The Improvement of China’s Ship Oil Pollution Damage Compensation System in Light of OPA 90

ZHAO Xiaonan,CHANG Yen-Chiang

Abstract: The first attempt to systematically legislate the ship oil pollution damage compensation system (hereinafter “SOPDCS”) was made in 2018,by the revision of Maritime Law of the People’s Republic of China (Revised Draft for Public Comments) (hereinafter “Exposure Draft”).Its basic legislative idea is to converge with the relevant international conventions to which China is a State party.Subsequently,the manuscript of Exposure Draft has been revised several times (hereinafter “Revised Draft”).This paper analyzes China’s current legislation for SOPDCS,briefly introduces the SOPDCS to be constructed by the Revised Draft,and provides a commentary on the context and legislative ideas of the Revised Draft.The SOPDCS of the U.S.under Oil Pollution Act of 1990 (OPA 90)is more advanced as its objects of regulation are comprehensive,the defenses to liability are detailed and the scope of the Oil Spill Liability Trust Fund is wide.This paper made a comparative analysis on SOPDCS of the U.S.SOPDCS and China in order to make suggestions for the improvement of SOPDCS in China regarding three issues,namely,regulation of pollution liability for drilling units,defenses to liability with an act or omission of a third party,and the oil pollution damage compensation fund.China should clearly incorporate mobile offshore drilling units into the scope of regulation of SOPDCS,and at the same time add the clause of “may refer to the ship oil pollution damage compensation clause” for fixed drilling units in the Revised Draft.In addition,China should also set stricter conditions and the obligation to pay compensation for the defenses to liability with an act or omission of a third party.Furthermore,China should optimize the compensation scope and limit of the ship oil pollution fund.

Key Words:Ship oil pollution damage compensation;Revised draft;Legislative ideas;OPA 90

I.International Background and Current Situation of China’s Ship Oil Pollution Damage Compensation System

International conventions,such as the 1971International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damageas well as theProtocol of 1992thereto (hereinafter “1992 Fund Convention”) and the 1992International Convention on Civil Liability for Oil Pollution Damage(hereinafter “1992 CLC”),which came into force successively after the1969International Convention on Civil Liability for Oil Pollution Damage,has established a two-tier compensation system for ship oil pollution damage: Shipowners provide compensation within the limit of liability and oil cargo owners provide supplementary compensation through the international fund established by apportionment.1ZHANG Chunchang &SHUAI Yuexin,The Legal Issues of Compensation for Oil Pollution Damage Caused by Ship Collision -A Case Study of the Retrial on the Dispute Over the Cost of Preventive Measures in the Collision and Pollution Accident of M.V CMA CGM Florida and M.V Chou Shan,China Oceans Law Review,Vol.16:3,p.83-118 (2020).(in Chinese)States with relatively developed shipping industry in the world have,whether by acceding to international conventions or enacting domestic legislation,have established a two-tier compensation mechanism for oil pollution damage from ships with reference to international practices.2XUE Mengxi &CHANG Yen-Chiang,Review on the System of Compensation Fund for Oil Pollution Damage,Shandong University Law Review,Vol.12,p.171-184 (2014).(in Chinese)Over the years,however,practice has revealed some defects in the international ship oil pollution damage compensation system.Quite a few scholars have already expressed the view that the limit of liability in the international compensation mechanism for oil pollution damage from ships is so low that adequate compensation cannot be provided,and that it over-subsidizes the shipping industry and even puts this burden on the victims.3David Soto-Oñate &Gonzalo Caballero,Oil spills,governance and institutional performance: The 1992 regime of liability and compensation for oil pollution damage,Journal of Cleaner Production,Vol.166,p.299-311 (2017).Further,assigning compensation liability only to shipowners may affect the amount of compensation that may be available to victims.

In the present stage,the relevant cases in China are mainly adjudicated on the basis of the relevant provisions in the international conventions on compensation for oil pollution damage from ships concluded or participated by China and stipulated to be applied by domestic laws,as well as in different branches of laws.In respect of international treaties,China has acceded to the1992 CLCand the 2001International Convention on Civil Liability for Bunker Oil Pollution Damage(hereinafter “Bunkers Convention”).As for domestic legislation,provisions on compensation for ship oil pollution damage can be found in many comprehensive laws and normative documents,including theMaritime Law of the People’s Republic of China(hereinafter “Maritime Law”) and theMeasures of the People’s Republic of China for the Implementation of Civil Liability Insurance for Vessel-Induced Oil Pollution Damage,as well as relevant judicial interpretations.These general and principled provisions do not specify the compensation for ship oil pollution damage,and lack practical operability.4YE Yanglian,Application of the Conventions on Ship Oil Pollution in China,Chinese Journal of Maritime Law,Vol.23:2,p.55 (2012).(in Chinese)

A sound ship oil pollution damage compensation system can reasonably allocate the compensation liability for damage in the event of an oil spill.5China Establishes a Risk Sharing Mechanism for Ship Oil Pollution Damage —Interpretation of the Ship Oil Pollution Damage Compensation Fund,GovCN (18 Jun 2015),http://www.gov.cn/zhengce/2015-06/18/content_2881447.htm.(in Chinese)Such a system can also enable us to significantly improve the level of safeguarding the legitimate rights and interests of victims,multiply the effectiveness of the work of maintaining the marine environment,and effectively practice the concept and policy of sustainable development of the shipping industry and marine ecological environment.6Environment and Resources Adjudication of China (2019),website of the Supreme People’s Court of the People s Republic of China (8 May 2020),http://www.court.gov.cn/zixunxiangqing-228341.html.(in Chinese)As a major maritime country and a big oil consumer,China is frequently involved in oil spills caused by ship collisions during the transportation of oil and cargo.A massive oil spill can cause damage to the marine environment that is difficult to repair,and at the same time can bring huge losses to the economy and damage to the public interest.Take theSanchiaccident in 2018 as an example.The explosion and sinking of theSanchiwith 11.13 tons of condensate oil on board caused a large oil pollution belt on the sea surface,the cumulative polluted area that needed to be cleaned amounting to 1,100 square kilometers.7YIN Jie,Analysis and Reflection on Causation and Emergency Disposal of “Sanchi”Crash-Blasting Accident,Navigation of China,Vol.42:1,p.42-46 (2019).(in Chinese)In this regard,it is necessary for China to reasonably attribute responsibility in the judicial adjudication of oil pollution damage compensation and settle the disputes of damage compensation.However,on the one hand,China has not yet developed a sound legislative system for ship oil pollution damage compensation.Despite the fact that a number of judicial interpretations are available for guidance on the trial of cases concerning ship oil pollution damage compensation,such as theProvisions of the Supreme People’s Court on Several Issues Concerning the Trial of Cases of Disputes over Compensation for Vessel-induced Oil Pollution Damage,there is still a need for special legislation in order to raise the legislative level and unify the application of maritime laws.On the other hand,the regulation of China’s ship oil pollution damage compensation system is not well established.For example,the dispute over whether the1992 CLCshould be applied to the compensation for oil pollution damage from non-foreign vessels,the uncertainty of the1992 CLCin issues such as the determination of the liability of non-oil-spill ships in oil pollution caused by ship collision and the limit of liability for fuel oil pollution,as well as the restriction of applicable oil types,8The Second Roundtable on Maritime Rule of Law was successfully held in Beijing,China Legal Science (25 Apr 2019),http://iolaw.cssn.cn/xshy/201905/t20190515_4896010.shtml.(in Chinese)all these are yet to be clarified and determined by way of domestic legislation.

There is no special legislation for China’s prevailing ship oil pollution damage compensation system,making it difficult to circumvent the disorder in judicial practice while leaving a legislative gap or duplicate legislation,which undermines the stability and authority of judicial decisions.On top of that,current regulations are more of principles and directions but are not specifically targeted and less operable.9Supra note 4.TheMaritime Law of the People’s Republic of China (Draft for Submission)10The April 2020 revision is the latest version of the Maritime Law of the People’s Republic of China (Draft for Submission).(hereinafter “Revised Draft”) attempts to break the situation of lack of systematic legislation on ship oil pollution damage compensation system in China by adding a new chapter on “Liability for Ship Oil Pollution Damage”.The legislative idea of theRevised Draftfollows the1992 CLCto which China is a State party.In view of the shortcomings of existing international conventions on ship oil pollution damage that have already been revealed in practice,the legislative idea of conforming with international conventions is not the best choice for China’s ship oil pollution damage compensation system at this stage.China’s system should not be limited to convergence with the international mechanism;instead,we should establish a more sound system which is more suitable for our practice on the basis of the international mechanism.In this regard,the ship oil pollution damage compensation mechanism of the United States (U.S.),as one of the guidelines for the evolution of international mechanism,is worth learning for China.

The U.S.adopted theOil Pollution Act of 1990(OPA 90),which provides for the civil liability of the responsible party for oil pollution damage from vessels,and also established the Oil Spill Liability Trust Fund (OSLTF),which is managed by the National Pollution Funds Center (NPFC),to provide supplementary compensation for damage caused by oil pollution.The ship oil pollution damage compensation system under OPA 90 has a wide range of compensation,a large number of claim objects,and a high limit of liability,making OPA 90 a global reference model.It also provides a reference for us to establish a more sound ship oil pollution damage compensation system that is more in line with China’s practical needs on the basis of the convention.

II.Analysis of and Comment on the Chapter Regarding Ship Oil Pollution Damage of the Revised Draft

The special chapter “Liability for Ship Oil Pollution Damage” consists of four sections,respectively on the general provisions of applicable waters,applicable pollutants,and shipowners;liability for ship oil pollution damage;liability for bunker oil pollution damage;ship oil pollution damage compensation fund.

This chapter limits the applicable pollutants to “pollution damage caused by persistent oils and bunker oil on board”.At the beginning of the revision of theMaritime Law,this special chapter was entitled “Liability for Ship Pollution Damage” with toxic and hazardous substances pollution within its scope of regulation.11See Maritime Law of the People’s Republic of China (Exposure Draft for Revision),Nov 2018.However,considering such problems as the fact thatInternational Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Seahas not yet come into force,the latest version of theRevised Draftdoes not include toxic and hazardous substances pollution in the scope of regulation.With regard to the civil liability of the responsible party,theRevised Draftprescribes that the responsible party for compensation for ship oil pollution damage is the shipowner,12Art.252 of the Maritime Law of the People’s Republic of China (Revised Draft).and specifies limited liability,13Id,Art.258.exceptions from liability,14Id,Art.249.and the circumstances of loss of limitation on liability15Id,Art.253.for the responsible party.Meanwhile,the compulsory insurance system has been explicitly included in theRevised Draft,allowing the claimant to submit all claims provided for in the new section directly to his/her insurer or financial guarantor,16Id,Art.256.without the need to submit them to the shipowner as a precondition.The ship oil pollution damage compensation fund serves as a supplementary compensation within the compensation limit for the part exceeding the compensation limit of the responsible party,the part for which the responsible party is not liable,and the part for which the responsible party is unable to compensate.17Id,Arts.266,269.

This special chapter is China’s first attempt to systematically legislate the ship oil pollution damage compensation system.TheRevised Draftamended the previous legal loopholes.For example,“pollution damage caused solely by the fault of a third party” is no longer an exception from liability for the responsible party,and the clear provision that the claimant may claim compensation for pollution damage directly to the insurer of liability or financial guarantor is also worthy of recognition.Nevertheless,we can still continue to improve our ship oil pollution damage compensation system on the basis of conforming with the international convention.

Concerning the responsible party,as for the persistent oil carried by the ship,theRevised Draftconforms with the1992 CLC,and clearly identifies the shipowner as the subject of ship oil pollution damage compensation.As for bunker oil pollution damage,theRevised Draftfollows theBunkers Conventionto include

the bareboat charterers,ship managers and ship operators into the scope of the responsible parties.However,theBunkers Conventionhas clearly emphasized that bareboat charterers,ship managers and ship operators be included in the scope of the responsible parties because it does not provide for damage compensation fund in terms of compensation mechanism,so the subject of liability is expanded to ensure that the victims of bunker oil pollution have more opportunities to receive compensation.In theRevised Draft,however,the oil pollution damage compensation fund is applicable to both ship oil pollution damage and bunker oil pollution damage.18Id,Art.266.Consequently,the scope of the responsible parties should be unified,either the responsible party of both types of pollution should be limited to the shipowner,or the bareboat charterer,ship manager and ship operator should be listed as the responsible parties of oil pollution damage accidents.The latter approach allows the victims to have more chances to get compensation by spreading the liability of the responsible parties.Stricter conditions can be imposed on the defenses to liability with an act or omission of a third party;and consideration should be given to clarifying its applicability to inland waterway ships and mobile offshore drilling units.There is an increasing flow of ships in the inland water system represented by the Yangtze River system,and the sailing ships are mainly inland waterway ships,which are subject to a higher risk of ship oil pollution damage,while almost none of the existing systems can be applied to inland waterway ships.As a maritime law system where any change may have wide-ranging implications,the currentRevised Draftonly refers to domestic waterway transport contracts in Chapter IV “Contract of Carriage of Goods by Sea”.The definition of ships in Chapter I General provisions does not mention inland waterway ships,and neither does the new special chapter.Whether inland waterway ships should be included in the scope of regulation of the ship oil pollution compensation system should be further discussed and clarified in the special chapter.In addition,mobile drilling units and other offshore facilities should also be explicitly included in the scope of regulation of the special chapter in order to deal with high-risk oil spill accidents on drilling units.Regarding the damage compensation fund system,there is also plenty of room for improvement,such as raising the fund compensation limit and optimizing the fund claim procedures.

III.OPA 90 as a Significant Reference

Out of its consideration for the limit of liability and other factors,the U.S.did not accede to the1992 CLCand the1992 Fund Convention.However,with its domestic legislation exceeding the standards set by international treaties,the U.S.has the highest liability limits for shipowners and the highest fund compensation in the world.19Inho Kim, A Comparison between the International and US Regimes Regulating Oil Pollution Liability and Compensation,Marine Policy,Vol.27:3,p.265-279 (2003).With strict defenses and extremely high limits of liability,the liability subject is subject to greater liability under OPA 90,20XIANG Zaisheng,A Legal Perspective on the Deepwater Horizon Oil Spill Incident in the Gulf of Mexico,American Studies Quarterly,Vol.25:4,p.47-61 (2011).(in Chinese)which can fully protect the rights and interests of oil pollution victims and exert a preventive and warning effect.21LIU Jing,Michael Faure &WANG Hui,Compensating for natural resource damage caused by vessel-induced marine oil pollution: Comparing the international,U.S.,and Chinese regimes,Journal of Environmental Law and Litigation,Vol.29:1,p.181 (2014).

A.The Ship Oil Pollution Damage Compensation System Under OPA 90

OPA 90 applies to all forms of oil,as compared with the1992 CLCand the1992 Fund Convention,which apply only to persistent hydrocarbon mineral oils.Unlike the1992 CLC,in which the shipowner is the sole responsible party,OPA 90 includes the shipowner,the ship operator and the bareboat charterer as the responsible parties for ship oil pollution damage compensation,22See 33 USCS § 2701(32)(A).but it does not provide for a specific allocation of liability among these three parties.In addition to the broader scope of responsible parties,OPA 90 also provides for a wide range of damages.The compensation items under OPA 90 are divided into two categories:cost of cleanup and damages,while the latter includes a number of specific items:natural resource damages,damages to real or personal property,loss of subsistence use,loss of government revenues,and expenses arising from increased public services.23Id,§ 2702(b).In contrast to the scope of compensation under the1992 CLC,OPA 90 covers not only actual losses and personal or institutional losses,but also losses and loss of income suffered by government departments due to accidents.

With regard to the liability of the responsible party,OPA 90 is consistent with the1992 CLCand adopts the principle of strict liability on the part of the responsible party.With the exception of such defenses as force majeure and acts of third parties,the shipowner shall be liable for compensation as long as the pollution damage is caused,whether it is at fault or not.In invoking the third-party clause to claim exemption,the responsible party shall prove that they have exercised due care.2433 USCS § 2703(a): A responsible party may be relieved of liability only if it can be proved that the accident was caused solely by (i) an act of God;(ii) an act of war;(iii) an act or omission of a third party with whom the responsible party does not have a contractual relationship if the responsible party can prove by sufficient evidence that it took into account the characteristics of the oil and exercised due care and by sufficient evidence that it took precautions against foreseeable acts or omissions of any such third party and the foreseeable consequences arising therefrom;(iv) any combination of paragraphs (i),(ii),and (iii).OPA 90 imposes a very high limit of liability25Id,§ 2704(a).on the responsible party and six exceptions from liability.26Id,§ 2704(c).In addition,if the accident is caused by gross negligence or willful misconduct of the claimant,the responsible party is also immune from liability.27Id,§ 2703(b).

The fund under OPA 90 is the OSLTF,which is financed primarily from taxes collected from oil,the same as provided for in the1992 Fund Convention.Besides,interest income,recoveries against liability subjects and their insurers and guarantors,compensation for damages and fines of a certain amount are also important funding sources of OSLTF.28John N.Woods,Going on Twenty Years -The Pollution Act of 1990 and Claims Against the Oil Spill Liability Trust Fund,Tulane Law Review,Vol.83:5-6,p.6 (2009).The OSLTF has two major components: the Emergency Fund and the Principal Fund.The costs of natural resources damage assessments and government removal costs are covered by the Emergency Fund,and “the uncompensated removal costs and damages,the total costs of natural resources damage assessments,and the operating costs of federal agencies required to implement and enforce the Act” are covered by the Principal Fund.29U.S.Department of Homeland Security,United States Coast Guard &The Oil Spill Liability Trust Fund,Funding for Oil Spills,USCG (Jan 2006),https://www.uscg.mil/Mariners/National-Pollution-Funds-Center/about_npfc/osltf/.

B.Analysis of the Rationality and Boundary of China’s Reference to OPA 90

The ship oil pollution damage compensation system under OPA 90 marks an innovation and breakthrough to the original international conventions,providing a legislative reference and good example for the international ship oil pollution damage compensation,as well as for China.With its broad scope of application,OPA 90 is capable of regulating a wide range of oil spills and the movement of various types of watercraft.30Supra note 21,LIU Jing,Michael Faure &WANG Hui,p.187.OPA 90 provides adequate protection for claimants by specifying multiple claim objects with the apportionment of liability for ship oil pollution damage to as many objects as possible.Features such as comprehensive compensation scope,high limit of liability and difficulty in defense by the responsible party also play an effective role in prevention and early warning.Facing comprehensive compensation matters and high compensation costs,the responsible party will act more cautiously to avoid the occurrence of ship oil pollution accidents.

The basic idea of China’s ongoing legislative work on the special chapter of theMaritime Lawon ship oil pollution damage compensation is also consistent with the international conventions.China,as a State party to the1992 CLC,should simultaneously improve the mechanism while conforming to the said convention.Moreover,China’s developing shipping economy also requires a higher standard of the ship oil pollution damage compensation system at home.In recent years,the amount of oil transported by ships at sea has been continuously increased and the exploitation of offshore oil has been intensified in order to meet the needs of social and economic development.In 2020,China’s crude oil imports reached 542.01 million tons,and the cargo throughput of coastal ports reached 9,480.02 million tons.31China Statistical Yearbook 2021,National Bureau of Statistics of China,http://www.stats.gov.cn/tjsj/ndsj/2021/indexch.htm.(in Chinese)As a result of the high-frequency offshore oil exploitation,transportation,storage and port trade,China is exposed to a high risk of marine oil spill accidents.32LIAO Guoxiang et al.,Predictive Assessment of Pollution and Hazard Resulting from Marine Oil Spill Accidents with Stochastic and Deterministic Scenario Simulations,Marine Environmental Science,Vol.36:2,p.266-273 (2017).(in Chinese)As a major shipping country and a major importer of crude oil in the world,it is not enough for China to merely follow international conventions in terms of domestic legislation.Considering that the U.S.,being one of the few States that have not acceded to theInternational Civil Liability Conventionand the International Oil Pollution Fund,has become the one with the highest limitation on shipowners’ liability and the highest supplementary fund in the world through its OPA 90,China can appropriately refer to some of the provisions in OPA 90,so as to enhance our ability to handle ship oil pollution damage cases.

IV.Legislative Suggestions for the Special Chapter on Ship Oil Pollution Damage Compensation in the Revised Draft

The ship oil pollution damage compensation systems established by OPA 90 and proposed by theRevised Draftare identical in structure,but differ in specific regulations.In terms of the compensation scope,OPA 90 provides more detailed regulations by listing detailed compensation items such as government rent loss.In terms of the compensation subject,OPA 90 provides for a wider range of liability subjects,a higher standard for the classification of ship tonnage adopted for the liability limit,more detailed regulations about loss of liability limitation for liability subjects,and stricter regulations regarding exceptions from liability for liability subjects.In terms of the oil pollution compensation fund,OSLTF is divided into the Emergency Fund and the Principal Funds,with a broader liability scope and higher compensation limit.Based on a comparative analysis of the respective ship oil pollution damage compensation system of China and the U.S.,this paper puts forward the following suggestions for the special chapter on ship oil pollution damage compensation in theRevised Draft,with an aim to improve China’s system in this regard.

A.Application of Compensation Liability for Pollution Damage by Offshore Facilities Such as Drilling Units

Many international conventions to which China is a State party provide no special regulations on the compensation for oil pollution damage caused by drilling units.China’s domestic legislation only provides for the principles of civil compensation for oil pollution damage from some drilling units,leaving the issues of civil liability attribution principle,compensation subjects,claim subjects,scope of compensation and limitation of liability unspecified.33OUYANG Zhenyuan,A Comparative Analysis of the Application of the Law on Oil Pollution Damage from Offshore Oil Drilling,Journal of Comparative Law,Vol.26:6,p.102-121 (2012).(in Chinese)In this regard,it is helpful to improve China’s compensation mechanism for offshore oil pollution damage by referring to the U.S.’ qualitative analysis of oil drilling units and its successful experience in dealing with civil compensation disputes over oil pollution from the offshore oil exploration and exploitation.

Drilling units are currently the most widely used offshore oil exploitation equipment.34ZHANG Hui,The Limitation of Liability of the Oil Pollution from Off-shore Oil Development,Wuhan University International Law Review,Vol.1:6,p.85-97 (2017).(in Chinese)Despite the fact that oil spills in China are mainly caused by ship collisions and the largest proportion of oil spills is caused by ship collisions,the occurrence of oil spills in offshore facilities such as drilling units is more risky and difficult to control,which will bring serious economic losses to the society.35CHEN Qinsi &HU Song,Marine Oil Spill Accidents in China’s Coastal Zone,Ocean Development and Management,Vol.37:12,p.49-53 (2020).(in Chinese)Therefore,we cannot ignore the regulation of oil spills from drilling units.

1.Application of OPA 90 to Oil Drilling Units

In OPA 90,the liability subjects for oil pollution damage are divided into vessels and offshore facilities.3633 USCS § 2701(32).Vessel means “every description of watercraft or other artificial contrivance used,or capable of being used,as a means of transportation on water”,other than a public vessel.37Id,§ 2701(37).Offshore facility means any structure,equipment,or device (other than a vessel) which is used for exploration,drilling,exploitation,etc.38Id, § 2701(9).Mobile offshore drilling units are classified as vessels,39Id, § 2701(18).while other oil drilling and exploitation equipment is classified as offshore facilities.Notably,the legislator of OPA 90 is aware of the differences between vessels and drilling units.In the event of an oil spill accident,for example,the amount of oil spilt from the ship is limited,but that from the offshore drilling unit is difficult to estimate;thus,different liability limits are applied to vessels and offshore drilling units respectively.40LIU Changxia,An Analysis of the Legal Attributes of Offshore Drilling Platform in the Context of Oil Pollution Damage Compensation,Journal of Ocean University of China(Social Sciences),Vol.29:3,p.50-55 (2016).(in Chinese)

Taking oil spills from ships as the starting point,OPA 90 covers almost all types of offshore oil spill accidents.Its original and innovative regulation of offshore drilling unit oil spill provided the legal basis for the US to deal with the Deepwater Horizon accident in the Gulf of Mexico.Pursuant to OPA 90,the US court found that BP p.l.c.(BP),the contractor of the drilling unit at the time,to be the primary responsible party for the accident,bearing 67% of the liability under the limitation of liability.41Federal Judge Decides BP Acted with Gross Negligence In Gulf Oil Spill,NPR (4 Sept 2014),https://www.npr.org/2014/09/04/345868809/federal-judge-decides-bp-acted-withgross-negligence-in-gulf-oil-spill#:～:text=Transcript-,A%20federal%20judge%20has%20 ruled%20that%20British%20Petroleum%20is%20guilty,in%20penalties%20for%20its%20 role.In this case,BP spent more than $61 billion on emergency response,cleanup,financial compensation,government payouts,settlements and restoration,according to the court decision and a summary released by BP.42BP estimates cost of 2010 Gulf oil spill at $61.6 billion,APNews (15 July 2016),https://apnews.com/article/15247c9394684b86baf0fff7fa2489c7.

2.Definition of the Nature of Drilling Units

Currently,there is no clear definition of the nature of oil drilling units in China’s laws.They are more commonly classified as fixed and mobile platforms.“Ship” is defined by the Maritime Law as “sea-going ships and other mobile units”,43Art.3 of the Maritime Law of the People’s Republic of China.whereby mobile offshore drilling units should be identified as ships under the Maritime Law.According to Article 29 of theRegulations of the People’s Republic of China Governing Survey of Ships and Offshore Installations(hereinafter “Survey Regulations”),mobile drilling units may also be identified as ships.44Art.29(1) of the Regulations of the People’s Republic of China Governing Survey of Ships and Offshore Installations.TheRevised Draftrefers to the1992 Civil Convention45Protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution Damage,1969.and defines a ship in the newly-added chapter as “a ship constructed or refitted for the purpose of carrying oil cargo in bulk”.46Art.257(2) of the Maritime Law of the People’s Republic of China (Revised Draft).This follows the interpretation of the definition of “ship” in the1992 Civil Conventionby the International Oil Pollution Compensation Fund Seventh Intersessional Working Group.47Supra note 34,ZHANG Hui,p.95.According to the Working Group,“transport” is an important element to be considered when defining a ship.Meanwhile,the purpose of the production storage unit and its power should also be taken into account.48Ibid.Under this interpretation,there is no doubt that mobile oil drilling units also meet the definition of “ship”.It can be thus inferred that “mobile offshore drilling units” can be interpreted as “ships”,be it in accordance with the definition of ship in the currentMaritime Law,theSurvey Regulationsor the special chapter “Ship Oil Pollution Damage Compensation” in theRevised Draft.In terms of fixed drilling units,there are no clear provisions or instructions on their nature in theMaritime Law.Some people argue that once the fixed drilling unit is in place in the operating area,it is difficult to be transferred,which is fundamentally different from the characteristics of the ship,and thus cannot be identified as a ship.49Id,p.91.In contrast,theSurvey Regulationsclassifies fixed drilling units as offshore facilities.50Art.29(2) of Regulations of the People’s Republic of China Governing Survey of Ships and Offshore Installations.In international practice,“purpose” is used as an important element to classify fixed units: those for the purpose of location transfer are classified as ships,while those for the purpose of exploitation of natural resources are not.51WANG Hui, Study on Oil Pollution Damage Compensation Caused by Drilling Platform,Science of Law,Vol.33:6,p.161-170 (2015).(in Chinese)

Currently,a clear definition of the nature of fixed and mobile drilling units is not available in the section on ship oil pollution damage compensation of theRevised Draft.In the presence of such uncertainty,parties to oil pollution accidents may attempt to avoid liability by applying uncertainty,and courts will face difficulties in interpreting and applying the law,thus causing a certain negative impact on the uniformity and stability of applying law.

3.Suggestion for Including Offshore Facilities Such as Oil Drilling Units in the Scope of Regulation

Offshore oil exploration and exploitation is a high-tech and high-investment activity subject to high risks.With a harsh environment for operation and high technical difficulty,the operating area is prone to oil spills that can cause oil pollution damage to the marine environment.The operating area of offshore oil drilling and exploitation is irregularly distributed from the offshore continental shelf to the area near the high seas.Oil spills from oil drilling units cause serious damages and the involved victims are wide.Yet there is no international convention or domestic legislation that specifically provides for civil liability for oil pollution damage from oil drilling units.In this regard,China should legislate or promulgate a judicial interpretation to provide the courts with a legal basis to follow when trying oil pollution damages caused by oil spills from oil drilling units in the future.However,considering that the definition of “ship” is very important to the whole maritime law system,any change to its definition will involve the maritime liability limit system,priority and other supporting issues.For this reason,it is suggested that the scope of “ship” be expanded in the special chapter on ship oil pollution damage liability in theRevised Draftto clearly include mobile drilling units,and different liability limits for ships and offshore mobile drilling units be prescribed with reference to OPA 90.As for fixed drilling units which are not appropriate to be identified as ships in nature,theRevised Draftshould add the provision of“may be dealt with by referring to the ship oil pollution damage compensation”to temporarily put aside the nature of fixed drilling units and solve the problem of the lack of corresponding system and regulation for fixed drilling unit oil pollution damage compensation.In addition,it is suggested to establish a matching insurance and fund system for offshore oil exploration facilities as soon as possible.

B.Provisions on the Defenses to Liability with an Act or Omission of a Third Party

1.Application Conditions for the Defenses to Liability with an Act or Omission of a Third Party

OPA 90 and theRevised Draftboth encompass the acts of a third party in the liability exemption,but they differ in the conditions of application.Under OPA 90,when the damage is caused solely by an act or omission of a third party,the responsible party shall first prove the absence of any contractual relationship between that third party and itself,including employment and agency relationships,etc.Second,the responsible party shall prove that it has given due care to the oil in question after taking into account the characteristics of the oil.Finally,the responsible party shall demonstrate that precautions have been taken against the foreseeable acts of the third party and the foreseeable consequences arising therefrom.5233 USCS § 2702(a).The strict application of these provisions is also reflected in the judicial precedents of the U.S.53Ibid.In theUnited States v.J.R.Nelson Vessel,Ltd.case,the court held that the third party was entrusted by the defendant to take charge of the ship at the time of the oil spill and had a contractual relationship with the defendant,so the responsible party could not invoke the exclusion of liability for the third party’s conduct as a defense to liability.54United States v. JR Nelson Vessel,Ltd.,1 F.Supp.2d 172 (E.D.N.Y.1998),A.M.C.2249.In theBuffalo Marine Services Inc.v.United Statescase,the NPFC denied a claim that included a barge as the only liable third party.The court held that the contractual relationship stipulated in the defenses to liability with an act or omission of a third party under OPA 90 included a non-direct contractual relationship,such as the relationship between the barge owner and the tanker interested party in this case,and that the NPFC was therefore correct in denying the claim for including the barge as the only liable third party.55Buffalo Marine Servs.Inc.v. United States,663 F.3d 750,74 E.R.C.1008,2012 A.M.C.91.

Article 249 of theRevised Draftprovides that the shipowner shall not be liable for compensation in the event that the pollution damage is caused solely by an act or omission of a third party that intentionally causes the damage.This article has been revised compared to Article 89 of theMarine Environment Protection Lawby removing “pollution caused solely by a fault of a third party” from the exclusion of liability of the responsible party.Nevertheless,theRevised Draftstill has some outstanding issues when compared with the system of OPA 90.According to theRevised Draft,such cases only involve the consideration of whether the damage is caused solely by the intentional acts of the third party,regardless of the relationship between the shipowner and the third party,which is not conducive to providing close protection for the interests of victims after an oil spill.Should there be a contractual relationship between the shipowner and the third party,or a high degree of common interest between them,the shipowner may exempt itself from liability by claiming the full responsibility of the third party to make it a “scapegoat”.Meanwhile,the third party is often less capable of compensating compared to the shipowner.This will lead to a situation where the shipowner bears no liability for compensation and the third party is unable to compensate.As a result,the interests of the victims are not effectively protected and the huge loophole in damages also burdens the ship oil pollution damage compensation fund.

2.Advance Compensation Obligation of the Responsible Party

Also,regarding the defenses to liability with an act or omission of a third party,China and the US have different provisions on the advance compensation obligation of the responsible party.Specifically,OPA 90 prescribes that even if a third party assumes the liability,the responsible party should first pay the pollution damage compensation and removal costs,and then obtain compensation from the third party or OSLTF after obtaining the right of subrogation.5633 USCS § 2702(d).Article 254(3) of theRevised Draftprovides that the defenses to liability with an act or omission of a third party shall not affect the shipowner’s right of recourse against the third party.In this situation,however,theRevised Draftdoes not specify whether the responsible party has the obligation of advance compensation.

In the absence of the obligation of the responsible party for advance compensation,it is not conducive to the claimants’ claiming compensation in ship oil pollution damage compensation accidents.In case of an oil spill,the shipowner is the infringer in the oil pollution infringement relationship,and the third party is the responsible party of the oil pollution damage compensation.Although the subject of liability can be determined by following the rule that the special law takes precedence over the common law,the lack of clear attribution of advance compensation obligation will result in a situation where the two parties will shirk their advance compensation obligation to each other.Where the shipowner claims that the compensation should be made directly by a third party,the claimant’s claim will be delayed if the third party has insufficient funds to settle the claim.From the claimant’s point of view,the claimant can easily find the owner of the involved ship after an oil spill,but may not know the existence of a third party with real liability for compensation,so it is difficult to determine the identity of the third party and its ability to make compensation.

3.The Revised Draft should prescribe strict conditions and compensation obligation for the defenses to liability with an act or omission of a third party

To begin with,China should set up stricter applicable conditions for the defenses to liability with an act or omission of a third party.In addition to the existing provisions,it is necessary to provide that there is no contractual relationship between the third party and the responsible party,and that the responsible party has exercised reasonable care and taken appropriate measures before it may apply this escape clause to exclude liability for ship oil pollution damage.

Furthermore,China should prescribe in theRevised Draftthe obligation of the responsible party for advance compensation in relation to the defenses to liability with an act or omission of a third party.It is suggested that theRevised Draftclearly provide that when the responsible party invokes Article 249(2)(b) as a cause of exclusion,if the cause of exclusion is established,the responsible party shall assume the obligation for advance compensation and then be subrogated to the rights of the victim.

C.Ship Oil Pollution Damage Compensation Fund System

After the adoption of OPA 90,the US became the country that offers the highest compensation by the ship oil pollution damage fund in the world.In comparison with OSLTF,China’s ship oil pollution damage compensation fund is unclear in the compensation amount,small in the scope of compensation and complicated compensation procedure,leading to low efficiency in compensation.

1.Scope and Limit of Compensation of the Fund

OSLTF consists of the Emergency Fund and the Principal Fund.57Supra note 29.Its scope of compensation covers damages to natural resources,damages arising from damage to real or personal property,damages arising from loss of subsistence use of natural resources,and expenses arising from increased public services.5833 USCS § 2712(a).The Principal Fund mainly covers claims and congressional appropriations to federal agencies,while funds in the Emergency Fund are available to the federal onsite coordinator59The Federal Onsite Coordinator is responsible for any oil spills or spill threats that may affect U.S.waters up to the outermost edge of the exclusive economic zone.to respond to the oil spill and to initiate a natural resource damage assessment.China’s ship oil pollution damage compensation fund provides compensation for emergency disposal costs,pollution control costs and removal costs,direct economic losses caused to fisheries and tourism,and ecological restoration costs,etc.60Art.17 of Administrative Measures for the Collection and Use of Compensation Funds for Vessel-Induced Oil Pollution Damage.The compensation scope of the fund is smaller than that of the shipowner’s tort liability.At the beginning of the revision of theMaritime Lawin 2018,the idea of first paying the emergency treatment fee incurred by ship oil pollution accidents was not reflected.But in the latest revision,it is prescribed that the fund may first pay for the emergency treatment organized by the State: “In the event of a ship pollution accident,the necessary costs incurred by the State in organizing relevant institutions for emergency treatment may be covered in advance by the ship oil pollution damage compensation fund.”61Art.269 of the Maritime Law of the People’s Republic of China (Revised Draft).

The OSLTF pays a maximum of $1 billion as compensation for each ship oil spill case in the US or the balance in the fund account,whichever is less.To date,no US oil pollution damage cases have reached that limit.62The Deepwater Horizon accident in 2010 was the only oil spill event that theoretically would have exceeded the limit,but the responsible party ended up paying more than $65 billion for removal costs,damages and fines.In contrast,an additional $50 million is budgeted into the Emergency Fund each year,and an additional $100 million may be withdrawn without congressional approval.63Helkei S.Hemminger,United States and Canada Transboundary Oil Spill Liability and Compensation Regimes: An Overview,International Oil Spill Conference Proceedings,May 2021.In the newly-added chapter of theRevised Draft,instead of specifying the compensation limit of the fund,the authority is given to competent departments of the State Council by delegation.64Art.268 of the Maritime Law of the People’s Republic of China (Revised Draft).The amount,operation methods and procedures in terms of paying in advance for emergency treatment by the ship oil pollution damage compensation fund shall also be prescribed by competent departments under the State Council.65Id,Art.269.TheAdministrative Measures for the Collection and Use of Compensation Funds for Vessel-Induced Oil Pollution Damage(hereinafter“Fund Administrative Measures”) set the maximum amount of compensation or indemnity for any oil pollution accident at 30 million yuan,and the limit remains under constant revision.It is clear from the comparison with OSLTF that China’s fund compensation limit is too low.The existing provisions of theRevised Draftmay facilitate the Ministry of Transportation and the Ministry of Finance to adjust the compensation amount in time according to the level of China’s economic and social development and the scale of the fund,yet it is still quite difficult to make a breakthrough in the fund limit due to the authorized provisions.Without an explicit change in the compensation limit of the fund by laws and regulations,it is too idealistic to try to break the limit of the fund by practice for a specific case and there is no reference amount.

2.Compensation Procedures and Payment Efficiency of the Fund

Pursuant to OPA 90,a claimant’s filing of a claim with the OSLTF is predicated on the filing of a claim with the responsible party.Should the responsible party deny the claim or fail to pay within ninety days after the claim is filed or announced,the claimant may file an application with the OSLTF.6633 USCS § 2713.

In China,the procedure of paying out from the ship oil pollution damage compensation fund is relatively complicated.First of all,a claimant can only enter into the procedure of filing a claim with the fund’s claim settlement agency when the claimant has gone through judicial proceedings and the court or arbitral agency has confirmed that the damage suffered by the claimant exceeds the liability limit of the ship owner or insurer,or the ship owner and its insurer and guarantor are not capable of making full compensation.Moreover,the ship oil pollution damage compensation cases generally involve a large amount and a long hearing period,so the victims have to wait a long time to obtain documents from the judiciary.On average,it takes two and a half years for claims to be paid by the oil pollution damage compensation fund in China’s case,67PAN Cen,Discussion on the Amendment of the Regulations on the Administration of Collection and Use of Ship Oil Pollution Damage Compensation Fund,SMU Law Review,Vol.15,p.219-228 (2020).(in Chinese)much longer than that specified in OPA 90 (90 days) for claims to be filed with the fund.In the current stage,many cases requesting claims from the ship oil pollution damage compensation fund have not been accepted.The primary cause is that the courts are still considering whether the reasonable loss exceeds the liability limit of the responsible party.68YANG Zhihui &ZHU Yiyi,Research on the Promotion of the Efficient Operation of the Chinese Ship-source Oil Pollution Compensation Fund,Chinese Journal of Maritime Law,Vol.28:2,p.45 (2017).(in Chinese)Secondly,when filing a claim with the fund’s claim settlement institution,the victim has to prepare additional applications and evidentiary materials different from those used in claiming liability against the shipowner,which increases the cost of application.Finally,as the compensation scope of the fund is smaller than that of the shipowner,the fund’s claim settlement institution needs to re-determine whether the application submitted by the claimant is within the coverage of the fund,which reduces the efficiency of compensation.69Id,p.42.

3.The Revised Draft Should Optimize the Scope and Limit of Compensation of the Ship Oil Pollution Fund

Firstly,China should expand the coverage of the ship oil pollution compensation fund to incorporate the indirect economic losses suffered by the victims in fisheries,tourism and other industries in order to provide the same scope of compensation as that of the responsible party.A continuous increase in the amount of assessments that can be collected by the China’s oil pollution fund each year will allow the fund to bear an expansion in the coverage.70Id,p.44.Achieving consistency in the scope of compensation can also improve the efficiency of the fund through joint claim settlement between the fund and insurers.

In the event of an oil pollution accident,the emergency response of the Maritime Safety Administration and other relevant institutions is of great importance to preventing and mitigating pollution of the marine environment.However,as part of the pollution damage,emergency treatment costs can only be reimbursed after a court hearing,which affects the emergency response capacity.TheRevised Draftadds a special chapter to provide for the fund to pay for emergency treatment costs in advance to promote timely and effective cleanup after the accident,so as to avoid the situation where the parties to the accident shirk their responsibilities for cleanup due to insufficient funds,and to prevent the expansion of pollution.In this regard,this new special chapter should go a step further and provide for a base amount to be paid in advance with reference to the costs of emergency treatment in the past ship oil pollution damage cases in China.In this way,in the event of an oil spill accident,no additional procedures need to be implemented by the competent department of the State Council,and the relevant cleaning institutions can directly obtain the emergency treatment costs paid in advance by the ship oil pollution fund,thus bringing the emergency capacity into full play.

Secondly,the newly-added chapter of theRevised Draftshould provide for the compensation limit of the ship oil pollution damage compensation fund for the oil pollution damage caused by any one accident at an amount higher than 30 million yuan,the limit set out in theFund Administrative Measures.Changing the compensation limit of the fund by an express provision in the law is the most direct and efficient way to raise such limit.As China’s economic development level is rising steadily and regularly,the fund’s ability to compensate for ship oil pollution damage cases has correspondingly reached a high level and will not change significantly in the near future.Setting a limit on compensation from the fund will not only enhance the stability of compensation from the said fund,but also solve the lingering debate on raising the compensation limit of the said fund mentioned in theFund Administrative Measures,so as to keep in line with theFund Administrative Measures.

V.Conclusion

To alter the situation that China has no systematic legislation for the ship oil pollution damage compensation system,theRevised Drafthas made a legislative attempt by adding a special chapter of “Liability for Ship Oil Pollution Damage”,which follows the legislative idea of international conventions such as the1992 CLCand theBunkers Convention.The content thereof is generally consistent with the said international conventions.However,there are still many areas for improvement.The ship oil pollution damage compensation system under OPA 90 has a wide range of compensation,a large number of claim objects,and a high limit of liability,which provides a reference for China to establish a more sound ship oil pollution damage compensation system that can better suit China’s practical needs on the basis of the international conventions.

In view of the absence of specific provisions on compensation for oil pollution damage caused by drilling units in China,this paper suggests an expansion of the scope of subjects to be regulated by the ship oil pollution damage compensation system by including mobile offshore drilling units in the category of “ships” and treating them as ships to solve the pollution damage compensation caused by their oil spill.With regard to fixed drilling units,we can add the provision of “may be dealt with by referring to the ship oil pollution damage compensation” so that the court can have a legal basis to follow when trying cases concerning compensation for oil pollution damages caused by drilling units.Moreover,we can improve the system of liability exemption for the responsible party,especially the situation of defenses to liability with an act or omission of a third party,by setting “there is no contractual relationship between the third party and the responsible party” and “the responsible party has exercised reasonable care and taken appropriate measures”as the preconditions for the responsible party to enjoy liability exemption.We should also improve the ship oil pollution damage compensation fund system by specifying the compensation limit of the said fund and expanding the scope of compensation covered the said fund.

By systematically legislating the ship oil pollution damage compensation system through the addition of a special chapter in theMaritime Lawas soon as possible,we can improve the stability of judicial trial of ship oil spill cases,effectively settle the disputes between the parties to the accident,safeguard the rights and interests of the victims,and maintain the sustainable development of seas and oceans and the healthy development of the shipping industry.