The PRC Supreme Court has deviated from the accumulated legal precedent regarding liability for pollution under the International Convention on Civil Liability for Bunker Oil Pollution Damage (the Bunker Convention) and held the owners of a non-leaking vessel liable for clean-up costs and pollution damage.
On March 19, 2013, the container vessel CMA CGM Florida (the Florida) collided with the bulk carrier Chou Shan some 140 miles east of Shanghai and within China’s exclusive economic zone. The Florida had left Yang Shan in China a day before, while Chou Shan was on her way to Australia from Qinhuangdao in China. Although both vessels sustained significant damage, the damage to Florida caused her to spill approximately 610 tonnes of heavy fuel oil into the East China Sea. The spill triggered emergency clean-up and salvage operations conducted by the Shanghai Salvage Bureau (the SSB) and the Shanghai Marine Safety Administration (the MSA), which also mobilized the local Ship Pollution Response Organization (the SPRO). The MSA investigated the incident to ascertain (among other matters) liability for the collision, and both owners were required to deposit with the MSA security for claims for pollution clean-up costs and damage to fisheries. A limitation fund was established by the owners of the Chou Shan in respect of their liabilities arising from the collision.
The SSB launched claims against the owners of both vessels to recover the costs of clean-up and for pollution damage. Given that the incident took place in Chinese waters, the dispute between the SSB and the owners of the Florida and Chou Shan fell to be decided by the Chinese courts (following an unsuccessful attempt by the owners of the Florida to have Australian courts take jurisdiction in 2014).
The lower court adhered to the existing understanding of liability for oil spills under the Bunker Convention, holding that only the owners of leaking vessels could be liable for such costs; on appeal by the SSB, the PRC Court of Appeal upheld the first instance decision. The matter was referred up to the PRC Supreme Court, which overturned the two lower court decisions and held that the owners of the non-leaking Chou Shan were also liable for a portion of the clean-up costs and pollution damage caused by the collision. The owners of the Florida were held primarily liable for the full cost because of collision liability and the low limit of Chou Shan’s liability.
Supreme Court’s rationale
In reaching its decision, the Supreme Court took the view that the Bunker Convention is silent on whether owners of non-leaking vessels could be held liable:
- paragraph 1 of Article III explicitly names owners of leaking vessels to be liable, but does not explicitly exclude the liability of owners of non-leaking vessels, and so this should not be inferred;
- paragraph 6 of Article III entitles owners of leaking vessels to retain all rights of recourse that they had outside of the Bunker Convention and this provision was not limited in any way, implying that the owners of leaking vessels could launch actions against other parties; and
- paragraph 3(b) of Article III allows owners of leaking vessels to escape liability on proof that the damage was wholly caused by an act or omission of another.
Having reached that conclusion, the court ruled that the liability (if any) of owners of non-leaking vessels is to be decided by domestic law, not the Bunker Convention. Citing Chinese domestic law that (a) allows claimants to hold the leaking vessel liable (Article 69 of the Tort Law), and (b) provides for collision liabilities to be apportioned among multiple parties (Article 169 of the Maritime Code), the court came to the decision that the owners of the non-leaking Chou Shan could be held liable for the costs claimed. The exact share of their liability was then a matter of looking at the evidence at hand and determining the percentage contributions of each vessel to the collision; however, the court did note that the total cost recovery could not exceed 100 percent of the clean-up costs claimed.
Although the decision was made under Chinese domestic law, it ultimately turned on a controversial interpretation of the scope of the Bunker Convention. It remains to be seen whether other courts will follow the logic and reasoning of the Supreme Court and whether this line of reasoning will be upheld by the highest courts in other jurisdictions. For now, owners may wish to review the extent of the insurance coverage provided by the Bunker Convention Certificate they must carry to comply with the Bunker Convention, and P&I clubs are likely to want to review the coverage they offer.