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CLC 2003

CLC 2003

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03/18/2014

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New fund heralds better deal for oil pollution victims
Supplementary Fund for Compensation for Oil Pollution Damage enters
into force

Increased levels of compensation will be available for victims of oil
pollution from oil tanker accidents on 3 March 2005 with the entry into
force of the 2003 Protocol establishing an International Oil Pollution
Compensation Supplementary Fund.

The Fund will supplement the compensation available under the 1992
Civil Liability Convention (CLC) and the International Convention on
the Establishment of an International Fund for Compensation for Oil
Pollution Damage (FUND), with an additional, third tier of

compensation. Participation is optional and is open to all States
which are parties to the 1992 Fund Convention.

The total amount of compensation payable for any one incident
will be limited to a combined total of 750 million Special
Drawing Rights (SDR) (just over US$1,145 million) including
the amount of compensation paid under the existing 1992
CLC/Fund Convention.

With the entry into force of the 2003 Protocol, IMO has substantially
enhanced the compensation available under the 1992 Convention.

It is expected that the increased compensation should put an end to
the practice of pro-rating of payment of claims, which, although it has
been unavoidable, has led to criticisms of the 1992 Convention.

The 2003 Protocol will apply to damage in the territory, including the
territorial sea and the Exclusive Economic Zone of a Contracting State.

Annual contributions to the Fund will be made in respect of
each Contracting State by any person who, in any calendar
year, has received total quantities of oil exceeding 150,000
tons. However, for the purposes of the 2003 Protocol, there is a
minimum aggregate receipt of 1,000,000 tons of contributing
oil in each Contracting State.

The Assembly of the Supplementary Fund will assess the level of
contributions based on estimates of expenditure (including
administrative costs and payments to be made under the Fund as a

result of claims) and income (including surplus funds from previous
years, annual contributions and any other income).

Amendments to the compensation limits established under the 2003
Protocol can be adopted by a tacit acceptance procedure, so that an
amendment adopted in the Legal Committee of IMO by a two-thirds
majority of Contracting States present and voting, can enter into force
24 months after its adoption.

The 2003 Protocol currently has eightContracting States (a ninth State has
ratified and entry into force for that State is May 2005). The entry into
force requirements were ratification by at least eight States who have
received a combined total of 450 million tons of contributing oil and
these requirements were met in December 2004.

Background:

The 1969 International Convention on Civil Liability for Oil Pollution
Damage (CLC), and the 1971 International Convention on the
Establishment of an International Fund for Compensation for Oil
Pollution Damage, (the Fund Convention, which established the IOPC
Fund), ensure that compensation is available for victims of oil pollution
from ships. The CLC places liability on the shipowner up to a set limit
and requires the shipowner to take out insurance against such claims.
If an accident at sea results in pollution damage which exceeds the
compensation available under the CLC, additional compensation is
available under the Fund convention, financed by contributions by oil
receivers. The compensation regime as a whole thereby ensures that
the burden of compensation is spread between shipowner and cargo
interests.

The 1992 Protocols to the International Convention on Civil Liability for
Oil Pollution Damage (CLC), 1969 and the International Convention on
the Establishment of an International Fund for Compensation for Oil
Pollution Damage (Fund Convention) 1971 replaced the original
Conventions.

The 1992 Fund Convention has been ratified by 93 States,
representing 88.50 per cent of world merchant shipping tonnage. The
1992 CLC Convention has been ratified by 104 States (93.44 per
cent).

In the wake of theNakhodka oil tanker incident in 1997 off Japan
and theErika oil tanker incident off the coast of France in December
1999, the IMO Legal Committee in October 2000 adopted

amendments to the 1992 Protocols to the CLC and Fund Convention
which raised the limits of compensation payable by more than 50 per
cent to 89.77 million SDR for a ship over 140,000 gross tonnage under
the CLC and 203 million SDR payable by the IOPC Fund. These
amendments entered into force on 1 November 2003.

For a number of States, however, even these proposed
increases were considered to be still too low. A European

proposal for the establishment of a fund providing compensation over
and above that generated by the 1992 Civil Liability and Fund
Conventions whenever an oil pollution incident occurred in European
waters was brought to the attention of the IOPC Fund Assembly, which
in April 2000 decided to set up an Intersessional Working Group to
further consider the matter. The Working Group recommended the

establishment of a supplementary fund, to provide
compensation over and above that currently available under
the 1992 Civil Liability/Fund regime, thus in essence creating a
third tier of compensation for pollution damage caused by oil
spills at sea. This Supplementary Fund is not limited
geographically to Europe but covers oil spills wherever they
occur, so long as it is damage in the territory, including the
territorial sea and the Exclusive Economic Zone, of a
Contracting State.

The text of the new Protocol was approved by the sixth session of the
IOPC Fund Assembly in October 2001 and submitted to the Secretary-
General of IMO. At its 84th session, in April 2002, the IMO Legal
Committee approved the draft text, prior to its submission to the May
2003 conference for adoption.

The IOPC Funds and IMO

Although the IOPC Funds were established under Conventions adopted
under the auspices of IMO, they are independent legal entities with
their own Directors and own Assemblies.

Unlike IMO, the IOPC Funds are not United Nations Agencies and are not part of the UN system. They are intergovernmental organizations outside the United Nations, but follow procedures which are similar to those of the United Nations.

To become a member of the 1992 Fund, a State must accede to
the 1992 Protocols to the Civil Liability Convention and the
Fund Convention by depositing a formal instrument of
accession with the Secretary-General of IMO. These

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