On 14 April 2014, Denmark became the tenth country to ratify the Nairobi Convention on Wreck Removal, which shall result in the automatic entry into force of its conditions exactly one year later. The Convention establishes a strict liability regime for the removal of hazardous wrecks contained within states’ Exclusive Economic Zones (EEZs). States forced to undertake wreck removal themselves are able to recover costs from registered owners as well as having rights of direct action against insurers. This is subject to the proviso that the steps required to be taken are commensurate with the hazard posed by the wreck.

What problem is the Convention seeking to address?

Two incidents, separated by almost twenty years, provide the backdrop against which the Convention is set. Firstly, in March 1967, the Torrey Canyon struck a reef off the Scilly Isles, outside the United Kingdom’s then territorial limit of three miles. The crude oil cargo slowly began to spill. The armed forces eventually dropped high explosives and liquefied petroleum jelly on the wreck to burn off the crude, with mixed results. Despite this unsophisticated solution, the costs incurred by the United Kingdom were considerable and recovery from the owner was difficult. Secondly, in August 1984, the French cargo ship Mont Louis collided, just outside Belgian territorial waters, with a German ferry, the Olau Brittania. The highly toxic uranium hexafluoride cargo was salvaged. Difficulties arose, however, as Belgium lacked a legal basis on which to compel removal of the wreck. The wreck had sunk in shallow water and became exposed at low tide, which posed a hazard to navigation.

These two high profile incidents helped to focus the international community’s attention on the lack of a unified system for the removal of wrecks located outside states’ territorial waters, but within their EEZs.

Add to this the fact that, in recent years, the costs of wreck removal have increased significantly. The relatively recent wrecks of the container carrier Rena and the cruise ship Costa Concordia cost approximately US$425 million and US$1.5 billion, respectively, to remove. Predominantly, the reasons for these costs are the increased influence of environmental concerns, as well as interventions by the local authorities as to the manner in which wrecks are to be removed. Interested parties will note with concern that modern generation cruise and container ships can be double the size of Costa Concordia and Rena.

To date, states have relied solely on their own legal framework to deal with wreck removals within their territorial waters. However, many states have had limited rights to claim compensation for their costs related to the removal of wrecks within their EEZ. Caprices of local legislation have led to legal uncertainty and a lack of transparency for all parties. The intention of the Convention is to provide a uniform international set of rules for the prompt and effective removal of wrecks.

How does the Convention work?

The Convention vests in signatory states the power to compel registered owners or their insurers to locate, mark or remove a wreck in cases where it poses a hazard. The Convention defines “hazard” as to include any threat to navigation, harmful consequences on the marine environment or damage to the coastline or related interests of a state. The notable proviso being that such removal must be proportionate to the hazard posed by the wreck and must not go beyond that which is reasonable.

The Convention applies to wrecks located in the signatory state’s EEZ and territorial waters, provided that state has opted in to extending the scope of the Convention (as the United Kingdom has done). The Convention applies to ships with a gross tonnage of 300 or more, ships registered in a signatory state, or ships entering or leaving the EEZ of a signatory state.

Owners are required by the Convention to have adequate insurance in place to cover the costs of wreck removal. This compulsory insurance must meet the limits provided for by the 1976 Limitation Convention. Ships will need to obtain, and carry on board at all times, a certificate issued or certified by the authorities of a signatory state, confirming that insurance for wreck removal is in place. Any ship that enters the EEZ of a signatory state without the necessary insurance in place to cover its liabilities, may be detained. Any such ship is only likely to be released once it has taken out satisfactory insurance.

Where the registered owner is unable to pay, any claim for compensation under the Convention may be brought directly against the registered owner’s insurers. In such an event, insurers may rely on the same defences available to owners under the Convention. The defences include damage resulting from an act of war or wholly and intentionally caused by a third party, or the negligence of any government or authority responsible for the maintenance of navigational aids. The Convention prevents insurers from employing any coverage defences that might have otherwise existed between insurer and insured, although insurers will not be liable if the damage was caused by the owner’s wilful misconduct.

The Convention does not affect an owner’s right to limit liability under any applicable national or international regime, most commonly the 1976 Limitation Convention. However, states are entitled to make a reservation excluding wreck removal from the category of claims subject to limitation.

The future

Despite the relatively low number of signatories to date, the Convention already extends quite a broad geographical reach and will capture a significant proportion of ships, because any ship passing through a signatory’s EEZ should have the necessary insurance in place (although it is not clear, at this stage, how this will be enforced). This reach will increase as more states ratify the Convention.

Only once the first removal orders are issued and the first wrecks are removed will the full practical effect of the Convention be revealed. In the interim, attention will likely focus on the insurance cover obtained by owners and whether it is adequate to discharge owner’s obligations to the satisfaction of the signatory states.