Voyage Charters

Timothy Young KC; Michael Ashcroft; Julian Cooke; Andrew Taylor; John Kimball; LeRoy Lambert; David Martowski; Michael Sturley

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Chapter 65 Oil Pollution

26. OIL POLLUTION CLAUSE: Owner agrees to participate in Charterer’s program covering oil pollution avoidance. Such program prohibits discharge overboard of all oily water, oily ballast or oil in any form of a persistent nature, except under extreme circumstances whereby the safety of the vessel, cargo or life at sea would be imperiled.

Upon notice being given to the Owner that Oil Pollution Avoidance controls are required, the Owner will instruct the Master to retain on board the vessel all oily residues from consolidated tank washings, dirty ballast, etc., in one compartment, after separation of all possible water has taken place. All water separated to be discharged overboard. If the Charterer requires that demulsifiers shall be used for the separation of oil/water, such demulsifiers shall be obtained by the Owner and paid for by Charterer. The oil residues will be pumped ashore at the loading or discharging terminal, either as segregated oil, dirty ballast or co-mingled with cargo as it is possible for Charterers to arrange. If it is necessary to retain the residue on board co-mingled with or segregated from the cargo to be loaded, Charterers shall pay for any deadfreight so incurred. Should it be determined that the residue is to be co-mingled or segregated on board, the Master shall arrange that the quantity of tank washings be measured in conjunction with cargo suppliers and a note of the quantity measured made in the vessel’s ullage record. The Charterer agrees to pay freight as per the terms of the Charter Party on any consolidated tank washings, dirty ballast, etc., retained on board under Charterer’s instructions during the loaded portion of the voyage up to a maximum of 1% of the total deadweight of the vessel that could be legally carried for such voyage. Any extra expenses incurred by the vessel at loading or discharging port in pumping ashore oil residues shall be for Charterer’s account, and extra time, if any, consumed for this operation shall count as used laytime. 65.1 The charter form was originally drafted for use by the Exxon Group which explains the reference to the “Charterer’s program covering oil pollution avoidance”. However, industry and inter-governmental awareness of the risk of oil pollution following the Torrey Canyon disaster in 1967 and subsequent well-publicised casualties has led to the implementation of numerous Conventions relating to oil pollution and its prevention including the International Convention for the Prevention of Pollution from Ships as amended (usually referred to as MARPOL 73/78). MARPOL sets international standards relating to permitted and prohibited oil discharges from ships and the transfer and storage of slops and clean and dirty ballast. Amendments subsequently introduced have imposed requirements relating to hull and tank design. Since almost any owner or charterer involved in the oil industry will wish to undertake measures to prevent pollution in line with these requirements the first two paragraphs of the clause are of little practical significance.

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65.2 Where oil pollution does occur, liability for loss caused thereby is, in many countries including the United Kingdom, governed by the Civil Liability Conventions 1969 and 1992, which impose on the shipowner strict, but limited, liability for pollution damage. Where the limit proves insufficient fully to compensate the claimant additional sums may be recovered from the IOPC Compensation Fund, established under the 1971 and 1992 Fund Conventions, and financed by levies imposed on the receivers of oil cargoes. Further compensation may also be available under the Supplementary Fund Protocol 2005 in those countries which have implemented this regime. To ease the burden on oil receivers, a voluntary agreement has been reached among owners of small tankers indemnified through members of the International Group of P. & I. Clubs to introduce the Small Tanker Oil Pollution Indemnification Agreement (STOPIA 2006). A second agreement known as the Tanker Oil Pollution Indemnification Agreement (TOPIA 2006) provides for indemnification of the Supplementary Fund for 50 per cent of the amounts paid in compensation by that Fund in respect of incidents involving tankers entered in one of the P. & I. Clubs which are members of the International Group. A full consideration of these important topics is, unfortunately, outside the scope of this book.1 65.3 The “Charterer’s program” contemplates an anti-pollution measure usually referred to as “Load on Top”. This involves retaining oily residues in the cargo and/or slop tanks and loading a compatible cargo on top. The expression is also frequently used where fresh cargo is loaded in tanks containing a measurable quantity of cargo residues. Where cargo is loaded on top, technical difficulties can arise as to the ownership of the mixed cargo. With load on top it has sometimes been assumed that the charterer or receiver is entitled to take delivery of the entirety of the mixed liquid cargo. However, in the absence of an express provision to this effect, it now seems clear that in the majority of cases this will not be so. Thus it has been held that, where a cargo and residues of substantially the same quality are wrongfully mixed by the owner, then, as long as his share of the total can be measured with reasonable precision, the cargo owner is entitled to receive only a quantity equal to that shipped. Any doubts as to quantity will be resolved in favour of the cargo owner.2

Limitation of liability

65.4 Liability for pollution is the subject of the 1992 International Convention on Civil Liability for Oil Pollution Damage by Article III of which, subject to certain limited exceptions,3 the registered owners of vessels have an absolute liability for pollution damage up to a limit determined by the size of their vessel unless the pollution damage resulted from the personal act or omission of the person concerned, committed with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result.4 Carriers of cargoes greater than 2,000 mts of oil are required to carry a blue card evidencing insurance for such liability and insurers may be directly liable for such pollution damage up to that limitation figure.

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U.S. Law

65A.1 Clause 26 was originally intended to obligate tanker owners to cooperate with the pollution prevention efforts of oil company charterers. However, the United States’ enactment of the Oil Pollution Act of 1990 (“OPA”),5 soon followed by several state oil pollution statutes, altered the way in which owners and charterers viewed the risk of oil spills and the cost of insuring against these liabilities. 65A.2 An owner’s oil pollution liabilities are usually insured by mutual Protection and Indemnity associations (“P. & I. Clubs”) who underwrite on an indemnity basis and are not generally guarantors. The 13 P. & I. Clubs currently making up the International Group of P. & I. Clubs (“the Group”) insure approximately 90 percent of the world’s ocean-going tonnage in this way. 65A.3 The P. & I. Clubs have nevertheless agreed to be guarantors and to provide evidence of financial responsibility in two exceptional cases: (1) certificates (commonly known as “Blue Cards”) guaranteeing payment of the shipowner’s liability for pollution damage under the 1969 and 1992 Civil Liability Conventions; and (2) certificates of financial responsibility (COFRs) issued under previous U.S. pollution law, the Federal Water Pollution Control Act,6 up to the limit of $150 per gross registered ton (“grt”). 65A.4 OPA drastically increased the limit of liability of owners, operators and demise charterers of tank vessels for removal costs and damages, up to $1,200 per grt with a minimum of $10 million for vessels in excess of 3,000 grt. OPA also introduced a new range of potential liabilities extending to economic and non-economic losses; eliminated an owner’s right to limit liability under the Limitation of Liability Act of 1851; and the courts have interpreted OPA’s provisions allowing an owner to limit its liability strictly against owners and limitation.7 The limitation amounts are adjusted from time to time for inflation.

Source categor	New CPI-adjusted limit of liability
§138.230(a) Vessels
(1) The OPA 90 limits of liability for tank vessels, other than edible oil tank vessels and oil spill response vessels, are-. The rest of this document is only available to i-law.com online subscribers. If you are already a subscriber, click Log In button. Log In Terms and Conditions Notes for Contributors Privacy Contact Demo/Subscribe Copyright © 2024 Maritime Insights & Intelligence Limited. Maritime Insights & Intelligence Limited is registered in England and Wales with company number 13831625 and address 5th Floor, 10 St Bride Street, London, EC4A 4AD, United Kingdom. Lloyd's List Intelligence is a trading name of Maritime Insights & Intelligence Limited. Lloyd's is the registered trademark of the Society Incorporated by the Lloyd's Act 1871 by the name of Lloyd's.