The Supreme Court recently granted compensation for moral damages (pain and suffering) to workshop service providers and fisherpeople in the context of a hydrocarbon spill. The spill occurred when the welding on a bond of an oil terminal's underwater duct broke.
Article 153(b) of the Navigation Act states as follows:
A minister of a Chilean court of appeal who has jurisdiction over where the facts of the case occurred shall at first instance know:…
b) trials of indemnification of losses caused to the State or to individuals for spills or pollution, whether from the marine environment or on the coast, from a spill or disposal into the sea of any fuel, waste, matter or other elements referred to in this Act.
On 25 May 2007 Marshall Islands-flagged tank vessel, the New Constellation, discharged crude oil at Empresa Nacional del Petróleo's (ENAP's) terminal in San Vicente Bay(1) in the Concepcion region. Specifically, when the welding on a bond of the terminal's underwater duct broke, a quantity of hydrocarbon spilled into the sea, ranging from 302m3 to 455m3.
On the same day, the local maritime authority (the Captaincy of San Vicente) banned oxyfuel and hot welding for one month. Later that month, the Regional Ministerial Secretariat of Health decreed a five-month commercial ban on any food products caught, collected or sourced from the area.
Approximately 77 workshop service providers and artisanal fisherpeople submitted a claim against ENAP for various damages in accordance with Article 153(b) of the Navigation Act – namely:
- environmental damage;
- actual loss for the impact on species and biomass, as well as the inability to use certain vessels and fishing utensils located under the waterline;
- loss of profit for having lost:
- in the case of the fisherpeople, the opportunity to capture the biomass of the region, which had affected their legitimate expectations of benefit or profit; and
- in the case of the workshop service providers, revenues during the ban on the use of oxyfuel and hot welding; and
- moral damages(2) (pain and suffering) for the profound impact of seeing the oil covering the water where they worked, which had resulted in the deterioration of the plaintiffs' economic activity and an inability to execute it.
The total claimed amount was Ps8,531,628,494 (approximately $11.8 million).(3)
First-instance decision
The minister of the Court of Appeal partially upheld the lawsuit, granting moral damages in favour of each plaintiff – respectively, Ps4 million (approximately $5,650) for the workshop service providers and Ps7.5 million (approximately $10,593) for the fisherpeople.
The minister took into consideration the fact that the spill was attributable to the defendant, whose procedures were not sufficiently effective to allow the spill to be detected and responded to quickly. The minister stressed that the alert had been raised by a third party and that the spill had lasted 47 minutes, which could have been reduced if appropriate procedures had been in place. Further, the first-degree judge ruled that the pipes had not been in an adequate state to be used for an oil discharge task, especially by underwater means, highlighting that an exceptional regime of objective liability applied.
The court rejected the claims for compensation for environmental damage and loss of profit. The claim for compensation for actual loss was also rejected since uncaught hydrobiological resources and the natural elements existing in the bay could not be considered the plaintiffs' property. Further, as regards hulls, rigging, engines and other petroleum-contaminated elements, no such damage was circumstantially proven.
As regards moral damages, the minister ruled that these stemmed from a deductive logical process that culminated in a judicial presumption with sufficient gravity and precision to make a decision as to the spill's negative impact on the plaintiffs' mood. The minister reasoned that this was proper because moral damages are a normal and ordinary consequence for people when the environment in which they work or live deteriorates, which is even more true for activities which have an affective link to the sea.
Second-instance decision
The Valparaiso Court of Appeal upheld the judgment appealed by declaration.(4) However, it ordered the defendant to pay Ps10 million to each of the remaining fisherpeople and Ps4 million to the workshop service providers to mitigate their loss of profit (in its variant of 'loss of chance'), based on the following grounds:
- The court recharacterised the loss of profit claimed as a "loss of opportunity or chance" of developing an economic activity in a better way, as was apparent from the antecedents provided, which led to a conclusion that while fishing activity had been reduced, it had not ceased altogether.
- The court ruled out the concurrence of moral damages as it is not something which can be presumed, adding that insufficient evidence had been provided.
Both the plaintiffs and the defendant lodged cassation remedies in form and substance with the Supreme Court.
Supreme Court decision
The Supreme Court overruled the Valparaiso Court of Appeal's decision.(5)
The Supreme Court declared that ENAP was responsible for the hydrocarbon spill and thus for paying compensation for moral damages equal to Ps4 million in favour of each plaintiff who provided workshop services and Ps7.5 million in favour of each fisherperson.
The Supreme Court agreed with the previous reasoning regarding the inability to compensate for environmental damage and actual loss. According to the Supreme Court, it was also unfeasible to equate the claimed loss of profit with the loss of opportunity or chance as its seriousness had not been proven.(6)
With regard to moral damages, the Supreme Court established that while this concept is not unique under Chilean law, in its most restricted meaning, it relates to the grief, pain or distress experienced by the victim (known as 'pretium doloris'). However, this vision has given way, both in the doctrine and in jurisprudence, to a broader meaning in order to mitigate all types of moral harm and not just pretium doloris, since each type of harm involves an attack on diverse extra-patrimonial interests.(7) In this case, the moral damages alleged by the plaintiffs were based on the variation of their working circumstances resulting from the hydrocarbon spill, which had put their livelihood and economic viability at risk.(8)
The Supreme Court added that, as was correctly stated in the appealed ruling, the fact that the fisherpeople or workshop providers had actually worked at the site of the spill should be regarded as a set of serious, precise and consistent factual circumstances which made it possible to presume a natural affliction and substantial impact of an extra-patrimonial interest (ie, preservation of livelihood, in the case of natural persons, and economic viability, in the case of legal persons). These circumstances were attributable to the sudden change in the plaintiffs' productive circumstances and had to be repaired.(9)
This decision is important as it provides a clearer criterion on compensation for the victims of oil spills, including the concept of moral damages. The shipping industry should follow this development carefully as it implies more certainty on the indemnification parameters for future spill cases.
Endnotes
(1) ENAP is owned by Chile and its line of business is the exploration, production and commercialisation of hydrocarbons and their derivatives.
(2) Moral damages are a judicial construction based on Article 2329 of the Civil Code, which states that "[e]very damage that arises from a negligent or tortious behaviour from a third party must be compensated by the later". Although this category is comprehensive and includes all non-pecuniary damages, for the purposes of this article, 'moral damages' include mental anguish, mental suffering, humiliation and emotional distress caused by a defendant (see Saul Litvinoff, Moral Damages, 38 LA L REV 1, 37 (1977)).
(3) As per the current exchange rate, $1 equals Ps708.
(5) 23 March 2021, Nº 18.365-2019 (the 'replacement judgment').
(6) Numbers 16, 17 and 18 of the replacement judgment.
(7) Number 19 of the replacement judgment.
