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B R I TA N N I A N E W S CO N V E N T I O N S

THE BUNKER CONVENTION

The Bunker Convention brings pollution from bunker spills within an international regime of liability, limitation and mandatory insurance, complementing the International Convention on Civil Liability for Oil Pollution Damage, 1992 (the CLC) already in place for many years with respect to spills of persistent oils from tankers.
In this article, zlem Grses, Lecturer in Commercial Law at Norwich Law School, University of East Anglia, answers questions about some of the key legal implications of the Bunker Convention and also looks at its relationship to CLC and the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC).
When did the Bunker Convention come into force?

the cost of measures to minimise or prevent damage actual damage caused by any such measures taken liability may also arise where there is a related threat of contamination that has been responded to, even if the anticipated contamination does not occur.
How is bunker oil defined?

Who faces liability under the Bunker Convention?

Article 3(1) makes it clear that it is the shipowner who is liable under the terms of the convention. Under Article 1 (3) shipowner is defined as the owner, including the registered owner, bareboat charterer, manager and operator of the ship. It is generally accepted that bareboat charterer would include a demise charterer.The term registered owner is defined at Article 1(4) as the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship. The Convention does not provide a definition of operator. However, by way of guidance, there is a definition of operator in the Nairobi International Convention on the Removal of Wrecks, 2007 (Article 1(9)). In this, operator of the ship means the owner of the ship or any other organisation or person such as the manager, or the bareboat charterer, who has assumed the responsibility for operation of the ship from the owner of the ship and who, on assuming such responsibility, has agreed to take over all duties and responsibilities established under the International Safety Management Code, as amended. It is reasonable to assume that this definition would also apply here. The master, crew members, pilots, charterers and salvors are not liable under the Bunker Convention, as they do not fall within the term shipowner. However, the potential remains for those parties to be sued outside the Convention for example, in tort.
What type of damage is covered under the Bunker Convention?

The Bunker Convention came into force on 21 November 2008.The original signatories are listed in the table on page 13.
To which ships does the Bunker Convention apply?

The Bunker Convention applies to any seagoing vessel and seaborne craft, of any type whatsoever, that is carrying bunker oil (for a definition, see below). The definition of vessel within the Bunker Convention is sufficiently broad to apply to most types of ship: bulk carrier, passenger ship, container ship, tug, fishing vessel or launch, irrespective of size, only with the proviso that it is sea-going. The Bunker Convention specifically excludes: warships a ship that never in practice leaves port or harbour (whatever the ships physical or legal capacities), any ship that is not carrying bunker oil. It should be noted, however, that domestic legislation may be more onerous. For example, in the United Kingdom domestic law provides that if oil is discharged or escapes from a ship (even if it never leaves port or harbour), the owner is still liable for: any external damage caused in the territory of the United Kingdom by resulting contamination

Bunker oil is defined by the convention as any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, and any residues of such oil (Article 1(5) refers). In contrast to the International Convention on Civil Liability for Oil Pollution Damage (CLC), there is no reference to persistent oil in the definition of bunker oil.Therefore it is more comprehensive, covering both heavy fuel oil and also lighter fuels such as marine diesels. Two further points are worth mentioning: First, the Bunker Convention puts the emphasis on the purpose for which a ship is carrying oil; that is, oil being used or intended to be used for the operation or propulsion of the ship. If the oil is being carried as cargo, the Bunker Convention will not apply (although CLC will). Second, if pollution damage is caused by bunker oil that is being carried for use in the operation or propulsion of a tanker, that damage will be covered by CLC and not by the Bunker Convention.
To which incidents does the Bunker Convention apply?

Incident is defined in Article 1 (8) as any occurrence or series of occurrences having the same origin, which causes pollution damage or creates a grave and imminent threat of causing such damage.

Pollution damage is defined as loss or damage caused outside the ship by contamination resulting from the escape or discharge of bunker oil from the ship (Article 1(9)a).The definition covers basic clean-up

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costs caused by contamination, as well as reasonable measures for returning the environment to its previous state.There may also be recovery of economic losses in the form of loss of profit from impairment of the environment. An example of this might be losses sustained by businesses relying on tourism that are adversely affected. The definition of pollution damage includes the costs of preventative measures, and indeed, further loss or damage caused by the same preventative measures. It does not specifically cover death and personal injury, but it is generally accepted that injury actually caused by contamination would be covered. Turning to preventive measures, Article 1(7) defines these as any reasonable measures taken by any person after an incident has occurred to prevent or minimise pollution damage. Article 1(8) goes on to clarify that an incident is any occurrence [which] causes pollution damage or creates a grave and imminent threat of causing such damage. Theoretically therefore, under the Conventions terms, a compensation claim could arise for costs incurred in taking preventative measures, even though no oil has actually leaked from a ship.
Where does pollution damage have to occur?

States parties as of 21 January 2010 Antigua and Barbuda Bahamas Barbados Belgium Bulgaria Canada China, Peoples Republic of Cook Islands Croatia Cyprus Denmark Estonia Ethiopia Finland Germany Greece Hungary Ireland Jamaica Kiribati Korea, Democratic Peoples Republic of Korea, Republic of Latvia

Liberia Lithuania Luxembourg Malaysia Malta Marshall Islands Norway Panama Poland Romania Russian Federation Saint Kitts and Nevis Saint Vincent and the Grenadines Samoa Sierra Leone Singapore Slovenia Spain Syria Tonga Tuvalu United Kingdom Vanuatu

beyond its coast, but foreign vessels are granted the right of innocent passage through this zone so long as passage is not prejudicial to the peace, good order or security of the coastal State. However, such a vessel is neither subject to the compulsory insurance requirement, nor to checks on relevant certificates.This would be in direct conflict with the concept of innocent passage, as defined in the United Nations Convention on the Law of the Sea.
Does strict liability apply under the Convention?

where the damage results from an act of war, hostilities, civil war, insurrection (although these are not defined with the Bunker Convention) or a natural phenomenon of an exceptional, inevitable and irresistible character; where the damage was wholly caused by an act or omission by a third party with the intent of causing damage; where the damage was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.
How do the terms of the Bunker Convention relate to CLC?

The Bunker Convention applies to pollution damage caused in the territory and territorial waters of a State Party, and also in its exclusive economic zone (EEZ) or equivalent if there is no EEZ; but in either case not exceeding 200 nautical miles from the territory (Article 2(a)). Article 2(b) makes it clear that the Bunker Convention also applies to preventative measures, wherever taken to prevent or minimise such damage. The wording of the Articles 2 (a) and (b) specifies that the polluting incident does not have to take place within the territorial area or the EEZ.Therefore, if an incident occurs outside these areas, but the pollution spreads into either the territorial area or the EEZ (or both), then liability under the Convention will arise. Pollution damage that is caused by a vessel on innocent passage is still subject to liability under the Bunker Convention. According to Article 3 of the United Nations Convention on the Law of the Sea, each countrys sovereign territorial waters extend to a maximum of 12 nautical miles (22 km)

Limited exceptions aside, the Bunker Convention provides for strict liability for a shipowner for pollution damage caused by any bunker oil on board or originating from the ship. In other words, it is not necessary for the claimant to prove fault.This means that: liability occurs regardless of the underlying cause; for example, grounding, collision or operational discharges (with limited exceptions see below). A practical example would be where two cargo ships collide due entirely to the fault of one of them, but the innocent ship is damaged and causes bunker pollution: in such a case, the innocent ship would still be liable for that pollution under the Convention; the phrase originating from the ship might be relevant if barrels of fuel oil or lube oil are washed overboard, but the ship itself is unharmed. It is worth noting however that incidents where, for example, a ship has damaged a shore loading pipeline causing leakage are unlikely to be covered by the convention; if an incident consists of a series of occurrences having the same origin, the shipowners liability begins at the time of the first of those occurrences. The exceptions to this regime are:

As commented, CLC is the key convention relating to bunker pollution from oil tankers; the Bunker Convention does not apply to pollution damage which falls within the scope of CLC (Article 4(1) of the Bunker Convention refers). Consequently, bunker pollution from oil tankers remains covered in the first instance by the CLC. Both the CLC (Article 4) and the Bunker Convention (Article 5) provide that where two or more ships are involved in an incident, resulting in pollution damage, the shipowners of all the ships causing pollution damage will be jointly and severally liable for any damage that is not reasonably separable. For example, in a case where an oil tanker and a container ship are involved in an accident and both leak oil, it may be hard to precisely allocate the resulting pollution damage between the two vessels. In this situation, both parties would remain jointly liable leaving the claimant with the task of trying to decide which convention to claim under; presumably, CLC where the compensation schemes are far more generous.

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B R I TA N N I A N E W S CO N V E N T I O N S

BLUE CARD No: BC : N OT TR A NS F E RA B LE To

The Britannia Steam Ship Insurance Association Limited

Managers Tindall Riley (Britannia) Limited New City Court 20 St Thomas Street London SE1 9RR

Tel +44 (0)20 7407 3588 Fax +44 (0)20 7403 3942 C E RTI F IC ATE FUR N IS HE D AS E VI D E NCE OF IN S UR AN CE PUR S UA NT TO AR TI CLE 7 O F THE IN TE RN ATI O NA L C O N V E N T I O N O N C I V I L L I A B I L I T Y F O R B U N K E R O I L P O L LU T I O N D A M A G E , 2 0 0 1 . Name of Ship: Distinctive Number or Letters: IMO Number: Port of Registry: Name and full address of the principal place of business of the Registered Owner: TH IS I S TO CE R TIF Y that there is in force in respect of the above named ship while in the above ownership a policy of insurance satisfying the requirements of Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001. Period of Insurance: from Noon GMT 20 February 2010 to Noon GMT 20 February 2011 Provided always that the insurer may cancel this Certificate by giving three months written notice to the above Authority whereupon the liability of the insurer hereunder shall cease as from the date of expiry of the said period of notice but only as regards incidents arising thereafter. Date : This certificate has been issued for and on behalf of TH E B R ITA NN I A S TEA M S HI P I NS UR A NCE AS S O CI ATI O N LI MI TED. New City Court,20 St. Thomas Street, London. SE1 9RR. By Tindall Riley (Britannia) Limited Managers of the above Association Risk Ref:

As a result, virtually all ships trading internationally will now require an official state-issued certificate.
Can claims be made directly against the Insurer (Direct Action)?

Article 7(10) provides that any claim for compensation for pollution damage may be brought directly against the insurer under the terms of the Bunker Certificate. Any claim would, however, be subject to the limits provided by Article 7(1). The insurer is entitled to invoke the same defences available to the shipowner, including limitation set out in Article 6.The insurer cannot seek to avoid liability based on the shipowners insolvency. However, the insurer may invoke the defence that the pollution damage resulted from the wilful misconduct of the shipowner. Refer to the table on page 15.
What time bars apply to claims under the Bunker Convention?

Signature of Insurer

The Britannia Steam Ship Association Limited Registered Office: New City Court, 20 St Thomas Street, London SE1 9RR Registered Number 10340 England Authorised and regulated by the financial Services Authority

Page 1 of 1

Model Certificate: Bunker Blue Card Under the Bunker Convention a certificate should contain the information shown above.

What are the compulsory insurance requirements?

The Bunker Convention mirrors the principles established by CLC as regards compulsory insurance and direct right of action against the insurer. Under Article 7(1) of the Bunker Convention, a ship of 1,000 gross tons or more, registered with a Signatory State Party, is required to maintain insurance (or other financial security, such as a bank guarantee) to cover the potential liability of the registered owner for pollution damage. The amount of the insurance or financial security required is to be equal to the limits of liability under the applicable national or international limitation regime, but in all cases not exceeding an amount calculated in accordance with the LLMC (1976), as amended by the 1996 Protocol. The Bunker Convention does not provide a uniform minimum limit, which is left to national laws (see Article 7(1)).
What insurance certificates are required?

As with CLC, the International Group of P&I Clubs issue their respective members with Bunker Convention Blue Cards as evidence that they have the requisite liability insurance. The Blue Card (or other evidence of insurance or financial security) is then submitted to the vessels flag state which, if a Signatory to the Convention, will issue a Bunker Convention Certificate.This Bunker Certificate should be recognised by all other Signatory States (Article 7(9) refers).The example above shows a model certificate. Where a vessels Flag State is not a Signatory to the Bunker Convention, the owner is obliged to apply to a Signatory State that is prepared to issue certificates for foreign flagged vessels. The Convention emphasises the importance of Port State Controls. Article 7(12) requires each Signatory State Party to implement in national law a rule that any ship with a gross tonnage of 1,000 or more entering or leaving a port in its territory or arriving at or leaving an offshore facility in its territory must have a Bunker Certificate. Smaller ships are not required to have insurance, but a ship without an insurance certificate will only be allowed to use the ports or offshore facilities in the territorial sea of a State Party if it is registered in that State.

The Bunker Convention has two time bars. The first is for three years from the date the damage occurred.The second is no more than six years from the date of the incident that caused the damage (Article 8 refers). Failure to correctly lodge a claim within these time bars results in the claim being extinguished. In practical terms, this means that where a ship sinks and oil escapes some years later, the Convention provides a backstop time bar of six years from the date of the incident causing the damage. If there is a series of occurrences, the time bar runs from the date of the first occurrence, for example: where there has been an engine failure, leading to a grounding, followed some time later by a sinking, leading in turn to leakage of bunkers causing pollution damage, the first occurrence would be the engine failure.
What limitations on liability may apply?

Strict liability is moderated by limitation of liability.The relevant provision is Article 6 of the Bunker Convention which provides: Nothing in this Convention shall affect the right of the shipowner and the person or persons providing insurance or other financial security to limit liability under any applicable national or international regime, such as the Convention on Limitation of Liability for Maritime Claims, 1976, as amended.

Under Article 7(5), a ship with a gross tonnage of 1,000 or more is required to carry a certificate on board showing that insurance or other financial security is in place.

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LLMC Article 6: limits for ships of four different sizes The limits are those under article 6(1)(b) of the LLMC.These are limits applicable for claims other than for loss of life or personal injury. As claims for bunker pollution fall into this category as well as all other property claims, these sums are shared among these claimants. Calculations made on the basis of a conversion rate of 1 SDR = 1.0360500000 UK Pound Sterling (http://www.imf.org/external/np/fin/data/rms_five.aspx) (12 November 2009). Ship Size Any ship of up to 2,000 gt 5,000 gt LLMC Regime LLMC 1996 LLMC 1976 LLMC 1996 LLMC 1976 LLMC 1996 LLMC 1976 LLMC 1996 LLMC 1976 SDR limit 1,000,000 417,500 2,200,000 918,500 4,200,000 1,753,500 26,200,000 10,923,500 limit 1,036,050.000 432,550.875 2,279,310.000 951,611.925 4,351,410.000 1,816,713.675 27,144,510.000 11,317,292.175

Therefore, the Convention does not contain a standalone limitation in itself, referring instead to an applicable national or international regime such as LLMC 1976 or 1996. If a State Party does not recognise any limitation of liability regimes, the shipowners will be subject to unlimited liability.The shipowner may however still face unlimited liability even though LLMC 1976 or 1996 is applicable, because Article 2(1) of LLMC 1976 and 1996 gives a shipowner the right to limit liability in respect of certain claims which are listed in this article and if a claim does not fall within these categories, it will not be subject to limits. For this reason, it is worth citing the Article 2(1) provisions in full: Article 2: Claims subject to limitation 1. Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom; (b) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage; (c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations; (d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship; (e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; (f) claims of a person other than the person liable in respect of measures taken in order to avert or minimise loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures.

10,000 gt 80,000 gt

In order to see whether a bunker pollution claim falls within Article 2(1), it is necessary to have a close look at the scope of the subparagraphs of the Article. Where there is physical damage to property caused by bunkers, as well as any lost profits, the claim by the owners of the property in question will fall under Article 2(1)(a). For example, actual damage to machinery such as harbour facilities and desalination intakes will fall under this category. Article 2(1)(b) will not apply to bunker pollution claims. The precise scope of Article 2(1)(c) is not clear. A loss which does not fall under subparagraph (a) may be limited within other loss under Article 2(1)(c). Financial losses such as the costs of a clean-up operation or economic losses in the tourist or fishing industries can fall in this category. Rendering harmless are the key words in sub-paragraph (d), signifying that a claim for clean-up costs may also be limited under Article 2(1)(d). In order to apply Article 2(1)(f ) there must already be a liability that could be limited by the shipowner under sub-paragraphs (a) to (e). For example, assuming that a shipowner is the person liable under the Bunker Convention and a local authority incurred expenses to avert or minimise the pollution damage and made a claim against the shipowner for reimbursement, the loss or the pollution damage which has been minimised by the local authority has to be one for which the shipowner may limit his liability in accordance with this Convention. In other words, in order to apply Article 2(1)(f ), the shipowner must be able to limit its liability under another different sub-paragraph of Article 2(1) because sub-paragraph (f ) does not allow limitation for mitigation claims in itself, but only if a right to limit already exists under sub-paragraphs (a) to (e).

Breaking limitation

The person liable under the Bunker Convention may be deprived of the right to limit.The test for breaking limits is stated in Article 4 of the LLMC that:A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. The test is very difficult to satisfy; for example in the case of a corporate defendant it requires the relevant intentional or reckless behaviour to be at a relatively senior level in management.Therefore, showing intent or recklessness of, for example, the master or a member of the crew will not be enough to break the limitation under LLMC.

Bibliography and further reading

For further references on Bunker Convention see Nicholas Gaskell and Craig Forrest,Marine pollution damage in Australia: implementing the Bunker Oil Convention 2001 and the Supplementary Fund Protocol 2003 (2008) 27 University of , Queensland Law Journal 103-165 and Michael N.Tsimplis,The Bunker Pollution Convention 2001: completing and harmonising the liability regime for oil pollution from ships? [2005] LMCLQ, , 83-100.