Posted: October 20th, 2022

Oil spill compensation scheme from an oil tanker in Korea : a case study on the Hebei Spirit

Oil Spill Compensation Scheme from an Oil
Tanker in Korea : Case Study on the Hebei Spirit

A dissertation submitted to the World Maritime University in partial
fulfilment of the requirements for the award of the degree of
MASTER OF SCIENCE
In
MARITIME AFFAIRS
(Marine Environment and Ocean Management)

ACKNOWLEDGEMENTS
First, I would like to thank my supervisor, Professor Neil Bellefontaine, for his
valuable guidance and advice. He inspired me greatly to study for this dissertation,
and taught me how to write academic papers in accordance with the APA system.
Besides, I would like to thank Professor Olof Linden for his kind Helpance when I
made a proposal for my dissertation. He encouraged me to study various valuable
marine environmental issues at World Maritime University.
A special thanks goes to my English teacher, Helpant Professor Inger Battista for
helping me perfect the writing of this dissertation in English. Her comments and
corrections on my dissertation were of huge help to me.
Also, I would like to thank Professor I.H. Kim, who works at Korea University, for
providing useful books and materials to help my research on the legal approach for
the Hebei Spirit incident.
Further, I would like to thank Mr. Y.W. Lee, CEO of my organization Korea Marine
Environment Management Corporation, for providing this valuable opportunity and
financial support for me to study at World Maritime University.
Finally, I would like to thank my parents, H.S. Kim and K.H.Yoon, for giving me my
life in the first place and for always believing in me. I also thank my wife, Y.H. Cho,
for encouraging and supporting me to study without any problems in Malmo, Sweden.
She listened to my complaints and frustrations, made me a better student, and had
confidence in me when I doubted myself.
iii
ABSTRACT
Title of Dissertation: Oil Spill Compensation Scheme from an Oil Tanker in
Korea : Case Study on Hebei Spirit
Degree: MSc
This dissertation is a case study of the Korean Oil Spill Compensation Scheme from
a tanker, examining it through the analysis of the Hebei Spirit incident, which is the
largest oil pollution incident from a ship in the Republic of Korea, occurring on 7
December 2007.
Additionally, the present International Compensation Schemes including its
evolution and domestic compensation schemes of two countries, the United States
and Canada, were also investigated briefly in order to compare them with the Korean
Scheme.
The oil spilled from the Hebei Spirit has affected much of the western coasts,
approximately 350km of the Korean coastline. The incident incurred irrevocable
damage to the marine ecological system, mariculture, and various coastal businesses
such as restaurants and tourism.
The most important issues were how to get compensation for the losses from the
Hebei Spirit incident because the estimated amounts of loss of damages exceeded the
limitation amounts of compensation under the Korean Oil Spill Compensation
Schemes at the moment.
iv
Furthermore, the payments from shipowners and International Oil Pollution
Compensation Fund were delayed for various reasons, and victims, such as fishermen,
vendors, environmentalists and residents criticized the Korean Goverment.
As a result, the Korean Government enacted a Special Law in March 2008, in order
to make speedy payments in the form of advance compensation or loans to claimants.
However, this Special Law can not alone solve the problems entirely, but the Korean
Government has also had to shoulder a lot of the financial burden.
Therefore, this dessertation will analyze the problems that arose during the
compensation process under the present International and Korean Oil Spill
Compensation Schemes and seek any measures to ensure a more effective
compensation to victims who may suffer from economic loss of damages in the
future.
KEY WORDS: Hebei Spirit, Oil Spill, Compensation, International Oil Pollution
Compensation Fund, Civil Liability Convention, Fund Convention, Oil Pollution
Act 1990, Liability, Limitation
v
TABLE OF CONTENTS
DECLARATION ………………………………………………………………………………………….. i
ACKNOWLEDGEMENTS ………………………………………………………………………….. ii
ABSTRACT………………………………………………………………………………………………… iii
TABLE OF CONTENTS ……………………………………………………………………………… v
LIST OF TABLES…………………………………………………………………………………….. viii
LIST OF FIGURES …………………………………………………………………………………….. ix
LIST OF ABBREVIATIONS ……………………………………………………………………….. x
CHAPTER 1 Introduction ……………………………………………………………………………. 1
1.1 Introduction……………………………………………………………………………………………. 1
1.2 Objectives of Dissertation ……………………………………………………………………….. 2
1.3 Organization of the Dissertation ……………………………………………………………… 3
CHAPTER 2 Overview of the Compensation Schemes…………………………………… 4
2.1 Introduction……………………………………………………………………………………………. 4
2.2 International Compensation Schemes………………………………………………………. 5
2.2.1 Civil Liablity Convention and Fund Convention…………………………… 5
2.2.2 Supplementary Fund……………………………………………………………………. 8
2.2.3 Small Tanker Oil Pollution Indemnification Agreement and Tanker
Oil Pollution Indemnification Agreement……………………………………………. 10
2.2.4 International Oil Pollution Compensation Fund………………………….. 11
2.3. Korean Compensation Scheme……………………………………………………………… 14
2.3.1 Compensation for Oil Pollution Damage Guarantee Act ……………… 14
2.3.2 Korea Marine Environment Management Act…………………………….. 17
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2.3.3 Special Law ……………………………………………………………………………….. 20
2.4. Other Schemes……………………………………………………………………………………… 23
2.4.1 Introduction ………………………………………………………………………………. 23
2.4.2 Oil Pollution Act 1990 of the United States………………………………….. 24
2.4.3 Canadian Compensation Scheme………………………………………………… 27
CHAPTER 3 The Hebei Spirit Incident ………………………………………………………. 30
3.1 Introduction………………………………………………………………………………………….. 30
3.2 Overview of the Incident……………………………………………………………………….. 31
3.2.1 Impact of the Oil Spill………………………………………………………………… 31
3.2.2 Clean-up operations…………………………………………………………………… 33
3.2.3 Legal Proceedings………………………………………………………………………. 35
3.3 Application of International Compensation Scheme……………………………….. 36
3.3.1 Liability and Limitation of Compensation…………………………………… 36
3.3.2 Level of Payment ……………………………………………………………………….. 38
3.3.3 Compensations Covered by the IOPC Fund………………………………… 39
3.3.4 Claim Office ………………………………………………………………………………. 42
3.4 Claim Status …………………………………………………………………………………………. 43
3.4.1 Estimated Losses………………………………………………………………………… 43
3.4.2 Claim Situation………………………………………………………………………….. 44
CHAPTER 4 Problems and Consideration of the Development……………………. 51
4.1 Introduction………………………………………………………………………………………….. 51
4.2 External Problems with IOPC Fund………………………………………………………. 52
4.2.1 Absence of Exact Standards for Compensation …………………………… 52
4.2.2 Size of the Secretariat of the IOPC Fund…………………………………….. 54
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4.2.3 Role of the Claims Office ……………………………………………………………. 56
4.3 Internal Problems in Korea …………………………………………………………………… 57
4.3.1 Unreasonable Claims and Poor Evidence ……………………………………. 57
4.3.2 Korean Fund ……………………………………………………………………………… 60
Chapter 5 Conclusions………………………………………………………………………………… 61
REFERENCES…………………………………………………………………………………………… 65
viii
LIST OF TABLES
Table 1 Changes of the Limitation Amounts of Compensation per Incident
Table 2 Member States of Executive Committee of IOPC Fund 1992 (2009~2010)
Table 3 Status of Contribution from Member States in 1992 Fund (2009)
Table 4 Changes of Shipowners Liability under OPA 90
Table 5 Total Amount of Resources used till Oct. 2008
Table 6 Summary of Hebei Spirit Incident
Table 7 Estimated Losses Caused by Hebei Spirit Incident
Table 8 Claim Situation Caused by Hebei Spirit Incident
Table 9 Major Oil Spill Incident in Korea
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LIST OF FIGURES
Figure 1 The Layers of Compensation
Figure 2 Compensation Limits under International Compensation Schemes
Figure 3 Limits of Liability and Compensation for Oil Tanker Spills in Canada
Figure 4 Location of the Hebei Spirit Incident
Figure 5 Map of Shoreline Contamination
Figure 6 National Disaster Response Organization for Hebei Spirit incident
Figure 7 Rate of assessment by the IOPC Fund based on the number of claims
Figure 8 Rate of assessment by the IOPC Fund based on the amount of claims
Figure 9 Claims Status (based on the number of claims)
Figure 10 Claims Status (based on the amount of claims)
Figure 11 Development Claims (based on the amount of claims)
Figure 12 Development Claims (based on the number of claims)
Figure 13 Current Structure of the IOPC FUND’s Secretariat
x
LIST OF ABBREVIATIONS
CLC International Convention on Civil Liability for Oil Pollution Damage
CODGA Compensation for Oil Pollution Damage Guarantee Act
CRISTAL Contract Regarding a Supplement to Tanker Liability for Oil Pollution
CSA Canada Shipping Act
EEZ Exclusive Economic Zone
FC International Convention on the Establishment of an International
Fund for Compensation for Oil Pollution Damage
FOSC Federal On-Scene Coordinator
GT Gross Tonnage
HNS Hazardous and Nuxious Substances
HSC Hebei Spirit Center
IMCO Intergovernmental Maritime Consultative Organisation
IMO International Maritime Organization
IOPC Fund International Oil Pollution Compensation Fund
ITOPF International Tanker Owners Pollution Federation Limited
KCG Korea Coast Guard
KOEM Korea Marine Environment Management Corporation
KRW Korean Won
LLP Liability Limitation Proceeding
MARPOL International Convention for the Prevention of Pollution from Ships
MLA Marine Liability Act
MLTM Ministry of Land, Transport and Maritime Affairs
MPCF Maritime Pollution Claims Fund
MOGASM Ministry of Government Administration and Safety Management
MOMAF Ministry of Maritime Affairs and Fisheries
NPFC National Pollution Fund Center
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OPA 90 Oil Pollution Act, 1990
OSLTF Oil Spill Liability Trust Fund
POPs Persistent Organic Pollutants
SDR Special Drawing Rights
SLQ Stand Last in the Que
SOPF Ship-Source Oil Pollution Fund
STOPIA Small Tanker Oil Pollution Indemnification Agreement
TOPIA Tanker Oil Pollution Indemnification Agreement
TOVALOP Tanker Owners Voluntary Agreement concerning Liability for Oil
Pollution
US United States
USCG United States Coast Guard
1
CHAPTER 1 Introduction
1.1 Introduction
On 7 December 2007, a Hong Kong Flag tanker Hebei Spirit (146,848 GT) was
struck by the Korean Flag crane barge Samsung No.1 while at anchor approximately
5 miles off Taean county on the west coast of the Republic of Korea.
The crane barge was being towed by two tugs, when the tow line broke suddenly,
caused by a rough passage. The crane barge was unable to manoeuvre itself, and was
subsequently blown by the strong wind towards the tanker. Consequently, the crane
barge collided with the tanker and the crane on the barge punctured three of the port
cargo tanks of the tanker.
After the collision, around 10,500 tonnes of crude oil from the tanker escaped into
the sea, and the oil affected most of the western shoreline of Korea very quickly due
to heavy weather. Finally, the incident incurred irrevocable damage to the marine
ecological system, mariculture, and various coastal businesses, such as restaurants
and tourism.
There were many issues such as legal aspects regarding the cause of the incident,
leading to marine environmental impact assessment and an oil spill response system.
However, the most important issue was related to the proper compensation to victims
suffering from huge economic losses.
Most of the victims, the maritime authorities and the local government did not have
much knowledge of the practical application of the compensation schemes under the
International Convention and Korean Law. That is why research on the practical
review of the compensation scheme is of great interest to the author of this
dissertation.
2
1.2 Objectives of Dissertation
The objective of this dissertation is to identify any problems regarding the current
Korean Oil Spill Compensation Schemes through a case study of the Hebei Spirit
incident, and to provide advice on how to upgrade the Scheme in the future.
Towards this end, the purpose of the research is:
i) to review current Korean and International Compensation Schemes when an oil
pollution incident occurs from a tanker,
ii) to analyze current claims proceedings of the Hebei Spirit incident under the
Schemes in order to find any problems, which occurred during the compensation
proceedings,
iii) to examine the International and Korean Compensation Schemes, and
(iv) to provide advice on development of alternatives for the International and
Korean Compensation Schemes in the future.
For this objective, the author will review the compensation schemes of the United
States (US) and Canada, which have their own national funds other than the
International Oil Pollution Compensation Fund. Also, the author will attempt to
compare the claims proceedings with other major oil pollution incidents which have
recently occurred.
3
1.3 Organization of the Dissertation
In Chapter 2, the author will review three compensation schemes applicable to an oil
pollution incident from a tanker as follows:
i) The evolution of the International Oil Spill Compensation Schemes, which are
Civil Liability Convention, Fund Convention, Supplementary Fund, TOPIA and
STOPIA,
ii) Korean Compensation Schemes including a Special Law enacted for the
Hebei Spirit incident, and
iii) The National Compensation Schemes, especially national funds, of the US
and Canada.
In Chapter 3, the author will analyse the current claim status and process including
who can make the claims, who will pay, what types of damages are covered, how to
make claims, and how much compensation is available under the International and
Korean Oil Spill Compensation Schemes. This case study will provide the basic
understanding on the practical application of the compensation scheme and Help in
carrying out the claim process efficiently in the future.
Then, in Chapter 4, the author will analyze the main problems, especially delay of
payments, and the cause of the problems identified during the claim process. The
causes of the problems will be analyzed in two parts, one involving the problems
with the IOPC Fund and the other associated with Korea‟s claim process.
4
CHAPTER 2 Overview of the Compensation Schemes
2.1 Introduction
In dealing with compensation for oil pollution damage caused by spills from oil
tankers, there are two international conventions, the Civil Liability Convention and
the Fund Convention, elaborated under the auspices of the Iinternational Maritime
Organization (IMO). As a member state of these conventions, the Republic of Korea
follows a similar compensation scheme to that of the international scheme in general.
Meanwhile, the United States is not a member state of these international
conventions, but it has a different compensation system to that of the international
scheme. Therefore, there is a need to study this system in general including the
differences between it and the international scheme.
This chapter will briefly review three issues. Firstly, it is the evolution of these
international schemes including the present framework. The CLC 1969 and the FC
1971 were the original international framework for the compensation scheme, but
today they have been developed as the CLC 1992, the FC 1992, and the
Supplementary Fund Protocol. Furthermore, on a voluntary basis, there are two
agreements, STOPIA 2006 and TOPIA 2006, to address the imbalance created by the
establishment of the Supplementary Fund.
Therefore, the original framework and new framework will be examined in this
chapter. Secondly, the Korean Compensation Scheme including status of
implementation of the international scheme and the domestic laws will be analyzed.
Finally, both the compensation scheme of the US under the Oil Pollution Act 1990
(OPA 90) and Canadian Oil Spill Compensation Scheme will be introduced and
evaluated.
5
2.2 International Compensation Schemes
2.2.1 Civil Liablity Convention and Fund Convention
Traditionally, the maritime law of each country allowed the limitation of liability of
shipowners in order to protect their shipowners, and this tendency resulted in the
development of an international convention on 25 August 1924, namely the
International Convention for the Unification of Certain Rules relating to the
Limitation of the Liability of Owners of Sea-going Vessels (Kim, 2009, p.2). This
convention was amended as an International Convention relating to the limitation of
the liability of owners of sea-going ships on 10 October 1957 (Voskuil, 1980, p.101).
At the time, an oil tanker owner was also able to limit his liability in cases of oil
pollution incidents in principle.
However, in 1967, the oil tanker Torrey Canyon had stranded itself on rocks off the
Scilly Isles to the southwest of Great Britain and spilled its cargo of crude oil. The
disputes about liability for compensation and the funds available led the
Intergovernmental Maritime Consultative Organisation (IMCO), the forerunner of the
International Maritime Organization, to consider options to make liability and
compensation more certain (https://monkessays.com/write-my-essay/intertanko.com).
As a result of these deliberations, on 29 November 1969, the International
Convention on Civil Liability for Oil Pollution Damage (CLC) was adopted to ensure
that adequate compensation is available to persons who suffer oil pollution damage
in case of oil pollution incidents from oil tankers. Since this international convention
needed a long time to come into effect, tanker owners had created the Tanker Owners
Voluntary Agreement concerning Liability for Oil Pollution (TOVALOP) in 1969.
6
TOVALOP is a voluntary agreement by the shipowners of oil tankers to accept
responsibility up to certain levels that a tanker owner would clean up oil pollution
resulting from a casualty of his ship and would compensate victims of the oil
pollution (Jacobsson, 2003, p.14).
Following settlement of the tanker owners‟ contribution to oil pollution response, the
focus turned to the responsibility of the cargo owners. As a result, the International
Convention on the Establishment of an International Fund for Compensation for Oil
Pollution Damage (FC 1971) was adopted in 1971 at IMCO, followed by the
establishement of the International Oil Pollution Compensation Fund (IOPC Fund).
At that time, a voluntary agreement, known as the Contract Regarding a Supplement
to Tanker Liability for Oil Pollution (CRISTAL) was set up by the oil industry,
topping up compensation provided by TOVALOP, to make voluntary provision until
the FC entered into force on a worldwide basis. The CLC 1969 and the FC 1971
entered into force on 19 June 1975 and 16 October 1978 respectively.
Consequently, there are two tiered compensation systems: the first tier is
compensated for any loss of damages from the oil pollution by shipowners, and the
second tier is compensated by cargo owners, namely the oil industry, when the loss of
damage is over the limitation of the liability of shipowners.
These two Conventions were amended in 1992 by two protocols, and these amended
Conventions are well known as the CLC 1992 and the FC 1992. The major
amendments to the 1992 Conventions is the increase of the limitation of liability and
expansion of the scope of application. Meanwhile, the 1971 Fund Convention ceased
to be in force on 24 May 2002 and does not apply to incidents occurring after that
date.
7
However, the termination of that Convention does not result in the immediate
liquidation of the 1971 Fund as the Organisation has to meet its obligations with
respect to pending incidents (https://monkessays.com/write-my-essay/iopcfund.org/govbodies.htm).
CLC has a legal character that is the “principle of polluter pay” and “strict liability”.
It means that shipowners have to compensate all claims for oil spills from their ships
whether they are at fault or not.
When the Nakhodka incident occurred in Japan in 1997, a number of member states
worried that the total amount of compensation under the CLC 1992 and the FC 1992
was insufficient to compensate all victims in full, so it was necessary to significantly
increase the amount of compensation after the Erika incident in France on 12
December 1999. As a result, the IMO Legal Committee held in 2000, decided to
increase the limits of the compensation amount by some 50% of the 1992
Conventions and it entered into force on 1 November 2003 (Jacobsson, 2008, p.9).
Table 1 shows the summary of changes in the limitation amounts of compensation.
Table 1 Changes of the limitation amounts of compensation per incident
(unit: million SDR1
)
CLCs FCs
CLC 1969 210 million francs FC 1971 450 million franc2
1976 14 1978 60
CLC 1992 59.7 FC 1992 135
2000 89.77 2000 203
2003
(Supplementary Fund)
750
Source: Author (2010)

1 The unit of account in the CLC 1992 and FC 1992 is the Special Drawing Right (SDR) as defined by
the International Monetary Fund. 1 SDR = US$ 1.527540 or € 1.163130 based on 10 August 2010.
2
Franc was used for the unit of account in the CLC 1969 and Fc 1971. 450 million franc was
approximately 30 million SDR at the time.
8
2.2.2 Supplementary Fund
A number of member states, especially in the European countries, recognized that the
limits of compensation amount decided by the IMO Legal Committee held in 2000,
was insufficient and that point of view had accelerated from the Prestige incident on
13 November 2002 in Spain. Thus, in 2000, the Assembly of the 1992 IOPC Fund
established a Working Group in order to carry out a general review of the 1992
Conventions.
The Working Group worked towards the creation of an optional third tier of
compensation and in May 2003, a Supplementary Fund was established at the IMO
through a Protocol that increased the amount of available compensation to around
US$1 billion, including the amounts paid under the CLC 1992 and the Fund
Convention, in countries that are parties to it.
This Protocol entered into force on 3 March 2005 and the Supplementary Fund is
financed by contributions payable by oil receivers in the Member States. The criteria
for compensation are the same as for the 1992 Conventions, that is, a spill of
persistent oil from a tanker within the EEZ of a contracting State (Gonsaeles, 2005,
pp.85-130).
Mans Jacobsson, former director of the IOPC Fund, introduced the main contents of
this protocol as follows (Jacobsson, 2008, p.10):
i) The protocol established a new intergovernmental organization, the
International Oil Pollution Compensation Supplimentary Fund, 2003.
ii) Any State which is a Party to the FC 1992 may become a Party to the Protocol
and thereby become a Member of the Supplementary Fund.
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iii)The protocol applies to pollution damage in the territory, including the
territorial sea, of a State which is a Party to the Protocol and in the exclusive
economic zone (EEZ) or equivalent area of such a State.
iv)The total amount of compensation payable in respect of any one incident is
750 million SDR, including the amount payable under the 1992 Civil Liability
and Fund Conventions, 203 million SDR.
v) The Supplementary Fund only pays compensation for incidents which occur
after the Protocol has entered into force in the affected State .
In summary, there are currently three tiers for the International Compensation
Schemes as shown in Figure 1, and the compensation limit under the International
Compensation Schemes is currently up to 750 million SDR, if a State joins the
Supplementary Fund as shown in Figure 2.
Figure 1 The Layers of Compensation
Source: International Tanker Owners Pollution Federation Limited, 2009, p.31.
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Figure 2 Compensation Limits under International Compensation Schemes
Source: International Tanker Owners Pollution Federation Limited, 2009, p.32.
2.2.3 Small Tanker Oil Pollution Indemnification Agreement and Tanker Oil
Pollution Indemnification Agreement
In principle, the 1992 Conventions were designed to ensure an equitable sharing of
the compensation for the victims by oil pollution between shipowners and oil
receivers. However, an imbalance was created by the establishment of the
Supplementary Fund which is financed by the oil receiver. Therefore, in order to
solve this imbalance and to ease the burden on oil receivers, the International Group
of P&I Clubs developed two agreements, known as the Small Tanker Oil Pollution
Indemnification Agreement (STOPIA 2006), and the Tanker Oil Pollution
Indemnification Agreement (TOPIA 2006). These Agreements are on a voluntary
basis, but contractually binding agreements. These agreements entered into force on
20 February 2006 (Jacobsson, 2008, p.10).
Under the CLC 1992, the limitation of compensation amount applicable to small
tankers not exceeding 5,000 gross tonnage, is just 4.51 million SDR. However, under
STOPIA 2006, the limitation of compensation amount applicable to the tankers up to
29,548 gross tonnage, is raised on a voluntary basis to 20 million SDR.
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Under TOPIA, the Supplementary Fund is entitled to reimbursement by the
shipowner/P&I Club to 50% of the amount paid in compensation by the Fund in
respect of incidents involving tankers covered by the agreement (International Tanker
Owners Pollution Federation Limited, 2009, p.32).
Consequently, these two agreements reduced the burden on oil receivers under the
Supplementary Fund and was offered by the International P&I Clubs, without any
amendments to the CLC 1992 (Jacobsson, 2008, p.11).
2.2.4 International Oil Pollution Compensation Fund
The International Oil Pollution Compensation Funds (IOPC FUNDs) were
established to provide compensation for pollution damage to the extent that the
protection afforded by the CLCs is inadequate. In other words, if all the admissible
claims for oil pollution damage cannot be covered by shipowners according to the
CLCs, then the IOPC FUNDs will provide the compensation amount according to the
FC. There are three IOPC Funds, namely the 1971 Fund, the 1992 Fund, and the
Supplementary Fund, in accordance with the Fund Conventions (FCs). These
organizations were established in 1978, 1996, and 2005 respectively. Meanwhile, the
1971 Fund Convention ceased to be in force on 24 May 2002 and does not apply to
incidents occurring after that date.
In case of the 1992 Fund, its organization is mainly composed of an Assembly, a
Secretariat headed by a Director (Article 16), and an Executive Committee. The
Assembly consists of all Member States and the Executive Committee consists of 15
Member States elected by the Assembly every year and the maximum term of
appointment is 2 years.
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Table 2 shows the Member States of the Executive Committee of the 1992 IOPC
Fund, which was elected by the Assembly in October 2009. The Assembly is the
supreme organ governing the FC. The function of the Executive Committee is to take
policy decisions concerning the admissibility of compensation claims for oil
pollution incidents. The Assembly created the Committee in October 1997 by means
of a Resolution which sets out the composition and mandate of the Committee
(https://monkessays.com/write-my-essay/iopcfund.org ).
The Secretariat is located in London, and currently has 27 staff in three departments:
Claims, External Relations and Conference, and Finance and Administration. IOPC
FUNDs have a joint Secretariat.
Table 2 Member States of Executive Committee of IOPC Fund 1992 (2009~2010)
Canada Cameroon Spain China(Hong Kong Special
Administrative Region)
Liberia
Sweden Cyprus Philippines Trinidad and Tobago France
Germany Singapore Japan The Netherlands Uruguay
Republic
of Korea
Source : International Oil Pollution Compensation Fund, Annual Report 2009, p.24
Member States to both the CLC 1992 and the FC 1992 are 104 States and 1992 Fund
Member States, which are Parties to the Supplementary Fund Protocol, are 26 States
as of 10 August 2010. As a result of the Hebei Spirit incident, Korea ratified the
Supplementary Fund Protocol in May 2010 and joined the Supplementary Fund with
effect from 6 August 2010 in accordance with Article 21 of the Protocol.
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The IOPC Funds are financed by levies on certain types of oil of more than 150,000
tonnes carried by sea. The levies are paid by entities which receive oil after sea
transport, and normally not by States. Table 3 shows the major 18 States contributing
to the 1992 Fund that are more than one percent of the total contribution.
Table 3 Status of Contribution from Member States in 1992 Fund (2009)
Member State Contribution Oil (tones) Percents of total
Japan 255 144 426 17.13%
Italy 129 334 221 8.68%
India 126 405 239 8.49%
Republic of Korea 119 568 421 8.03%
Netherlands 110 103 026 7.39%
France 98 359 780 6.60%
Singapore 92 190 163 6.19%
United Kingdom 73 071 850 4.91%
Canada 70 544 358 4.74%
Spain 63 471 950 4.26%
Germany 38 722 135 2.60%
Malaysia 29 425 638 1.98%
Sweden 26 860 650 1.80%
Australia 26 838 918 1.80%
Greece 23 653 163 1.59%
Turkey 23 166 454 1.56%
Argentina 15 156 816 1.02%
Norway 14 928 387 1.00%
Source: International Oil Pollution Compensation Fund, Annual Report 2009, p.18.
Japan is the largest contributor with more than 17% of the total contribution to the
1992 Fund and Korea is the fourth largest State in the 1992 Fund based on the
contributing rate.
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However, it is different with the United Nations (UN) assessment system in
calculating the contribution of each State. The UN calculates it based on the relative
capacity of each State to pay, as measured by their Gross National Income (GNI), but
the IOPC Fund does not reflect the relative economic capacity of each State (United
Nations, 22 December 2006).
2.3. Korean Compensation Scheme
2.3.1 Compensation for Oil Pollution Damage Guarantee Act
The Republic of Korea (Korea) ratified the CLC 1969 on 18 December 1978. Korea
also ratified the FC 1971 on 8 December 1992 and Compensation for Oil Pollution
Damage Guarantee Act (CODGA) was legislated at the same time. This Act reflected
all contents of the CLC and FC. On 7 March 1997, Korea ratified the 1992
Conventions and amended the Act accordingly.
This Act has several different regulations when compared to the 1992 Conventions
and they are as follows (Kim, 2009, pp.9-12):
i) Liability for Pollution Damage
In Article III of the 1992 CLC, the shipowner shall be liable for any pollution
damage caused by the ship. On the contrary, in Article 2, (4) and 5, (4) of the
CODGA, the charterer together with the shipowner, shall be liable for pollution
damage, in cases where a foreign flag ship is chartered by a Korean. This
provision is to protect victims, where ships not covered for their liabilities under
the 1992 Conventions, are chartered by Koreans.
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ii) Exemption of Liability for Pollution Damage
In Article III, 4 of the 1992 CLC, any charterer, manager or operator shall not be
liable for pollution damage unless the damages resulted from their personal act
or omission, committed with the intent to cause such damage, or recklessly and
with knowledge that such damage would probably result. Regardless, according
to Article 5, (5) of the CODGA, any manager or operator shall not be liable for
pollution damage and there are no provisions for any exemption on it. Therefore,
it can be interpreted that victims can not make claims to manager or operator of a
ship even though he is at fault, as described in Article III of the 1992 CLC.
iii)Right of Recourse of the Shipowner against Third Party
In Article III, 5 of the 1992 CLC describes “Nothing in this Convention shall
prejudice any right of recourse of the owner against third party”. This means that
the shipowner has the right of recourse against their charterer, manager or
operator according to a general principle of law on the liability. However,
according to Article 5, (6) of the CODGA, a shipowner is restricted in his right
of recourse against their charterer, manager or operator, only when the damages
result from their personal act or omission, committed with the intent to cause
such damage, or recklessly and with knowledge that such damage would
probably result.
iv) Scope of Application for Compulsory Insurance
According to Article 7 of the 1992 CLC, the shipowner of a tanker carrying more
than 2,000 tonnes of persistent oil as cargo has to maintain insurance to cover the
liability under the 1992 CLC, but the shipowner of a tanker carrying 200 tonnes
of persistent oil as cargo has to maintain proper insurance according to the
CODGA.
16
v) Maritime Lien
According to Article 51 of the CODGA, indemnity bond for loss of damage
caused by oil pollution from a ship shall be applied maritime lien, but this clause
is not in the 1992 CLC. This provision enables victims caused by oil pollution,
to recover their loss of damages before other claims.
The shipowner is able to follow the Liability Limitation Proceeding (LLP) under
Article 41 of this Act when the amount of loss caused by an oil pollution incident
exceeds the amount of limitation under the CLC. Other than the CODGA, there is a
separate Act called the Liability Limitation Proceeding Act. There are six steps in the
LLP under this Act as shown below (Kim, 2009, pp.22-24):
i) Application for Commencing the LLP
A shipowner has to apply for commencement of the LLP to court having
jurisdiction of the incident within six months after receiving claims exceeding
the amount of limitation available under the CLC.
ii) Deposition
The shipowner has to deposit the amount of limitation under the CLC and 6% of
the interest to the court of justice.
iii)Commencement of the LLP
The court of justice decides when to commence the LLP and then receive claims
from victims until the designated date.
iv) Attendance of the LLP
Victims have to submit their claims within the designated date and the IOPC
Fund may also attend the LLP as an interest party.
17
v) Examination
The court examines detailed contents of each claim submitted by victims. If there
are any different views on the claims, the claims may be decided as submitted.
vi) Judgement
If there are different views or arguments on the claims, the court decides the
amount of loss as judgment. If the IOPC Fund or claimants disagree with this
decision, they may bring this matter to court.
2.3.2 Korea Marine Environment Management Act
The details of oil pollution prevention and response are regulated in Korea Marine
Environment Management Act. This Act was formerly known as the Korea Marine
Pollution Prevention Act, which was registered in 1977, reflecting the MARPOL
Convention, but was replaced with the Korea Marine Environment Management Act
in 2007, with expansions on various provisions dealing with costal marine
environmental issues.
This Act has a wide scope and is composed of 13 Chapters and 133 Articles
including relevant International Conventions, such as MARPOL, Ballast
Management Convention, OPRC, Antifouling Convention, London Conventions and
Stockholm Convention on Persistent Organic Pollutants (POPs). The major contents
of this Act are as follows:
– Chapter 1 General Provision,
– Chapter 2 Measures for Conservation and Management of Marine
Environment,
– Chapter 3 Regulation for Prevention of Marine Pollution,
– Chapter 4 Regulation for Prevention of Air Pollution in Ocean,
– Chapter 5 Inspection of Vessel for Prevention of Marine Pollution,
18
– Chapter 6 Measures against Marine Pollution Prevention,
– Chapter 7 Marine Pollution Effect Investigation,
– Chapter 8 Marine Envrionment Business,
– Chapter 9 Sea Area Utilization Conference,
– Chapter 10 Establishment of KOEM3
,
– Chapter 11 Supplementary Provisions,
– Chapter 12 Penal Provision.
In the Act, there are four main provisions for the oil pollution response regime except
for operational regulations in accordance with MARPOL and they are as follows:
i) Principle of Polluter Responsibility (Article 7)
A person who has caused damage of marine environment or marine pollution
shall take responsibility for the restoration of the damaged and polluted marine
environment and bear expenses necessary to remedy any damage or pollution of
the marine environment thereof. This provision harmonizes with the „Strict
Liability‟ of the CLC.
ii) Designation of the Responsible Government Agents (Article 24, 61 and 62)
Responsible government agents for oil spill incidents at sea are as follows:
– The Ministry of Land, Transport and Maritime Affairs (MLTM)4
should
take the lead responsibility for the coordination of all the activities in
marine pollution incidents, including international cooperation and
support on site.

3 Korea Marine Environment Management Corporation (Formerly, Korea Marine Pollution Response
Corporation, KMPRC) is a specialized organization for oil pollution response established in 1997.
4
Formerly Ministry of Maritime Affairs and Fisheries (MOMAF); changed the name according to
amendments of Korean Government Organization Law in Feb.2008.
19
– The Korea Coast Guard (KCG) should be responsible for commanding oil
spill response activities off-shore, setting up a national contingency plan
and area contingency plans.
– Local governments should be responsible for commanding oil spill
response activities in their shoreline areas.
iii) Arrangement of Oil Response Vessels and Equipments (Article 67)
An owner of a ship or oil storage facility falling under any of the following
subsections shall, in order to prepare against marine oil spill accidents, arrange
or install oil spill response vessels or prevention equipment.
– A tanker is not less than 500 GT;
– A ship other than tanker which is not less than 10,000 GT
– Oil storage facility whose capacity is not less than 10,000 kiloliters
Normally, this obligation of the owner of a ship or oil storage facility is carried
out by KOEM.
iv) Marine Pollution Effect Investigation (Article 77)
Polluter shall execute marine pollution effect investigation through a marine
pollution effect investigation institution.
Unfortunately, the local governments did not have the abilities to carry out their
responsibility during the Hebei Spirit incident. Also, the Korea Coast Guard did not
command private oil spill response companies on site properly since they did not
want to take responsibility for the costs incurred during their control. As a result of
these problems, recently the MLTM is discussing these issues with relevant parties to
consider the necessary amendments in the Act.
20
2.3.3 Special Law
On 14 March 2008, the National Assembly legislated a special law, namely „The
Special Law for the Support to Residents Suffering Damages from the M/T Hebei
Spirit Oil Spill Incident and Restoration of Marine Environment‟ (Taean Special
Law), in relation to this incident, so that the local residents of the affected areas may
receive compensation in a speedy and appropriate fashion. The main contents are as
follows:
i) Establishment of Special Committee on Oil Pollution Incidents(Article 5, 6).
The Special Committee is comprised of the Prime Minister as the chairperson
and its main roles are to:
– discuss/decide on relevant issues regarding the support for compensation to
victims,
– discuss/coordinate relevant issues regarding marine environment restoration,
– make decisions on support for areas affected by oil pollution.
ii) Victim Group (Article 7).
Residents who suffered losses from the Hebei Spirit incident may establish
victim groups upon which they have to notify the local government. The victim
groups may then attend the meeting of the Special Committee and present their
opinions during the meeting.
iii) Support for Compensation to Victims (Article 8, 9)
This provision is divided into two types of compensation. Firstly, the Korean
Government may make advance payments to claimants based on the assessed
amount of the IOPC Fund, and if the total amount approved by the IOPC Fund
exceeds the maximum amount available under the FC 1992, then the Korean
Government would make payments to cover that excess amount.
21
According to this provision, the Korean Government had made advance
payments for 373 applications (KRW31.4 billion) submitted by claimants until
the end of 2009, which were based on the full amounts assessed by the IOPC
Fund (International Oil Pollution Compensation Fund, June 2010). Secondly, a
claimant, who has not received the assessment results from the IOPC Fund
within six months from filing a claim, may apply for a loan to the Korean
Government. The total number of loans executed was 920 (KRW3 billion) as of
the end of 2009, but that figure had increased rapidly to 6,557 (KRW 17 billion)
as of the end of May 2010, and is expected to jump higher in the future
(International Oil Pollution Compensation Fund, June 2010).
iv) Designation of Special Marine Environmental Restoration Zone (Article 10).
The Minister of MLTM throughout discussion with the Minister of the Ministry
of Environment may designate severely damaged areas and sensitive areas that
may change the ecosystem as Special Marine Environmental Restoration Zones
(Special Zones). The Korean Government must set up a Special Marine
Environmental Restoration Plan for the Special Zones and implement proper
measures according to the plan.
v) Support for Affected Areas by Oil Pollution (Article 11 and 12)
The Korean Government may provide support for medical services, prevention
of epidemics, clean-up and collecting wastes. The Korean Government also
provides financial support for residents who had suffered damages from the
Hebei Spirit incident but could not receive any compensation at all from the
IOPC Fund or the shipowner.
22
In accordance with the decision rendered by the Taean Special Law, the Korean
Government declared its decision to stand last in the queue (SLQ) in receiving
compensation for clean up and recovery costs incurred by the central and local
governments during the 41st session of the Executive Committee of the 1992 IOPC
Fund held in June 2008 (International Oil Pollution Compensation Fund, June 2008).
The main purpose of the enactment of the Taean Special Law is for the provision of
financial support to victims. This is because the estimated amount of compensation
had already exceeded the limited amount of compensation in accordance with the
CLC 92 and the FC 92, which Korea ratified at the time. There are three main
reasons for the enactment of the Taean Special Law (Ministry of Land, Transport and
Maritime Affairs, 2010, pp.100-101).
Firstly, under the International Compensation Scheme, the CLC 92 and the FC 92,
which Korea ratified, the limitation amount is 230 millon SDR (KRW321.6 billion),
but losses estimated by the IOPC Fund are around KRW372-424 billion (based on
estimated losses until March 2008). Therefore, actual victims can not recover their
losses from the IOPC Fund and the Korean Government has to take measures to
solve this problem.
Secondly, a long waiting period of time is required to pay compensations by the
IOPC Fund because the claims processing procedure under the Claims Manual is
very complex and the assessing process also takes considerable time. As the first step,
claimants need to prepare detailed relevant documents/evidence to prove their losses
as objectively, scientifically and reasonably as they can. Then, there is a long waiting
period during which their claims are assessed by the IOPC Fund. If there is some
disagreement on the compensation amount between the claimants and the IOPC Fund,
the claimants can bring this matter up to the courts.
23
Thirdly, under the International Compensation Scheme, there are no considerations
on the living support of the destitute or small-scale businessmen. Therefore, the
Taean Special Law is needed to compliment and address this problem.
Due to the Taean Special Law, the above three problems were somewhat solved, but
the Korean Government has had to shoulder a lot of the financial burden.
2.4. Other Schemes
2.4.1 Introduction
Other than the International Compensation Schemes, it is nessesary to study the
compensation scheme of two states, the US and Canada, because they have their own
Funds to compensate losses caused by oil pollution from ships.
A similar point between these two states is that they have their own funds. However,
the US did not join the International Compensation Scheme and they only apply their
own scheme for any compensation action. Regardless, Canada joined the
International Compensation Scheme and other than the international scheme, they
have their own scheme to complement and address the problems of the international
scheme.
Hereafter, the two compensation schemes will be introduced briefly with regard to
the Assessment of the schemes, and how to operate/apply and limit amounts of their
compensation.
24
2.4.2 Oil Pollution Act 1990 of the United States
The US is not a Member State of the CLC and the FC. They have an independant
compensation scheme under the Oil Pollution Act (OPA 90), which was legislated in
1990. The background of this Act is founded in the Exxon Vadez oil spill incident,
which occurred in Prince William Sound, Alaska on 24 March 1989. In this incident,
approximately 11 million gallons of crude oil was spilled into the sea, and a huge
amount of compensation arose including the cost of response activities
(https://monkessays.com/write-my-essay/fakr.noaa.gov ).
After this incident, the US needed to set out a shipowner‟s liability and compensation
scheme when an oil spill occurs, in order to ensure sufficient compensation to
victims. The US subsequently adopted the Oil Pollution Act in 1990 as their own
liability and compensation scheme instead of ratifying the 1984 Protocol of the CLC
69 and the FC 71. They amended the Act in 2006 and 2009 and increased the
limitation of the shipowner‟s liability and applied different limitations between a
single hull tanker and a double hull tanker as shown in Table 4.
Under OPA 90, there are also two tiers for compensation. The first tier is that the
shipowner‟s liability is the same as the CLC, and the second tier is the Oil Spill
Liability Trust Fund (OSLTF), which was established by the OPA 90. It may seem
that there is no liability of oil receivers, but they have to pay a five-cent per barrel tax
to the OSLTF eventhough there are some conditions. In 1991, the United States
Coast Guard (USCG) created the National Pollution Fund Center (NPFC) to
administer the OSLTF, and to ensure effective response and recovery
(https://monkessays.com/write-my-essay/uscg.mil/ccs/npfc/About_NPFC/default.asp).
25
Table 4 Changes of Shipowners Liability under OPA 90
Ship size Before 2006 Amendment 20065 Amendment 20096
Greater than
3,000GT
The greater of
$1200/ton or
$10 million
Single hull Single hull
The greater of
$3000/ton or
$22 million
The greater of
$3200/ton or
$23.496 million
Double hull Double hull
The greater of
$1900/ton or
$16 million
The greater of
$2000/ton or
$17.088 million
Less than or
equal to 3000GT
The greater of
$1200/ton or
$2million
Single hull Single hull
The greater of
$3000/ton or
6 million
The greater of
$3200/ton or
$6.408 million
Double hull Double hull
The greater of
$1900/ton or
4 million
The greater of
$2000/ton or
$4.272 million
Any other than
tanker
The greater of
$600/ton or
$0.5million
The greater of
$950/ton or
$800,000
The greater of
$1000/ton or
$854,400
Source : Adopted by Author from Federal Register / Vol. 74, No. 125 (1 July 2009) and from
Steamship Mutual web site (https://monkessays.com/write-my-essay/simsl.com)

5 Amendment of 2006 : effected on 11 July 2006, for tanker, effected on 9 October 2006
6 Amendment of 2009 : effected on 31 July 2009
26
According to the explanation of the NPFC, the OSLTF is funded in the following
ways (https://monkessays.com/write-my-essay/uscg.mil/npfc/About_NPFC/osltf.asp ):
– Investment interest on the Fund’s principal,
– Costs recovered from responsible parties,
– Civil penalties from responsible parties,
– Barrel tax on domestic and imported oil, and
– Transfers from other legacy pollution funds.
The OSLTF has two major components. One is the Emergency Fund that is:
“available for Federal On-Scene Coordinators (FOSCs) to respond to
discharges and for federal trustees to initiate natural resource damage
assessments. The Emergency Fund is a recurring $50 million available to the
President annually”. The other one is “the remaining Principal Fund balance
that is used to pay claims and to fund appropriations by Congress to Federal
agencies to administer the provisions of OPA and support research and
development” (https://monkessays.com/write-my-essay/uscg.mil/npfc/About_NPFC/osltf.asp ).
Now, the largest source of income for the Fund has been from the five cent/barrel tax
on imported and domestic oil. This tax was discontinued on 31 December 1994; but
the Energy Policy Act of 2005 re-instated the tax beginning in April 2006. If the
balance of the OSLTF reaches US$2.7 billion, the tax will no longer apply, until and
unless the Fund balance later drops below US$2 billion. The tax will be discontinued,
regardless of the Fund balance, on 31 December 2014.
The second largest source has been transferred from other legacy pollution funds, but
these transfers are now complete. The largest of the fund transfers was US$334.7
million from the Trans-Alaska Pipeline Liability Fund.
27
The OSLTF comes into operation when the responsible party denies a claim or fails
to settle it within 90 days, or when the first level of liability is insufficient to satisfy
all admissible claims for compensation. Further, the OSLTF will recover the costs
from the responsible party such as the polluter. The maximum amount of
compensation by OSLTF is US$1 billion per incident.
2.4.3 Canadian Compensation Scheme
Canada adopted the International Compensation Scheme as a Member State of the
CLC, the FC and the Supplementary Fund contrary to the National Compensation
Scheme of the US. However, Canada simultaneously operates its own national fund,
namely the Ship-Source Oil Pollution Fund (SOPF) to compensate any losses caused
by oil pollution from ships.
The SOPF was established by Part XVI of the amended Canada Shipping Act (CSA)
on 24 April. The SOPF succeeded the Maritime Pollution Claims Fund (MPCF),
which had existed since 1973 and the accumulated amount of 149,618,850 Canadian
Dollars (C$) in the MPCF was transferred to the SOPF (https://monkessays.com/write-my-essay/tc.gc.ca).
The International Compensation Scheme applies only to spills of persistent oil from
tankers, but SOPF is available to pay compensation for spills of all kinds of oil
including non-persistant oil from all kinds of ships. This compensation scheme is
governed by Part 6 of the Marine Liability Act (MLA) (https://monkessays.com/write-my-essay/tc.gc.ca).
The main financial source of the MPCF was a levy of 15 cents per tonne from 15
February 1972 to 1 September 1976. MPCF collected a total of C$34,866,459 during
that period. On 1 April 2009, the Minister of Transport imposed a levy of 46.29 cents
per metric tonne of contributing oil imported into or shipped from a place in Canada
in bulk as cargo on a ship (https://monkessays.com/write-my-essay/tc.gc.ca).
28
Based on 1 April 2009, the maximum liability of the SOPF is C$154,392,072 for all
claims per one oil spill incident and this amount is indexed annually (Ship-Source
Oil Pollution Fund , 2009).
The SOPF is very useful in two cases. Firstly, the SOPF pays claims to the extent
claimants have been unable to obtain full payment of their claims from the shipowner
or any other party. The SOPF is also available to provide additional compensation as
a third layer in the event that funds under the CLC 92 and the FC 92, with respect to
spills in Canada from oil tankers, are insufficient to meet all established claims for
compensation. In other words, if the amount of compensation is over the limitation of
amount of FC 92 (203 million SDR, around C$382 million7
), the SOPF may provide
additional compensation up to C$154 million to claimants as shown in Figure 3. As a
consequence, Canada may compensate total amounts of C$537 million including
amounts available under the CLC 92 and the FC 92 based on 1 April 20098
.
Secondly, claimants may file their claims directly with the SOPF and when the
administrator of the SOPF pays a claim, he is subrogated to the rights of the claimant
and is obligated to take all reasonable measures to recover the amount of
compensation paid to claimants from the shipowner, or the IOPC Fund, or any other
liable person. The administrator also has the responsibility to legally prove claims
against them. Under the Canadian compensation scheme, victims can recover their
losses of damage from the SOPF speedily because the SOPF has its own assessment
procedure and assessor.

7
1 SDR=C$1.8856 based on 1 April 2009.
8 Canada did not join the Supplementary Fund at the time.
29
Figure 3 Limits of Liability and Compensation for Oil Tanker Spills in Canada
Source: Ship-Source Oil Pollution Fund (2009). Annual Report 2008-2009. p.4
30
CHAPTER 3 The Hebei Spirit Incident
3.1 Introduction
The Hong Kong registered tanker Hebei Spirit which was laden with about 209,000
tonnes of four different crude oil was struck by the crane barge Samsung No 1 while
at anchor about five miles off Taean on the West Coast of Korea (see Figure 4), and
aprroximately 10,900 tonnes of crude oil escaped into the sea from the tanker.
The crane barge was being towed by two tugs, Samsung T-5 and Samho T-3, when
the tow line broke. Weather conditions were poor and it was reported that the crane
barge was blown by the strong winds into the tanker, puncturing three of its port
cargo tanks No.1, 2 and 3.
This incident is recorded as the most catastrophic oil pollution incident in the history
of Korea in terms of the amount of oil leaked and scale of damage. The Korean
Government declared the areas affected by oil as National Disaster Zones according
to the relevant Act.
Figure 4 Location of the Hebei Spirit Incident
Source: Author
31
This chapter attempts to describe the incident of the Hebei Spirit incident including
the cleanup operations, impacted areas, and then attempts to apply the FC 1992
regarding compensation for the victims.
3.2 Overview of the Incident
3.2.1 Impact of the Oil Spill
As a result of this incident, the areas affected by the spill along the western coasts of
three provinces, Chungchongnam-Do, Chollanam-Do and Chollabuk-Do, of Korea
have around 350 km of coastline, 101 islands, 15 beaches and 35,000 hectares of
aquaculture farms and other facilities, and including the total number of households
affected of approximately 40,000 units as shown in Figure 5 (International Oil
Pollution Compensation Fund, 22 June, 2008). This means much of the western coast
was affected by the oil spill.
The west coast of Korea is a very important area for aquaculture in Korea because
there are large numbers of mariculture facilities including seaweed, shellfish
cultivation and large-scale hatchery production. The area is also exploited by small
and large-scale fisheries.
The oil affected a large number of these mariculture facilities, as it passed through
the supporting structures, contaminating buoys, ropes, nets and the produce.
Immediately after the Hebei Spirit incident, the Korean Government declared a fishing
ban on the affected areas by the oil spill and restricted all harvest and capture of
marine products from the affected areas, in order to protect the public health against
any potential negative effects from the sale and distribution of contaminated fisheries
products.
32
Figure 5 Map of shoreline contamination
Source: International Tanker Owners Pollution Federation (Feb. 2008). News & Events:The
Environmental Impact of the Hebei Spirit Oil Spill, Taean, South Korea. p.3
33
As of 18 April 2008, in consideration of the progress of the clean-up operations
undertaken in the affected areas, and the results of the marine environmental study
and fisheries product safety test, the Korean Government lifted restrictions on fishing
activities for the first time. Thereafter, since 3 September 2008, all types of fishing
activities were resumed in all the affected waters and coasts.
The oil has also impacted amenity beaches and other areas of the Taean National
Park. The Taean peninsula is a favourite tourist destination for visitors from the
Seoul metropolitan area, with an estimated 20 million visitors every year, mostly
during the months of July and August.
3.2.2 Clean-up operations
Two plans, the National Contingency Plan prepared by KCG and the National
Disaster Prevention Master prepared by the Ministry of Government Administration
and Safety Management (MOGASM), were applied to coordinate all the measures to
combat the oil spill. According to those plans, a National Disaster Response
Organization was established as illustrated in Figure 6.
As mentioned earlier in Chapter 2, the MLTM has overall responsibility for marine
pollution response in the waters under the jurisdiction of Korea, and the KCG has
responsibility for control/command of all the response activities at sea and local
governments have the responsibility to control shoreline clean-up.
The KCG mobilized their response vessels and various equipment on site and
effectively controlled the response activities carried by KOEM and private companies
at sea. However, it was very difficult to collect oil at sea due to heavy weather even
though large numbers of specialized response vessels were launched.
34
Figure 6 National Disaster Response Organization for Hebei Spirit incident
Source : Author
The oil slick also affected the shoreline very quickly since the site of the spill
incident was so close (around 10 km) to the shoreline and the local currents were
very strong and fast. Therefore, the use of oil booms to contain oil and skimmers to
collect oil were very restricted. Consequently, most of the clean-up operations were
carried out on the shoreline. At the same time, the use of oil booms was a very
effective measure in protecting the sensitive areas, such as entrance areas of the
intake water of power plants and fish farms inside several important bays.
Clean-up operations at sea were carried out by the KCG, the KOEM and local
fishermen and the shoreline clean-up was carried out by more than 1.2 million
volunteers, local residents, the military and private clean-up companies. Most of the
clean-up operations were finalized by 10 October 2008, but additional clean-up
35
operations had to be conducted in the first half of 2009 as more traces of oil were
found, particularly tar balls in some of the islands and marine aquaculture farms
(International Oil Pollution Compensation Fund, 9 March 2009).
A huge number of volunteers from other cities helped cleaning oil on several beaches
affected during the early stages. Human resources and the main response equipment
and materials used until October 2008 are as shown in Table 5.
Table 5 Total Amount of Resources used till October 2008
Personnel
(Volunteers)
Vessels
(unit)
Oil Boom
(Km)
Absorbant
(tonnes)
Dispersant
(㎘)
Total 2,132,322
(1,226,730) 19,864 46.77 493 298
Source: Iinternational Oil Pollution Compensation Fund (29 May 2009). 92FUND/EXC.45/6/2.
3.2.3 Legal Proceedings
In the case of criminal proceedings, the Director of the IOPC Fund reported that
in April 2009, the Korean Supreme Court overturned the decision by the
Court of Appeal, which had held that the Master of one of the towing tugs
and of the crane barge and the Master and Chief Officer of the Hebei Spirit
were liable for the destruction of the Hebei Spirit, and sent back the case to
the Court of Appeal for a retrial. The Supreme Court in its judgement also
annulled the Court of Appeal’s decision to imprison the crew members of the
Hebei Spirit. The Supreme Court, however, upheld the decision to imprison
the Master of one of the towing tugs and of the crane barge and confirmed the
fines imposed by the Court of Appeal (International Oil Pollution
Compensation Fund, 16 June 2010).
36
Regarding the Liability Limitation Proceeding (LLP) by the owner of the Hebei Spirit,
the Director of the IOPC Fund reported (International Oil Pollution Compensation
Fund, 16 June 2010) as follows:
– February 2008: the owner made an application to commence LLP before the
Limitation Court.
– February 2009: the Limitation Court rendered an order for the commencement
of the LLP
– 126,316 claims totalling KRW 3,597 billion have since been submitted to the
Limitation Court.
– The Limitation Court appointed a Court Administrator to deal with the claims
and indicated its intention that the Court Administrator review the assessments
by the Club’s and the Fund’s experts and by the claimants’ experts rather than
appoint his own experts.
– At the same time, in March 2009, the Limitation Court rendered the order for
the commencement of the limitation proceedings for the Samsung Heavy
Industry, the bareboat charterer of the two towing tugs and of the crane barge,
and set the limitation fund, together with legal interests, at an amount of
KRW5,600 million.
3.3 Application of International Compensation Scheme
3.3.1 Liability and Limitation of Compensation
As mentioned in Chapter 2, Korea is a party to the CLC 1992 and a Member State of
the Fund 1992, but not a Member State of the Supplementary Fund at the time.
37
Since the CLC 1992 is based on strict liability, the shipowner of the Hebei Spirit was
liable to pay the compensation to victims eventhough the ship was not at fault in this
pollution incident according to the CLC 1992. Furthermore, if the total amount of
damages was to exceed the limitation amount applicable under the CLC 1992, the
Fund 1992 would be liable to pay compensation to the victims of the spill. The
tonnage of the Hebei Spirit (146,848 GT) is in excess of 140,000 GT. The limitation
amount applicable is, therefore, the maximum of 89.77 million SDR available under
the 1992 CLC, and the total amount available for compensation under the 1992 CLC
and the 1992 Fund Convention is 203 million SDR. Table 6 provides the summary of
the incident including the maximum available compensation amounts by the
shipowner and the IOPC Fund.
Table 6 Summary of Hebei Spirit Incident
Ship‟s name Hebei Spirit
Date of incident 7 December 2007
Place of incident 10 km off Taean county
Cause of incident Collision
Quantity of oil spilled 10,900 tonnes (12,547㎘)
Flag State of Ship Hong Kong
Gross tonnage 146,848 tonnes
P&I Insurer China Shipowners Mutual Insurance Association (China P&I)
Assuranceforeningen Skuld (Gjensidig) (Skuld Club)
CLC Limit 89.77 million SDR (KRW187 billion)
Fund Limit 203 millon SDR (KRW322 billion)
9
Source: Iinternational Oil Pollution Compensation Fund, 16 June 2010

9 The 40th Exacutive Committee of the 1992 IOPC Fund decided that the conversion of 203 million
SDR into Korean Won would be made on the basis of the value of that currency vis-a-vis the SDR on
13 March 2008 at the rate of 1SDR=KRW1,584.330. When coverted, KRW322 billion is
approximately US$310 million.
38
Unfortunately, the Korean government as well as most of the victims expected that
this maximum amount was not sufficient to recover the total loss of costs from this
incident.
As a result of this problem, local residents demanded a more satisfactory solution
from the Korean Government and the national assembly legislated a Special Law.
However, the Special Law brought forward a large number of claims from victims, so
the Korean Government shouldered the financial burden for the payments to the
victims.
3.3.2 Level of Payment
Article 5 of FC 1992 mentions “the amount available shall be distributed in such a
manner that proportion between any established claim and the amount of
compensation actually recovered by the claimant under this Convention shall be same
for all claimants.” In other words, if the total amount of compensation payable
exceeds the limitation of amount of the FC 1992, the IOPC Fund should decide the
levels of payment through a manner of proportion to make equivalent compensation
to all victims.
Consequently, when the total amount of compensation payable exceeds the limitation
of amount of the FC 1992, victims cannot recover the whole compensation from the
IOPC Fund eventhough their claims were accepted by the IOPC Fund. In this case,
there are no solutions to recover full payments for victims under the International
Compensation Scheme.
In the case of the Hebei Spirit, the IOPC Fund expected the total estimated amount of
losses arising from the incident could exceed the Fund‟s maximum amount of the
limitation for compensation.
39
The IOPC Fund estimated the amount was between KRW352 billion and KRW424
billion (267 million SDR) on the basis of the limited information available as of 26
February 2008. Therefore, the IOPC Fund initially decided the level of payments as
60% of the amount of the damage actually suffered by the respective claimant as
assessed by the Fund‟s experts in the 40th Executive Committee held on 26 Febuary
2008 International Oil Pollution Compensation Fund, 26 February 2008).
Thereafter, the 42nd Executive Committee held in June 2008 decided to reduce the
level of payment to 35% of the established claims because of the increased
uncertainty as to the total amount of the potential claims (International Oil Pollution
Compensation Fund , 27 June 2008).
3.3.3 Compensations Covered by the IOPC Fund
There are no detailed descriptions for types of damages covered by the IOPC Fund in
the FC 1992, but the IOPC Fund published a Claims Manual to guide claimants by
giving an overview of the IOPC Fund‟s obligation to compensation in accordance
with the FC 1992. This Manual was adopted by the Assembly of the 1992 IOPC
Fund in October 2004, and several amendments were made in December 2008.
However, it is only a practical guide, presenting claims against the IOPC Fund, but it
is not a legally binding document.
According to this Manual, in general, the IOPC Fund may compensate any loss of
damage arising from the incident in five main types, namely clean-up costs and
preventive measures, property damages, consequential losses, pure economic losses
and environmental damages.
40
i) Clean-up and preventive measures
In principle, the IOPC Fund is payable for the cost of clean-up operations at sea
and shoreline (Claims Maual, 2008, p.12). However, compensation is only
payable for the cost of reasonable measures. The interpretation of the word
„reasonable‟ is unclear, but claimants must prove that all clean-up measures
operated by them were necessary activities for effective operations. In practice,
there are a number of gaps between claimants and the experts appointed by the
IOPC Fund and shipowners to assess the cost of clean-up operations. For
example, the KCG used a number of chemical dispersants by airplane after a
week had passed from the date of the Hebei Spirit incident, so the experts of the
IOPC Fund and shipowners expressed doubts about the effects of the dispersants.
Therefore, the KCG must show scientific evidence to prove the effects of the
dispersant in order to recover costs, such as rental cost of airplanes and cost of
dispersants. According to Article 3(b) of FC, the IOPC Fund may compensate
the cost for preventive measures in the territorial waters of a State which is not a
Party to the Convention. However, this case did not occur in the Hebei Spirit
incident because the spilled oil did not reach any other States such as China and
Japan.
ii) Property Damage
The IOPC Fund is payable for reasonable costs of cleaning, repairing or
replacing property that has been contaminated by oil (Claims Manual, 2008,
p.12). There are a number of claims for the cleaning and replacing of fishing
gears such as nets and equipment of fish farms in the Hebei Spirit incident
because a number of fish farms were affected by oil. There were also cleaning
costs of various types of ships in berth at ports affected by the oil.
41
iii)Consequential Loss
This refers to “loss of earnings suffered by the owners of property
contaiminated by oil” (Claims Manual, 2008, p.12). In other words, if a
fisherman has loss of income because his fishing nets were contaiminated by
oil and he could not fish until the cleaning of the nets, he can claim his loss of
income during that time to the IOPC Fund. However, again it only applies to
reasonable costs.
iv) Pure Economic Loss
This refers to the “loss of earnings caused by the oil pollution suffered by
persons whose property has not been polluted” (Claims Manual, 2008, p.13).
There are a number of claimants who had suffered pure economic loss in the
Hebei Spirit incident. Fishermen could not catch any fish during the
designation of the fishing ban by the Korean Government. Therefore, they had
to claim loss of earnings to the IOPC Fund. However, the Korean Government
must prove to the IOPC Fund that the fishing ban was a necessary measure at
the time in order to recover the loss from the IOPC Fund. The owners of
restaurants, hotels, and tourisms living in the affected areas by the oil submitted
a huge number of claims to the IOPC Fund, but most of them had inadequate
evidence for their losses. Furthermore, there were a number of claims from fish
markets.
v) Environmental Damage
The IOPC Fund may pay for “the cost of reasonable reinstatement measures
aimed at accelerating natural recovery of environmental damages” (Claims
Manual, 2008, p.13). However, the case of recovery of the cost for
environmental damages from the IOPC Fund is very rare in practice because it
is very difficult to prove the direct relationship between the incident and the
cost of reinstatement measures.
42
In summary, the types of compensations covered by the IOPC Fund in accordance
with the Claims Manual are divided into five types in principle. In most of the oil
pollution incidents, it is relatively easy to provide actual evidence of the costs for
clean-up, preventive measures, property damages and consequential loss, but for the
costs of pure economic loss, it is very difficult to calculate the actual loss of damages
because there are no detailed standards for such calculations.
Therefore, big gaps may usually occur in assessing the damages between claimants
and the IOPC Fund, and these problems may be brought to court and result in the
delay of settlements of compensation.
3.3.4 Claim Office
On 24 December 2007, the KOEM arrested the Hebei Spirit in order to ensure
compensation for huge costs of clean-up operations, losses and damages from the oil
spilled from the ship (Ministry of Land, Tranport and Maritime Affairs, 2010, p.22).
Meetings to discuss compensation issues between MLTM/KOEM and the
owner/Skuld P&I Club were held several times and a Coorperation Agreement was
made on 5 January 2008.
In this agreement, each party confirmed that the arrest of the ship was unnecessary in
view of the compensation guaranteed in accordance with the international law,
namely the CLC 1992 and the FC 1992, and agreed to set-up a Receipt Office for the
receipt of claims under the CLC and the FC. As a result of this agreement, the ship
was allowed to sail from Korean waters on 7 January 2008.
43
Thereafter, throughout consultation with the MLTM, the 1992 Fund and the Skuld
Club, the Hebei Spirit Centre was established in Seoul to Help claimants in the
presentation of their claims for compensation. The Centre has a manager and two
supporting staff members. The office became fully operational on 22 January 2008
(International Oil Pollution Compensation Fund, 21 February 2008).
On 1 July 2008, a second Cooperation Agreement was concluded between the
owners/Skuld P&I Club and the MLTM. In accordance with this Agreement, the
Skuld P&I Club undertook to pay claimants 100% of their claims as assessed by the
Fund and the Skuld P&I Club up to the CLC limit.
In return, the Korean Government undertook to compensate in full all claims as
assessed by the Club and the 1992 Fund as well as the judicial settlements in excess
of the IOPC Fund’s limit to ensure that all claimants would eventually receive full
compensation. The Korean Government further ensured that the Skuld P&I Club
deposit in the Court the balance between the payments already made by them and its
limit under the 1992 CLC (International Oil Pollution Compensation Fund, 9
September 2008).
3.4 Claim Status
3.4.1 Estimated Losses
The IOPC Fund presented their estimated losses to each Executive Committee as
shown in Table 7. The estimated losses for the clean-up operation were increased
continuously because additional clean-up had to be conducted until the first half of
2009. The estimate of the expected admissible costs for the at-sea and onshore cleanup, consequent disposal of waste and for environmental restoration and monitoring as
a result of the incident totals KRW186,870 million.
44
The estimated losses for fisheries and mariculture were increased up to KRW209
billion until June 2009, but decreased to approximately KRW166 billion in June
2010 because the experts found many excessive claims through assessment. The
estimated losses for tourism were also decreased due to lack of evidence.
Source : Adapted by Author from IOPC Fund Executive Committee Papers.
In June 2010, the IOPC Fund estimated total losses of damages caused by the Hebei
Spirit was approximately KRW453 billion, but big gaps remained with the claims
amount of KRW1,978 billion submitted by claimants.
3.4.2 Claim Situation
According to the report of the Director of the 1992 IOPC Fund (International Oil
Pollution Compensation Fund, 16 June 2010), as of 1 June 2010, a total of 19,025
claims had been submitted on behalf of 117,636 claimants. Of the claims registered
in the HSC, 228 claims had been submitted by fishery cooperatives or committees on
behalf of 98,839 small-scale fishermen affected by the oil spill.
Table 7 Estimated Losses Caused by the Hebei Spirit Incident
Estimated losses(unit:billion KRW)
2008 2009 2010
March June October March June October June
Clean-up 110 134.5 162.3 163.3 173 195 186.9
Fisheries/
Mariculture
190 206 206 206.0 209 149 166.2
Tourism 72~
124
198~
233
198~
233
198~
233
198~
233
198~
233
100
Total 372~
424
538.5~
573.5
566.3~
601.3
567.3~
602.3
580~
615
542~
577
453.1
45
The remaining 18,797 claims, mostly in aquaculture and tourism sectors, had been
registered and are being assessed individually. A total of 6,163 claims had been
assessed and of these, 4,307 had been rejected.
A total of 1,654 claims, totalling KRW102,516 million have been paid by the Skuld
Club. These payments also include a number of subrogated claims submitted by the
Korean Government.
Table 8 provides an update of the claims registered in the HSC as at 1 June 2010.
Table 8 Claim Situation caused by the Hebei Spirit Incident
Claimed
but not yet assessed
Assessed
but not yet paid10
Paid
No.of
Claims
Amount
(million
KRW)
No.of
Claims
Amount
(million
KRW)
No.of
Claims
Amount
(million
KRW)
Clean-up/Preventive
Measures
56 105,505 50 9,459 165 78,790
Property Damage 11 2,603 5 94 6 345
Fisheries/Mariculture 5,638 1,468,548 429 1,005 145 9,342
Tourism and other
Economic Damage
7,067 285,476 4,114 1,348 1,338 14,037
Environmental
Damage
1 2,195 – – –
Total 12,773 1,863,327 4,598 11,906 1,654 102,516
Source: International Oil Pollution Compensation Fund , June 2010. (IOPC/JUN10/3/5).

10 The number of assessed claims includes rejections.
46
Through simple analysis of Table 8, two significant problems can be found in the
claims process of the IOPC Fund. Firstly, the assessment proceeding by the IOPC
Fund is much too slow. Despite two and a half years having passed from the date the
incident occurred, 12,773 claims among the total of 19,025 claims have not yet been
assessed by the IOPC Fund. In other words, the assessed rate based on the number of
claims is less than 33%, and approximately 67% of the claims have not yet been
assessed as shown in Figure 7.
Figure 7 Rate of assessment by the IOPC Fund based on the number of claims
Source : Author
Looking at the calculation of the assessment rate based on the amount of claims, it is
more significant. Approximately KRW1,863 billion from the total of KRW1,978
billion claimed by victims have not been assessed and the assessed rate is less than
6%. In other words, 94% of claims have not yet been assessed as shown in Figure 8.
47
Figure 8 Rate of assessment by the IOPC Fund based on the amount of claims
Source: Author
Secondly, payment by the shipowners and the IOPC Fund to victims is also very slow.
Based on the number of claims, 1,654 claims among the total of 19,025 were paid
which brings the payment rate to less than 9% . Based on the amount of claims,
around KRW103 billion from the total of KRW1,978 billion claimed by victims were
paid and the payment rate is approximately 5%.
Eventhough the total number of claims submitted by victims is not the exact amount
to be paid to them at the moment, the proceeding of the assessments and payments is
too slow. In a general point of view, the main reason for these problems seems to be
lack of experts or staff at the IOPC Fund to assess the huge number of claims.
Looking at Figures 9 and 10, these problems can clearly be seen. Furthermore,
Figures 11 and 12 show the development of claims from March 2008 to June 2010
and the delay of assessment and payment by the IOPC Fund can also be seen clearly.
48
Figure 9 Claims Status (based on number of claims)
Source: Author
49
Figure 10 Claims Status (based on the amount of claims)
Source: Author
50
Figure 11 Development of Claims (based on the amount of claims)
Source: IOPC Fund (2010, June 16). IOPC/JUN10/3/5.
Figure 12 Development of Claims (based on number of claims)
Source: IOPC Fund (2010, June 16). IOPC/JUN10/3/5.
51
CHAPTER 4 Problems and Consideration of the Development
4.1 Introduction
The International Compensation Scheme is very useful especially in the case of huge
oil spill incidents throughout the world. However, several problems relating to claim
procedures taken by the IOPC Fund, such as assessment and payment continuously in
practice were pointed out by each Member State.
The most significant problem is the delay of payments for compensation. For
example, in the case of the Erica incident, it took approximately 18 months after the
incident to pay the amount of shipowners‟ limitation to claimants, a further 4 years
after the incident, around 30% of total amount of limitation of the FC 92 was paid by
the IOPC Fund and 9 years after the incident, approximately 70% of the total amount
was paid (Morandeira, 2008).
At the same time, looking at past experiences in Korea, the average amount
recovered from the IOPC Fund was less than 14% of the claimed amounts. There are
various reasons in the low percentage of recovered amounts from the IOPC Fund, but
there is a need to analyze this issue further in order to recommend corrective
measures.
This Chapter will discuss several problems, especially the delay of payments that
occurred during the claims proceedings with the IOPC Fund throughout the Hebei
Spirit incident and other large oil spill incidents, and the author will consider
effective solutions to these problems. For this objective, the chapter will be divided
into two parts, one involving the problems with the IOPC Fund and the other
problems associated with Korea‟s claims process.
52
4.2 External Problems with IOPC Fund
4.2.1 Absence of Exact Standards for Compensation
As mentioned earlier in Chapter 3, there is no detailed information or guidelines in
deciding whether the IOPC Fund should pay for claims submitted by various
claimants.
There is only a Claims Manual, which was published by the Fund, to refer to claims
procedures of the Fund, but it only offers a general overview of the obligations of the
Fund to pay compensation. The Manual does not include three main significant
matters, such as legally-binding elements, nor detailed standards for assessment of
claims, and no designation of time periods for assessment by the Fund.
Firstly, it is an important issue whether the Manual is legally binding or not. Most of
the Member States of the Fund have their own guidelines based on the Manual, and
Korea also made investigation guidelines for oil pollution damage after the No.5
Kum Dong incident which occurred in 1993. These guidelines introduced various
requirements including how a claim should be presented, what document a claim
should contain, methods of calculating the cost of damages, and the procedures of
claim assessment and payment.
However, it is just a general guideline in making claims to the Fund, and it does not
include detailed information or standards in accordance with the Claims Manual.
Also, the Claims Manual and various guidelines made by each State do not have any
legally binding power.
53
The Manual describes “it does not address legal issues in detail and should not be
seen as an authoritative interpretation of relevant to the international Conventions”
(Claims Manual, 2008, p.5). Therefore, any significant issues caused by every
incident have to be decided by the Executive Committee of the Fund because there
are no clear provisions in the Conventions.
Furthermore, when claimants do not agree with the decisions of the Committee, they
will bring actions against the Fund, which will then cause a delay in the payments for
several more years until final decision is made by the court or the supreme court. On
the contrary, it is very difficult to make unified guidelines to apply to every State
because each State has different situations, laws, and customs. Also, all final
decisions can be made only by the Courts of Contracting States in accordance with
Article IX of CLC and Article 7 of the FC.
Secondly, the Manual, in section 2, gives general information on various types of
damage covered by the Fund in accordance with Article I, 6. According to the
Manual, the main types of pollution damage covered are described as six types:
i) clean-up and preventive measures,
ii) property damage,
iii) consequential loss,
iv) pure economic loss,
v) environmental damage, and
vi) use of advisers.
54
Besides general information, it does not give any detailed information for a standard
or methods of their assessment. Consequently, claimants or experts appointed by the
Fund may interprete it themselves, and these interpretations may cause a lot of
arguments between claimants and the Fund. Therefore, it is necessary to develop
more detailed criteria or standards for the assessments by the Fund in order to avoid a
lot of arguments in future.
Finally, the Manual describes very detailed information on the period that a claim
should be made, which is as follows:
“Claimants will ultimately lose their right to compensation under the 1992
Fund Convention unless they bring court action against the 1992 Fund within
three years of the date on which the damages occurred, or make formal
notification to the 1992 Fund of a court action against the shipowner or his
insurer within the three years period” (Claims Manual, 2008, p.19).
However, there is no mention as to the exact period to assess and pay claims, but
there are only general provisions as follows:
“The 1992 Fund and the P&I Clubs try to reach agreement with claimants and
pay compensation as promptly as soon as possible” (Claims Manual, 2008,
p.20).
In order to facilitate a speedy assessment and payments to claimants, a provision for
the exact period to assess and pay compensation is recommended to be included.
4.2.2 Size of the Secretariat of the IOPC Fund
There are currently a very small number of staff of 27, including a Director in the
Secretariat of the Fund, and they work on the investigations and assessments of
claims caused by the oil pollution incidents across the world.
55
The main role for the assessment of claims seems to be undertaken by 10 persons
working in the Director‟s office and Claims Department as shown in Figure 13.
*One person has combined role as technical advisor and claims manager
*Deputy Director and one claims manager is vacant
*( ) : number of persons
This small size of the Secretariat of the Fund may be considered as a significant
factor for the delay of the payments. There are several reasons for increasing the staff
of the Secretariat of the Fund in order to make more speedy payments. Recently,
Member States of the 1992 Fund were increased and the limitation amount of
compensation of the Fund based on the Supplementary Fund was increased up to
more than 25 times compared to the limitation amount of the FC 71. Furthermore, oil
spill incident trends are currently towards bigger and bigger spills than in earlier
years and the claims are also more complex than in past years. Therefore, the
workload of the Secretariat of the IOPC Fund was increased and they need to
increase the staff accordingly.
Director
Director‟s
Office*
(4)
Claims Dept.*
(6)
External Relations &
Conference Dept.
(6)
Finance &
Administration
Dept.
(11)
Figure 13 Current Structure of the IOPC FUND’s Secretariat
source : Adopted by Author from https://monkessays.com/write-my-essay/iopcfund.org
56
According to the Claims Manual, “the fund usually appoints experts to monitor
clean-up operations, to investigate the technical merits of claims and to make
independant assessments of the losses” (Claims Manual, 2008, p.19). The Fund
usually depends on the advice of the International Tanker Owners Pollution
Federation Ltd (ITOPF).
However, the Fund has to make decisions as to whether to approve or reject a
particular claim, and the Fund should have sufficient staff capacity in order to meet
this principle. This issue was discussed at the Assembly of the 1992 Fund held in
October 2009, but the Fund had objections to this matter (Iinternational Oil Pollution
Compensation Fund, October 2008). However, the Fund should consider taking this
matter into account in the future.
4.2.3 Role of the Claims Office
The IOPC Fund and the P&I Club, occasionally, establish a local claims office in the
case of an incident where a large number of claims arose, in order for the claims to be
processed efficiently (Claims Manual, 2008, p.17). In the case of the Hebei Spirit
incident, the Fund and Skuld P&I Club established the Hebei Spirit Center in Seoul
as mentioned in the previous chapter. The local claims office is very useful for
claimants to submit claims.
On the other hand, it may cause delay of payments of compensation because the
office does not have the authority to make any decisions on whether or not claims
qualify for compensation.
The main role of the office is to transfer claims submitted by claimants to the Fund.
There is an opinion that if the office has the authority to assess claims, then the
57
claims procedure may be speedier than the present procedure (Choi D. H. & Choi J.
S., 1997, p.75).
In the case of the Sea Prince incident, which occurred in 1995, claimants were able to
submit their claims to a local law firm designated by the Fund and claimants were
informed of the status of their claims proceeding from the law firm directly because
the law firm was handling the claims. In contrast, in the case of the Hebei Spirit, not
only did the local office not have any information on the handling of the claims, but
they also did not have any authority to discuss the claims.
4.3 Internal Problems in Korea
4.3.1 Unreasonable Claims and Poor Evidence
The average percentage of the actual amount compensated by the Fund among the
total amount claimed in several incidents which occurred from 1993 to 2003 in Korea
is less than 14% as shown in Table 9.
The main reason for this result may be due to a lot of unreasonable claims submitted
by fisheries groups eventhough their claims did not have sufficient close link to
causation between the contamination and the loss or damage.
In addition, this problem occurred occasionally because most surveyors or law firms
appointed by owners of fisheries did not fully understand the policy for the
compensation of the Fund.
58
Table 9 Major Oil Spill Incidents in Korea
Date Ship‟s name
Claimed
amount
(million
KRW)
Compensated
amount
(million
KRW)
Compensation
rate
(%)
27 Sept, 1993 Keumdong No.5 93,132 8,718 9.4
23 July, 1995 Sea Prince 68,812 19,836 28.8
3 Aug, 1995 Yeo Myung 20,247 600 2.9
21 Sept, 1995 Yuil No.1 36,889 7,960 21.6
17 Nov, 1995 Honam Sapphire 49,923 1,112 2.2
3 April, 1997 Osung No.3 1,125 69 6.1
22 April, 2003 Buyang 3,611 319 8.8
13 May, 2003 Hana 1,589 91 5.7
12 Sept, 2003 Duck yang 696 46 6.6
12 Sept, 2003 Kyung Won 2,800 310 11.1
23 Dec, 2003 Jeong Yang 1,064 76 7.1
Total 279,888 39,137 13.98
Source : Cho (2008).
These unreasonable claims may result in more delay of compensation for the actual
victims and a drop in the credit of overall claims against the IOPC Fund. Furthermore,
the initial level of payment decided by the Fund may be lowered because of those
excessive claims and actual victims may suffer as a result. Therefore, the Korean
Government and Fisheries Associations should carry out proper education for
fishermen and the owners of fisheries in order to prevent unreasonable claims or
excessive claims without relevant evidence.
59
Another important reason for the low compensation rate is caused by inadequate
evidence in proving loss or damage of claimants. According to the Claims Manual,
“the assessment of claims for economic loss in the fisheries, mariculture and
processing sectors is based on a comparison between the actual financial results
during the claim period and those for previous period” (Claims Manual, 2008, p.30).
In the case of the Hebei Spirit incident, it is expected that the compensation rate is
very low because there are big gaps between the estimated amount of KRW453
billion of damage by the IOPC Fund and the submitted claims amount of KRW1,977
billion as shown in Tables 7 and 8 in Chapter 3.
The main reason for these problems is caused by false income tax returns of
fishermen. Furthermore, small-scale fishermen and bare-hands fisheries (or capture
fisheries) do not have any objective evidence to support their income claims nor any
income tax returns. As a result, several figures regarding productions of various
fisheries published by the Korean Government are different from the actual
production statistics of the fisheries.
For example, in the case of the Nahodka incident which occurred in 1997, since a
local government in Japan has recorded the actual production of fish and shellfish in
their region every year during the past 30 years, fisheries could recover the actual loss
caused by the incident against the Fund without any problems (Kim, 2009, p.64).
Therefore, the Korean Government should introduce mandatory measures for various
fisheries and fishermen to implement their obligation of income tax return following
relevant Acts, and try to ascertain the exact production of fisheries in the future.
60
4.3.2 Korean Fund
The Taean Special Law was legislated to support victims who suffered from the
Hebei Spirit incident temporarily as mentioned earlier in Chapter 2. However, there
is a need to consider a permanent solution to help with speedy compensation to
victims in the case of huge oil pollution incidents in the future.
Eventhough Korea ratified the Supplementary Fund shortly after the Hebei Spirit
incident, the delay in compensation can not be solved. Therefore, the application of
an additional compensation scheme is essential. One solution is to establish a Korean
Fund similar to that of the Canadian Compensation Scheme. The main problem with
this solution is financial sources.
The SOPF in Canada imposes a levy on oil importers, but this measure is not easy for
the Korean Government to implement at the moment. This is because the oil industry
in Korea has already undertaken a financial burden from joining the Supplementary
Fund. The Korean oil industry is different from that of Canada and the US because
there are no major oil companies to create much benefit from their business in Korea.
Korea does not have oil resources on land, so they depend only on imported oil. As a
result, Korea is currently the fourth largest contributor to the 1992 IOPC Fund as
shown in Table 3. Recently, the MLTM indicated it is planning to research this
matter through an institutional review.
61
Chapter 5 Conclusions
After the Torrey Canyon incident in 1967, the International Scheme for the
compensation of pollution damage caused by oil spills from tankers was based on
two sets of International Conventions, the CLC 1969 and FC 71. The international
community reaffirmed its commitment to this system widely in 1992 and in 2003,
and kept the levels of compensation up-to-date as mentioned in this paper.
Before the Erica (1999), Prestige (2002), and Hebei Spirit (2007) incidents, most of
the Member States of the IOPC Fund focused on increasing the limitation amount,
believing that the levels of compensation are enough for victims suffering from oil
spills from tankers. There is no doubt that it is a fact that the most important issue
regarding compensation to victims is the limitation amount which could help recover
their losses for damages caused by oil spills.
However, a speedy and fair compensation also became another significant issue for
victims in practice after the above three large oil pollution incidents. There is an
important point of similarity in the three incidents unlike previous incidents, namely
the positive intervention of the Government of each State dealing with the
compensation proceedings between the victims and the shipowner/IOPC Fund. The
main reasons are not only the estimation for exceeding the limitation amount of the
International Compensation Scheme, but also the delay of assessment and payments
to victims.
In the case of the Prestige incident, the Spanish Government enacted a Special Law,
Royal Decree Laws, in order to establish a system of advance payment to the Spanish
claimants, because the IOPC Fund pays the compensation only after assessment of
claims, which takes more than a year (Morandeira, 2008). This advance payment was
62
conducted by their own assessment, similar to that of the US and Canadian
compensation schemes.
In the case of the Erika incident, the French Government did not enact any Special
Law, but they used a huge amount of their government budget to enable speedy
payments to victims before the assessment by the IOPC Fund. Then, the French
Government declared that they would stand last in the queue in recovering the
amount for the advance payments from the 1992 Fund. This is the first case where
the government declared that they would stand last in the queue in recovering the
government budget used earlier to compensate victims from the IOPC Fund in the
world (Ministry of Land, Transport and Maritime Affairs, 2010, p.425).
The Hebei Spirit incident, which is the largest oil spill incident in Korea, brought
about many economical, social, environmental and political issues. The most
important issue was speedy and fair compensation to actual victims suffering from
the incident. Therefore, the Korean Government enacted a Special Law and also
conducted advance payments from the Government budget to some of the victims.
The Korean Government also declared it would stand last in the queue in recovering
the Government budget used to compensate victims from the IOPC Fund, the same
as the French Government. Unfortunately, the advance payments to victims were
very slow because the payments were conducted based on the results of the IOPC
Fund‟s assessment.
It is important that the IOPC Fund make changes in their administration to improve
efficiency. Although the Fund is opposed to increasing staff, this is something that
should be looked into seriously because the assessment periods for the claims became
longer leading to longer delays in payments made out to claimants, as can be seen
from the Erica, Prestige, and Hebei Spirit incidents. From looking at the current
International Oil Pollution Compensation Scheme, although the compensation
63
amounts seem sufficient due to the Supplementary Fund, problems relating to delay
in payments will constantly occur in the future.
Due to victims suffering from the delay in payments, Member States of the IOPC
Fund need to enforce a separate national compensation scheme. Moreover, with the
HNS Convention coming into effect shortly, the work load of the Fund will increase
even more. Therefore, it will not be a matter of the staff concentrating on the problem
of the compensation amount, but making sure that speedy compensations to victims
can take place efficiently in cases of oil spill incidents. For this to take place,
increasing the number of staff in the Fund should be looked into.
The current claims manual should also be supplemented. This is because there is a
need to state the assessment standards of claims in detail to avoid different
interpretations. When an accident occurs, the Fund will call ITOPF and local experts
from every Member State to decide the assessment standards, but this may lead to
different assessment standards every time an accident takes place because every
expert has different ways of interpreting. Furthermore, there is a need to state the
assessment periods of claims by the IOPC Fund. This way experts employed by the
Fund can follow the assessment proceedings in a timely and speedy manner.
Through this incident, what does the Korean Government need to do in the future?
The Korean Government need to concentrate on enacting a law on the detailed
standards of the assessment for various types of claims, following the general
standards of the assessment by the IOPC Fund in order for fair compensation to take
place. Therefore, all related organizations including Government officials need to be
educated and trained thoroughly and a group of Korean experts also needs to be
formed and trained. For example, the KCG or local governments need to be able to
command the cleaning operations reasonably, and government officials at the
fisheries departments need to follow scientific evidence instead of political reasons
64
when declaring a fishing ban, so that no problem will arise during compensation.
Sufficient training and publicity are also required in stopping excessive claims from
taking place because the excessive claims prevent speedy compensations from taking
place.
Monitoring of unlicensed and illegal fishing is necessary, so the government should
strongly enforce the implementation of relevant Acts on fisheries accordingly.
Further, the government should maintain all of the income tax returns against all
kinds of business in fisheries to present a clear record of their production in order to
provide proper evidence for loss of damages from oil spill incidents.
The Korean Government also joined the Supplementary Fund shortly after this
incident. Therefore, in the future, there is no need to worry about the limitation
amount because by joining the Supplementary Fund, the limitation amount has been
raised. However, how can the actual compensation process become more timely,
considering the total number of claims is over 190,000 in the case of the Hebei Spirit
incident? The delay of payments by the IOPC Fund can not be solved unless the
claims processing of the Fund is changed as shown not only in the Hebei Spirit
incident but also in the other incidents. To solve this problem, the Korean
Government needs to secure financial resources to make advance payments to
victims, and develop its own national assessment system on various claims caused by
oil pollution from ships.
In conclusion, the Secretariat of the IOPC Fund and the Korean Government should
develop their current Compensation Schemes as mentioned above in order to make
speedy and fair compensations to victims suffering from oil pollution from ships in
the future, taking into account the goal of the International Compensation Schemes.
65
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