Bunker Convention. Application specificity
The International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunker Convention), 2001 came into effect on November 23, 2008. Over fifteen states have ratified it including those of EU, China and the states of convenient flag. The Russian Federation acceded to the Convention by the Federal Law dated December 3, 2008. When discussing the bill a number of expert committees of the State Duma expressed their general opinion about extraordinary value of the Convention norms and the forthcoming improvement of ecological safety within the RF territorial waters. However, the Law on Accession, as often happens, is especially laconic and does not contain any sub-regulations to determine the procedure for the application of the Convention in the Russian Federation. The effective date of the Convention in Russia became known only in late February: May 24, 2009.
Meanwhile, there is a presumption against reasonability of such an unconditional accession of the Russian Federation to the above Convention. A number of problems related to its application can be acknowledged today.
Meanwhile, there is a presumption against reasonability of such an unconditional accession of the Russian Federation to the above Convention. A number of problems related to its application can be acknowledged today.
Limits of compulsory insurance
The Convention requires ships flying the flags of the member states over 1,000 gross tonnage to have a Certificate on compulsory insurance to cover the liability of the registered owner for pollution damage. It should be acknowledged that limits applied by insurers under the Convention are controversial, to put it mildly.
According to the Convention, the limits of liability are calculated in accordance with the Convention on Limitation of Liability for Maritime Claims, 1976 (LLMC 1976), as amended by the Convention on Limitation of Liability for Maritime Claims LLMC Protocol 1996.
Thus, the limit of liability for property claims for ships from 1,000 but not exceeding 2,000 gross tonnage is 1 million SDR, or some USD 1.5 mln.
The following additional amounts are used in calculating the limitation amount:
For each tonne from 2,001 to 30,000 tons, 400 SDR (about USD 598);
For each tonne from 30,001 to 70,000 tons, 300 SDR (about USD 448);
For each tonne in excess of 70,000, 200 SDR (about USD 299).
There would be no questions if insurers applied the above limits. However, in practice we see the following:
The above LLMC Protocol 1996 envisages another limit of liability – that related to human health and survival damage. Insuring companies (including international P&I Clubs) think that the insurance coverage should be calculated by summing up the above limits.
It is difficult to agree with such an interpretation as it is almost impossible to determine a direct dependence of damage to human health and survival with the spill of bunker fuel. Ship owners of dry cargo and passenger fleet are actually obliged today to insure their liability for bunker spill at double rates as compared with the requirements of compulsory insurance based on Protocol 1992.
As may be supposed, the Ministry of Transport will shape its position as regards this issue in the nearest future and will officially support ship owners of dry cargo carriers after it sees that to obtain a certificate under the Convention it is necessary to get policies not including the limits of liability for damage to human health and survival.
It is important that the Convention only sets the maximal insurance coverage though national legislation is entitled to set smaller insurance coverage within the framework of the Convention.
According to the Convention, the limits of liability are calculated in accordance with the Convention on Limitation of Liability for Maritime Claims, 1976 (LLMC 1976), as amended by the Convention on Limitation of Liability for Maritime Claims LLMC Protocol 1996.
Thus, the limit of liability for property claims for ships from 1,000 but not exceeding 2,000 gross tonnage is 1 million SDR, or some USD 1.5 mln.
The following additional amounts are used in calculating the limitation amount:
For each tonne from 2,001 to 30,000 tons, 400 SDR (about USD 598);
For each tonne from 30,001 to 70,000 tons, 300 SDR (about USD 448);
For each tonne in excess of 70,000, 200 SDR (about USD 299).
There would be no questions if insurers applied the above limits. However, in practice we see the following:
The above LLMC Protocol 1996 envisages another limit of liability – that related to human health and survival damage. Insuring companies (including international P&I Clubs) think that the insurance coverage should be calculated by summing up the above limits.
It is difficult to agree with such an interpretation as it is almost impossible to determine a direct dependence of damage to human health and survival with the spill of bunker fuel. Ship owners of dry cargo and passenger fleet are actually obliged today to insure their liability for bunker spill at double rates as compared with the requirements of compulsory insurance based on Protocol 1992.
As may be supposed, the Ministry of Transport will shape its position as regards this issue in the nearest future and will officially support ship owners of dry cargo carriers after it sees that to obtain a certificate under the Convention it is necessary to get policies not including the limits of liability for damage to human health and survival.
It is important that the Convention only sets the maximal insurance coverage though national legislation is entitled to set smaller insurance coverage within the framework of the Convention.
Certificates for oil vessels
As for oil fleet, apart from a Certificate under the International Convention on Civil Liability for Oil Spill, ship owners should obtain an additional Certificate confirming availability of insurance coverage for bunker spill.
According to current position of insurers, to obtain this Certificate ship owners have to increase limits of liabilities and to indemnify for damage caused by a terrorist act.
Who issues Certificates of insurance coverage?
As of today, no state authorities or other organizations empowered to issue certificates have been determined yet. According to the RF Transport Ministry, approval of the corresponding document is preliminary scheduled for no sooner than April 2009.
In compliance with the Convention norms, the powers of state authorities or other organizations come into effect upon expiry of three months from the date of assignment notification provided to IMO Secretary General. So, as may be supposed, legal certification in the Russian Federation will not start before the second half of 2009.
Many ship owners have been certified by authorized bodies of other states parities to the Convention. In this respect, however, the Convention requires that vessels, the flag state of which is a party to the Convention, should be certified by an authorized body of this very state. So Russian ship owners will then have to replace Certificates issued by foreign authorities.
In compliance with the Convention norms, the powers of state authorities or other organizations come into effect upon expiry of three months from the date of assignment notification provided to IMO Secretary General. So, as may be supposed, legal certification in the Russian Federation will not start before the second half of 2009.
Many ship owners have been certified by authorized bodies of other states parities to the Convention. In this respect, however, the Convention requires that vessels, the flag state of which is a party to the Convention, should be certified by an authorized body of this very state. So Russian ship owners will then have to replace Certificates issued by foreign authorities.
Inland and sea-and-river going vessels
It appears that Russian shipping companies operating the fleet of sea-and-river going vessels are likely to face a number of other problems when interpreting and applying the Convention norms.
In particular, it is still not clear if the Convention is applicable to inland and sea-and-river going vessels, traveling by inland waterways to estuary seaports without entering the sea areas.
As for these issues the Association of Shipping Companies (ASC) is waiting for explanations from the RF Ministry of Transport.
Andrei Shchesnyak
Legal Advisor to ASC President, Lawyer
In particular, it is still not clear if the Convention is applicable to inland and sea-and-river going vessels, traveling by inland waterways to estuary seaports without entering the sea areas.
As for these issues the Association of Shipping Companies (ASC) is waiting for explanations from the RF Ministry of Transport.
Andrei Shchesnyak
Legal Advisor to ASC President, Lawyer