29 November 2021

Liability and compensation for ship-source oil pollution in the marine environment. An overview (2021)

A spill of oil may result in expenditure and financial loss for a variety of organisations and individuals affected. Despite best efforts, the response to an oil spill can be protracted and costly and oil may contaminate property and the environment with associated economic loss to fishing, tourism and other commercial activities. Those who suffer a financial loss as a result of a spill of oil may be eligible for compensation.

The insurer of a vessel’s third-party risks, usually a Protection and Indemnity Club (P&I Club), provides coverage for pollution damage, including where caused by oil, in accordance with the terms of the insurance. In some circumstances, compensation may be available from a national or international Fund.

International Conventions enable compensation to be paid to those affected by an oil spill from a ship in countries that have signed the applicable Convention and where it is in force. Amongst many advantages, these Conventions provide a uniform set of rules governing liability and the admissibility of claims. However, some Conventions have not been ratified universally or are not yet in force. In addition, some countries have distinct national arrangements for compensation either in place of, or to supplement, the International Conventions. As a result, liability and the availability of compensation can vary.

This booklet, written together with the International Group of P&I Clubs and the IOPC Funds, provides an overview of the international, and selected national, arrangements in place for compensation of costs arising from pollution damage caused by oil spills from ships in the marine environment, and some background on ‘who pays’.

The case studies included in this booklet illustrate the importance of a close relationship between those claiming compensation, those paying compensation and technical advisers, who all work together closely during the claims process.

Categories: Compensation, Papers

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