cial impact on oil-importing companies. Moreover, it was argued that the newdefinition of pollution damage would open up for speculative claims in respectof prospective restitution of the environment. Finally, the extension of the geographical scope to cover the EEZ could result in an unacceptable increasein the exposure of the industry.

In the campaign against the international instruments, the oil companies foundsome unusual bedfellows. It turned out that most of the American environ-



mentalists and their organisations also opposed the Protocols, but for differentreasons. In their minds, limited liability was no good at all.

Time had come for the boards of TOVALOP and CRISTAL to re-evaluatetheir positions. The oil industry proposed to abolish the current private agree-ments and adopt a new and more attractive compensation scheme. This wasnamed PLATO, an acronym for Pollution Liability Among Tanker Owners.One important feature of the plan was that shipowners maximum liabilitywould not be more than USD 10 million – in case of tankers up to 5,000 grt.For tankers in excess of that size, USD 10 million plus USD 500 per grt in excess of the mentioned 5,000 tons subject to a maximum of USD 60 million.

Considerable efforts were made to gain support for new scheme. Invitationswith comprehensive information were sent out throughout 1985 to all tankerowners. The invitation was signed by: the president of Amoco Transport Co.,E. J. Roland; the managing director of BP Shipping, Ian G. S. Hartigan; thepresident of Chevron Shipping Co., D. C. Wolcott; an attorney for Esso Int.Shipping, Chris J. Carven; a director for Fina Marine, H. Cran; an attorneyfor Mobil Shipping, Walter C. Mink Jr.; the managing director of Shell Int.Marine, Juan H. Kelly; and the vice-president of Texaco Inc., J. A. Cole Jr.

The plan was to make PLATO operational when a tanker fleet of 50 milliongrt had been entered in its membership. However, the needed support had notcome forward within the time limit, March 31, 1986. In a presentation onSept. 5, 1985, in the International Chamber of Shipping, Mr. N. Zervudachi,a vice chairman of INTERTANKO, had made the points that:

“1. PLATO would have severe adverse effects on ratification and entry into force of the 1984 Protocols 2. PLATO/CRISTAL offered less compensation than the Protocols. 3. PLATO increased the financial burden on the ship-owners, while reduc-ing the obligation of the cargo owner to compensate pollution victims and 4. Ship-owner organizations including Comite Central des Armateurs deFrance, Danish Ship-owners Association, Japanese Ship-owners Association,Norwegian Shipowners’ Association, Swedish Shipowners Association,Union of Greek Shipowners, Hong Kong Shipowners Association andBIMCO all opposed the scheme.”

Because of insufficient signatories, the scheme was given up without becomingoperational.



Instead, a TOVALOP supplement was worked out. In February 1987, tanker-owners agreed to increase their level of compensation close to the figures inthe CLC Protocol. The CRISTAL limits were also raised, but the oil industrysaw no reason to increase their compensation to match the Fund Protocol. There were also some other significant differences. The revised CRISTALadopted a tonnage-linked cargo compensation system, which OCIMF hadstrongly promoted during the 1984 Conference. Moreover, several strict con-ditions had to be satisfied before CRISTAL would provide any compensation.

On the background of the oil companies’ campaign against ratification, Ms.Chao seemed perhaps not quite realistic when she, in her otherwise excellentbook, claims that the lower CRISTAL limits “would appear to have been donedeliberately in order to encourage States to ratify the Protocols.” In hindsight,it might seem puzzling that so little governmental action was taken to ratifythe Protocols. However, further to the increased compensation from the private regimes, the effective lobbying of the oil industry and other politicalevents in the shipping sector, the interest of governments seemed to evaporate.

One reason may be the Iran-Iraq war. The conflict lasted from 1980 to 1988.For the shipping industry in particular, serious problems escalated in 1984.From that time, tankers in the Gulf were bombed or hit by Exocet missilesfrom fighter planes as well as being the target for surface craft, mines and land-based missiles. Before the war ended, more than 250 seafarers had lost theirlives.

One dramatic but unsuccessful attack was on one of the largest Liberian flag-holding tankers in the world fleet; World Petrobras (412,000 dwt) occurredon Dec. 22, 1987. At the time, the tanker served as a floating oil storage shipin the northern part of the Strait of Hormuz. When Mirage jets dropped two500–pound bombs onto the main deck, the crew was in the process of trans-ferring cargo to other smaller tankers. Some damage was caused, but WorldPetrobras could resume operations 42 hours after the attack. Probably becauseof the working of the inert gas plants on board, a serious explosion wereavoided. The tanker had, however, to be later repaired in Singapore.

One of the many other victims was the super tanker Seawise Giant owned byMr. Tung in Hong Kong. She was built by Sumitomo Heavy Industries ofJapan in 1976 for a Greek owner and later sold to Mr. Tung, who rebuilt theship to increase its carrying capacity and make it the world’s largest tanker.



After being bombed at Larak Island, the tanker was burned out, but later completely restored, rebuilt and resold to Norwegian interests, then namedJahre Viking. It was 565,000 dwt.

Having appealed in vain for several years to both sides to stop the attacks, theINTERTANKO Chairman, Basil Papachristides, in May 1988 hosted a meet-ing with members of the UN Security Council in New York to discuss the sit-uation in light of international law and freedom of navigation in internationalwaters. The need for the UN to see the tanker war as a separate issue wasstressed. The impact of the meeting should not be overstated; combatantsagreed later that year on a cease-fire.

Both CLC69 (article IIIa) and FC71 (article 4.2) provide immunity for theshipowner as well as the Fund with respect to pollution damages caused byact of war. Nevertheless it is noteworthy that the chairman, Jorgen Bredholt,of the IOPCF Assembly (1978-1994) in pages 64 to 67 of the organization’s25th-jubilee book reviewed his period without mentioning the tanker war withone word.

Long after the hostilities between Iraq and Iran had come to an end, a newdramatic situation emerged in early October 2002. Terrorists attacked aFrench-flag super tanker, Limburg, with a cargo-carrying capacity of nearly300,000 barrels of crude oil while she was miles off the shores of Yemen. Theattackers were believed to be associated with al-Qaeda. They fired a rocketfrom a small boat against the hull of the tanker, which caught fire. Accordingto another source, it was a suicide boat laden with explosives that the terroristsused. The explosion killed one crewmember. In early 2005, a Yemeni appealscourt found that it was proved that the arrested individuals had given a pledgeto al-Qaeda leader Osama Bin Laden to kill “infidels.” A group of 15 menwas found guilty of the attack. The leader was sentenced to death. The tankerwas to be repaired later.

According to the international liability regimes, the shipowner was not ex-posed to pollution liability claims in such situations. Moreover, standard P&Irules excluded coverage for damage war perils caused unless a special insur-ance agreement was signed between the parties. No surprise that the press reported that the Belgian operator of the Limburg (Compagnie Maritime Belge– CMB) reacted furiously when the Yemen government initially requested awarranty between USD 18 million and 19 million in respect of the resulting



pollution damage. The government, however, shortly dropped the claim, andthe damaged tanker was permitted to leave its waters and be towed to Dubai.After the event, P&I clubs have offered coverage for war perils including actsof terrorism.

The attack was unique because it was the first time terrorists caused pollu-tion. Because of the leakage from the large tanker, IMO offered its assistanceto combat the oil spill. The pollution problem proved, however, to be man-ageable. It had happened neither in Europe nor US and did apparently notproduce a great deal of dead fish and birds. Hence the media attention was ofonly middle intensity and probably a great disappointment for the terrorists,who had hoped to catch the headlines in the media in the same way as Erikaand the calamity that followed a month later off the Spanish coast.

In the meantime, tanker accidents at sea had continued in more peaceful areas.In March 1985, Greek tanker Patmos collided in the strait of Messina withSpanish tanker Castillo de Monte Aragon. Seven hundred tons of oil driftedashore. The Italian Ministry of the Merchant Marine lodged a claim that in-cluded lost values of the affected natural resources. Were such losses legallycompensable and covered by the definition of “pollution damage” set out inCLC69? A higher court upheld the claim, but the basis for the award is unclear.In 1994, it became clear that the final compensation was within the limitationsof the shipowner, and the Fund was not called upon.

On Nov. 10, 1988, the 136,280 dwt Liberian tanker, Odyssey, caught firein the mid-Atlantic. She lost her cargo of 132,000 tons of crude oil about 700miles off the coast of Nova Scotia. Nature took care of the spilt oil, but all 27crewmembers died.

More attention was given to Khark 5, an old and not well-maintained Iran-ian VLCC of 284,632 dwt which exploded off Morocco in 1989. Seventy-sixthousand tons of crude oil were released. The Dutch salvors were denied taking the tanker into the sheltered waters of the Canary Islands. This wasalso the position of other coastal states. Despite the huge oil spills the Odysseyand Khark 5 caused, there were no serious initiatives to have the ’84 Protocolsratified internationally.

The accidents would be completely overshadowed by a tanker accident inMarch 1989 in Alaskan waters.

Notes:An American review of the 1984 Protocols to the 1969 International Convention on Civil Liability forOil Pollution Damage and the 1971 International Convention on the Establishment of an InternationalFund for Oil Pollution Damage is found in memos prepared for the Oceans and Fisheries Committee



May 1, 1985, and for Assistant Secretary Malone, March 27, 1985. On pages 4 and 5, it is reportedthat the major contentions of the oil industry are that the Protocols would place a disproportionate financial burden on US consumers as they fail to place sufficient liability on the tanker owner and toomuch of the burden on the cargo interest. The general conclusion of the review is that “the 1984 Protocols do indeed entail the probability of a net outflow of money. If one could devise an optimuminternational regime that would best serve US interests, the Protocols would not be that regime.” About the oil industry’s PLATO scheme, see Ms. Chao, “Pollution from the Carriage of Oil by Sea,”pp. 192-196, and INTERTANKO Circular letter to members, no. 5A, May 24, 1985.On the revised TOVALOP and CRISTAL agreements, see the October 1987 presentation of The Britannia Steam Ship Insurance Association Limited and Ms. Chao, “Pollution from the Carriage ofOil by Sea,” p. 210 note 81, where she comments on the revision of CRISTAL. Contrary to TOVALOP,it does not entertain the same compensation as provided in the Protocols.On the Iran-Iraq war, see above chapter 7iii. On Limburg, see IMO News no. 4, 2002 and various articles referred to in IMO Awareness Bulletin, November 2002 to March 2006



9

Exxon Valdez and subsequent incidents

in US waters

I. EXXON VALDEZMaritime safety legislation and rules on compensation for pollution damagewere pushed ahead after the event at the Seven Stones Reef in the British Channel. The public outcry after the grounding off the coast of Brittany – 11years later – generated a new wave of rules. The next impetus came after anew interval of 11 years. The “incident” happened in Prince William Sound,south of Valdez, Alaska. On a late evening in March 1989, a modern, verylarge crude carrier of about 215,000 dwt departed from the Valdez MarineTerminal. She was built at the National Steel & Shipbuilding’s yard in SanDiego, California, and named Exxon Valdez.

Real industrial oil production had started in Alaska in 1965. But it all beganin a modest way more than 100 years ago when a beach caught fire after ahunter had lit a match to it. Such seep sites were obvious places for oil explo-ration, and by 1930 a modest amount of 150,000 barrels of oil per day wereproduced. In 1965, Union Oil was blessed with a series of oil discoveries inthe icy waters of Cook Inlet. The strikes signalled the finding of new rich oiland gas fields. Three years later, one other enterprising company, Atlantic (laterArco) struck oil in Prudhoe Bay. This proved to be a reserve of major impor-tance. Money for further development was no longer a problem when Exxonwas brought in as a partner. Also the geologists from BP had been hunting foroil in the area, and their search was rewarded nine years later.


EXXON VALDEZ AND SUBSEQUENT INCIDENTS IN US WATERS

Valdez had a good port. In 1963, only about 400 inhabitants had settledhere. On Good Friday 1964, an environmental disaster hit Alaska. It took theform of a violent earthquake that jolted the coast including the town, whichwas half destroyed within five minutes. At night, four surges completed itsruin. It turned out to be the strongest earthquake ever recorded in NorthAmerica. Union Oil’s efforts to explore potential oil fields suffered a serioussetback.

Bad luck struck again in October when the company’s tanker, Santa Maria,loaded with heating oil and gasoline, collided with another vessel and caughtfire in the same area.

In 1969, Exxon converted one of its large tankers, Manhattan, to find outwhether ice-breaking tankers could deliver crude oil from Alaska through theArctic ice fields of the North West Passage to the US East Coast. Her hull wasreinforced by 10,000 tons of extra steel and included an ice belt around thetanker’s waterline. The test voyages made it clear that she still was not powerful enough. The experiments were suspended in 1970.

Tankers sailing south continued to carry the oil from the North Slope. Oilwas also pumped to the markets through pipelines. This was no easy game.They were laid through forests and rugged hills, encountering numerous prob-lems in the early years. New projects were met with opposition from environ-mentalists, who claimed that realization of such plans would seriously disturbthe wildlife of the whole region.

The protests delayed the oil production for three to four years. But then,the federal government, alarmed by the Arab oil boycott, swept the oppositionaside and encouraged the oil industry to explore for more oil in Alaska andon the outer continental shelf. One contribution of Congress was the enactment of the Trans-Alaska Pipeline Authorization Act (TAPAA) in 1973,which would facilitate the delivery of gas and oil. Alyeska, a consortiumowned by seven oil companies, became the operator of both the long 800-mileTrans-Alaska Pipeline and the Valdez tanker terminal. From now on, theAlaskan oil production became an important part of world production, andthe North Slope became a pioneer province for petroleum development in Arctic conditions.

Under TAPAA, strict and joint liability was imposed on operators andowners of tankers for all damages oil spills caused. The TAPAA Fund estab-lished under the law would top up the USD 14 million liability of the operatorto a total of USD 100 million. It was entitled to seek reimbursement from negligent tanker owners. If the damage exceeded the maximum amount, the



Captain Joseph Hazelwood Known as Jeff in his youngerdays, Captain Joseph Hazel-wood was born 1946 inHawkinsville, Georgia. As oneof four children, he was the sonof a Pan Am Pilot. The allega-tion that the Captain was drunkwhen Exxon Valdez groundedhas been rejected by the crew. A test taken some 10 hoursafter the accident found that hisblood alcohol content wasabout 50 percent higher thanthe 0.1 percent level laid downin Coast Guard regulations.The Coast Guard later ex-pressed that his handling of thetanker after the grounding wasexemplary. By adjusting the engine power, he kept the shipstable, thereby preventing aneven worse spill and may havesaved lives.

claims were reduced proportionally, and the claimantcould pursue his claim under any other applicablestate/federal law. Under Alaska state law, a shipownerwas strictly liable for all clean-up costs and damages incurred as a result of the spill, including damages onprivate properties.

That particular evening of March 23, 1989, the ExxonValdez’s Captain Joseph Hazelwood had some drinksin his favourite bar, the Pipeline Club, half an hour driveaway from the terminal. After returning to his tanker,he radioed the Coast Guard station that he would bechanging course to avoid some small, drifting icebergson the way out. He received permission, but instead ofguiding the tanker from the bridge, he went back to hiscabin after instructing the third mate and the assistinghelmsman to get back into the lane once the ship hadpassed the icebergs. With a cargo of nearly 200,000 tonsof North Slope crude on board, the large tanker movedslowly out into Prince William Sound’s shipping lane.

The third mate had gotten less than six hours’ sleepduring the last 24 hours and was probably very tired.Just after midnight, the large tanker grounded with aloaded draft of 56 feet on Bligh Reef, where the low-tide chartered depth was only 30 feet. When reportingthe grounding over the radio to the Coast Guard, Captain Hazelwood added: “We are leaking some oil.We will be here for a while.”

In his conversation with the Coast Guard representa-tives and during later hearings, the captain never deniedthat he’d had some drinks. Thirty-two years old, he wasExxon’s youngest master and had turned down promo-tion ashore on several occasions. Now commandingone of the newest and largest tankers in the fleet, hisstyle later did him no favour along with his concise replyto the first Coast Guard officer to board his groundedvessel. “What is the problem?” asked the officer. “I think you are looking at it,” was the answer.

© NICK UT / AP / Scanpix


It appeared that 11 of the centre and starboard tankswere ripped open, resulting in an oil spill of 37,000tons. At first light on Good Friday, observers flying overthe crippled tanker saw an oil slick of about five mileslong and 1,000 feet wide. That was seven hours afterthe accident. The release of the crude oil polluted a1,300-mile shoreline, comprising one of the most sensi-tive wilderness areas in the US. Local fishermen andbusinesses were dependent on fishing and wildlife andfeared that their future was disrupted.

Exxon Valdez has been seen as a disaster on a scalethat defies comparison. But paradoxically, the accidentis not found in the list of the 35 worst tanker spills; neither did it cause any deaths. Statistically, the oil pollution was less than one third of the spill from TorreyCanyon and about 15 percent of Amoco Cadiz. But theclean-up costs, the claims from fishermen and other par-ties, the headlines in the media, the series of legal battles,the political discussions and the consequential nationaland international legislation put the event in a class ofits own.

HM Strategies

US OIL SUPPLY BALANCEMILLION B/D Source: EIA

Note: Minor crude oil export volumes excluded Compiled by HM Strategies

12

10

8

6

4

2

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

CRUDE OILIMPORTS

OIL PRODUCTS IMPORTS

OIL PRODUCTS EXPORTS

CRUDE OIL PRODUCTION

US Oil Energy Balance

The negative oil supply balanceand the increasing dependenceon foreign oil has for manyyears been a challenge for theUS Congress. The breathingspace Alaskan oil provided inthe mid- 70s was warmly welcomed. The same can be said for production of oil in theMexico Gulf wells during themore recent years.



The past spills of any importance in Alaskan waters were limited to the SantaMaria accident 25 years earlier and the Glacier Bay, an American flag tankerowned by Apex Oil which grounded in 1987 and released an estimate of 100-150 tons of crude oil. Due to the increased tanker traffic as well as the growingappreciation of the environmental risk, a US Coast Guard’s office had beenopened in Valdez in 1977. In 1989, about 8,700 oil tanker transits had takenplace, but only minor spills had occurred.

Exxon was blamed for permitting a suspected alcoholic to be in charge of asuper-tanker that was operating along an environmentally sensitive coastline.The refusal of its chairman to demonstrate the slightest regret over the spilldid not help the position of the company. It may be assumed that legal advicehad suggested that regret would indicate liability. In Washington, DC, younggirls were walking around wearing T-shirts marked “I hate Exxon.”

As the first few days passed after the grounding, a whole crew of other “villains” began to emerge, including Alyeska, whose statistical departmentin 1986 had previously presented figures implying that a major tanker spillwould take place in Prince William Sound once every 241 years.

Alyeska had a commitment to the federal government to implement a contingency plan in case of a major oil spill. But it turned out that little hadbeen done. The evening before the grounding, its management had declinedan invitation from a local group to give a presentation at a meeting convenedto discuss the tanker traffic and the potential pollution risk. After the spill, themedia was quick to point out that the partners BP and Exxon had just spenthundreds of thousands of dollars to prepare and present their new logo, butthe spending on an efficient contingency plan for Valdez never reached anamount worthwhile mentioning in any PR report.

Also, the Coast Guard came in to the fire line. In a report on the grounding is-sued some time after the accident, the National Transportation Safety Board(NTSB) of Washington, DC, concluded that the Coast Guard had not beenmaintaining an effective vessel traffic system in the area. It was revealed thatthe person standing watch on duty on the fated day lost the tanker on his radarscreen. When the master reported that he would be leaving the normal routeto avoid ice, the watch did not adjust his screen to locate the new position andcourse of the tanker. Thereby, he failed to see that the new course brought thevessel into dangerously shallow waters.

When Exxon in 1994 in a federal court claimed that the Coast Guard hadfailed in its duty to warn the tanker of impending danger, the agency’s top of-



ficer at the time of the grounding, Paul Yost, rejected the allegation, pointingout that Prince William Sound was a rather easy area to navigate, requiringno extraordinary safety measures by tanker captains. He was convinced thatthe Coast Guard’s control centre bore no blame for the grounding. The vesselwas in open water on a clear night with all the aides working. On the bridgewas a competent third mate, but the pilot as well as the captain should havebeen there. “Somebody is at fault when a ship goes aground. In this case, it isnot the vessel-traffic service,” Mr. Yost said. However, other subsequent in-vestigators have maintained that the traffic control system was neglected atthe time. Exxon Valdez would not have slipped through the surveillance if theradar equipment had been up to par and the operators less complacent.

The night of grounding and during two more days, the weather was calm. Thesmooth sea was perfect for an orderly cleanup. That task rested with the USCoast Guard, which, however, made no protests when Exxon took upon itselfto lead the work. Exxon’s authority lay in its purse. When informed about thespill, the top management of Exxon in New York saw what might be in theoffing and immediately assumed full responsibility. But it took nearly 12 hoursbefore a tugboat arrived with equipment to pump oil off the grounded tanker.By the time Exxon had sufficient equipment available, the weather hadchanged dramatically, and gales drove the oil ashore with tremendous force.Under such conditions, the use of chemical dispersant and efforts to burn offthe oil were non-starters.

The Jones Act, which protects US flag vessels, meant that vessels under for-eign flags could not be deployed immediately. Another frustration was that nowaste disposal sites were available.

An organisation including over 12,000 people, 85 aircraft and 1,400 vesselswas established to do what could be done with the oil spill. These efforts couldnot prevent the grounding from sparking a battle lasting for years about whowas most to blame, a firestorm of lawsuits and a flurry of legislation.

In the years following the spill, a high percentage of fishermen and associ-ated companies went bankrupt. More than 4,000 plaintiffs filed 190 lawsuitsin the Federal District Court of Alaska. More than 200 cases were filed withthe Alaskan State Court involving some 3,000 plaintiffs. The federal govern-ment filed criminal charges against Exxon, Captain Hazelwood and severalother officers onboard.

In April 1989, US President George Bush requested an assessment of the spill



response. A report provided by the National Response Team was available thenext month. It stated that none of the “responsible parties,” Exxon, Alyeska,the State of Alaska or the federal government had been prepared for a spill ofthis magnitude. In July, a Senate Committee reported that the spill was “exac-erbated greatly by an unreasonably slow, confused and inadequate responseby industry and government that failed miserably in containing the spill andpreventing damage.”

A year after the accident, the Valdez’s officials felt compelled to issue a pressrelease to convince the hesitant potential tourists that the spill did not havethe long-term effect the media supposed. In any case, the lost wildlife was onlya minor fraction of the fauna in the surrounding area. The affected shorelinewas remote and outside the area likely to be seen by seaborne tourists. Tenyears after the grounding, Bob Malone, President of Alyeska, told the Anchor-age Chamber of Commerce that the company now was very different fromwhat it was in 1989. At that time, the company’s clean-up standard mandateda response to only a 4,000-barrel spill. “Now we can respond to spills of300,000 barrels in 72 hours,” he said.

Payments to victims were delayed. Four years after the accident, the mayor ofa nearby fishing community committed suicide and left a note blaming Exxonfor some of his problems. The claimants for damages numbered 11,000, andin 1994 a federal jury finally ordered the corporation to pay punitive and actual damages of USD 5.3 billion – the largest amount ever assessed by anAmerican jury. The company was found to have been recklessly guilty whenit had failed to monitor the captain, who had been an alcoholic for some time.

The punitive amount was roughly equivalent to a single year’s profit byExxon at that time. But the stock market may have fared even worse asExxon’s shares rose after the verdict. If the punitive fine had been based on2005 profits, it would have been about USD 30 billion (not accounting for in-flation). However, its chairman at the time, Lee Raymond, described the awardas utterly unfair, totally unwarranted and excessive. He promised that everylegal means would be used to fight the unjust verdict.

Exxon had paid USD 300 million voluntarily after the spill, but many com-mercial fishermen expected far better compensation and looked forward tohaving their claims honoured. In March 1999, attorney generals from 37 USstates sent a letter to the chief executive, Mr. Raymond, demanding that Exxonshould pay the punitive damages for the spill in accordance with the 1994



verdict. In this connection they pointed out that the oil company was profitingfrom delaying the payment: “Each year Exxon delays payment of its obliga-tion it earns an estimated USD 400m from the difference between the statutoryinterest rate on judgements of six percent, and the company’s internal rate ofreturn of about 14 percent.”

Neither were the efforts to overturn the verdict well received by a groupof 30,000 to 40,000 people the spill affected. They had taken the name “Sur-vivors of the Exxon Valdez Oil Spill.” Steven Goldstein, their press secretary,responded: “People all across the country and the world are indignant atExxon’s arrogance ... Exxon had been counting on the political pressure tosubside once the 10th anniversary (of the spill) passed. But guess what? Thepressure is still on.”

Exxon seemed to take little notice and maintained that the company was: “exercising a fundamental right to appeal these damages, a right to whichevery American individual and company is entitled. This is a core value of ourjudicial system which any AG (Attorney General) should understand and support.”

The reward came about in 2001, when the 9th Circuit Court of Appeal ruledthat the punitive damages imposed in 1994 were excessive. At the end of 2002,the punitive damages were set at USD 4 billion plus interest. Exxon appealedagain, but this just caused the judge to increase the punitive damages to USD4.5 billion. Once more, the oil company appealed. The US Supreme Courtwho decided that the reduced amount should be reviewed again wrote the nextchapter in the tragic/comic saga. In December 2006, IMO reported that anappeals court, considering the case for the third time, had slashed the punitivedamages to USD 2.5 billion. The Court hoped that its third review of damagesawarded to the Alaskan seafood and tourist industry now would end thelengthy litigation.

But Exxon/Mobil still felt over-penalised and continued to press for a betterdeal. However, in May 2007 – 18 years after the event – the public was in-formed that:

“Exxon Mobile has failed yet again to get a US appeals court to cap itsExxon Valdez punitive damages at USD 2.5 billion, setting the stage nowfor the US Supreme Court to issue the final verdict. The US Court of Ap-peals for the Ninth Circuit refused on Wednesday to reconsider its earlierdecision to set the punitive damages payable by Exxon Mobil at USD 2.5billion. This decision, issued in late December last year, had trimmed the

damages figure down from USD 4.5 billion.”



Contradictory reports have been released regarding the long-term effect of thespill.

During the first years after the accident, each scientist’s report on the extentof the pollution damages generally reflected the view of his or her sponsor.But in 1993, a geochemist, K.A. Kvenvolden, working for the US GeologicalSurvey independently from Exxon, concluded that on the surface of the shoresit was easier to find residues from the unnoticed spill after the earthquake in1964 than from the oil that gushed from the big tanker in March 1989. Hisfindings indicated that some of the claims against Exxon were not valid.

A report from early 1999 issued by a coalition of federal and Alaskan agencies working to restore the oil spill region was far more negative in itsjudgement. Out of the 28 species listed as being injured by the spill, only two,the river otter and the bald eagle, were considered to be recovered. Eightspecies were considered to have made little or no progress towards recovery,including killer whales, harbour seals and common loons. But in a commentto the report, Molly McCammon, executive director of the Exxon, told thepress that the impact of the spill now was subtle and probably not detectable.

More than USD 2 billion had been spent on cleaning up the mess after thegrounding in Valdez. Despite the favourable weather conditions throughoutthe night of the spill and the two following days, the local contingency planAlyeska prepared proved to be worthless. Later, it was claimed that there hadbeen more focus on operational pollution caused by discharge of ballast waterfrom loading tankers than on the capacity to handle a major accidental tankerspill. Whether that assumption is right or wrong is water under the bridge.What became clear was that the combined efforts of the US government andone of the world’s largest corporations proved inadequate.

Exxon spent millions on animal rescue and billions on shoreline clean-up andcompensation to fishermen and various local businesses. Two months afterthe accident, between 700 and 750 vessels and oil skimmers were deployed,assisted by 36 helicopters and 17 floatplanes. More than 6,000 people wereinvolved in the effort. The background or qualifications did not matter muchto the labour contractor, and what counted to the job seekers was the goodpay. The work force engaged in the clean-up left their garbage in the wilder-ness. Some of the cleaning methods may have done more harm than good. Thechemicals used seemed to remove the oil from the rocks and beaches, but dev-astated many of the organisms under and above the surface.



The exact amount of monetary damages will never be known. The researchundertaken at the time was more than ever subject to public pressures. Emotions ran high, and each scientist’s presentation echoed to a large extentthe interest of his/her sponsoring agency. Exxon seemed to be blamed byeverybody. An exception was – no surprise – the president of the firm in Anchorage that handled the cleanup for the oil company, Peter Leathard. Outof tune with public opinion, he compared the current damages with thestrongest earthquake ever recorded in North America on Good Friday, 25years earlier: “We did not waste time seeking to punish the cause of that disaster,” he said in a press statement sent out a few weeks after the accident.He continued: “nor is it productive to spend time placing blame and seekingto punish the perceived cause of this disaster.”

It has been estimated that as much as one quarter of the spill evaporated anddisappeared. Jeff Wheelwright – a long-time science editor of Life Magazineand devoted to environmental issues worldwide – claims in his book, “Degreesof Disaster,” that the billions Exxon spent for the cleanup were mainly an ex-ercise in corporate contrition. His analysis of the shoreline cleanup programconcluded that the operation in itself was a disturbance and inferior to thenatural cleansing by waves and weather. “It was overkill that fell short, a par-adox obscured by an overkill of figures.”

However, after public hearings many years later, the National Fisheries Servicein Juneau reported that the oil spilled had caused further harm to the environ-ment than previously thought. Further to the report, the US federal govern-ment and the State of Alaska in 2006 asked Exxon/Mobil to pay an extra USD92 million to cover the lingering ecological damage in Prince William Sound.It was alleged that remaining pockets of oil spilt in the basin in March 1989continued to threaten a variety of marine species.

A press release sent out by the US Department of Justice on June 1, 2006,refers to a 1991 civil settlement reached with Exxon. The agreement includeda “re-opener provision” enabling the authorities to claim up to an additionalUSD 100 million for damages not reasonably anticipated in 1991. Such claimshad to be submitted by June 2, 2006. When notified about the intention to re-open the case, Exxon/Mobil spokesman Mr. Boudreaux, referring to thefindings of more than 350 studies done by independent academics, commentedthat “the sound has recovered, is healthy and is thriving. ... We find the timinginteresting, that the study has been released for peer review two weeks beforethe deadline for the decision to notify Exxon Mobil of an intention to requesta reopener of the settlement.”



Exxon’s own estimates were that its war against the oil spill had resulted inexpenditures for clean-up costs, government settlements, fines and compensa-tion exceeding USD 2.5 billion. The scale of expenditure seems to bear no se-rious relation to the technical affairs of the case, but reflects to a far greaterextent the large resources of the company and its determination to do whatevercould be done to repair its damaged public image. It is claimed that Exxonspent USD 40,000 on every one of the 5,000 otters that the company tried torescue. Thanks to its relentless legal defence, there have been widespread feel-ings that the oil giant avoided paying damages that it should have paid.Alaskan fishermen still insist that the spill continues to have bad effects ontheir livelihood, such as the herring catches, which are way down.

Further to the huge pollution-related expenses, Exxon turned to its global corporate excess insurance policy and called for re-imbursement from under-writers for the incurred costs. The underwriters first repudiated the claims fora number of reasons. Their objections were many, including arguments thatthe corporation had failed to disclose material facts about Exxon Valdez andoil transportation in Alaskan waters. Moreover, a good deal of Exxon’s expenditures were made to protect its profits and public image for which itwas not insured. Neither did the policy cover the claims, fines penalties, etc.,which resulted from violating government regulations. Finally, it was assertedthat the stranding occurred because of wilful and/or reckless misconduct ofExxon as a shipowner. The tanker was unseaworthy before the incident, andthe company knew, but failed to report.

Nevertheless, in 1996, a settlement was agreed on with the underwritersin the London market. The settlement brought the total payout from insurersup to about USD 780 million. This amount adds to what Exxon has recoveredthrough tax write-offs and not least by a simultaneous and well-timed increasein the price for its product. Finally, further to the punitive damages imposedin 1994, the company set aside the USD 5 billion and has since been collectinggood interest. With respect to the underwriters, they embarked on a lengthylitigation to recover their outlays from the re-insurers.

Captain Hazelwood, who previously had lost his driver’s license because ofalcohol problems, was for some time said to be the most hated man in Amer-ica: A villain whose recklessness had caused irreparable harm to the environ-ment. The relentless pursuit of the wretched master should be seen in the lightof one mistake. Contrary to regulations for navigation in inland waters, navigation was left to a third mate who possibly left the steering on automatic



pilot. It was claimed that the mate had had very little sleep and was deadlytired. According to industry practice, mates in a loading port and on watchstanding after departure could be on the job for up to 36 hours.

Although he was permitted to leave Valdez after the accident, Captain Hazel-wood was then regarded as a fugitive from justice. Despite a pre-arranged agree-ment to attend the court at a certain time, various New York City and State policeforces were waiting outside when he returned home for the “honour” of bringing in the “fugitive” to court. He was first convicted but later got theconviction reversed, being defended by Michael Chalos of a Manhattan lawfirm. The firm rose to public prominence through its client.

Mr. Chalos argued that the captain was merely a convenient scapegoat forthe significant failures of the other actors in the drama. The captain never hadhis master’s license revoked and he paid his share through a long-lasting com-munity service in Alaska and finished his debt by handing over a USD 50,000check to the authorities in May 2002.

The final act in the legal drama that had lasted for 19 years ended when theUS Supreme Court in June 2008 slashed to USD 500 million the USD 2.5 bil-lion in punitive damages that Exxon had been ordered to pay for the Valdezdisaster in Alaska. Writing for the majority, Justice David Souther said thepunitive damages should not have exceeded the actual damages of some USD500 million that Exxon had spent in compensatory damages to those who hadsuffered economic losses from the accident. Exxon/Mobil chairman Rex Tillerson was reported to send an apologetic note after he had been informedabout the decision, reiterating the oil giant’s regret for the “tragic accident.”

But Exxon and the oil industry in general had reason to cheer. In 1994, ajury had awarded those harmed by the spill USD 5 billion in punitive damages.Now the 32,677 fishermen and other interests whose business was disruptedby the spill were left with USD 500 million. Since the lawsuit was filed, plain-tiffs alleged that 20 percent of those eligible for damages had died.

Environmental groups criticized the decision. “The worst environmentalcalamity in US history will continue to haunt the Prince William Sound andthose dependent upon it for their livelihoods” said the director of GreenpeaceUS in a statement. One other spokesman in Valdez now felt that enough wasenough and said that “The courts have spoken, and it’s time to put it to bedand get on with life.” The Senate Judiciary Committee chairman Patrick J.Leahy regretted the ruling as “another in a line of cases where this SupremeCourt has misconstrued congressional intent to benefit large corporations.”



In September 2008, the press reported that Exxon/Mobil had reached anagreement with the plaintiffs over the punitive damages, meaning that a por-tion of the disputed award could be expected to be paid out in October 2008.

Notes:On TAAPA, see de la Rue and Anderson: “Shipping and the Environment,” London, 1998, pp. 48-51.On the history of Valdez, see Welty & Taylor: “The 76 Bonanza,” and J. Wheelwright: “Degrees of Dis-aster” and in particular p. 150, where he makes the point that risk assessment is a social science that pro-duces hard numbers, the utility of which is not known until after the fact. Thus it was not a good assessmentwhen Alyeska in 1986 predicted that a major tanker spill in Prince William Sound would happen onlyonce every 241 years. This should be noted by coastal states with much tanker traffic.See “Federal on the Scene Co-ordinators Report” on the Exxon Valdez oil spill, published by USCG Sep-tember 1993 and the report to 101st Congress 1st session, July 28, 1989, from the Senate’s Committee onEnvironment and Public Works.See also E. Nalder: “Tankers Full of Trouble,” pp. 37-48, 187, 225 and Jim Mulrenan in Lloyd’s List,March 24 and 30, May 1994, July 13, 1992, Oct. 2, 1993, Oct. 4, 1995, Nov. 2, 1996, July 10, 1998,Feb. 12, 1999, Oct. 2, 2003, Sept. 13, 2004, Dec. 28, 2006; and Seatrade Week, July, July 17-23, 1992;Tradewinds, Sept. 11, 1998 and July 9, 1999; New York Times, Dec. 1, 1993; Fairplay, Dec. 6, 2001; OilSpill Intelligence Reports, Jan. 17, May 23 and June 23, 2002, June 8, Sept. 14, 2006 and Sept. 4, 2008;Financial Times and US Today, June 25, 2008; Wall Street Journal, June 26 and 27,, 2008; and a press release from the US Department of Justice, June 1, 2006, on a new compensation claim.

II. SUBSEQUENT INCIDENTS IN US WATERSAt the beginning of the new millennium, Valdez was again in a panic when asister vessel to Exxon Valdez, the S/R Long Beach, started to leak crude oil inwaters nearby. According to press reports, another environmental disaster wasnarrowly averted. Now the oil giant Exxon had joined forces with Mobil andbecome the world’s largest oil company.

After the grounding in 1989, Exxon changed the name of the company fromExxon Shipping Co. to Sea River Maritime Co. The unfortunate Exxon Valdezwas renamed Exxon Mediterranean and sent in to exile outside home waters.Under a section in the Oil Pollution Act of 1990, the tanker was banned fromever entering the Prince William Sound again. A suit to have the section declared unconstitutional was in vain, and Exxon suffered a new setback whenthe Anchorage District Court in 1998 dismissed the lawsuit. An appeals courtupheld the ban in the fall of 2002.

The Exxon Valdez spill was followed in quick succession by new tanker accidents in US waters. Three spills happened on June 23/24, 1989, anddemonstrated that oil pollution from accidental tanker spills was a real and



continuing threat to the public health and welfare. The Greek tanker World Prodigy (30,000 dwt), built in 1986, spilled about

200 tons of Bulgarian heating oil in the coastal waters of Rhode Island. Later,it was contended that the captain had violated state regulations by enteringthe area without a pilot, he had suffered from lack of sleep and was using anobsolete map.

The next day, the Uruguayan tanker President Riviera (87,300 dwt) left theshipping channel in the Delaware River and grounded 15 miles from Philadel-phia. About 100 tons of heavy fuel oil leaked out. For good measure, a bargecollided at the same time with a freighter in the Houston Ship Channel, spillingabout 10 tons of heavy crude oil.

In June 1990, a Norwegian tanker, Mega Borg (136,500 dwt) exploded andcaused a major oil spill while in the course of lightering operations off Galve-ston, Texas. Twelve thousand tons of its cargo of crude oil were lost overboardacross 57 miles of beaches in Texas. Four crewmembers were killed in the explosion and blaze. The 15-year-old tanker burned for five days. The smokyblaze was tremendous, and the locals demanded that it be put out. This wasdone, but the USCG, again unprepared for a spill of this magnitude, had tofly in equipment from the North Sea to stop or at least minimize the damage.Little of the leaked oil reached the coast. The tanker was later towed to theFar East and sold for demolition.

The need for better American legislation to protect against pollution fromtankers was reconfirmed in February 1990 by the unfortunate AmericanTrader (80,700 dwt). The tanker, owned by Attransco, punctured her hull byrunning over her own anchor when approaching the mooring buoy at low tidein Huntington Beach off the coast of California. Associate branches of BP ofAmerica had time-chartered the vessel and owned her cargo. More than 9,000barrels were spilt to the sea. It emerged that the water depths in the area werefour feet less than the master and the pilot had been led to believe from theircharts.

The Attorney General, Bill Lockyer, later described the accident as the worstin California for 20 years. Claims included compensation for lost opportunitiesof beachgoers and boaters who were unable to use local waters and beachesafter the accidents. After more than nine years of litigation, a settlement wasreached with the tanker owner. The shipping company agreed to pay USD 16million for the damages. The case raised the interesting issue of whether acharterer could be considered to be an operator. The court noted that this possibility should not be ruled out, but due to the settlement, the question



remained unanswered. Separately, between 1994 and 1996, the cargo owner,the tanker terminal and other involved parties had paid about USD 11 millionfor clean-up costs, biological resource damages, lost recreational uses and legalfees, etc. BP was reported to have spent about USD 250,000 a day to minimizethe spill.

Even though the money paid out and the responses to the latest spills by andlarge were more prompt than in Valdez, the efforts were in the view of the USCongress no unqualified success. The pollution damage was given substantialmedia coverage and gave a further impetus to the feelings that the tankers rep-resented a continuing threat to the environment in the waters and the coastlineof the US.

In the wake of these accidents, the interest in Alaska was revived for a pollution accident that had occurred way back in July 1987. At the time, anAmerican flag tanker, Glacier Bay (82,000 dwt) – controlled by Apex OilCompany based in St. Louis – spilled about 150 tons of oil whilst in transitfrom Valdez to the Nikiski Terminal in Cook Inlet, Alaska. The tanker was inthe process of dropping her anchor in the inlet when she struck an unknownrock, resulting in the leakage. It was later claimed that the National Oceanicand Atmospheric Administration (NOAA), had failed to chart the rocks in thearea properly.

The P&I club, the West of England Shipowners’ Mutual Insurance Associ-ation, had undertaken the cleaning in co-operation with the owner of the ship,the cargo owner and the time charterer. Because of the renewed interest forcompensation, claims were now brought before the court for the District ofAlaska. The court held that the Trans-Alaska Pipeline Authorization Act(TAPAA) had completely removed the old federal 1851 Limitation of LiabilityAct with respect to the tanker owner’s liability and tanker transportation ofAlaskan oil.

The shipowner was a member of TOVALOP. The oil company, whichowned the cargo, was a party to CRISTAL Ltd., which was backed by morethan 700 oil companies worldwide and intended to provide a last-resort fund.Compensation could only be claimed when the oil cargo in question wasowned by a party to CRISTAL.

Two hundred thirty-two claims arose from the spill. West of England paid out some USD 60 million to compensate claims from fishermen, fishprocessors and others. The amount exceeded the shipowner’s liability limitsof TOVALOP, and West of England requested reimbursement of up to USD40 million from CRISTAL. However, the claim was denied on the grounds



that written notice, in accordance with the rules of this institution, was notgiven within two years of the incident. Furthermore, reference was made toits charter that stated: “In fulfilling its obligations ... CRISTAL shall be thesole judge ... of the validity of any claim made hereunder...”

West of England opined that proper notice was given. In any case, the timebar did not apply to the circumstances of the case, and it would be “repugnantor void as contrary to public policy” if CRISTAL was the sole judge of its legalobligation. The insurer brought the claim to the Commercial Court in Londonthat held that its power of review was unrestricted under English law, and thata party was free to challenge any of CRISTAL’s findings.

However, after an appeal, the Court of Appeal’s ruling went in favour ofCRISTAL. It was held that “subject to there not being unfairness and notshowing bad faith or perversity in its determination,” the defendant was allowed to be the sole judge. The feeling within West of England was thatCRISTAL had been “using all their endeavours to avoid paying proper andadequate compensation to anyone whatever their status for as long as possi-ble.” But the Appeals Court refused an appeal to the House of Lords. Thechief executive of CRISTAL, John Hawkes, emphasised to the press that thereason for contesting the claim was in no way to resist the claim, but to avoidsetting an unwelcome precedent. The case was later settled amicably when theP&I club accepted a reimbursement of about USD 17 million to 18 millionfrom CRISTAL.

Congress passed the Oil Pollution Act (OPA90) in 1990. Up to that time, theAmerican oil pollution liability and compensation legislation embraced abroad patchwork of federal statutes and laws of various coastal states. Thelegislation was partly supplemented by the old Limitation of Liability Act of1851 – which had remained part of domestic law for nearly 140 years – andpartly the two private schemes: TOVALOP and CRISTAL.

The Clean Water Restoration Act of 1966 introduced liability for clean-upcosts for the first time. The act contained, however, no authority for courts toprovide compensation for damage private parties suffered. When CLC69 wassent to the Senate for ratification, the Foreign Relations Committee reportedfavourably on the treaty, but advised the Senate to await the pending discus-sion on the Fund Convention before further steps were taken. The messageresulted in nothing.

Instead, Congress enacted the Federal Water Quality Improvement Act(WQIA) that imposed liability on tanker owners and operators for clean-upcosts the federal government incurred, but not for pollution damage private



parties suffered. The shipowner was made subject to strict liability. The liabil-ity limits were linked to the size of his vessel. If the accident was caused by an“act of God, act of war, negligence on the part of the US Government or anact or omission of a third party,” liability was avoided. On the other hand,the limits could be broken if the discharge was a result of “a wilful negligenceor misconduct within the privity and knowledge of the owner.” In 1972, thelaw was amended to cover “hazardous substances,” as well. Thirty-five yearslater, the discussion in IMO has not resulted in an operational internationalconvention on liability caused by chemical cargoes.

The concerns of private parties about the pollution risk represented by tankerscarrying oil from Alaska along a sensitive coastline were accommodated in1973, when the Trans-Alaska Pipeline Authorization Act (TAPAA) was passed.TAPAA contained provisions imposing strict, but limited, liability on tankeroperators for all pollution damage caused, including on private property. Inthe Glacier Bay case, the Ninth Circuit Court of Appeals held:

“... TAPAA was designed to supersede any conflicting law – Because thisscheme is in irreconcilable conflict with the Limitation Act, we hold that

TAPAA implicitly repealed the Limitation Act with regard to transportation of trans-Alaska oil.”

At the time of the oil crisis in 1973-74, it was envisioned that offshore termi-nals would be built to receive large tankers that because of draft restrictionscould not safely enter US ports. Such a facility was the Louisiana Off-ShoreOil Port (LOOP). The enactment of the Deepwater Port Act in 1975 appliedto ports outside the three-mile territorial limit of the US. For clean-up costsand pollution damage within designated safety zones, shipowners and opera-tors were held strictly and jointly liable. The liability was limited, but withfew defences, to USD 150 per gross ton or USD 20 million, whichever was thelesser. On the other hand, these limitations might be broken if gross negligencecaused the discharge.

In the midst of hectic legislative activity during the 1970s, both the Nixon andFord administrations submitted bills to Congress in order to implement theinternational regimes, but in vain. President Carter placed the ratificationprocess on hold, and the Reagan administration opposed ratification partlybecause it would increase governmental spending.

The main reason for the refusal, however, was the Senate’s resistance togive up the legislative rights of the individual states. One of the first states to



provide for special compensation for pollution damage was Florida, whichimposed strict and unlimited liability on shipowners for damage caused bypollution in its waters. The state had been sued by various shipping interestsbecause it allegedly had intruded upon federal jurisdiction, but the SupremeCourt opined that so long as the federal government had not by its legislationpre-empted the individual coastal states from protecting its own waters, thestates were free to legislate.

In the light of the Amoco Cadiz and the public alarm Argo Merchant caused,Congress in 1980 was determined to update legislation to address the problem.Some states had at that time indicated a willingness to accept adequate, inter-national limits to benefit from a federal regime, provided they retained theright to maintain their own funds for well-established purposes. But the occurrence of a series of domestic disasters connected with disposal of chem-ical wastes changed the focus. The result was the enactment in 1980 of theComprehensive Environmental Response, Compensation and Liability Act(CERCLA), which established a tax-financed Superfund for removing hazardous waste sites. A main target was the cleaning of the contaminatedland-based facilities. Among the many other features was the inclusion of a liability regime for vessel operators for about 300 designated hazardous substances.

By and by, some 24 individual states had separately enacted comprehensiveoil pollution laws covering compensation for clean-up costs and/or damagesto third parties. A number of the laws created compensation funds to pay forclean-up operations. License fees, penalties, fines and/or state appropriationsfinanced such funds. Several states, including Maine, New Hampshire, NewYork, New Jersey and Florida, financed their funds in part by a tax on oil. In17 states, the liability imposed on the polluter was unlimited.

In February 1983, the US General Accounting Office presented a study thatconcluded that a complex legal patchwork of international, national and statearrangements governed ocean spill cleanup in America. It was claimed thatthe system did not effectively protect US interests from the risk of ocean pol-lution. “In general, a private American party injured by oil pollution from aship must now legally depend for compensation either on State statutes or ontort suits in the civil courts.”

The American Petroleum Institute (API) and the oil industry were frustrated



about the regulatory framework. In a June 1989 report, API complained:

“In order to accomplish its operational and logistical goals, the spiller usually must comply with a myriad of federal, state and local regulations

and ordinances. Very often compliance requires review and/or approval by a number of political agencies or subdivisions. ... In a catastrophic spill

situation, where swift and decisive action is critical, such delay can substantially increase environmental impact.”

Notes:Exxon Valdez renamed Exxon Mediterranean, which was renamed again in 2009 to Dong Fang Oceanand spent the 20th anniversary of the oil spill at a Chinese yard to be converted to a dry cargo bulker.See Tradewinds, May 26, 2000, and March 27, 2009. On the polluters Mega Borg, World Prodigy, President Rivera and American Trader, see de la Rue andAnderson: “Shipping and the Environment,” London, 1998, pp. 58, 226, 462 and 618 and John I Jacobs1989/1990 Reports. On Glacier Bay, see Lloyd’s Law Report, 1995, Vol. I, pp. 560-570, Lloyd’s ListFeb. 3, 11, 20 and Oct. 28, 1995. See also Tradewinds, April 4, 1996. On the Deepwater Port Act, seede la Rue and Anderson: “Shipping and the Environment,” London, 1998, pp. 51-53. On the complex legal patchwork of international, national and state arrangements, see the US GeneralAccounting Office: “International Oil Pollution: Current and Alternative Compensation ArrangementsAffecting the US,” February 1983 and INTERTANKO: “Survey of the US Coastal State Law,” Oslo,1995.

III. NEW RADICAL LEGISLATION AFTEREXXON VALDEZ – THE TANKER INDUSTRY IN DESPAIRThe Exxon Valdez and American Trader, followed by other accidents in domestic waters, triggered a reaction from Congress in the form of unilateralpunitive oil spill regulations.

On April 7, 1989, President Bush went on record stating: “The Alaska spillis in my judgment conclusive evidence against pre-empting state law.” He introduced a plan that included a comprehensive legislative program to addressthe wide-ranging problems associated with prevention, response and compen-sation for oil spills. New standards would be required for vessel construction,crew licensing, manning and contingency planning. Federal response capabilitywould be enhanced, enforcement authority broadened, penalties increased, research and development authorized and new liability for oil pollution damage and financial responsibility rules were to be introduced.

President George Bush

George Bush was the forty-firstPresident of the United States.Serving from 1989-1993, he wasalso a World War II veteran. Hestarted his own oil company in1951 and co-founded the ZapataOffshore Company, which firstdrilled for oil in the Texas basinand then moved on to Houston.After being elected chairman ofthe company, his ambitions turnedpolitical. He was President whenCongress rejected ratifying theIMO protocols. He signedOPA90, but regretted that the ratification failure “may weakenour leadership in the developmentof international maritime standards.”

© Ria Novosti / Boris Kaufman / Camera Press / Scanpix



Within the White House and the House of Representatives, there was never-theless a widespread desire to restore the credibility of the US with respect tocontinued cooperation within IMO. Thus, there was support for some type ofinternational solution. Secretary of Transportation Mr. Skinner, in the first ses-sion of the 101 Congress, testified before the Senate Subcommittee on Envi-ronmental Protection and argued that the Protocols would provide effectivecoverage for US citizens; jurisdiction and enforceability of US judgmentsabroad; enhanced settlement of claims; predictability and consistency of limitsand costs for ship owners and oil companies; reduced costs to the US for catastrophic spills and expanded US influence in international maritime negotiations.

But strong opposition to the ’84 Protocols was soon signalled by the Senateand in particular by Senator George J. Mitchell, Jr., a Democrat from coastalMaine. He moved to attack the administration by introducing a bill meant toset up a unique national regime for tanker traffic to the US. Bitterly opposedto any federal legislation that would deprive the coastal states of the right tolegislate in respect of environmental issues, he brushed the ’84 Protocols aside.In his mind, their scope was too limited and the liability limits far too low. Heargued that the only way the citizens of Alaska would have any hope of beingfully compensated for their losses was under Alaskan law. Had the protocolsand/or pre-emptive federal legislation been in place, Alaskans would have been unable to seek full recovery for their losses. In the wake of the Valdez spill, it was inconceivable to him that anyone would want to pre-empt State legis-lation.

Whether Exxon’s liability would have been confined by the Protocol limits ifthese had been in effect is, however, questionable. The company had left thecommand of a giant super tanker to a master with a sheet of conduct that reflected alcohol abuse. It is not unlikely that claimants in such a situationwould have argued that the owner (Exxon) acted “recklessly and with know -ledge that such damage would probably result.” This could have meant thatthe limitations in CLC would not apply. On the other hand, one may also askwhether the oil company could have escaped part of its liability by provingthat the damage resulted from the wrongful acts of the US Coast Guard, whoseradar control operation arguably amounted to gross negligence.

Speculation aside, the fact remains that nearly all environmental groups supported Senator Mitchell, including the few who initially had been sympa-



thetic to ratification. Oil was both dirty and a symbolof economic growth. The “greens” were opposed toboth, and gained an increasingly powerful voice as a re-sult of their support for a cleaner and “kinder society.”

An effort to resolve the dispute came about in Novem-ber 1989 when Congressman Gerry Studds, chairmanof the House of Representatives’ Merchant Marine andFisheries Committee, introduced a bill. The House votedin November 1989 overwhelmingly to pass Congress-man Studds’ bill, which would strengthen the federalstandards. But the bill also contained an ingenious provision letting the US join the international conven-tion - that would enable ratification of the ’84 Protocolsand yet would avoid pre-empting state laws. It wouldallow the US to participate within the IMO instrumentsfor five years on a trial basis as soon as sufficient ratifi-cations had been achieved. During this time, US nego-tiators would work with representatives from othercountries to “modify” the Protocols to bring them inline with US legislation. Although the proposal won thesupport of the administration and even from some environmentalists, the independent tanker owners qui-etly asked themselves how such a compromise couldwork in practice.

Fearing that the version with unlimited liability provi-sions would prevail, Ian McGrath, managing directorof the oil major Shell, in early June 1990 announcedthat his company would stop crude oil deliveries to theUS mainland. Shell-owned or managed tankers wouldgo no further than the marine terminal platform“LOOP” some 20 miles off the Louisiana coast in orderto limit the company’s exposure to the pollution liabilityrisks. The news caught the headlines of the finance andshipping press. According to June 12 edition of the WallStreet Journal, Shell’s reaction “will make the liabilityproblem more visible and accelerate a compromise.”

George J. Mitchell Jr.

Senator Mitchell was the major-ity leader of the US Senatewhen Congress agreed onOPA90. Before entering theSenate in 1980, he served as afederal judge and as a long-standing member of the SenateEnvironment and Public WorksCommittee, and was thus per-fectly suited to spearhead thepassage of the Act. Neverthe-less, he had to give up the im-plementation of his favouredprinciple that all parties in-volved in a pollution accidentshould be held accountable fortheir actions. A stipulation ex-onerating cargo owners (oilcompanies) was worked intothe bill before it was passed. In1994, he turned down an ap-pointment to the US SupremeCourt. Since then, he has suc-cessfully completed several in-ternational missions. Mostimpressive is his work as the USSpecial Envoy for Northern Ire-land, which resulted in theBelfast Peace Agreement signedon Good Friday 1998.

© Sebastian Scheiner / Afp / Scanpix



In a press statement, Mr. Skinner, Secretary of Transportation, expressed deepconcern that failure to ratify the treaties would drive responsible owners “fromour shores.” However, the abundant supply of bank loans combined with lessdemand for transportation had caused the surplus of tankers to grow to di-mensions never seen before. The independent tanker owners found themselvesin a market obsessed with the bottom line. Not much else mattered except thefreight rate. To no avail, voices were raised arguing that the oil industry ascharterers of tankers had a duty and responsibility to ensure that the shipsthey chartered were properly maintained and operated.

The development caused strong protests from INTERTANKO. One of itsCouncil members, Bjorn Wilhelmsen, opined that the unlimited liability ontanker owners would mean that well-established shipping companies mighthesitate to serve the US and leave the trade to one-ship companies with verylittle to lose. Thus, he felt tempted to draw a comparison with the prohibitionlaws in the 1920s:

“The comparison is not perfect because whisky is certainly a better drink than crude oil, but my point is that if you criminalise

an activity, you leave the field open to the bad guys with nothing to lose.And oil is presumably more vital to the nation than whisky.”

Although the US had taken a leading role in the formation of the ’84 Protocolsand had signed both, the Senate never consented to ratification. In late June,members of the House and Senate came together to work out a compromise.Senator Mitchell’s argument that the protocols did not provide advantagesover US federal and state law met with very little opposition. It was unani-mously agreed to drop the “joinder” provision, which had contemplated implementation of the ’84 Protocols.

A provision in the House Bill, which imposed a secondary liability on the cargoowner confined to 50 percent of the removal costs, became one of the mostcontroversial proposals. It was deleted by the conferees in order to completetheir work before Congress’ August 1990 recess. The effective lobbying of oilcompany representatives had “convinced” members of Congress that such aprovision “would have had a devastating effect on small, independent com-panies which provide home heating oil to citizens of the north east part of thecountry.”



Whereas the provision in the House Bill which had directed a secondary lia-bility on the cargo owner was deleted, Congress agreed that there would be anational Oil Spill Liability Trust Fund (OSLTF) financed from a 5-cent-a-barrel oil tax imposed on imported oil as well as oil produced in the US. A second major source of revenue was the transfers from the previous pollu-tion funds, which had been operating under the Federal Water Pollution Con-trol Act, Trans-Alaska Pipeline Authorization Act, Deep Water Port Act andthe Outer Continental Shelf Lands Act. Some revenues would also be receivedfrom other sources such as interest on the capital and penalties imposed onthe polluter.

“The reason you need a fund, of course, is maybe you may not have anExxon that has an accident; you may have a fly-by-night oil company that

cracks up on the reef with no assets. And what does unlimited liability meanfor them? Not very much. Their only asset may be the ship.”

These were the words of senator Breaux at the Senate floor debate on Aug. 3,1989. The Certificate of Financial Responsibility requirements introduced fiveyears later would prevent such incidents that he had in mind. Otherwise, the“flight by night” term may perhaps in practical life more likely be a one-shipindependent tanker owner rather than an oil company.

The one billion dollar Fund (OSLTF) would be made available to cover clean-up costs and damages not compensated by the shipowner. Its history went fouryears back in time. Congress had established a similar fund already in 1986,but had not passed legislation to bring it into effect. OSLTF would be availableto cover clean-up costs and damages not compensated by the shipowner orany other responsible party within 90 days unless the damages were causedby gross negligence or wilful misconduct of the claimant. But in “normal”cases, claimants, whose claims were not settled by the responsible party, mightseek compensation directly from the Fund, which in turn could later seek reimbursement from the responsible party by means of subrogation rights.The amount to be paid per incident was assumed not to exceed USD 1 billion.

Hence, despite diplomatic pressure and reproach from IMO and all partieswithin the shipping and insurance industries, Congress saw no reason to bringthe US laws in conformity with the Protocols.

The Oil Pollution Act (OPA90) was signed on Aug. 18, 1990, by President



Bush somewhat reluctantly, it may seem, as he after signing also felt compelledto declare that:

“In most respects the Oil Pollution Act is a responsible piece of legislation...Ultimately the threat of oil pollution is a global challenge, and the solutionswe devise must be broad enough to address the needs of all nations. There-fore I urge the Senate to give immediate consideration to the InternationalProtocols and give its advice and consent to ratification of these treaties.”

He also expressed concern that failure to ratify could create a situation:

“in which larger oil shippers seeking to avoid risk are replaced by smallercompanies with limited assets and a reduced ability to pay for the clean-up

of oil spills. We will need to monitor developments in order to protectagainst such undesirable consequences.”

Maritime governments as well as the shipping industry were distressed. Despitethe fact that no liability was imposed on the cargo-owner, the oil industry wasalso frustrated, as Congress had failed to harmonize the variety of oil spill li-abilities under the complex combination of state and federal law. In the viewof Peter H. Ghee, Mobil’s legal counsel, Congress was posed in the summerof 1990 with “a unique opportunity to resolve in a uniform manner the liability for oil spills in US waters,” but the situation was left “as confused asit had been, with no clear perception as to whether the potential exposuresunder either prior law or the 1990 Act would or would not be beyond the financial resources of tanker owners, charterers, and their underwriters.”

The oil industry’s frustration is understandable, but the same companies haddone their utmost to oppose ratification of the international regimes. The oldsaying that you cannot have your cake and eat it too comes to mind.

A few independent tanker owners followed Shell’s example and confined theiroperation to the “LOOP terminal.” One of them, A.P. Moller of Copenhagen,Denmark, told Tradewinds in December 1990 that they had adopted a policyof not serving US ports with their crude oil tankers, but would continue tocall as before with their tankers carrying clean products. But a clear majorityof the owners continued as before, including the largest independent operator,World Wide in Hong Kong, who first had told Lloyd’s List that a decision tohalt its shipments to the US probably would be made. Similar statements were



also uttered by some French and Belgian oil companies, whilst a leading tankerbroker, Clarkson & Co. in London, opined there were still enough tanker own-ers more than willing to serve the US.

Two years later, Senator Mitchell gave some lip service to international co-op-eration on environmental issues. There would be many benefits for his countryin a worldwide approach to the problems oil spills caused, he claimed. Thus,OPA90 was not a rejection of future participation in an international oil pollution regime. Instead, the law would be seen as a clear signal that any international accords must provide the degree of protection sought by theAmerican people. At the same time, he acknowledged the value of state lawliability rules that motivated the cargo interests to avoid oil spills. He pointedout that if the ’84 Protocols had been ratified when the American Traderspilled the large amount of oil off Huntington Beach, BP would have been insulated from liability, as California law would have been pre-empted:

“The Congress and the states, however, have recognised that channelling liability to shipowners and relying on recourse actions to impose liability onother responsible parties does not provide the same level of deterrence andaccountability that is provided by holding each and every responsible party

directly and fully liable for their actions ...“Much of American and English civil law and criminal law is based uponthe principle that persons are accountable for their actions. Our law usesthat accountability to create a deterrent to negligent, damaging behaviour.

The public interest is not served where charterers, operators, pilots and others who are in the best position to prevent oil spills know that they areinsulated from liability for catastrophic oil spills caused by their own gross

negligence or violation of federal regulation.”

Notes:On the development of US environmental legislation, see de la Rue & Anderson, “Shipping and the En-vironment,” London, 1998, and US Coastguard, “Regulatory Impact Analysis - Financial Responsibilityfor Water Pollution (Vessels),” CGD 91-005, June 1994. Also see B. Sandvik, “What can we learn from US law,” Marius no 218, Norsk Institutt for Sjorett,Oslo.On the exoneration of the cargo owner, Chao notes that the omission of the cargo owner was not ex-plained anywhere except in a brief statement given by Mr. Lent, a member of the House of Representa-tives. See “Pollution from the Carriage of Oil by Sea,” pp. 234-235. The full text of President GeorgeBush’s statement was sent from the White House, Aug. 18, 1990, and is reproduced in INTERTANKO’sAnnual Report, 1990, p. 23. Mobil’s legal counsellor Mr. Gee’s paper on OPA90 was presented April15-17, 1991, at an international shipping seminar at Oslo Plaza Hotel.On the reaction of tanker owners, see Lloyd’s List, June 25, 1990, and Wall Street Journal late June1990. Senator Mitchell’s article is found in “Environmental law,” Vol. 21, pp. 236-251.



IV. OPA90 & THE IMO INSTRUMENTSA few voices tried to iron out the difference between OPA90 and the interna-tional instruments. One of them was Daniel F. Sheehan, director of the U.S.Coast Guard National Pollution Funds Centre in Virginia. “The devil is in thedetails,” he argued. In his mind, the regimes were, after all, very similar. Atthe American 1995 Oil Spill Conference, he “substantiated” his view with thefollowing generalisations about the two regimes:

“Both have limits of liability for ship-owners – OPA90’s is higher. Bothhave limits that can be broken – OPA90’s is easier to break. Both describedamages that are compensable – OPA90’s are broader and more extensive,

particularly in the area of natural resource damages.Both require certification of ability to meet potential limits of liability. Both

permit third-party direct action against guarantors. Both limit policy defences of guarantors. Both have funds for damages and removal costs in

excess of shipowners’ liability and both are funded by importers.”

Mr. Sheehan’s points are perhaps valid, but only to a limited extent. A roughcomparison of the two legal systems reveals that the OPA limits increased thetanker owners’ liability exposure substantially. In the case of a tanker of 3,000gross tons or more, liability was set at USD 1,200 per grt, or USD 10 million,whichever is the higher. Thus, it is the highest figure that is chosen in contrastto the international instruments that apply the lower figure. A medium-sizetanker of 75,000 dwt (roughly 40,000 gross tons), would thereby face a liability of nearly USD 50 million, and for the largest tankers, limits would gobeyond USD 240 million. However, due to draft restrictions, the VLCCs couldnot enter US ports. These super tankers discharged their cargoes far out fromthe coast by transferring the oil to smaller tankers or to LOOP. If an accidentoccurred there, the risk of being exposed to huge claims would be considerablyreduced, as was pointed out in Shell’s press release mentioned above.

Moreover, the OPA90 defences against liability for an oil spill are weaker. Theshipowner may be “excused” only if the spill is solely caused by “an act ofGod, or an act of war” or under certain circumstances “an act/omission of athird party” or any combination of these factors. There is no reference to thedefences such as “hostilities,” “insurrection” or “irresistible natural phenom-enon.” Neither is there any exoneration of the shipowner for claims from private parties if the spill was caused by the negligence of any authority responsible for the operation of navigational aids. In such a situation, the



shipowner is exempted from claims of the Government only if the spill iscaused by gross negligence of the same Government.

Conflicts of perhaps an even more serious nature exist in relation to other liability aspects. Under the ’84 Protocols, the liability limits of a shipownercan be broken only if the damage is caused by his personal fault, committedwith the intent to cause damage or recklessly with the knowledge that suchdamage was likely to occur. In an effort to encourage responsible behaviour,OPA90 made tanker owners exposed to unlimited liability for spills not onlycaused by gross negligence or wilful misconduct of the shipowner himself, butequally on the part of any of his employees, agents, contractors, the master ora crew member. Moreover, taking into account the masses of rules and regu-lations issued by the Coast Guard and other American authorities, the shippingand insurance industries were particularly troubled. The law made it clear thatthe limitations did not apply if there was a violation of an applicable federalsafety, operation or construction requirement. Likewise, a failure to report anincident or to provide reasonable co-operation with officials in connectionwith clean-up operations would break the ceiling and expose the shipownerto unlimited liability.

V. COMPENSATION FOR DAMAGE TO NATURAL RESOURCESAt the 1984 IMO Conference, it was agreed that “speculative and frivolousclaims” should be excluded from compensation, but the definition of “pollu-tion damage” would remain wide enough to allow recovery for all reasonableclaims. To reach this goal, compensable claims were limited to costs of damagecaused outside the ship, such as damage to property and direct economiclosses, and to the cost of reasonable measures taken to prevent pollution. Fordamage to the environment, the IMO Protocol compensation was restricted“to reasonable measures undertaken (or to be undertaken)” to restore the en-vironment after the accident. According to a resolution passed by the IOPCFAssembly in 1980, compensation should not be based on “abstract quantifi-cation of damage calculated in accordance with theoretical models.”

OPA90 introduced no such restrictions. The obligation to pay for damage tonatural resources included compensation for all “lost values,” as well asrestoration of bringing impaired natural resources back to their original state.



Furthermore the costs incurred to assess such damages would be compensated.The full, legal effect of OPA90 on this issue still remains to be seen. But itseems clear that the law differs fundamentally compared with the internationalregimes.

In 1989, the Court of Appeals for the District of Columbia held that underCERCLA, so-called “contingent valuation” was an acceptable yardstick tocalculate non-use values. This meant that compensation for lost values couldbe measured by taking into account the (economic) value set by individuals,irrespective of whether they were users of the resources in question or onlypassive, potential users. In other words, what non-users were willing to payfor the availability of the natural resource seemed as relevant as the value setby users. The only two exceptions recognized by the Court were if restorationwas infeasible or when the restoration costs were “grossly disproportionate”to the diminution in the value of the damaged resources. With this approach,the shipping and oil industries, and not least their insurers, feared that levelsof liability, hitherto unimaginable, had been introduced.

In 1990, Congress gave NOAA the task of publishing rules on the assessmentprocedure to establish the scope of pollution damage. In this respect, one ofmany problems was that unspoiled natural areas of considerable ecologicalvalue often have little or no commercial value.

For several years, the international community hoped that NOAA wouldremove the most extreme feature of the law and return the issue to a practicallevel. After a delay of nearly three and a half years, the federal agency finallypublished standards for Natural Resource Damages Assessment (NRDA). Therules had many facets, one being that the “Contingent Valuation Methodology(CVM)” was authorized as a legally acceptable assessment method. The “pas-sive use” value seemed thereby to be reconfirmed as a basis for the evaluation.

Prior to OPA90, tanker owners were subject to, but less concerned with, theprospects of facing unlimited liability for removal costs and damages associ-ated with an oil spill under US state laws. While such consequences had existedfor many years, it was only after the claims against Exxon Valdez that the fullimplications were acknowledged. Thereafter, it seemed clear that there was arisk that, with a catastrophic spill, liability could exceed both available insur-ance and the assets of the responsible party. No independent tanker companyhad the financial resources or insurance to withstand the claims faced byExxon. Based on an open-ended definition of pollution damage, an oversight



of a crew member resulting in a serious oil spill could overnight enable anAmerican judge to wipe out the business of any independent tanker companysupplying oil to the US.

In a submission to NOAA dated Sept. 10, 1992, INTERTANKO claimed thatCVM would place an additional intolerable financial pressure on an extremelysmall sector of the transportation chain. It would benefit only the lawyers andother experts who would be paid millions of dollars to litigate the merits ofthe methodology.

Senator Mitchell had made the point that the threshold, as regards theamount that can be recovered from a polluter in violation of OPA90, couldbe found in only the US bankruptcy laws. Some shipowners transporting oilto America felt they were engaged in “I bet my company lottery.”

However, several members of Congress by and by concluded that certain re-alities might have been overlooked when the NRDA provisions in CERCLAand OPA90 were passed. A new bill was introduced in the House that wouldrequire resource restoration plans to be cost-effective and cost-reasonable.NOAA was requested to issue specific regulations to take care of the short-comings.

In 1997, it was reported that the US Court of Appeals for the District of Columbia had in principle approved the CVM calculation methods, but hadat the same time underlined that the courts had an obligation to independentlyscrutinize assessments for reliability and validity. Simplified computer assess-ments, without the development of actual site-specific plans, would not be allowed. Furthermore, it was held that claimants cannot simply estimate thedollar value of damages, but must present calculations showing the exact valueof lost services. The next year, NOAA proposed new regulations along thelines the Court decided.

The Contingency Valuation MethodologyAn illustration of the shortcomings of an extreme implementation of the con-tingent value principle was presented at a public meeting of the ContingentValuation Panel in August 1992:

“If citizens are polled regarding the value of a single dolphin killed by pollution, the average “value” would, for example, be maybe ten cents.



Consequently, if 100 dolphins are killed, the harm valued by that single surveyis 10 dollars. Multiplying this number with the total population of the US –about 260 million – the damages from the killing of these dolphins would bean implausible USD 2.6 billion. Even in the event that a recommended dis-count factor of 50 percent is used, the damages would still amount to an un-believable USD 1.3 billion, which is USD 13 million for each dolphin killed.”

Notes:On National Resource Damage and Restoration Costs, see de la Rue & Anderson, “Shipping and theEnvironment,” London, 1998, pp. 503-558. On the “Contingent Valuation Methodology” (CVM), see“Maritime Update” issued by Eckert, Seamans, Cherin & Mellot, Washington, Nov. 6, 1995, and Nov.18, 1997. For Ohio v. Department of the Interior, see DC 1986 and Collin de la Rue & Charles Anderson, p. 526.

VI. RESPONSIBLE PARTIES – CHANNELLING OFCOMPENSATION CLAIMSAt the 1984 IMO Conference, Admiral Hollingsworth stressed that the suggested channelling concept was unfamiliar in US law. Also, France had objected strongly to a text that seemed to provide virtual immunity upon anumber of identified parties.

The formulation would be unacceptable “if inadequate amounts of liabilitywere adopted.” Several other delegations were of the same opinion, includingCanada, Greece and Poland. The final result was nevertheless that claims forpollution damage would be directed against the ship owner alone.

The US Congress decided that shipowners should be the responsible parties,but not all other parties in a position to prevent oil spills would be insulatedfrom liability. Thus the responsible parties identified were – “in the case of avessel – any person owning, operating, or demise chartering the vessel.”

The Act gives no further guidelines with respect to the interpretation of a“responsible party,” but as the shipowner may be exonerated if the damage iscaused by an omission or act of a third party, this third party may under suchcircumstances be regarded as a “responsible party.”

The person operating the vessel – the operator – is mentioned expressly in thelaw. Based on the rulings of US courts, it seems clear that people or corpora-tions that exercise day-to-day management or control over the vessel are



operators. Many tanker owners have entered into contractual arrangementswith professional management companies and left the operation of their fleetto them. If such a company has assumed the operational responsibility in respect to seaworthiness, maintenance, crewing and other functions relevantto general safety, the company may fall under the term “operator.” The term“operator” has been liberally construed by US courts under CERCLA, but theCoast Guard has in the Preamble to the rules on financial responsibility in1994 presumed that traditional voyage or time charterers are not covered bythe term “responsible party” in OPA.

In 1996, Ms. Chao in her book, “Pollution from the Carriage of Oil bySea,” commented on the question as follows:

“... given that various persons may exercise some degree of control over theship to a greater or lesser degree, it remains to be decided what degree orcontrol would be sufficient to render a person liable as an operator. It wasunderstandable that several categories of persons within the oil industry

were concerned about whether they might be construed as being operators.”

At the proceedings following the American Trader, the time charterer and the cargo-owner, BP Oil Shipping and BP Oil Supply, argued that the companywas neither owner nor operator. The argument was rejected, as it was foundpossible “for the plaintiffs to establish that the charter by BP makes it an operator under the statute” by both the district court and the court of appeals. The case was heard under TAPAA, but in this context this is of limited conse-quence as long as the act contained the same provision as OPA90, makingboth the owner and the operator liable. Had the ’84 Protocols been in placein the US, the time charterer – BP Oil Shipping – would have been insulatedfrom liability. Based on the two court findings in the American Trader case, itcannot be ruled out that following a future pollution disaster in US waters, atime charterer may be regarded as an operator and responsible party, as well.

For the shipping industry, a major concern has been whether a corporationwith multiple tanker companies could go down the drain altogether if onlyone tanker faulted and polluted the American coast. Thus, foreign tanker owners raised the question of whether single-asset shipping companies wouldprovide protection against a veil-piercing/alter-ego inquiry in the event of a catastrophic spill. Another important question was whether individual shareholders and/or members of the board of directors could be held personally liable.



As a general rule, there is a presumption of separateness between a corpo-ration and its owners. Nevertheless, this is no more than a starting point, or arule with important exceptions. The legal battle which started after thegrounding of Amoco Cadiz in 1984 was in the back of the industry’s mind. Itwas a battle that carried on until the litigation finally concluded in 1992,nearly 14 years after the accident.

Both the Federal District Court and the Federal Court of Appeals held AmocoInternational and Standard Oil Company responsible. The claimants wereawarded USD 61 million, plus interest. Standard Oil had exercised such control over its subsidiaries that these entities were considered to be mere instrumentalities. The management had failed to maintain the steering gear inorder, and the maintenance had been delayed to avoid disturbing in the commercial operation of the tanker. The judge pierced the corporate veil anddecided that the parent company had been substantially involved in the operation, and consequently had contributed to the damage. Thus the judg-ment led to involvement and controls of operation being critical elements.

Following legal advice, the Norwegian shipowner Westye Høegh consideredsplitting up his company into separate units. He controlled a large fleet, ownedand managed by the company Leif Høegh & Co. AS. In October 1990, thepress was told that because of the potential liability OPA90 imposed, the parent company would no longer exercise full control over all the activities.Later, the company sold its crude tankers and combined carriers to morecourageous operators.

At the same time, two Norwegian shipping institutions approached a NewYork law firm, asking for a legal analysis on the potential liability of share-holders, partners, investors and officers in shipping companies. They wereinformed that: “A shareholder who has the ability to and exercises substantialcontrol over the Company takes a larger risk than one who, having the abilityto do so, accedes to greater independent judgement by the company throughits officers and directors.”

In September 1998, the Oil Spill Intelligence Report informed that the USSupreme Court had ruled that a corporate parent might be culpable only if it“actively participated” in operating the facility responsible for the pollutiondamage.



OPA90 does not specifically establish director or officer liability for pollutiondamage. However, as the definition of the responsible party does not excludeindividuals, such officers may be at risk. One may assume, however, that of-ficers or directors will risk liability themselves only if it is proved that theyknew of an unseaworthy condition of one of the company’s tankers and failedto remedy it, with the result that a major oil spill occurred.

OPA90 explicitly states that demise charterers are responsible parties togetherwith the shipowners. Such charterers are commonly called “bare boat charterers.” The characteristic of such a contractual relationship is that a shipis leased on a “bare boat,” without a crew. The charterer will thus engage themaster and crew and have full control of the operation unless he prefers toengage a professional management company. In short, he will be in commandand is thus very much in the same position as the owner.

In the drafting stages, OPA90 was to contain an exclusion from liability forlenders, but the exception was dropped. A particular problem is therefore thepotential liability for financiers or lenders who have chosen to take control ofa shipping company that has failed to fulfil its obligations. In the case United States v. Fleet Factors Corp., an appeals court held that under CERCLA, alender could be held liable if he actively participated in the financial manage-ment of a company to such a degree that it influenced the company’s treatmentof hazardous wastes.

On May 10, 1991, The Journal of Commerce addressed the problem and announced: “Ship pollution rules send banks running for cover.” The paperreported that banks were buying liability insurance for their entire shippingportfolios as their pollution litigation risks now had increased. Even with noexplicit provision in OPA90, it was feared that if a bank or any other lenderaffirmatively decided to take over the operation of a shipping company to sucha degree that it de facto undertook the role as the ship manager/owner, it mightbe seen by American courts as the responsible party.

In the same way, a mortgagee could not feel certain any longer that he wouldbe shielded from pollution damages if he chose to participate in managing theship in an active way, for example by supervising the employees or directorsof the owning company. Peter Stokes, a maritime consultant in London,painted a picture of the risks for banks in an article in Lloyd’s List, Dec. 31,1990:



“If, for example, we take the case of a vessel owned by a one-ship companyin Liberia and financed mainly by debt rather than equity, we can be reason-ably sure that claimants in the US will not waste their time trying to pursue

the beneficial owners, unless they are known to be a substantial group. Instead they will be inclined to pursue the mortgage bank, arguing that theequity content in the vessel is negligible and the true controllers of the ship

are the secured lenders.”

Notes:On “responsible party,” see de la Rue & Anderson: “Shipping and the Environment,” London, 1998,pp. 31-32, 179, 616-618, 665-667, 687-690 and W. Chao: “Pollution from the Carriage of Oil by Sea,”p. 235. See also Hazardous Cargo Bulletin, April 1988, and the legal counsellor Lasse Brautaset’s article:“Piercing the Corporate Veil” in Nordic Defence Club’s bulletin for 1990. The mentioned unpublished memorandum to Norwegian shipowners is dated Feb. 1, 1991, and is writ-ten by the New York lawyer Richard L. Jarashow.

VII. CERTIFICATE OF FINANCIAL RESPONSIBILITY (COFR) According to a special section in OPA90, any vessel calling US waters has toestablish evidence of financial responsibility to meet the maximum amount of liability to which the owner could be subjected to under the law. It was leftto the “Secretary” to declare further regulations for this purpose. The job toprovide evidence of financial capability to satisfy liability claims for removalcosts and damages was in turn left to the US Coast Guard, which faced noeasy task in its dealing with the shipping industry. The “maximum amount ofliability” was in many quarters within the shipping industry feared to mean aliability without limitations and as such the requirement was unknown andunacceptable.

As usual, tanker owners looked to their P&I clubs for liability insurance andassistance. The mutual clubs were owned by a variety of owners: Independenttanker owners, oil company tanker owners, owners of dry cargo ships, liners,passenger vessels, etc. The major clubs were all part of the International Groupof P&I Clubs that at the time insured the liability of over 95 percent of theworld’s ocean-going tonnage. They in turn reinsured most of their coveragewith Lloyd’s London, a marketplace made up of about 27,000 individual underwriting members.

The boards of the various clubs in the International Group responded and of-fered tanker owners a modest coverage of USD 500 million as protection


against pollution claims in the US. An additional coverage of USD 200 millionwas also obtained elsewhere in the commercial market.

The International Group had fundamental difficulties providing further assis-tance, including acting as guarantors under the harsh conditions of OPA90.To accept the exposure as guarantor by issuing certificates of financial respon-sibility along the lines suggested by the US Coast Guard would mean that theclaimants could sue the clubs directly (direct action). It was claimed that sucha procedure conflicted with a basic principle for this type of insurance, theessence of which was that the shipowner would remain primarily liable to theclaimant, but would be indemnified by his club for the claims he had paid(“pay-to-be-paid principle”).

Another important P&I principle was that any claim for indemnity would be subject to the terms of the insurance contract. If the club in question had adefence under the tanker owner’s insurance contract, the obligation to indem-nify the shipowner ceased. Such defence could include that the owner hadfailed to pay the insurance premiums, failed to maintain the insured tanker inclass or failed to report information material to the insured risk.

The implication of the guarantor role combined with “direct action” meantthat the clubs could be sued directly in US courts and be held directly liablefor the consequences of a pollution incident. Would an American judge in aheated situation respect statutory limits in the law where the dollar amountswere in the range of the Valdez catastrophe? Due to the non-pre-emption ofstate liability laws, US courts had ample opportunities to find reasons for imposing liability in excess of the OPA limitations. An additional risk wasthat insurers’ conduct – not only the polluters – could become an issue in thelitigation. The clubs’ final objection was that they had a duty to their wholemembership, not only to tanker owners, to preserve – and not jeopardise –the mutual capital base by exposing it to open–ended liability claims undernational laws.

When Terence Coglin, on behalf of the clubs, testified in November 1991 before the House Merchant Marine and Fisheries Subcommittee, he stressedthat the clubs had: “consistently stated that the position that they would notprovide certification under any law which differed markedly from the 1984Protocols ... The clubs believe the reinsurances which they obtain from thecommercial market, and which are vital to their coverage, would be imperilledby the giving of certificates under OPA.”




His statement was confirmed at the same hearing by a marine underwriter atLloyd’s, Richard Youell, who claimed that:

“We at Lloyd’s wish to respond in a constructive fashion to the insurancerequirements which arise anywhere in the world. However, it is impossibleto justify employing our capital and resources in an insurance environment

where some of the fundamental principles of insurance practice are notallowed to operate.”

The implementation of the requirements for financial responsibility, COFR,

Wilbert Joseph Tauzin was born in 1943, elected to US Congress in 1980 and was chairman of the Subcommitteeon Coast Guard and Navigation at hearings on the OPA90 - proposed rules for evidence of financial responsibility(COFR). In November 1991, his committee listened to the statements presented by the insurance and tanker in-dustry, but was not impressed.Bill Clinton was President of the US from 1993 to 2001. During this period, the US Oil Pollution Act (OPA90)was fully implemented.Daniel F. Sheehan was the first Director of the United States Coast Guard National Pollution Funds Center whenit was established in Arlington, Virginia, in 1991. The mission of the center set up in accordance with OPA90 wasto provide funding for oil-removal actions, initiate damage assessments, compensate claimants, recover fundsowed by responsible parties and certify the financial responsibility of vessel owners and operators.Tormod Rafgard was born in 1937. He joined INTERTANKO after the inaugural meeting in October 1970. Rafgard served as the manager of the association during the first 25 years until the fall of 1995, when he joined a law firm before he became a judge in a Norwegian Appeals Court the next year.

Wilbert Joseph Tauzin, Bill Clinton, Daniel F. Sheehan and Tormod Rafgard

© Lloyd’s List



was delayed time and again because of the protests. In a statement in earlyNovember 1991, Admiral Appelbaum of the National Pollution Fund Centretried to justify the COFR requirements. He told Lloyd’s List: “We are tryingto be as flexible as possible.” He insisted that “direct action” was not at all anew concept; it was a feature of TAPAA and CLC69 as well. If a responsibleparty’s liability limit was broken, the guarantor would still only be liable –under direct action – to the limits of the guarantee, he claimed.

Despite such comforting explanations, scepticism prevailed. The spokesmenfor the industry had probably not forgotten that “direct action” was – as Appelbaum had said – accepted in principle already when CLC69 was agreedon in Brussels in 1969. But the IMO limits seemed much more reliable andfar more “solid” to shipowners. In any case, the insurance coverage offeredwas grossly inadequate to cover a catastrophic spill that was bound to happenin US waters sometime in the future.

Some tanker owners still wanted to “boycott” the US. However, their organ-ization was placed between “a rock and a hard place,” as many other ownersfound that the risk of a total catastrophe had been reduced to acceptable levelsby way of the increased USD 700 million insurance coverage. Miles Ku-lukundis, chairman of a leading shipping company, London OverseasFreighters, was one of them. At a conference in Genoa, he proclaimed that:“With additional cover ... and some minor structural changes, we are satisfiedas things stand today not only to fulfil our charter commitments, but also toincrease our involvement in the US trade.”

When Mr. Kulukundis later was elected as the chairman of INTERTANKO, alarge group of members argued that COFR should be replaced by a mandatoryinsurance scheme providing cover for a “worst case discharge” as defined inOPA90. Because funding beyond the market capacity was required, Congresswould, according to the proposal, establish a Mandatory Excess Insurance Fa-cility (MEIF) which would be authorized to issue federal debt certificates tosecure the capital required. The “facility” would provide additional oil pollu-tion coverage above the coverage obtained from the clubs. It was estimatedthat a total of USD 2 billion to USD 3 billion might be available if the US Government accepted the concept. The financing would in the first place betaken care of by the owners themselves who, when calling US ports, wouldpay premiums to MEIF as port taxes to be refunded by the charterers (oil com-panies) through the freight rate. Ultimately, the cost would be passed on to



consumers. The federal government’s participation in the scheme would byand by diminish as the public debt was repaid.

The plan was met with little enthusiasm in London, which remained the ship-ping centre of the world. In the opinion of the UK Chamber of Shipping, thescheme was found “unworkable - and naive in the extreme.” Influential voicesin the institution recommended that their members should give “no supportto the Norwegian/Greek proposal, but refrain from criticising it unless pro-voked.”

When the so-called “Regulatory Impact Analysis” on the COFR was finallyprepared and published by the USCG in June 1994, it concluded that of alloptions available, MEIF would be the most expensive. Furthermore, ifadopted, it would require fresh legislation and probably a substantial imple-mentation delay. Nevertheless, there were some positive elements in the pro-posal, so the USCG concluded diplomatically that “it deserved further study.”Why not? In practice such time-consuming exercises were never in the cards.

Several business proposals had meanwhile been introduced to overcome theimpasse stubborn shipowners and their insurers caused. A potential “COFRMarket” alternative to the traditional P&I coverage started to emerge duringthe spring and early summer of July 1994. Two commercial entities as well asa number of so-called “surety companies” came forward and declared thatthey were willing to provide the required guaranties without further delay. TheUSCG was also delighted. On July 1, 1994, the agency after lengthy hearingsand informal discussions with the industry published its long-awaited but con-troversial Interim Final Rule to implement the provisions concerning financialresponsibility.

The rules provided that the owner of any tanker calling US ports after Jan. 1,1995, had to procure a COFR by the end of 1994. The USCG, conscious ofthe importance of keeping the oil flowing into America, quietly allowed a moreflexible interpretation of the rules than anticipated. It was clarified that appli-cations for certification did not have to be submitted to the USCG by the endof the year for tankers that were going to call months later. So in the last hoursof 1994, two alternative guarantee offers emerged from the scramble. Theywere made available by commercial interests under the names “First Line”and “Shoreline Mutual” who both had identified COFR as an interesting business opportunity.



First Line offered to be accountable for the entire amount of financial responsibility for each owner or operator. Premiums would be based on thetype of operation and vessel as well as the operators’ prior shipping record.Shoreline Mutual resembled a P&I club, but covered only US pollution risks.

The Coast Guard showed further flexibility when the financially stronger ship-ping companies were allowed to set up guaranty corporations with the solepurpose of qualifying for COFR. The method was developed by Mobil andadopted by Shell to cover the liability for their large tankers. A few foreign in-dependent tanker owners such as A.P. Moller, Bergesen and Stolt-Nielsen withsubstantial assets in the US adopted the same solution. Moreover, American“bonding companies” soon offered their co-operation.

Thus, the immediate “technical” problem was solved – albeit it being a verycostly solution – thanks to the flexibility of the parties involved. Tanker ownershad to pay the special P&I oil pollution premium when calling US ports in addition to the “COFR premium.” The exposure to the potential unlimitedliability led to a continued discussion about whether the P&I coverage couldbe raised to USD 1 billion. This took time, but in March 2000, it was reportedthat following a decision of the International Group, the clubs would providemembers with coverage up to USD 1 billion for each accident in respect to aship entered by an owner.

Notes:In January 1995, Luke Readman, a director of Thomas Miller P&I, elaborated in an article in Lloyd’sList about why the P&I clubs rejected the “OPA guarantor role.” In his opinion, it was conceivablethat the US oil pollution risk would become genuinely uninsurable. See also the Hearing in the House Merchant Marine and Fisheries Subcommittee on Coast Guard andNavigation, Nov. 6, 1991, serial no. 102-47, pp. 29-46, where the two English insurance experts, Mr.Coughlin and Mr. Youell, testified. In April 1992, the Greek shipowner Mr. Kulukundis opined that his company, London OverseasFreighters, would continue to call US ports despite the new liability imposed on shipowners. See Lloyd’sList, April 9, 1992. He (off the record) added that his company – contrary to many other owners –avoided calling on Kharg Island, which certainly was more than risky.The Norwegian shipping director of Cosmos, Bjorn Wilhelmsen, looked at the problem from a differentangle: “My lawyers have read the 100 pages of uncertainty (that constitutes the Act) and told me thatthey see little risk that I will be held personally liable or ruined and be sent to jail. But why should Itake any risk at all?” (Extract from a speech given at a Marine Log seminar in Washington, DC, on thenew legislation. See Seatrade Business Review, Nov/Dec. 1990)For the “Mandatory Excess Insurance Facility – MEIF” designed by Mr. Wilhelmsen, the negative reac-tion in the unpublished UK Chamber of Shipping Report was a major blow to the efforts of the largegroup of independent tanker owners who had put forward the scheme.



VIII. PREVENTION IS BETTER THAN CURE – TECHNICAL REQUIREMENTSThe rules on liability enter the stage when administrative and operational control have failed to prevent damage.

In light of the growing environmental concern and the projections for increased oil import, OPA90 required that rulemaking should be undertakenon a great number of pertinent issues to enhance safety and reduce the pollution risk.

Obviously inspired by the Exxon Valdez experience, a new stipulation was introduced whereby the master could be removed if the next two most seniorofficers believed that he was under the influence of drugs or alcohol.

A more practical component of the Act’s measures to prevent and minimisethe impact of oil spills was the requirement that owners/operators of tankerswould submit their own contingency plan. OPA90 did not provide much guid-ance exactly on what the legislators had in mind, but eventually the USCGpresented the suggested rules. By February 1993, tanker owners trading toevery port and terminal in the US were required to lodge detailed contingencyplans to cover their ships in the event of any oil spill – ranging from the small-est spill to a catastrophic accident: “worst case discharge.”

The demands were complex, and the costs had to be borne entirely by theshipowners. The USCG instigated now for the first time “a rulemaking-by-negotiation process (reg. neg)” to enlist assistance in formulating workableregulations. INTERTANKO and one other overseas shipping organizationwere invited to participate in the 26-man committee composed of industrygroups together with state and federal representatives. Tanker owners wouldhave to contract US “oil-spill-removal organisations” in the various geograph-ical locations where their tanker would trade and appoint a “qualified individual (Q.I).” with sufficient experience to handle any emergency to thesatisfaction of USCG. The Q.I. would be available on a 24-hour basis and cooperate with a “Federal On-Scene Coordinator.”

During the negotiations, the tanker owners in particular stressed the inadvis-ability of using ship crews to undertake clean-up activities, on the groundsthat they would be more effective when carrying out traditional duties onboard– e.g., damage control, stability, stopping oil flow and reporting the discharge.



The final rules concurred with this view. As no time extension was given withrespect to implementation, tanker owners once again felt squeezed from allangles.

Existing tank vessel design standards were found to be inadequate. Apart fromthe liability provisions, none of the new rules proved to be more controversialthan the double-hull requirements. Steel is the highest-priced item on a tanker.Mr. Nalder points out in his book, “Tankers full of trouble,” an extra ton ofsteel in the hull means roughly that the tanker can carry one less ton of oil.Unless the administration found that equal or better protection would beachieved by other structural arrangements, OPA90 required that all newtankers should be built with double hulls and double bottoms. A second hullhad the obvious advantage in case of groundings and collisions, as puncturingone single hull would not allow oil to escape. Existing tankers were requiredto be retrofitted with double hulls according to a phase-out schedule based onage, the latest to be done by 2010. For tankers trading to offshore terminals,the time limit was 2015.

The advantages of double hulls in so-called “low-energy accidents” were gen-erally accepted by the industry as an expensive solution. If a tanker groundedwith low speed on a sandbank, at least the inner hull would remain intact. Butthe industry opposition, fronted by the Greek shipowner Mr. Embiricos,claimed that double hulls were counterproductive in the event of “high-energyaccidents” when for example a large tanker grounded on a rocky beach orcollided with another vessel at a certain speed. Most of the serious oil spillsprior to OPA90 were caused by explosions/fire/structural failure. Double hullscould increase the explosion and fire hazard, it was argued. Moreover, struc-tural failures would multiply as a consequence of the increased maintenanceburden. The length of a super tanker approximates the height of the EmpireState Building, with the depth equal to a 10-story building. Inspections of suchcolossal additional areas meant serious personnel safety risks. Finally, in theevent of a grounding causing penetration, there would be a loss of buoyancythat would make the tanker more difficult to save. Thus it would be wrong to“freeze technology” by double-hull requirements.

Instead the so-called “Hydrostatically Balanced Loading systems (HBLS)”were promoted. The concept was based upon ideas presented from varioussources including two Americans, the naval architect George Blake and theship-owner C.S. Conway. Both had separately concluded that according to the



law of physics, hydrostatic pressure was a means to reduce or prevent oil outflow resulting from bottomdamage or damage to the side tanks. The oil would runout of the submerged tank, opening only if the interiorpressure of the oil at the opening was greater than thepressure of the seawater outside at the same point. Provided that the cargo tanks were not fully loaded, theoutside pressure of the seawater would then prevent oiloutflow, it was argued. One of the HBLS variations, theso-called “Mid-Deck tanker,” was promoted by theJapanese shipyard Mitsubishi Heavy Industries.

Before the final rules were announced, a total of 17 design concepts were evaluated by a committee set upby the National Research Council. The majority viewpresented in 1991 was that no design could be identifiedas superior to the double-hull solution for all accidentscenarios. HBLS were untested, and their effectivenessdepended on “the operator’s strict adherence to rules,rather than on a permanent feature of vessel design andconstruction.”

More than nine years after Exxon Valdez, in July 1998,the environmentalist Sally Ann Lentz in a hearing in theHouse of Representatives claimed that the USCG haddemonstrated a remarkable reluctance to impose anymeaningful measures on the existing fleet of single-hulltankers. The opposite view was once again presentedwhen Senator Breaux spoke up in the Senate andopined: “ignoring new, innovative technology which hasbeen developed since the passage of OPA90 exhibits badjudgement and, simply put, is bad policy.”

After a new round of consultations, the USCG an-nounced its final word in April 1999. Double hulls hadcome to stay. No extension of the time limit for doublehulls would be granted.

Shipowners realized that double hulls were the config-

(Seigo) Shigeyuki Suzuki

Shigeyuki Suzuki was a directorof the Japanese shipping giantMitsui O.S.K. Lines Limitedwhen he was elected Chairmanof INTERTANKO in 1989. Hewas the first Japanese to chairan international shipping asso-ciation. It is arguable that ifthere ever was a time not tovolunteer to take over such apost, this must have been it. ButMr. Suzuki completed his three-year term in 1992, promotingthe view of independent tankerowners in Washington, DC, onthe problems the Exxon Valdezcatastrophe caused and the sub-sequent implementation of thenew and radical US Oil Pollu-tion Act of 1990. The views ofhow tanker owners should reactto the multiple regulations is-sued under the Act were in noway homogenous within themembership. But Mr. Suzuki’smessage that accidents happennot because of lack of regula-tions but lack of compliancewith the existing rules and thatquality must be paid for wasshared by all members.




uration at least for the next decades. A number of double-hull tankers wereordered. The first VLCC with the new design, Arosa, was ordered by a Greekshipowner, Lykiardipolu & Co. Ltd., and delivered in Japan in January 1993.The next VLCC, Eleo Maersk, was ordered by A.P. Moeller and built at LindoeShipyard in Denmark. In 1997, however, a large Swedish tanker, Stena Con-voy, was converted and certified for HBLS.

In the meantime, the existing single-hull tankers continued to trade. Mid-2007,Tradewinds reported: “Large charterers take single hulls. Some big names havetaken more than 400 single-hull tankers on charter this year. ExxonMobil, theUS oil group at the heart of the Exxon Valdez spill in Alaska which led todouble hulls for tankers, is still one of the biggest charterers of single-hull tonnage...”

Notes:On the discussion on tanker design, see National Research Council’s “Tanker Spills: Prevention by design” published by the National Academy Press, Washington, 1991. See also E.Nalder: “Tankers fullof trouble,” pp. 216-219 and Philip A. Embiricos: “The quest for the environmental ship.”About the first VLCC built with double hulls or converted to hydrostatic balanced loading, see Dr. Ray-mond Solly: “Supertankers – Anatomy and Operation,” Witherby & Company Ltd, London, 2001, pp.409 and 563.

IX. OSLTF IN TROUBLEThe five-cent OSLTF import tax imposed on the oil cargo was suspended in1993, and the authority to collect the tax expired at the end of 1994.

During that year, the Fund was down to USD 842 million, mainly becauseof an oil spill on Nov. 26 in the Delaware River caused by a Cyprus single-hull tanker, Athos I. Some 30,000 gallons of heavy Venezuelan crude oil leakedout. The US Coast Guard warned that OSLTF was likely to be exhausted byfiscal year 2009 if the present rate of depletion continued unchecked.

Then the largest spill in US waters since Exxon Valdez occurred in November2000, when the oil tanker Westchester lost power and ran aground near PortSulphur in the Mississippi River, south of New Orleans, Louisiana. Five hun-dred sixty-seven thousand gallons of crude oil went into the river. Four yearslater, a major December storm pushed a dry cargo vessel onto a rocky beachin an Alaskan bay. The vessel broke in two, and 337,000 gallons of oil werereleased. In May 2005, the British shipping magazine “Fairplay” brought details about OSLTF and the tax to be paid by the oil industry:



“The US Congress is trawling for money, which means that the maritime industry had best watch its wallet. Two key programmes need funding

sources. USCG warned on May 12 that the OSLTF would be bankrupt by2009. Then a key senator suggested taxing imports to fund maritime

security efforts. The spill trust set up by OPA90 is the ultimate insurer forclean-ups in US waters. It has had more than one billion in its coffers,

but rising costs, compounded by a rash of major spills, have diminished the Fund.”

By the Energy Policy Act of 2005, Congress reinstated the import tax and increased the maximum size of the Fund to USD 2.7 billion. Well aware ofmisgivings from the industry that the current rules might result in liabilityclaims out of all proportion to the losses suffered, Congress also passed a provision to the effect that no more than USD 500 million of governmentmoney would be available per incident for natural resource damage expendi-tures in the future.

To alleviate the oil industry further, the House of Representatives passed a billin 2005 raising the liability limits for shipowners’ single-hull tankers by 2007,with nearly 100 percent and roughly 50 percent for double hulls.

Notes:On OSLTF, see Oil Spill Intelligence Report, May 19, 2005, and the USCG National Pollution Centre,University of Delaware’s Internet, reported in 2006.

X. DEEPWATER HORIZON OIL SPILLThe US Oil Pollution Act of 1990 limits the liability of an offshore drilling facility for non-clean-up costs of USD 75 million unless gross negligence isproven. All removal costs are additional. When the suggested liability ruleswere discussed in the US Senate 30 years ago, four Senators expressed deepconcern: Chaffe, Lieberman, Graham and Durenberger. They stressed that ac-cidents occurring with Outer Continental Shelf (OCS) facilities might be in-frequent, but like airline tragedies, they will be catastrophic. The size of sucha spill might be enough to fill hundreds or even thousands of tankers the sizeof the Exxon Valdez, they argued. Moreover, leakages will be particularly difficult to control. To weld steel plates below the water line of a leaking supertanker is an extraordinary, but still a minor, problem compared to efforts tocap a well that has blown out several miles beneath the ocean surface. Two



OCS spills were used to illustrate the thrust of the statement: The Santa Bar-bara blowout in 1969 and the even more dramatic “IXTOC I spill” (3.3 mil-lion barrels), which occurred 20 years later, leaking more than ten times asmuch oil in the Gulf of Mexico as was lost in the grounding of Exxon Valdez.

The Deepwater Horizon oil spill, also known as “the BP oil spill” or “theMega Gulf of Mexico oil spill” occurred on April 20, 2010, in the MacondoProspect reservoir in the Gulf of Mexico. The culprit was no tanker and fallstherefore – strictly speaking – outside the framework of this book. But the disaster overshadowed by far any other accidental spill in the history of the oil industry and cannot be ignored. The leaking oil stemmed from the explosion of a nine-year-old oil-drilling rig, killing 11 platform workers andseriously injuring 17 other workers onboard. The other workers were evacu-ated by lifeboats or airlifted by helicopter from the rig that was located about66 km off the Louisiana coast. The damaged Horizon, owned by a companynamed Transocean and leased to BP, sank, dragging its equipment and pipesto the bottom of the ocean 1,500 meters below. (The world’s biggest oil spill,however, was intentional and happened in Kuwait during the Gulf War, whenIraqi forces dumped an estimated six billion to eight billion barrels of oil intoP.G. to set it on fire to stop the progress of US forces.)

President Obama soon pledged that if laws were broken, the responsible wouldbe brought to justice. The Justice Department was then focusing on criminalcharges under federal legislation including the Clean Water Act and the OuterContinental Shelf Act as well as other laws aimed at the protection of endan-gered species. Moreover, it was considered to pursue charges under the Sea-man’s Manslaughter Statute to address the workers’ deaths.

In BP’s initial exploration plan in March 2009, the oil company announced“it is unlikely that an accidental spill would occur.” No adverse effects wereexpected for the fishing industry. But they happened. It took close to threemonths to stop the leak after Deepwater Horizon had released an estimated4.9 million barrels of oil – or around 700,000 tons. On its way, the oil causedextensive damage to marine wildlife and to the fishing and tourism industries.In early May, the US Coast Guard estimated that 170 vessels and nearly 7,500personnel – with an additional 2,000 volunteers – were engaged in the effortsto protect the coastline and marine environment. The same month, the federalgovernment declared a fishing ban covering more than one third of the MexicoGulf. In August, the fishing ban was lifted in some areas. In the meantime, a



Taiwanese super tanker retrofitted as an oil skimmer was found useless to collect any significant amount of oil.

The US Government named BP as the responsible party, holding the companyaccountable for the pollution damage as well as all clean-up costs. BP, owning65 percent of the Macondo Prospect, was the operator and the developer ofthe Prospect. The other owners were Anadarko Petroleum Corporation with25 percent – the largest independent gas and oil operator in the US – and Mitsui, Japan, with 10 percent. The three partners had contracted a companynamed Halliburton Energy Services to do the well cementing and other installations on the rig.

By July 30, the oil appeared to have dissipated faster than originally expected.Warm weather accelerates the evaporation and microbes’ consumption of oil.BP was, however, criticised for having failed to disclose the amount and effectof the chemical dispersants used to dissolve the oil. The US EnvironmentalProtection Agency (EPA) feared that the detergents used could reduce oxygenlevels and kill microbes in the already-reeling Gulf. It did not help that BP andalso the US Government restricted the media’s access to the spill area. In earlyAugust, the EPA voiced the opinion that the dispersants did no more harmthan the oil itself and that they stopped a good deal of the oil from reachingthe coast by making it break down faster.

Horizon was still a major disaster. But arguably, there were some “extenuatingcircumstances.” Unlike the Valdez oil, the Gulf oil is light-degradable. The oilfrom Horizon was certainly of a heavier blend than most of the oil drilled offLouisiana. But the water there is very warm, which has helped bacteria breakdown the oil. Moreover, the heavy flows of Mississippi water helped to keepsome of the oil away from the coast and finally – not to forget – the oil is apart of nature, and nature in the Gulf area in this respect takes care of itselfbetter than in chilly Alaska.

Several US agencies including the USCG are investigating the accident. Congressional committees arranged hearings. Some crewmembers testified in federal hearings that several alarms had been either bypassed or disarmed onthe orders of rig officials. In early August, BP published the first comprehensivereport about what had gone so very wrong. According to the report, it wasevident that no single factor caused the explosion and that a series of mechan-ical errors and human failures by BP’s own crew had been committed. The



incoming CEO, Bob Dudley, stated that the explosion was a shared responsi-bility among several entities. The allegations included that the cement job wasbad, the blow-out preventer did not work well and pressure tests were misread.But no admittance of gross negligence or reckless behaviour, which would haveopened the door to unlimited liability, were forthcoming.

However, Transocean announced that the report was self-serving and rejectedthe accusations. Halliburton, which did the well cementing, said that therewere a number of inaccuracies in the report. The work they had undertakenwas in accordance with BP’s specifications. BP’s partner, Anadarko Petroleum Corporation, was also very critical. Its CEO, Jim Hackett, went on the recordand said that research “indicates BP operated unsafely and failed to monitorand react to several critical warning signs during the drilling.”

A report of the Committee set up by the President, which was released in January 2011, concluded that a number of system failures and economizingefforts seemed to have contributed to the accident.

According to the US Energy Information Administration, offshore drilling inthe Gulf of Mexico represents 23.5 percent of US oil production. Less than amonth before the explosion, President Barack Obama announced support fora plan to expand offshore drilling as a part of his energy policy. Instead, anumber of initiatives were taken in and out of Congress to curb offshore oildrilling. The President’s plan seemed at the time to be dead on arrival.

Instead, the Department of the Interior announced a six-month moratoriumon new drilling in the Gulf and Pacific. A federal judge lifted the moratoriumon June 22, but the Department of Justice did not hesitate to appeal the decision to the 5th Circuit Court of Appeal. In the House of Representatives,an energy reform bill was discussed which contained more stringent rules foroffshore drilling. One suggested provision would ban BP from offshore drillingfor seven years because of an “extensive record of serious worker safety andenvironmental violations.”

Initially, BP promised to compensate oil spill victims. After a meeting with thePresident in June, the BP executives probably found it unrealistic to insist onthe liability cap laid down in OPA90 and agreed to create a USD 20 billionspill fund to alleviate the pollution damage. Moreover, the Fund would be nocap on BP’s potential liabilities. For the Fund’s payment, BP said it would cutcapital spending, sell assets and cut dividends to shareholders. A Gulf CoastClaim facility was set up on Aug. 23. Within a week, 19,000 claims were



received, and in early September, BP had paid out about USD 375 million.

In Canada, stricter rules were discussed after the Horizon disaster, whilst reports from Brussels said that the EU was discussing toughening the regimeon offshore liability. In Norway – an important European player with respectto offshore drilling – Horizon provided left-wing politicians and environmen-talists with fresh ammunition in their fight to stop drilling off the sensitivecoastline of Northern Norway.

A 200- to 300-ton oil spill from a grounded Panama dry cargo ship off theNorwegian coast in 2009 resulted in the internment of the Chinese captain,followed by a six-month jail sentence. So far no Horizon personnel are reported to be jailed. On June 25, Tradewinds reported that BP then-chief executive Tony Hayward may well have had a “bruising in the US,” but wasfree to return to the UK and enjoy an outing with his yacht during the follow-ing weekend.

The legal challenges for the US government, the victims of the pollution andthe actors involved in the accident will be messy. It is difficult to imagine thatthey will come to an end before five to 10 more years have passed. Still, authorization of new offshore drilling activities seems unavoidable with thepresent huge US oil deficit. Past experience suggests that such activities willhardly be allowed without toughened regulations.

The international re-insurance market expects that the liability cap in OPA90will be raised. Whether the Horizon disaster also will prepare the ground foreven harsher liability provisions for oil tankers is a scenario that cannot beruled out.

Notes:For information on the Senator’s stances, see 101st Congress, 1st session – Senate – Report 101-94, pp. 26-27, Time Magazine, May 17, June 21, June 28 and Aug. 9, 2010; Los Angeles Times, September2010. Fortune magazine, Feb 7, 2011, presentation of Admiral Thad Allen, USCG, in Oslo, March 9,2011.Information about the Kuwait oil spill during the Gulf War is from Jessica Marshall in Discovery News,June 1, 2010.


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10

IMO wakes up

I. MORE OPA APPROACHES?When Mr. Chandrika Pasad Srivastava retired in 1989 after 16 years as Secretary General of IMO, the US appeared to have withdrawn from the closecooperation in what would be the closest thing to world authority on maritimesafety and environmental protection. The development represented a seriousblow to the prestige of the agency.

At the time OPA90 was adopted, five years after Amoco Cadiz, only Aus-tralia, the Federal Republic of Germany, France and three other small countrieshad ratified the CLC Protocol. Even worse, only the Federal Republic of Germany and France had become parties to the Fund Protocol. Thus it wouldtake many years before the efforts of the ’84 Conference and its chairman Mr. Jacobsson were recognized.

The delayed ratifications, together with the unilateral action taken in Wash-ington, DC, raised the obvious question of whether other nations would alsowork out their own solutions.

No great imagination was needed to see the implications of numerous national “OPA approaches.”

Was Canada next? Canadians were infuriated when the Cayman Islandtanker Rio Orinico grounded in the Gulf of St. Lawrence in 1990 with a cargoof heated asphalt on board. The National Coast Guard faced an unpleasantchallenge. The clean-up operation was difficult because of the bad weather.Once in the water, it was feared that the solid-but-brittle asphalt would breakinto small pieces and cause the most serious damage by contamination tobeaches. No asphalt leaked out, but 150 tons of fuel was spilt. Despite themodest amount, a costly operation was initiated to diminish the pollutiondamage. Contracted personnel were able to clean the most seriously pollutedbeaches manually, supported by boats, helicopters and hovercrafts, as there

were no coastal roads in the area. In November, Rio Orinoco was declared a total loss.

The next summer, she was refloated and pulled freewithout further complications. The cargo of asphalt waspartly removed. After it had been refloated and towedto a place of safety, the tanker and the remaining cargowere disposed of. The costs incurred were recoveredfrom the P&I club and from IOPCF by way of preven-tive measures.

Canada did not follow in the footsteps of the US.Perhaps it was realized that inconsistent national regu-lations of the shipping industry would mean an utterlyinefficient transportation system. A shipper would beconfined to chartering tankers that complied with thenational regulations of his own country. Instead of ac-cess to the free world market where all tankers offeredtheir transportation services at competitive rates, hewould have very limited possibilities to cover unforeseentransport needs, not the benefit of free competition.Transport costs would surely escalate.

Inspired by the development in the US, IMO took freshmeasures to reduce accidental pollution from new andexisting tankers. New tankers, ordered after July 6,1993, would be built with double hulls. Not to “freezetechnology,” the door remained open for approval ofalternative designs provided they offered the same protection. The design requirements would be phased

Secretaries-General of IMO

IMO’s past Secretaries-Generalincludes; Ove Nielsen (Denmark) 1959-1961, William Graham (United Kingdom) 1961-1963, Jean Roullier (France) 1964-1967, Colin Goad (United Kingdom) 1968-1973,Chandrika Pasad Srivastava(India) 1974-1989, William A. O’Neill (Canada) 1990-2003 andEfthimios E. Mitropoulos(Greece) 2004-present.

Efthimios E. Mitropoulos

Efthimios E. Mitropoulos wasborn in Piraeus, Greece, in1939. His career has includedworking as a commissionedCoast Guard officer and servingon the Maritime Safety Commit-tee and other subcommittees ofthe IMO.


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in for existing tankers in accordance with an agreed time plan. Moreover, inJuly 1995, the amendments to the IMO Convention on Standards of Trainingand Certification amounted to a complete re-writing.

In December 2003, IMO adopted a revised, accelerated phase-out scheme forsingle-hull tankers by amendments to MARPOL 73/78. The final phase-outof such a tanker built before 1982 was brought forward to 2005 from 2007.The flag state was, however, allowed to permit continued operation if this,after careful consideration, was found justifiable but in no case beyond thedate which the tanker reached 25 years old.

II. THE SALVAGE CONVENTIONFor salvors, the working conditions had been somewhat improved under thechannelling provisions of the unratified 84CLC Protocol. The 84CLC Protocolencouraged them to provide prompt assistance in difficult environmental situations. Thus it was spelled out that no claims could be made against “anyperson performing salvage operations with the consent of the owner or on theinstructions of a competent public authority.”

In the same spirit, IMO in 1989 adopted a new International Convention onSalvage, which included an additional incentive for salvors to minimize thepotential for environmental damage tanker accidents caused.

A salvage operation had normally been performed on the terms of Lloyd’sstandard salvage contract, “Lloyd’s Open Form.” This contract reflected es-tablished maritime law as laid down in a convention of 1910. For generations,the rule of the game had been “no cure, no pay,” meaning that the opportu-nities were unpredictable, the risks high and the potential reward considerableif the salvage operation was successful; five to 10 percent of the salvaged values– ship and cargo – were not uncommon. It was called an “open form” becauseno amount is stipulated prior to the salvage job. The award to be paid wouldbe decided later by a professional arbitrator. Amoco Cadiz and her cargo havebeen valued to some USD 40 million. The salvage company could have mademillions and the accident could have been avoided or minimized if the Amocoheadquarters in Chicago had permitted the master to sign the form the firsttime he requested permission to do so. To avoid a salvage award, the man-agement took a risk hoping everything would turn out all right. It did not.


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For the salvor, the old principle “no cure, no pay” could turn out to be dis-astrous when his efforts were in vain. When Lloyd’s Open Form was revisedin 1980, the old principle was modified in order to prepare the ground for theparties to agree that the salvor’s cost for rendering assistance to a tanker wouldbe recovered also if he had not been successful. In the revised Salvage Con-vention, this principle was firmly established to all vessels. The salvor wouldbe entitled to the special compensation whenever his operation had minimisedor prevented damage to the environment. It meant reimbursement of his costsplus an extra award of 30 percent of the expenses incurred. The amount couldbe further increased to 100 percent of his costs under certain circumstances.

IMO cannot, however, be said to have played a particular pro-active role inthis context. The most important principles agreed on were not revolutionary,but simply conclusions which the private industry by and large had reachedseveral years ago. The Convention took 10 years to develop and another sevenyears before it came into force. Indeed, some nations are only just adopting it.

IMO also left another problem unsolved. It is no simple task to calculate afair reward for salvors’ efforts to avoid environmental damage. But it was pos-sible to contractually amend several provisions in the Convention. In the1990s, the commercial insurance market went a step further to enable salvorsto respond to pollution threats with more confidence. Once again a new clausewas introduced in Lloyd’s Open Form, to entitle the salvor – provided he inno way was to blame for his operation – to at least break even on his costs formaintaining salvage tugs that may be employed for only a short time, when athreat of damage to the environment existed. After the Sea Empress disaster,the salvors have been concerned that they are increasingly exposed to potentialcriminal liability. Moreover, the Bunker Convention of 2001 does not providethe same protection against liability for oil spills as the CLC protocol. Thus,salvors still feel that they are inadequately rewarded for the environmentalbenefit of a salvage operation.

Notes:On Rio Orinoco, see IOPCF Annual Reports 1990-1995.On the topic of environmental salvage, see Legal Advisor to the International Salvage Union ArchieBishop’s presentation at the CMI seminar in Dubrovnik, May 2007.


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III. INTERNATIONAL CONVENTION ON OILPOLLUTION PREPAREDNESS RESPONSE ANDCO-OPERATION (OPRC)After Canadian William A. O’Neil took over the job as IMO’s Secretary Gen-eral in January 1990, some quarters found it evident that with the new lead-ership the IMO would become more active.

Already in November 1990, the International Convention on Oil PollutionPreparedness Response and Co-operation (OPRC) was adopted. OPRC wasone of a number of measures IMO initiated as a response to the Exxon Valdezoil spill. It was designed to facilitate international cooperation and mutual assistance for preparing for, and responding to, major pollution incidents.Member states would be encouraged to develop an adequate capability to dealwith oil pollution emergencies. OPRC is claimed to have proved useful alreadybefore it came into force. It received its first test only a few months after theadoption, when a major oil spill occurred in the Persian Gulf as a result ofmilitary hostilities. Acting as if the Convention was in effect, IMO in co-op-eration with other local and international organizations set up a Disaster Fundand an Oil Spill Co-ordination Centre. Even if the impact is difficult to assess,it seemed that the action taken might have prevented major damage to the environment of the Saudi Arabian coast.

Notes:On the change of leadership in IMO, see the above-mentioned report “Ships of Shame” from the Aus-tralian House of Representatives Standing Committee on Transport to the Parliament in December1992: “Inquiry into ship safety – Ships of Shame,” December 1992, p. 77.

IV. RESURRECTION OF THE PROTOCOLSIn September 1990, just weeks after President George Bush signed OPA90, theInternational Oil Pollution Compensation Fund (IOPCF) found that time was ripe to undertake a thorough review of the situation. An intercessionalworking group under the chairmanship of Mr. Popp of Canada got the following mandate:

“To consider the future development of the inter-governmental oil pollutionliability and compensation system by examining the prospects for the entry


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into force of the 1984 Protocols to the Civil Liability Convention and theFund Convention...”

The group’s report was available in October 1991. It warned that a full revision of the ’84 Protocols would be an enormous task. That would meanre-opening a large number of problems that had already found their solutions.A resolution was addressed to the new Secretary General requesting that theorganization convened an international conference in 1992. It was recom-mended that IOPCF should confine the work to modify the entry into forceprovisions and consider the possible introduction of a cap on contributionspayable.

After the preparatory work had been undertaken by IMO’s Legal Committee,a diplomatic conference convened in November 1992 in London. At the open-ing session the Secretary-General O’Neill made the intentions clear:

“... two draft protocols have been prepared to revise the 1969 CLC and the1971 Fund Convention. In practice, these protocols will replace the 1984

Protocols ... they are however not intended to introduce any changes to thesubstantive provisions of the 1984 Protocols but merely amend the entry

into force provisions.”

There was considerable support for his view. A submission from Greece readin part:

“... The above system (CLC 69 and FC 71) has met with world-wide acceptance and constitutes an adequate international treaty regime, on thebasis of which the economic consequences of pollution damage are shared

by the shipping industry and by the oil cargo interest. ... For this reason, theneed of maintaining the viability of the aforementioned system ... is obvious.

... we wish that the diplomatic conference limit its work only to focus on the earliest possible enforcement of the ’84 Protocols. ... the revision mustnot be used to re-open other issues which had already been given careful

attention ... any such attempt could jeopardise the early entry into force of the new protocols ...”

Not all parties agreed. The US had by the passing OPA90 made its view quiteclear. Two other major oil-importing countries, Italy and Japan, had strongreservations. The IOPCF assessment of compensation after two recent major


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oil pollution accidents in Italian waters was on Italians’ minds.The Italians were at that time ripe for immediately accepting compensation

for “environmental damage.” Moreover the liability ceiling was “inadequateespecially in cases of disasters occurring in sea areas of high economic and en-vironmental interest.”

Japan had already signalled that it would be “difficult” to ratify the revisedinstruments. As the largest contributors to the IOPCF, the country had in thepast roughly paid some 30 percent of the Fund’s total annual income. On theother hand, the country had received only 15 percent of the total payout fromthe Fund after spills in Japanese waters. In 1984, only Japan had spokenagainst the “American” compromise on which the Protocols were based, andyet its delegation did not vote against their adoption. Despite the minute fee(probably less than one fifth of a US cent per ton, according to Katherine Greyof IOPCF) to be paid per ton on imported oil, the Japanese oil companies feltthat they paid too much for pollution damage in other parts of the world.

Furthermore, Japan was proud to have developed a very effective domesticresponse program, which was well-geared both to prevent and mitigate sig-nificant oil spill damage. The proposal now was to cap the contributions sothat no oil-importing country payment should exceed 25 percent of the totalamount of annual contributions to the Fund.

Nearly all other delegations preferred the existing system. The suggested cap-ping meant that Japan’s oil industry would get a five percent rebate and theeffect would arguably be a distortion of competition within the industry. Takeninto consideration that the fees per ton were minute, the Japanese view washard for other delegates to appreciate.

But the Conference did not have much of a choice. Finally a cap was agreedon, but not quite the one Japan suggested. Agreement was reached on the com-promise that no oil-importing country should contribute more than 27.5 per-cent of the total amount paid to the Fund. The cap was further modified bythe inclusion of an extra provision to the effect that the cap would apply onlyuntil the total amount of contributing oil to the Fund had reached 750 milliontons, or until five years had elapsed after entry into force of the Protocols,whichever occurred first.

Agreement was thereby reached. According to the final clauses, the new ’92Fund Protocols would require for its entry into effect ratification at least eightstates representing together a total amount of 450 million tons “contributing


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oil,” instead of the 750-million-ton requirement of the ’84FC.Also, the entry-into-force provisions in the 92CLC Protocol were modified.

It would enter into force when ratified by 10 states, including four states, eachwith a tanker fleet of no less than one million grt. This compared with sixstates previously.

With the exception of the entry into force provisions and the cap provision,the ’92 Protocols merely became a new name for the ’84 Protocols. But whenIMO in 1998 reported on its achievements in the publication “50 years ofIMO,” it was proclaimed that the compensation for victims of oil pollutionwas greatly increased in 1992. In the mentioned jubilee publication, everyagreement of some importance is listed ... except the ’84 Protocols, which wereworked out after endless meetings and three weeks of heated discussion underthe chairmanship of Mr. Jacobsson, who was later the Director of IOPCF. Thepresentation might perhaps be seen as a clever marketing effort to promote ratifications of the new Protocols. For whatever reason, it was hardlya slip of the pen.

The ratification process of the revised instruments progressed slowly, but byand by, support from more governments came along. After Denmark’s ratifi-cation in 1996, the Protocols from 1984, as revised in 1992, finally enteredinto force. More than 16 years had passed since the revision began after theAmoco Cadiz disaster. Finally in 1996, the new Salvage Convention went intoforce, as well.

Two sets of IMO compensation schemes were now in force: The 69CLC/FC71and the ’92 Protocols, 92CLC and 92FC.

The duplication was not without problems. FC71 was still operational andsupported by a large number of nations that had not yet adopted the new instruments. The text of FC71 provided that it would not cease to be in force before the number of contracting states had fallen below three. 92 FC contained a mechanism for compulsory denunciation of FC71. According tothe 1996 IOPCF annual report, page 16, the compusory denunciation takeseffect when eight parties to the '92 Protocol import 750 million tons of oil an-nually.

The states that had ratified the two Protocols were obliged to deposit in-struments of denunciation by May 1997 that would take effect 12 monthsafter that date.


IMO WAKES UP

Before time had solved the problem with the two different and operationalfunds, a Russian tanker, Nakhodka, broke up in Japanese waters early in January 1997. In bad weather, the vessel carrying 19,000 tons of medium fueloil broke in two and spilled about 6,200 tons of its cargo. Although much ofthe oil dispersed naturally at sea, the spill resulted in heavy contamination of the adjacent shoreline. There were important seafood activities in the area,including oyster, fish and seaweed cultivation in sheltered bays and inlets.

An investigation commissioned by the Japanese government found that cor-rosion of the tanker had resulted in a substantial reduction in the originalthickness of the forepart hull. The strength of the hull at the point where itfailed was about half of what it should be. Had the ship not been corroded sobadly, it would have weathered the gale.

The ’92 Protocols had entered into effect in respect of Japan and were there-fore in principle applicable. The Russian Federation was, however, at that timenot yet a party to the protocols, but to 69CLC/FC71.

In October 1999, the Executive Committees of IOPCF’s two funds concluded that the investigation of the tanker’s hull had revealed that it hadbeen unseaworthy. Thus it was claimed that the owner, Primorsk, should notbe able to limit its liability, as the incident resulted from his personal fault orprivity. Recovery action was started in Japan both against the classificationsociety, the Russian Maritime Register of Shipping (which had not ensuredthat the tanker met the applicable safety regulations) as well as the owner andits P&I club (UK Club).

In a parallel legal action the Japanese government, nine associations of fish-ermen and more than 330 additional parties, mainly in the tourism sector, proceeded against the shipowner, the P&I club and the two IOPC Funds forcompensation. All in all, the claims amounted to about GBP 190 million(about USD 311 million).

The owner rejected the claims on the grounds that the incident was causedmainly by an extraordinary natural phenomenon. A settlement to pay GBP137 million (about USD 205.67 million) was reached by November 2002. In accordance with the agreement, the owners’ P&I club reimbursed theIOPCF Funds about GBP 27 million (about USD 40.53 million) in respect oftheir payments.

The question arose of how the recovered amount should be shared. The Japan-ese delegation took the view that an amount recovered during the transitionalperiod, when both the new and the old instruments were applicable, shouldbe re-imbursed to the 1992 Fund.


IMO WAKES UP

This view was, however, met with opposition from several other delegations.The majority concluded that the provisions in the two legal instruments gaveno guidance of how to solve the problem. Five years after the accident, it wasfinally agreed to support a proposal from the Director. Thus the recoveredamount “should be distributed in proportion to the respective liabilities of the1971 and 1992 Fund in yen.”

Both funds became involved again when a small Korean tanker, Osung no. 3,grounded in April 1997 in the Pusan area, polluting the nearby Korean shoreas well as Japanese beaches with heavy fuel oil. The Republic of Korea was aparty to 69CLC and FC71, but not yet a party to the ’92 Protocols, whilstJapan had ratified the new instruments. On this occasion, the overlap causedfewer problems. The total claims were below GBP 10 million (about USD16.37 million) and were settled at a lower amount. The Japanese pollutionvictims had the advantage of a higher maximum amount of compensation thanthose suffering from the spill along the coast of Korea and were compensatedaccordingly.

IOPCF now had several other problems to deal with. It had become evidentthat countries were becoming parties to the new instruments in less numbersthan desirable. Furthermore, the dwindling support of the “old Fund” slashedits contribution base. Should a major pollution accident happen in the watersof the “FC71 countries” – and Italy was one of them – the FC71 might be unable to fulfil its function. Such failure could damage the credibility of bothIMO as well as the new compensation regimes.

It had been the hope of many IOPCF members that the FC71 would fall asleepand gradually die away, but the process seemed to take more time than antic-ipated. The difficulty was that several states whose help were needed to reachan agreement did not even bother to attend the sessions of IOPCF. The predominant feature of these states was that they imported no or little oil.

When the FC71 assembly met in October 1999, representatives of only 17out of 45 member states showed up. The meeting was postponed for half anhour, but in vain, participation was still not sufficient to establish a quorum.The failure to achieve a forum re-occurred in the next year, as well, and theagenda had to be dealt with administratively on behalf of the Assembly. Further complications resulted from the fact that a great number of the member countries had been neglecting to file their oil-import reports despitethe requirement on each state to submit such a statement annually.


IMO WAKES UP

All state members of the FC71 were now urged to denounce the old instru-ments and join the ’92 Protocols as soon as possible. In an effort to solve thelegal problems, two experts were commissioned by IOPCF to ascertainwhether the old fund could be legally wound up before the number of statesfell to the statutory minimum. In September 2000, a diplomatic conferenceamended the rules for winding up the FC71. Hence the 1971 Fund Conventionceased to be in force in May 2002, when the number of member states hadfallen below 25.

The termination did not result in liquidation. Obligations in respect of pendingclaims had to be complied with and took several more years.

Notes:For further information on the ’92 Protocols, see the Official Records of the International ConferenceOn The Revision Of The 1969 Civil Liability Convention (69CLC) and The 1971 Fund Convention(FC71), held in London from Nov. 23 to 27, 1992, Volume 4, which provide comprehensive reports onthe participation, documentation and deliberations. The ’92 Conference was initiated when it becameclear that the ’84 Protocols would not enter into force in the foreseeable future and were intended tomaintain the substantive provisions in the 1984 Protocols, but introduce lower requirements for entryinto force. See in particular Volume 4, pp. 85-86, 150 and 176. Also see IOPCF annual reports 1991 to1993. The two major, recent incidents in Italian waters, the Haven and the Agip Abruzzo, caused thesomewhat “militant” Italian position at the ’92 Conference. See information below. The IOPCF feeswere minimal, probably less than one fifth of a US cent per ton, according to information from the sec-retariat. On Nakhodka, see Lloyd’s List, Jan. 20, 2000, and the IOPCF annual report, 1997-2002. OnOsung no. 3, see IOPCF annual reports, 1997-2001.

V. TOVALOP & CRISTAL OUTThe question had been raised from time to time whether the private schemeshad served as a soporific for governments and contributed to many years’ neg-lect of the international agreements and principles introduced after AmocoCadiz’s grounding in 1978.

The “seven sisters” had in no way been happy with the outcome of the 1984Conference. Some had openly lobbied against ratification. Their preference hadbeen to handle the pollution damage potential as a problem to be managedby the industry in the driver’s seat.

Now it seemed that the relevance of the private schemes would erode as moreand more states ratified the IMO agreements. This development acceleratedwith the entry-into-force of the ’92 Protocols in May 1996.

The decision to withdraw the private compensation agreements, TOVALOPprovided by the International Tanker Owners Pollution Federation (ITOPF)


IMO WAKES UP

and CRISTAL, had already been made the previousyear. In June 1996, the Chairman of TOVALOP, PeterJohn Goulandris, announced the termination taking effect in February 1997: “Port authorities, terminal operators and others who have for many years requiredsight of TOVALOP certificates before allowing a tankerto load or discharge will need to amend their proce-dures, looking to the stronger legal alternative offeredby the Civil Liability Convention and its Protocol.”

For the victims of oil pollution damage, the IMO instru-ments offered significant advantages. Unlike the privatearrangements – which depended upon whether thetanker and cargo owner concerned were parties to therespective agreements – the Protocols provided assur-ance of financial responsibility and made tanker ownersand oil receivers legally liable to meet legitimate costs.

ITOPF was originally established to administer the private liability arrangements under the TOVALOPagreement, but had during the last decades placed moreand more emphasis on the provision of technical services to tanker owners and governments in the field of oil spill preparedness, damage assessment andresponse.

An important aspect of TOVALOP was that each par-ticipant had to provide evidence to ITOPF of financialcapability to meet his responsibilities under the agree-ment. Whilst this function now had come to an end, thetechnical assistance including training and educationwould continue as before. This role had evolved in response to the growing demand throughout the worldin the face of increasing environmental awareness. Themajority of clean-up operations involving the 1971Fund had been monitored and claims assessed in co-op-eration between the Fund and one of the P&I clubs andITOPF.

Peter John Goulandris was pleased to report in 1996:“that the Federation will continue as present to play an

Helmut Sohmen

Helmut Sohmen is an Austrianlawyer and banker who in 1967married the daughter of SirYue-Kong Pao; Anna. In 1970his family moved to HongKong. He is in charge of theWorld Wide Shipping Group,one of the largest in the world.His many commission of trustsin shipping include President ofthe “Baltic and InternationalMaritime Council, Copen-hagen” and Chairman of “International Tanker OwnersPollution Federation” London(TOVALOP) - 2001-2006.

© Scanpix

active technical and advisory role in support of our Membership, their insurers,and those who suffer pollution damage.”

There seems to be little doubt that this promised professional assistance continued undisturbed, to the satisfaction of governments and industries alikein the following years.

Notes:On the exit of TOVALOP and CRISTAL, see Ocean Orbit, June 1996, and the IOPCF annual report1996, p. 33.


IMO WAKES UP


NEW SERIOUS INCIDENTS AT TANKER TERMINALS AND IN COASTAL WATERS AROUND THE GLOBE

11

New serious incidents attanker terminals and incoastal waters around

the globe

I. HAVENIn April 1991, Italy became the theatre of the most spectacular pollution accidents in Europe since 1978. The prologue to the disaster was caused by aVLCC, Agip Abruzzo, with a cargo-carrying capacity of more than 250,000tons. On the night of April 10, 1991, the super tanker was struck by a cargoferry, Moby Prince, when at anchor off Livorno. Both vessels caught fire. Twothousand tons of cargo oil escaped from the Italian oil company-owned VLCC,but more important, 143 people on board the ferry were killed.

Not many miles to the north, seven miles off the old shipping centre Genoa,the Cypriot flag super tanker Haven (232,000 dwt) was anchored. The tankerhad just emerged from an extensive refit. But on the April 11, she caught fireand exploded. On board was a cargo of approximately 144,000 tons of crudeoil. Some of it was consumed by fire, but most was spilled into the sea. Fivecrewmembers were killed. Beaches in the area were polluted. Oil spread as faras France and contaminated four French departments. On April 14, the Italiangovernment declared a state of national emergency.

Whereas Amoco Cadiz and Exxon Valdez were new and modern tankers,



Haven was not. Whereas the two oil-company-owned tankers descended fromthe old established petroleum industry in the US, Haven was one of manycrude carriers the Haji-Ioannou family from Cyprus owned. Pater familias:Lucas Haji-Ioannou was born in 1927 in the mountain village named Ped-houlas. He first moved to work in a trading house in Nicosia. In 1950, he im-migrated to Saudi Arabia, where he started as a trader and shipping agent. In1958, he settled in London and became involved with passenger vessels anddry cargo ships before he realized his dream to transport oil all over the world.With active support from his two sons, Polys and Stelios, his dream came truein April 1991, when Lucas Hadji-Ioannou could claim to be the owner of oneof the largest private tanker fleets afloat, including the unfortunate Haven.

In terms of legal complexity, the Haven accident turned out to be the Europeancounterpart to Exxon Valdez. Claims for pollution damage were presentedfrom the Italian and French governments for clean-up operations. The Italiangovernment also claimed for damage to the environment.

Moreover, demands for compensation were received from about 1,300 affected parties, including 700 hotel owners, more than 40 yacht owners,about 200 fishermen, 230 shop and restaurant owners, as well as nearly 100operators of beach facilities. All in all, about USD 1 billion in claims were filedin the proceedings against the ship owner.

In IMO, the Italian delegation – inspired by the consequences of the two majoraccidents back home – obtained little support for the proposal to introducemajor changes in the liability provisions. Whilst the delegations discussed therevision of the ’92 Protocols in London, the battle between claimants and theowners of Haven and IOPCF began in Genova.

Legal action had been taken soon after the accident. It became clear that thedamages by far exceeded what could have been recovered even on the basis ofthe ’84 Protocols if they had been in force. An IMO Protocol which in 1976had replaced the “official value” of gold francs with Special Drawing Rights(SDR) was in force with respect to CLC69 but not in relation to FC71. In1978, the IOFCF Assembly adopted an interpretation under which one SDRwas to be considered equal to 15 gold francs.

Nevertheless the claimants argued that the current limitation amounts, stipu-lated in gold francs, had to be converted to the local currency, lire, based onthe free market value of gold. This method produced a liability limit more


than seven times the size of what it had been, if the basewas SDR.

IOPCF rejected the argument for gold franc conver-sion. Moreover, a number of claimants failed to notifyits administration within the three-year time limit in accordance with the provisions in FC71. Finally it wasalleged that a number of other claims could not be justified by the current definition of pollution damage.

The proceeding went on for several years before theFrench authorities, together with some privateclaimants, were prepared to compromise. However, theItalian government still continued to press its claims thatamounted to USD 530 million as compensation for en-vironmental damage and a further USD 150 million forclean-up costs. In October 1995, it seemed that the efforts to resolve the most controversial case in the 17-year history of IOPCF had collapsed completely.

Despite the gloomy situation, an international con-sultation group remained in existence to find a solution.Its work was successful when a tripartite global settle-

Haven

The super tanker that the Haji-Ioannou family owned was atanchor in Genoa when it ex-ploded in April 1991. On boardwas a cargo of some 144,000tons of crude oil which partlywere consumed by flames. Mostwas spilled into the sea. Fourcrew members were killed.There was massive pollution ofthe Italian coastline, and the oilslick spread as far as France.The heavy contamination re-sulted in numerous claims fromthe pollution victims as well as a major claim from the ItalianGovernment. All in all, claims ofabout USD 1 billion were filedagainst the shipping company.The subsequent litigation can beseen as the European counter-part in complexity to the dis-putes subsequent to the ExxonValdez disaster in Alaska. Also,a lengthy criminal proceedingwas instigated. Finally in 2002,the ship owner was acquitted ofthe manslaughter charges.

Photo: www.aukevisser.nl


ment finally was signed in Rome in March 1999 afternearly eight years of negotiations and litigations. Thecompromise meant that Italy accepted a total compen-sation package of about GBP 43 million, of which some30 million was paid by IOPCF with the remaining – in-cluding an ex gratia payment – to come from the ownersthrough its P&I club. The payment was to be madewithout admission of liability by the owners – the Haji-Ioannou family – to the extent it exceeded the limitationamount under CLC69. At the end of May 1999, thelong-running saga of the compensation case wasbrought to a final conclusion when the agreed amountwas paid and the compensation proceedings terminated.

Despite that compensation had been paid far beyond thelegal liability under the conventions - which was GBP37 million in 1991 - Mr. Jacobsson, director of theIOPCF, did not hesitate to express to Lloyd’s List thathe was happy that a solution was reached, particularlyas the settlement respected the two principles the Fund

Stelios Haji-Ioannou

Born in 1967, Stelios Haji-Ioannou has had several entrepreneurial ventures. Afterworking for the Troodos Ship-ping Co Ltd., his father's firm,he founded Stelmar Shipping. He went on to start the airlinecompany EasyJet. He alsoearned the title of Sir Stelioswhen he was knighted at age 39.

© Bruno Bebert / EPA / Scanpix



had all along: “first that the maximum amount is fixed in SDR, and second,that the Fund convention does not allow any payments for environmentaldamage.”

However, these claims were not the only major worry for the owners. Criminalproceedings had started after the accident. It was alleged that the master, thechief mate and the chief engineer had been guilty of gross negligence, and theowners’ right to limit their liability was challenged once more. Crewmembershad been killed. The owners were blamed because they had not ordered thetanker to stop sailing, despite serious technical problems. Furthermore, theprosecutor insisted that the classification had not been notified about an inertgas generator that was out of order.

In November 1997, a Genoa court seemed to have ended the seven-year ordealwhen Lucas Hadji-Ioannou and his son, Stelios, were acquitted of the chargesof manslaughter. Stelios Haji-Ioannou, relieved but bitter, commented to thepress that he was highly critical of what he described as the Italian “bananarepublic” justice system.

But the criminal case had not yet come to an end. The nightmare of the ownerscontinued when they were faced with an appeal against their acquittal oncharges relating to the explosion of their tanker. For the appeals court, an ex-pert panel had been set up. A second diving survey of the wreck at the bottomof the Genoa harbour revealed, according to the panel, that the accident wasindeed a result of overpressure of inert gas whilst cargo was transferred. Theappeal case was now to be administered by a judge who was the Mayor ofGenoa when the accident took place. In that position, he had previously con-demned the parties involved. A petition was sent to the Italian Supreme Courtto have the appointed judge, who was claimed to have “political ambitions”removed. However, in March 2000, before any decision on his qualificationswas made, it turned out that the acquittal was upheld.

In the meantime, Stelios Hadji-Ioannou, born in 1967, extended his businessinterests in shipping as well as other areas, notably airlines. His entrepreneur-ship and philanthropic achievements earned the young man a knighthood in1996, when Queen Elisabeth II on her 80th birthday made him Sir Stelios.

Further to the lengthy legal battle on the compensation issue, the trade presswas, in the following years, filled with speculations about whether the public



outcry over the disaster would spark off “OPA-like” regulations in the Euro-pean Community. Whereas some voices spoke up in favour of such legislation,Haven did not result in any unilateral action. The Europeans seemed to con-tinue to support IMO to coordinate the efforts to improve safety at sea andprotection of the marine environment, including the liability question.

Notes:On the Haven incident, the claims and the method of conversion are listed in local currency in theIOPCF annual reports, 1991-1999. Also see Lloyd’s List, March 6, 1999. On the criminal case, seeTradewinds, Nov. 28, 1997. Also see Lloyd’s List, Feb. 19, 1999, and March 15 and 21, 2000.

II. ABT SUMMER Two more serious incidents followed Haven only a month later.

The 17-year-old Saudi-owned and Liberian-flag super-tanker ABT Summerexploded in the deck area and sank 900 miles off the coast of Angola. Onboard was a cargo of 260,000 tons of crude oil. Five of the 32-man crew losttheir lives. The oil around the tanker began to burn, and the oil slick was re-ported to cover 80 square miles. The tanker was recently bought from a Greekowner, had been transferred to the French classification society Bureau Veritasand was due for docking in September. The charterer was the National IranianTanker Co., who was also the owner of the super tanker Albortz, whichshortly after the accident in Angolan waters was under repair in Cape Townharbour. The Albortz exploded and caught fire, killing three repairmen andseriously injuring six others.

Hence during a time span of less than two months, three 1970s-built largetankers had exploded at a cost of 16 lives – one of the tankers were charteredto and one owned by the National Iranian Tanker Company.

Mohammad Souri, the honest chairman of the company, stated in a speechdelivered to the annual meeting of INTERTANKO in Hamburg, Germany,that his group was in general satisfied with the old ships and that the affiliatedcompany, National Iranian Oil Co., did not “prefer” to pay higher rates forships certified above minimum class standards.

Despite that the ABT Summer spill ranks as the one of the largest everrecorded, the accident received modest attention in the media. Partly perhapsbecause of the location, the media instead continued to focus on the Havenaffair.

Notes:On ABT Summer, see Seatrade Week, May 31 to June 6, 1991. According to ITOPF Data and Statistics2010, the ABT Summer spill – 260,000 tons – is the second largest ever.



III. AUSTRALIA WARNS AGAINST “SHIPS OFSHAME” - KIRKIAlso on the other side of the globe, the experience with the standard of foreignships gave rise to serious concern.

The anger in Australia culminated on July 21, 1991, when the bow sectionsimply fell off a rusty Greek registered tanker, Kirki, while en route from theArabian Gulf. She was loaded with 82,000 tons of light crude when she collapsed. The coast of Western Australia and its marine environment faced amajor pollution risk that was only narrowly averted. In the event the lives ofthe crewmembers were put at risk, but with good luck and a major salvageoperation, the crew was rescued and the ship saved.

Together with the loss in close succession of six bulk carriers in the same wa-ters between January 1990 and August 1991, Kirki resulted in an inquiry fromthe Australian House of Representatives Standing Committee on Transport.The report, which was presented in December 1992, carried the name “Shipsof Shame.” Kirki, owned by the Thenamaris group, was nicely painted whilsther tanks were horribly corroded. Rust was camouflaged with canvas. Thecommittee pointed out that Kirki was in class with a reputable classificationsociety and had been regularly inspected. Yet the tanker suffered a major struc-tural failure because of corrosion which had gone undetected by all responsibleparties including the classification society, Germanischer Lloyd, the ship’s man-agers and the charterers.

The committee turned its focus on the classification societies and made thepoint that the industry is unusual in the sense that these societies, which areused to regulate the world fleet, are subject to the same market forces asshipowners. Whilst being responsible for safety at sea, the societies have tomaintain market share to be commercially viable. The basic dilemma that it isthe shipowner who selects and pays his regulator – the classification society –for its services was not expressly mentioned. More diplomatically, the com-mittee focused on the wide variance in the quality of classification societiesthat allowed irresponsible tanker owners to cut corners with respect to invest-ments in safety.

A small consolation to the tanker industry is shown in the findings that thedry bulk industry standards were found to be worse. The Australian committeestated:



“It is generally recognised that the conditions of oil tankers is better thandry bulk carriers. ... It is evident that, with the new leadership, the IMO is

becoming more active. The recent initiative of the Secretary General in having bulk carrier safety addressed is an indication of a refreshing change

of attitude within IMO. ... This attitude must be encouraged.”

In this connection it was pointed out that between 1988 and 1991, 47 drybulk carriers sank, with a loss of 381 lives. In 1991 alone, 19 of these carrierssank, with a loss of 149 lives.

The Committee recognized that while IMO had proven an effective forum forsetting standards, it had generally been ineffective in ensuring the observationof the same standards. Thereby it repeated the message that Sir Yue Kong Paohad sent to IMO from Helsinki 11 years earlier. The considerations in the report also included a reference to the continued crisis in the shipping industrywith substantial overcapacity, which enabled the charterers – including the oilcompanies – to press freight rates to levels below what was required to main-tain decent quality for marine transportation:

“In response to commercial pressure, substandard ship-owners/managersare accepting lower freight rates, leaving responsible ship/owners/managersthat are unable to operate at the lower freight rates with a declining market

share. ... Where maintenance is not carried out it may be a case of the captain and crew not being provided with the necessary resources rather

than poor onboard procedures.”

It was found that the continued depression in the market place also had resulted in considerable pressure by the shipowner on the master. Such pressurecould include maintaining speed in heavy weather conditions to meet deadlinesset by the oil charterers, in which case the Captain was reduced to “merelythe driver of a ship, rather than its master.”

The inquiry into ship safety undertaken by the Australian Parliamentary Committee revealed a better understanding of the market forces than seenwithin other governmental quarters prior to Erika, which grounded sevenyears after the inquiry was published.

When Kirki experienced structural failure, Australia had not taken steps toratify many IMO conventions, yet the report concluded that international co-



operation was the most effective lasting solution to ship safety problems. Disaster was never far away, and prevention of pollution of the sea is a farbetter option than cure. IMO, flag states, port states, classification societies,shipowners and managers, crews, insurance underwriters, charterers and cargoowners all need to participate if short- and long-term solutions were to bearpositive results. The possibility of unilateral Australian action was considered,but rejected: “What concerns the Committee is that ships which are now in-appropriate for the US trade will operate in those areas which are less capableof regulating them. This situation would not improve the ship safety problemas much as pass it on to those nations least able to do something about it.”Australia’s representation at IMO should be strengthened by the inclusion ofindustry and trade delegates with relevant experience.

In a widely published message to IMO and the oil industry, INTERTANKOonce more appealed – this time through its new chairman, Mr. Suzuki, MitsuiOSK (Japan):

“accidents happen not due to lack of regulation but due to lack of compliance with the existing rules. ... Quality must be paid for – in shippingas in other industries. The oil companies continue to declare their preference

for first class tankers, but their chartering departments often pursue a different strategy. In the spot market, the cheapest rust bucket is often

treated as the market leader – the rate setter! The oil industry’s charteringconditions should induce compliance with conventions. Today, however,

this is not always the case. ... If charterers pay a premium for quality, theyalso pay a premium for a better marine environment and, not least, the aging tanker fleet would be renewed on a sound financial basis.

Governments can contribute to this renewal process by resisting pressure toover regulate the industry. ... Overregulation would detract from existing

standards and, once again, would push quality tonnage into an unfavourable market position. This, in turn, would delay much-needed

fleet renewal.”

Notes:Seigo Suzuki’s statement is found in Lloyd’s List, July 2, 1991.On Kirki, see the above mentioned report “Ships of Shame” from the Australian House of Representa-tives Standing Committee on Transport to the Parliament in December 1992, pp. xxi, xvii, 1, 2, 27-29,32 and 75.See also Jack Devanney: “The Tankship Tromedy,” Florida, 2006, pp. 56-57.



IV. AEGEAN SEAThe Iraqi invasion of Kuwait in August 1990 overshadowed any other eventin the tanker market. Within months, a land campaign led by US forces underthe authority of the United Nations completed the liberation of the country.

But Iraq had in the meantime deliberately released an estimated 780,000 to1,500,000 tons of crude oil into the Arabian Gulf off the tanker terminals inKuwait. It is listed in the news as the largest oil spill ever. Hundreds of milesof the Saudi coast were smeared black, but had little military significance. Ithelped that the conditions were excellent for skimming, the weather was niceand a converted tanker, Al Wasit, and two other skimmers managed to recoversome of the oil.

A few weeks after the IMO delegates had left the conference rooms on AlbertEmbankment, several major oil spills occurred in European waters.

The night of Dec. 3, 1992, a double-bottom combined carrier under theGreek flag, Aegean Sea (114,000 dwt), ran aground while approaching theport of La Coruna, in northwestern Spain. The owner, linked to the London-Greek company Coulouthros Shipping Agency, had agreed with the Spanishoil company Repsol to carry a cargo of oil from Sullom Voe to “one or twosafe ports European Mediterranean.” Repsol ordered the vessel to go to LaCoruna where she arrived on Dec. 1 and waited two days for a berth beforeshe was ordered to proceed. Despite the bad weather, the Greek master, Cap-tain Stavridis, attempted to manoeuvre the tanker into the entrance channelat a point, later found to be dangerously close to the shore.

The vessel ran aground, broke in two and exploded. The heavy weather de-layed initiatives to start effective recovery of the spilled oil. All 32 crewmem-bers were rescued by helicopter after the grounding. The last man was still inthe air when the tanker exploded. The forward section sank 50 metres fromthe coastline. Most of the cargo of some 80,000 tons was either consumed bythe fire or dispersed into the sea. Only 6,500 tons that remained onboard weresuccessfully removed by salvors.

Like Exxon Valdez, the tanker grounded in an area where extensive fishingand various forms of aquaculture took place. A wide-ranging clean-up oper-ation was carried out at sea and ashore. Attempts were made to protect sen-sitive areas by using booms deployed from ships and from shore. Severalstretches of the coast northeast and east of La Coruna were contaminated.The regional Fisheries Council imposed a comprehensive fishing ban in inshore



waters. Later, the Council presented a claim totalling more than GBP 2 million(about USD 3.53 million) for economic assistance given to fishermen and shell-fish harvesters.

The oil lost was less than the Urquiola spill in the same waters in 1976. Butthe spill from Aegean Sea is still listed as one of the major spills. As a result ofthe nature of the cargo and the vigorous wave action, there was, however, con-siderable natural dispersion of the oil, and fishing was back to normal in August 1993.

Nevertheless, the restrictions had seriously affected 3,000 to 4,000 fisher-men, including shellfish harvesters. At the end of 2001, the amount of claimssubmitted before the Spanish courts represented some GBP 200 million (aboutUSD 287 million). It took more than 10 years to settle all compensation claims.Settlement agreement was finally reached between the government, the IOPCFand the tanker owner and his P&I club in 2002. The last outstanding paymentwas made in December 2003.

In 1992, criminal proceedings had been initiated against the master and thepilot. The Court held that Captain Stavridis had been negligent when he de-cided to bring the ship into the port in extremely bad weather with poor visi-bility. He was held liable together with the pilot who had ordered the masterto enter port at 2 a.m. in spite of the heavy weather and knowing that theweather would further deteriorate. Contrary to the regulations, the pilot didnot meet the ship at the designated boarding station and did not board theship until she had entered into the port area.

The criminal court also considered the compensation claim that had been presented against the owner, the P&I club, the master, IOPCF and the ownerof the cargo, the Spanish oil company Repsol. The court held that the limita-tions in CLC69 were applicable. According to the 92 CLC Protocol, no claimfor compensation for pollution damage under the Convention could be madeagainst the pilot. The protocol was, however, not in force and the originalCLC69 contained no such exception. Spanish pilots were state employees andin its first ruling the court held that the owner and the pilot were both liablefor criminal negligence. It was found that the incident could have been avoidedif either of them had acted with proper care. The ruling of April 1996 was appealed, but upheld by an appeal court in June 1997.

During the pleadings on the claims for compensation, IOPCF maintained that



the Commandant of the port should be held liable. He had ignored an orderprohibiting this type of tanker from entering port under the prevailing condi-tions. In the end, the court acquitted him of the charge.

Moreover, the tanker company started arbitration proceedings in Londonagainst the charterer. The shipowner alleged that Repsol by nominating LaCoruna had failed its obligation to nominate a safe port. On this basis theowner sought to recover the substantial compensation he had paid out to pol-lution victims plus the value of the tanker, her bunkers and the loss of freight.It all amounted to USD 65 million.

Repsol refused to pay and contended that in the event the company was liable to pay damages, the liability would be limited under the general 1976Convention on Limitation of Liability for Maritime Claims. The Conventionentitles a shipowner to limit his liability for certain claims listed therein andthe definition of the term ship owner (article 1.2) included “charterer, managerand operator of a sea-going ship.”

The English High Court held by way of preliminary issue that the chartererswere not entitled to limit liability in respect of a claim based on failure to nom-inate a safe port under the charter party. De la Rue and Anderson have drawnthe conclusion that if oil pollution claims are brought directly against the char-terer, he may limit his liability under the 1976 Convention. But if claims arebrought against the owner, who later seeks to recover the sums he has paidfrom the charterer by way of recourse, limitation is not available. The impli-cations of this view may be of particular interest to oil companies charteringtankers to the US.

Notes:On Aegean Sea, see IOPCF’s annual reports, 1992 to 2003, and de la Rue and Anderson: “Shippingand the Environment,” London, 1998, pp. 642-643.

V. BRAEREurope should soon once again be subject to another spectacular pollution incident.

The next occurred in early January 1993, when a Liberian tanker Braer of89,730 dwt suffered an engine failure, lost her power and went aground inhorrendous weather 15 km off the southern coast of the Shetland Islands. She



was en route from Norway to Canada with a cargo of 85,000 tons of NorthSea crude oil. Severe gales prevailed for several days. The ship broke up inthree sections. No crewmember was killed, but the entire cargo was lost. During the first week after the spill, TV crews, journalists and other mediapeople flocked to Shetland and reported that this was one of the most seriousenvironmental catastrophes ever seen.

The oil spray from the tanker contaminated 45 square km of the local farm-ers’ grassland. About 23,000 sheep had to be removed and given special feed.Three days after the accident, the UK Government imposed a fishing exclusionzone in the affected area.

A high-level committee under the leadership of Lord Donaldson was appointedto study what went wrong and to come up with recommendations on howmarine safety could be enhanced in the area.

The 85,000 tons of oil Braer spilt was twice as much as the Exxon Valdez spilland the largest spill in the UK since Torrey Canyon in 1967. Partly because ofextremely high wave conditions produced by strong winds and partly becauseof the low viscosity and dispersibility of the light crude spilled, most of the oilvanished naturally into the sea. Thus there was less pollution of the coastlinethan feared. It was later estimated that only one percent of the oil cargo hadbeen washed up on beaches. Despite the harm it caused to fisheries and farm-land, the accident required a physical clean-up response on a comparativelymodest scale. The doomsday forecasts during the first days evaporated littleby little. But the compensation claims still amounted to large sums.

The tanker owner was a Liberian single-ship company controlled by Norwe-gian/US interests: Bergvall & Hudner. Its P&I club, Skuld, together withIOPCF set up a joint office on the island to administrate the claims which werecoming from various affected interests including farmers, fishermen, propertyowners and the tourist industry. Moreover, the UK government had submitteda claim for compensation for costs incurred for its clean-up operations, fordisposal of oily waste, for monitoring operations carried out for salving shipand cargo and for tests undertaken in the water to establish the extent of hy-drocarbon content. In October 1995, IOPCF had to terminate all paymentsto claimants. According to Tradewinds, a compensation of USD 70 millionhad so far been paid to the victims, leaving just another USD 18 million beforethe amounts available under the conventions were exhausted.



The standstill of further payments led to impatience among the uncompensatedclaimants, who now saw a breach of the CLC limitations as the only way ofresolving the problem. Thus a leading Scottish law firm, Paul & Williamsons,told the press that action might be prepared to break the (near) USD 90 millionlimit on compensation available. Among the claimants still waiting to havetheir claims settled were the Department of Transport and the Shetland IslandsCouncil, the salmon farming industry and a number of fish processors.

A club spokesman rebuffed the contention and maintained that the two-tiersystem, including the shipowner’s right to limit, had been and still was funda-mental to the system for handling oil spill. Furthermore, he cautioned the lawfirm by informing that the single ship company that owned Braer no longerexisted. It was now up to his club to consider refusing to meet claims underthe “pay-to-be-paid” rule. According to the press report, his view was that theclaimants had no direct action against Skuld. This statement should, however,be seen in the light of CLC69, which entitled the claimant to bring his claimsfor pollution damage directly against the insurer, but the insurer may “availhimself of the limits of liability.”

A wide range of business interests were affected by the accident, and some feltvery strongly that their losses should be taken into account. Landcatch, a com-pany that produced smolt (juvenile salmon), based on the West Coast of Scotland, sold its product to salmon farms, some of them located as far awayas Shetland; a distance of 500 km. Landcatch claimed that because of Braer,its buyers in Shetland purchased less smolt than usual. It was argued that com-pensation had to be granted and that it was sufficient to prove that the losswould not have happened if the pollution accident had not taken place. Theclaim was, however, rejected both in the lower court as well as by three judgesof the Court of Appeals. In its house magazine, Skuld commented on thefavourable judgment, stressing that all legal systems have to establish a pointbeyond which one cannot recover for economic losses. A line has to be drawnsomewhere, otherwise - as a judge in the US had put it - there will be liability“in an indeterminate amount for an indeterminate time to an indeterminateclass.”

In January 1999, a number of disillusioned Shetlanders felt they had to aban-don their compensation claims. It was not worthwhile to pursue the expensivelegal action further, as they probably would be able to secure only a fractionof the original amount. One claimant said that he was asked for hundreds of

Braer

Braer spilled twice as much oilas Exxon Valdez when shebroke up in three sections dur-ing horrendous weather off thecoast of the Shetland Islands inJanuary 1993. The entire cargoof more than 80,000 tons of oilwas lost, representing one ofthe largest oil spills ever. How-ever, partly due to extremelyhigh wave conditions and partlydue to the low viscosity and dispersibility of the light crudeoil spilled, most of the oil vanished naturally into the sea.Nevertheless, the impact on thecoastline was serious, and theclaims for compensation fromthe pollution victims were numerous and huge. Thirteenyears after the accident, oneclaim remained still unsettled.The tanker was owned jointlyby US and Norwegian interestsand represented by the Norwe-gian P&I club Skuld.

Exxon Valdez oil spill

37,000 tons

Braer oil spill

85,000 tons

85

37

© AFP / Scanpix



pounds for lawyers every year and could not afford it. One of them, MartinThomson, a farmer at Exnaboe, told Lloyd’s List that he would drop his five-figure claim because of frustration over the IOPCF policy not to co-operate,but just to play for time. Chemical dispersants had swept ashore in January1993 and covered his property. Moreover, the asbestos roofs on his farm build-ings had been affected and started leaking one year after the accident. “Youcannot run a farm with leaking roofs. I have to look after my livestock.” Heclaimed that the position of IOPCF was that: “the roofs form part of the evi-dence, and we are not allowed to touch them until the claim is settled.” Thefarmers could not live with that. A representative of an Edinburgh law firm,Eric Scott, said that damage to the asbestos roofs had all happened in one par-ticular area and had affected all roofs of this kind, old and new. He complainedthat the Fund “is using every procedural and technical device to avoid payingthe claims.”

IOPCF seemed to be at pains about what to do. There was only GBP 3.5 mil-lion (about USD 5.66 million) left to accommodate the remaining claims. Yetthe press was told that its policy was successful. Sally Gregory, spokeswoman,said that the number of court cases had dropped from 200 in January 1996 to100 cases in 1998. Most of the big claims were not backed up properly, shesaid, and the Fund would prefer to talk to people in order to persuade themto reach out-of-court settlement.

In mid-March 2000, Lloyd’s List could report that the UK government haddropped its claim. It turned out that the Shetland Salmon Farmers’ Associa-tion, smolt suppliers and several other claimants had also withdrawn theirclaims after the courts had rejected them. IOPCF should thereby be able to liftits self-imposed moratorium so that legitimate payments long overdue couldbe paid out.

In early January 2005, only one claim remained. At that time, the Fund hadpaid nearly GBP 46 million (about USD 83.73 million) and the shipowner’sinsurer, Skuld, had paid GBP 6.2 million (about USD 11.22 million) toclaimants. The remaining claimant was Shetland Sea Farms Ltd., which contended to have contractual commitments to buy smolt at the mainland.The question arose whether some of the documents offered as evidence weregenuine.

The court of the first instance concluded in 2001 that officers of theclaimant had knowingly presented copies of fake letters in support of the



claim. The court decided, however, that the company should be given anotheropportunity to prove that a contract existed before the Braer accident. In May2003, a new decision was rendered confirming that Shetland Sea Farms Ltd.had indeed been involved in a fraudulent scheme. Nevertheless, the case wasallowed to proceed. Skuld and the IOPCF Fund appealed against this deci-sion.

In January 2007, a settlement was reached between Sea Farms and IOPCFand Skuld, whereby the claimant withdrew its claim and paid GBP 75,000 toSkuld (USD 150,126) and GBP 20,000 (about USD 40,033) to the 1971 Fundfor the legal costs incurred. Fourteen years after the grounding, the case wasthereby brought to an end.

Notes:See “The Impact of an Oil Spill in Turbulent Waters: The Braer,” a report edited by J.M. Davies and G.Topping, London, 1998. See also IOPCF annual reports 1993-2007; Tradewinds, May 31, 1996; Skuldnewsletter no. 3, October 1999; and Lloyd’s List, Jan. 6, 1999.

VI. MAERSK NAVIGATORSixteen days after the Braer accident, a fully laden large Danish crude carrier,Maersk Navigator (255,000 dwt), which had been leased to an affiliate ofExxon Corporation, collided with a Japanese tanker (96,000 dwt). Thecalamity occurred near the entrance of the Malacca Strait, one of the busiestwaterways in the world. Both tankers were registered in Singapore. The Japan-ese ship was in ballast, but oil leaked out from Maersk Navigator. Mr. LawHieng Ding, Malaysia’s environment minister, warned the press that “We canexpect a disaster” whilst a spokesman of the owner played down the danger,saying that a salvage tug reached the tanker the same night and “Any leakingoil from the breached cargo is burning off.” Before the leakage was stopped,however, about one-tenth of the cargo escaped into the sea.

In Malaysia, concern had for some time been expressed about the practice ofallowing big tankers use the already congested and relatively shallow straight.The government had proposed that laden super tankers carrying oil from theArabian Gulf to Japan should proceed through the Sunda Strait, or the Lom-bok and Makassar Straits, which offered a safer deep-water channel throughthe Indonesian archipelago. Tanker owners were reluctant to comply with therouting the government proposed, as the oil industry was not prepared to paythe added transportation costs which the extra mileage would mean.



Notes:See International Herald Tribune, Jan. 22, 1993, on Maersk Navigator. In1975, Jacob Maersk had spilled more than the double amount of oil –88,000 tons – off Oporto, Portugal.

VII. SEA EMPRESSIn February 1996, history repeated itself. Thirty yearshad passed since the master of the Torrey Canyonordered a change of course which, all being well, wouldsave half an hour and reach the evening tide in MilfordHaven. Once more, a large tanker on its way to this veryterminal caused a major spill. Once more it was confirmed that tanker pollution is a media event as longas it occurs close to the media centres and there is badphotogenic news to report.

The Milford Haven waterway had a long history as anoil port, chosen during the 1950s for its deep waters andnatural shelter, features that make it ideal for largetankers. In 1996, the oil terminal was the second busiestin Britain, taking delivery of crude oil and shipping re-fined petroleum products worldwide. On Feb. 15 thatyear, the three-years-old Liberian-flag tanker (149,000dwt) Sea Empress – owned by a Norwegian, JohnFredriksen, and managed by Acomarit, Glasgow –caused an oil spill of 72,000 tons of crude oil and 360tons of heavy fuel oil, polluting the waters and coastlinein southwest Wales. Four cargo tanks and two ballasttanks had been ripped open on the rocks at the entranceto Texaco’s terminal.

The grounded tanker had been in very good technicalcondition. But the first mate did not speak English, andcommunications between ship and shore proved diffi-cult. The port’s radar installations had been out of orderfor some time. A pilot had been on board at the time ofthe accident, but according to reports available, he arrived just 15 minutes before the tanker grounded. He

John Fredriksen

John Fredriksen was born in1944 in Eidsvoll, north ofOslo. At 16 years old, he beganas a ship broker and moved toNew York, where he proved histalent in the early 1970s. There,he worked closely with oil inter-ests in the Middle East and established his own tanker company. The next decade, hemade good money transportingoil from the Persian Gulf duringthe war between Iran and Iraq.In Oslo, he got his own table,known as “Kharg Island,” at“Theatercafeen” restaurant. His many other investments include oil rigs and marine harvesting. Today, he is probably the world’s majortanker owner.

© Poppe Cornelius / Scanpix



had failed to follow the leading lights, and it took 12 hours from when thepilot reported that he had lost control with the steering till any action wastaken by the authorities ashore. It turned out to be an accident from top totoe. The tanker was refloated, but despite salvors efforts, she grounded againthe next day and once again, causing more oil leakage during persistently badweather. On Feb. 21, Sea Empress was finally towed to a jetty inside MilfordHaven, where the remaining 58,000 tons of oil was discharged.

The oil came ashore along 200 km of coastline, most of which was a nationalpark. The Milford Haven Waterway represents one of the most productivecommercial fisheries in Wales, taking advantage of the abundant shellfish, craband lobsters, sea bass and other fish. The event prompted widespread fears ofan environmental catastrophe. A ban was imposed on commercial and recre-ational fishing in the region, and there was concern that tourism – importantfor the local economy – would be badly affected by the heavy-oiled beaches.The ban was lifted 18 months later. At that time, there were few visible signsof the oil except in a few areas where some clean-up still was required.

Critical voices later claimed that the spill could have been reduced significantlyif communication had been better. It was moreover claimed that shore personnel had given inaccurate information about the tide.

During the investigation that followed, the Minister of Maritime Affairs,Lord Goschen, went a long way to admit that the distress signals from thetanker had not been taken sufficiently seriously. He and his government wereharshly criticized by the Labour opposition for not having paid attention tothe recommendations in the report Lord Donaldson worked out after the Braeraccident. A spokesman for the opposition demanded that Lord Goschen andthe secretary of transportation, Sir George Young, should leave their Cabinetposts. A draft report issued by the UK Marine Accident Investigation Branchesleaked out in January 1997. Glenda Jackson, Labour transport spokeswoman,said: “The (draft) report underlines that the Sea Empress grounding was a disaster, the salvage operation a farce.” She also accused the Government of“a cover-up” after it was revealed that the official report on the oil spill wouldnot be published until after the general election.

Also the Government found that the standards of training and examinationof pilots at Milford Haven were unsatisfactory and in need of improvement,in particular with respect to large tankers. In hindsight, an accident seemedjust waiting to happen. Thus when the Milford Haven Port Authority (MHPA)


was prosecuted by the UK Environment Agency, thePort Authority pleaded guilty to a charge under the newand unfamiliar 1991 Water Resources Act. A fine ofUSD 6.5 million was imposed by Cardiff Crown Courtthree years later in January 1999. It was held that pi-lotage standards were inadequate, and pilot errorcaused by inadequate training and experience were seenas contributory factors to the accident. The governmentrepresented by the head of the Environment Agency, EdGallagher, left no doubt as to his satisfaction. He sawthe huge fine as “an important landmark in environ-mental protection.”

The harbour master, Captain Mark Andrews, who hadpleaded not guilty, was acquitted on all counts. As anemployee of the port authority, he had only acted on itsbehalf.

In the meantime, the new general manager of the port,Ted Sangster, had repeatedly pointed out to the pressthat the MHPA guilty plea was based on a non-faultbasis and was meant to end an extraordinarily expen-sive lawyer festival. He felt strongly that the court hadfailed when it imposed the unprecedented fine. In addi-tion to the fine, the port was ordered to pay GBP

Sea Empress

On Feb. 15, 1996, the three-year-old modern tanker on herway to a refinery in MilfordHaven grounded and lost72,000 tons of crude oil and480 tons of fuel into the sea.The incident proved the oldtruth that despite a vessel beingin first-class technical condition,safety depends on the qualityand professionalism of the otheractors on sea or shore. In this case, the communicationbetween the ship and the portwas not up to par. The portradar was out of order, the pilotarrived too late and it wasclaimed that inaccurate informa-tion had been given about thetide. The Milford Haven Water-way is one of the most produc-tive fisheries in Wales. Thedamage to marine life was serious. Among the conclusionsof a special Environmental Evaluation Committee set up bythe British Government was:“The main impact occurred atthe time of the spill or shortlyafterwards - there appear tohave been few major long term effects.”

© Rebecca Naden / EPA / Scanpix


CHAPTER

825,000 in legal costs. According to Mr. Sangster, these fees came on top ofthe GBP 1.3 million the port had spent “on enhancing and investing in itssafety system over the past couple of years.” The judgment was appealed inJanuary 1999.

In Norway, a spokesman of the owner’s defence club Skuld, Arild Wegener,did not quite agree with the views Mr. Sangster expressed. Mr. Wegener toldthe press that the MHPA’s guilty plea was a further confirmation that itsshipowner member was not at fault, thus the blame for the accident “can belaid at the doorstep of another party.” The club consequently hoped to recoverall or part of what had been paid out to victims for the spill. Another Skuldspokesman, Jonathan Hare, a senior lawyer, told the press that the likelyamount of claims could reach USD 65 million. He would not give an amountof the claims settled but said that “a great majority” had walked away withan acceptable settlement. In his mind, it seemed clear that the early press reports holding the owner responsible had proved incorrect and that it hadbeen recognized that a safe ship is still a major hazard if shore-side responsi-bilities are evaded. According to Mr. Hare, the insurers and the shipowner hadabided by the rules and that time had come – together with the Fund – to consider teaming up as plaintiffs seeking redress for the liabilities incurred.Such action would have as its basis the rights acquired by subrogation fromthe victims of oil pollution to whom it had made compensation payments.

Both sides expressed strong opinions. In October 1999, Lord Donaldson feltcompelled to publicly attack the “disgraceful” conduct of the EnvironmentAgency over the prosecution of the Port Authority. In March the followingyear, Lord Chief Justice Bingham of the Appeal Court found that the port au-thority’s fine was manifestly excessive. He slashed the fine to GBP 750,000(USD 1,213,670). But the fine came on top of the GBP 1.3 million (USD 2.10million) that the port had invested in a safety system the last couple of years.For the new general manager of the port, Mr. Sangster, the reduced fine wasstill a considerable burden for the port. “There had been no winners here,”he said.

Also, the Environmental Agency was depressed. Its Chairman, Sir John Har-man, told the press that the passed judgement was “extremely bad news.” Inhis mind, the fine could in no way be compared to the serious impact on theenvironment that the Sea Empress incident caused. Moreover, the judgementfailed to address the vexed issue of responder immunity, which first and fore-



most concerned the salvage companies.

The UK government decided to stand last in queue for its claims to ensure thatIOPCF had sufficient funds to pay other claimants. Once again, the Fund hadbeen compelled to suspend payments to the victims of the pollution damageas the claims presented exceeded the amount available under the internationalconventions.

After thorough consideration, the Fund decided to take recoursive actionagainst MHPA in the Admiralty Court in early 2001. The action was delayed,but in February 2002 the proceedings commenced in cooperation with Skuldand on behalf of 786 other claimants. The claims were based on allegationsof negligence and/or breach of duty, including failure to put a proper systemin place for safe entrance into the port, failure to have in place effective radar,the entrance to the port not being sufficiently marked, the system of pilot allocation being negligent and the system of pilot training being defective.

At the same time, Texaco, which operated the oil terminal in Milford Haven,commenced legal proceedings against MHPA and the Milford Haven PilotageLimited. The compensation claim of Texaco included damage to the cargo(USD 10.5 million), whilst other expenses including salvage costs amountedto more than USD 5.6 million.

MHPA rejected all claims in respect of the economic loss suffered. The defencewas lengthy and detailed. In short, it was alleged that the port indeed had putin place proper systems to ensure that the entry to the port was safe. Duringthe court proceedings, the parties finally agreed with the proposal of the judgethat the parties should explore the possibility of a settlement by mediation.The mediation resulted in an agreement with IOPCF and Skuld that theirclaims should be fully and finally settled by means of a payment by MHPA ofGBP 20 million by the end of 2003. By this settlement, all outstanding claimsin relation to the Sea Empress incident had been resolved.

An out-of-court settlement was also reached with Texaco. The IOPCF an-nual report for 2003 concludes that 1,034 claimants had presented claims fordamages caused by the Sea Empress accident. The claims represented nearlyGBP 50 million. Payments were made to 797 claimants totalling some GBP37 million, of which 7.4 million had been paid by Skuld and the balance bythe Fund.



The lesson learnt was that a safe ship is still a major hazard if shore-side responsibilities are evaded. The focus was for once turned on port safety, notonly on ship safety. One other positive consequence of the spill was recognizingthat the chain of command after the serious incident has to be clear with respect to political and operational control. Mid-2002, Milford Haven PortAuthority announced that it would escort loaded tankers over 50,000 dwtthrough the narrow entrance to the port. At Lord Donaldson’s suggestion, aSecretary of State representative was appointed by the UK administration totake charge in such incidents. According to observers in London, this has beena resounding success. Moreover the enactment of the UK Maritime Safety Act of 2003 provides powers for the Secretary of State`s Representative for Maritime Safety andNavigation (SOSREP) to facilitate salvage and assist ships in distress outsidethe English coast.

Notes:On Sea Empress, see IOPCF annual reports 1996-2003; Lloyd’s List through January 1997; Feb. 15and 18, 1999 and May 3, 2000; Tradewinds, Jan. 15 and Feb. 26, 1999; Skuld’s Newsletters 1996-1997and a final report of the Sea Empress Environmental Evaluation Committee, Cardiff 1998.


DRACONIAN MEASURES REQUIRED?

12

Draconian measures required? - The viability

of IMO’s solutions questioned again

I. ERIKAThe break-up of an old 37,000-dwt, single-hull tanker on the morning of Dec.12, 1999, in the Bay of Biscay 60 nautical miles off the coast of Brittany,France, came as a bolt out of the blue. It happened after an extended periodof relative peace and quiet on the maritime spill front.

In severe weather, the master sent the first distress signal late Dec. 11, but soonafter, he cancelled the message. Then, the next morning at 6:20 a.m., he senta new distress message. Two hours later, the tanker broke up.

Under the Maltese flag, Erika (built in 1975) was en route to Italy fromDunkirk with a cargo of 31,000 tons of heavy fuel oil on board. Nearly 20,000tons were spilt about 100 km off the mouth of the river Loire. The wreck sankin 120 meters of water.

No lives were lost, as the French marine rescue services airlifted all membersof the Indian crew to safety. The oil that escaped from Erika was less thanseven percent of the oil spilt 22 years earlier when Amoco Cadiz grounded inwaters nearby. Nevertheless, the incident stirred up more media interest andpolitical debate than the grounding in Brittany in 1978. The spilt cargo was



blown east towards the coast, and the first oil polluted the shores of Franceon Dec. 25. The clean-up efforts continued for two years.

The incident illustrated dramatically the difficulties of cleaning up heavy fuel– whether originating from cargo or from the fuel from any kind of ship. Be-cause of its highly persistent nature, such oil is resistant to natural clean-up aswell as difficult to remove from the surface by booms, skimmers, chemical dis-persant or other techniques. Hence, the consequences were immense when theheavy fuel travelled great distances from the spill location and caused wide-spread contamination of coastlines and damage to fish and fishing gear as wellas to aquaculture facilities and wildlife. At the end of 2001, about 250,000tons of oily waste had been collected from the coast and stored. It took twomore years to dispose of the recovered waste. The connected costs alone rep-resented about GBP 33 million.

The Savarese family in Sorrento owned Erika through Tevere Shipping Com-pany of Valetta. The technical manager was an Italian company, Panship Man-agement and Services in Ravenna, with Captain Antonio Pollara in charge.She was one of eight tankers built at the Kasado Dockyard in Japan in themid-seventies, and had been used to carry black-market products at freightrates which a French Permanent Commission of Enquiry into Accidents at Sea(CPEM) in December 2000 concluded were insufficient to cover the mainte-nance costs. From 1975 to 1994, the tanker changed its name several times,which suggested several changes in ownership.

The irony of the disaster was that the three major oil companies on the Euro-pean continent, the Total/Fina/Elf group, had chartered an old tanker – laterclaimed to be sub-standard – spilling a substantial amount of heavy fuel oiland affecting 400 km of shoreline, including some of the best beaches on theFrench coast. Twenty years ago, Total had sent a large tanker (Betelgeuse) withhorribly corroded structures to discharge her cargo at Bantry Bay in Ireland.Here, the tanker exploded in January 1979, with the result of 50 people dying.The tanker was to be sold, and neither the oil company nor the French classi-fication society, Bureau Veritas, had concluded that it was required to spendextra money before the transaction.

Following the breakdown of Erika, governments, the media, the public ingeneral and not in the least environmentalists scrutinised Total once again.This time, no crewmember was killed, but the tanker chosen by the companyto carry its oil caused one of France’s worst environmental disasters and dom-inated the media for a considerable time.

Erika

The 37,000 dwt single-hulltanker, Erika, 24 years old at thetime, was en route to Italy with a cargo of heavy fuel oil for theFrench oil company Total in December 1999 when she sankand spilled nearly 20,000 tons ofoil about 60 km from the Frenchcoast. The oil that escaped wasonly a fraction of the spill AmocoCadiz caused in the same area 22 years earlier, but came as abolt out of the blue after a peace-ful period with respect to marinespills. The incident stirred upmore media attention and politi-cal debate in Europe than everseen before. Because of the oil’shighly persistent nature, it was resistant to natural cleanup anddifficult to remove. The fuel travelled great distances andcaused widespread contaminationand damage to the fishing andtourist industries as well as to the wildlife.

© Stephane Marc / AFP / Scanpix


The French environmental minister, Dominique Voynet,told the press that it was impossible to approve a systemthat pushed old ships to their limits, underpaid its sea-farers and imposed minimum control. “Satisfying one-self with saying that the captain is the sole masteronboard after God often amounts to putting the bulkof responsibility on the fall-guy,” she said. Transportersand charterers had to assume the responsibility.

But Guiseppe Savarese, the owner, claimed that the ves-sel was in good condition. A reputable company inRavenna managed it. The Italian classification company,Registro Italiano Navale (RINA), which was a memberof the International Association of Classification Societies, an association of high esteem, approved it.Everything was done according to the rules. Moreover,the tanker had recently passed inspections by other lead-ing oil companies, including Exxon and Repsol. Accord-ing to a press report, at least five major oil firms hadapproved the 24-year-old tanker for chartering at thetime she was lost.

Giuseppe Savarese

Giuseppe Savarese, the Italianowner of old Maltese tankerErika, soon faced criminalcharges and had huge bail on his head after the accident. Hewas summoned to the Court inParis. His defence was that theresponsibility for the pollutionscandal did not lie with him butwith the Maltese authority andthe Italian classification societyRINA. He argued that he hadpaid RINA to verify that hisship was in proper condition.This was verified. When given aclean bill of health on his ship,he should be allowed to tradethat ship.

© Benoit Tessier / REUTERSP / Scanpix



In a subsequent interview with the newspaper Le Journal du Dimanche, Captain Karun Mathur – who had been jailed after being brought ashore –claimed that the manager of the vessel had offered little or no cooperationduring the fatal hours.

The only advice he received was to try to get the stricken tanker to Spain. “Ithink that they feared the French authorities and that they probably hoped todo better with the Spanish authorities,” he said.

When asked whom he thought was ultimately responsible for the disaster,he replied: “An inquiry is in progress. But I think that the most guilty are theNeapolitan owner Guiseppe Savarese and the bank which finances him, TheBank of Scotland.”

A lawyer representing him claimed that Mathur had discovered and signalledsome serious corrosion problems to the owner in November, two months afterhe took command of the ship. The conditions onboard the tanker had notbeen good. The crew had not been paid for three months. The master had or-dered spare parts that never arrived. Moreover, the crew on three other vesselsMr. Savarese owned had been waiting for their wages for a considerable time.One of these tankers was Maria S, arrested in Augusta, Sicilia, in mid-January2000 because of unpaid wages of some USD 107,000 and several technicalproblems.

According to a report by RINA – issued after two months internal inquiry –the residual strength of the vessel at the time of the casualty was sufficient towithstand normal operations, even during the prevailing storm conditions.Captain Mathur and the manager of the vessel had misjudged the problemsposed by a small structural failure in the hull, and thereby allowed it to developinto a much more serious structural failure. The crack was from corrosion, itwas claimed, but rather it was due to weaknesses in the hull, possibly causedin the course of repair work by the Byelaw shipyard in Monte Negro in August1998. Moreover, the master had failed to follow the emergency procedureslaid down in the International Ship Management Code, and he had not soughtadvice from RINA.

When it became known not long after the accident that several of Erika’s sisterships – all still trading – had suffered identical structural failures in 1990 and1991, RINA’s chief executive, Nicola Squassafichi, countered the accusationsand complained that the other classification societies had failed to report thepast problems with the sister ships:



“Eight sister ships of the Erika class were built under two different class societies, and have been classed by five different IACS classification societies

at some time in their life. ... All of these ships have suffered structural problems. Three of them, other than Erika, were serious. No information

on the history of problems was available to RINA.”

When it was revealed that Erika had changed classification society four times,the public and the media seemed to lose faith in the experts. Instead of an in-dustry educating the public, the reverse now seemed to be the case.

A representative of the Green party in France had called a few days after theincident for the freeing of the master, who had been detained in custody:

“The detention of the captain of Erika is all the more scandalous for the factthat the ones really responsible for this shipwreck and this ecological catas-trophe – the owner, the shipping company, the charterer Total/Fina, the portauthorities of all kind who have judged the ship, worn out by the years, fit

for service – seem to have slipped through the judicial net.”

The Greenpeace international oil campaigner was no less blunt: “It is anotherexample of the irresponsibility of the oil industry to operate as cheaply as possible.”

Substandard ships would not be sailing if oil companies did not cut costs byusing them, the environmentalists argued. Dagfinn Lunde, managing directorof INTERTANKO, backed them up. French shipowners joined the environ-mentalists and the domestic shipmasters’ association protesting against the de-tention of Captain Mathur.

The Director of OCIMF, John Hughes, confirmed that the information onErika in SIRE, a central oil industry database register, had been available tothe Total group. SIRE had, however, never been intended to report on the hullcondition of a tanker as long as the papers were in order. But the databasewould be re-considered in light of the accident.

On the role of the classification societies in the future, the outspoken ship-ping financier Paul Slater told the press that in his mind, their days might soonbe over. The system whereby class societies were chosen and answerable toshipowners was in his mind “monstrously outdated.” The better alternativewas publicly funded societies with powers similar to the aviation authorities.

A leading tanker owner, Lars Carlsson, president of Concordia Maritime,



accused the oil industry of undermining safety measures that could preventdisasters. He pointed out that if only the oil companies were prepared tochange their policies and begin to charter the better ships in the world fleet,this would eliminate the cheats who systematically broke the law and avoidedthe restrictions.

In an interview with Lloyd’s List, the chairman of the Italian shipowners’ as-sociation Confitarma, Mr. Paolo Clerici, proposed: “a broader form of liability– if not unlimited – for charterers as a measure by the EU to cut the numberof aged and substandard tankers in European waters.”

He was not at all happy with the policies of the charterers and how theywere in a position to run the game: “There are owners who have quite youngvessels in their tanker fleets, but who are keeping in service aged vessels dueto the demand from the market. Often, aged vessels are specifically required.The market is prepared to pay only marginal premiums for young tonnage.”

On this background, it was no surprise that Henry Desmarest, chairman ofthe Total group, won few friends when he was confronted with aggressivejournalists at a press conference in January 2000. When asked about the qual-ity elements in the chartering policy of his group, according to a Lloyd’s Listreport, he “with his eyes on the group’s share price” in no way agreed thatthe oil group had been shaken to its roots by the impact of public opinion.Mr. Desmarest also called for a massive increase in the liability for shipownersfor the consequences of casualties like Erika. On another occasion, however,the director of the group’s shipping department, Bertrand Thouilin, admittedthat the disaster had shaken his own belief that the system in place within thecompany was good and effective.

France’s Green party claimed that the oil group’s financial liability bore norelation to the real cost caused by the accident and presented a number of pro-posals to the Commission, including one which would compel the oil compa-nies to assume the total costs of all environmental damage caused by oilpollution for which they were responsible. Draft legislation to this effect wouldbe presented to the French Parliament.

At the same time, the Total/Fina/Elf group – under pressure to announce some-thing quickly – together with the subsidiaries of Shell, BP, Esso and other localoil companies, worked out a “charter” committing themselves to introducetighter checks on vessels aged 15 years and above and to phase out single-hull



vessels by 2008. They also seemed to agree that vessels 15 years and over would not be used

unless they had undergone a thorough hull inspection in the preceding two-and-a-half-year period and could provide inspection reports no more than sixyears old. The Total group announced that it would no longer employ tankersof 80,000 dwt and above if their age exceeded 20 years. With respect to thesmaller sizes, Total maintained that there were not enough vessels below 20years on the market.

A few weeks before the joint announcement, the Total group had reacted fu-riously to a statement from Shell to the effect that it considered the Erika unfitfor charter. The group counterclaimed that Shell was operating a large 300,000dwt tanker that should rather be scrapped and in no way used for oil trans-portation. The whole discussion seemed at this stage an open-ended circus.

The European Commission’s maritime policy director, Georgette Lalis, announced that tougher measures on shipping were in the pipeline.

She criticised the classification societies and the flag-of-convenience coun-tries that continued to allow obsolete tankers to be used by the oil industry. It should be considered to phase out old single-hull tankers in line with theUS Oil Pollution Act, rather than the current IMO targets.

Another item on its agenda was whether the liability of cargo owners wasadequate or whether the international compensation fund should be supple-mented within EEC. Leading shipping representatives were summoned severaltimes to discuss the various proposals. The agenda included more stringentport state control and for the European Union to become closely involved inauthorising classification societies. A proposal to accelerate outlawing of sin-gle-hull tankers was controversial. Opponents claimed that such age limitswould discourage owners from building into new ships’ extra strength againstfatigue, corrosion margins, the best coating and first-class steel. With radicalage limits, why should owners bother to invest in such luxuries?

European Transport Commissioner Loyola de Palacio reacted sharply inMarch 2000 to the opposition of an early phase-out of single-hull tankers,and now revealed that a second package of safety measures was prepared.

At a maritime conference in Athens in June, Ms. de Palacio declared:“We have found no plausible explanation why the European Commissionshould not act when it comes to protecting its coasts and its population, espe-cially when the US has already taken similar measures.”



She brushed aside arguments that maritime safety is a global issue and shouldbest be left with IMO. She feared that unless action was taken, the result wouldbe that Europe would be “getting all the rust buckets that will be prohibitedfrom US waters.” The current liability regime was inadequate and needed ashake-up.

Listening to her thunder were IMO chief O’Neil – who previously had warnedagainst taking action hastily on the spur of the moment – and the President ofthe Greek Shipowners Union, John M. Lyras. After the presentation, Mr. Lyrastold the press that he had found the message from Ms. de Palacio “rather disconcerting.”

Erika broke apart while underway at sea. Such occurrences are rare. Analysiscarried out after similar incidents had shown that it was highly unlikely thata floating object could have struck the ship with sufficient energy to cause abreach. Whilst the tanker had encountered bad weather throughout the voy-age, she should not have been overwhelmed by the wave loads or by the hullloading, even taking into account the reduced steel thickness measured duringthe last survey.

With the safety net to be provided by the international classification societies,it seemed obvious that behind the structural failure, the survey must havefailed. Subsequent investigations undertaken by the governments of Franceand Malta concluded, however, that it was not possible with absolute certaintyto establish what caused the accident. But it was most likely that it resultedfrom structural weakness due to a combination of corrosion, local cracks, substandard repairs and maintenance as well as the questionable quality ofsurveys previously carried out.

The master could have made some mistakes, but it had to be taken into consideration that he had to act quickly. He was not in an office with plentyof time. The achievement in getting his crew off the ship unharmed should notbe underestimated. A preliminary report of a marine accident bureau teamwhich had investigated the loss of Erika leaked out in April. This concludedthat the state of the vessel and its rapid deterioration in the last hours of itslife were such that the master and his crew could probably not have done anything to prevent the disaster.

But it did not take long before a subsequent French Senate Commission report criticised the master for not alerting the authorities sooner. He could

have given information about the crack in the hull from the beginning, reducedspeed and waited for the arrival of a tug.

A new blow to RINA and to the oil industry as well came in August 2000,when a BBC correspondent wrote the story “The scandal of Erika,” which includes the following passage: “The oil tanker industry argues that Erika wasone off, but Correspondent discovered another tanker in an even worse condition – and still sailing. Like Erika, the Nunki was flagged to Malta andsurveyed by the Italian classification society, RINA.”

Another judicial report published six years after the incident goes a long wayto confirm the conclusions of the first investigation.

Corrosion failures meant that Erika’s “fate was sealed.” The report highlights the failure of Panship and RINA to detect and deal with advancedstructural corrosion from which the vessel was suffering before its break-upand sinking. At the time of chartering, it did, however, not seem possible forTotal to detect the state of corrosion of the internal structures of Erika.

Total/Fina chairman Thierry Desmarest had shortly after the casualty publiclyundertaken to not pursue any claim for cleanup and other related expenses,to the extent that the total claims exceeded the maximum amount availableunder the international IMO instruments. The French Government also undertook not to pursue claims which would exceed the maximum amountsavailable under the international regimes. Moreover, the government providedsupplementary compensation for the benefit of suffering parties engaged intourism, salt-producing and the fishing sector. These special payments fromthe government totalled about GBP 11 million (about USD 16.67 million).

In March 2000, a local court in Nantes determined that the owner’s and hisP&I club’s (Steamship Mutual) tonnage limitation under the CLCProtocolamounted to GBP 8.6 million (about USD 13.03 million). The total maximumamount available for compensation under the international instruments at thetime of the disaster was GBP 124 million.

As of Dec. 31, 2007, more than 7,000 claims for compensation had beensubmitted to IOPCF, for a total of GBP 155 million (about USD 310.26 mil-lion). By that date, 99.7 percent of the claims had been assessed. Payments



Total’s Thierry Desmarest and Bertrand Thoulin

In early January 2000, the chairman of Total, Thierry Desmarest, told the press that Total had set aside 50 million French francs to cover cleanup costs after the Erika accident. Their contribution to the compensation to the pollution victims amounted to about 120 million French francs. Total had chartered Erika to carry itsoil, and the chairman called for a massive increase in the liability for shipowners to cover the expenses causedby such casualties. The shipping manager, Mr. Thoulin, conceded that he was shaken in his belief that the chartering system within the oil company group was good.



had been made in respect of some 5,900 claims representing GBP 95 million(about USD 190.15 million). About 1,000 claims totalling up to GBP 23 mil-lion (about USD 46.03 million) had been rejected.

Several disputed claims resulted in judgements rendered by French courts.Erika was a small tanker. Many of these judgements related to claims for lossof earnings suffered by parties whose property had not been polluted (pureeconomic losses). In view of the uncertainty as to the total amount of claimsarising from the incident, the IOPCF decided in July 2000 that the paymentsshould be limited to 50 percent of the damage actually suffered by theclaimants. In 2003, the level was increased to 100 percent.

Among the various claims that was approved was one from France’s Brittany Ferries. The shipping company had suffered disruption of its ferryservices and succeeded in convincing the Fund that the consequential loss wasa direct result of the pollution incident.

As a condition for approval, the IOPCF adhered to a number of rules agreedon by its governing bodies.

The starting point was that a claim was not admissible for the sole reasonthat the loss would not have occurred had no oil been spilt. The following elements should be taken into consideration before approval:

“the geographic proximity between the claimants activity and the contamination, the degree to which a claimant was economically dependent

on an affected resource, the extent to which a claimant had alternativesources of supply or business opportunities, the extent to which a claimant’s business formed an integral part of the economic

activity within the area affected by the spill.”

The judgements rendered by the French Courts related mainly to loss of earnings suffered by parties whose property had not been polluted. Claimantsquestioned the application and justification of some of the principles listedabove. In some cases, IOPCF was ordered to pay compensation. However, inmost of the proceedings, the Fund’s interpretation was upheld. Several claimswere, however, still pending in 2007.

Separate actions in court were brought against the shipowner by a number ofpublic and private bodies, including Total and the French State. However, mostof these claims, other than those of the government and the oil company, weresettled. France also brought action against the shipowner, Panship, IOPCF and



Total, claiming about GBP 128 million (about USD 256.16 million). The picture was most complex, suffice perhaps to add that Total in turn took legalaction against the shipowner and IOPCF and others, claiming some GBP 96million (about USD 192.16 million).

Whilst the shores were cleaned and compensation claims discussed, a criminalinvestigation was commenced by an appointed magistrate in Paris. From 2000to 2003, criminal charges were brought against several individuals includingthe master of Erika, a representative of Tevere Shipping, the president of Pan-ship, one of RINA’s managers, representatives of the French Navy who wasin control of the traffic off the coast of Brittany, as well as RINA and the Totalgroup. They were charged for “maritime pollution, endangering life and com-plicity in endangering life.” After four years of investigation, it was announcedthat the trial would begin in 2005.

But there were delays. The criminal proceedings finally started in February2007 and were meant to last until June. It seemed that everybody was blamingeach other of negligence. The case was seen as one of the most complex inFrench legal history. According to the judges, no final judgement could be expected before the end of 2007 at the earliest. The Court ruled againstRINA’s bid for immunity on the same terms as the flag state, Malta, whoseright as a sovereign nation was not disputed.

During the hearing, it was claimed that the amount of steel plating to carryout the repairs in 1998 was massively reduced to cut the bill of the shipyard.The steel plates required had originally been estimated to 273 tons, but thefinal bill showed only some 73 tons. According to one of the first parties totestify, the Secretary General of the International Federation of Shipmasters’Association, Rodger McDonald, port state control in Dunkirk had not doneits job properly. It had the authority to prevent the unseaworthy tanker fromsailing, but had failed to do so. He implied that the port should be arraignedwith other defendants at the trial.

There were heated exchanges when the Court was informed that BP had declined to approve the tanker after carrying out a vetting inspection less thanthree weeks before the accident. Moreover, Total had to accord that the 12months’ approval of Erika had run out when it took her on charter for thelast time. It probably did not help that the group insisted that this did notmean that it was prohibited from chartering a vessel with a hidden defect notpossible to detect.

Total was also faced with the assertion that it had effective operational con-



trol over Erika during its last voyage. Reference was made to the voyage instructions warranted by the charter party and concluded between the oilcompany and the commercial manager of the tanker. But the head of the ship-ping department, Mr. Thouilin, insisted that there were only three parties re-sponsible for the calamity: The owner, Malta and RINA. He was supportedby the last Total vetting inspector, who visited Erika and told the Court thatshe was “quite well-equipped.”

When the long-awaited criminal trial of those accused opened, the court heardseveral expert witnesses who supported RINA and alleged that a hidden weak-ness in its hull and not corrosion caused the collapse of the tanker. Moreover,she could have been saved if appropriate action had been taken when she firstgot into difficulties. The master’s decision to rebalance the ballast tanks hadprobably increased the stress on the hull and contributed to the collapse.

The owner, Mr. Savarese, who had been largely absent from the media whensummoned by the court, was now facing serious criminal charges and a bailof EUR 1 million on his head. He had argued that the responsibility rested notwith him, but with Malta, under whose flag Erika sailed, and with RINA.

Mr. Savarese saw no reason not to be blunt and stated:

“A lot of people behaved in an extremely bad way. I paid RINA to certify my ship. I paid RINA to verify that my ship was in proper condition.

They did verify that my ship was in a proper condition. If, as some peopleare alleging, there was a structural problem, they should have been able to spot that there was a structural problem. If they give me clean bill of

health on my ship, I am allowed to trade that ship!”

The owner’s former technical manager, Captain Pollara of Panship, had beencompelled to maintain a fairly high profile during the time passing since December 1999. He had dismissed the official report by the French accidentinvestigation bureau as partly wrong, partly incomplete and partly as an effortto defend domestic institutions. In the courtroom, he became irritated againwhen was asked for an explanation of why he had flown the crew out ofFrance after the accident. He denied that this was done to escape questioning,claiming that there was a “revolutionary climate” surrounding the crew at thetime and the authorities were looking for “heads to cut off.”



A witness with particular expertise in the application of the InternationalSafety Management (ISM) Code told the Court that after his investigation, hehad no negative remarks with respect to Panship’s safety management system.Two technical experts Panship called upon came up with more defence. Onecriticized the theory that corroded steel structures had caused the breakup ofErika. Instead, he supported Captain Pollara’s theory that further to thestormy weather, “sloshing” – violent movements of the cargo and ballast waterwithin the tanks – had resulted in a massive crashing back and forth and placedsubstantive stress on the steel structure.

Captain Mathur was briefly detained in a French jail after the loss of Erika.He had been released on bail, but was not present in the Tribunal de GrandeInstance in Palais de Justice when he on the first day of the hearing was calledby the President of the Court Jean-Baptiste Parlos to give evidence. From hishome in Bombay, Mathur had questioned the French legal system, which hadsingled him out as the person who had to go to prison.

When the young captain, who had no previous experience in Atlantic wa-ters, suddenly appeared in the courtroom in March, his lawyer claimed thathis defence rights had not been respected. Moreover, penal proceedings againsthim had also started in India, and he should not be charged twice. But to noavail. He came soon under fire and was faced with an explanation from Ad-miral de Monval, who told that the Coast Guard centre in Brest had consid-ered Erika as no emergency after Captain Mathur had cancelled his firstMayday signal and informed that he had the situation under control. Valuabletime was thereby lost. Other witnesses claimed that the tanker could have beensaved had it been handled differently by its master. The Captain sprung a newsurprise when he announced that he would sue RINA for having put his lifein danger. He said he was also considering claims against Mr. Savarese and Captain Polara.

In June 2007, the criminal prosecutors called for a fine of EUR 10,000 (aboutUSD 13,340) for Erika’s Indian captain because he noted anomalies from thestart, but as his whole crew was saved, the charges of endangering lives weredropped. One year in jail and the maximum of EUR 75,000 (USD 100,800)each were suggested for the tanker owner, Mr. Savarese, and the manager, Mr.Pollara. They were both accused of reckless negligence and putting people’slives in danger.



In mid-January 2008, a milestone was passed when theParis Tribunal de Grande Instance published a clear-cutjudgement after more than six months of proceedings.

A number of contributory causes were found to haveresulted in the loss of Erika and the subsequent pollu-tion disaster. Whilst the master and other individual defendants were acquitted with the exception of theowner and the manager, RINA was found guilty of fail-ure to show due caution when it declared the Maltese registered vessel seaworthy. Total was deemed to havebeen imprudent from its failure to find the ship unfit forservice during its vetting process. The oil company andRINA were each fined nearly USD 560,000. The crimi-nal charges against the head of the Total’s shipping de-partment, Mr. Thoulin, as an individual were notapproved.

The Italian shipowner and the manager, Mr. Savareseand Mr. Pollara, were both found guilty of the oilpollution Erika caused, and a fine was imposed on eachof them at the maximum penalty set by law for individ-uals, which was EUR 75,000 (USD 100,800).

It may have been the first time a European court hasheld a charterer of a tanker responsible for pollutioncaused by a tanker accident.

A London-based lawyer at Clyde & Co commentedafter the ruling of the French court: “Charterers andship managers of all descriptions should be careful, asthey are likely to find themselves more liable for prose-cution in pollution cases.”

The judges did not, however, directly pass sentenceon whether Total in its capacity as charterer was im-mune to sanctions under international maritime conven-tions (the ’84/’92 Protocols). They circumvented thedifficulty by holding it liable for the ship’s “vetting.”Total had neglected the age of the ship, the low standardof its technical management and its maintenance.

Captain Karun Mathur of Erika

Captain Karun Mathur was theIndian Captain of Erika, fullycrewed with Indian seamen.Certain people made efforts tomake him a scapegoat of the catastrophe, but as usual insuch cases, a number of playerswere involved. He was one ofthe very last people to leave thevessel when the crew was rescued. No human lives werelost. The cargo owner Total’soffice could not be reachedwhen Mathur contacted it inthe early morning when it became clear to him what wasin offing. A Total executivecontacted the Captain abouttwo hours and 50 minutes later. At that time, everyone apartfrom the maritime authoritiesknew that the situation wasdesperate.

© Michael Lipchitz / AP / Scanpix



According to newspaper reports, after two weeks of consideration, Total de-cided to appeal the verdict. This was reported to have caused very strong re-actions from environmental organizations that now also would lodge appealsin efforts to obtain higher awards for the damage to nature.

One of several other “Erika lawsuits” which Total faced was in the centre ofthe media attention in the early summer of 2008. It was reported that theFrench coastal region of Mesquer tried to use the EU waste directive to holdthe oil major further responsible. The claim had no legal relationship to thejudgement passed by the Paris Tribunal in January, when Total was orderedto pay for the incident. Mesquer received half a million Euros in that decision.

France’s Supreme Court did not dismiss the new claim from Mesquer, butasked the European Court of Justice (ECJ) to decide whether, under the direc-tive, it was for the producer of the oil, the seller or the carrier who had to payfor clean-up. ECJ’s 13-judge panel ruled in June 2008 that the shipownershould be regarded as having produced the waste, but the national courtscould hold Total responsible if it had “failed to take measures to prevent suchan occurrence, such as measures concerning the choice of the ship.”

Long before the criminal investigations were commenced, IOPCF concludedthat it had to protect its legal position in particular to prevent that potentialrecourse claims became time-barred. Hence, the Director was authorised tochallenge the owner’s right to limit his liability. In December 2002, recourseactions were brought in a French Civil Court against a number of parties in-volved, including Tevere Shipping, Panship and Total.

The CLC92 Protocol precludes claims for marine pollution damage againsta number of other parties than the owner, such as the charterer, but cargoowners and classification societies were not among these parties. In principle,the potential liability of a classification society would normally fall within twocategories, either negligence or breach of contract. Thus, the Fund ExecutiveCommittee authorized the director to bring action against RINA and theFrench classification society Bureau Veritas when it became known that thesociety had inspected Erika prior to the transfer of class to RINA. Furtherlegal steps were, however, postponed until the criminal trial had been termi-nated.

As the buck-passing and finger-pointing continued during the criminal proceedings in Palais de Justice, the EU transport committee had rejected aproposal from an Italian member to limit liability for classification societies.



A plea from the chief executive of the American Bureau of Shipping (ABS),Robert Sommerville, was also ignored. He feared that unlimited liability wouldruin his and other classification societies within a matter of time. ABS was atthe time involved in a legal dispute after one of its classed tankers had causedserious pollution in Spanish waters.

In response to the public/political outcry for measures that could prevent sim-ilar accidents in the future, the French government and the Commission of theEU had in the wake of the accident called for new measures to improve marinesafety and the position of pollution victims. In March and December 2000,the Commission put forward the so-called Erika I and II packages to bringabout the necessary improvements. Timetables were agreed on for phasing outsingle-hull tankers, and directives were issued providing for stricter controlfor ship inspection and classification societies. It was in no way given fromabove that Europe would wait for IMO to act. The Erika II package estab-lished a Community vessel traffic-monitoring and information system and anew European Maritime Safety Agency (EMSA) to monitor the implementa-tion of the safety regulations and standarise the response to accidents.

Within the European Union, the discussion continued on regional regulationsto improve marine safety and protect the environment. But progress was slow,and in November 2002 the transport and energy commissioner Loyola de Pala-cio seemed to have lost some of her fighting spirit. According to Tradewinds,she did not think countries would speed up the phase-out programme of elderly tankers. “EU-member states are already dragging their feet over existing legislation,” she complained.

Hence in February 2004, only a handful of EU countries stood ready to intro-duce the second package of regulations; some had not even managed to implement the first set of safety rules. Nevertheless, the Commission continuedits work and presented a third “Erika package” in November 2005. It comprised seven additional legislative measures, including a re-definition ofthe pollution liability concept and increased shipowners’ liability.

The ICS urged the EU governments to “veto” the two most controversial proposals in the Erika III package.

Focus was on the civil liability directive that threatened to undermine theprinciple of limited liability, as it seemed to transfer sovereignty from the flagstate to Brussels. The industry felt furthermore particularly provoked by a



directive imposing criminal sanctions in respect of accidental pollution at sea. Various shipping bodies challenged the validity of the Directive as conflict-

ing with internationally agreed instruments. The coalition scored the first vic-tory when the High Court in London mid-2006 decided that their case shouldbe heard before the EU’s Luxemburg-based European Court of Justice (ECJ).A one-day oral hearing was held in the fall the following year. The coalition,which INTERTANKO now led, presented its case. But to no avail, in June2008, ECJ delivered its judgement, holding the main provisions of the Direc-tive valid.

In Spain, the government was encouraged by the Erika judgment and appealeda US First District Court ruling that had dismissed its USD 1 billion lawsuitagainst American Bureau of Shipping (one of the biggest classification societies) over the Prestige casualty. The appeal used RINA’s conviction ascase law.

In France, further to the appeals, the Criminal Court of Appeals in Paris beganhearings in October 2009. During the following seven-week hearings, Totalargued that oil companies couldn’t be bound to check the work of classifica-tion societies. But most appeals were in vain. The Appeals Court upheld thecriminal law judgements from 2008 and confirmed the fines imposed. Regard-ing civil liabilities, the Court held that RINA, in issuing statuary safety certifi-cates, had acted as an agent of Malta – the flag state – but could not takeadvantage of the state’s immunity because it had not been invoked in an earlierstage in the proceedings.

The Appeals Court found, however, that Total de facto was the chartererof Erika and could therefore benefit from the channelling provision in CLCArticle 4 IIIc. Despite the oil company’s sloppy control of the tanker, its failurecould not be considered as having been committed “with the intent to causesuch damage; or recklessly and with knowledge that such damage would probably result.”

The judgement is not supportive of the guidelines the IOPCF Fund hasworked out in order to quantify “pollution damage.” The French interpreta-tion goes well beyond the strict definitions applied by the Fund. The CriminalCourt accepted the right to seek compensation for “pure environmental damage.”

The Erika accident and the subsequent situation were also carefully studiedin Japan. A submission to IMO drew attention to similarities with a rusty



tanker that had collapsed in Japanese waters. It was suggested that tougherrequirements should be introduced worldwide on the structural integrity oftankers, including a maximum 15 percent corrosion tolerance limit.

IMO’s committee on the protection of the marine environment also receivedproposals from European countries that would accelerate the phase-out of eld-erly single-hull tankers. The age limits suggested were less than those agreedby IMO in 1992 and included categories of tankers, which, on account of theirsize, were not covered by the mandatory requirements for double hulls or theapproved alternatives.

Some sceptics questioned the impact such legislation would have – if imple-mented – on the world tanker fleet’s ability to ensure that supplies of oil couldmeet global demands. But Secretary General O’Neil welcomed the proposals.Fully aware of the preference in some quarters for regional solutions, he stressed:

“Any attempt to impose regional standards will simply divert the problemelsewhere. If the European Union, for example, imposes its own restrictionson tankers, we should not expect the sub-standard ships that are displaced

will go straight to the scrap-yard. They will move to other areas such asAsia and continue trading.”

Notes:On Erika, see the IOPCF annual report 1999-2007; IMO publication World Maritime Day 2000; IN-TERTANKO Briefing Notes for the Monte Carlo Tanker Event April 9 to 13, 2000; BBC News: “Thescandal of Erika,” July 24, 2008; and Lloyd’s List Tanker Safety Supplement, May 17, 2000. Also seeLloyd’s List through January 2000, Feb. 9, 11 and 12, March 3, April 10 and June 5, 2000, Oct. 24,2004, Dec. 16, 2005, July 6, 2006, March 14, 2007 and Jan. 16 and 31, 2008; Fairplay, April 11, 2002,and Feb. 5, 2004; Tradewinds, July 12, Nov. 22, 2002 and Jan. 25, 2008. See the Judgment dated Jan.16 of the Paris Court Of First Instance, 11th Chamber – section 4.In July 2009, it was reported that further to the appeals, a Paris court would begin hearings in October2009. During the following seven-week hearings, Total argued that oil companies cannot be bound tocheck the work of classification societies. The appeals were in vain. The appeals court upheld the judgments from 2008. But the last word is notyet said, as it expected that a further appeal to the Supreme Court may be expected.Exchange rates for Euros to USD were calculated based on historical rates found at http://www.oanda.com/currency/historical-rates.For details on EMSA, see home page: “Agencies of the European Union”



II. CASTOR AND PRESTIGE - PLACE OF REFUGEThe right of a coastal state to take action to protect its coastline from maritimepollution was now well established in international law. On the other hand,there was no doubt that it was acceptable for a foreign ship to enter the inter-nal waters of another state in a situation of distress to protect human lives.

The dilemma came to light on New Year’s Eve 2000 in Spanish waters,when heavy weather came close to tearing the Liberian flag tanker Castorapart. On a voyage from Constanza to Lagos with a cargo of 28,000 tons ofunleaded gasoline, Castor suffered damage to the hull, resulting in a 26-metercrack half way along its length.

After the initial heavy damage, the President of the American classificationcompany ABS, Robert Somerville, told the press:

“this vessel has been subjected to an extreme force 12 gale with waveheights in excess of eight meters without any further deterioration in its

structural condition. Over the last 30 days, it had been towed 1,000 milesacross the Mediterranean, remaining intact without losing any cargo or

causing any pollution. Only a remarkable robust, well-maintained vessel instout structural condition could withstand such a beating and still deliver

its cargo safely.”

In a subsequent annual report of ABS, the description of the weather was toneddown a bit.

The coastal states in the area deemed Castor to represent a serious risk of explosion and a serious potential polluter. Hence the authorities of nine countries, including Morocco, Algeria, Greece, Tunisia, Gibraltar and Spain,refused the tanker refuge as salvors towed it through storms in search of sheltered waters.

Still, it ended well. Early February 2001, the salvage company Tsavliriscould announce that after five weeks of battle and a risky operation, the cargoonboard the stricken ship was safely pumped onto another tanker in the exposed waters of Malta. No oil pollution happened, and no lives were lost.The crew on board was evacuated and brought to Spain. At the end of theday, it turned out that the fatal crack was caused by “hyper-accelerated”corrosion of the hull.

Steel thickness and corrosion had never been on the top of IMO’s workingagenda. Concerned about the experience with Castor, IMO’s Secretary



General was instead swift to suggest that the organization should deal withthe “place of refuge” problem.

The problem had already been discussed in the media. During the salvageoperation in March 1967, Prime Minister Wilson had told the press that ifTorrey Canyon was refloated, his Government reserved the right to refuse herentry into UK territorial waters.

Castor had demonstrated the need to designate places where damaged shipscould seek shelter. In the interest of a cleaner environment, the Secretary General invited members of IMO to find a solution: “Taking into account thenon-mandatory character of the approach envisaged by IMO, I am confidentthat any concerns can be alleviated and that the matter will be tackled inIMO’s usual successful manner,” he said.

In 2002, a new disaster confirmed the need for such action. Regrettably, however, little or no progress had been made with respect to the “place ofrefuge” proposal. The result was that when a Bahama-flag tanker, Prestige,broke in two and later released some 25,000 tons of crude oil into the Atlantic,no progress had been made.

Guidelines on places of refuge were in 2003 worked out by IMO (ResolutionA.949), but the difficulty with implementation was the lack of incentive forgovernments to designate such “safe havens”. To provide a real incentive –such as a special salvage award – would require changing international law,which is a very time-consuming process. Nevertheless in 2003 the UK MarineSafety Act directed the Secretary of State’s Representative for Maritime Salvage(SOSREP) to locate places of refuge as appropriate anywhere around the UKcoast. It was, however, considered unwise to pre-emptively list the particularplaces as each incident would have its unique character.

According to the legal advisor to the International Salvage Union, ArchieBishop, it is commonly accepted within the industry that Prestige and muchof her cargo could have been salvaged had a place of refuge been granted. OnNov. 13, 2002, the Bahamas-registered tanker – loaded with a cargo of 77,000tons of heavy fuel oil – suffered structural damage on her way to Singapore,30 km off Cape Finisterre at the north-west coast of Spain. This was roughlythe same area where Aegean Sea had grounded 10 years ago, and the com-pensation claims had just been settled when the new accident was reported.Prestige went down some 200 miles west of Vigo. This Spanish town happened



not only to be the base for more than half the domestic fishing fleet, but alsothe main port for fishing vessels in all of Europe. Also shellfish harvesting andvarious forms of aqua culture were important industries in the area.

The owners of Prestige, a company registered in Liberia, remained veiled, butwere believed to be hidden behind a single-purpose company called Mare Ship-ping, associated with a foundation the late Greek shipowner John Coulouthrosset up. Despite the name, the group was not linked with the London-basedCoulouthros Shipping Agency, which in the past had suffered the loss ofAegean Sea. The tanker was managed by Universe Maritime through its officein Athens. Here decisions were made by Captain Michael Margetis, who soonproved to be rather reluctant to provide information to the media. There weremany initiatives after the accident. Among them, French President JacquesChirac demanded and Spanish Premier Jose Maria Aznar pushed for greaterownership transparency instead of the current “shady” structure in interna-tional shipping.

Prestige was 26 years old, with a single hull like Erika, but double her size– about 42,000 gross tons. She was entered with the London Steamshipown-ers’ Mutual Insurance Association Ltd. (the London Club) and had been deployed as a storage tanker off St. Petersburg prior to her fateful journey.The charterer Crown Resources was one of the major oil traders in Russia.She began listing and leaking oil and drifted three miles in heavy seas off thecoastline before salvors were able to secure lines onboard. Spain flatly refuseda plea from the management to allow the stricken tanker to find a place ofrefuge close to shore. Following orders from the Spanish Government, she was instead towed into deep waters. Whilst under tow, she broke in two and sank,having released about 25,000 tons of the cargo. Oil continued to leak at a declining rate from the wreck. All in all, it is estimated that the leakageamounted to more than 60,000 tons.

At the end of 2002, the north-west coast of Spain – with numerous beaches –had been seriously polluted. The coastline was, and still is, an attractive touristdestination, and the hotels, restaurants and other parties involved feared heavyeconomic losses. Contamination by the escaped oil made the local governmentimpose a ban on fishing and use of the marine resources in places extendingeight to 10 miles offshore. A number of onshore fish farms and other industriesthat were dependent on regular supplies of clean seawater found themselvesin deep trouble. In some cases, the situation was so serious that seafood stockshad to be destroyed. However, in 2003 the situation improved, and in Octoberthe authorities had lifted all fishing bans.


Because of the highly persistent nature of the cargo, theoil had moved as far as the Bay of Biscay, polluting apart of the French coast. For a short period, early 2003,the French authorities imposed a ban on the sale ofshellfish from the Arcacon Basin. Even the UK was affected, as some minor traces of oil were detected onthe shores of the Channel Islands.

An armada of oil recovery vessels from a number of European countries participated in the clean-up opera-tions. About a thousand fishing vessels assisted them. A large workforce comprising local government andmilitary personnel, contractors and volunteers handledmanual clean-up of the shoreline. Some 5,500 personnelwere engaged in the months following the accident.

At the end of 2003, the Spanish government decided totry removing the oil remaining in the wreck. A contractwas signed with Repsol, which commenced the work in

Prestige

The 26-year-old, single-hulltanker Prestige broke in twoand released 25,000 tons of itsoil cargo in the Atlantic in2002. The Spanish authoritiesrefused Prestige a port ofrefuge, and her huge subsequentspill impacted many of the sameareas in Galicia (Spain) thatwere polluted by the AegeanSea a decade earlier. Also, partof the French coastline was pol-luted. It thereby seemed clearthat the post-Erika legislationhad failed to prevent disastercaused by “single-hull pariahs.”The result was new hefty dis-cussions in IMO and amongEuropean politicians aboutwhat steps had to be taken.

© Spanish Navy Press / AFP / Scanpix



May 2004. After four months, some 13,000 tons of cargo were successfullyremoved from the forepart of the vessel. The remaining oil was treated by bi-ological agents aimed at accelerating the degradation of the oil.

But, in February 2004, only a handful of EU countries stood ready to introducethe second package of regulations; some had not even managed to implementthe first set of safety rules. Nevertheless, the Commission continued its workand presented a third “Erika package” in November 2005. Five years later,by Nov. 20, 2010, EEC member states were required to implement it into do-mestic law. The third package is made up of eight regulations and directiveswhich include measures dealing with quality of flag, standards for classifica-tion societies and port state control.

Notes:On Castor and Prestige, see ABS press releases May 16 and 30 and June 2003; Jack Devanney: “TheTankship Tromedy,” Florida, 2006, pp. 67-72; News Updates Marine log, Feb. 9, 2001; ProfessionalMariner, April/May 2002; Lloyd’s List, Feb. 9, 2001, Aug. 5 and 6, 2004, Dec. 6, 2006 and Jan. 29,2008; Fairplay, May 22, 2003, Nov. 24, 2005 and Nov. 11, 2006; Tradewinds, Dec. 6, 2002, Nov. 29,2003, Dec. 8, 2006, Jan. 4 and 11, 2008; Reuters, Jan. 2, 2008 and Daily News, Jan. 11, 2008. See alsoan article on “The Prestige In The Courts” by Prof. Dr. Miguel Michinel of the University Vigo in Spain,IOPCF annual reports 2002 to 2009 and European Parliament resolutions on Prestige in 2002, Crispin,Gill, Soper: “The wreck of Torrey Canyon,” London, 1967, p. 39 on Harold Wilson’s threat in 1967:“To refuse her (Torrey Canyon) entry into British territorial waters.”After six years of proceedings, in March 2009, a Spanish Judge concluded: “It is not the case that the decision to send the ship was an aggravating factor to the risk already present. ... There was no other option but to deny it (refuge).” See Lloyd’s List, March 25, 2009. In the US, the proceedings were allowed to continue. The US government filed an “amicus curiae brief” in favour ofSpain. See Lloyd’s List, March 26, 2009 and Tradewinds, March 27, 2009. Regarding Places of Refugein the UK, see home page “Maritime and Coastguard Agency.”

III. DRACONIAN MEASURES REQUIRED?Under the current IMO “phase-out programme,” the 26-year-old Prestigecould have gone on trading for several more years. Now the interest of themedia was enormous. It was claimed that the spill was a carbon copy of Erika.Single-hull tankers over 20 years old were labelled “single-hull pariahs.”

Prestige was approved for hydrostatically balanced loading, a techniqueavailable to single-hull tankers to prevent oil pollution in case of hull damage.Even if this solution works fine in the event of grounding or bottom damage,it seemed to not function if a breach occurred in the hull plating, which seemedto be the case with Prestige.



Questions were asked how a tanker classed and con-trolled by one of the leading classification societies, theABS, could break up and cause one of the biggest envi-ronmental disasters of recent times. The press concludedthat the post-Erika legislative programme had failed, oras Labour’s European transport spokesman Brian Simp-son described it: “too little, too late.”

The European port state inspection seemed to havefailed, as well. The Commission sent letters to the UKgovernment because it allegedly failed to inspect Prestigein Gibraltar and to Greece for failing to inspect thetanker when it stopped in a domestic port for bunkers.But the countries replied that they had no such dutywith respect to vessels in transit when no complaintshad been received.

Once again, it became clear that a huge gap was openingbetween the massive claims that were in prospect andthe relatively modest compensation available under theIMO instruments. The damages were likely to exceedthose of Exxon Valdez. The limitation amount applica-ble to the owners of the tanker was about GBP 15 mil-lion and adding money from IOPCF, the total amountavailable for pollution victims was about GBP 115 mil-lion.

The growing pressures on the authorities to be seen toact with more determination persuaded the French Pres-ident Jacques Chirac to come forward and call for “dra-conian measures.” In November 2002, he said,according to Tradewinds:

“I am horrified by the inability of those in charge, politically, nationally and particularly at the European

level, to take action to stem the laxity that permitsthese ships fit only for the dustbin to carry on. Nowwe must urgently take draconian measures, even ifthey harm the interests of certain companies whose

interests are not worth defending.”

French President JacquesChirac (1995-2007)

Subsequent to the Erika andPrestige disasters, French President Jacques Chirac didnot hesitate to make strongpublic statements about his perception of the oil and ship-ping industry with respect toenvironmental issues. In thephoto, he seems to be inspect-ing ducks which have been exposed to pollution. He calledfor draconian measures to stemthe laxity that permitted suchvessels as Erika to carry on.



At the time, Denmark was the only EU country that hadratified the Erika I package. The transport and energyCommissioner Ms. de Palacio seemed disillusioned andtold the press that the recent experience had shown thatEU members were “dragging.” Under her original tough“phase-out scheme,” Prestige would have been scrappedin 2001.

In many quarters, it was claimed that the salvage effortshad been undermined by the “desperate action” of theSpanish authorities to refuse the vessel refuge and chaseher as far away as possible. Spain rejected such accusa-tions, probably feeling that the country once more hadto “show muscles.” Information leaked to the press thatthe country together with France and Portugal was con-sidering prohibiting single-hull tankers to carry heavyfuels within their 200-mile EEZ. Such steps would be abreach of international law.

According to a press report, the ban was implementedand enforced by warships by the three states.

IV. COMPENSATION CLAIMSAGAINST THE CLASSIFICATIONSOCIETYBy April 2003, insurers had paid out USD 7 million forthe loss of Prestige. The settlement followed an agree-ment that the tanker was lost as an insured peril of thesea rather than due to lack of maintenance or othercauses that could have prejudiced the claim. The mostlikely reason, according to the classification society ABS,was that the tanker could have sustained unreporteddamage to its shell plating during the lightering activitiesprior to the fatal journey.

At the end of 2006, ABS was the third-largest classsociety, with a classed fleet of over 10,000 commercialvessels and off-shore facilities. The records showed that

Loyola de Palacio y del Valle-Lersundi

Loyola de Palacio y del Valle-Lersundi (Sept. 16, 1950 to Dec.13, 2006) was a Spanish politi-cian. She was elected to the European Parliament in June1999 and joined the EuropeanCommission the same year asCommissioner for energy andtransport. The Erika incidentand the following oppositionfrom the shipping industry to an early phase-out of single-hulltankers made her very annoyed.“We have found no plausibleexplanation why the EuropeanCommission should not actwhen it comes to protecting itscoast and its population, especially when the US has already taken similar measures,”she said. As a response to thepublic outcry, the EuropeanCommission put forward severallegislative passages to improvemarine safety and to protectagainst marine pollution (“Erikapackages I, II and III”).

© Yves Logghe / AP / Scanpix



a sister ship to Prestige suffered hull damage back in 1989 after a similar com-mission. But according to the ABS President Mr. Somerville, the damage lead-ing to the loss was unlikely to be definitively identified either at the time or inthe future.

Fronted by their organization IACS, the classification societies had consistentlyargued that they had no legal liability for such consequences of their surveyactivities. This argumentation did not impress the Spanish government, whichhit the company with a USD 700 million “gross negligence suit” for declaringthe tanker seaworthy when it was not. The society’s survey of the tanker wasclaimed to be flawed. The inspection had failed to detect corrosion, permanentdeformation, defective materials and fatigue. In short, ABS was accused ofgross negligence when granting renewal of the classification certificate. A suitwas filed in the Federal Court of First Instance in New York in May 2003. Areservation was added to allow the claim to be increased when the totalamount of damages became clearer. The reservation related in particular tothe environmental damages which had not yet been assessed, as well as to theloss of earnings from tourism and other costs.

In June 2005, lawyers acting for the Spanish government revealed to the pressthat they would raise the claim against ABS to USD 2.5 billion, more thanthree times the amount originally demanded. To exclude ABS from doing business in Europe, Spain had moreover announced that it would submit aformal request to the European Commission to have the recognition of theclassification company revoked within the European Union. A dossier was inthis connection sent to Brussels, listing recent maritime casualties involvingstructural damage on vessels ABS classed (including Castor).

ABS refuted the allegations and presented a counterclaim against Spain, arguing that the pollution damage could be directly attributed to the government’s failure to activate an oil spill contingency as required by Spanishlaw. The government response by not assuming control of the tanker, refusingthe request of a place of refuge and not moving the vessel to a place where thecargo could be off-loaded – instead ordering Prestige away from the coast indeteriorating weather – all amounted to gross negligence. Moreover, Spaincontravened its obligations under the 1989 Salvage Convention by delayingaccess to the vessel by professional salvors.

With respect to the ABS counterclaim, however, the New York Court agreedwith Spain that the State was entitled to immunity by the Foreign SovereignImmunities Act. The society suffered a double blow when it failed to have a



claim – brought by the Basque government – dismissed by the Federal Courtin Houston, Texas. But the decision was later overturned, and the Basqueswithdrew their USD 50 million claim after an agreement was sealed to joinforces with the central government of Spain.

All classification societies followed the dispute closely not only because of thehuge claim, but because it could set a precedent that would expose the businessof the societies to the constant risk of bearing the liability for ruinous com-pensation claims for big-dollar casualties.

During the legal battle, rumours surfaced, according to Lloyd’s List, thatthe ABS executives had been hugely rewarded (amounting to millions of dol-lars), despite an apparent shortage of resources to hire surveyors. An apparentsuicide of the chief financial officer of ABS mystified the issue further.

The case took a new dramatic turn in January 2008, when it became knownthat the Southern District Court of New York ruled in favour of a motion forABS filed in 2005 and threw the billion-dollar claim from the Spanish Government out of court. The judge, Laura T. Swain, came under heavy firefor having let the decision rest for several years and then dismissing it on jurisdictional grounds. Classification societies are not among the parties listedin CLC84/92 expressly exempted from liability like, for example, the charter-ers. But to seek immunity against pollution liability claims, representatives forclassification societies have argued that they should be entitled to the samelegal position as flag states, as they are indeed carrying out statutory functionson behalf flag states. Instead, the District Court seemed to accept that ABS fellin the category of “any other person who performs services for the ship” underArticle III.4B of the 1992 CLC and thereby may enjoy protection similar topilots. However, judge Swain confined herself to declare that Spain as signatory to CLC is bound by the provisions therein and had to pursue itsclaim under that convention in its own courts. US courts lacked the necessaryjurisdiction to adjudicate the case, she said. Lawyers in another case Swainwas handling were reported to seek the appointment of a new judge, citingyears of delays and decisions which they regarded as similar to her perform-ance in the Prestige case.

A strongly worded appeal from Spain followed. Then the press reported thatafter a brief internal skirmish, Spain decided to engage a new legal counsel todefend its interests. In June 2009, the Court of Appeals reversed both the dismissal of Spain’s claim as well as ABS’s counterclaims. The case was sent



back to the District Court for further consideration, and a hearing took placein May 2010. ABS argued that there was no evidence of reckless behaviouron their part, and in any case unlimited liability based on ordinary negligencecould destroy the international classification system. Spain argued that ABSwas aware of certain serious deficiencies in its control system and – knowingthese risks – the company should have addressed the problem. If Prestige hadbeen properly examined, the disaster would not have happened.

In a new summary judgment published in August 2010, Judge Swain oncemore ruled in favour of ABS. She found that a class society performing servicesfor a shipowner cannot be held responsible “to an injured coastal state on thebasis of reckless certification-related conduct.” The next month, nearly eightyears after the breakup of Prestige, it became clear that the Kingdom of Spainonce more had appealed the decision of Judge Swain to a federal court.

The Exxon Valdez legal drama continued for 19 years. The battle about compensation for pollution damages after the Amoco Cadiz spill lasted from1978 to 1992. The Prestige dispute might go on for years. How long is anybody’s guess.

V. IOPCF POSITIONThe breakup of the Prestige was expected to produce the biggest claim sincethe Exxon Valdez.

On the basis of the damage reports, the IOPCF director, Mr. Jacobsson, estimated that the potential total claims could amount to nearly GBP 700million (about USD 1.14 billion). In view of this prediction and the uncertainlevel of admissible claims, the Executive Committee of IOPCF decided in May2003 that the level of payment to victims for the time being should be limitedto 15 percent of the loss or damage suffered by the claimants as assessed byIOPCF and London Club experts.

Seven years later, in May 2010, the Claims Handling Office set up in La Coruna received 844 claims – all relating to damage in Spain. The claimstotalled more than 1 billion EUR (USD 1.32 billion). Fourteen claims were included from the Spanish government, amounting to 968 million EUR (aboutUSD 1.27 billion). IOPCF rejected more than 300 claims, mainly because theclaimants were not in a position to prove their alleged losses. One claim



totalling 132 million EUR (USD 174.24 million) from a group of 58 associa-tions representing 13,600 fishermen and shellfish harvesters had been withdrawn following a settlement with the Spanish Government. The Fund’sexperts disputed a number of other claims.

In France, the Claims Handling Office in Bordeaux had at the same time received 482 claims. The claims had been assessed at nearly 110 million EUR(USD 145.20 million) including a claim from the French government for clean-up expenses and preventive measures. This claim alone represented 67.5 mil-lion EUR (about USD 89.10 million). The remaining claims included allegedlosses oyster farmers suffered, companies and persons in the fishing industryand businesses engaged in the tourist sector. Also, the IOPCF experts disputeda number of the claims France submitted.

In addition, Portugal’s government had been compelled to engage in clean-upand preventive measures, resulting in a claim for 3.3 million EUR (about USD4.356 million).

In late 2002, a group of European politicians passed a resolution calling forthe establishment of an additional European compensation fund of 1 billionEUR (USD 9.84 million) to be implemented immediately.

An urgent overhaul of the international liability arrangement was also calledfor “in order to establish a much clearer division of responsibilities betweenthe various actors in the oil transportation chain.” Among the actors mentioned were: “the shipping company, the captain of the vessel, the state inwhich the vessel was registered and the owner of the cargo) ...,” according totexts agreed on at the sitting of European Parliament on Nov. 21, 2002.

At the 2004 October session of IOPCF’s Executive Committee, the delegationof Spain reported that the 15 percent limitations – the lowest in the Fund’shistory – had left the victims in a very unsatisfactory situation. France regrettedto report that at home the Fund’s policy had triggered a reaction of incom-prehension and hostility towards the international system. For a number ofthe smaller calls, this level did not even cover the costs of preparing the claimsand the time spent answering questions from the experts. But the ExecutiveCommittee’s decision was not changed.

In 2003 and 2004, Spain felt compelled to pass legislation to make availablean additional amount of about 250 million EUR (USD 335.35 million) to the



victims of the pollution disaster. In turn, the compensated victims renouncedtheir rights to compensation in any other way and transferred their claimsagainst IOPCF to the government. Individuals and businesses affected by theoil spill received aid in the form of loans, tax relief and waivers of Social Se-curity premiums.

In 2006, the Spanish government reported that the European Commission haddecided to make a concession to alleviate the consequences of the pollution.Spain had received aid of about GBP 34 million (about USD 62.64 million),and another GBP 22 million (about USD 40.53 million) was pending. As aconsequence, Spain reduced its claim against the IOPCF accordingly.

Also, French victims got governmental assistance when a national scheme wasintroduced in 2004 to provide compensation in excess of the amount IOPCFpaid to claimants in the fishery and shellfish-harvesting sector. One hundredseventy-five claims were subsequently approved, for a total amount of 1.15million EUR (about USD 1.42 million).

Then in 2005, IOPCF’s Executive Committee authorised the Director to payanother 15 percent, in other words to increase payments to the three countriesfrom 15 percent to 30 percent. As a condition, the Fund should receive suchundertakings from the three states that it was protected against any overpay-ment if this later proved to be the case. In addition, an amount representingthe total compensation payable by the Fund, minus a reserve of 10 percent,should be apportioned between the three states.

During the previous year, the Executive Committee of IOPCF had consideredwhether it should take recourse action against ABS. The delegates were veryaware of the fact that it has proved to be very difficult to pursue classificationsocieties in court. The societies have relied on the language on the certificatesthat disclaims liability for any loss arising out of reliance on these documents.Moreover, they have been confident that when they are carrying out statutoryfunctions on behalf of a flag state, they should be entitled to the same immu-nity as the government they represent.

After a lengthy discussion based on the documentation and opinion the IOPCFDirector presented, the committee found it premature to take action until theresults of the investigations was fully established. Moreover, in view of thehigh legal costs which would incur in the US, combined with the risk that an



action could be unsuccessful, it was found preferable to consider such actionin only Spain and possibly France. A French lawyer had advised that as theincident occurred on Nov. 13, 2002, a 10-year time bar would be applicablefor a recourse action. This meant that here the Fund could wait till November2012 to bring an action against ABS.

Spanish legislation differed from French law and provided other proceduraldifficulties. In Spain, criminal actions were still pending. When a criminal action had been brought under Spanish law, action for compensation undercivil law could not be based on the same facts, not against the defendants andnot against other parties, until final judgment had been rendered in the criminal case. Thereafter, the Fund would have one year to bring an actionagainst ABS before any such claim would be time-barred. Furthermore, it wasfound highly doubtful whether ABS had any significant assets in Spain, andthe enforcement of a positive judgement would represent another problem.

In view of these and other considerations, the Fund agreed with the Director’srecommendation to reconsider the matter at a future session.

The flag state, Bahamas, undertook an investigation into the cause of the accident, and the IOPCF Executive Committee reported a summary of thefindings in March 2005. The initial failure was found in several starboardtanks. The tanks were in such a condition that they had not been in a positionto resist the huge waves. Damage from a recent ship-to-ship transfer of cargo,or stress from large quantities of new metal being attached to old steel couldhave contributed to the weakening of the tanks. Port state controls and a SIREinspection gave no cause to believe that an internal inspection of some of thetanks was required. The tanker would probably have survived had it beentaken to a place of refuge instead of being chased out into the open waters ofthe Atlantic. The investigators “found it was difficult to blame the master,” asCaptain Mangouras had acted in a “proper seamanlike manner.”

The Spanish Ministry of Public Works had also carried out an investigationand provided IOPCF with some very frank comments.

It was inter alia claimed that the Bahamas report was drawn up to reachconclusions in line with the argumentation of ABS and the auditors of the International Association of the Classification Societies (IACS). Thus, the report could not be considered to be independent or impartial. The Ministrypointed also out that the sea conditions on Nov. 13 could not be considered



extreme or unusual for the time of the year. There was no evidence of abnor-mal waves. It was highly likely – as the Captain had believed – that severalbulkheads between the tanks had failed or become badly damaged. No othership had at the time reported extreme conditions. Thus, the conclusion wasthat the available evidence, including documentation recovered, “allowed Pres-tige to have been described as “substandard.”

Also, the French Ministry of Transport passed the results of its preliminaryinvestigation to IOPCF. Problems with aging along with successive repairswhich could indicate structural weakness and result in corrosion were amongthe possible causes mentioned. Another factor was the conditions of the tankermarket, which were: “leading to carriage of a substantial part of such heavypolluting products in old and pre-Marpol ships.”

In April 2010, the French State brought legal action in Bordeaux against theABS group to recover costs the French state incurred in the cleanup operations,totalling 67.5 million SDR (USD 87.75 million). It was argued that the missionof ABS was to verify the conformity of ships to safety regulations. The Prestigeincident was a consequence of an important structural failure ABS inspectorshad overlooked in 2001 and in 2002.

Note:Information about the Resolution on the European compensation fund is from the Confederal Groupof the European United Left/Nordic Green Left.

VI. GREEK MASTER ARRESTEDThe 67-year-old Greek master of Prestige, Captain Mangouras, with morethan 40 years of service on tankers, had been swiftly and summarily arrestedon Nov. 15, 2002, by the Barcelona police. Madrid had accused him of ham-pering early salvage efforts by refusing to take a tow, and he was suspected ofnot having a valid master’s certificate.

This line of attack caused a furor within the Greek shipping industry. Somesaw it as an effort to pin the blame on him. It took months to verify that themaster was properly certified. In the meantime, bail was set at USD 3 million,a higher amount than ever seen in any case of this nature. It surprised even USlawyers, who reminded the press that Captain Hazelwood initially faced aUSD 1 million bond when he surrendered to officials in 1989. This figure hadsoon been reduced substantially. However, the appeal the managing company



of Prestige, Universe Maritime, lodged to reduce the bail was quickly refused.Interventions to free the veteran master or at least reduce the bail also camefrom Bahamas and the London P&I club, but in vain. In February 2003, 23shipowners, including the Greek chairman Mr. Lyras, joined forces and decided to pay the USD 3.2 million to get Mangouras out of jail. He was released, but not allowed to leave Spain.

In the P&I club’s annual report for 2002, Mr. Lyras said:

“It was difficult to reach any other conclusion than the action taken againstthe captain was designed to shield others responsible for the direction and control of the salvage efforts ... and in particular denial of access

to a place of refuge. ...”

Fear of being flung in jail kept representatives of Universe Maritime from at-tending public hearings in Brussels. Instead, the manager, Michael Margetis,submitted a written statement claiming that Spanish authorities denied a first-class salvage team access to the vessel during the critical 12-hour period. Hecontended that the team had arrived in La Coruna at 2 p.m. Nov. 14, the dayafter the tanker had suffered problems, but was not allowed onto Prestige until3 a.m. Nov. 15. After his release, the captain confirmed that Spanish maritimegovernment personnel had, in spite of his protest, ordered the tanker’s mainengine to be restarted and the vessel to be moved away from the coast.

Jose Luis Lopez-Sors, head of Spain’s Merchant Marine Directorate, verifiedthis information to a court in Galicia. He said that he, on the advice of tech-nical experts, had made this decision the day after the Prestige ran into trouble.Mr. Lopez-Sors, together with other two senior officials, was later charged fortheir handling of the ill-fated tanker.

In January 2004, Mr. Mangouras was still not allowed to leave Spain. At theend of the year, the manager Michael Margetis died from heart failure shortlyafter a Spanish court made a renewed push to have him extradited to answerquestions regarding the disaster. Meanwhile, the Justice Minister of Greeceurged the Spanish government to allow the captain to come home. Despite thefirm assurances from the Greek government that the master, 69, would returnto Spain once the date for the trial was set, the request was refused again. A Spanish appeals court gave the old sea wolf a three-month grace period. Hewent home to Greece and was expected in Spain in February/March 2005.There, he got the good news that he was granted permission to reside indefi-nitely in his homeland pending the start of the trial proceedings. In 2006, the



press reported that Captain Mangouras had convinced the European Courtof Human Rights to investigate whether the Spanish court had violated international law when it imposed a several-million-dollar bail upon himshortly after his arrest.

The shipping industry was dismayed in January 2009, when it became clearthat the European Court of Human Rights had found that the long-lasting imprisonment of Captain Mangouras was justified. More depressing news waspublished in June 2010, when Fairplay reported that lawyers acting for fisherswho had lost their livelihoods as a result of the spill called for a nine-year jailsentence for the Captain on the grounds that he had disobeyed the orders ofthe Spanish Authorities. At the same time, it was reported that a civil rightsorganization, Nunca Mas, had called for a five-year sentence of Mr. Lopez-Sors, the chief of the Spanish merchant marine authority who had ordered theCaptain to take the tanker off the Spanish coast.

Note: See Lloyd’s List, Jan. 12, 2009, and Fairplay, June 10, 2010.


SUPPLEMENTARY COMPENSATION FUNDS FORMED

13

Supplementary compensation funds

formed – Private schemesto replace/delay IMO

I. REVIEW OF THE CURRENT SYSTEMIn 1996, the United Nations Secretary General Dr. Boutros Boutros-Ghaliswore in 21 judges of the newly established International Tribunal for the Lawof the Sea in Hamburg, Germany. The new court was meant to be a dedicatedtribunal for controversies arising from diverging interpretations of the UNConvention of the Law of the Sea. Issues ranging from fisheries and navigationto the prevention of pollution of the marine environment were on its agenda.The Assistant Secretary General of IMO, Dr. Thomas Mensah, who had beenwith the organisation for a number of years, became one of the judges.

The “Hamburg tribunal” was apparently not meant to interfere with the workof IMO or satisfy IOPCF’s strong desire to speed up payments and overcomeor alleviate the problems national courts caused with respect to the interpre-tation of the key provisions in the compensation regimes. Within IOPCF, several delegations felt that the magnitude of the compensation amounts, thegreater sensitivity to environmental issues and the diversity of legal systemshad made it increasingly difficult to reach settlements and ensure prompt pay-ment of compensation. The time had come to study the possibilities of intro-ducing alternative dispute procedures for cases where out-of–court settlementscould not be reached.



At the end of the day, the national courts have the final say with respect to theinterpretation of “pollution damage” and other important concepts laid downin the conventions. Understanding of these concepts could vary from countryto country. How far should the liability extend for the alleged consequencesof a spill? How to differentiate between real and imaginary losses after a pol-lution incident? The need for uniformity in the application of the two conven-tions was clear.

In a conflict with a foreign shipowner, it is understandable that some nationalcourts might be tempted to go a long way to protect local interests when deal-ing with a claim for “indirect” losses. After all, it is much easier to “punish”a foreign shipowner who is not a part of a country’s infrastructure than a fac-tory employing local people.

Nevertheless, most IOPCF delegates found that the current system had workedwell. After all, national courts had by and large based their decisions on thecriteria agreed upon within IOPCF. Ways had been found to settle matters am-icably. But not always. Hence, the idea of a neutral body surfaced as a possibleinstrument to secure fair application of the Protocols across borders. The UKdelegation had in particular stressed the need for the Fund to be more proac-tive in encouraging claimants to have their claims dealt with by arbitration.

A working group that Canadian delegate Mr. Popp chaired was appointed in1996 to consider options to reach out-of-court settlements. A proposal to es-tablish an international body (tribunal) received some interest. But afterlengthy discussions, the working group found that the idea had to be put aside,as a number of countries found it unacceptable for constitutional and otherreasons. The group suggested that if more information were made availableto national courts with respect to decisions made by the IOPCF Assembly onthe interpretation of the Conventions, this might contribute to uniformity.

Thus the Chairman of the Assemblies, Mr. Charles Coppolani, had to admitthat it was not yet possible to make any decision on the “settlement of claimsproblem.” But the question was of prime importance – “it is imperative thatthe IOPC Funds resolve it in the future,” he expressed in the 1997 IOPCF annual report. The report reveals that another decision of some importancewas made: Compensation should not be withheld to pollution victims if theirgovernments did not fulfil their obligations as members of the Fund.



The accidents in 1999 and 2002 in the Mediterranean had showed that well-established claims for pollution damage could not be expected to be paid infull. IOPCF had found it necessary to resort to pro-rating payment of claimsto ensure that all claimants were treated on an equal footing. France and Spainhad been compelled to come forward with additional funds. The regrettablesituation had resulted in a discussion within the European Union aboutwhether to replace the IMO instruments with a “made-in-Europe compensa-tion regime” or establish a regional compensation fund to supplement IOPCF.There was no reason why EU citizens should not have the same protection astheir US counterparts.

II. COMPENSATION INCREASEDThe pressure from Brussels and Paris had an effect. In October 2000, 10months after the Erika incident, the IMO’s Legal Committee adopted two resolutions to increase the compensation to pollution victims.

Using the so-called “tacit amendment procedure,” the liability limits wereincreased by about 50 percent for incidents occurring on or after Nov. 1, 2003.The minimum liability for tankers (of 5,000 gross tons or less) was increasedto SDR 4.5 million (nearly USD 6 million). The maximum liability for thelargest tankers was raised to about USD 117 million. The total compensationpackage for a single accident under both regimes amounted thereby to USD265 million. It took effect in November 2003.

The criticism from the EU, however, not only focused on liability levels. Someof the basic elements in the two aging instruments were also questioned, andthe IOPCF Assembly had to respond.

In April 2000, an internal review was initiated to assess the adequacy of thecurrent compensation system and identify possible improvements. An inter-cessional working group, again with Mr. Popp as chairman, was set up to dothe job. Its mandate was:

“a) to hold a general preliminary exchange of views, without drawing anyconclusions, concerning the need to improve the compensation regime

provided by the 1992 Civil Liability Convention and the 1992 Fund Convention.

b) to draw up a list of issues which could merit further consideration inorder to ensure that the compensation system meets the need of society.”



When Mr. Popp delivered his report the next year, the Assembly was told thatthe deliberations had resulted in a proposal to introduce an optional third tierof compensation by means of a Supplementary Fund (SF). The suggestionwould be implemented by a new Protocol to the 1992 Fund Convention. Thisreflected the view of many governments who maintained that in order for thetwo regimes to retain credibility, the compensation offered should be sufficientto ensure full coverage to victims even in the most serious oil spill incidents.But several other delegations referred to the increases in the limits alreadyadopted by IMO in October 2000. They saw no need for any further increase.

Would the oil receivers be prepared to pay up? Not quite. The oil industry argued that the suggestion would distort the current “balance” between the contributions from the shipping and cargo interests. OCIMF recognized thatthere was a need to take prompt action, but stressed that any funding of theoil industry should be only “an interim solution.” It was argued that a per-manent supplementary fund financed by oil receivers would “shield low-qual-ity ship-owners from the consequences of their actions and would thereforenot provide any incentive to improve the quality of their ships or the standardof their operations.” Thus, the oil companies demanded that a third tier hadeither to be partly funded by shipowners, or the liability limits of shipownershad to be substantially increased.

Whilst it was appreciated that the regimes could benefit from a review, views differed fundamentally on what steps should be taken to contribute to maritime safety and reduce accidental oil spills in general. In a document submitted to Mr. Popp’s working group from France, Spain and the EuropeanCommission, it was claimed that the virtually unbreakable liability limits ofthe shipowners had hampered IOPCF from taking effective recourse actionagainst owners of substandard tankers. France also attacked the channellingprovisions agreed on in 1984 and proposed that one should revert to the provisions of CLC69, which barred only claims against the servants or agentsof the shipowner. Italy went a step further and suggested that the best way toremedy the situation would be to allow claims to be directed against chartererswhich often were the “owners of the polluting cargo.”

A number of “conservative” delegations argued on the other hand thatwhereas safety considerations were most important, the matter should betaken care of by other appropriate IMO instruments. In their view, Protocols’aims were to create nothing but an efficient compensation regime.



Shipowners agreed that an increase was called for. The P&I clubs, representingboth oil companies and independent tanker owners, came forward and declared that they were developing a voluntary scheme to increase the liabilitylimits for small tankers.

III. NEW DIPLOMATIC CONFERENCE – SUPPLEMENTARY FUND ESTABLISHEDWhen the Diplomatic Conference convened in May 2003, the most importanttopic on the agenda was not uniformity of interpretation of the internationalregimes and/or their speedy application, but the amount of compensationavailable.

Negotiations once again proved to be “difficult,” but the outcome of thegathering was in line with the proposal of Mr. Popp’s working group. Delega-tions adopted a Protocol establishing a “voluntary” Supplementary Fund (SF)which should provide additional compensation when the amounts availableunder the ’92 Protocols were insufficient. Any state which was a party to the’92 FC could opt to become a member of SF. The total amount of compen -sation for any one incident within the territories of these members wouldthereby reach SDR 750 million (about USD 1.1 billion), including the amountpayable under the ’92 Protocols. The extra compensation would be availableto victims only in states that had joined SF.

The annual contribution of any state should not exceed 20 percent of the totalamount of contributions levied. IOPCF hoped that by means of the increasedcompensation, one could put an end to the practice of prorating payment ofclaims, a practice that became unavoidable in the recent years.

The conditions for the entry into force of SF required the ratification of eight States, which together imported at least 450 million tons of contributing oil. According to the IOPCF annual report for 2004, the conditions were met al-ready in December 2004, when Spain ratified after Denmark, Finland, France, Germany, Ireland, Japan and Norway. Thus SF became operational in March2005. Soon, the Netherlands, Portugal and Sweden also joined. In the foreword of IOPCF annual report for 2005, readers were told that:

“On 3 March 2005, the Supplementary Fund Protocol entered into forceand as a result the Supplementary Fund was established, which will provide

additional compensation over and above that available under the 1992



Civil Liability and Fund Conventions. This new Fund should ensure that, in those States that ratify the Protocol, sufficient compensation is availablefor even the most serious spills and also that accepted claims can be paid

in full from the outset.”

Had time now come to consider a full-scale revision of the internationalregimes? In March 2005, Lloyd’s List reported:

“Discussion on revisions to the Civil Liability and Fund Conventionscovering oil spill compensation has ended in stalemate with states evenly

split between those for and those against. More than 50 states had put theirviews forward ... ranging from those in favour of a more radical amendment

to the two conventions to those opposed to any revision at all.”

IV. STOPIA AND TOPIAIn the depressed period, 1974 to 1990, a large fleet of tankers exceeding 200million dwt had by and by been removed as surplus tankers and sold for dem-olition mainly to scrap yards in the Far East. That amount of tonnage corre-sponds to about 800 VLCCs. Moreover, in 1978, INTERTANKO estimatedthat cancelling new building orders at shipyards around the world had reachedclose to 70 million dwt.

This massive reduction is best seen in the light of the fact that the currentworld fleet of tankers above 200,000 dwt per January 1st 2011, totals 548units, or around 165 million dwt.

SSY Consultancy in London – (which had taken over John I. Jacobs’ reviews) – described the tanker market conditions during the second half ofthe year 2000 as “the strongest experienced in three decades, which was espe-cially significant as this happened in peace time conditions.” Tanker owners –and owners of dry cargo ships, as well – enjoyed the most favourable freightrates at the time. In the annual report for 2006/07, the manager of INTER-TANKO’s research section, Erik Ranheim, could inform readers that “Thetanker market and other shipping market have been enjoying a glorious run.”

A resilient world economy and a substantial increase in the demand for ton-nage followed the brutal slimming of the fleet in the 1970s and 1980s. The oilindustry’s financial results were at record levels. The previous crisis with ahuge excess of tankers seemed to belong to the history books.



Study of past oil spills had showed that on the basis of the available compen-sation regimes, the shipping industry had contributed 45 percent and the Fund55 percent of the total costs of the pollution incidents (except US) that hadoccurred worldwide. The contribution of the cargo interest was in particulardominant with respect to incidents that ships up to 20,000 grt caused.

Thus the shipping industry enjoyed a most favourable market. Their P&Iclubs, being in full control of the liability insurance business, felt that the cur-rent IMO instruments from their point of view worked very satisfactory in awell-established game. To change the rules, as implied by certain Europeangovernments, and introduce radical changes – for example impose liability onother parties involved in oil transportation – was consequently opposed.

Instead, a new private scheme, “Small Tanker Oil Pollution Indemnification Agreement (STOPIA),” was introduced in order to “Demonstrate the commitment of shipowners to the notion of sharing and in recognition of the potential increased burden for contributing oil receivers under the proposalto introduce a third tier of compensation through the Supplementary FundProtocol” and “avoid the necessity to amend the Conventions ...”

The clubs informed the Fund Assembly accordingly. Tanker owners were will-ing to accept a minimum liability of SDR 20 million (about USD 26 million)for accidents occurring in SF member states. In other words, the Fund wouldbe repaid by STOPIA “for any compensation it pays as a result of the ship’sliability limit under CLC 92 being less than SDR 20 million.”

A contemporary circular (published in February 2005) from the P&I clubsand distributed to members referred to the new scheme’s relations to the ’92Fund Protocol and included the following passage:

“The indemnity will only apply in the event of tanker spills affecting a Statein which the Supplementary Fund Protocol is in force and when liability is imposed on the shipowner under CLC 92. Neither the flag of the vessel northe ownership of the cargo is relevant. Provided that the amount of compen-sation payable exceeds the shipowner’s limit under CLC 92, the scheme will

operate even if there is no claim upon the Supplementary Fund.”

STOPIA entered into force on March 3, 2005, on the same date as the Sup-plementary Fund. One step further was taken when the clubs extended the in-demnity to include spills not only in SF states, but to spills in all states that



had ratified the ’92 Fund Protocol. The minimum liability limit for shipowners was thereby increased nearly

five times from SDR 4.5 million to SDR 20 million (about USD 26 million)for “small” tankers not exceeding 29,584 grt. That a tanker of this size is nota small tanker seemed to be of no consequence. Erika was 19,666 grt.

The first incident involving a vessel entered in STOPIA occurred in August2006, when a small (998 grt) Philippines-registered tanker, Solar I, sank offGuimaras Island in local waters. The following oil spill – 2,000 tons of fueloil – had a significant impact on the fishing industry and tourist business inthe area. More than 30,000 claims for compensation were made, and pay-ments of about SDR 10 million (about USD 13 million) were paid to the victims of the spill. The amount was more than double the small tanker limitunder CLC, but did not exceed the STOPIA limitation. The payment proce-dure agreed on between the 1992 Fund and the P&I club in question was thatthe Fund assumed responsibility for compensation payments once the club hadpaid up to the 1992 CLC limitation. The Fund would then seek reimburse-ments from the club up to the STOPIA limit. Payments would be made to theFund within two weeks.

Through STOPIA, the oil companies’ goal of having the small ship liabilitylimit substantially increased was realized. But the oil industry’s position wouldbe even further improved when the P&I clubs sent a new message to IOPCF.The Fund learned that tanker owners – in addition to the increased minimumliability – were prepared to indemnify the SF in respect of 50 percent of allcompensation amounts which SF would pay out to SF member states. A newscheme – Tanker Oil Pollution Indemnification Agreement (TOPIA) – wouldprovide this oil industry subsidy.

The offers were presented as legally binding on the condition that the revision of the existing conventions should be put on hold.

With such private schemes in sight, the majority of delegations to the IOPCF Assembly supported its Chairman J. Rysanek when he in October 2005 sum-marized the discussion and stated that it was “clear that there was insufficientsupport for the proposal to amend the terms of reference of the WorkingGroup with a view to revising the Conventions.” Consequently, the WorkingGroup was disbanded and the revision of the Conventions was removed fromthe agenda.



This was not the end. The next year, the very active P&I clubs came forwardonce again with a new proposal. According to the IOPCF Annual Report for2006, they were prepared to extend STOPIA even more “to apply not only to1992 Fund Members States but also to those parties to the 1992 Civil LiabilityConvention which were not Members of 1992 Fund.”

The Assembly had good reasons to reject the idea. It was felt that such ex-tension would serve as a disincentive to further ratification of the ’92 FundConvention. One may wonder what the real intention of this proposal was –an effort to diminish the future role of IOPCF? Was the plan that the Fundsome time in the future should be financed by the shipping industry alone?

At a meeting in October 2006 the same year, the Fund Assembly approved theframework for the implementation of the two private compensation schemes.The two Funds and the P&I clubs signed a memo of understanding. It wasagreed that a review should be carried out in 2016 to consider the fairness andperformance of the two schemes in light of the experience obtained with respect to the assumed cost-sharing between the shipping and cargo interests.A new review should be carried out every five years.

Provisions were also included for termination if the changed circumstancesproved that the agreements were no longer workable.

The position of the oil industry/cargo owner was now improved considerably.The decision of IOPCF in October 2005 to postpone any initiative to reviseCLC/FC to some point in the not-foreseeable future seemed widely applauded.The environmentalists were apparently engaged on other fronts.

The P&I clubs, which formally had only consultative status within IOPCF,seemed now to be in the driver’s seat. On their initiative, the Fund Assemblyset up a new working group. According to the mandate, it should consider“non-technical measures to promote quality shipping” and “make recommen-dations to the Assembly upon completion of its work.” The focus should beon insurance measures, sharing of information and more transparent co-op-eration between the interests involved in oil transportation, including the classification societies. It was stressed that the group should not “stray intoareas of competence of IMO nor duplicate work which had been undertakenby that organisation,” and most important “not consider issues that wouldrequire any re-opening of the discussion regarding a revision of the 1992 Convention.”



The Working Group had its first session in May 2006 and decided to consultComite Maritime International (CMI) to perform a study that would meet therequirements. A number of other industry associations were also approached.

But there were problems. At a CMI Symposium in Dubrovnik one year later,a lawyer who was to explain CMI’s role regretted to state that it was not yetclear what the IOPCF working group had in mind. Whereas the promotion ofquality shipping certainly was the most worthy cause, more precise instruc-tions were needed before CMI could start its work. The lawyer concluded thatonly time would tell if, when, how and by whom it would be carried out.

Notes:Dr. Thomas Mensah was appointed Assistant Secretary General of the IMO in 1981 and Judge of TheInternational Tribunal of the Law of the Sea in 1995. One year later, he was elected President of theTribunal. See IOPCF 25 years, pp. 45-51.On the alternative dispute settlement discussion and the working group Mr. Alfred Popp chaired, seethe IOPCF annual report 1996, p. 22 and 1997, p. 36. On the new Alfred Popp committee on the ad-equacy of the compensation system, see the IOPCF annual reports for 2000 and 2001. The IOPCF annual reports for 2000 and 2003 comment on the compensation increase effective Nov. 1,2003. The unit of account is Special Drawing Rights (SDR), as defined by the International MonetaryFund, converted into US dollars at the rate of exchange applicable at a certain date. The dollar figureshere are based on the exchange rates in 2000 as reflected in the annual report for that year. But if oneconverts SDR to USD on the basis of the rates on Dec. 31, 2003, when the increase entered into effect,the total compensation package becomes some USD 300 million.For more on STOPIA and TOPIA, see the IOPCF annual report 2006 and Skuld’s circular to memberson Feb. 14, 2005. Several delegations expressed reservations about setting up a group to study alternatives to a review ofthe liability instruments. See the presentation by the Deputy General Manager of the Nordic DefenceClub, Oslo, Karl Johan Gombri, at a CMI Conference in Dubrovnik in May 2007. The group was notable to come forward with any recommendation. However, the chair person reported in October 2008to the IOPCF Assembly that the work had “enhanced awareness and understanding of the issues in-volved.” See the IOPCF annual report, pp. 30-32.


NEW BIG SPILLS IN 2007

14

New big spills in 2007

To the casual observer, major tanker spills seemed stagnant for several yearsafter the Prestige calamity. There was no serious incident worth mentioningin front-page news. But once again without warning, new major incidents happened during the winter storms of 2007. Two tankers spilled thousandsof tons of oil, caused extensive pollution of shore lines and resulted in newcomplex challenges for IOPCF. None of the recently established compensationschemes – the Supplementary Fund, STOPIA and TOPIA – were applicable tothe spills a Russian tanker caused in the Black Sea or a Hong Kong tanker inthe waters of the Republic of Korea.

VOLGONEFTAn incident that raised unusual legal problems on the IOPCF agenda in 2007occurred after an accident in the strait of Kerch between the Russian Federation and the Ukraine. In these waters, a Russian registered tanker,Volgoneft, broke in two in November 2007. Volgoneft was a relatively smalltanker of 3.463 grt built in 1978. The tanker was not insured by a member ofthe International Group of P&I Clubs, but by a Russian insurance company,and was therefore not covered by STOPIA.

The consequential oil spill of 1,200 to 2,000 tons, polluting the shorelines of the two states, represented the biggest oil spill that had ever happened inthis particular area. In terms of legal complexity, it overshadowed previous accidents by presenting new problems in respect of the interpretation of theinternational compensation regimes.

The Ukraine had not ratified or acceded to the ’92 Fund Convention whilst



the Russian Federation had ratified, and was a party both to the 92 CLC andthe ’92 Fund Convention. The pursuant investigation revealed, however, thatit was more than doubtful whether the Russian Government had compliedwith its duty to implement the CLC 92 in its national legislation. Thus basedon the liability limits published in the Russian Official Gazette, shipowner JSCVolgotanker’s insurance coverage was SDR 3 million, well below the minimumliability limit in CLC 92 of SDR 4.51 million. There was, in other words, an“insurance gap” of about SDR 1.5 million (about USD 1.95 million).

The matter was further complicated as the Russian insurance company claimedthat “a natural phenomenon of an exceptional, inevitable and irresistible character” wholly caused the accident, so that no liability could be attachedto the shipowner, the Fund should pay up. The Fund experts who investigatedthe weather conditions at the time of the incident concluded that the stormwas timely forecasted, but the master had not acted on the weather forecast.Had he done so, the casualty would have been avoided. Moreover, the accidentwould not have occurred if the master had respected the trading limits prescribed in its classification certificate.

Adding to the problems, it appeared that several claims represented compen-sation for environmental damage. One large claim was based on abstract calculations; the quantity of oil spilled multiplied by an amount of Roublesper ton. This was the Metodika model. As such claims were not in accordancewith the rules of the international regimes, the Fund experts succeeded to convince the Russian authorities to withdraw the Metodika claim.

But the parties were far apart. In October 2008, the Russian delegation inIOPCF’s Executive Committee expressed its concern about the perceived slow-ness of the compensation in general, since although the Secretariat had fullycooperated with the Russian authorities, the victims had not yet received com-pensation for the losses suffered. The chairman of the Committee, on the otherhand, claimed that the Russians had not provided adequate information. Untilthis request was satisfied, payment could not be authorized.

The interpretation of the Russian Government with respect to the liability levelwas confirmed by an arbitration court in St. Petersburg, in February 2008.Since the ruling was in clear conflict of CLC 92 as amended (ratified by Rus-sia), IOPCF appealed the decision to several higher courts. But in vain. Finally,the conflict was brought to the Supreme Court in Moscow.

To the astonishment of IOPCF delegations, the wording in the Official Gazettewas confirmed by the Russian Supreme Court in December 2008. Thus, theapplicable limitation figures according to Russian law were SDR 3 million(about USD 3.9 million), not SDR 4.51 million. In an effort to resolve the “insurance gap” issue, a number of meetings have been held in Russia in 2009,and new hearings were agreed upon. The Russian Ministry of Transport wasbrought into the picture as a third party. The discussions continued throughout2010.

HEBEI SPIRITOn the morning of Dec. 7, 2007, while at anchor, a very large single-hull crudecarrier, Hebei Spirit, was struck by a crane barge – Samsung no. 1 – on thewest coast of the Republic of Korea. Close to 11,000 tons of crude oil escapedinto the sea from two cargo tanks ripped open above the waterline. The tankerwas loaded with 209,000 tons of four different crude oils. Her tonnage wasin excess of 140,000 grt, which meant that the liability limit applicable reachedthe maximum under CLC 92, close to SDR 90 million (about USD 117 mil-lion). The amount available under CLC and FC for compensation was SDR203 million (about USD 263.9 million).

On Dec. 24, the Korean Government declared that the spill was a nationaldisaster. In early 2008, a total of 375 km of shoreline had been polluted. The 11,000-ton oil slick generated an unusually high rate of small claims as aconsiderable number of mariculture facilities, hatchery facilities and oysterfarms were affected. By the end of June 2010, the number of claims receivedby IOPCF was 15 times greater than the Erika casualty in 1999. It soon became clear that the amount available under the international regimes wouldnot cover the losses suffered by the victims of the spillage.

Hebei Spirit hoisted the flag of Hong Kong and was owned by a Hong Kongcompany of the same name. In a three-page report issued by Hong Kong’s marine department published in March 2009, “a litany of errors by the tugsinvolved” were identified as the main probable causes and contributory factorsof the casualty.

However, further to a suit of the state-controlled, pollution-controlled response agency, the tanker was arrested. Moreover, despite the fact that HebeiSpirit was at anchor when the barge punctured it, the Indian master, JaspritChawla, and his chief officer were jailed shortly after the incident. During thefollowing criminal proceedings, they were found not guilty, but an appeals





court later overturned the acquittal. About a year after the spill, they werebailed out and released after an unprecedented and concerted campaign ontheir behalf across the maritime industry, including a protest that 40 membersof INTERTANKO’s Council signed. Nevertheless, the officers were still notallowed to leave Korea; the release did not mean that their case would be dismissed.

Korea was a party to CLC 92 and a member of the ’92 Fund, but was nota member of the Supplementary Fund. As the total claims for damages werelikely to exceed both the limitation figure in CLC 92 and the ’92 Fund Convention, the Fund decided first to limit the payments to 60 percent andthen to 35 percent of the established damages. Once more, IOPCF took thisstep in light of its limited resources to ensure equal treatment of all claimants.Once more, a local Government – this time the Republic of Korea – was ofthe opinion that the victims of oil pollution deserved a better treatment.

In 2009, the Korean Government took it a step further and decided to bansingle-hull tankers from calling its ports by the end of 2011 instead of 2015.Single-hull tankers were on average 20 percent less expensive to charter thantheir double-hull cousins, and were still in 2009 in heavy demand from manyoil companies looking to make savings rather than support the double-hullconcept. In October 2009, Tradewinds reported that there were still some 90non-double-hulls trading, but several of those were expected to be removedfrom the market in the near future.

In May 2009, it was reported that the owner of Hebei Spirit and the insurer,Skuld, of Oslo, were considering launching a multi-million-dollar recourse action against the owner of the crane barge that struck the tanker. For moreinformation, see Appendix II of the 2009 IOPCF Annual report, which givesan extensive review of the challenge the Fund is facing when handling com-pensation problems after a major oil spill. The review is also found as an appendix to this book on page 356.

Notes:For the 2009 report on the double-hulls still trading, see Tradewinds, April 3 and May 8, 2009; Lloyd’sList, Feb. 9, May 12 and May 22, 2009.At the request of the South Korean government IOPCF agreed, however, in April 2011 to meet 100 %of the losses resulting from the Hebei Spirit oil spill. The decision was taken at a meeting in Marrakech.(Tradewinds April 21, 2011).


TANKER OWNERS AND THEIR CLASSIFICATION SOCIETIES

15

Tanker owners and their classification

societies

In a press release DNV sent out in 1984, the roles of shipowners and class institutions were set out as follows: “The responsibility for the technical standards of ships clearly rests with the owner, but it is also clear that the workof the classification societies has an important impact on technical standardsand safety at sea.”

For several hundred years, shipowners have kept their financial risks at acceptable levels by means of insurance. Because the insurance underwritersappreciate that they are the real risk-takers, they demand that the ships theyinsure meet acceptable standards. The ships had to be “classed,” and “classi-fication” began as a concept in Edward Lloyd’s coffee house in London in1760. Lloyd’s employed surveyors with technical knowledge they had gainedthrough practical experience at sea. The recognition by the surveyors’ experteyes enabled shipowners to get insurance coverage for the marine enterprise.

In 1950, there were less than 10 classification societies. The number later morethan doubled. It is not easy to set up a real classification society. It is claimedthat, on the other hand, to set up a new flag of convenience, all you need is tofind a government that wants to make some easy money. Neither do you needany specific qualifications to become a shipowner.

Thus, maritime governments of all flags rely heavily on the societies to


discharge the government’s responsibility to have theirships operated and maintained according to IMO stan-dards. Marine safety and environment is thereby dependent upon the performance of the various classification societies, which may or may not be mem-bers of the International Association of ClassificationSocieties (IACS).

Currently, the SOLAS Convention set out their role:

“In addition to the requirements contained elsewherein the present regulations, ships shall be designed and

maintained in compliance with the structural, mechanical and electrical requirements of a

classification society which is recognised by the Administration ... or with applicable national

standards of Administration, which provide an equivalent level of safety.”

Lloyd’s Coffee House

It opened in the 17th centuryand soon established itself asthe meeting place of shipown-ers, cargo owners and insuranceclerks together with captainswith salt in their hair as well as young ambitious journalists.As a hub of intelligence andnews gathering, the house fostered important institutionslike Lloyd’s Register of Ship-ping and Lloyd’s List, to mention some.

© Topham Picturepoint / Scanpix

From Florida, one critical voice, Mr. Jack Devanney,pointed out that in the period 1995 to 2005 inclusive,54 tanker men were killed in tanker casualties, whilstthe statistics for dry cargo carriers are even more alarm-ing: 463 crewmen were killed in the same period. Heasks: “Why would we ever think that a system based onthe regulatee, sorry, the client, choosing and paying forthe regulator would work? If a building contractorchose and paid the Building Code inspection company,would we not expect substandard buildings?”

Several years ago, his fellow country man, the financierMr. Slater, alleged that: “It is time that classification so-cieties were as directly answerable to the various governments under whose nationality they operate asare the civil aviation authorities of the same nations.”

During the last decades, it has been argued that there isample evidence that the quality of inspections has gonedown, whereas competition for clients has gone up. Hasthe societies’ focus on profit developed at the sacrificeof marine safety?

These are strong words. What seems certain is that thecoordination between the various class institutions withrespect to safety regulations – and implementation ofthe same – has not been without problems during thetime since World War II.

If we go back again to the early 1950s, the formationof IMCO resulted in a common fear among the societiesof being threatened and overshadowed. In particular,the possibility of IMCO taking over or regulating thesocieties’ role was scary. At a meeting of the leading so-cieties in Oslo in 1968, the representative of the FrenchBureau Veritas argued that there was a need for an umbrella because “mist and dark clouds had banked onthe skyline and that a devastating storm was likely tocome.” When the representatives soon met again in



Paul Slater

An American banker from FirstInternational Corporation withclose ties to the North Ameri-can tanker industry, Paul Slaterwas the first chairman of INTERTANKO’s Communica-tions and PR Committee. His main message to the mediawas that the private classifica-tion system did not work well.The role of the civil aviationauthorities of the various national governments should beconsidered as a possible modelfor regulating internationalshipping. But his private viewin this respect has not obtainedwide support within the tankerindustry.




Hamburg, the IACS was established to streamline their work and prepare forconsultant status in IMCO. Dr. Schultz of Germanischer Lloyd was elected asthe first chairman of the Council. The next year, IACS Council togetheradopted certain unified requirements with some guidelines to ensure uniforminterpretations of the agreed rules.

ABS, Bureau Veritas, DNV, Germanischer Lloyd, Lloyd’s Register of Shipping,Nippon Kaiji Kyokai and RINA were all members of the new club. At the endof 1968, IACS was granted consultative status with IMCO. Today, the RussianMaritime Register of Shipping, the China Classification Society and the Ko-rean Register of Shipping have also become full members of the association.The members of the association classify more than 90 percent of the world’smerchant marine tonnage.

Several classification societies such as Lloyd’s Register and ABS have remainednon-profit organisations. Their charitable status is claimed to be based onwork for the benefit of the public by investing their surplus in research to improve marine safety further.

Others such as DNV are profit-making companies. After 10 years of litigation,the Norwegian Supreme Court in 1991 decided that DNV was a taxable entity.Classification had at the time become only one of many services offered to avariety of industries. It had become a technology centre and moved into qualitycontrol, research and development for the offshore industry as well as a num-ber of land-based companies. It may be illustrative that during the tanker crisis,DNV was seen to market a new tanker design. This caused concern in somequarters. The INTERTANKO philosophy was that there were no tight bulk-heads between the various tanker markets. The initiative might provide DNVwith some new clients, but could at the same time deepen the overall shippingcrisis.

The individual societies preferred for many years to remain as “Kings of theHill” and rotate the chairmanship within IACS without any joint secretariat,which may have resulted in a more meaningful co-ordination of policies. Butthe societies were hesitant to delegate any real power to IACS as such. Fewpaid any attention to the association, and many did not know that it existed.

With respect to the relationship between the client and the regulator, one may dwell with the comments from DNV many years after the two large

Norwegian-owned combination carriers blew up in the1970s and resulted in a total loss of 70 human lives. Nocertain conclusion has been drawn as to the cause of theexplosions, but explosive gases may have developed inthe unwashed wing tanks of the two ships. Whateverthe explanation is, it is noteworthy that the classificationsociety DNV in its 125-year jubilee saga in 1989 com-mented as follows: “a change of cargo as often as eachtrip sometimes made it impossible to carry out sufficientcleaning in all spaces other than the cargo tanks.”

Impossible is a strong word. The International SafetyGuide for Oil Tankers and Terminals issued by ICSjointly with the OCIMF spells out that the wing tanks(which have contained oil) should be cleaned and gasfreed before loading a dry cargo.

A positive effect of the competition between the classi-fication societies is said to be improved safety at sea aswell as improved services rendered. But a less positiveeffect is the temptation to compete by being lenient toattract more clients. In the wake of accidents at sea, classification societies have been accused of trying to appease clients and attract new business by approvingsub-standard ships. We remember the 23-year-old Liber-ian tanker, Argo Merchant, which sank in 1976 and pol-luted the waters of Massachusetts. She was six monthsbeyond her annual date of inspection when she wentdown. Another example is the fate of Betelgeuse, whichexploded in Bantry Bay in 1979 and cost the lives of 50people. The classification society knew that the ship wasin a deplorable condition, but did not intervene becausethe owner, Total, intended to sell the ship.

At the time of the Betelgeuse accident, IACS appointeda permanent representative in IMCO, Mr. F.N. Boylan.So far, the IACS council meetings had been confined toone meeting per year. IACS was seen as a technical body.To use their own words: “Not widely known outside a



Dr. Nils Nordenstrom

Dr. Nils Nordenstrom was theChairman of the InternationalAssociation of Classification Societies (IACS) from 1984 to1986. He is a specialist in ship-building, and has been the Director of Research and headof the Norwegian Veritas international department. He –among other tasks – was incharge of the start of the classifi-cation society’s engagement inquality security systems.

© Private photo



limited group of experts.” Keeping their seat warm in IMO, they played arather modest role.

In 1984, Dr. N. Nordenstrom of DNV was elected to chair the IACS Council.He held the chair for two years, struggling to stop the disgraceful practice ofsecond-class ship owners shifting classification society when they were required to meet international standards which they found too costly. In orderto put an end to owners’ shopping around for the most lenient society, require-ments for a unified procedure for transfer of class from one member societyto another had to be agreed on. IACS members would be obliged to tell eachother when a ship leaves its class. Moreover, Mr. Nordenstrom wanted thesecond society to be obligated to enforce recommendations of the requirementsof the previous society. In a presentation to IMO’s Marine Safety Committeeon May 22, 1985, he announced: “In order to prevent owners from changingclass to avoid recommendations, it is required that the receiving society checksand deals with all recommendations from the previous society. Proposals formore stringent requirements related to transfer of class will be handled at theIACS Council Meeting in June 1985.”

When that meeting occurred, the majority of his Council felt that it was suf-ficient that the second society should deal with an outstanding recommenda-tion without any strict and specific obligations to interfere. Has the situationimproved?

Well, IACS’s Transfer Of Class Agreement (TOCA) of 1996 intended tomake it impossible for owners to switch class until the requirements of theoutgoing society had been agreed. Still, after the Erika disaster, not everybodywas convinced. The chairman of the Italian shipowners’ association, Mr. PaoloClerici for one, fired this broadside against class in Lloyd’s List:

“I believe that the growing competition between classification societies sincethe liberalisation of the sector may cause risks for the industry. Some soci-eties are so eager to take new tonnage that the possibility of lowering their

guard over the vessels’ real condition is becoming real.”

Neither was the EU Commission’s marine director, Georgette Lalis, relaxed:“The Erika changed classification society four times. Now we are trying toprevent company-hopping.” No surprise that the previously mentioned TOCAhas been revised several times since then.



Traditionally, classification societies require an annual survey and a more detailed special survey every five years. IACS took one step further in 1982,when it was agreed to introduce a new special survey aimed to bring about aconsiderable upgrading of large tankers when they reached the age 15. But noextension had been given in 1991 to the Greek tanker Kirki en route from theArabian Gulf to a terminal in Western Australia. Nevertheless, the forepeakballast tank was horribly corroded, and her bow section simply suddenly felloff. She was loaded with some 82,000 tons of crude oil and fully approvedfive months earlier by her classification society, Germanischer Lloyd.

Six years later, the Russian tanker Nakhodka broke in two in the Sea of Japan.Her hull was also “significantly corroded,” and she was fully in class withoutany outstanding recommendations by the Russian Classification Society.

Since 2002, a European Directive has required that the EMSA controls eachauthorised society at least bi-annually to ensure that their performance is incompliance with the rules. Whilst there are no IMO rules regulating the robustness of the steelwork in tankers, IACS has during the last years takenseveral initiatives to improve their services and address problems as far as possible before, rather than after, a major casualty. Most important, in December 2005, members without any reservation agreed to discontinue the“rule competition” between them by producing Common Structural Rules toensure that the construction of oil tankers and bulk carriers in the futureshould be more robust and safe. But some years later, this agreement had tobe amended because of the intervention of the Brussels antitrust directorate.

Class-hopping on the one hand and the liberal practice of many major societiesto permit extensions with respect to renewal of certification were intolerablein the long run. A representative of a major society operating from his officein Piraeus about 20 years ago was called “Mr. Extension” in informal circlesof shipping people in Oslo. They were frustrated about the liberal policies ofsome IACS members. It seemed that owners in a poor financial situation wereallowed to continue to trade regardless of outstanding orders to undertakemaintenance and/or repairs, whereas there was no mercy for financiallystronger owners. Together with the oil companies’ constant pressure to forcefreight rates well below break-even, the liberal policies of the classification societies were a factor which did not seem to promote marine safety. On thecontrary.



Something obviously had to be done to reduce the unhealthy competition andinstead facilitate a closer cooperation between the IACS societies. Within theindustry, it was rumoured in the late 1980s that a Super IACS was about tobe formed by the major societies including ABS, DNV, Lloyd’s and possiblyalso Germanischer Lloyd. They all had exclusive surveyors in the most important ports. Now the intention was to coordinate and enforce qualityshipping by a stricter control of their entered fleet. The formation of a “premium league” was, however, never realized, mostly because of commercialand regional implications. But in 1991, long overdue, it was decided inHelsinki to set up a permanent Secretariat. Moreover, an IACS Quality SystemCertification Scheme was introduced.

The next year, Mr. J. D. Bell was appointed as the first permanent secretary ofthe association. On July 1, 1992, a permanent secretariat was set up in London. In 1993, the members introduced a programme for more stringentinspection of bulk carriers and oil tankers – the Enhanced Survey Programme.It required that surveyors should physically reach all areas in the ships whichthey were supposed to examine. More emphasis should be placed on gaugingthe metal thickness of the hull.

A society could be expelled from IACS if it did not meet the quality criteria inthe Charter of the association. On June 1, 2000, the new administrationshowed its strength when the Polish Register was expelled following the tragicloss of one of its registered ships, which had cost 18 lives. Since then, the hullsof Castor, Erika and Prestige, to mention a few, were later found to be dan-gerously corroded despite being classed by major societies.

Are periods of grace still parts of normal procedure among classification so-cieties?

After the Erika tragedy, a representative of Bureau Veritas commented inLloyd’s List on the extension practice with respect to the special five-year survey and said that: “There was nothing exceptional in the operation … It isa normal procedure which exists when an owner is in difficulty because of acommercial operation in progress.”

Obviously shaken by the attitude of RINA and Bureau Veritas, the IOPCF decided in December 2002 to take recourse in the Civil Court in Lorient,France, because of the their involvement in the Erika accident. Both societieswere among the founding members of IACS. None of them had stopped Erika,



which had changed classification companies four times and ended up at thebottom of the Atlantic. After Erika, Dr. Nikos Mikelis, a well-known Greekexpert on marine technical issues, fired a salvo on IACS for the lack of actionto rectify the current sad state of affairs. In his opinion, IACS had – despitethe serious flaws that now so clearly had been revealed – confined itself tosimply announce more surveys, which according to Dr. Mikelis was a self-serving decision because:

”1. More surveys equals more fees. 2. IACS is seen as doing something when the whole of the industry now admits that the existence of substandard ships is a problem of

lack of compliance with the existing regulations.”

He added:

“The reality is that behind every structural failure of a substandard ship,there is a substandard survey. The question IASC should therefore have

addressed is how to eradicate substandard surveys, and to this day we havenot heard a word on this matter from IASC.”

INTERTANKO was far more complimentary. In a report to its AGM in 2000,tanker owners welcomed new IACS measures aimed at removing substandardships from service. These included:

“more rigorous check for older ships changing class, the computerisation of class records and the transfer of these to new societies; increased

inspection of ballast tanks located next to cargo tanks carrying heated products, more detailed intermediate surveys and closer monitoring of

steel thickness measurements.”

Up to the Erika and Prestige, pollution incidents in 1999 and 2002, IACS hadsuccessfully protected status quo. Inspired by Prime Minister Chirac’s state-ment that “draconian measures” were required, the European Communityembarked on a crusade to put the shipping industry in order. One target wasthe classification societies. As mentioned before, a European Directive on Classification Societies enacted in 1994 was now amended asking the EMSA to control each authorised society at least bi-annually to ensure that the performance complied with the rules.



The exclusive IACS group had battled complaints about restrictive businesspractices since adopting its own common structural rules in December 2005.

One further step the European Community took was to launch an investi-gation into the activities of IACS that could possibly be in breach of the regional antitrust legislation. The IACS Code of Ethics soon became a majortarget. A central provision in the Code stipulated that the services renderedby IACS members: “must not lead to compromises on safety of life and property at sea or the lowering of technical standards.” Press reports impliedthat IACS had been compelled by the EU “to scrap ethics.” This proved, ofcourse, to be a gross overstatement. The result was rather that the IACS codeas such had to be cancelled, but each member could continue to operate ac-cording to its “in-house” ethical rules. One cannot help feeling that this exer-cise caused a lot of bureaucratic ado about very little.

In December 2008, delegates to a meeting of IMO’s Maritime Safety Committee were reported to be shocked by rumours that the EU would forceall classification societies to recognise each other’s certificates on a “no-ques-tions-asked basis.” It was felt that this idea would undermine the traditionalclassification process and impinge on the sovereignty of states to decide independently what society was trustworthy or not. In an unusual move, theCommittee instructed the Secretary General of IMO, E. Mitropoulos, to voiceconcern over the EU plans.

IACS’s membership had been confined to classification societies which represented a sizeable fleet in international trade. One of the EU’s other concerns was that the access to the IACS and its working groups, which discussed and prepared the common rules and procedures, was closed to non-members. An important result of the mentioned anti-trust investigationsaw the light of day in June 2009, when Brussels without further ado compelled IACS to open the door to membership ajar. This meant that non-members in the future could obtain access to the mentioned working groups.Moreover, any classification society would be entitled to apply for membershipin IACS. The new approach to assess applications for membership was to bebased more on quality rather than quantity criteria.

Following the publication of the new regime, the Polish register PRS confirmedthat it would “welcome a return to IACS.” Another obvious candidate formembership is the Hellenic Register of Shipping, who chose to not comment.Hellenic also had other problems. In March 2009, Lloyd’s List reported that



Brussels was planning to prevent the Hellenic Register from taking on newbusiness, as EU members states had decided to give the Greek classificationsociety 17 months to resolve “quality” issues. In the meantime, no classing ofnew ships was allowed. What the future brings is always uncertain, but fewobservers would be surprised if Hellenic is a member before 2012. In October2009, Tradewinds reported that the EU regulators had ended their anti-trustcase against IACS after it had agreed to let rivals access its activities and technical data.

For many observers within the tanker industry – including the author – thefierce competition between the classification societies in the past has been aproblem. The result has been lenient practices with respect to certification andrepresentation of substandard surveyors. When the EU has chosen to focus onpossible restrictive business practices and opened the door to what may endup in more competition – fair or unfair – it is in no way given from above thatthe results will be safer shipping and a cleaner environment.

Today, charterers, insurers and other parties interested in the performance andquality of a particular tanker will enjoy the increased transparency that hasdeveloped in the shipping business. Safety-related data has become availableto all interested parties thanks to an initiative the European Commission andthe UK government launched to establish the Equasis database. From 2002,maritime authorities of countries outside the European Community includingJapan and Singapore have agreed to support Equasis financially. Thus, it mightbe hoped that some of the problems we have addressed are now more likelyto be addressed before, rather than after, a major casualty.

Serious accidents have in the past compelled clients and third parties to holdthe societies accountable for alleged mistakes. The claims brought by com-mercial interests have amounted to billions of US dollars. But it has proved tobe very difficult to pursue classification societies in court. The societies haverelied on the language on the certificates or reports that disclaim liability forany financial loss arising out of reliance on these documents. Moreover, theyhave felt confident that when they are carrying out statutory functions on behalf of a flag state, they should be entitled to the very same immunity as thegovernment they represent. Most of the claims against the societies have failed.

Speaking on this topic at a maritime law conference (Marlaw) in Ithaca,Greece, in September 2007, a legal adviser to the Lloyd’s Register put it thisway:



“... governments around the world now rely heavily on class societies to discharge the particular government’s statuary responsibility to have ships

flying its flag designed, constructed, operated and maintained in accordancewith its national laws including the applicable IMO conventions and class

requirements. That has resulted in classification going from, what at its origin was purely a private function, into what is today, in reality,

a public function.”

But sorry, it is more complicated. When the immunity argument seemed un-likely to succeed in the Prestige case, the American Bureau of Shipping – withMr. Somerville in the driver’s seat – successfully convinced a New York Courta few years ago that his society could not be held liable because it was “a per-son” like any agent or servant of the ship owner. This is the very point of Mr.Devanney, mentioned above. Hence, in accordance with the channelling provision in CLC, ABS was exonerated. It is arguable that class really wantsto have its cake and eat it, too. The decision was, of course, appealed by theSpanish government. The outcome of the appeal remains to be seen.

The classification societies want the statutory privilege, but not the responsi-bility, of approving ships that are protected by disclaimer clauses in their stan-dard contracts. Moreover, they maintain that when they are carrying outstatutory functions on behalf of a flag state, the societies should be entitled tothe very same immunity as the state. When liability has been tested in courts,the societies have also more often than not had the sympathy of the judge.Heavily publicised cases have fuelled the perception in the industry that theseinstitutions do not owe a duty of care to third parties and therefore cannot befound liable to them in tort. A representative ruling of a US court rejected theliability claim and warned: “The societies could be deterred by the prospectof liability from performing work on old or damaged vessels that most needtheir advice. The spreading of liability could diminish owners’ sense of vesselsafety ...”

In other jurisdictions such as France, the law is based on a simple but funda-mental principle that “he who causes harm to a third person is obliged to makeit good” (Article 1382 of the Civil Code). When the French Court deliveredits widely published Erika judgment in January 2008, it became clear that thecourt had swept aside RINA’s defence that it had jurisdictional immunity of a foreign state. The Court held that “when it consists of checking the implementation of the safety rules by the means if inspections involving the



structural solidity of the hull (1.1.1. § 6), the activity of classification societiesare of a private nature, performed at the request of the owner, in accordancewith a contract entered into.” The fault of imprudence of the inspector wasone of the causes of the shipwreck.

Nevertheless, the liability questioned remains a problematic issue. The Erikajudgment is appealed. There is no international guidance. An effort was madein 1995, when CMI was asked to set up a working committee to draft rulesintended to reduce the threat of litigation. Frank Wiswall, a former chairmanof IMO’s Legal Committee, was asked to serve as chair. His working grouprejected the proposal to introduce straightforward limited liability for the so-cieties’ involvement in shipping casualties. Some suggested standard clauseswere drafted, but the issue remains unsolved and has not yet been addressedby IMO. So the question of what the classification societies’ liability exposurereally is in a certain jurisdiction, or should be on an international level, remainsunanswered. Any person or company who has incurred losses because of neg-ligent acts or omissions of a classification surveyor is free to sue the society intort, finds himself in unchartered waters.

Neither marine safety nor the environment is served if the principal caretakerof the public interest knows that they are insulated from liability for loss oflives and major oil spills. Years ago, the Norwegian ship owner Knut Klosterpresented his dream of quality ships sailing under the flag of the UN. Can are-organization of IMO and a unification of the major classification societiesmake his dream come true some time in the distant future? Can the IACSjudges one day be judged on their merits by IMO?

There’s a long way to go, but a first step could be introducing an inter -national accrediting system for classification societies to which member gov-ernments may delegate regulative responsibilities. It sounds utterly unrealistictoday just as the vision of Mr. Kloster was, and probably still is, when he de-livered his speech in 1987 at an INTERTANKO Council meeting. In any case,here is the last paragraph of his presentation:

“The maritime industry has a proud history and long tradition of adventureand discovery. As our forefathers did so many centuries ago – when they

sailed beyond the horizon and opened the world – we should once again beguided by a process of vision. In the words of one of my favourite proverbs,

we must set our course by the distant stars and not by the light of the passing ships.”



Notes:On the role of class, see the SOLAS Convention chapter II-1, A-1, Reg. 3-1 and Andrew Kennedy:“Classification societies & the law - The Inside Story” and Roger Miles’ “Class Societies and Liabilities,”both papers presented at the Marlaw Conference in Vathy, Ithaca, Greece in September 2007. Mr. Kennedy’s reference to the statement of the judge is taken from US Fifth Circuit Court of Appealsin the case Otto Candies LLC vs. Nippon Kaiji Kyokai Corp. 346 F.3d 530 (2003). The judge alsostated: “The spreading of liability could diminish (an) owner’s sense of responsibility for vessel safetyeven as it complicates liability determinations”See comments on the fully classed Kirki in the Australian report on “Ships of Shame,” p. 1. On the his-tory and development of IACS, see Eirik Andreassen’s presentation “IACS Organisation” at Interna-tional Affairs, MSTNO232, November 2008 and Det Norske Veritas’ 125th-anniversary book, “Anchorand Balance,” Oslo, 1989. Jack Devanney’s criticism is taken from his “The Tankship Tromedy – The Impending Disasters inTankers,” Florida, 2006, pp. 56 and 260-267. On the Berge Istra and Berge Vanga disasters, see “Anchor and Balance,” pp. 265-268.On the expelling of ships, see DNV’s press release reported in Lloyd’s List on Oct. 15, 1984, Journalof Commerce, Sept. 7, 1984 and comments on IACS in Fairplay, Oct. 18, 1984 and Nov. 30, 2006.On IACS Quality Certification, see Dr. Philippe Boson’s paper presented at the 12th SBL Biennial Con-ference in Paris in September 1995. See the leader on Judging Judges in Lloyd’s List from July 27, 1995.See the article on the views of Bureau Veritas in Lloyd’s List, Jan. 12, 2000, and the views of PaoloClerici in Lloyd’s List on Jan. 26, 2002. On the revision TOCA, see Lloyd’s List, Jan. 7 and 26, 2000.On the anti-trust allegations, see the February 2009 issue of Tradewinds.Shipping financier Paul Slater’s address was at INTERTANKO’s AGM in Rome, 1986.


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16

On Reflection

Is it realistic to expect that the measures to better the marine environment willbe more successful than the efforts to halt increasing air pollution and globalwarming?

The sneaking global warming represents no tangible threat comparable withthe dramatic grim pictures of a collapsed tanker blackening pristine shorelinesand killing birds, fish and wildlife. Air pollution is transparent in comparisonwith ugly polluted beaches and may for many perhaps represent more of anacademic problem.

Still, crude oil is Mother Earth’s own product, and spillage from tankers rep-resents only a minor part of the pollution of the environment. More oil getsinto the sea through the drainage system of the world than ever gets in fromtankers. But people detest oil spills because of their photogenic attributes.

Whereas large spills capture our attention, numerous, smaller, but regular“operational” spills unnoticed by the media do more cumulative damage tothe oceans. But piles of statistics showing encouraging reductions in marinepollution will count for nothing as soon as the next major spill flashes acrossthe TV screens. When it strikes as a bolt from the sky and is covered by themedia within minutes, political statements follow. The usual reaction has beento: 1) Refer to human failure 2) Demand that the polluter shall pay up or 3) Impose new regulations on shipowners.

In between the big oil spills, there have been long periods without major tankerpollution incidents hitting the headlines. But it would be naïve to believe thatmajor spills are not waiting out there.

During the last decades, tankers have spilled oil and seriously polluted thecoastlines around the world. Marine pollution of the waters of the US, theUK, Japan, France, Spain and Italy proved to be disasters for the effected


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regions. Some coastal states have been spared. The increase in Russian oil moving through the Danish and Turkish straits bodes no good. Off the longwestern coast of Norway, large tankers with up to 300,000 tons of oil aredaily carrying Siberian oil from Murmansk to terminals in Rotterdam and theUS East Coast.

When the dry cargo ship Full City leaked 290 tons of its fuel in Norwegianwaters in July 2009, the local media’s focus on the “catastrophe” was intense,and the cleaning up proved to be a major problem for the government. TheChinese Captain was sentenced to six months in jail despite widespread suspicion that the accident was linked to deceptive information by the localport authority. On the contrary, little attention was given to the large tankerMoscow Universe when she lost her power in 2003 and drifted 20 km off theNorwegian coast. Fortunately, the crew managed to restart the engines. Thevision of a large tanker discharging its entire cargo off the coast of one of theScandinavian countries is a nightmare.

In 1996, Sea Empress highlighted that you can operate the best ship andyet you might cause severe pollution because you are vulnerable to shore-basedinefficiencies.

Quality commitment vs. lingering legalconcernsIn June 1999, marine oil pollution was addressed at a two-day policy confer-ence, Mare Forum, in Amsterdam’s Grand Hotel Krasnapolsky. In attendancewere 300 high-level representatives of flag states, port states, classification societies, insurers, banks, shipyards, ship owners and ship managers, cargoowners and charterers, regulators and legislators within and outside the EU.After having endured some 25 presentations each day, it seemed accepted thatthey all had important roles to play to enhance maritime safety and a cleanerenvironment.

Moscow Universe

The main transport for Russian crude carriers from the Barents region in the north, is passing along the westerncoastline of Norway. The oil is mainly discharged in Rotterdam. A Norwegian research centre believes that Russian oil transport could reach 50 million tons in 2012, but higherestimates have also been presented. It is generally believed that the Russian tankers are high standard, but misgivings have been expressed about the strong growth of these shipments, which makes the probability of anenvironmental catastrophe a real danger. Norwegian authorities express great confidence in its own contingencyplanning to cope with such accidents. However, the many “small” spills of bunker oil from dry cargo ships havenot convinced sceptics that Norway is prepared to handle a major spill. A breakdown of the engine of a Russiansuper tanker some years ago was quickly rectified by the crew, but could be seen as a warning light.


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The delegated were finally – invited by the chairman, the shipping journalistMichael Grey – to agree on certain basic principles. Some of them were:

“Each link in the maritime responsibility chain, on sea or on shore, shouldmake safety considerations an integral part of its activities.”

“Industry participants should take reasonable care to ensure that the shipswith which they are dealing are of good standards of quality. Accordingly,they should avoid using, servicing, supplying or otherwise doing business

with ships which clearly do not meet the internationally applicable requirements.”

Whilst Lloyd’s List the morning after the conference had the heading of its report “Quality Charter Born,” the text below seemed to tell a story of a still-born baby. Seventeen representatives of the international maritime organ-izations had signed the charter, but the OCIMF held off. The directorexplained to the press that his body had “lingering legal concerns” and hadto review the charter further.

Two years earlier, the managing director of one of the leading P&I clubs, em-braced a paper the EU issued which also expressed that quality shipping wasnot just a matter of imposing further obligations on the shipowners: “Manyothers – in particular flag state administrations and classification societies,cargo owners and insurers – have to take their share of responsibilities,” theCommission document stated. The Director proclaimed to the press: “We would like to see the pragmatism displayed by Brussels reflected else-where” (Lloyd’s List, Aug. 17, 1998). But when the International Group ofP&I clubs were presented with the mentioned Quality Charter, they had thesame “lingering legal concerns” and explained diplomatically that the path remained open for signature at a later date.

Their “lingering legal concerns” were not alleviated when Erika, a 24-year-old rusty tanker, some months later collapsed off the coast of France. The ecological damage outstripped all previous incidents except the Exxon Valdezand served as an eye-opener to governments and the public. Most important,the disaster confirmed that safety at sea depends on an interaction of a numberof parties involved in the transportation sector. Apart from the owner and hismanager, the accident pictured the roles played by the other participants inthe market.

The vessel had been inspected and approved by a major classification


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society two weeks before her final voyage. But perhaps most important, thechartering policy of the oil industry caught the attention of the press and television. Why did a rich oil company hire a rusty old tanker to transport itsoil when first-class carriers were available?

If port states around the world were free to regulate the tankers entering andleaving their terminals the way they felt best, the consequence would be chaos.IMO’s objective is summed up as follows: “Safe, secure and efficient shippingon clean oceans.” The support for the organization’s work to coordinate marine safety regulations is reflected both by its nearly 160 member countriesand by the large number of consultative organisations representing all the in-terested parties including the industry and the environmentalists.

But IMO has a problem within the national bureaucracies. Many memberstates are dragging their feet with respect to implementing the measures theyhave agreed on after time-consuming preparations and lengthy debates. Someissues remain talking topics for decades whilst little or nothing is done.

One example relates to the 1969 Convention on pollution liability. At theend of the 1969 Conference, a resolution was passed to intensify the work ofIMCO “on all aspects of pollution by agents other than oil.” More than 40years passed before IMO managed to agree on liability rules for damage thatmarine transport of chemicals caused. At the time this book was printed inearly 2011, the rules have not yet been put into effect.

No better is the endless talk on how to deal with residues from tankers. In1972, the INTERTANKO annual report (p. 10) was proud to announce that:“IMCO has recognized the need to provide reception facilities to be utilizedby tankers.” Sixteen years later, IMO’s Secretary General urged governmentsto consider the adequacy of reception facilities in their ports. After new count-less meetings and papers, IMO NEWS could in June 2006 inform readers that:“A draft Action Plan to tackle the alleged inadequacy of port reception facil-ities – seen as a major hurdle to overcome in order to achieve full compliancewith MARPOL – was agreed (on) by the Sub-Committee on Flag State Implementation when it met for its 14th Session ...”

But no progress seemed forthcoming. In July 2008, a new Secretary Generalof IMO, Mr. Mitropoulos, had to be reminded of the poor standards of waste-reception facilities.

The balance between laxity and over-regulation is another major problem.


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Many of the members are “flag of convenience” states. They have large fleetsand considerable voting power, but limited resources are set aside for enforce-ment of international standards. The technical expertise found in major portstates is often superior. One critical voice, David Cockford, General Secretaryof the International Transport Workers Federation (ITF), several years agocriticized the current power balance: “members from flag of convenience statesare far too ready to use their considerable influence to slow down the pace ofchange ...” His words might still be valid.

The effects of IMO delays may be “OPA-like” unilateral initiatives. Moreover,lacking flag state enforcement distorts the rivalry in the highly competitivetanker market. This is a challenge that port states’ intervention can alleviate.

Port state quality audit has been practiced by a large number of Europeancountries for more than 25 years. Canada soon supported their scheme, basedon an initiative outlined in the 1982 Paris Memorandum of Understanding(Paris MoU). Furthermore, the USCG, second to none in this respect, has beenan active participant in the discussions. Similar cooperation is also found inother regions, notably through the Tokyo Memorandum of Understanding.Despite the much-praised port state control, however, there is obviously roomfor improvement when tankers like Nakhodka, Erika and Prestige had no dif-ficulty escaping the safety net.

The industry took a step in the right direction in 1993, when OCIMF waspersuaded by INTERTANKO – fronted by the Swedish shipowner Hans Lau-rin – to introduce SIRE for the exchange of the various oil companies’ tankerinspection reports. Hopefully, the combination of more effective port statecontrol and SIRE may have forced some of the worst operators to either up-grade their vessels or leave the major oil trades.

The risk of accidents can be minimized, but never totally eliminated. Rules onliability enter the stage when legislation and administrative control proves in-effective. The public reaction in the wake of huge oil spills is anger.

Pollution liability rules are caused by anger. Torrey Canyon resulted in CLCin 1969 and FC in 1971. Amoco Cadiz led to the Protocols of 1984 and 1992.OPA90 was passed as a consequence of the Exxon Valdez. Following Erikaand Prestige, the EU pushed IMO to establish a Supplementary CompensationFund. In the US (and elsewhere) the legislative reaction to the Deepwater Hori-zon disaster remains still to be seen.

Voices have implied that that the gap between the Protocols and OPA90 lia-


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bility rules may at some stage be surmounted. Such har-monization might seem to belong to a distant future. Inthe meantime, we may ponder what is required to es-tablish effective liability rules for oil transportation atsea. You then need to answer the key question: Whichactor or actors should be made responsible for the damage caused?

Which actor should be responsible?In US Federal legislation, “the operator” and “owner”are the responsible parties.

When the US Congress met in a conference duringthe fall of 1990, the provision entitling pollution victimsto seek compensation from cargo owners was promptlyremoved, but the party operating the ship remained asa responsible party. In an article written in 1991, themajority leader in the US Senate, Senator Mitchell,stressed that “a key objective of any pollution regimeshould be to prevent spills by inducing a high standardof care.”

US and English law are based upon the principle thataccountability creates a deterrent to negligent behaviour.

“The public interest is not served where charterers,operators, pilots and others who are in the best position to prevent oil spills know that they are insulated from liability for catastrophic oil spillscaused by their own gross negligence or violation

of federal regulations.”

The US never ratified the Protocols. France ratified de-spite its scepticism and despite the reaction of nationallegal experts who were astonished when they learnedabout the revised channelling provisions. According toone of them, at a CMI conference in 1992, Mr. M.

Hans Laurin and his wife

Hans Laurin of Laurin Maritime AB, Sweden, is shownhere. The company operatesmodern tankers that providemaximum flexibility of opera-tion. He was INTERTANKO’sdriving force in the 1990s tocope with the huge number ofvetting inspections carried outat tanker terminals by differentbodies. One goal was to persuade the oil companies toharmonize their vetting proce-dures by an exchange of infor-mation systems. An “afterlunch” meeting with oil repre-sentatives in London was notencouraging. Mr. Laurin hadthe habit of smiling broadlywhen he argued. More opposi-tion meant a bigger smile. I observed some irritation onthe other side. Nevertheless, thepressure continued. Eventuallythe oil industry set up an infor-mation centre in London: ShipInspection Report Programme –“SIRE.” Here, Mr. Laurinsmiles again, this time togetherwith his wife.

Foto: Tradewinds


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Remond-Gouilloud concluded that “the list of exceptions suggested by theProtocol no doubt goes too far.”

At the end of the day, it is the charterer who decides to use a particular vesselthat he directs to loading and discharging ports within an agreed range. Theship owner is obliged to perform in accordance with the charter party, whichin practical life often corresponds with the oil companies’ own standard terms.As one other French legal expert, Mr. Du Pontavice, points out:

“ ... the time charterer or bareboat charterer, who will actually be the realmasters of the ship in that they belong to the same group as the carrier, willhave no need to take precautions since the convention as amended by the

protocol declares that they are not liable.”

In an article on the Norwegian Pollution Control Act, professor Thor Falka-nger touches upon the same problem. He accepts that it is obvious that theshipowner should remain in the frontline. However, he concedes:

“An assertion to the effect that the oil company is a liable party is strengthened if it is assumed that the transportation is performed under

a charter party which enables the oil company to influence how the transportation is to be carried out. This becomes very clear if the oil

company is a time charterer and decides what kind of cargo should be transported, where the destination is and to a great extent controls or

acts on the handling of the cargo.”

Looking back to the 1969 Conference, a large number of delegates referred tothe particular characteristics of oil cargoes when transported across the oceans.In his opening statement, Donald Jamieson, Canadian Minister of Transport,stressed that pollution is attributable to the nature of the substance carried. Inhis view, the main point was the notion of joint enterprise: “Just as they sharedthe profits from carrying oil in bulk, charterers and oil companies ought likewise to share the liabilities inherent in that form of transport. ...”

At the international conference in 1984, it was agreed to channel liabilityfor pollution damage to one party only: The registered shipowner. This solu-tion was required to avoid a breakdown of the negotiations. Since then, notmuch has happened. IMO’s much-publicized 1992 revision was a joke. What


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was changed were the entry into force rule and thegranting of a rebate to Japanese oil companies. Thecompensation amounts have been increased, but thelegal framework remains the same.

Thereby, all individual actors other than the tankerowner are for practical purposes insulated from pollu-tion liability. It does not help that money is not alwaysavailable from the Fund when major accidents occur.Then reduced compensation is paid to pollution victimson a pro-rata basis unless additional money comes fromelsewhere.

Nevertheless, the majority of oil receivers within IOPCFhave so far provided a most robust defence for statusquo. This is understandable, as they pay only minutecontributions to the Fund. Applying their contributionsto barrels or litres, they are hardly visible. For the indi-vidual oil company/charterer or operator, the exposureof the IOPCF has no preventive effect whatsoever. Oil-exporting countries do not contribute to the Fund at all.

Should the classification societies contribute to IOPCF?We have seen that class wants the privilege of approvingships, but not the responsibility. When they are proceeded against, they are not shy to explain that theyrepresent the prolonged arm of governments and can inno way be sued for pollution damage compensation.However, when convenient, their argument might be theopposite; they are only “servant of the owner” and trustthe wording of the CLC Protocol, which explicitly for-bids such claims. That no one during the 1969 or the1984 conference ever even dreamt of that class being re-sponsible for safe constructions of ships should at thesame time be the shipowner’s “servant” seems to be oflittle consequence.

The annual reports of IOPCF reveal that the discussionon the liability framework was re-opened in 2004 to

Alfred H. E. Popp, QC

Alfred H. E. Popp has been adistinguished representative ofthe Canadian Government inIMO and IOPCF for manyyears. Apart from his participa-tion in the Diplomatic Confer-ence to revise the oil pollutionliability instruments in 1992, he has served as Chairman ofthe IMO Legal Committee. InIOPCF, he has chaired a num-ber of working parties set up tostudy various aspects of the international liability regimes,including the need for a full-scale updating of the instru-ments. In 2007, he wasappointed as administrator ofthe Canadian Ship-Source OilPollution Fund.


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enable the Protocols to play a more suitable role in theoverall IMO struggle for cleaner seas.

A proposal which would open up for compensationclaims against other parties involved, including the char-terer, was rejected by a majority of delegations. They argued that the Protocols were intended to only “createan efficient compensation regime and were not aimedat the quality of shipping ...”. These are strong words.A convenient way out for IOPCF, who after all wouldlike to be seen as a promoter of safety at sea, was to setup a working party to find other means to improvequality shipping. But after some years of debate, no con-crete recommendations came about.

The philosophy of the IOPCF majority seems to differquite a bit from Senator Mitchell. In his essay on OPA90in “Environmental Law” (Vol 21-237), he stressed that“a key objective of any pollution regime should be toprevent spills by inducing a high standard of care.”

Accountability might be a key word. IMO regulationsshould not be allowed to grow up with watertight bulk-heads between them. Whether technical or legal, theyshould aim at the same goal: Safety at sea and a cleanerenvironment. In an interview with Lloyd’s List a fewyears ago, at least one European, Jan Kopernicki (Shell),then-chairman of OCIMF, saw the light when he ex-pressed that: “a link can be made between the use of theoil spill compensation and safety at sea.”

One of the arguments for narrowing the responsibleparty to the registered shipowner has been saving insurance costs. Insurance for pollution liability hasbeen the business of the P&I clubs for more than 50years. They have argued successfully that the capacityof the market would shrink if other parties also were compelled to take out insurance against pollution liabil-ity. Dr. Tanikawa, a distinguished representative of Japan, at a number of IMO and IOPCF conferences,

Professor emeritus Hisashi Tanikawa

Professor emeritus HisashiTanikawa of Sekei University,Tokyo, Japan was a representa-tive of the Japanese delegationto the Brussels Conference in1969 – two years after the Torrey Canyon accident. Later he became a Chairman ofthe International Oil PollutionFund`s Executive Committee(1979-1981) and was the firstVice Chairman of the 1971 and1992 Assemblies. In the 25-year jubilee book of IOPCF from2003, he concluded: “In myopinion the reason for the successful history of the Fundsystem is that contributors tothe Fund have been limited to a manageable number.”


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accepted the argument, but admits:

“… it is very difficult to explain the channelling of liability ... In today’sshipping, the ship owner is often far removed from the operation of the ship

and might therefore not be the most suitable person to be held liable. ...However, in so far as pollution damage is concerned, the registered tanker

owner is also one of the persons who create the risk of pollution through oilspills from the tanker, even though this is remote.”

His conclusion is that if liability was applicable to other people involved, itwould be impossible to obtain effective insurance.

OPA90 has come to stay. The Act has been in operation for two decadesand applies to the world’s major oil transportation routes. No tanker operatorin international trade escapes the role of a responsible party any more, andinsurance does not seem to be a very serious problem.

Substandard tankers would not exist if the oil industry were not inclined totake the risk of hiring them. Increased attention has been directed to the useof obsolete tonnage. When the supply of tonnage is limited, charterers find ittoo expensive to be choosy. In a depressed market with a surplus of tonnage,the same chartering personnel will not hesitate to squeeze freight rates furtherdown, even below the shipowner’s operational costs. This does not serve safetyat sea, either.

In Lloyd’s List, the senior shipping journalist Michael Grey has comparedtanker shipping with the taxi market in the UK:

“Substandard cabs would not exist without people willing to take the risk ofhiring them ... one of the wonders of the century that has just ended is the

way charterers have been able to consistently avoid any liability whatsoeverfor the consequences of their going to the utmost lengths to obtain the

cheapest possible marine transport.”

The introduction of TOVALOP/CRISTAL in 1969/1971 delayed the imple-mentation of the international agreements for many years. As previously mentioned, the International Group of P&I Clubs in 2006 put forward twonew private schemes to persuade IOPCF to further postpone the revision ofthe Protocols. Mr. Ryansak, Chairman of the 1992 Fund Assembly and wellaware of the fact that the suggested revision was thereby removed from the


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agenda, expressed the hope that the work so far undertaken would “prove avaluable resource in the future when, as seems inevitable, it becomes necessaryto reconsider revision in order to ensure that the regime continues to meet theneeds of society.”

IMO, which in the past has tried to clarify the liability position of class withoutsuccess, should try again. A revised liability system might serve as an instru-ment to minimize pollution incidents and add to the compensation of pollutionvictims.

To single out one actor as solely responsible can hardly be a productive approach to protect the environment and ensure safe transportation at sea.

Notes:The article by D. Crockford, ITF, was printed in Lloyd’s List on Oct. 24, 1998. In 2003, the chairmanof the Greek Cooperation Committee, Mr. E.G. Embiricos opined: “careful analysis of IMO’s responseto recent shipping casualties shows that this criticism cannot be justified. IMO has responded slowly, ithas done so with deliberation, as is its duty, after full and sound technical, legal and economic analysis.”IMO News no. 4, 2003.Senator Mitchell’s article is found in “Environmental law” Vol. 21, pp. 236-251. The presentation of Mr. Pontavice is reported in more detail in W. Chao: “Pollution from the Carriageof Oil by Sea,” pp. 172-173.At a CMI conference in 1992, Mr. M. Remond-Gouilloud argues that the list of exceptions suggestedby the Protocol no doubt goes too far. See “Liability for Damage to the Environment” edited by Colinde la Rue, pp 95-96.Thor Falkanger’s article is found in: “Sjotransportoren og den norske forurensningsloven in Festskrifttill Kurt Gronfors 1991”.The statements of the Canadian Minister of Transport are found in the official IMCO report on the1969 Conference, pp. 84-86. On the reflections about the taxi market, see Lloyd’s List, Jan. 12 and March 14, 2000. West of Eng-land’s support for the paper issued by the European Union on quality shipping is found in Lloyd’s List,Aug. 17, 1998.The oil industry’s annual contribution to IOPCF depends upon the number and size of the incidentscausing pollution damage. During the 10-year period 1996-2005, the levy per ton oil varied from 0.011pound sterling to 0.054. The statement the Chairman of the ’92 Fund, Mr. J. Ryansak, regarding the future need for a reconsid-eration of the international instruments to meet the needs of society, is found in 2005 IOPCF annual report, p. 9.

APPENDICESWith the kind permission of the International Oil Pollution Compensation Fund, Appendix I containsa reprint of a section in IOPCF`s annual report of 2009. It reviews the complex and comprehensive workof the organization. The oil spill stemming from the accident of the supertanker Hebei Spirit in December2007 illustrates the efforts.Appendix II is a reprint of an article which appeared in INTERTANKO’s jubilee book: “My 25 yearswith INTERTANKO,” Oslo, 1996.



APPENDIX I: HEBEI SPIRIT

Appendix I

Hebei Spirit

Republic of Korea, 7 December 2007

The incident

The Hong Kong flag tanker Hebei Spirit (146 848 GT) was struck by the cranebarge Samsung No 1 while at anchor about five nautical miles off Taean onthe west coast of the Republic of Korea. The crane barge was being towed bytwo tugs (Samsung No 5 and Samho T3) when the tow line broke. Weatherconditions were poor and it was reported that the crane barge drifted into thetanker, puncturing three of its port cargo tanks.

The Hebei Spirit was laden with about 209 000 tonnes of four different crudeoils. Due to inclement weather conditions, repairs of the punctured tanks tookfour days to complete. In the meantime, the crew of the Hebei Spirit tried tolimit the quantity of cargo spilled through holes in the damaged tanks by making it list and transferring cargo between tanks. However, as the tankerwas almost fully laden, the possibilities for such actions were limited. As a result of the collision a total of 10 900 tonnes of oil (a mix of Iranian Heavy,Upper Zakum and Kuwait Export) escaped into the sea. The remaining oil inthe damaged tanks was transferred to other tanks on board and to anothervessel. Once stabilised, the Hebei Spirit proceeded to the Hyundai Oilbankterminal in the port of Daesan (Republic of Korea), where the cargo was discharged.

Shortly after the incident the Korean Government declared it was a nationaldisaster and on 24 December 2007 the Hebei Spirit was arrested at the suit ofthe Korean Marine Pollution Response Corporation (KMPRC), a state-ownedpollution response agency.

The Hebei Spirit is owned by Hebei Spirit Shipping Company Limited. It isinsured by Assuranceforeningen Skuld (Gjensidige) (Skuld Club) and managedby V-Ships Limited. The crane barge and the two tugs are owned and/or



operated by Samsung Corporation and its subsidiary Samsung Heavy Industries, which belong to the Samsung Group, Korea’s largest industrial conglomerate.

The Fund and the Skuld Club appointed a team of Korean and internationalsurveyors to monitor the clean-up operations and investigate the potentialimpact of the pollution on fisheries, mariculture and tourism activities.

Impact of the spill

Much of Korea’s western coast has been affected to varying degrees. Shorelinecomposed of rocks, boulders and pebbles, as well as long sand amenity beachesand port installations in the Taean Peninsula and in the nearby islands, werepolluted. Over a period of several weeks, mainland shorelines and islands fur-ther south also became contaminated by emulsified oil and tar balls. A totalof some 375 kilometres of shoreline were affected along the west coast ofKorea. A considerable number of commercial vessels were also contaminated.

The west coast of the Republic of Korea hosts a large number of mariculturefacilities, including several thousand hectares of seaweed cultivation. It is alsoan important area for shellfish cultivation and for large-scale hatchery pro-duction facilities. The area is also exploited by small and large-scale fisheries.The oil affected a large number of these mariculture facilities, as it passedthrough the supporting structures, contaminating buoys, ropes, nets and pro-duce. The Korean Government financed the removal operations of the mostaffected oyster farms in two bays in the Taean Peninsula. The removal opera-tions were completed in early August 2008.

The oil has also impacted amenity beaches and other areas of the Taean Na-tional Park. The Taean Peninsula is a favourite tourist destination for visitorsfrom the Seoul metropolitan area, with an estimated 20 million visitors everyyear, mostly in the months of July and August.

Clean-up operations

The Korea National Coast Guard Agency, a department of the Ministry ofMaritime Affairs and Fisheries (MOMAF), has overall responsibility for ma-rine pollution response in the waters under the jurisdiction of the Republic of



Korea. By the first quarter of 2008, responsibility for overseeing onshore cleanup had been passed on to the affected local governments.

The Coast Guard coordinated the response at sea. Over 100 vessels of theCoast Guard, the Navy and KMPRC were deployed to carry out clean-up op-erations. Over 1 500 fishing vessels were also deployed. The Coast Guard ap-plied dispersants from vessels and later helicopters over patches of floating oil.Tens of kilometres of booms were also deployed at sea and along coastal areas.

The government-led response at sea was completed within two weeks althougha large number of fishing vessels were still deployed in the following weeks totow sorbent booms and collect tar balls. Some were used to transport man-power and materials to offshore islands in support of clean-up operations untillater in the year.

The Korean Coast Guard tasked a total of 21 licensed clean-up contractors,supported by local authorities and fisheries cooperatives to undertake shorelineclean-up operations. Onshore clean-up operations were carried out at numer-ous locations along the western coast of Korea. Local villagers, army and navycadets and volunteers from all over Korea also participated in the clean-upoperations. In excess of one million man-days were worked during the firsttwo months. Clean-up operations involved both manual and mechanical re-moval of bulk oil and the work of a large number of volunteers wiping rocksand pebbles using sorbent materials.

The removal of the bulk oil was completed by the end of March 2008. Themajor part of secondary clean-up operations, involving, among other tech-niques, surf washing, flushing and hot water high-pressure treatment, werecompleted by the end of June 2008. Some clean-up operations in remote areascontinued until October 2008.

The 1992 Civil Liability and Fund Conventions

The Republic of Korea is a Party to the 1992 Civil Liability Convention (CLC)and a Member State of the 1992 Fund, but not a Member State of the Supple-mentary Fund.

As a consequence, since it is very likely that the total amount of damages willexceed the limitation amount applicable under the 1992 CLC, the Fund will



be liable to pay compensation to the victims of the spill.

The tonnage of the Hebei Spirit (146 848 GT) is in excess of 140 000 GT. Thelimitation amount applicable is therefore the maximum under the 1992 CLC,namely 89.77 million SDR. The total amount available for compensationunder the 1992 CLC and the 1992 Fund Convention is 203 million SDR.

Level of payments

The Executive Committee, at its March 2008 session, authorized the Directorto settle and pay claims arising from this incident to the extent that they didnot give rise to questions of principle not previously decided by the Committee.The Executive Committee also decided that the conversion of 203 million SDRinto KRW would be made on the basis of the value of that currency vis-à-visthe SDR on the date of the adoption of the Executive Committee’s Record ofDecisions of its 40th session, i.e. 13 March 2008 at the rate of 1 SDR = KRW1 584.330, giving a total amount available for the compensation of KRW 321618 999 000.

At the same session the Committee noted that based on a preliminary estima-tion by the Fund’s experts, the total amount of losses arising as a result of theHebei Spirit incident was likely to exceed the amount available under the 1992Civil Liability and Fund Conventions. In view of the uncertainty as to the totalamount of the losses, the Committee decided that payments should for thetime being be limited to 60% of the established damages.

In June 2008, the Executive Committee took note of the new informationwhich indicated that the extent of the damage was likely to be superior to thatinitially estimated in March 2008. At that session, the Committee decided that,in view of the increased uncertainty as to the total amount of the potentialclaims, and in view of the need to ensure equal treatment to all claimants, pay-ments made by the Fund should for the time being be limited to 35% of theestablished damages.

The Executive Committee decided to maintain the level of payment at 35%of the amount of the established damages, and to review the situation at itsnext session, at the October 2008 session, as well as in March, June and Oc-tober 2009.



As of October 2009, the latest estimate of the total amount of the losses causedby the spill was between KRW 542 000 million and KRW 577 000 million.

Actions by the Korean Government

Hardship payments made by the Korean Government

The Korean Government informed the Fund that payments totalling KRW117.2 billion had been made to residents in the affected areas. Out of thisamount, the Central Government has provided KRW 76.8 billion, theGhungcheongnam Province KRW 15 billion and private donors KRW 25.4billion. The local authorities in the affected provinces have distributed the payments.

It has been reported in the press that in Taean County, which is one of themost affected areas, a total of 18 757 households received payments betweenKRW 746 862 and KRW 2 916 000.

In June 2008 the Korean Government informed the Executive Committee thatthese payments were made as donations to the affected residents. The pay-ments therefore did not constitute payment for compensation of pollutiondamage and would not fall within the scope of Article 9.3 of the Fund Con-vention.

Payments by local authorities

A number of local authorities in the affected provinces have made paymentstotalling KRW 4 770 million to claimants in the clean-up sector in respect ofthe cost of villagers’ labour in January and February 2008, corresponding tothe difference between the amount claimed against the Fund and the SkuldClub and the amount assessed. A number of local authorities in the affectedprovinces have also made payments totalling KRW 9 569 million to claimantsin the clean-up sector for similar costs incurred during the period March toJune 2008, corresponding to the amounts claimed against the Skuld Club andthe Fund. One local authority has made payment totalling KRW 23.5 millionto claimants for villagers’ labour costs incurred in the period after August2008. All these local authorities have submitted claims in respect of these pay-ments.



Special Law for the support of the victims of the Hebei Spirit incident

At the June 2008 session of the Executive Committee, the Korean Governmentinformed the Fund that a Special Law for the Support of Affected Inhabitantsand the Restoration of the Marine Environment in respect of the Hebei SpiritOil Pollution Incident was approved by the National Assembly in March 2008.Under the provisions of the Special Law, the Korean Government was autho-rised to make payments in full to claimants based on the assessments made bythe Skuld Club and the Fund within 14 days from the date they submit proofof assessment to the Government. Claimants could therefore receive compen-sation in full for the losses suffered as a result of the incident based on the as-sessments of claims by the Fund and the Skuld Club. The Special Law enteredinto force on 15 June 2008.

At the same session the Korean Government also informed the Fund that ifthe Fund and the Skuld Club paid claimants compensation on a pro-rata basis,the Korean Government would pay the claimants the remaining percentage sothat all claimants would receive 100% of the assessment.

As at the October 2009 session of the Executive Committee the Korean Gov-ernment had made payments totalling KRW 29 900 million to 292 claimantsin the clean-up sector based on assessments by the fund and the Skuld Club.The Korean Government has submitted a subrogated claim for these pay-ments.

Loans granted by the Korean Government

As a measure to assist victims of pollution damage as a result of the incident,the Korean Government has granted loans totalling KRW 1 330 million to 16clean-up contractors through an agreement with the National Federation ofFisheries Cooperative.

Korean Government decision to ‘stand last in the queue’

At the June 2008 Session of the Executive Committee the Korean Governmentinformed the Committee of its decision to ’stand last in the queue’ to be in theregion of KRW 89 billion, but that this figure was likely to increase as theGovernment continued to incur costs in order to regenerate the local economy,



including works to reinstate the environment and promote consumer spend-ing.

The Fund and the Skuld Club are in frequent contact with the Korean Government to maintain a coordinated system for the exchange of informationregarding compensation in order to avoid duplication of payments.

Cooperation Agreements between the Korean Government, the shipowner andthe Skuld Club

In January 2008, discussions took place on compensation issues which resultedin the First Cooperation Agreement concluded between the shipowner, SkuldClub, KMPRC and MOMAF. The Fund was consulted during the negotiationsbut is not a party to the Agreement. Details on the contents of the First Cooperation Agreement can be found in document 92FUND/EXC.40/9.

The Skuld Club also entered into discussions with the Korean Government inorder to resolve its concern that Korean courts dealing with the limitation proceedings might not fully take into account payments made by the SkuldClub and that the Club would therefore run the risk of paying compensationin excess of the limitation amount.

In July 2008 a Second Cooperation Agreement was concluded between theshipowner, Skuld Club and the Korean Government (Ministry of Land, Trans-port and Maritime Affairs (MLTM), which had incorporated part of the functions of MOMAF). Under this Agreement, the Club undertook to payclaimants 100% of the assessed amounts up to the shipowner’s limit of liabilityunder the 1992 CLC, namely 89.77 million SDR. In return, the Korean Government undertook to pay all claims in full, as assessed by the Club andFund, as well as all amounts awarded by judgements under the 1992 CLC and1992 Fund Convention in excess of the limit so as to ensure that all claimantswould receive compensation in full. The Korean Government further under-took to deposit the amount already paid out by the Skuld Club to claimantsinto court should the Limitation Court order a deposit of the limitation fund.

Claims Office

In January 2004, in anticipation of receiving a large number of claims, and



after consultation with the Korean Government, the Fund and the Skuld Clubopened a Claims Office (the Hebei Spirit Centre) in Seoul to assist claimantsin the presentation of their claims for compensation. The office became fullyoperational on 22 January 2008. The Hebei Spirit Centre has a manager andsix supporting staff members.

Claims for compensation

As at the October 2009 session of the Executive Committee the Skuld Cluband the Fund had received 7 960 claims totalling KRW 1 503 billion on behalfof 51 970 claimants. A further 30 155 claims, totalling about KRW 325 bil-lion, were being registered.

Out of all the claims reviewed by the Skuld Club and the Fund, 929 had beenapproved for the KRW 77 171 million and 978 claims had been rejected. Interim payments totalling KRW 65 926 million (GBP 36.4 million) had beenmade by the Skuld Club in respect of the 740 claims, including payments madeto the Korean Government totalling KRW 25 105 million in respect of the 260claims paid under the Special Law. These payments had been made at 100%of the assessed amount.

The remaining claims had been queried and were awaiting response from theclaimant. Most claims were submitted with very poor or no supporting docu-mentation.

As of the October 2009 session of the Executive Committee the Fund had re-ceived 82 125 claims, most of them from small-scale fishermen affected by theoil spill. These claimants are represented by fishery cooperatives or commit-tees. In the past incidents in the Republic of Korea, the fishery cooperativesor committees submitted the claims on behalf of their numbers and the Fundregistered and assessed the collective losses of each cooperative or committeewho would then distribute the compensation to its members.

The practice of previous incidents in the Republic of Korea cannot howeverbe applied in the Hebei Spirit incident as a consequence of the Special Law,which entitles any claimant, who has submitted a claim for the compensationand has not received an offer of compensation within six months of the sub-mission of their claim, to receive a loan from the Korean Government.



In order to comply with the provisions of Korean Law, the Fund has to registerthe names and details of each fisherman member of the cooperative or com-mittee individually. The Fund has therefore had to redesign the Web-basedClaims Management System (WCMS) to enable registration of each claim in-dividually while maintaining the possibility of assessing the loss of the coop-eratives or committees as single groups.

Fisheries restrictions

Following the incident, the Korean Government established a number of fish-eries restrictions. The restrictions began to be lifted in some areas in April2008. The last restrictions were lifted in September 2008. Details of the processfollowed by the Korean Government to lift the restrictions can be found indocument IOPC/OCT09/3/8/1, paragraph 2.3.

Examination of the data provided by the Korean Government regarding thebasis on which the fisheries restrictions were imposed and lifted indicated, inthe Secretariat’s view, that on the basis of the scientific and technical informa-tion available, all of the fisheries should reasonably have been reopened beforethe actual date when the restrictions were lifted.

In June 2009 the 1992 Fund Executive Committee decided that the assessmentof claims in the fisheries sector should be based on conclusive scientific infor-mation available to the Fund. Therefore, any losses suffered by fishermen aftera point in time when the Korean Government could have reasonably had theopportunity to lift the restrictions should not be considered due to the contamination caused by the incident and should, in principle, not be consid-ered admissible for compensation. The Skuld Club and the Fund are assessingclaims from fishermen affected by the fisheries restrictions in accordance withthe Executive Committee decision.

Investigations into the cause of the incident

Investigation into Korea

An investigation into the cause of the incident was initiated soon after the in-cident by the Incheon District Maritime Safety Tribunal in Korea. In September2008, in a decision rendered by the Incheon Tribunal, both the two tugs and



the Hebei Spirit were considered at fault for causing the collision. The Tribunalfound that the Master and the Duty Officer of the Hebei Spirit were also partlyliable for the collision between the crane barge and the Hebei Spirit.

A number of defendants, including Samsung Heavy Industries, the Masters ofthe tug boats and the Master and Duty Officer of the Hebei Spirit have ap-pealed against the decision to the Central Maritime Safety Tribunal.

In December 2008 the Central Maritime Safety Tribunal delivered its decision.The decision of the Central Tribunal is similar to the one of the Incheon Tri-bunal in that the two tugs were found mainly responsible and the Master andthe Duty Officer of the Hebei Spirit were also found partly liable for the col-lision between the crane barge and the Hebei Spirit.

Investigation in China (Hong Kong Special Administrative Region) (China(HKSAR))

An investigation into the cause of the incident had also been initiated by theship’s flag State administration in China (HKSAR). The results of the investi-gation have not yet been published.

Legal proceedings

Criminal proceedings

In January 2008, the Public Prosecutor of the Seosan Branch of the DaejeonDistrict Court (Seosan Court) brought criminal charges against the Mastersof the crane barge and the two tugs. The Masters of the two tugs were arrested.Criminal proceedings were also brought against the Master and Chief Officerof the Hebei Spirit. The Master and Chief Officer of the Hebei Spirit were notarrested, but they were not permitted to leave the Republic of Korea.

In June 2008, the Seosan Court delivered its judgement to the effect that (i)the Master of one of the tugboats was sentenced to three years imprisonmentand a fine of KRW 2 million, (ii) the Master of the other tug boat was sen-tenced to one year imprisonment, (iii) the owner of the two tug boats (SamsungHeavy Industries), was sentenced to a fine of KRW 30 million, (iv) the Masterof the crane barge was found not guilty and (v) the Master and Chief Officer

of the Hebei Spirit were also found not guilty.

The Public Prosecutor and the owner of the tug boats filed an appeal againstthe judgement, pending which the Master and Chief Officer of the Hebei Spiritwere still not permitted to leave the Republic of Korea.

In December 2008, the Criminal Court of Appeal (Daejeon Court) renderedits judgment. In its judgment, the Daejeon Court reduced the sentence againstthe Masters of the two tugboats. The judgement overturned the not-guiltyjudgements for the Master of the crane barge and the Master and Chief Officerof the Hebei Spirit. The owner of the Hebei Spirit was also given a fine ofKRW 30 million and the Master and Chief Officer of the Hebei Spirit werearrested.

In April 2009, the Korean Supreme Court annulled the Court of Appeal’s de-cision to imprison the crew members of the Hebei Spirit and they were allowedto leave the Republic of Korea. The Supreme Court, however, upheld the de-cision to imprison the Masters of one of the towing tugs and of the crane bargeand confirmed the fines imposed by the Court of Appeal.

In June 2009 the Master and Chief Officer of the Hebei Spirit were releasedfrom arrest and left the Republic of Korea.

Civil Proceedings

Limitation proceedings by the Owners of the Hebei Spirit

In February 2008, the owners of the Hebei Spirit made an application to com-mence limitation proceedings before the Seosan Branch of the Daejeon DistrictCourt (Limitation Court). The Limitation Court decided to postpone its deci-sion on the shipowners’ right to limit his liability since the shipowners had notprovided evidence that claims in excess of the limitation amount had been sub-mitted and since the results of the criminal investigation had not been pre-sented to the Court.

In August 2008, at a hearing, the owner of the Hebei Spirit requested the Courtto issue an order granting the shipowners’ right to limit its liability. The courthowever, decided not to grant the request and to give time to the victims ofthe oil spill to register their claims.





In February 2009, the Limitation Court rendered an order for the commence-ment of the limitation proceedings. According to the Limitation Order, thepersons who have claims against the owners of the Hebei Spirit had to registertheir claims by 8 May 2009, failing which the claimants would lose their rightsagainst the limitation fund. Also in February 2009 a number of claimants ap-pealed to the Daejeon Court of Appeal against the decision of the LimitationCourt to commence limitation proceedings. In July 2009 the appeal was dis-missed. A number of claimants appealed to the Supreme Court. The appeal isstill pending.

One hundred and twenty six thousand three hundred and sixteen claims to-talling KRW 3 597 billion were submitted to the Limitation Court. The Lim-itation Court indicated that it would not accept further claims. The claimantswould however still have time to modify the amount of their claim until suchtime as the Limitation Court would complete the assessment of the claims.

The Limitation Court held a first hearing in June 2009. The Korean lawyersacting for the Skuld Club, the Fund and for a number of claimants, attendedthe meeting. It was agreed among the parties present that the Court Adminis-trator would review the assessments by experts engaged by the Skuld Cluband the Fund as well as the assessments by the experts engaged by theclaimants, rather than appointing Court experts.

In August 2009, the Limitation Court indicated its intention to monitor on aregular basis the progress in the registration and assessment of claims, and toschedule its subsequent hearings when the claims assessment process was moreadvanced.

The 1992 Fund, through its Korean lawyers, is following the developments inthe limitation proceedings.

Limitation proceedings by the bareboat charterer of the two tugboats and thecrane barge

In December 2008, the bareboat charterer of the two tug boats and of thecrane barge, Samsung Heavy Industries (SHI), filed a petition requesting theSeoul Central District Court to issue an order granting the right to limit its liability in the amount of 2.2 million SDR.

In March 2009, the Limitation Court rendered the order for the commence-ment of the limitation proceedings. The Court decided to grant SHI the rightto limit its liability and set the limitation fund to KRW 5 600 million (GBP2.9 million) including legal interest. SHI deposited this amount in court. TheLimitation Court also decided that claims against the limitation fund shouldbe registered with the Court by 19 June 2009.

In June 2009, a number of claimants appealed to the Seoul Court of Appealagainst the decision of the Limitation Court to grant the bareboat chartererthe right to limit its liability. The Seoul Court of Appeal has not made a deci-sion yet.

Claims by fishery interests

In December 2007, a group of fishery claimants belonging to the Seosan Fish-eries Cooperatives made an application to Seosan Court requesting the Courtto order the preservation of evidence and to appoint a court expert to assessthe losses.

In March 2008, another group of fishery claimants from the area of BoryangCity and Hongsung County made a similar application to the HongsungCourt.

The 1992 Fund has instructed its Korean lawyers to intervene in the proceed-ings to ensure that the interests of the Fund are protected.

In January and April 2008 respectively, the Courts of Seosan and Hongsungappointed the Maritime Research Institute of Pukyong National Universityand the Fishery Science Institute of the Jeonnam University as the court experttasked with the assessment of the damages arising from the Hebei Spirit inci-dent. The Courts ordered that any material that the court experts receive fromthe claimants is made available to the experts engaged by the Skuld Club andthe Fund who should have unrestricted access to any material necessary toconduct the assessment of losses.

Injunction against the experts engaged by the Club and Fund

In March 2008, three fishermen and two owners of raw-fish restaurants filed





an application for an injunction with the Seoul Central District Court. Thiswas aimed at preventing the experts appointed by the Club and the Fund fromcarrying out the assessments on the grounds that they were not qualified underKorean Law to carry out such work.

In April 2008, the Court dismissed the application since the claimants still hadthe right to bring the claims into court if they did not agree with the assess-ment. The Court stated that under Korean law the experts engaged by theClub and Fund were authorised to carry out the investigation and assessmentof damages arising from an oil pollution incident. The claimants appealedagainst the decision.

In March 2009, the Seoul Court of Appeal rejected the appeal and confirmedthe decision by the Seoul Central District Court. In April 2009, the claimantsappealed against the decision to the Supreme Court of Korea.

In July 2009, the appeal was dismissed by the Supreme Court of Korea. Thisdecision is final.

Recourse action against Samsung C&T Corporation (Samsung C&T) and SHI

In January 2009, the owners and insurers of the Hebei Spirit commenced arecourse action against Samsung C&T and SHI the owner and operator/bare-boat charterer of the two towing tugs, the anchor boat and the crane barge,in the Court of Ningbo in the People’s Republic of China, combined with anattachment of SHI’s shares in the shipyards in China as security.

In January 2009, the Director decided that in order to protect the interests ofthe 1992 Fund, the Fund should also commence its own recourse actionagainst Samsung C&T and SHI in the Court of Ningbo in the People’s Re-public of China, combined with an attachment of SHI’s shares in the shipyardsin China as security.

In January 2009, the Ningbo Maritime Court accepted the two recourse ac-tions filed by the owner/Skuld Club and the 1992 Fund. The total amountclaimed in each action is RMB 1 367 million or US $200 million. The Courtalso accepted the two applications for attachment of SHI’s shares in the ship-yards and issued orders accordingly.

In relation to the attachment of SHI’s shares, the Fund arranged for the deposit

of the required countersecurity, corresponding to 10% of the amount claimedor US $20 million (GBP 12.3 million) through the Skuld Club.

At its session in March 2009, the 1992 Fund Executive Committee endorsedthe decision taken by the Director in January 2009 to commence recourse action against Samsung C&T and SHI in the Ningbo Maritime Court in Chinaat the same time as the owner and the insurer of the Hebei Spirit. The Committee also decided that the Fund should continue the recourse action.

Service of proceedings on both Samsung C&T and SHI was effected in September 2009 but both have filed application objecting to the jurisdictionof the Court of Ningbo and, in the case of SHI, objecting to the attachment.Submissions in response to the applications have been lodged on behalf of the1992 Fund and the decision of the Court of Ningbo on all applications is expected shortly.




APPENDIX II: MY 25 YEARS WITH INTERTANKO

Appendix II

My 25 years with

INTERTANKO

Looking back on my 25 years with INTERTANKO, what first comes to mind– now 10 months after retirement – is that I as manager perhaps first and fore-most played the role of merchant – by and large successfully – but also ofdiplomat – perhaps not always so successfully!Together with devoted chairmen, colleagues and a no less devoted member-ship, the Association grew from a modest start to one of the most respectedspokesmen for the shipping industry. The first budget for 1971 was set at USD45,000, whereas by 1995 the budget was USD 3,850,000, and we had ourown small office building which, at the time I retired, was written down belowmarket value.Erling Naess has a chapter about INTERTANKO in his autobiography wherehe rightly underlines the great value of the support from the very start fromthe Norwegian Shipowners’ Association. Nevertheless, when we were able thebuy our own little office building in 1989; this was felt to be a step forward.We had always been independent - but with our own address we were nowalso clearly seen to be independent! The wholehearted support from the Greekside, in particular the Greek Shipping Co-Operation Committee in London,was also a very important factor, not least because its chairmen personallywere so keenly interested in a closer co-operation between independent ownersworld-wide.INTERTANKO’s touch of uniqueness was from the very start its basic con-cept: an association for tanker owners and only for the independents. Thiswas the strength, but, one may say, with an inherent weakness, as the very in-dependence on some issues could make co-operation difficult. This bookshould, however, prove that we had a long agenda with a number of topics of


mutual interest. Of course there were limitations. Available resources was one.Secondly, no company is prepared to sacrifice its own business interest to makea better world for its competitors. But even within difficult areas, true states-manship sometimes surfaced and INTERTANKO could take a large stepahead.During most of the period the market was very poor. Tanker owners lostmoney and some went bankrupt. In this situation it was often difficult to makeoutside commentators appreciate the overriding principle in the Articles of As-sociation of support for free competition. Not only would any efforts thatsmacked of market manipulation have brought us in trouble with the law inmany countries, but our credibility would have suffered dramatically if we hadbeen seen to restrict competition whilst at the same time in UNCTAD pro-claiming how consumers world-wide benefited from the free competition inthe bulk market.Still, it takes time and hard work to be recognized. During the first years someUS oil companies would not even speak to INTERTANKO. One of the short-est and most concise messages ever received was a telex from a top oil execu-tive replying to a request for a meeting as follows: “I do not want to see youhere.” When acting as a commercial traveler soliciting membership support

INTERTANKO’s h.q. in Gange-Rolvs gate at the time



in London, I was sometimes told: “INTERTANKO is a dirty word.” Not aneasy remark to forget.Today this is all past history. Oil companies are associate members and par-ticipate at the AGMs. The dream of the late Per Gram, who was one of thetop maritime lawyers of his time and chairman of our Documentary Commit-tee for many years, was to have the oils standardize the great number of con-flicting charter party clauses in existence – particularly in regard to thetechnical descriptions of tanker operations. Recently a dialogue took placewith The European Petroleum Institute, thanks to the efforts of Trygve Meyer.The outcome, however, remains to be seen.The value of the information service is perhaps sometimes overlooked whenINTERTANKO is discussed. Information flows to shipowners from manysources. To distinguish the INTERTANKO circulars from those of other or-ganizations, we took Neil Freeland’s simple advice and gave them colours. Re-alising that the tanker owner’s priority is to try to make money and not toread circulars, we strictly practiced the rule that no topic should extend beyonda single page. The shipping industry has been traditionally secretive and wetried to be very open. The trade Press supported us but the financial Press wasless interested. Despite advice to the contrary, a Freight and Demurrage Poolwas established and since the start, claims for nearly 60 million US dollarshave been settled.The environmental challenge has increasingly played a more important parton the agenda. Accidents are bound to happen, whatever form or shape trans-portation takes. Unfortunately, a tanker accident is often a very spectacularevent attracting more media attention than disasters involving air planes, fer-ryboats etc., where hundreds of lives may be lost. Tanker owners can be proudof the improved safety record during the last decades. Nevertheless there willbe a temptation for owners who have burned their fingers by contracting newand very expensive tankers to press for tougher rules for the existing ones. Iwould like to take this opportunity to go back to 1980 when the Councilpassed a resolution to IMCO stressing that implementation of existing rulesmust be given higher priority and also warning against the trend to changetechnical rules before they had been tried out. IMCO did not reply directly,but passed in the same year the well-known assembly resolution A500, whichstated that amendments to existing conventions should only take place “incase of compelling need” - and implementation of what had already beensigned must take priority.The work for effective and even implementation of safety legislation has al-ways been high on INTERTANKO’s agenda. A particular challenge was the



penalization of double hull and SBT tankers through higher port costs and tosome extent high P. and I. premiums due to their higher gross tonnage. Thanksto a member of the Norwegian Parliament, who being a shipowner himselfunderstood the problem, it was solved in Norwegian ports and by and by inmany other ports as well.The environmental problems can be solved. It would help if the users of ton-nage were more selective with the tonnage they chartered in or were preparedto pay up for quality. In practice it has been argued that it is the owners withthe most expensive tankers who press the market down - they cannot affordto let their tankers lay idle and wait for better rates. It would also help if gov-ernments implemented the safety conventions somewhat more quickly andmore effectively than seen so far.In this book on the first 25 years from the inaugural meeting in Oslo on 21stOct 1970, there will also be comments on the future strategy, as put forwardby the new Chairman and Managing Director. During 1995 a number of newinitiatives have been taken, sub-offices have been set up and the staff has beenstrengthened. For me the strategy was not to go forward quickly and keep thefinancial situation in good order, so that no member, regardless of the size ofhis fleet, could use his contribution to unduly press for certain policies.Looking back I feel privileged to have been allowed to work together with somany gifted and interesting people. My warm feelings go first and foremostto my INTERTANKO colleagues, past and present, to the chairmen and mem-bers in more than 40 countries, but also to colleagues in other private andgovernmental associations with which we co-operated, to the Press people andall the industry representatives who gave inspiration and colour to an excitingtime in my life.

Tormod Rafgard



BIBLIOGRAPHY

BibliographyBakka, Dag Jr.: “Hoegh – Shipping through Cycles,” Oslo, 1997Bishop, Archie: “Places of Refuge” presentation CMI seminar in Dubrovnik, May 2007BP: “Fifty years in pictures,” London, 1959Braer: “Impact of an oil spill” – Editors: J.M. Davies and G. ToppingBP Company: “Our Industry” private circulation, third editionBugge, Alex. a.o.: “Den norske Sjofartshistorie,” Steenske forlag, Oslo, 1933Chao, Wu: "Pollution from the Carriage of Oil by Sea: Liability and Compensation," Kluwer Law International, London, 1996 Clarke, Keith: “Santa Barbara Oil Spill: Retrospect” - Kluwer Law International, London, 1996Cowan, Edward: “Oil and Water,” William Kimber, London, 1969Danielsen, Rolf: “Frakteskuter og Fraktemenn,” Fylkesmuseet Telemark, 1993 De la Rue, Colin, editor: “Liability for Damage to the Marine Environment,” Lloyd’s, London press,1993Det Norske Veritas: “Anchor and Balance,” Cappelen, Oslo, 1989Devanney, Jack: “The Tankship Tromedy,” The CTX Press, Florida, 2005Embiricos, P. A.: “The Quest for the Environmental Ship,” INTERTANKO, Oslo, 1991Egeland, John O.: “Kongeveien II,” Aschehoug, Oslo, 1973Evans, Peter: “Onassis,” Hjemmets bokforlag, Oslo, 1987Falkanger, Tor/ Bull, H. J.: “Innforing i Sjorett,” Forsikringsakademiet, Oslo, 1995Falkanger, T.: “Sjotransportoren og den norske forurensningslov” saertrykk, Oslo, 1991Frischauer, Willy: “Onassis,” Dreyer, Oslo, 1968Gibb, D.E.W: “Lloyd’s of London,” Macmillan & Company Ltd., London, 1957Gill & Booker & Soper: “The Wreck of the Torrey Canyon,” David & Charles, New York, 1967Harlaftis, G.: “A history of Greek-Owned Shipping,” Routledge, London and New York, 1996Howarth, Stephen: “Sea Shell,” Thomas Reed, Wiltshire, 1992IMCO: “Official Records - The International Legal Conference on Marine Pollution Damage 1969,”London, 1973IMO Library Services’ “Current Awareness Bulletin,” 1998-2007IMO: Procedings of the Marine Safety Council, 1995IMO News: No. 1, 1998INTERTANKO: “The first twenty-five years,” Oslo, 1996IOPCF: “25 years,” Impact PR & Design, CanterburyJacobsen, Alf R.: “Dynastiet Bergesen,” Atheneum Forlag, Oslo, 1984John I. Jacobs & Company: Semi-annual reports, London Jacobsson, M.: "Compensation for costs of removal of oil from sunken tankers," Shipping & Transport International, 2007, p.8Jacobsson, M.: "Diplomatic Conference adopts Protocol to the 1996 HNS Convention," Shipping &Transport International, 2010, No. 2, p. 8.Jacobsson, M.: "El Régimen Internacional de Responsabilidad e Indemnización de Daños Debidos ala Contaminación por Hydrocarburos: Evolución Reciente," Revista de estudios marítimos, publishedby Associación Argentina de Derecho Marítimo, 2005Jacobsson, M.; Ndiaye, T. M., and Wolfrum, R., (eds): "Uniform Application of the InternationalRegime on Liability and Compensation for Oil Pollution Damage," Law of the Sea, EnvironmentalLaw and Settlement of Disputes, Liber Amicorum Judge Thomas A. Mensah, Leiden/Boston: Martinus Nijhoff Publishers, 2007, p. 421.Jacobsson, M.: "Le régime international d'indemnisation des victimes des marées noires en pleine évolution," Le Droit Maritime Français, No. 652, October 2004Jacobsson, M.: "L'expérience française du FIPOL," Le Droit Maritime Français, 2007, p. 968Jacobsson, M.: article in the publication ”Journal of International Maritime Law,” 2009, p. 21.


BIBLIOGRAPHY

Kennedy, A.: "Classification Societies and the Law" presentation, Greece, Sept. 2007King, G.A.B.: “Tanker Practise,” The Maritime Press Limited, London, 1960King, G.A.B.: “A Love of Ships,” Kenneth Mason, 1991Klaestad, H.: “Rederansvaret,” Cappelen, Kristiania, 1920Leggett, Jeremy: "Carbon War: Global Warming and the End of the Oil Era," Routledge, 2001Lloyd’s List: 250th Anniversary Supplement; Lloyd’s of London Press, 1984Longhurst, Henry: "Adventure in Oil," Sidgwick & Jackson, London, 1959Lucas, W.E.: “Eagle Fleet,” Weidenfield & Nicolson, London, 1955Michelet, Hans Petter: “Last og Ansvar,” p. 62-66, Oslo, 1993Miles, Roger: “Class societies and liabilities,” Marlaw Conference, Greece, Sept. 2007 Mitchell, C. Bradford, "Touching the Adventures & Perils," United States Salvage Association Inc.,New York, 1970Montefiore, S.S.: “Young Stalin,” Phoenix, London, 2007Mostert, Noel: “Supership,” A.A. Knopf, New York, 1974Naess, Erling D.: “Autobiography of a Shipping Man,” Seatrade, Colchester, 1977Nalder, Eric: “Tankers Full of Trouble,” Grove Press, New York, 1994National Research Council: “Tanker Spills Prevention by Design,” Washington, 1991Nelson-Smith, A.: “Oil Pollution and Marine Ecology,” Elek Science, London, 1972Newton, John: “A Century of Tankers,” INTERTANKO, 2002Parliament of Australia: “Ships of Shame,” Canberra, 1992Petrov, Richard: “The Black Tide,” Hodder & Stoughton, London, 1968Platou, Oscar: “Sorett,” Christiania, 1900Plimsoll, Samuel: “Our Seamen - An Appeal,” Virtue & Co., London, 1873Ratcliffe, Mike: “Liquid Gold Ships,” Lloyd’s of London Press Ltd., 1985Reksten, Audun: “Slik var det,” Gyldendal, Oslo, 1983Research Council: “Tanker Spills,” National Academy Press, Washington, 1991Risanger, Otto: “Skipet som ikke kunne synke,” Cappelen forlag, Oslo, 1976Sampson, A.: “The Seven Sisters,” The Viking Press, New York, 1976 (Bantam)Sea Empress U.K. Government’s Environmental Evaluation Committee, London, 1998Senate report 101 Congress 1st Session, July 28, 1989Solly, Dr. Raymond: “Supertankers,” Witherby, London, 2001SSY Consultancy & Research: “World Oil Tanker Trends,” London, 2000 Taylor & Welty: “The Black Bonanza,” McGraw-Hill, New York, 1950Tolf, Robert W.: “The Russian Rockefellers. The Saga of the Nobel Family and the Russian Oil Industry,” Sanford, California, 1976Zischka A.: “Krigen om Oljen,” Stenersens forlag, 1941Ozaiyr Z. O.: “Liability for Oil Pollution and Collisions,” Sedgwick, London, 1998Welty & Taylor: “The 76 Bonanza,” Lane Magazine Book Co., California, 1966 Wheelright, Jeff: “Degrees of Disaster,” Simon & Schuster, New York, 1994


AAlbortz: 262ABT Summer: 262Aegan Captain: 147Aegean Sea: 13, 266, 267, 268, 301, 302, 303 Agip Abruzzo: 254, 257Allegro: 80, 106 Al Wasit: 266American Trader: 208, 213, 220, 226Amoco Cadiz: 13, 109, 119–123, 140, 143, 147,148, 174, 175, 198, 212, 227, 244, 246, 251,254, 257, 280, 283, 309Antonio Lavalleja: 80 Argo Merchant: 13, 115, 116, 140, 212, 334 Arosa: 238Arrow: 80, 85, 106 Athos I: 238Atlantic Empress: 13, 147

BBarcelona: 139Berge Adria: 110Berge Brioni: 110, 113Berge Istra: 84, 110, 111, 112, 113, 114, 155,343Berge Vanga: 84, 110, 112, 114, 155, 343Betelgeuse: 54, 57, 146, 152, 281, 334 Braer: 13, 268–273, 275

CCastillo De Bellver: 148, 152Castillo De Monte Aragon: 193Castor: 300–304, 307, 337

DDerbyshire: 136, 148, 152

EEburna: 28 Eleo Maersk: 238Elizabeth Watts: 20Exxon Mediterranean: 207, 213Exxon Valdez: 13, 16, 89, 116, 122, 150, 151,157, 195–207, 213, 223, 235, 237, 238, 239,240, 248, 257, 258, 259, 266, 269, 271, 305,309, 346, 348

Erika: 13, 17, 151, 193, 264, 280–299, 302,304, 305, 306, 318, 323, 328, 335, 337, 337,341, 342, 346, 348 Estonia: 150, 152

FFull City: 345

GGeneral Colocotronis: 54, 57 Gluckauf: 21, 22

HHaven: 13, 254, 257–262 Hawaiian Patriot: 117Hebei Spirit: 328, 329, 358–372Herald of Free Enterprise: 150, 151, 152Horta Borbosa: 109

IIdemitsu Maru: 43 Independenta: 148, 152Inverpool: 46 Irene’s Serenade: 148

JJacob Maersk: 110, 274Jahre Viking: 192Jules Henry: 25

KKhark 5: 193Kirki: 13, 18, 263, 264, 265, 336, 343 Kong Haakon VII: 80, 83, 84

LLake Palourde: 48, 55 Limburg: 192, 194

MMactra: 80, 83, 85Maersk Navigator: 273–274Manhattan: 196Maria S: 285Marpessa: 80, 82, 83, 85Mega Borg: 150, 208, 213

Index of Ships

SHIP INDEX


SHIP INDEX

Metula: 109, 110Moscow Universe: 345Murex: 22, 23

NNaess Norseman: 43 Nakhodka: 252, 254, 336, 348Nissho Maru: 43

OOcean Eagle: 57 Odyssey: 193Olympic Bravery: 116, 159

PPacific Glory: 80, 106 Patmos: 193Polycommander: 80 President Riviera: 208Prestige: 13, 298, 300–309, 313, 314, 326, 337,338, 341, 348

RRamsey: 20Rio Orinoco: 245, 247Risobank: 20

SSamho T3: 358Samsung No 1: 328, 358Samsung No 5: 358Sansinena: 48, 54, 58Santa Maria: 196, 199Scandinavian Star: 150, 152Sea Empress: 13, 247, 274–279, 345 Sea Star: 109Seawise Giant: 191Selandia: 27 Silja: 81–84Sinclair Petrolore: 41, 47 Silverlip: 25 Solar I: 323S/R Long Beach: 207Stena Convoy: 238

TTanio: 122, 123, 147, 166, 178Titanic: 12, 36, 48 Torrey Canyon: 12, 13, 14, 15, 48–57, 60, 61,63, 65, 68, 76, 80, 94, 106, 107, 116, 198, 269,274, 301, 304, 348, 352

UUniverse Apollo: 41 Universe Ireland: 43 Urquiola: 117, 267Utrecht: 51

VVille de Majunga: 81Volgoneft: 326–328

WWafra: 80, 85Westchester: 238World Petrobas: 140World Prodigy: 208, 213World Saga: 130

ZZoraster: 22

Index of Organizations and Key Companies


INDEX OF ORGANIZATIONS AND KEY COMPANIES

AAcomarit, 274Advisory Committee on Pollution of the Seas, 164American Bureau of Shipping (ABS), 10, 296, 298, 341 American Committee for Flags of Necessity, 41, 45American Hull Insurance Syndicate, 57 American Petroleum Institute (API), 10Amnesty International, 16Amoco International Oil Company, 120, 175Amoco Transport Corporation, 119, 120, 175, 190Anglo American Oil Company, 27Anglo-Norness Shipping Company, 42Anglo Persian Oil Company, 27, 29 Anglo-Saxon Petroleum Company, 27, 30 Apex Oil Company, 199, 209

BBank of Scotland, 285Barracuda Tanker Corporation, 48Bergvall & Hudner, 269British Maritime Law Association, 63 British Petroleum (BP), 25, 29, 40, 48, 50-54, 56,79, 82-83, 129, 153, 190, 195, 199, 208-209, 220,226, 240-243, 287, 292, 356 Bureau Veritas, 147, 262, 281, 296, 332, 333, 337, 343 Bureau Wisjmuller N.V, 51

CChevron, 40, 79, 144, 190Comite Maritime International (CMI), 10, 59, 63-64, 67, 71, 74, 85, 87, 123, 163, 187, 247, 301, 325, 342, 349, 354, 356 Concordia Maritime, 286Consolato Del Mare, 59Coordination Committee on Oil Pollution at Sea,47 Coulouthros Shipping Agency, 266, 302Crown Resources, 302

DDet Norske Veritas (DNV), 10, 113-114, 144, 146,330, 333-337, 343, 356

EEagle Oil Transport, 29East Asiatic Company, 27Environmental Protection Agency (EPA), 241, 260, 276Esso Petroleum/Exxon/Mobil, 23, 40, 46, 79, 81,127, 190, 287, 7-8, 13, 16, 79, 89, 116, 122, 150-

151, 157, 190, 195-213, 202, 204, 206-207, 215,219-220, 234, 238, 243, 248, 257-259, 266, 269,271, 273, 284, 305, 309, 346, 348, 378 European Community, 18, 262, 338-340 European Court of Human Rights, 315European Maritime Safety Agency (EMSA), 297,336, 338

FFearnleys, 15, 45, 130, 152-155 Federal Water Quality Administration, 61 Federation for American-Controlled Shipping, 42Fleet Factors Corp., 228Friends of the Earth International (FOEI), 10, 164,169, 172

GGard, 81, 135,150, Germanischer Lloyd, 263, 333, 336-337 Greek Shipowners’ Union, 190, 289Greek Shipping Cooperation Committee, 39

HHellespont Steamship Corporation, 137Hilmar Reksten, 80, 82-84, 126 HM Strategies, 45, 153-155, 198 House of Lords, 47, 210Hugo Neu Corporation, 110

IICS, 78Inter-Governmental Maritime Consultative Organization (IMCO), 6, 10, 15, 45-48, 50, 52-53,55-57, 60-63, 66, 67, 71-73, 75, 78, 80-81, 85, 87,89, 91, 101, 103, 106, 117, 119, 122, 141-142,147, 156, 158-159, 177, 190, 332-334, 347, 354,356, 375 International Association of Classification Societies(IACS), 10, 286, 307, 312, 331, 333, 340, 342-343 International Association of Independent TankerOwners (INTERTANKO), 9-10, 17, 23, 31-32, 42,64, 71, 78, 127-133, 137, 140-142, 144, 172, 180,190, 192, 194, 213, 217, 220, 224, 231, 232, 235,237, 262, 265, 286, 298, 321, 329, 332, 333, 338,342-343, 347-349, 354, 356-357, 373-376 International Association of Lighthouse Authorities(IALA), 10, 171 International Association of Ports and Harbours,171 International Chamber of Shipping (ICS), 10, 63-64, 78-79, 112-113, 182, 297, 334International Federation of Shipmasters (IFSMA),


INDEX OF ORGANIZATIONS AND KEY COMPANIES

292 International Maritime Industry Forum, 128-129International Maritime Organization (IMO), 8, 9,15-16, 18, 64, 67, 71-72, 77, 79, 114, 116, 129-130, 132, 144, 151-152, 156-159, 165, 177, 180,182, 185, 188-189, 193-194, 202, 211, 214-216,218, 221-222, 225, 232, 244-256, 258, 262, 264-266, 280, 288-290, 297-301, 303-305, 316, 318-320, 322, 325, 331, 335-336, 339, 341-342,347-348, 350-354, 356-357 International Tanker Owners Pollution Federation(ITOPF), 10, 15, 152, 254-255, 262International Transport Workers Federation (ITF),10, 41, 45, 348, 354International Union for Conservation of Natureand Natural Resources (IUCN), 10, 174Irish Shipping Limited, 65

JJohn I. Jacobs & Company Limited, 47-48, 119,126, 130-131, 134, 140, 146, 213, 260

LLiverpool Shipowners’ Association, 35London Steamshipowners’ Mutual Insurance Association (the London Club), 302, 309

MMilford Haven Port Authority (MHPA), 11, 275-278

NNational Fisheries Services, 204National Oceanic and Atmospheric Administration(NOAA), 11, 209, 223-224 National Iranian Tanker Company, 138-139National Transportation Safety Board (NTSB), 11, 199 Northern Shipowners Defence Club, 69 Norwegian Shipping and Trade Mission (Nortraship), 38-39, 42

OOil Companies International Maritime Forum(OCIMF), 11, 64, 78, 85, 88-89, 94, 100, 104-106,112-113, 160, 174, 179-180, 184, 191, 286, 319,334, 346, 348, 352 Organisation for Economic Cooperation andDevelopment (OECD), 18, 180

PP&I Clubs, 18, 63, 69, 73, 78, 89, 104-105, 135,

146, 150, 152, 165-166, 169, 174, 177, 181-182,192-193, 209-210, 229-230, 233-234, 245, 252,255, 260, 267, 269, 271, 290, 314, 320, 322-324,326, 346, 352-353Pennsylvania Rock Oil Company, 20

RRegistro Italiano Navale (RINA), 284-286, 292-298, 333, 337, 341 Repsol, 266-268, 284, 303Royal Dutch, 22

SSea River Maritime Co., 207Shell Oil, 22-25, 27-30, 40, 79, 80, 82-84, 100,109, 119, 124, 127, 190, 216, 219, 221, 234, 287-288, 352 Shetland Salmon Farmers’ Association, 272Shetland Sea Farms Ltd., 272-273Sigval Bergesen, d.y., 62, 84, 110, 112, 114, 234 Skuld, 63, 269-273, 277-279, 325, 239, 356, 357,360-362, 364, 367-370 Secretary of State's Representative for MaritimeSalvage and Intervention (SOSREP), 279Standard Oil Co. of Indiana, 22-23, 25, 119, 120,175, 227Suez Canal Company, 22

TTevere Shipping Company, 281, 292, 296 Texaco, 40, 79, 190, 274, 278Total, 146-147, 281, 283, 286-288, 290-293, 295-296, 298-299, 334

UUgland Nordic Shipping AS (UNS), 150UK Chamber of Shipping, 233-234UK Department of Transport, 270 UK Environment Agency, 276Union Carbide, 16 Union Oil Company of California, 48, 52, 54-57,61, 195-196United Nations, 46, 137, 266, 316UN Security Council, 137, 192US Court of Appeals, 55-56, 122, 202, 223-224,226-227, 270, 343

WWest of England Shipowners’ Mutual InsuranceAssociation, 209-210Wilh Wilhelmsen, 30World Wide Shipping Group, 219, 255


INDEX OF PEOPLE

AAlkemade, J. van Rijn van, 66, 86, 97, 98, 101,104, 277Anders, P., 175 Anderson, Charles B., 106, 115, 123, 168, 173,207, 213, 220, 225, 229, 268Andrews Mark, 276Appelbaum, Admiral, 232Aubin, David, 61

BBievre, Aline de, 14, 164, 182Bingham, Lord Chief Justice, 277 Bissel, George H., 19Bardari, Captain Pasquale, 119Blackwood, I., 184 Blake, George, 236Blom, B., 86 Boe, Carsten, 144Boudreaux, Mark, 204 Boutros-Ghali, UN Secretary General Dr. Boutros, 316 Bonfiglio, Silvano, 50Breaux, Senator, 189, 218, 237 Bredholt, Jorgen, 108, 192Brigstocke, G.R.W., 86, 91, 94, 97, 102, 104,105, 107Bruzelius, K.M., 162Bryant, Charles, 20Bush, George Sr., 136, 200, 213, 214, 218, 220,248

CCarlsson, Lars, 286 Carly, M.R., 169Carter, Jimmy, 116, 211 Carven, Chris J., 190 Chalos, Michael, 206Chao, Wu, 62, 72, 79, 99, 159, 168, 170, 176,191, 194, 220, 226, 229, 347, 354, 356Chirac, Jacques, 302, 305, 338Churchill, Winston, 27Clerici, Paolo, 287, 335, 343Clinton, Bill, 231Cockford, David, 348 Coglin, Terence, 230 Cole, J.A. Jr., 190Coppolani, Charles, 317Coulouthros, John, 266, 302Curzon, Lord, 29

DD’Arcy, William Knox, 29Danielsen, Rolf Kr., 23De Fazio, Peter, 14De la Rue, Colin, 87, 106, 115, 168, 173, 187,207, 213, 220, 225, 229, 268, 354, 356Desmarest, Henry, 287Desmarest, Thierry, 290Deterding, Henry, 24Devanney, Jack, 115, 123, 140, 265, 304, 332,341, 343, 356 Devlin, Lord P.C., Lord, 63, 67, 74Diesel, Rudolf, 26Djavad, J., 107Dole, Elizabeth H., 188 Donaldson, Lord, 269, 275, 277, 279 Doraiswamy, R., 89, 92 Douay, Claude, 67, 72, 73, 91, 95, 96, 103, 207,108, 162, 171, 173, 175, 181, 182Doud, A.L., 86Drake, Edwin, 19, 20 Dyvi, Jan Erik, 129

EEeg, Edmund, 20Embiricos, E.G, 354 Embiricos, Philip, 17, 236, 238, 354, 356

FFoley, Maurice, 52 Ford, Gerald, 211Fredriksen, John, 146, 274

GGallagher, Ed, 276Ganten, Reinhard, 162, 163, 168, 176, 188 Gesmar, E., 173Ghee, Peter H., 219Gibson, E.A., 20Goad, Sir Colin, 85, 245Goh, P.C., 105Goldstein, Steven, 202Goschen, Lord, 275 Goulandris, Peter John, 127, 255Gram, Per, 71 Graham, William, 245Gregory, Sally, 272 Grey, Michael, 346, 353

HHaji-Ioannou, Lucas / Polys / Stelios, 258, 260,261

Index of People


INDEX OF PEOPLE

Hall, James, 35, 36 Hallberg, C.R., 103Hammer, Jarle, 45, 153-155Hansen, Gustav Conrad, 21Hansen, Thormod Holt, 114 Hansson, Herbjorn, 131, 150Hare, Jonathan, 277 Harlaftis, G., 39 Harman, Sir John, 277 Hartigan, Ian G.S., 190Hazelwood, Captain, 197, 200, 205, 313Healey, Denise, 52Heyerdahl, Thor, 128Hitler, Adolf, 37Hollingsworth, B.F., 161, 164, 175, 182, 185,225Horrocks, Chris, 182 Howard, Stephen, 25Hudig, Jan, 42 Hughes, John, 286Hussein, Saddam, 136Hoegh, Leif & Co., 30 Hoegh, Ove, 8Hoegh, Westye, 8, 227

IIvanov, G., 186

JJaafar, Dr. A.B., 165, 171 Jackson, Glenda, 275 Jacobsson, Måns, 87, 157, 159, 168, 178, 183,184, 244, 251, 260, 309, 356, 357Jahre, Anders, 62Jahre, Jorgen, 127, 128, 129, Jamieson, Donald, 65, 350 Jeannel, M.R., 104

KKalpin, Dr. A., 81, 89Keeler, R. von, 92 Kelley, Juan, 98 Kennedy, Andrew, 343, 357Kennedy, C.K., 98, 99Kerry, M.J., 66, 69, 70, 93 Kessler, Jean, 22Khomeini, Ayatollah, 25, 189King, George, 52, 57, 357King, Stephen, 14 Kirby, John, 100, 124, 127Klingsborn, E., 164 Kloster, Knut, 342 Kulukundis, John, 32, 232, 234Kulukundis, Miles, 232, 234Kurzman, Dan, 16Kvenvolden, K.A., 203

LLangley, J.C., 87, 92, 104, 161Laurin, Hans, 349Leathard, Peter, 204 Leggett, Jeremy, 357 Lentz, Sally Ann, 237Leon, Imeldo Barreto, 111 Liar, Albert, 64, 65Livanos, Stavros, 39Lockyer, Bill, 208Lopez, Epifanio, 111Lopez-Sors, Jose, 314, 315Ludbrook, L.J.W., 169 Ludwig, Daniel K., 41, 47, 127Lyras, John M., 289, 314

MMcDonald, Rodger, 292Makowsky, A., 97Malone, Bob, 201Mangouras, Apostolos, 312-315Margetis, Michael, 302, 314 Mathur, Karun, 285, 286, 294, 295 Maslov, George, 76Massey, E.A., 94, 97, 98McCammon, Molly, 203McGrath, Ian, 216 McGovern, J.N., 65, 69, 87 Medcraft, P.A., 88, 104, 105Mensah, Thomas, 170, 316, 325Meyer, Trygve, 132, 373Mink, Walter C., 190 Mitchell, C. Bradford, 57, 357Mitchell, George, 215-217, 220, 224, 349, 352,354, 357 Mitropoulos, Efthimios E., 245Moestue, Sven, 9, 81, 85Mohamed, A.A.K., 73 Montefiore, Simon Sebag, 25Mostert, Noel, 13, 14, 57, 85, 357 Muller, W., 64, 86, 88Moller, A.P., 30, 31, 62, 219, 234Moller, Maersk McKinney, 31Mossadeq, Dr., 25

NNaess, Erling Dekke, 41-43, 133-134Nalder, Eric, 13, 16, 57, 119, 207, 236, 238, 357Newton, John, 23, 39, 131Niarchos, Stavros, 41Nicholas II, Tsar, 24Nicholson, W.B., 95 Nielsen, Ove, 46, 245Nixon, Richard, 211Nobel, Ludwig, 22, 24Nomura, I., 100


INDEX OF PEOPLE

Nordenson, Ulf, 66, 74, 86, 87, 92, 93, 103,106, 107Nordenstrom, Nils, 334

OOnassis, Aristotle, 40O’Neil, William, 245, 248, 249, 289, 299

PPalacio, Loyola de, 288, 289, 306Pao, Sir Yue-Kong, 127, 141, 144, 255, 264 Papachristidis, Basil, 137, 192 Papadopolos, Georgios, 115Paust, Dagfinn, 31Perrakis, I., 98, 182, 186 Perrett, J.R., 161, 176, 186Petrow, Richard, 54, 57, 127Pevlevi, Reza Khan, 25Philip, Allan, 74, 95, 101, 105Plimsoll, Samuel, 34-37, 357 Pompidou, Georges, 53 Pontavice, Du, 350, 354 Popp, Alfred H.E. (Q.C.), 175, 248, 317-320,325, 351Poulsson, Annar, 63, 89, 101

RRajwar, L.M.S., 66 Ratcliff, Mike, 25, 48Raymond, Lee, 201Reagan, Ronald, President, 141, 188, 211Reksten, Hilmar, 126Remond-Gouilloud, M., 350, 354 Rentz-Petersen, Carl, 127Reza, Mohammed, 25Riedemann, Heinrich, 21 Riley, J.C.W., 181Rockefeller, John D., 23Roullier, Jean, 245Rugiati, Pastrengo, 48, 50, 53-54 Ryansak, Jerry, 353-354

SSalisbury, Lord, 23 Salvesen, Emil, 20 Sanders, E.A., 20 Sangster, Ted, 276-77Samuel, Marcus, 22-24 Savarese, Guiseppe, 284-285, 293-295Schierwater, Harry T., 30-31, 44 Schmidt, Helmut, 141Scott, Eric, 272Sebek, Dr. V., 164Sheehan, Daniel F., 221, 231Shikama, Rikiwo, 71 Silliman, Professor B., 19

Simpson, Brian, 305Sinaga, H., 184-185Skinner, Samuel S., 188, 215-216 Slater, Paul, 286, 332, 343 Sohmen, Helmut, 255 Sommerville, Robert, 297 Souri, Mohammad, 138Spiliopoulos, Professor K., 69 Squassafichi, Nicola, 285 Srivastava, Chandrika P., 244-245Stal, Hans, B., 51-52 Stalin, Josef, 24Stavridis, Captain, 266-267 Stokes, Peter, 228 Stopford, Dr. Martin, 135, 140Studds, Gerry, 216 Suzuki, Seigo, 237, 265

TTanikawa, Dr. Hisashi, 160, 181, 185, 352 Tauzin, Wilbert Joseph, 231Thatcher, Margaret, 141Thompson, Matthew, 52 Thomson, Martin, 272 Thouilin, Bertrand, 287, 290, 293 Tolfe, Robert W., 25Tollefsen, Even, 21 Trotsky, Mr., 24Trotz, Dr. N., 160, 165 Tung, Chee-Jva, 62, 127, 191

VVoynet, Dominique, 284

WWegener, Arild, 277 Wershof, Max, 72Weyergang-Nielsen, A., 23Wheelwright, Jeff, 123, 204, 207 White, B.H., 86, 94, Wilhelmsen, Bjorn, 217, 234 Wilhelmsen, Halfdan, 28 Wilson, Harold 52, 76, 301, 304 Wiswall, Frank, 342 Wolcott, D.C., 190

YYamada, T., 184 Yamani, Zaki, H.E. Sheik of Saudi Arabia, 125Youell, Richard, 231, 234 Yost, Paul, 200

ZZervudachi, Nolly, 190 Zhaoqi, Shen, 182 Zhuanghuai, Captain S., 186

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