Oil Company

As already mentioned, pollution liability is the one area where the Club’s cover is not unlimited. Two international legal regimes were established namely the International Convention on Civil Liability for Oil Pollution Damage (1969 Civil Liability Convention) and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1971 Fund Convention). These were subsequently updated to provide a satisfactory insurance framework for compensating victims of marine pollution by tankers. These conventions entered force in 1975 and 1978 respectively. From the Clubs’ position the main element that initially developed from this framework was the Tanker Owners’ Voluntary Agreement concerning Liability for Oil Pollution, “TOVALOP”, first introduced in 1969.  Tankers were entered in the TOVALOP scheme thorough their respective P&I Clubs, who assumed the responsibility for underwriting the compensation limit and for providing necessary documentary evidence of cover. There was a separate agreement between oil companies (Contract Regarding a Supplement to Tanker Liability for Oil Pollution – “CRISTAL”) designed to provide a further voluntary layer of compensation above that provided by TOVALOP.  TOVALOP and CRISTAL were discontinued on the introduction of the CLC and the Fund Convention, these were all based on the premise that the costs resulting from a major oil spill should be shared between the shipowner and the cargo owner (i.e. Oil Company).  It must be recognised that there is still a significant portion of the world’s tankers directly or indirectly owned by the oil companies and most of the balance – the independent fleets – only exist because the oil companies need them.  Unlike dry cargo ships, tankers are locked into one commodity, not being able to switch to others, say from fertilisers to steel as a bulk carrier can in response to changes in the market. The original regimes were enhanced in 1992 by new Conventions, (the 1992 Civil Liability Convention and 1992 Fund Convention,) and the Fund conventions established an Intergovernmental organisation to administer the compensation regime.