Solong to legal certainty? Marine pollution liability in a changing world

This newsletter will describe the international legal framework for marine pollution damage with focus on the non-persistent oils and other chemicals and the renewable fuels and consider the legal position of owners and insurers – and what may be expected in the future.

The oil conventions

Spurred by the Torrey Canyon disaster in 1967, the Civil Liability Convention (“CLC”) was adopted in 1969 to cover oils spills from tankers. Following another disaster, the Exxon Valdez in 1989, the CLC was updated in 1992. Subsequently, following the Erika and Prestige disasters in 1999 and 2002, further amendments were made to the international framework for oil tanker pollutions. Consequently, large parts of the world have today ratified and implemented the revised CLC of 1992 as well as the 1992 Fund Convention and the 2003 Suplementary Fund Convention which set up international recovery funds to cover oil tanker oil spills.

In 2001, the Convention for Bunker Oil Pollution Damage (“Bunker Convention”) was adopted to provide a liability framework for oil pollution damage stemming from non-tanker vessels[1]. It is based on the same general principles as the CLC, however, with no supporting funds as the scale of the pollution is deemed to be less for such vessels compared to tankers carrying oil cargoes.

The CLC as well as the Bunker Convention only apply to spills of persistent fossil-based oils[2]. It will thus not apply to non-persistent oils (e.g. light diesel oil, gasoline and kerosene type fuels like the jet fuels carried on the Stena Immaculate[3]), chemicals or bio-based or other renewable liquids.

The CLC and the Bunker Convention have the following characteristics:

1. Strict liability: Both conventions provide that the owner[4] is strictly liable for pollution damage stemming from spills from the vessels. The conventions only allow the owner to avoid liability in few narrow instances such as in the event of act of war and natural disasters or if the damage was intentionally and wholly caused by a third party.
2. Liability channelling: All claims in respect of vessels interests are to be made against the registered owner under the CLC or the registered owner, bareboat charterer or manager in respect of the Bunker Convention. Under the CLC, this means that no claims may be made against example the charterer or the technical manager[5]. This is to ensure that as many claims as possible are made against the entity, the owner, who is also subject to the insurance requirement.
3. Compulsory insurance: The owner is required to take out insurance to cover its liability under each insurance. The insurance is customarily provided under standard P&I cover and compliance with this requirement is proven by the issuance of certificates by the vessel’s flag state.
4. Direct action against insurers: Both conventions grant a statutory right to sue the liability insurer of the owners. The insurers are not entitled to rely upon any special defences which the insurer would have against the owner under the policy (such as the owner’s failure to pay the premium) but may invoke the owner’s defences and that the owner caused the incident by intent.
5. Limitation right: The CLC includes certain limitation limits based on the size of the vessel and the type of claims. The maximum limit for the largest tankers for property claims is SDR 89.77 mil. (≈ USD 120 mil.). The Bunker Convention does not contain its own limitation limits as the incidents are covered by the London Liability Limitation of Maritime Claims Convention (LLMC) of 1976 (96) which cover most maritime incidents. Under the CLC as well as the LLMC, the limitation right will only be lost if the claimant can prove that the owner by personal act of omission caused the damage with intent or recklessly and with the knowledge that the damage would probably result. As aptly noted by the IMO Legal Committee, the limitation right is “virtually unbreakable”[6].
6. Recovery funds: In respect of oil pollution damage from tankers, the International Oil Pollution Compensation (IOPC) Funds will grant cover for oil pollution damage exceeding the limitation amounts up to a total of SDR 750 mil. (≈ USD 997 mil.). The funds are financed by contributions by the oil importers and are administrated by a Secretariat based in London.
7. International uniformity: The limitation amounts are based on Special Drawing Rights (SDR) (being a so-called international reserve assets which value is based on an average of some of the world’s major currencies), ensuring that the limitation amount will be the same irrespective of the convention state in which the suit is filed. The conventions also provide that judgments on liability against the owners, insurers and the international funds are to be recognised in other contracting states. Generally, these uniform and collaborative rules limit the risk of forum shopping.

The conventions are widely regarded as forming a fair and logical legislative framework which allow injured parties to obtain compensation and legal predictability for the owners and insurers. Enforcement has, however, recently become a contentious issue in respect of old tankers forming part of the Russian shadow fleet. These vessels appear to suffer from the absence of effective insurance cover, potentially due to lack of proper vetting and enforcement by all the responsible flag state authorities of the underlying policies[7]. Rather than requesting fundamental changes to the setup for oil tankers, it seems that the industry at large agree that we need to enhance the enforcement measures to avoid evasion of the insurance requirements.

Non-persistent oils, liquified CO₂ and hazardous chemicals

As the oil conventions only apply to “persistent” fossil-based oils, the IMO adopted in 1996 the Hazardous and Noxious Substances Convention (“HNS Convention”) to fill the gap. The convention which was supplemented by a 2010 Protocol is, however, yet to enter into force. It has a broad scope, covering over 2000 hazardous and noxious substances (“HNS”) carried as cargo onboard vessels, such as[8]:

• Non-persistent oils not covered by the oil conventions (such as jet fuel).
• Liquefied Natural Gas (LNG) (mainly consisting of methane, CH₄).
• Liquefied Petroleum Gas (LPG), liquified CO₂ and other substances covered by the Liquified Gases in Bulk (IGB) Code.
• Bulk materials possessing chemical hazards subject to, e.g., the International Maritime Dangerous Goods Code (IMDG Code).

The HNS Convention is based on the same principles as CLC, including the strict liability, liability channelling, compulsory insurance, direct action against insurers, evaluated limitation levels and a recovery fund to cover losses exceeding the limitation amounts (up to SDR 250 mil. (≈ USD 332 mil.).

The HNS pollution claims will today be subject to compulsory insurance under the EU Maritime Claims Insurance Directive[9]. In effect, the claims will be covered by the standard P&I cover provided by clubs in the International Group of P&I Clubs. Individual coastal states could thus also decide to implement stricter liability regimes, such as strict liability, to help injured obtain recovery for HNS spills within its waters. Some states have, for instance, introduced strict liability for the authorities’ cleanup costs in respect of all forms of illegal discharge of substances under MARPOL, which may also cover HNS substances[10]. Such legislative measure will generally allow the authorities to be reimbursed for costs subject to the limitation limits in the LLMC. Private claimants will in most jurisdictions need to substantiate that the owners acted negligently (as appears to be the case for the Stena Immaculate) under the general rules on tort. In summary, the liability regimes for HNS related damages are clearly not satisfactory in the absence of the HNS Convention.

While individual states will be able to introduce stricter liability regimes unilaterally in respect of their own waters, the states cannot solve the major hurdle that no international fund is available to cover losses exceeding the LLMC limits. Furthermore, no state can by unilateral action ensure that its courts’ judgments will be enforced abroad, i.e. without a treaty basis to ensure mutual enforcement rules.

Noteworthy, non-persistent oils may typically involve less severe pollution incidents as the oils may easily evaporate (the reason for these oils being excluded from the CLC in the first place). The IOPC has nevertheless presented several ‘disaster examples’ where the cleaning costs and other losses will exceed the LLMC limits to a significant extent[11]. Sadly, the hypothetical examples may now have been replaced with real ones: For the Solong-Stena Immaculate incident, third party observers expect the total initial insurance losses to be in the range of USD 100-300 million.[12]

The only prudent solution appears to be the HNS Convention. In order for it to enter into force, it has to be ratified by at least 12 states representing at least 40 mil tonnes of HNS cargo imports. Only eight states – including Denmark, France, Netherlands and Norway – have at this point signed or ratified the 2010 HNS Convention. The convention states represent about 17.5 mil. tonnes of HNS cargo, meaning that we are quite some way to meet the targets[13]. Belgium and other states have recently taken the steps to allow for its to ratify the HNS Convention. The international community can thus hope that more states will soon follow suit.

Renewable fuels

The adoption of renewable fuels in the shipping industry will involve many new technical, operational and legal challenges due to the advent of new decarbonisation regulations. Shipping companies will need to submit data and certifications of biofuels in order to obtain the relevant benefits under the EU ETS and the FuelEU Regulation and the fuel supply contracts, and charter parties need be altered to accommodate the changes. We refer for more information to our newsletter of 22 August 2024 (link).

The main challenge relating to the liability for pollution incidents involving renewable fuels is quite different from the decarbonisation regulations: It is not the adoption of new regulations but the absence thereof. Fundamentally, neither the oil pollution conventions or the HNS Convention will cover liability for damage caused by spills of biofuels or renewable fuels such as power-to-x fuels to be adopted in the industry. While some alternative ‘renewable’ substances may be covered by the HNS Convention if carried as cargo, depending on the product properties[14], none will cover spills from biofuels used as bunkers.

For the time being, the owner’s liability in respect of pollution or other incidents involving biofuels will, perhaps apart from the authorities’ cleaning costs covered by MARPOL, be left to the general rules on liability for maritime incidents. In most countries, the owner will be liable for negligence and willful misconduct but not on any strict basis. The owners may rely on the general limits under the LLMC which are lower than e.g. the HNS Convention limits and the insurers are not, unless otherwise provided in national law, subject to a risk of direct action (unlike under the CLC, the Bunker Convention and the HNS Convention). From a legal perspective, the owners and insurers have a beneficial position in respect of liability for renewable fuels.

Naturally, from a societal perspective, we should hope that the environmental effects of spills involving biofuels are less severe than with persistent oils or hazardous chemicals covered by the HNS Convention. As hope should not be a strategy, the Comité Maritime International has in a Green Fuels Discussion Paper highlighted the need for an international legal regime to address the liability and compensation framework for renewable fuels[15], to supplement the legal regimes on certification, safety and other issues. Work is ongoing in various international bodies to advance this agenda though no international convention is expected in the short term.

Concluding remarks

For owners, managers and operators, the legal uncertainty on the adoption of the HNS Convention and the current ‘black box’ on the future legal regime for renewable fuels do not come across as critical: The companies may for the time being rely upon limitation (in all LLMC states) and will not always be strictly liable (but more often based on simple negligence). Provided the owners keep customary P&I cover, the owners – and non-cargo owning charterers and managers – have a fairly good legal position.

From this narrow legal perspective, it is mostly in the interest of governments, other non-governmental stakeholders to establish a strong international framework to ensure recovery in the event of disasters. Nonetheless, it is typically in the interest of all stakeholders to operate under a uniform legal regime – providing a great level of certainty even if it embodies a strict liability. If the regime is supported by compulsory insurance and firmly enforced throughout the world, it would allow for the injured parties to obtain sufficient compensation in pollution incidents and likewise allow owners to compete on a level playing field.

Gorrissen Federspiel’s Shipping/Offshore/Transportation Department follow and engage in the international development on regulations impacting the green transition of the shipping industry.

[1] With the exception of some governmental vessels, see for instance CLC, Art. XI (1).

[2] On persistent oils, see ITOPF’s article (“Persistent vs. non-persistent oils: What you need to know”) of July 2001 (link). See also information page on ITOPF’ website “Fate of Oil Spills” (link).

[3] Press release from ITOPF of 10 March 2025 (link) and Stena Bulk of 10 March 2025 (link).

[4] On the responsible entity, see item 2 on liability channeling below.

[5] The only exception to this is if such party has caused the damage by willful misconduct or recklessly and with the knowledge that the damage would result, i.e. the same as the test for breaking the limitation right, see item 5 on the limitation right below.

[6] IMO Legal Committee, Unified Interpretation on the Test for Breaking the Owner’s Right to Limit Liability under the IMO Conventions, 10 January 2020, 107^th Session (LEG 107/9).

[7] For more information, see our newsletter on enforcement of international sanctions against Russian vessels in the Danish straits of 2 April 2024 (link).

[8] See HNS Convention, Art. 1 (5), definition of HNS.

[9] Directive 2009/20/EC of 23 April 2009 on the insurance of shipowners for maritime claims.

[10] An example is the Danish Marine Environmental Act (“havmiljøloven”), Sec. 44.

[11] Website for the HNS Convention (administrated by ITOPF):

[12] Article on Offshore Energy of 13 March 2025 (link). It is not clear which proportion of the estimate which relates to third party claims.

[13] Not all states which have signed the 1996 Convention have also signed the 2010 Protocol and these nations have also not necessarily ratified the convention or protocol, respectively. For more information on the status for the ratification of the convention and protocol, reference is made to the HNS Convention website (link).

[14] I.e. if the type of substance will fall within in the HNS categories in the HNS Convention, see above.

[15] CMI, Discussion Paper (July 2024): Gothenburg-discussion-paper-Green-Fuels-1.pdf