Mauritius Oil Spill Highlights Inadequacy of Compensation under Bunker Convention – How Little is Too Little?

On 25th July 2020, a Japanese bulk-carrier MV Wakashio ran aground on a coral reef on the southeast coast of Mauritius. A week later, it started leaking oil into the pristine coastline that is home to coral reefs, mangroves, and varied species of aquatic wildlife resulting in the worst ecological disaster the country has ever witnessed. The authorities declared a ‘state of emergency’ only on August 12 which showed the government’s apathy and failure to control the spread on time. As much as fifteen kilometers of the coastline has been affected and this is only expected to increase further as the situation develops. The accident had taken place near two environmentally protected marine ecosystems and the Blue Bay Marine Park Reserve, which is a wetland of international importance.

While the ecological and economic ramifications of the spill are topics of much discussion, the authors are more concerned with the compensatory and liability aspect of the spill. The Japanese operator of the ship pledged to contribute a sum of 1 billion Yen ($9.4 million) over a period of several years to help manage the fallout. To what extent is such a compensatory amount adequate is the foremost question that the authors will be addressing in this article.

According to Article 3 of the International Convention on Civil Liability for Bunker Oil Pollution Damage (“Bunker Convention”), the owners of vessels are responsible for damages caused by oil leaks. The convention thus imposes strict liability on the part of the vessel owners and their insurers for such losses. Compensation amounts paid by shipowners are governed by the Convention for Limitation of Liability for Maritime Claims, 1976 (“LLMC”) and a subsequently amended convention agreed in 1996 (“The 1996 Protocol”), which significantly increases the cap for compensation based on the gross tonnage of the vessel. Mauritius has, however, not ratified the 1996 Protocol as a result of which the older 1976 Limitation Convention is to be applied to the present case. Under the 1976 Limitation Convention, there is a maximum limit of Special Drawing Rights (“SDR”) of 25 million, that is $16.7 million (SDR 1 = $1.5). The Convention, thus, limits payments to $18.7 million including additional clean-up costs. Had Mauritius ratified the 1996 Protocol, it could have received up to $65 million or more according to some experts. The amount that has been pledged to be paid by the operator of the ship to the Mauritian government, in the instant matter, seems hardly enough to cover the sort of losses that would arise once 1,000 tonnes of heavy fuel oil pollutes the pristine ecological environment—the devastating aftermath of which is expected to last for decades—pushing the ecosystem to struggle for its very survival. It is pertinent here to mention that Art. 2 of the LLMC 1976 only defines limits for losses due to physical damage. It is unclear whether Art. 2(a) of the LLMC 1976 covers damage from bunker oil when no physical damage has been sustained. This uncertainty, thus, additionally poses a risk in jurisdictions where such type of damage may occur vis-à-vis a claim for compensation. The Bunker Convention would, in such cases, establish strict liability with no limitation thereby exposing an inherent loophole in the legislation.

Furthermore, different ships are subject to different international legal conventions which pose another concern vis-a-vis the different compensation amounts. The more comprehensive international regime on liability and compensation for oil pollution damage caused from tankers, International Convention on Civil Liability for Oil Pollution Damage, 1969 (“CLC”) and  International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992 (“FUND”) would have provided liability and compensation of up to $286 million for this incident had the oil spill been from an oil tanker rather than a bulk-carrier. The 2003 Supplementary Fund Protocol would have provided even higher liability and compensation, up to around $1.05 billion, but neither has Mauritius ratified this Protocol nor is the vessel an oil tanker. Thus, the amount of compensation under the Bunker Convention is significantly lower compared to the compensation under the International Oil Pollution Compensation Funds regime for oil pollution from tankers and further depends on the size (gross tonnage) of the ship which in itself is a debatable classification.

Simply put, it means that the amount of compensation payable is capped, regardless of the size of the damage. This makes it clear that the objective of these laws is not to protect oceans and sensitive ecologies, but instead to protect shipping companies from facing full liability for their actions. However, there is a way to breach this compensation cap. If the Mauritius government wants to get more compensation, it has to demonstrate that ‘the loss resulted from his [the shipowner’s] personal act or omission, committed with the intent to cause such loss, or recklessly and with the knowledge that such loss would probably result’. This is an extremely high degree of culpability which is difficult to prove due to lack of evidence in most cases.

The difference in legal treatment between oil tankers and bulk carriers is the presumption that oil pollution from tankers is more substantial compared to pollution arising from a bulk carrier, which carries solid cargoes like grain or coal. To what extent is such a classification reasonable under present circumstances has been a point of contention amongst experts and maritime lawyers because even if such measures are legally correct, morally they are not. Ships have gotten bigger since those Conventions were adopted and carry more fuel, so even bulk carriers can cause significant spills as we have seen in the present case.

The current legal framework providing such limited monetary compensation dwarfs the scale of the damages caused, which is now estimated to be upwards of $10 billion. What has happened in the Indian Ocean highlights the urgent need for governments of coastal states to enact any increased limits in their own jurisdiction without any more delay by signing the most recent Conventions. Furthermore, there is an urgent need to set compensation slabs according to the location of the spill. For instance, a spill in Mauritius would be much more devastating in almost every sense as compared to a spill in the middle of the Atlantic Ocean. The damage in ecologically sensitive areas is—in most cases—irreparable.

It, thus, calls for universal participation in the existing international legal framework and crucially, for all countries to adopt the latest international legal instruments in addition to modifying the existing compensatory slabs by incorporating new criteria like location, the population affected, coral reef destruction, tourism losses, biodiversity loss and rehabilitation amongst others. Perhaps, it is high time the international community reconsiders the current legal framework and aligns regulations for both tankers and bunkers because, at the end of the day, an oil spill is an oil spill, whether it is caused by a bunker or a tanker.

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