International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND), 1971

Adoption: 18 December 1971
Entry into force: 16 October 1978

Note: The 1992 protocol replaces the 1971 Convention

For more information on the IOPC Fund, please see http://www.iopcfund.org/

The Frequently Asked Questions on the IOPC site give up-to-date information on how the Fund works.

Introduction and history
The Protocol of 1976
The Protocol of 1984
The Protocol of 1992
The 2000 Amendments (raising limits)
The 2003 Protocol (supplementary fund)

The IOPC funds and IMO
Special drawing rights
Winding up of 1971 fund

Introduction and history

Although the 1969 Civil Liability Convention provided a useful mechanism for ensuring the payment of compensation for oil pollution damage, it did not deal satisfactorily with all the legal, financial and other questions raised during the Conference adopting the CLC Convention.

Some States objected to the regime established, since it was based on the strict liability of the shipowner for damage which they could not foresee and, therefore, represented a dramatic departure from traditional maritime law which based liability on fault.  On the other hand, some States felt that the limitation figures adopted were likely to be inadequate in cases of oil pollution damage involving large tankers.  They therefore wanted an unlimited level of compensation or a very high limitation figure.

In the light of these reservations, the 1969 Brussels Conference considered a compromise proposal to establish an international fund, to be subscribed to by the cargo interests, which would be available for the dual purpose of, on the one hand, relieving the shipowner of the burden by the requirements of the new convention and, on the other hand, providing additional compensation to the victims of pollution damage in cases where compensation under the 1969 Civil Liability Convention was either inadequate or unobtainable.

The Conference recommended that IMO should prepare such a scheme. The Legal Committee accordingly prepared draft articles and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage was adopted at a Conference held in Brussels in 1971.  It is supplementary to the 1969 Civil Liability Convention.

The purposes of the Fund Convention are:

·          To provide compensation for pollution damage to the extent that the protection afforded by the 1969 Civil Liability Convention is inadequate.

·          To give relief to shipowners in respect of the additional financial burden imposed on them by the 1969 Civil Liability Convention, such relief being subject to conditions designed to ensure compliance with safety at sea and other conventions.

·          To give effect to the related purposes set out in the Convention.

Under the first of its purposes, the Fund is under an obligation to pay compensation to States and persons who suffer pollution damage, if such persons are unable to obtain compensation from the owner of the ship from which the oil escaped or if the compensation due from such owner is not sufficient to cover the damage suffered.

Under the Fund Convention, victims of oil pollution damage may be compensated beyond the level of the shipowner's liability.  However, the Fund's obligations are limited so that the total payable to victims by the shipowner and the Fund shall not exceed 30 million SDR (about US$41 million) for any one.  In effect, therefore, the Fund's maximum liability for each incident is limited to 16 million SDR incident (under the 1971 convention - limits were raised under the 1992 Protocol).

Where, however, there is no shipowner liable or the shipowner liable is unable to meet their liability, the Fund will be required to pay the whole amount of compensation due.  Under certain circumstances, the Fund's maximum liability may increase to not more than 60 million SDR (about US$82 million) for each incident.

With the exception of a few cases, the Fund is obliged to pay compensation to the victims of oil pollution damage who are unable to obtain adequate or any compensation from the shipowner or his guarantor under the 1969 Convention.

The Fund's obligation to pay compensation is confined to pollution damage suffered in the territories including the territorial sea of Contracting States.  The Fund is also obliged to pay compensation in respect of measures taken by a Contracting State outside its territory.

The Fund can also provide assistance to Contracting States which are threatened or affected by pollution and wish to take measures against it. This may take the form of personnel, material, credit facilities or other aid.

In connection with its second main function, the Fund is obliged to indemnify the shipowner or his insurer for a portion of the shipowner's liability under the Liability Convention.  This portion is equivalent to 100 SDR (about US$128) per ton or 8.3 million SDR (about US$10.6 million), whichever is the lesser.

The Fund is not obliged to indemnify the owner if damage is caused by his wilful misconduct or if the accident was caused, even partially, because the ship did not comply with certain international conventions.

The Convention contains provisions on the procedure for claims, rights and obligations, and jurisdiction.

Contributions to the Fund should be made by all persons who receive oil by sea in Contracting States.  The Fund's Organization consists of an Assembly of States, a Secretariat headed by a director appointed by the Assembly; and an Executive Committee.

The Protocol of 1976

Adoption: 19 November 1976

Entry into force: 22 November 1994

The 1971 Fund Convention applied the same unit of account as the 1969 Civil Liability Convention, i.e. the "Poincaré franc".  For similar reasons the Protocol provides for a unit of account, based on the Special Drawing Right (SDR) as used by the International Monetary Fund (IMF).

The Protocol of 1984

Adoption: 25 May 1984

Entry into force: 12 months after being accepted by at least 8 States whose combined total of contributing oil amounted to at least 600 million tons during the previous calendar year.

Status: Superseded by the Protocol of 1992

The Protocol was primarily intended to raise the limits of liability contained in the convention and thereby enable greater compensation to be paid to victims of oil pollution incidents.

But as with the 1984 CLC Protocol, it became clear that the Protocol would never secure the acceptances required for entry into force and it has been superseded by the 1992 version

The Protocol of 1992

Adoption: 27 November 1992

Entry into force: 30 May 1996

As was the case with the 1992 Protocol to the CLC Convention, the main purpose of the Protocol was to modify the entry into force requirements and increase compensation amounts. The scope of coverage was extended in line with the 1992 CLC Protocol.

The 1992 Protocol established a separate, 1992 International Oil Pollution Compensation Fund, known as the 1992 Fund, which is managed in London by a Secretariat, as with the 1971 Fund. In practice, the Director of the 1971 Fund is currently also the Director of the 1992 Fund.

Under the 1992 Protocol, the maximum amount of compensation payable from the Fund for a single incident, including the limit established under the 1992 CLC Protocol, is 135 million SDR (about US$173 million). However, if three States contributing to the Fund receive more than 600 million tonnes of oil per annum, the maximum amount is raised to 200 million SDR (about US$256 million).

From 16 May 1998, Parties to the 1992 Protocol ceased to be Parties to the 1971 Fund Convention due to a mechanism for compulsory denunciation of the "old" regime established in the 1992 Protocol.

However, for the time being, two Funds (the 1971 Fund and the 1992 Fund) are in operation, since there are some States which have not yet acceded to the 1992 Protocol, which is intended to completely replace the 1971 regimes.

IMO and the IOPC Fund Secretariat are actively encouraging Governments who have not already done so to accede to the 1992 Protocols and to denounce the 1969 and 1971 regimes. Member States who remain in the 1971 Fund will face financial disadvantages, since the financial burden is spread over fewer contributors. For both the 1971 and 1992 Funds, annual contributions are levied on the basis of anticipated payments of compensation and estimated administrative expenses during the forthcoming year

The 2000 Amendments

Adoption: 18 October 2000

Entry into force: 1 November 2003 (under tacit acceptance)

The amendments raise the maximum amount of compensation payable from the IOPC Fund for a single incident, including the limit established under the 2000 CLC amendments, to 203 million SDR (US$260 million), up from 135 million SDR (US$173 million). However, if three States contributing to the Fund receive more than 600 million tonnes of oil per annum, the maximum amount is raised to 300,740,000 SDR (US$386 million), up from 200 million SDR (US$256 million).

The 2003 Protocol (supplementary fund)

Adoption: 16 May 2003

Entry into force: 3 March 2005

The 2003 Protocol establishing an International Oil Pollution Compensation Supplementary Fund was adopted by a diplomatic conference held at IMO Headquarters in London.

The aim of the established Fund is to supplement the compensation available under the 1992 Civil Liability and Fund Conventions with an additional, third tier of compensation. The Protocol is optional and participation is open to all States Parties to the 1992 Fund Convention.

The total amount of compensation payable for any one incident will be limited to a combined total of 750 million Special Drawing Rights (SDR) (just over US$1,000 million) including the amount of compensation paid under the existing CLC/Fund Convention.

Application of Protocol
The supplementary fund will apply to damage in the territory, including the territorial sea, of a Contracting State and in the exclusive economic zone of a Contracting State.

Contributions to the supplementary fund
Annual contributions to the Fund will be made in respect of each Contracting State by any person who, in any calendar year, has received total quantities of oil exceeding 150,000 tons. However, for the purposes of the Protocol, there is a minimum aggregate receipt of 1,000,000 tons of contributing oil in each Contracting State.

Assessment of annual contributions
The Assembly of the Supplementary Fund will assess the level of contributions based on estimates of expenditure (including administrative costs and payments to be made under the Fund as a result of claims) and income (including surplus funds from previous years, annual contributions and any other income).

Amendments to the limits
Amendments to the compensation limits established under the Protocol can be adopted by a tacit acceptance procedure, so that an amendment adopted in the Legal Committee of IMO by a two-thirds majority of Contracting States present and voting, can enter into force 24 months after its adoption.

Resolutions adopted by the Conference

The Conference adopted three resolutions:

Conference resolution 1: Financing of the International Conference to adopt a Protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992 - acknowledges that the funding of the International Conference was made available on the understanding that the amount paid to IMO for convening and holding the Conference would be reimbursed, with interest, by the Supplementary Fund to the 1992 Fund, and urges the Contracting States to the Protocol, when it has entered into force, to ensure that the amount paid to IMO is reimbursed by the Supplementary Fund, with interest, to the 1992 Fund.

Conference resolution 2: Establishment of the International Supplementary Fund for Compensation for Oil Pollution Damage - requests the Assembly of the International Oil Pollution Compensation Fund, 1992 (1992 Fund), to authorise and instruct the Director of the 1992 Fund to take on administrative and other functions relating to the setting up of the supplementary Fund; recommends the two Funds to share a single Secretariat and Director; and recommends meetings on 1992 Fund and supplementary Fund to be held simultaneously and in the same place.

Conference resolution 3: Review of the international compensation regime for oil pollution damage for possible improvement - requests the 1992 Fund Assembly to consider enhancements that could be made to the 1992 Liability Convention and the 1992 Fund Convention; urges all Contracting States to the Conventions to place a high priority on ongoing work towards a comprehensive review of the Conventions; and requests IMO to take action as necessary based on the outcome of the deliberations of the 1992 Fund Assembly.

The IOPC funds and IMO

Although the 1971 and 1992 Funds were established under Conventions adopted under the auspices of IMO, they are completely independent legal entities.

Unlike IMO, the IOPC Funds are not United Nations (UN) agencies and are not part of the UN system. They are intergovernmental organisations outside the UN, but follow procedures which are similar to those of the UN.

Only States can become Members of the IOPC Funds. States should consider becoming Members of the 1992 Fund, but not of the 1971 Fund which will be wound up in the near future.

To become a member of the Fund, a State must accede to the 1992 Civil Liability Convention and to the 1992 Fund Convention by depositing a formal instrument of accession with the Secretary-General of IMO. These Conventions should be incorporated into the national law of the State concerned.

See the IOPC Funds website at http://www.iopcfund.org/

Special drawing rights

The daily conversion rates for Special Drawing Rights (SDRs) can be found on the International Monetary Fund website at http://www.imf.org/

Winding up of 1971 fund

Due to denunciations of the 1971 Fund Convention, this Convention ceased to be in force on 24 May 2002.

Contracting Parties to the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (IOPC Fund)  on 27 September 2000  signed a Protocol allowing for the early winding-up of the 1971 Fund, which was established to provide compensation to victims of oil pollution from ships carrying oil as cargo.            

The 2000 Protocol was signed following a Diplomatic Conference held from 25 to 27 September 2000.

From 16 May 1998, Members of the 1992 Fund ceased to be Members of the 1971 Fund Convention due to a mechanism in the Protocol which established the 1992 Fund allowing for compulsory denunciation of the "old" regime. However, with the departure of these States, the total quantity of contributing oil on the basis of which contributions to the Fund are assessed has been dramatically reduced. The effect of this reduction in the contributions base is two-fold.

In the first place, a considerably increased financial burden will fall on the contributors in those States which remain Members of the 1971 Fund if a major oil spill occurs in any of those States, since the contributors will be legally responsible for the funding of the total amount of compensation due from the 1971 Fund.

In addition, as long as the 1971 Fund remains in existence, the concern remains that it will face a situation in which an incident occurs where the 1971 Fund has an obligation to pay compensation to victims, but where there are no contributors in any of the remaining Member States.

In such a situation, if a tanker spill should occur, the remaining 1971 Fund Member States would not have the financial protection which they would expect under the provisions of the 1971 Fund Convention.

Under Article 43.1 of the 1971 Convention, the 1971 Fund ceases to exist when the number of Contracting States falls below three. In order to allow the Convention to terminate sooner, the Conference agreed to amend Article 43.1 so that the Convention ceases to be in force:

(a)        on the date when the number of Contracting States falls below twenty-five; or

(b)        twelve months following the date on which the Assembly notes that, according to the information provided by the Director on the basis of the latest available oil reports submitted by Contracting States in accordance with article 15, the total quantity of contributing oil received in the remaining Contracting States by those persons who would be liable to contribute pursuant to article 10 of the Convention during the preceding calendar year falls below 100 million tonnes, whichever is the earlier.          

The 2000 Protocol will be brought into force by the tacit acceptance procedure, whereby it is deemed to have been accepted six months from the date of its adoption unless objections are received by not less than one-third of the Contracting States.


Conventions
Depositary Information on IMO Conventions
Status of Conventions - Summary
Status of Conventions by country
Convention on the International Maritime Organization
Latest Ratifications
Action Dates (Entry into force dates)
SOLAS
COLREG
STCW
SAR
SUA
Load Lines
MARPOL
Ship Recycling Convention
Removal of Wrecks
Anti-fouling Systems
Ballast Water Management
Liability and Compensation Conventions
Maritime Safety Conventions
Maritime Security
Prevention of Marine Pollution Conventions
Other IMO Conventions
List of Conventions
Abbreviations of Conventions
Sources and citations