International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 adopted in London 23 March 2001 entered into force on 21 November 2008 (one year following the on which eighteen States, including five States each with ships whose combined gross tonnage is not less than 1 million, have either signed/ratified the Convention or acceded to the latter).

Russia acceded to the Bunkers Convention (Federal law dated 03.12.2008 No. 230-FZ), which entered into force for Russia 24 May 2009.

By the Federal law dated 14.06.2011 No. 141-FZ the Merchant Shipping Code (MSC RF) was supplemented by chapter XIX.1. “Liability for Damages Caused By Bunker Oil Pollution”. In essence the said chapter is almost an identical implementation of the provisions of the Convention into Russian law.

Sine 2009 there has not been a major bunker oil spill (in terms of damages to the environment), which would fall under the sphere of the Convention.

Almost after 10 years after the entry into force of the Convention for Russia, such a spill happened in St. Petersburg.

Facts: 19 June 2019 at sea port “Big Port of St. Petersburg” a bunker oil spill occurred from a foreginflagged vessel “LOZA” (flag Malta), resulting in contamination of the water are and berths of the “Ugolnaya Gavan” (Coal Harbour), vessels that were at port at the time of the spill. Marathi Shipping (the shipowner) and The Standard P&I Club (liability underwriter) had hider LLC “SeaEcology” on the same day for clean-up of the contamination caused by the bunker oil spill.

The Federal State Budgetary Institution (FGBU) “Administration of Sea Ports of the Baltic Sea” had hired their contractor – LLC “Kontur SPb” pursuant to their governmental contract for the clean-up of the contamination, and subsequently had assigned its rights for compensation of damages to LLC “Kontur SPb” (the costs of clean-up of the port from the bunker oil spill). At that time the shipowner had partially settled the costs with LLC “SeaEcology”. LLC “Kontur SPb” enjoyed a payment of USD 580 000 (approximately 36,5 million rubles) and Letter of Undertaking of the P&I Клуба for the same amount.

FGBU) “Administration of Sea Ports of the Baltic Sea” had filed a claim to the shipowner (Marathi Shipping) and to the liability underwriter (The Standard P&I Club). The claim was filed to two defendants jointly and severally. Subsequently due to the assignment of rights the claimant was substituted to LLC “Kontur SPb”, the claim quantum was increased to 103 million rubles (about USD 1,6 millions).

The expert of ITOPF (International Tanker Owners Pollution Federation)¹ was involved by the shipowner and the liability underwriter. After the examination of documents, interrogation of employees of LLC “Kontur SPb”, examination in person of the port, had approved only 6 million rubles in of the claimed costs and queried costs for another 20 million rubles. LLC “Kontur SPb” were requested for documents. The remaining part of the claim was rejected as unsubstantiated.

The shipowner contested the amount of expenses for the clean-up of the bunker oil spill, their reasonableness, requested the court to appoint an expert examination, requested for evidence confirming the costs of OOO Kontur SPb, presented alternative calculations of experts. According to the shipowner, the cost of the work did not exceed 25 million rubles.

The liability underwriter who was involved as a co-defendant, adhered to the position of the shipowner and additionally argued that there were no legal grounds for bringing him into the proceedings as jointly and severally liable. The possibility of bringing a claim against the insurer on the basis of Art. 7(10) of the Bunker Convention and Art. 336.9(5) of MSC RF of the Russian Federation does not entail the emergence of joint and several liability of the insurer with the assured-tortfeasor.

Rulings of the courts: the Commercial Court of St. Petersburg satisfied the claim of LLC “Kontur SPb” almost in full. Taking into account the paid USD 580,000 (about 36.5 million rubles), the court adjudged the recovery of 58,312,671 rubles 31 kopecks of losses (807,265.62 US dollars at the exchange rate as of the date of the decision on July 30, 2020), jointly and severally from the shipowner and the insurer. The court established the total costs of the clean-up at more than RUB 97 million.

The court refused to order an expert examination on the grounds that the expert’s reports presented to the court were sufficient to assess the reasonableness and validity of the reinstatement measures as compensation for the impairment of the environment.

To substantiate the joint liability of the shipowner who caused the damage and the liability insurer, the court referred to the very fact of insurance (financial security) of civil liability for damage from pollution with bunker fuel, as well as to the fact that the insurer issued a guarantee (LOU) to secure the plaintiff’s claims. According to the court, these circumstances meant that the insurer had an obligation to compensate for the damage jointly and severally with the tortfeasor.

The 13th Court of Appeal upheld the findings of the first instance court and ruled to uphold the judgement. In the opinion of the court of appeal, Chapter XIX.1 of the MSC RF grants the right to bring a claim against both the ship owner and the liability insurer (clause 1 of Art. 336.9, clause 5 of Art. 336.9 of MSC RF). Also, § 10 of Art. 7 of the International Convention on Civil Liability for Damage from Bunker Fuel Pollution, 2001, provides that the insurer has the right to demand the involvement of the shipowner into the proceedings as a co-defendant. In the court’s opinion, the status of “co-defendant” means that both defendants have a joint and seve ral liability.

The court also noted that in accordance with Art. 322 of the Civil Code of the Russian Federation, a joint obligation (liability) or a joint claim arises if it is provided for by an agreement or is established by law, and also referred to the fact that the letter of undertaking (LOU) was issued by the liability insurer – The Standard P&I Club.

The North-West District Court did not agree with the conclusions of the lower instance courts, the judgement of the Arbitration Court of St. Petersburg and the ruling of the Thirteenth Arbitration Court of Appeal were overruled, and the case was sent for a re-trail to the court of first instance to a different judge.

The cassation court noted that the insurer and the shipowner are not the tortfeasors and are not jointly and severally liable for the claim (§ 3 of Art. 1079 of the Civil Code of the Russian Federation). Joint and several obligations arise only in cases directly provided for by law or an agreement (clause 1 of Art. 322 of the Civil Code of the Russian Federation). Clause 5 of Art. 336.9 of the MSC RF allows for bringing a claim directly to the underwriter but does not establish joint and several liability of the assured person (policyholder) and the underwriter, just as other provisions of Russian legislation do not provide for the latter. The plaintiff has the right to choose to whom to bring a claim – to the ship owner or the liability underwriter. In the event of a claim against the liability underwriter, the latter has the right to demand the involvement of the ship owner as a co-defendant (procedural action), joint and several liability does not arise in this case. Involvement of the underwriter as jointly and severally liable with the assured (shipowner) contradicts the above provisions of substantive law. The provisions of civil law do not provide for joint and several liability of the tortfeasor and the latter’s liability underwriter.

The court of cassation also noted that upon determining the quantum of damage from bunker oil pollution (i.e. reasonable measures of reinstatement actually undertaken or to be undertaken, as well as preventive measures in accordance with Art. 336.1 of the MSC RF and Art. 1 of the Convention), expert knowledge is required. Upon re-trail the court must consider the issue of appointing an expert examination.

Commentary: In this case, two legal issues are of interest: joint and several liability of the tortfeasor and the underwriter under Russian law, as well as the determination of damage for the impairment of the environment with bunker oil.

Joint and Several Liability

It is very interesting that the arguments of the plaintiff and the conclusions of the lower instance courts on joint and several liability of the underwriter were based on the provisions of § 5 of Art. 336.9 of the MSC RF and § 10 of Art. 7 of the Bunker Convention, which states that if a claim is brought directly against the insurer, the latter shall in any event have the right to require the shipowner to be joined in the proceedings co-defendant. In relation to these norms of law, the court of cassation noted that this is a procedural action, joint and several liability does not arise.

The situation becomes even more interesting if we refer to the foreign-language texts of the Bunkers Convention. In Art. 7(10) we do not find the words “as co-defendant” in the English, Spanish, French texts. There is a full stop after the words “... the right to require the shipowner to be joined in the proceedings” in the said languages. English: “The defendant shall in any event have the right to require the shipowner to be joined in the proceedings”. Spanish: “El demandado tendrá, en todo caso, el derecho de exigir que el propietario del buque concurra en el procedimiento”. French: “Le défendeur peut dans tous les cas obliger le propriétaire du navire à se joindre à la procédure”. Russian: “Ответчик во всех случаях имеет право требовать, чтобы собственник судна был привлечен к участию в деле в качестве соответчика” (“The defendant shall in any event have the right to require the shipowner to be joined in the proceedings as co-defendant” (translation of Russian into English)).

Which text of the Convention is authentic? The Convention itself (in Art. 19 “Languages”) states – “This Convention is established in a single original in the Arabic, Chinese, English, French, Russian and Spanish languages, each text being equally authentic”.

The 2001 Bunkers Convention was adopted following the patterns of the 1969 International Convention on Civil Liability for Oil Pollution Damage, abbreviated as CLC². Art. VII(8) of the Convention (CLC) in Russian contains the same text “The defendant shall in any event have the right to require the owner to be joined in the proceedings as a co-defendant”. In the English text of the 1969 CLC, after the words “...joined in the proceedings” there is a full stop – “The defendant shall in any event have the right to require the owner to be joined in the proceedings”.

At present, the International Convention on Civil Liability for Oil Pollution Damage as amended by the 1992 Protocol and the 2000 limits is in force for Russia. The additional three words “as a co-defendant” migrated from the text of the 1969 CLC into 1992, and then into the 2001 Bunkers Convention and the MSC RF.

A joint and several obligations arise only in cases directly provided for by law or contract (clause 1 of Art. 322 of the Civil Code of the Russian Federation). The higher instance courts have repeatedly noted that the provisions of civil law do not provide for joint liability and several liability of the tortfeasor and the liability underwriter³.

Joint and several liability for damage caused by bunker oil is established by Art. 336.4 MSC RF only for cases of damage from pollution as a result of an incident involving two or more ships. In such a case, the shipowners of all the ships concerned shall be jointly and severally liable for all such damage which is not reasonably separable.

Damages | Reasonable Measures | Expert Knowledge

Pursuant to Art. 336.1 MSC RF and article 1 of the Convention compensation for impairment of the environment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken, and the costs of preventive measures – any reasonable measures taken by any person after an incident has occurred to prevent or minimize pollution damage.

The MSC RF and the Convention use the term “reasonable measures”. Reasonableness not only in terms of costs, but in terms of the type and amount of measures taken to eliminate a bunker oil spill. It is necessary to invoke expert knowledge regarding the chemical properties of a particular oil product, its reaction with water, as well as hard surface (walls of berths and hulls), the use of special equipment, technologies that should be used for the reinstatement of the environment from an oil spill, and other issues.

The most reputable international organization that specializes in issues of oil and oil products spill response is ITOPF (International Tanker Owners Pollution Federation).

It seems difficult or barely possible to evaluate the damage – that is, the cost of reasonable measures of reinstatement – without expert knowledge. ITOPF expert Angela Pinzon had visited the port of St. Petersburg during the bunker oil spill response operations, and also prepared a report (assessment of the of the plaintiff’s claims), which was presented in the court file. At the same time, the court refused to summon A. Pinzon as an expert to the court hearing.

The cassation court directly noted that for the correct resolution of the dispute, expert knowledge is required in the field of bunker oil spill response operations, the court needs to discuss the issue of appointing an expert examination. This indication seems to be absolutely justified based on the circumstances of the case, the nature of the dispute and the provisions of Art. 82 of the Commercial Procedure Code. ■

Notes