CASE STUDY: THE OIL POLLUTION ACT OF 1990
This case study provides an illustrative example of how national law can drive the development of international law. As Chapter 9 explained, actual payment of damages by States for international environmental harms is the exception rather than the rule. The practical difficulties in establishing jurisdiction, determining choice of law, and enforcing judgments serve as important barriers to successful claims for liability and securing awards. When coupled with nations' unwillingness to subscribe to liability regimes, liability provisions in treaties are often reduced to mere expressions of aspiration. UNCLOS Article 235(3), for example, calls on States to cooperate in implementing and developing further international law "relating to responsibility and liability for the assessment of and compensation for damage and the settlement of related disputes..." Parties to the London Convention similarly have called for the creation of a liability regime, but none has yet been negotiated. BIRNIE & BOYLE op. cit. at 291. Damage resulting from oil spills presents a notable exception to this state of affairs.
An international liability system for pollution damage from oil spills has been in place for over 25 years. The system operates under the aegis of two two international oil spill conventions. Supplemented by private compensation accords among the oil industry and oil tanker owners, these conventions have been regularly used to provide compensation to parties injured by oil spills. The first of these conventions, the International Convention on Civil Liability for Oil Pollution Damage (CLC), provides compensation for certain costs resulting from oil pollution discharged by a seagoing vessel or any seaborne craft carrying bulk oil in cargo. 9 I.L.M. 45.
Adopted in 1969, the CLC channels liability to the shipowner, who is strictly liable for releases subject to a small number of narrow exceptions. The owner, who is required to carry insurance, is liable up to $14 million to parties who have been injured or suffered a loss from the spill. Actions brought under the CLC must be brought in the courts of the Contracting State in which the damage occurred within 3 years from the date of damage, but not later than six years after the date of the incident. Over fifty nations have become parties to the CLC.
It was soon realized that the CLC's maximum liability was insufficiently low, and in 1971 the International Oil Pollution Compensation Fund Convention (the Fund Convention) was adopted. The Fund Convention serves two roles. It provides limited coverage for compensation claims exceeding the CLC's maximum coverage and shifts responsibility for the increased liability from the shipowners to those who own the cargo. Essentially the Fund Convention constitutes a levy on oil importers, primarily the oil companies whose cargo the vessels are likely to be carrying. The Fund Convention provides a maximum compensation of $16 million per incident for victims of oil pollution damage who are not fully recompensed by the shipowner's liability through the CLC Convention.
Thus the two Conventions provide a combined maximum liability of $30 million for each incident, providing that the cost in case of large damages is in effect borne by both the shipowner and the oil companies. If the liable shipowner is not liable or cannot pay out, under certain circumstances the Fund will pay the entire compensation due, up to $60 million for each incident. The Fund Convention does not apply if the ship causing the polluting incident failed to comply with provisions from other IMO conventions. Since entering into force in 1976, the Fund Convention has been used in 72 incidents and paid over $180 million in compensation. In only 2 cases has it proven insufficient to cover all claims. See, <http://www.IMO.ORG/imo/convent/liabilit.htm>; DOUGLAS BRUBAKER, MARINE POLLUTION AND INTERNATIONAL LAW 158 (1993); Risk Management, January 1994.
Importantly, the U.S. is not a party to either the CLC or the Fund Convention. Dissatisfied with the level of liability provided by the CLC and Fund Conventions, in the wake of the Exxon Valdez oil spill in Alaska the U.S. passed the Oil Pollution Act of 1990 (OPA). P.L. 101-380 (1990). OPA provides an excellent example of national law's influence on the development and application of international law.
OPA requires that all new foreign and domestic tankers over 5,000 gross tons docking in U.S. ports and transporting oil have double hulls. The law provides a complex formula for phasing out older single hull vessels over time, with only double-hulled tankers (or an equally effective double containment system) permitted after 2015. While OPA does set limits for total liability in the case of an oil spill, liability is unlimited if the incident was proximately caused by (1) gross negligence or willful misconduct or (2) a violation of an applicable federal safety, construction, or operating regulation (e.g. the requirement of double hulls).
OPA and the associated laws provide for much higher limitations of liability than those provided by CLC. For tankers this is defined as the greater of $1200 per gross ton or $10 million, if over three thousand gross tons, with smaller limits for smaller ships. However, the right to limit liability is lost where the spill has been caused by, among other things, "gross negligence". It is widely considered that, to put it inelegantly, if the amount spilled is "gross" then the courts will consider that "gross negligence" has been involved. Therefore it is considered that in practice in the USA shipowners cannot rely upon any limitation of liability in the event of an oil spill.
In addition, OPA calls for the provision of certificates of financial responsibility providing evidence of insurance coverage up to the limitation amounts provided (it is considered that insurers would not be liable beyond the limitation amounts, even if the shipowner himself lost the right to limit), and permitting direct action against the insurer who has given the certificate.
The maximum applicable limit under OPA would, in practice, ... be approximately $120 million. Therefore in principle the OPA limits of liability could be covered by the P&I clubs [traditional insurers of oil tankers], but they have so far refused to offer certificates of financial responsibility. This means that any shipowner who spills oil in the USA may well find that he has completely inadequate insurance, even granted that the P&I clubs may well respond to indemnify him, despite having refused to give a certificate of financial responsibility.
Douglas Brubaker, MARINE POLLUTION AND INTERNATIONAL LAW 158 (1993).
The main elements of the Oil Pollution Act are the following:
1) a comprehensive federal liability scheme, addressing all discharges
of oil to navigable waters, the exclusive economic zone, and shorelines;
2) a single, unified federal fund, called the Oil Spill Liability Trust Fund, to pay for the cleanup and other costs of federal oil spill response authorized at $1 billion, far higher than any of the other funds previously authorized;
3) stronger federal authority to order removal action or to conduct the removal action itself;
4) drastically revised spill prevention control and countermeasure plan requirements for onshore facilities, offshore facilities, and vessels;
5) tougher criminal penalties;
6) higher civil penalties for spills of oil and for spills of hazardous substances;
7) tighter standards and reviews for licensing tank vessel personnel, and for equipment and operations of tank vessels, including the requirement of double hulls; * * *
Recoverable damages are grouped in six categories, several of which appear to overlap:
(1) natural resource damages;
(2) damages to real and personal property, including loss of use of such property;
(3) loss of subsistence use of natural resources;
(4) loss of tax and other revenues;
(5) loss of profits or earning capacity; and
(6) increased costs of public services.* * *
Three of these classes of damages from oil discharges ?? natural resource damages, loss of tax revenue, and increased cost of public services ?? are recoverable only by governmental entities. Natural resource damages are recoverable by four classes of natural resource trustee: federal, state, foreign government, or Indian tribes. Loss of tax and other forms of governmental revenue are recoverable by the United States, the states, and political subdivisions of states. The increased cost of public services (including such items as fire protection) caused by an oil discharge, are recoverable by the same claimants. * * *
Russell V. Randle, The Oil Pollution Act of 1990: Its Provisions, Intent, and Effects, 21 ELR 10119 (1991).
Because the U.S. is such a large importer of oil, OPA's construction requirements had a significant impact on foreign tankers. At the time of its passage, OPA was denounced by some countries as a unilateral imposition of America's standards on the rest of the world and as a violation of UNCLOS. In reading the UNCLOS excerpts below, consider whether this was a valid charge. How might the U.S. justify its decision?
UNCLOS Article 21 Laws and regulations of the coastal State relating
to innocent passage
1. The coastal State may adopt laws and regulations, in conformity with the provisions of this Convention and other rules of international law, relating to innocent passage through the territorial sea, in respect of all or any of the following:* * *
(d) the conservation of the living resources of the sea;
(e) the prevention of infringement of the fisheries laws and regulations of the coastal State;
(f) the preservation of the environment of the coastal State and the prevention, reduction and control of pollution thereof;* * *
2. Such laws and regulations shall not apply to the design, construction, manning or equipment of foreign ships unless they are giving effect to generally accepted international rules or standards.
UNCLOS Article 211 Pollution from vessels
1. States, acting through the competent international organization or general diplomatic conference, shall establish international rules and standards to prevent, reduce and control pollution of the marine environment from vessels and promote the adoption, in the same manner, wherever appropriate, of routeing systems designed to minimize the threat of accidents which might cause pollution of the marine environment, including the coastline, and pollution damage to the related interests of coastal States. Such rules and standards shall, in the same manner, be re-examined from time to time as necessary.* * *
3. States which establish particular requirements for the prevention, reduction and control of pollution of the marine environment as a condition for the entry of foreign vessels into their ports or internal waters or for a call at their off-shore terminals shall give due publicity to such requirements and shall communicate them to the competent international organization.* * *
4. Coastal States may, in the exercise of their sovereignty within their territorial sea, adopt laws and regulations for the prevention, reduction and control of marine pollution from foreign vessels, including vessels exercising the right of innocent passage. Such laws and regulations shall... not hamper innocent passage of foreign vessels.* * *
In this context, it is also worth comparing OPA to the Arctic Waters Pollution Act of 1970, passed by Canada to strengthen environmental protection in its arctic archipelago (see p. x). At the time, the U.S strongly denounced Canada's action as an unwarranted unilateral exercise of national authority and refused to recognize the legislation. Is OPA any different?
While double-hulled tankers have been held up in the public eye as a solution to oil spills, their merits are hotly debated. At the time of the Oil Pollution Act's passage, proponents of double-hulls contended that if the Exxon Valdez had been built with a double hull far less oil would have been released. Critics replied that having a double hull actually would have increased the chances that the Valdez sunk, losing all of its cargo and causing a worse accident than it did. Randle op. cit. Indeed, a government study mandated by the Act concluded that a double hull would not have prevented the Exxon Valdez spill off Alaska and, after studying 17 tanker design concepts, declared that no single design is superior in preventing all oil spill accidents. Beyond their added costs of construction, double-hulled tankers may also collect hydrocarbon vapors in the space between the hulls, potentially creating a risk of fires and explosions. Their more complex design makes inspection and maintenance less straightforward and, some contend, makes the tankers less stable following an accident. Moreover, because the double hulls reduce cargo space for carrying oil, overall they increase the total amount of tanker traffic needed to carry the same amount of oil, thus increasing the possibility for accidents. Tanker Spills: Prevention by Design, Oil & Gas Journal, March 11.
In any case, OPA proved effective because the world responded. In 1992 MARPOL was amended to require double hulls or alternative designs with the same level of protection in tankers ordered after July 1993. MARPOL Regulation 13F. Since the price of oil has dropped in recent years, tanker owners have been operating on slim margins, allowing their fleets to age rather than order expensive new tankers. The average age of tankers is now over 18 years old and there is concern over a "safety gap." MARPOL's double hull requirement applied to new ships and to older ships when they reached 25 years of age. Within the next few years many of the world's tankers will either have to be refitted or scrapped. Indeed only a few hundred of the world's more than 3,500 tankers have double-hulls. 30 Years On: What's Happened Since the Torrey Canyon?, IMO News at 14-15, Number 1:1997.
OPA had another effect, as well. A Civil International Liability Protocol had been proposed in 1984 to ensure increased funds for recovery of costs under the CLC and Fund Convention. Under the Protocol the upper limit on liability was significantly raised and coverage was extended to pollution damage in the EEZ as well as preventative measures taken even if no spill occurred so long as the threat was grave and imminent. Each State party was responsible for making sure all importing oil companies contribute to the fund as required, and failure to do so made the State itself responsible for making up the loss. The Protocol, however, was never ratified by enough large oil importing States to enter into force. Brubaker, op. cit., at 158.
Following passage of OPA, the Protocol was revised in order to lower
the required number of ratification of oil importing States for entry
into force. It was adopted soon after. The 1992 Protocols to the CLC and
Fund Conventions significantly increase the compensation available to
victims of oil pollution damage from tankers, substantially increasing
the shipowner's liability. Thus while the prior CLC and Fund Convention
in most cases provided a maximum of $30 million available in compensation,
depending on the circumstances of the spill the 1992 Protocols could,
combined with the CLC and Fund Conventions, provide up to $208 million
in compensation. The geographic coverage of the Conventions was extended,
as well, to include the EEZ of contracting States. The range of compensable
costs is narrower than under the OPA, since only costs for reasonable
measures to prevent loss or damage and to restore the contaminated environment