Shipping (Oil Pollution) (Liability and Compensation) (Jersey) Law 201-
Report
Background
The draft Law will enable the States to continue to give effect to the International Convention on Civil Liability for Oil Pollution Damage 1992 (“the Liability Convention”) and the International Convention for Compensation for Oil Pollution Damage 1992 (“the Fund Convention”). Importantly, it will also enable the Island to give effect to the international protocol in 2003 to the Fund Convention (the protocol itself being known as “the Supplementary Fund Protocol”).
The Conventions regulate liability and provide for compensation for damage caused by oil pollution. They are currently implemented in Jersey by a United Kingdom Order-in-Council that has been extended to the Islands – the Merchant Shipping (Oil Pollution) (Jersey) Order 1997.
Crucially, the addition of the Supplementary Fund Protocol will provide the Island with access to a scheme for a very valuable supplementation of the 1992 Fund. The aim is to ensure that adequate compensation is available for victims of oil pollution damage and to alleviate the effects of any shortfall of funds available under the Liability and Fund Conventions.
Legislative alternatives
It was technically possible for the Island to seek a new Order-in-Council to apply the Supplementary Fund Protocol to the Island. However, a Jersey Law has the advantage of consolidating in Jersey legislation a fully comprehensive international compensation scheme regarding oil pollution damage from ships.
Content of the Draft Law
Much of the law is quite literally word-for-word as can already be found in the 1997 Order-in-Council which already applies in Jersey.
Additionally, the law now includes specific provisions in order to give effect to the Supplementary Fund Protocol. These provisions are detailed in Part 3 of the law. They cover such matters as contributions to be made to the Supplementary Fund, its liability and limitations to its liability, jurisdiction and extinguishing of claims. The provisions are essentially the same as those for the 1992 Fund Convention and the text can be viewed at
www.iopcfunds.org/uploads/tx_iopcpublications/Text_of_Conventions_e.pdf.
In ‘bringing home’ this legislation a useful difference from the current provisions is the provision in article 8(3) that allows the Minister to up-date limits on owner liability by Order. Furthermore, article 24(5) allows the Minister to up-date liability limits of liability attributable to the Fund. At the moment these adjustments can only be done by order of the UK’s Secretary of State which in turn would then require local application and modification of the Order-in-Council. This change puts the Island in charge of such matters and makes the process much simpler.
A further improvement is that article 35 of the draft law includes Regulation-making powers so that new or modifying international agreements can be agreed by the States without new primary legislation. This is not possible under the current Order-in-Council.
The remaining difference that might at first reading appear substantive is the addition of a tax exemption clause and this is dealt with in more detail below.
Financial Risks and Benefits
Tax
In accordance with the Conventions and Protocol, a Tax Exemption clause is required and this has been included at article 34 of the draft law.
However, the Funds are currently established in London, not Jersey. Their everyday business is carried out from that base and further details on their work in distributing compensation internationally can be found at www.iopcfunds.org . So, for these tax exemption provisions ever to be needed, one of the Funds would have to establish itself in the Island. This is a very unlikely contingency but in theory the Fund or the Supplementary Fund could need to base itself in Jersey in order to deal with an oil catastrophe in or adjacent to Jersey waters. Even in the event of such a catastrophe, the Funds may carry on much if not all of their work from London. This is because their principle work is to provide compensation for oil pollution damage, not to be involved with the prevention or clean-up itself.
This means that the tax exemptions sought are a legal necessity to satisfy the requirements of compliance with the Convention. They do not represent a loss of income to the Treasury. The article has been included with the support and permission of the Minister for Treasury and Resources.
Oil Pollution Risk and Cost
Although the Island has been mercifully free of damage from a major oil spill for many years, the potential damage is extremely significant. A failure to apply the Protocol relating to the Supplementary Fund to the Island would be grave. There is very significant additional protection and access to compensation conferred by membership of that Fund.
Major countries contribute to the Fund based on the amount of crude and heavy fuel oil they import. Jersey imports no crude oil and heavy oil imported annually for the power station has averaged just 19,000 tonnes per annum in the last three years. This is well below the limit of 150,000 tonnes over which contributions would be required by article 10.1 of the Protocol. Forecasts from the Jersey Electricity Company show that imported tonnage will in fact fall as power imported from Europe through the undersea cables is maintained and increased.
At the same time, the UK, as the State Party, already meets the deemed minimum receipt of 1 million tons per annum in accordance with article 14.1 of the Protocol. Jersey therefore stands to benefit from the Fund without having to contribute to it.
The current limits on funds available is a maximum of 203 million Special Drawing Rights (SDR) and once the Island has acceded to the 2003 Protocol this would rise to 750 million. One SDR is currently valued at 1.08 to £1.00 so that this represents a change from a maximum compensation level of approximately £188m to £694m.
UK Support
As the Supplementary Fund Protocol will be new to Jersey, discussion took place with United Kingdom officials to ensure that if the States seek ratification of the Protocol on behalf of the Island this would be supported by the UK. Personnel from the UK’s Department of Transport have provided useful comment and have been very supportive. Agreement and approval of the draft law was confirmed in January 2015.
Penalties and Human Rights Approvals
Offences include failing to have compulsory insurance under article 14 for the carriage of oil and for a ship proceeding to sea when served with a detention notice as dealt with under article 33. Penalties for these offences have been approved by the Attorney General’s office and it should be noted that no new offence has been created. Existing offences under the existing Order-in-Council are maintained.
As a projet du loi, the Attorney General has considered the draft law regarding the European Convention on Human Rights and found no conflict. The Minister has therefore signed the relevant declaration.
Conclusion
It is clear that the Island stands to benefit by giving effect to the Supplementary Fund protocol. The draft law will enable that and the UK will be asked to ratify it on Jersey’s behalf. It will also provide in one Jersey statute, a comprehensive maritime pollution compensation and liability regime capable of modification and up-dating in a way that cannot be easily achieved at the moment. Approval of the law by the States is strongly recommended.
Feb 2015
gov.je