Although important steps have been taken in recent years that have led to a more solid system for compensation of maritime claims there are still areas left uncovered. This overview shows which territories remain unchartered and call for further action especially against the background of maritime decarbonization now moving full steam ahead.

Global Limitation

When a seagoing vessel causes damage, for instance through a collision, the extent of the obligation to renumerate such damage is governed by various conventions on limitation of liability for maritime claims. The most well-known convention in this area probably is the Convention on Limitation of Liability for Maritime Claims which dates from 1976 and its protocol from 1996 (LLMC 1976). This convention sets out the mechanism for limitation of liability: limitation limits based on the tonnage of the vessel that has caused damage and with the constitution of a fund for all claims from that maritime incident. The idea is that all claims resulting from one incident are handled through the fund and that the fund can offer protection from claimants for the ship-owner and other parties involved with the operation of the vessel. Limitation of liability is a right that may be invoked when certain criteria are met. It is up to the ship-owner to decide whether or not the right is relied upon. The system is generally referred to as “global limitation”.

The principle of global limitation is older than the LLMC 1976 and can be traced back to laws from the 17th century. Predating the LLMC 1976 were the Brussels Limitation Conventions of 1924 and 1957 which can be seen as the first attempts to establish international uniformity in the field of global limitation. The system as we know it today – whereby the limit of liability is determined on the basis of the vessel’s tonnage – was already incorporated in the Brussels Convention 1924.

The LLMC 1976 makes a distinction between claims for loss of life or personal injury and other claims with the limit of limitation for the first type of claims being twice the amount of other claims. There is also a separate limit and fund for passenger claims.

The LLMC 1976 does not provide for (nor did its predecessors) a separate limit or fund for (oil) pollution or environmental damage claims. Interestingly, the Strasbourg Convention on the Limitation of Liability in inland Navigation (CLNI 2012) which was based on the LLMC 1976 does provide for separate limits for claims resulting from the carriage of dangerous cargo.

Oil Pollution

After the incident with the Torrey Canyon is 1967 which caused an environmental disaster the need was felt to introduce a system for compensation of the damage caused through oil pollution in case of a maritime incident. This led to the introduction of an international compensation regime for oil pollution set up by the 1969 Civil Liability Convention (CLC 1969) and the 1971 Fund Convention. The CLC 1969 entered into force in 1975. These conventions were followed by the 1992 Civil Liability Convention (CLC 1992) and the 1992 Fund Convention.

The CLC 1992 governs the liability of shipowners for oil pollution damage. It is based on the same principle of limitation of liability as provided for in the LLMC 1976. However, the limits are much higher.

In addition, under the CLC 1992, the registered shipowner has strict liability for pollution damage caused by the escape or discharge of persistent oil from his ship. This means that in principle he is liable even in the absence of fault on his part. Another key element is the obligation for the registered owner of the vessel to maintain adequate insurance at all times.

But the most striking difference is that a compensating regime is created for when compensation under the CLC 1992 is not available or is inadequate through the 1992 Fund Convention by setting up the International Oil Pollution Compensation Fund (IOPC Fund). This is called the two-tier system for compensation.

The fund pays compensation when:

• the damage exceeds the limit of the shipowner’s liability under the CLC 1992, or
• the shipowner is exempt from liability under the CLC 1992, or
• the shipowner is financially incapable of meeting their obligations in full under the CLC 1992 and the insurance is insufficient to pay valid compensation claims.

The IOPC Fund is financed by levies on certain types of oil carried by sea. The levies are paid by entities which receive oil after sea transport, and normally not by states.

Anyone who has suffered pollution damage in a state which is a member to the convention may make a claim against the IOPC Fund for compensation.

In 2001 a separate regime was introduced for damage caused by spills of oil when carried as fuel in ships’ bunkers. This is the International Convention on Civil Liability for Bunker Oil Pollution Damage which entered into force in 2008.

Areas not covered

Although it may appear that most types of damage caused through a maritime incident are now covered there is an important area missing in the system for compensation of maritime claims: damage caused by the carriage of dangerous cargo other than persistent oil or bunkers. As set out above this is included in the CLNI 2012 but this convention only applies to inland vessels and not to seagoing vessels.

In 1996 the Hazardous and Noxious Substances Convention (HNS 1996) was adopted which introduces a compensation system similar to that of the CLC 1992 and the Fund Convention but for the carriage of other dangerous cargos. However, the HNS 1996, in the meantime amended in 2010, still has not entered into force due to a lack of ratifications. This may change however as the Netherlands, together with Germany and Belgium, has now taken the step to ratify the HNS 2010. Now only one more ratification is needed to reach the required number of twelve before the convention will enter into force. The HNS Fund will be established through compulsory contributions from the receivers of hazardous and noxious substances in the member states.

The HNS 2010 unfortunately does not cover damage caused by alternative fuels such as LNG, hydrogen or ammonia as it only covers damage through the carriage of dangerous cargos. This means that there may be a need to further amend the HNS 2010 as soon as it enters info force or to add another convention to the framework currently in place. The challenge will be to keep the law up to speed with the developments that are currently taking place with regard to maritime carbonization. Working towards greener shipping also means that an adequate system for maritime claims needs to be in place.