The 1992 Civil Liability Convention (CLC 1992) and Fund Convention 1992 provide for strict liability and compulsory insurance for shipowners in respect of oil pollution damage. In return, shipowners are entitled to limit their liability for pollution claims. Clearly, therefore, it is of some significance to owners and operators of floating offshore units whether the courts will treat these as ships, or in the same way as more permanent offshore installations. Opinion on the issue is divided, with countries like Japan (the largest contributor to the IOPC Fund, but with relatively few offshore E&P units) naturally wanting to restrict the scope of its application.
Since we last examined this question1, an IOPC Funds Working Group has revisited the subject and has now published its final report2, discussing the issues and making recommendations to the 1992 Fund Assembly in relation to the definition of a “ship” in the context of oil pollution liability.
Article 1 of CLC 1992 defines a ‘ship’ as “any sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo, provided that a ship capable of carrying oil and other cargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo and during any voyage following such carriage unless it is proved that it has no residues of such carriage of oil in bulk aboard.”
The definition stipulates that the oil must be carried, but whether this covers FPSOs, FSOs and FSUs has always been a grey area3.
The Working Group has recommended a ‘hybrid approach’, combining:
- A non-exhaustive, illustrative list of vessel types clearly within or outside the definition of ‘ship’ under CLC 1992; and
- A case-by-case analysis by reference to the ‘maritime transport chain’4 where it is not clear whether a vessel falls within or outside the definition.
The Working Group considered that offshore craft such as FDPSOs, FPSOs and FSUs (whether purpose-built or converted) with independent motive power would fall within the definition of ‘ship’ under CLC 1992 when carrying oil (or oil residues) and undertaking a voyage, whether under their own propulsion or being towed. On the other hand, vessels not designed for the carriage of oil, such as container ships, passenger vessels or dredgers, would fall outside the definition, as would drilling rigs, drill-ships and FPSOs when involved in exploration, production and/or processing.
In cases where it is not clear whether a structure is a ‘ship’ or not, the question should be decided on a case-by-case basis using the ‘maritime transport chain’ test. Where oil is produced offshore, the maritime transport chain begins when the oil “is loaded into a vessel other than the one that received the oil directly from the subsea well to which it was connected.” Any seagoing vessel or craft – tanker, FPSO, jack-up rig, mobile offshore production unit or other craft – will be a ‘ship’ from the moment it departs on a voyage laden with oil or, if it has its own independent motive power, from the moment the oil is loaded. The maritime transport chain ends when the oil is discharged. If it is transferred to another ship, this would amount to a new maritime transport chain.
It remains to be seen whether the 1992 Fund Assembly will adopt the Working Group’s recommendations. The proposed analysis certainly makes the position somewhat clearer, although many cases would still have to be decided on their specific facts.