Friday, April 29, 2005

The Threat

The general public has most probably been blissfully unaware of the fact that, besides the obvious exposure of our shoreline to pollution threats, primarily from oil pollution resulting from the shipping traffic plying our coasts the extent to which compensation is payable has been dangerously lagging behind the rest of the world. In essence, where there is a major oil spill with massive resultant damages, the burning issue is who is liable to pay compensation and to what extent is the loss covered.

One of the primary reasons in the past for South Africa’s non-participation in the updating of its accession to International Conventions with regard to pollution liability and compensation was the unwillingness of the Government to disclose statistics relating to its oil imports. Since the emergence of the new South Africa the situation has become increasingly unfathomable whilst the threat of a major catastrophe has been looming.

The South African liability and compensation regime has in the result over the years fallen far behind international norms. There has been a growing clamour for South Africa to accede to the more up to date and so-called Fund Convention, which is an inter-governmental measure, establishing a Fund, contributed to by contracting states in proportion to the volume of the imports of the individual oil dealers and financed by levies upon oil companies in proportion to the volume of their imports. To tap into the Fund’s higher limits a claimant State needs to be a contributor and nothing short of full accession to the Fund Convention and its two Protocols would have given South African claimants the significantly increased Fund compensation for oil pollution losses. Accordingly, for some time our shores, the environment and potential claimants have been horrendously exposed to the risk of enormous losses.

The Good News

The South African Maritime Safety Authority has recently reported that the Protocols to the Fund Convention will come into force in South Africa on 1 October 2005. Accordingly South Africa will now at last join the International Oil Pollution Compensation Fund of 1992 which provides supplementary compensation in cases where the amount payable by the shipowner or its insurer is insufficient to provide full compensation to the victims of oil pollution damage. South Africa’s accession to the 1992 Fund is of major significance and should cause all concerned to breathe a collective sigh of relief.

A further development of International importance is that a further Protocol was adopted in May 2003 under the auspices of the International Maritime Organization which creates a Supplementary Compensation Fund that improves the international regime for compensation of victims of oil pollution from oil tankers. The Supplementary Fund does not replace the 1992 Fund but will make available additional compensation to victims in States which accede to the Protocol. One important effect of the Protocol is that, in practically all cases, it will be possible to pay compensation at 100% of the amount of the damage agreed between the Fund and the victim.

The conditions precedent to the entry into force of the Protocol were fulfilled on 3 December 2004 and the protocol entered into force on 3 March 2005.

Until the Erica and Prestige spills, victims of oil pollution damage were adequately compensated under the applicable compensation regimes. The introduction of an optional third tier of compensation will raise the maximum compensation available to USD 1.1 billion for those States who choose to adopt the tier. Whilst the spectre of pollution and threats to the environment are ever present, it is at least comforting to know that adequate compensation is available to deal with, if not avert, major oil spill disasters.