Incidents - The Prestige Incident : IOPC Funds

On 13 November 2002 the Bahamas registered tanker Prestige, laden with 77 000 tonnes of heavy fuel oil, broke in two off the coast of Galicia (Spain) spilling an unknown but substantial quantity of its cargo. The bow and stern sections, which are lying in 3 500 metres of water, are estimated to contain 13 300 tonnes and 900 tonnes of oil respectively.

A major offshore clean-up operation was carried out using vessels from Spain and nine other European countries. The oil from the Prestige affected the Atlantic coast from Vigo in Spain to Brest in France, as well as causing intermittent and light contamination on the French and English coasts of the English Channel as far as the Dover Strait. Approximately 1 900 km of shoreline was affected in Spain and France. Around 141 000 tonnes of oily waste was collected in Spain and some 18 300 tonnes in France.

The Spanish Government concluded a contract with the oil company Repsol YPF to remove the remaining oil from the wreck of the Prestige. The work commenced in May 2004 and was finalised in September 2004 at a cost of some €109.2 million (£81.4 million).

No oil is reported to have come ashore in Portugal, but some clean-up operations at sea were carried out by the Portuguese authorities.

Compensation is available to any individual, business, private organisation or public body who has suffered pollution damage as a result of the Prestige incident. Compensation is payable under the 1992 Civil Liability and Fund Conventions which form part of Spanish, French and Portuguese law.

Compensation is payable for expenses actually incurred and for loss or damage actually suffered as a result of the oil pollution. All claims must be properly supported by documentation - a well-substantiated claim can be processed more quickly than one which is not.

Approximately €22.8 million (£17 million) compensation is available from the shipowner's liability insurer (the London P&I Club). Additional compensation of up to approximately €148.7 million (£111 million) is available from the 1992 Fund. In other words, a total of €171.5 million (£127.9 million) is available.

The London P&I Club and the 1992 Fund have established a Claims Office in La Coruña (Spain) to assist claimants who wish to make claims for compensation for pollution damage in Spain. Claimants are invited to contact the Prestige Claims Office by telephone or fax in order to obtain a claims form and further information on presenting claims. The office is located at:

(c/o CGC y Asociados S.L.)
San Andrés, 56 - 2º A
15003 La Coruña
Spain
Telephone: 00 34 981 217207
Fax: 00 34 981 210538

The London P&I Club and the 1992 Fund have set up a Claims Office in Bordeaux (France) for the handling of claims for pollution damage in France. The office is located at:

56, rue de Tivoli
33000 BORDEAUX
France
Tel: 00 33 556 01 50 10
Fax: 00 33 556 01 50 11
(Closed as at 30 September 2006. The activities of that Office will be carried out from Lorient by the person who currently manages the Erika Claims Handling Office.)

With respect to Spain, as at 30 August 2007 the Claims Handling Office in La Coruña had received 840 claims totalling €704.6 million (£525 million). These include ten claims from the Spanish Government totalling €654.3 million (£488 million) submitted during the period October 2003 – August 2007. As at 30 August 2007, 753 (90.72%) of the claims other than those of the Spanish Government have been assessed for €3.9 million (£2.9 million). Interim payments totalling €489 042 (£329 512) have been made in respect of 157 of the assessed claims, mainly at 30% of the assessed amount.

As regards France, as at 30 August 2007, 479 compensation claims totalling €109.7 million (£81.8 million) have been received by the Claims Office in Lorient, including a claim from the French Government for clean-up totalling €67.5 million (£50.3 million). Other claims relate to losses in the fishing, mariculture and tourism industries. Over 85% of these claims have been assessed and additional information has been requested in respect of many of the remaining claims. The remaining claims are being assessed by the 1992 Fund and the London Club.

Concerning Portugal, the Portuguese Government has submitted two claims totalling €4.3 million (£3.2 million) in respect of clean-up and preventive measures.

The maximum amount available for compensation under the 1992 Civil Liability Convention and the 1992 Fund Convention in respect of the Prestige incident is €171.5 million (£127.9 million). The figures given in May 2003 by the Governments of the three States affected by the incident, Spain, France and Portugal, as to the damage caused indicated that the total amount of the damage could be as high as €1 050 million (£783.1 million). Under the 1992 Conventions, the Fund has to give all claimants equal treatment. The Executive Committee therefore decided in May 2003 that the 1992 Fund's payments should be for the time being limited to 15% of the loss or damage actually suffered by each individual claimant as assessed by the 1992 Fund's experts. The Committee reconsidered the payment level several times but decided, as late as in June 2005, that the level of 15% should be maintained.

At its October 2003 session, the 1992 Fund Assembly had decided that the 1992 Fund should make advance payments to the Spanish Government on account, subject to certain conditions. The Director therefore made a preliminary assessment of the claims which had been presented at that time by the Spanish Government for €383.7 million, and the Fund made a payment of €16 050 000 (£11.1 million), corresponding to 15% of the interim assessment of €107 million (£79.8 million). The Director also made a general assessment that the total admissible damage in Spain arising from the incident would be at least €303 million (£226 million), and the Fund made a further payment of €41 505 000 (£28.8 million) , corresponding to the difference between €57 555 000 (15% of €383.7 million) and €16 050 000. In order to protect the 1992 Fund if an overpayment situation were to arise, this further payment was made against a bank guarantee and an undertaking by the Spanish Government to repay up to the amount of that payment if the Executive Committee so decided.

The 1992 Fund has thus paid a total of €57 555 000 (£39 914 906) to the Spanish Government which has been used to pay compensation to claimants.

The level of the 1992 Fund's payments has in the past generally been determined on the basis of the total amount of claims already presented and possible future claims against the Fund, and not on the basis of the Fund's assessment of the admissible amounts. When the level of payments was considered by the Executive Committee in October 2005 on the basis of the figures presented by the Governments of the three States affected by the incident, it was clear that the level of payments would probably have to be maintained at 15% for several years, unless a new approach were taken.

The Director suggested that an alternative way of determining the Fund's level of payments would be to base it on an estimate of the final amount of the admissible claims against the Fund, established either as a result of agreements with the claimants or by final judgements of a competent court, which was unlikely to be exceeded.

In view of the magnitude of the Prestige incident and the exceptional circumstances surrounding it, the Executive Committee agreed to the Director’s proposal to increase the level of payments from 15% to 30% of the actual losses suffered by claimants. The Committee also decided to apportion on a provisional basis the amount payable by the 1992 Fund, minus a reserve of 10%, amongst the three States affected by the incident. Both these decisions were subject to the provision of certain guarantees and undertakings by the States concerned so as to ensure that the Fund was protected against overpayment. In agreeing to the proposal, it was stressed that it should not be seen as a precedent for future incidents.

The Portuguese Government subsequently informed the 1992 Fund that it would not provide any bank guarantee and would, as a consequence, only request payment of 15% of the assessed amount of its claim. In January 2006 the French Government gave the required undertaking to accept, if necessary, a reduction in compensation in respect of its own claim. As for Spain, in March 2006, the Spanish Government gave the required undertaking and bank guarantee and as a consequence, a payment of €56 365 000 (£38.5 million) was made in March 2006. The Director also increased the level of payments to 30% of the established claims for damage in Spain and in France (except in respect of the French Government's claim), with effect from 5 April 2006. In August 2006 the 1992 Fund settled the claim of the Portuguese Government at €2.2 million (£1.5 million) and made a payment of €328 488 (£222 600), corresponding to 15% of the assessed amount.

As requested by the Spanish Government, the 1992 Fund retained €1 million in order to make payments at the level of 30% of the assessed amounts in respect of the individual claims that have been submitted to the Claims Handling Office in Spain. These payments will be made on behalf of the Spanish Government in compliance with its undertaking, and any amount left after paying all the above claimants will be returned to the Spanish Government. If the amount of €1 million were to be insufficient to pay all the claimants who had submitted claims to the Claims Handling Office, the Spanish Government has undertaken to make payments to these claimants up to 30% of the amount assessed by the London Club and the 1992 Fund.

At its October 2005 session, the Executive Committee considered whether a claim for €109.2 million (£81.4 million) by the Spanish Government relating to the cost of the operation to remove oil from the wreck of the Prestige was admissible in accordance with the 1992 Fund's criteria.

As already mentioned, the Prestige had broken in two and sank some 260 kilometres west of Vigo (Spain), the bow section to a depth of 3 500 metres and the stern section to a depth of 3 830 metres. Following extensive studies and trials the decision was taken by the Spanish Government to remove as much cargo as possible using aluminium shuttle containers, which were lowered down to the wreck and then filled with oil by gravity through holes cut in the wreck’s cargo tanks. Using this procedure some 13 000 tonnes of oil was successfully removed from the forepart, following which nutrients were added to the cargo tanks to promote the biodegradation of the remaining residues.

In the light of the findings of two separate studies (see Annexes I and II to document 92FUND/EXC.30/9/2) on the technical reasonableness of the operation, one commissioned by the Director and the other by the Spanish Government, the Director expressed the view at the October 2005 session that the oil remaining in the wreck did not pose a significant pollution threat and that the costs of the operation were disproportionate to any potential economic and environmental consequences of leaving the oil where it was. He had therefore concluded that the claim did not fulfil the Funds' admissibility criteria.

Some delegations had disagreed with the Director's conclusions, since in their view, it was not possible to predict with any certainty what the outcome of leaving the oil in the wreck would have been, and it would have been difficult for any government to resist the pressure from the public to ensure that the risk was eliminated or for it not to comply with various United Nations Conventions on protecting the environment.

Other delegations had agreed with the Director that the claim did not fulfil the Funds' admissibility criteria, making the point that if the decision to remove the oil was based on potential social, non-economic effects, these could not be taken into account when assessing the admissibility of the claim. However, some of those delegations made the point that some of the costs of studies and surveys may have been reasonable up to the point when the actual cost of the oil removal operation was known and therefore recommended carrying out assessments of the different elements of the claim to see if some were admissible.

The Committee decided in October 2005 to defer any decision on the admissibility of the claim, but instructed the Director to collaborate with the Spanish Government to examine all elements of the claim with a view to identifying possible admissible items for consideration by the Committee.

During this examination, the total costs of the oil removal operation of €109.2 million (£81.4 million) were broken down into two main parts, namely the costs incurred in 2003 totalling €33.1 million (£24.7 million) and those incurred in 2004 totalling €76.1 million (£56.8 million). The 2003 costs related to further operations to seal the oil leaking from the wreck and various studies into the feasibility of recovering oil from the cargo tanks as well as work preparatory to the commencement of the recovery operation. Costs incurred in 2004 related to the actual oil removal operation and the addition of nutrients to the fore part of the wreck.

In December 2003 and March 2005 the European Commission made concessions of aid to the Spanish Government of €27.1 million (£20 million) in respect of the costs incurred in 2003 and €56.8 million (£42 million) in respect of costs incurred in 2004. Because of the amounts awarded by the European Commission, the Spanish Government reduced its claim in February 2006 to €24.2 million (£18 million).

During the discussions at the Executive Committee' s February 2006 session, most delegations that intervened expressed the view that, on the basis of the Funds' existing admissibility criteria, and in the interest of applying those criteria in a uniform way, the claim for the costs incurred by the Spanish Government in 2004 for the removal of the oil from the wreck was inadmissible. However, some delegations considered that it was important that the Funds were prepared to deal with similar claims in the future in a more flexible manner. To that end, those delegations expressed the view that the Director should be instructed to examine the existing admissibility criteria in respect of preventive measures and to submit to the Assembly detailed proposals for clarifying the criteria within the framework of the existing Conventions.

In the light of the Director's analysis of all the elements of the claim, the Executive Committee decided that some of the costs incurred in 2003 relating to the additional sealing of leaks emanating from the wreck and various surveys and studies were admissible in principle, but that the costs incurred in 2004 relating to the actual removal of the oil from the wreck were inadmissible for compensation under the 1992 Fund's criteria.

The Governments of the Fund Member States have taken a policy decision that the Fund should, in respect of any oil pollution incident, endeavour to recover from third parties the amounts it has paid in compensation for pollution damage.

Spain has taken legal action against the American Bureau of Shipping (ABS), the classification society of the Prestige, before a Court in New York. In October 2004, the Executive Committee therefore considered whether the Fund should also pursue recourse action against ABS, and if so, in which jurisdiction, namely the United States where ABS is incorporated or in Spain where the major part of the pollution damage occurred.

Prestige

Spain, 13 November 2002