We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
01 December 2010
The International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea 1996 has not entered into force despite 14 years having passed since it was agreed. A new protocol was adopted on April 30 2010 at a conference convened by the International Maritime Organisation (IMO) to make certain changes which were considered necessary to facilitate the convention's entry into force.
The convention has the same structure as the International Convention on Civil Liability for Oil Pollution Damage 1969 and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (as amended). With some exceptions, the convention imposes strict liability on a registered shipowner for damage caused by the escape of hazardous or noxious substances in connection with their carriage by sea. A shipowner is entitled to limit its liability on the basis of the vessel's tonnage.
The convention establishes an insurance scheme whereby a shipowner is required to maintain compulsory insurance to cover its liability under the convention. Losses exceeding the limitation amount will be covered by the International Hazardous and Noxious Substances Fund up to 250 million special drawing rights. Compensation from the fund will be financed by a fee imposed on importers of hazardous or noxious substances.
Need for change
Several issues have remained unresolved since the convention was agreed in 1996, which explains why only a small number of states have ratified it.
One of the challenges has been that states have failed to provide the IMO with information regarding the quantity of hazardous or noxious cargo imported in the year before ratification and on an annual basis thereafter, which is a requirement under the convention. It had been assumed that the reporting procedures made compliance too difficult, especially with respect to packaged hazardous or noxious substances. Another concern has been the lack of funding in respect of liquefied natural gas cargo, as many of the parties that are obliged to contribute are located beyond the jurisdiction of the convention states.
In an attempt to overcome these difficulties, the 2010 protocol to the convention imposes penalties for states which do not comply with their reporting obligations in respect of cargo quantities. An instrument of ratification which is not followed by a report on the quantity of cargo received in the preceding year will not be accepted by the IMO's secretary general. If a state party fails to comply with the annual reporting requirements, the state will be temporarily suspended as a state party until the required reports have been provided. As a result, these states will not be entitled to rely on the rights and obligations of the state parties under the convention. Moreover, the right to compensation for incidents which occur in the state (except compensation for death and personal injury) will be lost unless the state provides the reports within a certain deadline. However, the shipowner's liability under the convention will not be affected.
The protocol also contains new provisions which exempt packed hazardous or noxious substances from the convention's fee system in order to simplify reporting. Thus, receivers of packed hazardous or noxious substances will not be obliged to contribute to the fund, but the shipowner and the fund will remain liable to pay compensation for damage caused by such cargo. Hazardous or noxious substance cargoes are now split into two categories: bulk hazardous or noxious substances and packaged hazardous or noxious substances, with only bulk cargoes contributing to the financing of the fund. Moreover, the shipowner's limit of liability for packaged hazardous or noxious substances has been increased: liability will be 15% higher for packaged hazardous or noxious substances than for bulk hazardous or noxious substances.
Amendments have also been made regarding the parties that are obliged to pay fees to the fund for liquefied natural gas cargoes. Under the convention, the owner of liquefied natural gas cargo is obliged to pay fees to the fund before the liquefied natural gas cargo is discharged in a signatory state. The identity of the owner must be determined by the contract between the buyer and the seller of the cargo. A potential problem is that the cargo owner may not necessarily be subject to the jurisdiction of either the state where the liquefied natural gas cargo is being discharged or another convention state. This may result in difficulties in obtaining the fee from the owners, which may cause further problems in financing the fund. The protocol provides that where the fee cannot be recovered from the cargo owner, the receiver of the liquefied natural gas cargo is liable for the fees.
Entry into force
The convention will enter into force once 12 states have ratified it, provided that at least four have a minimum fleet of 2 million gross registered tonnes, and the IMO's secretary general has received information substantiating the fact that these states received a total quantity of hazardous or noxious cargo of at least 40 million tons in the year before ratification.
In total, 14 states had ratified the convention as of December 10 2009, but only two states had submitted reports regarding cargo. Only three of the ratifying states met the requirement with respect to tonnage. Moreover, it is difficult to determine the requirement regarding 40 million tons of received cargo without reports from the ratifying states.
The convention, as amended by the protocol, will be open for signature from November 1 2010 to October 31 2011 and thereafter will be open for accession.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.