Liability and compensation

IMO is primarily concerned with the safety of shipping and the prevention of marine pollution, but the Organization has also introduced regulations covering liability and compensation for damage, such as pollution, caused by ships.

The Torrey Canyon disaster of 1967, which led to an intensification of IMO's technical work in preventing pollution, was also the catalyst for work on liability and compensation.

An ad hoc Legal Committee was established to deal with the legal issues raised by the world's first major tanker disaster and the Committee soon became a permanent subsidiary organ of the IMO Council, meeting twice a year to deal with any legal issues raised at IMO.

The main issues raised by the Torrey Canyon were: who is to be held responsible for damage caused by oil pollution, the basis for determining liability and the level of compensation for damage. There were already well-established procedures for settling claims resulting from, for example, a collision between two ships. Generally speaking, only they are to blame, and only the ships, cargo, and those on board are likely to suffer damage or injury. But a major pollution disaster, like the Torrey Canyon, involves third parties and the damage caused can be enormous. It is important to establish a system which enables liability to be determined and ensures that any compensation due is paid.

In 1969, a conference convened by IMO adopted a convention dealing with the civil liability of the ship or cargo owner for damage suffered as a result of a pollution casualty. The purpose of the International Convention on Civil Liability for Oil Pollution Damage was to ensure that adequate compensation was paid to victims and the liability was placed on the shipowner.

Some delegates to the 1969 Conference felt that the liability limits established were too low, and that the compensation made available in some cases, therefore, might prove to be inadequate. As a result, another conference was convened by IMO in 1971 which resulted in the adoption of a convention establishing the International Fund for Compensation for Oil Pollution Damage. The Convention came into force in 1978 and the Fund has its headquarters in London. Unlike the Civil Liability Convention, which puts the onus on the shipowner, the Fund is made up of contributions from oil importers. The idea is that if an accident at sea results in pollution damage which exceeds the compensation available under the Civil Liability Convention, the Fund will be available to pay an additional amount, while the burden of compensation will be spread more evenly between shipowner and cargo interest.

The limits of liability in the two conventions were greatly increased through amendments adopted by a conference held in 1992, and again during the Legal Committee's 82nd session held from 16-20 October 2000.

In May 2003, a Diplomatic Conference adopted the 2003 Protocol on the Establishment of a Supplementary Fund for Oil Pollution Damage. The Protocol establishes an International Oil Pollution Compensation Supplementary Fund, the object of which is to provide an additional, third tier of compensation for oil pollution damage. Participation in the Supplementary Fund is optional and is open to all Contracting States to the 1992 Fund Convention. However, those States that do not join will continue to enjoy their present cover under the current CLC/Fund regime.

IMO's success in dealing with pollution compensation has encouraged Member States to refer a number of other legal matters to the Organization.

In 1971 IMO, in association with the International Atomic Energy Agency and the European Nuclear Energy Agency of the Organization for Economic Co-operation and Development, convened a conference which adopted the Convention relating to Civil Liability in the field of Maritime Carriage of Nuclear Material to regulate liability in respect of damage arising from the maritime carriage of nuclear substances.

In 1974, IMO turned its attention to the question of passengers and their luggage and adopted a convention which establishes a regime of liability for damage suffered by passengers carried on seagoing vessels. The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea declares the carrier liable for damage or loss suffered by passengers if the incident is due to the fault or the neglect of the carrier. The limit of liability was set at 46,666 Special drawing Right (SDR) per carriage. In 1990 a Protocol was adopted to the Athens Convention raising the amount of compensation payable. For death or personal injury, for example, the limit was raised to 175,000 SDR. In October 2002 a Diplomatic Conference adopted a 2002 Protocol which totally revised the 1974 Convention, adopting much increased levels of liability, revising the basis of liability and introducing compulsory insurance.

The general question of limitation of liability for maritime claims was dealt with in a convention adopted in 1957, before IMO first met. As time went by, however, it became clear that the limits of liability established were too low and, in 1976, IMO adopted a new convention which raised the limits, in some cases by 300%. The Convention on Limitation of Liability for Maritime Claims specifies limits for two types of claim - those for loss of life or personal injury and property claims, such as damage to ships, property or harbour works. The compensation limits of this Convention were raised by means of a Protocol adopted in 1996.

In 1996, IMO adopted the HNS Convention, which is based on the highly successful model of the Civil Liability and Fund Conventions. As with the original oil pollution compensation regime, the HNS Convention will establish a two-tier system for compensation to be paid in the event of accidents at sea, in this case, involving hasardous and noxious substances, such as chemicals.

By 2009, the HNS Convention had still not entered into force, due to an insufficient number of ratifications. A second International Conference, held in April 2010, adopted a Protocol to the HNS Convention (2010 HNS Protocol), that was designed to address practical problems that had prevented many States from ratifiying the original Convention.

In March 2001, IMO adopted a new International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, which established a liability and compensation regime for spills of oil, when carried as fuel in ships' bunkers. Previous regimes covering oil spills did not include bunker oil spills from vessels other than tankers. The convention is modelled on the International Convention on Civil Liability for Oil Pollution Damage, 1969.

IMO's Legal Committee adopted a wreck removal convention (WRC) by a Diplomatic Conference held from 14 to 18 May 2007.