Australian Year Book of International Law
Delegates from 73 countries and numerous representatives of Inter-governmental and non-governmental organisations attended a three-week Diplomatic Conference in May 1996 convened by the International Maritime Organization (IMO) at its London Headquarters. On 3 May 1996, the delegates finally adopted the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS Convention).
The idea of such a treaty regime was not new. Indeed, although they took approximately 30 years to germinate, the seeds of the HNS Convention were sown as far back as 1967, following the grounding of the Torrey Canyon on Seven Stones reef, between the Isle of Scilly and Lands End, off the south-west coast of England. That incident involved the spill of some 117,000 tons of crude oil which polluted the English and French coastlines on an unprecedented scale. This led to the subject of maritime pollution being taken up at the international level. Ultimately, a raft of measures were adopted including the establishment of the Legal Committee of the IMO which, as one of its first tasks, developed the International Convention on Civil Liability for Oil Pollution Damage, 1969 (Civil Liability Convention) and, two years later, the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971 (Fund Convention). As will become apparent, both of these treaties served as a model for the HNS Convention.
The matter was first brought to the attention of the IMO  by the United Kingdom government because of the sheer scale of the disaster, coupled with the belief that many of the problems, brought to light by the incident, could only be resolved by the adoption of international measures, and that this would require changes in international law. In this regard, it was pointed out in a note submitted by the United Kingdom to the Intergovernmental Maritime Consultative Organization (IMCO) Council that:
international law governing such matters does not adequately take into account the interests of countries which may have no direct interest in the ship or its cargoes but the territory of which may be affected by accident to the ship. In future accidents it may well be that, in order to protect its coasts from pollution, the Government of the Coastal State may wish to take certain measures which might cut across the rights of owners, salvors and insurers and indeed the Government of the flag of the vessel.
Among the major issues confronting the Organization were the legal and procedural obstacles put in the way of innocent victims of pollution incidents, who, more often than not, would be unsuccessful in obtaining satisfactory compensation. The Organization’s response was to convene a Legal Committee, established at first on an ad hoc basis. This committee was given the mandate of advising the Council on the introduction of some form of compulsory insurance scheme that would compensate governments and other injured parties for damage arising out of the discharge at sea of persistent oils or other noxious and hazardous substances.
In carrying out this responsibility, the Legal Committee was guided by a report prepared originally for the Comité Maritime International (CMI) by the Rt. Hon. Lord Devlin PC, in his capacity as Chairman of a CMI sub-committee established to consider problems arising out of the Torrey Canyon grounding.[6 ]Among the issues that were explored in the report was the type of damage that might be covered by a new international convention. It had been suggested by Lord Devlin that all ultra-hazardous cargoes should be included in any liability and compensation regime, and not just crude oil carried as cargo. This suggestion was not, however, followed. The Working Group that had been set up by the Legal Committee to consider the matter, while acknowledging that such an extension would give the proposed convention a more universal character, nevertheless took the view that the Committee should limit its consideration to oil pollution as the most hazardous type of pollutant known to be in existence at that time.
The idea of an international liability and compensation treaty covering damage from other types of hazardous and noxious substances transported by sea was, nevertheless, not forgotten. In 1977 renewed efforts were made in this direction leading to a Diplomatic Conference held in 1984 which, unfortunately, did not reach the consensus required to adopt a new international instrument. That was the first (and so far the only) occasion on which a Diplomatic Conference convened by the IMO had failed to achieve its desired objective. The reasons for that failure are unclear but would seem to include the fact that not enough preparatory work had been undertaken prior to the Conference to ensure a sufficient meeting of minds on certain key issues.
Notwithstanding the failure of the 1984 Conference and despite the lack, in the years following the Conference, of any major incident involving the sea carriage of hazardous and noxious substances which might be expected to galvanise public opinion, political pressure within member states for the adoption of an international treaty on the subject refused to abate. After a suitable period of time had elapsed, discussions of the topic within the IMO Legal Committee resumed and the proposed convention retained its priority status until 1995, when a draft text was finally considered ripe for another Diplomatic Conference.
For the IMO the successful adoption of the 1996 HNS Convention was not only a face-saving exercise, but vindicated the time and effort expended in the negotiation of the text within the Legal Committee. It also served to reinforce the role of the IMO as the body responsible for the development of international treaties dealing with liability and compensation in the field of maritime transport and for the harmonisation of international maritime law on a global basis.
For the international community, adoption of the HNS Convention means that, at least in theory, an international liability and compensation regime can be put in place before any major hazardous and noxious substance disaster occurs. Unlike the Civil Liability Convention and the Fund Convention, from which the HNS Convention draws much of its substance, and which were developed by the international maritime community as a direct response to the disastrous oil spills of the 1960s and 1970s, involving the Torrey Canyon and Amoco Cadiz oil tankers, the HNS Convention is based on the precautionary principle. Uniquely for treaties of this nature, it has been developed in anticipation of future accidents at sea involving the carriage of hazardous and noxious substances. As soon as its entry into force provisions are satisfied, it will be available to be activated if and when required.
The successful outcome of the Diplomatic Conference also means that there will be a declining need for states to take unilateral or regional action to introduce measures to cope with such incidents. As had been made clear, both at the preliminary sessions of the Legal Committee and during the Diplomatic Conference itself, several states had considered the subject matter to be of such urgency that they had contemplated introducing unilateral legislation to deal with it in the event that the international maritime community failed to come up with a satisfactory response. Some European Union delegations, in particular, had suggested that, in the event of a failure to adopt an HNS Convention, they would consider going to Brussels and having the matter put on the agenda of the European Community. Such a step now appears unnecessary.
The definition of hazardous and noxious substances was one of the main issues confronting the Legal Committee when it resumed debate after the failed 1984 Diplomatic Conference, and the definition ultimately arrived at is very different from that proposed in the 1984 text. One of the problems with the earlier text was its restriction to hazardous and noxious substances carried in bulk; another was its restriction to substances classified as particularly hazardous substances, both of which proved to be unacceptable to a large number of states.
Article 1(5) of the 1996 Convention defined hazardous and noxious substances in the following way:
(a) any substances, materials and articles carried on board a ship as cargo, referred to in (i) to (vii) below: (i) oils carried in bulk listed in appendix I of Annex I to the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, as amended;
(ii) noxious liquid substances carried in bulk referred to in appendix II of Annex II to the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, as amended, and those substances and mixtures provisionally categorized as falling in pollution category A, B, C or D in accordance with regulation 3(4) of the said Annex II;
(iii) dangerous liquid substances carried in bulk listed in chapter 17 of the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk, 1983, as amended, and the dangerous products for which the preliminary suitable conditions for the carriage have been prescribed by the Administration and port administrations involved in accordance with paragraph 1.1.3 of the Code;
(iv) dangerous, hazardous and harmful substances, materials and articles in packaged form covered by the International Maritime Dangerous Goods Code, as amended;
(v) liquefied gases as listed in chapter 19 of the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk, 1983, as amended, and the products for which preliminary suitable conditions for the carriage have been prescribed by the Administration and port administrations involved in accordance with paragraph 1.1.6 of the Code;
(vi) liquid substances carried in bulk with a flashpoint not exceeding 60ºC (measured by a closed cup test);
(vii) solid bulk materials possessing chemical hazards covered by appendix B of the Code of Safe Practice for Solid Bulk Cargoes, as amended, to the extent that these substances are also subject to the provisions of the International Maritime Dangerous Goods Code when carried in packaged form; and (b) residues from the previous carriage in bulk of substances referred to in (a)(i) to (iii) and (v) to (vii) above.
As is apparent from the above article, the Convention covers both packaged substances and those carried in bulk and is not restricted to substances classified as particularly hazardous. In addition, the HNS Convention also applies to residues from the previous carriage in bulk of certain types of cargo: a significant extension which will ensure that compensation will be available to cover fire and explosion damage caused by vapours in empty cargo tanks. Another significant feature of the definition is the fact that the drafters of the HNS Convention, instead of defining hazardous and noxious substances by reference to its own freestanding list, have opted instead to define these substances by incorporating pre-existing lists of hazardous or noxious substances which are part of and which were developed for other IMO conventions and instruments.
This approach was not without its critics. During debates on the subject in the Legal Committee, many delegates, including from Australia, had put the view that the HNS Convention should have created its own list of hazardous and noxious substances tailored specifically to the needs and objectives of the Convention. As they pointed out, each of the IMO Conventions and the Codes has its own purpose and objective and the mere fact that a particular chemical or other substance had been listed in one of them was not necessarily indicative of the fact that it should be regarded as hazardous and noxious for the purposes of the HNS Convention. A definitive list of hazardous and noxious substances would, it was contended, facilitate greater control by the HNS treaty parties over what should be included in the list, as well as, identify those substances which might not be appropriate for inclusion.
It was also argued that only by attaching a freestanding list of hazardous and noxious substances to the HNS Convention would members and officials responsible for administering the Convention have sufficient certainty as to whether a particular substance fell within the scope of the Convention. It was proposed that the list be kept updated by a tacit amendment procedure similar to that used in other IMO conventions. In addition, several states objected on constitutional grounds to the incorporation of existing lists which, they contended, would effectively result in their being bound by international treaties to which they might not be party. These objections were met by the point that this technique was not entirely novel and that, for example, the Convention on Civil Liability for Damage caused during Carriage of Dangerous Goods by Road, Rail and Inland Navigation Vessels (CRTD Convention) also defines its scope by reference to other treaty instruments and relies on the procedure for updating the lists provided for in those instruments.
There are, undoubtedly, several advantages to be gained from the approach to defining hazardous and noxious substances adopted by the HNS Convention. In the first place, port state authorities, shipowners, insurers, cargo agents and other persons involved with the sea transportation of goods would already be familiar with the various technical instruments containing the lists and would, accordingly, have no problems in identifying the substances covered by them as hazardous and noxious. This familiarity would carry over to the HNS Convention and facilitate its administration.
Another advantage is that, once a substance has been included in any of the instruments listed in Article 1(5), it automatically becomes a hazardous and noxious substance for the purposes of the HNS Convention. This will, first, ensure that the HNS Convention keeps pace with technical developments in the field. It will also promote harmony with the technical instruments in question. From an administrative point of view, it will also eliminate the time-consuming and costly need for a specially appointed body of technical experts to be established under the Convention to decide which substances should be included in the initial list or to monitor the emergence of new chemicals with a view to ascertaining whether they should be included in the HNS Convention. That process would already have taken place in the context of the MARPOL 73/78 or the other maritime codes referred to in Article 1(5).
While the decision to define hazardous and noxious substances by reference to pre-existing lists of such substances in other treaties had been taken prior to the Diplomatic Conference, the draft of Article 1(5) put to the Conference initially included coal as a hazardous and noxious substance in draft Article 1(5)(vii). It fell within the category of ‘solid bulk materials possessing chemical hazards covered by appendix B of the Code of Safe Practice for Solid Bulk Cargoes, as amended’ (BC Code).
Where not hauled over land, coal is always transported by sea and the apprehension among many coal-exporting and coal-importing states was that, due to the sheer volume in which it was carried, the coal industry would be liable to contribute enormous levies under the second tier of the Convention and so would end up cross-subsidising other, far more dangerous, hazardous and noxious substances. This would clearly involve substantial financial and trade implications for the states in which those industries were based. These delegations also argued that, even when shipped in bulk and so liable to the risk of explosion, coal does not pose the same environmental risks as many other hazardous and noxious substances, at least in the sense that any incident at sea involving a coal-carrying vessel would be unlikely to be accompanied by long-term environmental damage. In this context, it was maintained, coal was not a pollutant but, rather, a naturally occurring mineral. On the other hand, a number of delegations, including several from net coal-importing states, argued that coal should remain in the Convention on the understanding that not only pollution damage but also damage caused by fire and explosion was covered by the Convention. In this context, the carriage of coal by sea presented undeniable hazards through explosion and fire for those on board such vessels.
In an attempt to effect a compromise that would keep coal within the ambit of the HNS Convention (and thus require all ships carrying coal as cargo to be covered by the necessary compulsory insurance), and which at the same time would cushion the coal industry against unfair financial contributions, the delegations of Australia, Canada and New Zealand submitted a position paper to the 70th session of the Legal Committee, which became referred to as the ACN paper. The paper argued that coal should be treated like any other hazardous and noxious substance for the purposes of the first tier of the Convention. In relation to the second tier, it was proposed, in effect, to ‘quarantine’ coal from the other hazardous and noxious substances so that financial contributions on the part of receivers of coal would be triggered only by an incident involving coal or other high volume, low-hazard substances carried in bulk and included in appendix B of the BC Code. A later refinement was to propose that contributions by coal receivers be triggered only by incidents involving coal and not other solid bulk BC Code substances. A draft text in this form was submitted to the Diplomatic Conference for its consideration.
While the ACN paper received a great deal of support, the coal issue remained highly political and lobbying on all sides continued before and during the Diplomatic Conference. A number of papers were put forward by states at the 72nd session of the Legal Committee which continued to advocate the total exclusion of coal from the ambit of the HNS Convention. It was apparent that the United Nations Economic Commission of Europe Working Party on Coal also supported such an exclusion, but many states still preferred to keep coal in the Convention. Debate remained polarised even at the Diplomatic Conference with those delegations favouring the inclusion of coal suggesting that additional safeguards could be built into the Convention to lessen even further the risk of coal cross-subsidising other, more hazardous substances. Ultimately, however, those delegations favouring the total exclusion of coal from the Convention won the day. At the same time, for technical reasons, it was also decided to exclude from the Convention other potentially hazardous substances classified as high-volume, low-hazard solids of IMO classes MHB, 4.2 and 9, which are also listed in appendix B of the BC Code and which have safety characteristics similar to that of coal. For Australia, this means that woodchips, too, will not be subject to the liability and compensation regime created by the HNS Convention.
This does not, of course, mean that those individuals responsible for the sea transport of such substances will be immune from liability. The situation is rather that, should an incident at sea occur involving any of these exempted substances, liability would be governed by the rules now existing. That is to say, subject to the application of existing limitation of liability regimes, those individuals responsible for causing the damage would be liable to pay the total amount of compensation due in respect of an incident provided negligence can be proved. In this regard it should be noted that most coal-carrying ships do carry insurance to cover such liabilities, although this is a matter of best commercial practice, and not due to any legal requirement, as such, to be covered by compulsory insurance.
Nuclear substances, like coal, were also originally included as hazardous and noxious substances although this is not apparent from a reading of Article 1(5), which defines the term ‘hazardous and noxious’. However, early drafts of Article 4, which relates to the scope of application of the Convention, provided at paragraph 3(b) that the Convention shall not apply:
to damage caused by a nuclear substance: (i) if the operator of a nuclear installation is liable for such damage under either the Paris Convention of 29 July 1960 on Third Party Liability in the Field of Nuclear Energy and its additional Protocols of 28 January 1964 and 16 November 1982 or the Vienna Convention of 21 May 1963 on Civil Liability for Nuclear Damage or under any amendments to those Conventions, or
(ii) if the operator of a nuclear installation is liable for such damage by virtue of a national law governing the liability for such damage, provided that such law is in all respects as favourable to persons who may suffer damage as either the Paris or Vienna Conventions as referred to under (i).
The proponents of this formula, which included the International Atomic Energy Agency (IAEA), had thereby aimed to ensure that, at least to the extent that incidents involving nuclear or radioactive substances were not already covered by the Paris and Vienna Conventions, they would fall within the scope of the HNS Convention. An example of such a situation might be where the nuclear or radioactive substances in question were not in the course of being transported en route to or from a nuclear reactor, which is one of the requirements for coverage under the Paris and Vienna Conventions. The formula adopted was intended essentially as a gap-filling exercise, which recognised the primacy of the Paris and Vienna Conventions in matters nuclear but which would allow recovery of compensation under a different treaty regime in situations where these Conventions did not provide compensation.
It soon became apparent, however, that a number of delegations were opposed to this course of action, proposing instead to exclude nuclear or radioactive substances altogether from the scope of the Convention. Their main argument was that it would be unfair to burden shipowners with responsibility for the potentially unlimited consequences of nuclear incidents. These substances, it was suggested, comprised a special category of cargo already subject to a specialist international regime under which liability is traditionally channelled exclusively to the operator of the nuclear facility. Proponents of this view indicated their strong preference not to undermine this well-established principle of international law. Any outstanding issues of liability, it was argued, should be dealt with within the framework of that specialist international regime, which had been created specifically to deal with the subject of liability for nuclear substances and not under a totally different treaty regime, particularly one in which the question of liability for damage caused by nuclear substances was peripheral to the main subject-matter of the Convention.
At its 71st session held in October 1994, the Legal Committee was informed by the IAEA Secretariat of developments within its Standing Committee on Liability for Nuclear Damage which aimed at revising the Paris and Vienna Conventions in light of their shortcomings made evident by the Chernobyl disaster. In this regard, the United States delegation informed the Legal Committee about a draft proposal that it had submitted to an Intersessional Working Group of the IAEA Standing Committee held in May of that year. The United States had proposed the introduction of a freestanding convention, intended to complement the Paris and Vienna Conventions, which would provide supplementary funding to compensate for transboundary nuclear damage and which would cover certain other aspects of nuclear liability, including damage during carriage. The American delegation argued that its proposed convention, if adopted, would be a more appropriate vehicle than the HNS Convention to compensate for damage caused by the sea transport of nuclear materials.
By the time of the HNS Diplomatic Conference in May 1996, agreement had already been reached within the IAEA on a number of proposals to amend the Vienna Convention. These would cover, among other things, its geographical scope, its application to military installations, the expansion of the definition of ‘damage’, the increase of liability limits, the provision of funds by the installation state, the extension of time limits for submission of claims, the restriction of exonerations, as well as the settlement of claims and state liability. Significantly, these amendments will allow for claims to be brought for damage suffered in the territory of a non-contracting state and will also allow compensation to be awarded for environmental damage and pure economic loss (along the lines proposed for the HNS Convention). Notwithstanding their introduction, however, the possibility would still exist of an incident involving the sea carriage of nuclear substances not being compensable under the Paris or Vienna Conventions, as in the example mentioned above, where the materials were not being shipped to or from a nuclear reactor. Neither the American proposal nor the other proposed amendments would, therefore, take care of all potential liability situations arising in the course of carriage by sea of nuclear materials.
A different option, also explored within the Legal Committee, was to keep within the framework of the HNS Convention only so-called ‘low-level’ radioactive substances, which are excluded from the Paris and Vienna regimes on the de minimis principle. The rationale behind this was to secure for victims of incidents involving such substances, at least when they were carried at sea, compensation under an international treaty regime. The inclusion of these ‘low-level’ radioactive substances in the HNS Convention was regarded as justifiable by its proponents because they do not pose the same degree of hazard as those categories of nuclear substances covered by the Paris and Vienna Conventions. As a result there would be little risk of an incident generating claims to compensation of such magnitude as to cause an undue financial burden on contributors to the system.
An intersessional correspondence group chaired by the United States of America was set up by the Legal Committee to explore all possible options including that of keeping ‘low-level’ radioactive substances within the Convention. Ultimately, however, these efforts failed and at the Diplomatic Conference the decision was taken to exclude nuclear and radioactive substances altogether from the scope of the Convention. This decision was partly due to the difficulties of arriving at a formula that would adequately (from a scientific perspective) and pragmatically (from a mariner’s perspective) identify what was meant by the term ‘low-level’ radioactive substances. The inclusion of ‘low-level’ radioactive substances in the HNS Convention was also objected to by those states, including those with ostensibly the most to gain by their inclusion (such as the Solomon Islands), which had earlier argued forcefully in favour of extending the HNS Convention to cover all nuclear and radioactive substances. They were concerned that this type of ‘partial’ coverage might do more harm than good in the sense that, while it might provide them with a right to compensation for minor incidents involving the sea carriage of such substances, it would also remove the pressure to introduce a more complete liability regime which would afford them protection from the really serious incidents. These considerations apart, the majority of delegations remained intractably opposed in principle to the inclusion of radioactive substances of any type within the ambit of the HNS Convention.
The formula ultimately adopted to deal with the nuclear situation is reflected at Article 4(3) of the HNS Convention
This Convention shall not apply:
(b) to damage caused by a radioactive material of class 7 either in the International Maritime Dangerous Goods Code, as amended, or in Appendix B of the Code of Safe Practice for Solid Bulk Cargoes, as amended.
The effect of this provision has been to exclude nuclear and radioactive substances in their entirety from the scope of the HNS Convention, thereby exonerating both shipowners and receivers of such substances from all liability under the regime created by the Convention. The Conference did, nonetheless, adopt a Resolution on liability and compensation for damage occurring during the transport of radioactive materials which recommended, somewhat lamely, that member states of the Organization and the IAEA should work together in defining and considering issues of liability and compensation for such damage. Given, however, the IAEA’s previously stated position that any gaps in coverage provided by the Paris and Vienna Conventions should be covered by the HNS Convention, there seems little to be gained by this approach and, indeed, at the time of writing no further move has been made to implement the Resolution.
The term ‘damage’ is defined in Article 1(6) of the Convention as meaning:
(a) loss of life or personal injury on board or outside the ship carrying the hazardous and noxious substances;
(b) loss of or damage to property outside the ship carrying the hazardous and noxious substances caused by those substances;
(c) loss or damage by contamination of the environment caused by the hazardous and noxious substances, provided that compensation for impairment of the environment other than loss of profit from such impairment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken; and
(d) the costs of preventative measures and further loss or damage caused by preventative measures.
Although the HNS Convention is primarily regarded as an environmental treaty, as is apparent from the above definition it covers not only property and environmental damage but also loss of life and personal injury. For its scope to be fully appreciated, Article 1(6) should be read in conjunction with a number of other provisions which will be discussed below.
In the case of environmental contamination, the confinement in Article 1(6)(c) of compensation for impairment of the environment (other than actual loss of profit from such impairment) to the costs of reasonable measures of reinstatement actually undertaken or to be undertaken mirrors that introduced into Article I(6) of the Civil Liability Convention by the 1992 Protocol. The 1969 Civil Liability Convention had, originally, not contained any such limitation, defining ‘pollution damage’ merely as damage caused ‘by contamination’. This had lead to considerable debate within the Fund Assembly as to whether and if so, the extent to which, reinstatement measures would be recoverable. The formula ultimately adopted in the Civil Liability Protocol and now included as Article 1(6)(c) of the HNS Convention was intended to exclude open-ended claims for environmental loss but, at the same time, has the merit of ensuring that victims (in this instance mainly states) will, in most cases, be fully compensated for measures taken to repair the coastal environment in the wake of a major hazardous and noxious substance incident, provided only that these measures are, objectively speaking, reasonable. The provision should also protect shipowners (or their insurers) as well as the International Hazardous and Noxious Substances Fund (HNS Fund) from excessive claims in situations where the compensation may not be directed to reinstatement of the environment itself. It does, however, mean that there will be no compensation payable for ‘pure’ environmental loss unless this is quantifiable in terms of loss of profits or clean-up costs.
Despite the strong influence exerted by the Civil Liability and Fund Conventions on the drafting of the HNS Convention, there was never much doubt within the Legal Committee that the HNS Convention should not be confined to pollution damage but should also cover damage by fire, explosion and toxicity. As noted by Nicholas Gaskell in his comprehensive analysis of the (then) draft Convention the justification for such an extension follows from the risks to human life inherent in the nature of hazardous and noxious cargo, which are not inherent in the character of oil. The inclusion of fire, explosion and toxicity damage is, nevertheless, not expressly provided for in the context of Article 1(6) but is to be inferred from the fact that the definition of ‘damage’ in paragraphs (a) and (b) of this Article is qualified only by the requirement that it be caused by hazardous and noxious substances. In addition, Articles 3(a) and (c) relating to the scope of application of the Convention make it clear that the term ‘damage’ is not limited to environmental damage.
Under Article 1(6)(a), the Convention extends to claims for loss of life and personal injury whether caused on board or outside the ship and, pursuant to Article 11, these claims have priority over all others. Claims for loss of or damage to property outside ships carrying hazardous and noxious substances are also recoverable, although liability in respect of cargo inside such ships will continue to be regulated by contractual provisions. In this regard, Article 4(1) expressly excludes claims arising out of any contract for the carriage of goods and passengers on the basis that adequate arrangements for compensation in such situations already exist under the conditions of the contract of carriage itself, making it unnecessary for the Convention to provide a remedy.
Finally, to ensure the availability of compensation in situations in which it is not possible to separate damage caused by hazardous and noxious substances from that caused by other factors, the penultimate paragraph of Article 1(6) of the HNS Convention contains a clause, modelled on Article 1(10) of the CRTD Convention, which clarifies that all such damage shall be deemed to have been caused by the hazardous and noxious substances. This provision will undoubtedly be of assistance to claimants in borderline situations, although it does not obviate the need to make the distinction and, to the extent that it is possible to prove that the damage was caused by non-hazardous and noxious factors, no compensation will be available under the HNS Convention.
It is not sufficient under the HNS Convention merely to prove damage. Where it occurs is also a factor. All damage is recoverable under Article 3(a) if it is caused in the territory, including the territorial sea, of a state party. If, for example, an explosion were to spark a fire aboard a ship loaded with hazardous or noxious substances berthed in the harbour of a state party, and that fire were to spread to the buildings on the harbourside, this would be recoverable under the HNS Convention. By comparison, any claims made under the Civil Liability or Fund Conventions, would be limited to damage by contamination. Damage, other than damage by contamination of the environment, caused outside the territory, or the territorial sea of a state, will be recoverable if it has been caused by a substance carried on board a ship registered in a state party or, in the case of an unregistered ship, on board a ship entitled to fly the flag of a state party.
Claims in respect of damage by contamination of the environment will succeed provided the damage occurs within the limits of the exclusive economic zone of a state party or, where no such zone has been established, in an area extending no more than 200 nautical miles seaward from the base lines from which the breadth of the territorial sea is measured. This provision was inspired by the 1992 Protocols to the Civil Liability and Fund Conventions. During negotiations on this provision in the context of the HNS Convention, Australia and several other states, notably Latin-American, had attempted to widen the scope of application to allow for recovery for environmental contamination beyond the 200 nautical mile zone, at least where the continental shelf of a state extended beyond the zone. This was not acceptable to the majority of delegations and the idea was ultimately dropped.
Article 3(d) of the HNS Convention also allows for recovery of compensation in respect of ‘preventive measures, wherever taken’. The original draft submitted to the Diplomatic Conference used the terminology employed in the 1992 Civil Liability and Fund Protocols, namely ‘preventive measures, wherever taken, to prevent or minimize such damage’, the intention behind the italicised phrase being to limit recovery for preventive measures to those taken within the geographical scope of the Convention. At the Diplomatic Conference the Drafting Committee redrafted the provision excluding the reference to the italicised phrase. This led to the question subsequently being raised, after the Conference, at the 74th session of the Legal Committee as to whether the new wording had inadvertently broadened the scope of the Convention by sanctioning recovery of damages for preventive measures taken in respect of damage which itself would not have been compensable. As the record of that debate indicates, it was agreed that the italicised words had been removed because they were thought to be superfluous rather than through any intention to expand the text. However, the deliberations of the Drafting Committee were not recorded nor had there been any subsequent discussion of this redrafted provision at the Conference within the Committee of the Whole (due to lack of time), so it remains to be seen what interpretation will prevail when the Convention eventually enters into force.
The term ‘ship’ is defined rather broadly in the Convention as meaning ‘any sea-going vessel and seaborne craft, of any type whatsoever’. All ships fall within its scope, except for warships, naval auxiliary or other ships owned or operated by a state and used at the time exclusively for government non-commercial service, although a state party may decide to waive its rights to exempt such ships. Ships owned by a state party and used for commercial purposes, rather than governmental purposes, are subject to claims for compensation under the Convention and states parties are required to waive all defences based on sovereign immunity. These provisions are in line with those contained in other maritime law conventions, and reflect the restrictive theory of state immunity.
Special arrangements have been made pursuant to Article 5 of the HNS Convention for small ships of less than 200 gross tonnage, which carry hazardous and noxious substances only in packaged form and which are engaged exclusively on intra-state voyages (that is to say, voyages between ports and facilities of the state party). In respect of these ships a declaration may be made at the time of ratification, acceptance, approval of, or accession to the HNS Convention by the state party in which the small ships are registered, exempting them from the application of the HNS Convention. There is also provision under the Convention for two neighbouring states to agree upon the exclusion from the Convention of small ships which operate under these conditions between ports or facilities of those states.
In the text initially agreed upon by the Legal Committee and submitted to the Diplomatic Conference, small ships had not been exempted. Instead, the provisions had been modelled on those inserted into Article V of the Civil Liability Convention by Article 6(1) of the 1992 Protocol, the effect of which was to limit the liability of the owners of such ships according to their size. The sole questions thought to be left for the Diplomatic Conference were the precise figures to be inserted. Events at the Conference proved otherwise.
Concerted pressure was applied to exempt small ships from the provision on compulsory insurance by the governments of several states, particularly small island communities, whose economic well-being depended upon small ships going freely about their business of plying the hazardous and noxious substances trade, unencumbered by the burden of having to pay compulsory insurance and contributing to the HNS Fund. They were supported by other states, notably Japan, on the basis that, if small ships were not excluded from the requirement to pay compulsory insurance, an inordinate administrative burden would be imposed upon those states in whose waters small ships operated.
At the same time these delegations also argued that the HNS Fund should pick up the bill for any damage caused by the carriage of hazardous and noxious substances on small ships engaged on intra-state voyages. This latter proposal was not acceptable to the majority of delegations who were of the view that contributors to the HNS Fund should not be required to subsidise incidents caused by non-contributors. A compromise was ultimately reached, the terms of which are reflected in Article 5 as described above. Whilst states may choose not to apply the HNS Convention to small ships, neither will the HNS Fund be liable to pay compensation caused by the carriage of hazardous and noxious substances in the territory, the territorial sea, or the exclusive economic zone of the state or states making such a choice. States that opt to keep small ships in the Convention will be required to contribute financially in the same manner as any other state party.
As has been noted above, the HNS Convention establishes a two-tier system of liability. A closer look at Chapter II of the Convention, which covers the liability of the shipowner, reveals the full extent to which it has been modelled on the provisions of the 1969 Civil Liability Convention and its 1992 Protocol. In particular, the following main features of the Civil Liability Convention and Protocol have been appropriated to the HNS Convention:
• strict liability;
• channelling of liability;
• compulsory insurance; and
• limited liability.
It is a fundamental tenet of the HNS Convention that the shipowner’s obligations are based on the principle of strict or no-fault liability. This principle, which was first employed in the 1969 Civil Liability Convention on the understanding that its use was essential to avoid lengthy actions in negligence the outcome of which would at best be uncertain, is not expressly mentioned in the HNS Convention but is reflected in Article 7(1) by the statement that ‘the owner at the time of an incident shall be liable for damage caused by any hazardous and noxious substances in connection with their carriage by sea on board the ship…’.
As is the case with the Civil Liability Convention, the shipowner may be exonerated from liability if it is able to prove that the damage:
(a) resulted from an act of war, hostilities, civil war, insurrection or a natural phenomenon of an exceptional, inevitable and irresistible character; or
(b) was wholly caused by an act or omission done with the intent to cause damage by a third party; or
(c) was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.
These defences were uncontroversial as was the inclusion of Article 7(3), which exonerates the shipowner in whole or in part from liability to any person if the shipowner proves that the damage resulted wholly or partly from an act or omission done with intent to cause damage by, or from the negligence of, that person.
Rather more contentious was the inclusion of Article 7(2)(d), which does not appear in the Civil Liability Convention and which, as originally drafted, exonerated the shipowner from liability in the event that ‘the consignor or any other person failed to meet the obligation to inform the owner of the hazardous or noxious nature of the substances, and that … the owner … [neither] knew or ought to have known of their nature’. At issue was the question whether the shipowner should be held liable where a third party (primarily the consignor or the shipper) had failed to inform it of the hazardous or noxious nature of the substances being carried. During preliminary discussions in the Legal Committee delegations had been evenly divided as to whether the shipowner should be exonerated from liability in such circumstances, with the view being expressed, on the one hand, that fairness dictated that the shipowner should not be held responsible, especially if the proposed convention was to cover the carriage of goods in packages and containers where it would be difficult for the owner to be aware of the nature of their contents. On the other hand, it was argued that the provision was necessary to guarantee the payment of compensation to victims of a hazardous and noxious substance incident and that, in most cases, the shipowner would not be unduly out of pocket as it would normally be able to recover any compensation paid by exercising its right of recourse against the negligent third party. Those in favour of including such an exoneration clause also argued that, even without this first-tier liability, the HNS Fund would pick up the bill so that the victim would not go uncompensated.
The Legal Committee at its 66th session in March 1992 and subsequently at its 72nd session in April 1995 agreed to leave the resolution of this matter to the Diplomatic Conference. In that forum, after some debate, it was agreed to include the provision. The form of wording ultimately adopted in this paragraph nevertheless represents a compromise, in the sense that the shipowner will be exonerated only if the third party’s failure to furnish the information has either caused the damage or has led the shipowner not to obtain insurance in accordance with Article 12.
Claims under the first tier are required under Article 7 of the HNS Convention to be channelled against the shipowner or, in practice, against the shipowner’s insurer. This notion of channelling, which was first incorporated into the 1969 Civil Liability Convention as Article III, was intended, in part at least, to provide victims of hazardous and noxious substance incidents with a readily accessible and identifiable party against whom to initiate action, thereby helping to ensure prompt recovery of compensation. Liability is channelled, not by placing any express obligation on claimants to pursue the owner, but rather by providing that the owner shall be liable for damage caused by hazardous and noxious substances carried aboard the ship and, as a corollary, excluding claims against the servants or agents of the shipowner, as well as against crew members, pilots, charterers, salvors, or persons taking preventive measures unless the damage resulted from their personal act or omission, committed with intent to cause such damage or recklessly and with knowledge that damage would probably result.
As is the position under the Civil Liability Convention, the shipowner (or the shipowner’s insurer) may exercise a right of recourse against any third parties notwithstanding that other parties are unable to initiate action against them.
The wording of the HNS Convention in this respect differs from that of the Civil Liability Convention in that it expressly mentions that the right of recourse includes, but is not limited to, actions against the shipper or the receiver of the substance causing the damage, or any of the other persons listed in Article 7(5). This wording was introduced into the HNS Convention at the 67th session of the Legal Committee in September 1992 in order to ensure that recourse action would be available even if the shipowner was in contractual relations with the person causing the damage (such as the charterer).
Another consequence of the channelling provision is that the HNS Convention also protects the shipowner from being sued otherwise than in accordance with the Convention. This means that, if for a Convention reason, the shipowner is exempt from liability, no action may be taken outside of the Convention to recover compensation. Similarly, the shipowner cannot be sued in common law actions for negligence in an attempt to recover an amount greater than that for which it is liable under the Convention.
The HNS Convention requires shipowners engaged in the carriage of hazardous and noxious substances to maintain insurance or other financial security, such as a bank guarantee, in the sums fixed by applying the limits of liability prescribed in Article 9 of the Convention. This requirement, modelled on Article VII of the Civil Liability Convention, is rightly regarded as one of the lynchpins of the liability and compensation regime. Its aim is to ensure that victims of a hazardous and noxious substance incident will in fact be able to recover compensation whenever it is due. The provision was regarded as necessary because, although statistics show that the vast majority of responsible shipowners routinely take out such insurance on a voluntary basis, a small but significant minority has failed to follow this practice. By obliging states to legislate for compulsory insurance, the Convention achieves two ends: the protection of potential victims and a more equitable situation for shipowners in a market where, previously, those shipowners operating according to good practice who took out insurance were at a competitive disadvantage in comparison with their less-responsible counterparts.
For practical purposes the HNS Convention also requires that a compulsory insurance certificate attesting that insurance or other financial security is in force is required to be carried on board the ship carrying hazardous and noxious substance cargo. The certificate must be issued by the appropriate authority of the state of the ship’s registry or, where the ship is not registered in a state party, it may be issued or certified by the appropriate authority of any state party. The form of the insurance certificate, which is set out in Annex I to the HNS Convention, is required to contain the following details:
(a) name of the ship, distinctive number or letters and port of registry;
(b) name and principal place of business of the owner;
(c) IMO ship identification number;
(d) type and duration of security;
(e) name and principal place of business of insurer or other person giving security and, where appropriate, place of business where the insurance or security is established; and
(f) period of validity of certificate, which shall not be longer than the period of validity of the insurance or other security.
A copy of the insurance certificate must be deposited with the authorities who keep the record of the ship’s registry or if the ship is not registered in a state party, with the authority of the state issuing or certifying the certificate.
Where a compulsory insurance certificate has been issued in accordance with the Convention, other states parties are obliged to accept it for the purposes of the Convention and to regard it as having the same force as compulsory insurance certificates issued or certified by themselves. Where a state party has reason to believe that the insurer or guarantor named in the compulsory certificate is not financially capable of meeting the obligations imposed by the Convention, it may at any time request consultation with the issuing or certifying state. Such a state party is not, however, entitled to ignore or dismiss the certificate out of hand.
From the shipowner’s perspective, one positive outcome of the obligation under the HNS Convention to take out compulsory insurance to cover its liability under the Convention is its consequent entitlement to limit its liability in respect of any individual incident, in this instance in a sliding scale based on the gross tonnage of the ship. These limits are set out at Article 9(1) as follows:
(a) for ships not exceeding 2,000 gt, 10 million SDRs;
(b) for ships between 2,001 and 50,000 gt, 10 million SDRs plus 1,500 SDRs for each additional unit of tonnage, making a maximum of 82 million SDRs at 50,000 gt;
(c) for ships between 50,001 and 100,000 gt, as per (b) but in addition, 360 SDRs for each unit of tonnage over 50,000 gt, making a maximum of 100 million SDRs at 100,000 gt; and
(d) for ships exceeding 100,000 gt, 100 million SDRs.
These limits were agreed on only at the Diplomatic Conference, which of itself is not an unusual procedure. Nor is it unusual for the limits to rise progressively according to the size of the vessel. What was, nevertheless, somewhat surprising was the decision of the Conference to set the limits for small ships (those not exceeding 2000 gt) at 10 million SDRs and to set the overall limits for the first tier at 100 million SDRs. This outcome was the result of a compromise between those states calling for higher shipowner limits, and those who argued that, if the shipowners’ contributions were too high, this could jeopardise the entry into force of the Convention. The compromise left both sides of the industry dissatisfied, with shipowners arguing that the Convention had failed in its aim of equitably sharing the financial burden between ship and cargo interests, while shippers maintained for their part that the compromise would risk engaging the second-tier fund in a considerable number of incidents involving smaller vessels.
The decision to set the limits of the first tier of the HNS Convention at 100 million SDRs was based, in part, upon the Conference’s assessment of the capacity of the London insurance market and its ability to provide compensation at that level. To facilitate market capacity the draft text submitted to the Conference contained a provision the effect of which was to ‘link’ the liability of the shipowner under Convention to existing liability regimes thereby requiring claimants, in the event of a hazardous and noxious substance incident, to pursue their claims in the first instance under the applicable limitation fund.
As might be expected, this proposal was strongly supported by the insurance industry which saw it as a way to avoid double insurance in respect of risks arising from the same incident, thus ensuring the best possible use of the limited capacity of the insurance market. It was also pointed out by the International Group of Protection and Indemnity Clubs that, if two different funds were required to be established to cover hazardous and noxious substance incidents (one under the HNS Convention, the other under the 1976 (or other) Limitation of Liability for Maritime Claims (LLMC)), this would result in a reduction of the available insurance capacity, a situation best avoided. The proposal was generally supported by shipowners as it meant that, in practice, they might not need to obtain separate insurance coverage for the full HNS first-tier limits, as they would under the Convention only be required to establish a supplementary fund to cover the excess of their general limits (for example, under the 1976 LLMC) and any limits under the HNS Convention.
Nevertheless, despite the apparent benefits of the proposals, doubts were expressed and the position was analysed in a paper submitted by France to the 66th session of the Legal Committee. In particular, the paper revisited the problems that might arise where a single incident gives rise both to HNS and ‘ordinary’ non-HNS claims. In such a situation the HNS claimants would be in competition with ordinary law claimants for the compensation available under the limitation fund established, for example, pursuant to the 1976 LLMC and would receive only part of that compensation. This reduction in their rights would not necessarily be compensated by the supplementary HNS fund. A compensation ‘gap’ would also be created in other situations, for example, where hazardous and noxious substance damage was caused in the territory of a state party to the HNS Convention by a ship flying the flag of a non-HNS state, in circumstances where both states have common treaty obligations under a general limitation convention. In such a case the shipowner could not be forced to accept liability under the HNS Convention which, it was envisaged, would prescribe much higher limits than the general limitation regime.
These scenarios in turn raised the question of what to do about the consequent compensation gap. Several options were suggested, including shifting responsibility for filling the gap to the HNS Fund or on to the non-HNS state. It was alternatively suggested that only those states which denounced any limitation regime that offered less compensation than that afforded by the HNS Convention should be allowed to become parties to the Convention. According to one report, some shipowners had even expressed to their Protection and Indemnity Clubs their concern that the compensation gap might have to be filled by the mutual membership of the Clubs, entailing even greater costs on the part of shipowners (although this idea was never discussed in the Legal Committee). The end result of all these doubts was that considerable pressure was exerted to abandon the idea of linkage, even though this might entail steeper insurance costs and less insurance availability, and at the Diplomatic Conference it was decided to delete in its entirety the Article on linkage from the HNS Convention, leaving as the limits of liability those prescribed solely by the Convention.
The ability of the shipowner to limit liability is activated by the constitution of a fund for the total sum representing the limit of liability with a court or other competent authority of any one of the states parties in which action is brought under the Convention, or if no action is brought, with any court or other competent authority in any one of the states parties in which an action can be brought under Article 38 of the Convention. The fund can be constituted either by depositing the required sum or by producing a bank guarantee or other guarantee, acceptable under the law of the state party where the fund is constituted, which is considered to be adequate by the court or other competent authority.
The constitution of a fund also has other effects. First, no person having a claim for damage arising out of the hazardous and noxious substance incident is entitled to exercise any right against any other assets of the owner in respect of the claim, and, second, the court or other competent authority of any state party is required to order the release of any ship or other property belonging to the owner which has been arrested in respect of a claim for damage arising out of the incident. The court is similarly obliged to release any bail or other security furnished to avoid such arrest. These provisions will, however, only apply if the complainant has access to the court administering the fund and if the fund is actually available in respect of the claim.
The Convention also provides for the ranking of claims. Claims in respect of death or personal injury have priority over all other claims, except to the extent that the aggregate of such claims exceeds two-thirds of the total amount established in accordance with Article 9(1). Claims in respect of expenses reasonably incurred or sacrifices reasonably made by the shipowner voluntarily to prevent or minimise damage rank equally with other claims against the fund.
The HNS Convention is premised on the assumption that it would be inequitable to expect all liability for damage occurring in the context of carriage of cargo of hazardous and noxious substances to be borne solely by the shipowner. This is particularly so in cases where the shipowner may not be aware of the hazardous nature of the cargo or where liability may arise through no fault of the shipowner. There are also practical reasons for removing some of the financial burden from the shipowner, in particular the need to ensure the viability of adequate compensation for victims of hazardous and noxious substance incidents in a market environment where sufficient insurance capacity may not be evident. The Convention accordingly establishes a second tier of liability, supplementary to the first tier, which is financed by cargo interests. The vehicle used in the HNS Convention to implement this second tier of responsibility is the HNS Fund.
To this end the Convention establishes the HNS Fund as a legal person capable under the laws of each state party of assuming rights and obligations and of being a party in legal proceedings before the courts of those states. Articles 24 and 25 of the Convention envisage that the HNS Fund will be comprised of two organs, namely an Assembly consisting of all states parties to the Convention and a Secretariat headed by the Director.
The Director will play a key role in his or her capacity as Chief Administrative Officer of the HNS Fund  as well as its legal representative. The Director’s duties are set out at Article 30(2) of the Convention. They include the collection of financial contributions, and the taking of appropriate measures for dealing with claims against the HNS Fund, within the limits of conditions to be laid down in the internal regulations of the Fund, including the final settlement of claims without the prior approval of the Assembly where the regulations so provide. In carrying out these and other duties, the Director and the staff of the Secretariat are required to act independently of any government and of any authority external to the HNS Fund. Conversely, the Convention also requires each state party to respect the exclusively international character of the responsibilities of the Director and the staff of the Fund and not to seek to influence them in the discharge of their duties. Certain privileges have been conferred on the HNS Fund, key among which is the exemption from all direct taxation of the HNS Fund, its assets, income, including contributions, and other property necessary for the exercise of its functions.
The functions of the Assembly as set out in Article 26 are as follows:
(a) to elect at each regular session its President and two Vice-Presidents who shall hold office until the next regular session;
(b) to determine its own rules of procedure, subject to the provisions of this Convention;
(c) to develop, apply and keep under review internal and financial regulations relating to the aim of the HNS Fund as described in article 13, paragraph 1(a), and the related tasks of the HNS Fund listed in article 15;
(d) to appoint the Director and make provisions for the appointment of such other personnel as may be necessary and determine the terms and conditions of service of the Director and other personnel;
(e) to adopt the annual budget prepared in accordance with article 15(b);
(f) to consider and approve as necessary any recommendation of the Director regarding the scope of definition of contributing cargo;
(g) to appoint auditors and approve the accounts of the HNS Fund;
(h) to approve settlements of claims against the HNS Fund, to take decisions in respect of the distribution among claimants of the available amount of compensation in accordance with article 14 and to determine the terms and conditions according to which provisional payments in respect of claims shall be made with a view to ensuring that victims of damage are compensated as promptly as possible;
(i) to establish a Committee on Claims for Compensation with at least 7 and not more than 15 members and any temporary or permanent subsidiary body it may consider to be necessary, to define its terms of reference and to give it the authority needed to perform the functions entrusted to it; when appointing the members of such body, the Assembly shall endeavour to secure an equitable geographical distribution of members and to ensure that the States Parties are appropriately represented; the Rules of Procedure of the Assembly may be applied, mutatis mutandis, for the work of such subsidiary body;
(j) to determine which States not party to this Convention, which Associate Members of the Organization and which intergovernmental and international non-governmental organizations shall be admitted to take part, without voting rights, in meetings of the Assembly and subsidiary bodies;
(k) to give instructions concerning the administration of the HNS Fund to the Director and subsidiary bodies;
(l) to supervise the proper execution of this Convention and of its own decisions;
(m) to review every five years the implementation of this Convention with particular reference to the performance of the system for the calculation of levies and the contribution mechanism for domestic trade; and
(n) to perform such other functions as are allocated to it under this Convention or are otherwise necessary for the proper operation of the HNS Fund.
The review function described at paragraph (m) above reflects a decision taken by the Legal Committee at its 71st session in September 1994, following a proposal by Japan that a provision be inserted into the Convention providing for a formal mechanism for review. The Japanese proposal was prompted by the fact that, if as seemed likely, domestic voyages were included in the scope of the Convention, given the differences between states in standards of safety and environmental regulation, the rate of accidents for domestic voyages might well be at a much greater level than for international voyages. In that situation the balance between contributions and compensation would be seriously jeopardised. The Japanese concern, in particular, was that any imbalance in the implementation of the contribution mechanism could lead to inequitable situations with cross-subsidisation. A process of review would allow these to be quickly identified and, wherever necessary, remedied.
The principal task of the Fund is to consider claims made against it and to provide compensation for damage in connection with the carriage of hazardous and noxious substances by sea, to the extent that the protection afforded by the shipowner under the first tier of the HNS Convention is inadequate or not available. It is inaccurate to think of the HNS Fund as existing merely as a means of ‘topping up’ or supplementing the compensation available under the first tier in situations where the damage exceeds the shipowner’s liability. This is only part of its raison d’être. The liability of the HNS Fund may also be activated in circumstances where there is no shipowner liability under the Convention. One such example would be where the shipowner is exonerated from liability because of the failure of the shipper to furnish information concerning the hazardous and noxious nature of the cargo. The HNS Fund may also incur liability where the owner is financially incapable (for example, through insolvency) of meeting the obligations under the Convention in full and any financial security that might be provided under Chapter II does not cover or is insufficient to satisfy the claims for compensation for damage.
The liability of the HNS Fund, like that of the shipowner under the first tier of the Convention, is based on the principle of strict liability, that is to say dependent solely on causation and not on the establishment of negligence on the part of the Fund itself. The causation must, of course, be limited to ship-sourced damage as the HNS Convention does not cover situations where the damage results from land-based sources. This led to some debate within the Legal Committee as to which party should bear the onus of proving causation in situations where no shipowner could be identified. Early drafts of the HNS Convention placed this onus on the Fund. In a joint submission to the Legal Committee, Japan and the United Kingdom argued that, since the majority of pollution entering the sea comes not from ships but from other sources, it would be an extremely costly exercise for the Fund to have to employ resources to attempt to determine whether every incident of non-attributable pollution was or was not due to a ship. They suggested a compromise, which was ultimately accepted by the Committee, to the effect that the burden of proof should be placed on the claimant (as it is in the Fund Convention) but that the standard of proof should be that of ‘a reasonable probability’. The Convention also exonerates the HNS Fund where the Fund can prove that the damage resulted from an act of war, hostilities, civil war or insurrection or was caused by hazardous and noxious substances which had escaped or been discharged from a warship or other ship owned and operated by a state and used at the time of the incident only on government non-commercial service. These exemptions are similar to those afforded to the shipowner under Article 7 and also reflect those contained at Article 4 of the 1971 Fund Convention.
The liability of the HNS Fund, like that of the shipowner, is limited. In respect of any single incident, the total amount of compensation payable by the shipowner under Chapter II and the HNS Fund under Chapter III is set at 250 million SDRs. This does mean that in a major incident the compensation available may be not sufficient to satisfy all claims, and in this event, a pro-rata reduction will be made. As is the case with the first tier, claims in respect of death or personal injury are to have priority over other claims, at least in respect of the first two-thirds of the amount available to satisfy such claims. All other claims are to be treated on an equal basis. For example, claims for property damage and for loss of profits would be treated equivalently.
The question at which point the shipowner’s liability would cease and that of the HNS Fund begin was a matter of some debate, both before and during the Diplomatic Conference. While it was generally agreed that liability should be shared equitably between the shipowner and the Fund, there were differing views as to what was meant by the term ‘equitably’. Many developing countries expressed the view that, for economic reasons, it was necessary to keep the shipowner’s limits as low as possible. They argued that, if the limits were set too high, this would not only have adverse implications for the shipowner in the form of a steep increase in insurance costs, but would also adversely effect the growth of their economies generally. At the same time, other delegations expressed the view that very high shipowner limits were essential in order to satisfy public opinion. This reflected general criticism of the shipowner’s traditional right to limit liability. The arguments were also framed in terms of ability to pay as opposed to the criterion of capability to cause damage. Ultimately, those pressing for high shipowner limits won the day. The result is that, despite the fact that it was never intended that the HNS Fund should cover only exceptional incidents, this may be the consequence.
The scheme adopted by the HNS Convention envisages that the HNS Fund will be financed entirely through contributions levied on receivers of hazardous and noxious cargo in the states parties. The levy will be imposed by way of an annual contribution in a sum to be determined by the Assembly and to be calculated on the basis of units of contributing cargo received during the preceding calendar year. Annual contributions by receivers are to be levied on a needs basis, that is, only as required to make payments by the account in question. It is quite possible, therefore, that receivers of cargo in one or more of the accounts might not be called upon to make contributions in any particular calendar year.
A distinctive feature of the HNS Convention, and one that differentiates it from the 1976 Fund Convention, is the fact that the second tier is divided into four distinct accounts, namely, a general account, the oil account, the LNG account and the LPG account. The original draft of the HNS Convention had envisaged that the second tier would consist of a single account and that all contributors would become liable to pay into that one account, with the effect that the HNS Fund would operate on a single fund. However, during discussions in the Legal Committee, it became apparent that such a system, if adopted, would be inequitable and disadvantage those industries in which large volumes of cargo of a particular type were carried by sea. The fear was that these high-volume cargoes which were not necessarily more dangerous but, simply because of their sheer mass, would be obliged to cross-subsidise the other hazardous and noxious cargoes carried in much lower volumes. Certain sectors of the market, notably the LNG industry, also maintained that, in view of their exceptional safety and environmental record, they should not be expected to cover the liabilities incurred by other, less-safe industries. These claims were supported by several states which proposed that the Convention should take due account of the relative risks posed by each principal type of cargo to be included. This led to a suggestion by Japan that a system of separate accounts be established which would finance the second tier on a market-sector basis. At the 68th session of the Legal Committee in March 1993 Japan presented a formal submission which resulted ultimately in the introduction of four disparate accounts into the HNS Fund. The effect of having disparate accounts is that receivers of oil, LNG and LPG will only become liable to contribute if and when an incident occurs involving oil, LNG or LPG, respectively. Receivers in the general account will be called on collectively to provide compensation in respect of incidents triggered by any of the hazardous and noxious substances covered by the general account.
The decision to establish separate accounts was essentially a political one. This is evidenced by the fact that there are no specific criteria included in the HNS Convention for the establishment of such an account despite a concerted effort on the part of several countries, led by Australia, to have such criteria included. There were, nevertheless, lengthy debates within the Legal Committee in the sessions preceding the Diplomatic Conference as to why some substances should be given separate accounts.
With regard to the oil industry, the Committee was influenced by the homogenous nature of the industry and its good track record in paying contributions in the context of the 1971 Fund Convention as well as by the fact that it was already liable, in principle, to pay contributions under that regime for pollution damage and under the HNS Convention for damage by fire and explosion. It was considered inequitable to extend the industry’s liability to cover damage caused by chemicals in general.
Arguments advanced on behalf of the LNG industry likewise convinced the Committee that this industry, too, was small enough and sufficiently well organized to generate the payment of compensation in the event that an incident involving an LNG ship should cause pollution damage. The Committee was also impressed by the excellent safety record of LNG ships, which are constructed specifically to carry LNG. Similar arguments were made in favour of establishing a separate account for LPG, although initially there was some doubt on the part of the Legal Committee as to whether the industry was sufficiently cohesive or large enough to offer the same guarantees. The Diplomatic Conference, however, was won over, and LPG became the third separate account.
Not all delegations were always in favour of establishing separate accounts, the main argument against them being the danger that, the more the second tier was segmented, the greater the possibility of its financial viability being undermined. Ultimately, however, the weight of opinion swung decisively in favour of separate accounts with the help of certain safeguards being built into the Convention to reduce the risks associated with segmentation. Thus the Convention provides that the initial operation of a separate account should be postponed until such time as there are sufficient quantities of contributing cargo to ensure the financial viability of the account. In addition, the Assembly has the power to suspend the operation of a separate account if the quantity of contributing cargo in respect of that account falls below a certain level or where more than ten per cent of the most recent levy remains uncollected for a period of six months.
Receivers of all other hazardous and noxious substances are obliged to contribute through the general account, provided only that they receive a certain minimum quantity of hazardous and noxious cargo during a particular calendar year. On current estimates it is expected that the general account will cover approximately 3,000 to 5,000 hazardous and noxious substances, the vast majority of these being chemicals of one type or another that are regularly transported by sea. All of the hazardous and noxious substances in the general account will, in effect, cross-subsidise all of the other substances in the general account. This means, for example, that if an incident occurs involving a ship carrying paint, the liability of the general account will be triggered and all the receivers of hazardous and noxious substances in that account will be called upon to contribute towards the costs of the incident.
A list of all persons liable to pay contributions either to the general account or to the separate accounts is required to be established and kept up-to-date by the Director of the HNS Fund. In order to assist the Director, states parties are required to supply the Director with the name and address of any person liable to pay such contributions as well as data on the relevant quantities of contributing cargo for which such a person is liable to contribute in respect of the preceding calendar year. States parties who fail to fulfil their obligations in this regard become liable to compensate the HNS Fund for any resulting financial loss to the Fund. The HNS Convention envisages that individual receivers of hazardous and noxious cargo will be responsible for payment of the levy directly to the Fund, however, the Convention does provide certain mechanisms whereby states parties may assume that responsibility. Presumably in such cases the state concerned will recover those contributions from individual receivers by way of its own internal laws and regulations.
The rights of victims to bring actions under either tier of the HNS Convention is not unlimited. Rights to compensation against the shipowner or the shipowner’s insurer under Chapter II must be brought within three years from the date when the person suffering the damage knew or ought reasonably to have known of the damage and of the identity of the owner. Actions against the HNS Fund under Chapter III are similarly required to be brought within a period of three years from the date when the person suffering the damage knew or ought reasonably to have known of the damage. In no case, however, is it possible to bring an action later than ten years from the date of the incident which caused the damage, and, where the incident consists of a series of occurrences, the ten-year period will run from the date of the last of these.
The three-year period of limitations is consistent with Article VIII of the Civil Liability Convention and Article 6(1) of the 1971 Fund Convention except that, in those Conventions, the time runs simply from the date when the damage occurred. In addition, the period of ten years for the overall time limit is rather more generous, the overall period in the Civil Liability Convention and Fund Conventions being limited to six years. The more expansive time limits were regarded as necessary in order to balance the need for finality in respect of legal action arising out of a hazardous and noxious substance incident with that of allowing victims ample time in which to begin an action against the shipowner or the Fund.
Article 46 of the HNS Convention provides that the Convention will enter into force 18 months after the date when the following conditions have been fulfilled:
• 12 states have accepted the Convention, four of which have not less than 2 million units of gross tonnage; and
• provided that persons in these states who would be responsible to pay contributions to the general account have received a total quantity of at least 40 million tonnes of contributing cargo in the preceding calendar year.
These somewhat complex requirements reflected the concern of delegations at the Diplomatic Conference that it would be inadvisable to allow the Convention to enter into force simply on the basis of the number of states parties. To ensure the financial viability of the Convention and in order to spread the burden of compensation more equitably, it was also regarded as important that, among the states becoming parties to the Convention, a sufficient number should be major shipping nations and, in addition, the volume of contributing cargo to the general account should represent a sufficiently high volume of trade. Accordingly, the present formula envisages a combination of number of states, gross tonnage of ships as well as a certain volume of received cargo.
The aim of the drafters of the HNS Convention has been to put in place an international scheme capable of providing compensation to innocent victims of pollution incidents resulting from the sea carriage of a wide range of hazardous and noxious substances. The Convention that has been developed draws, heavily in places, on the Civil Liability/Fund regime which was specifically devised, in the aftermath of the Torrey Canyon and Amoco Cadiz disasters, to secure compensation for oil-pollution damage. Based on the experience of that regime, the expectation is that victims of hazardous and noxious substance incidents will, in future, also receive adequate, effective and prompt compensation, without the need to resort to lengthy and complex court proceedings. To achieve this result, the HNS Convention, once it enters into force, will ensure that financial measures are in place to meet the compensation limits established by the treaty and that claimants have direct and immediate access to insurers and to the HNS Fund.
As with all treaties, the text of the HNS Convention reflects the result of an international compromise. This may help to explain some apparent anomalies, including the exclusion of coal from the ambit of the regime. Arguably, it might have been possible to keep coal in the Convention and to deal with the problems arising from its inclusion, particularly that of cross-subsidisation, by treating it similarly to oil, LNG and LPG. The reality of the negotiating process was that the ‘coal question’ was dealt with in the context of the definition of hazardous and noxious substances, rather than in the context of second-tier accounts. By the time the latter was under debate at the Diplomatic Conference, a political decision had already been taken to exclude coal. This was not reopened.
The elements of compromise are also evident in the compensation limits set by the Convention. From the claimants’ point of view it would appear that these have been set at sufficiently high levels to provide adequate cover for most, if not all, anticipated incidents, at least for the foreseeable future. Whether, from the point of view of those liable to pay compensation, the process is quite so satisfactory, is an open question. The two-tier system of liability was intended to provide a means of sharing the financial burden of compensation among those best able to pay, namely, shipowners and cargo interests. In practice, the relatively high level of compensation payable under the first tier means that, only rarely, will receivers of hazardous and noxious cargo become liable for contributions.
Because of its nature and, in particular, the lack of homogeneity of the hazardous and noxious substance industry, the HNS Convention is a more complex treaty instrument than the Civil Liability and Fund Conventions. This has meant that progress towards ratification has been slow and, as at the date of writing, only eight states have signed the instrument. To date only the Russian Federation has so far deposited an instrument of accession.
Ultimately, the entry into force of the Convention, as with all treaties, will be a matter of political will. In this regard, while there continues to be opposition from a few industry quarters to the effect that there is no necessity for the HNS Convention or that putting it into place will be too expensive, these doubts do not currently seem to be shared by state administrations. Since the Diplomatic Conference in 1996, a great deal of international activity has taken place with the objective of assisting states in becoming parties to the Convention preferably at roughly the same time. While such a course of action may appear somewhat unusual, this has come about partly through the recognition that major importing states could place themselves at an economic disadvantage if their international competitors were not also to join the regime.
Because of the potential economic impact, countries of the European Union have been pressing for all states in the Union to become parties at approximately the same time. To this end, they have held a series of meetings to work collectively towards synchronised accession, and the matter is also currently on the agenda of the Asia-Pacific Economic Co-operation Group. In addition, several informal meetings of interested states have also been held at IMO Headquarters at which problems of implementation have been discussed.
Quite uniquely, the Legal Committee of the IMO has also agreed to include on its agenda the item ‘Monitoring Implementation of the HNS Convention’. To this end a Correspondence Group has been established, co-ordinated by the United Kingdom delegation, which now regularly reports to the Committee. The purpose of the Correspondence Group is to monitor the efforts and achievements of states interested in implementing the HNS Convention and, in so doing, to encourage other states to follow suit. The airing of common problems and solutions within the Legal Committee will, it is hoped, help to ensure that these are resolved as speedily as possible and that the Convention is ultimately implemented in a uniform manner.
[∗] Director, Legal Affairs and External Relations Division, International Maritime Organization.
 973 UNTS 3.
 1110 UNTS 37.
 Then called the Intergovernmental Maritime Consultative Organization (IMCO).
 Doc C/ES III/3 [14(1)].
 Doc C/ES/5 .
[6 ] For a discussion of this report, see R Balkin, ‘The Establishment and Work of the IMO Legal Committee’ in M H Nordquist and J N Moore (eds), Current Maritime Issues and the International Maritime Organization (1999) 291, 297ff.
 Doc LEG/WG (II) I/WP 1  .
 Doc LEG/WG (II) I/2 .
 See A de Bievre, ‘Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea’ (1986) 17 Journal of Maritime Law and Commerce 61.
 Art 46. As with most other IMO Conventions, entry into force is not solely reliant upon the number of states that ratify or otherwise accept the Convention. The requirements are discussed below p 31.
 See M Göransson, ‘The HNS Convention’ (1997) 2 Uniform Law Review 249, 250, 252.
 Pollution damage from oil residues is already covered by the 1992 Protocol to the Civil Liability Convention, art 1.1.
 Principally, the International Convention for the Prevention of Pollution from Ships, 1973 as modified by its Protocol of 1978 (the MARPOL 73/78) as well as various maritime Codes developed by IMO, namely, the International Maritime Dangerous Goods Code (IMDG), the International Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in Bulk, 1983, the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk, 1983 and the Code of Safe Practice for Solid Bulk Cargoes.
 Doc LEG 68/4/2 submitted by Australia, which also attached an indicative list of some 3000 substances as an example of what an HNS list might comprise.
 IMO has, for example, included in the MARPOL 73/78 a simplified procedure for the amendment of such lists, known as the ‘tacit amendment procedure’ which eliminates the need to resort to the time and expense of a full-scale Diplomatic Conference, art 16(2). A similar procedure is included in art 48 of the HNS Convention to enable the speedy amendment of limits of liability. See also arts 15 and 33 of the 1992 Protocols to the Civil Liability and Fund Conventions, respectively.
 Select Docs No 37 (1989) 9.
 The IMO Secretariat reported at the 72nd session of the Legal Committee in October 1995 that establishing and maintaining a freestanding list would be a highly labour-intensive exercise. This report clearly influenced the Committee’s decision to opt for the current structure of art 1(5).
 Including Canada, the United States of America and Australia.
 Including Italy and Japan.
 Doc LEG 70/4/10.
 Doc LEG/CONF 10/6(a), art 17.
 LEG 72/4/2 (Italy); LEG 72/4/3 (Austria); LEG 72/4/4 (Venezuela); LEG 72/4/8 (Portugal); LEG 72/4/10 (South Africa); LEG 72/4/11 (Japan).
 Other listed substances include aluminium dross, charcoal, direct reduced iron, ferrophosphorus, fluorspar, lime, metal sulphide concentrates, petroleum coke, pitch prill, prilled coal tar, pencil pitch, sawdust, silicon manganese, tankage, vanadium ore and wood pulp pellets.
 See, eg, Doc LEG 65/3/1 of 23 August 1991. See also Doc LEG 65/3/3 of 29 August 1991 submitted by the Organisation for Economic Cooperation and Development (OECD).
 By comparison, a proposal by Greenpeace at the 66th session of the Legal Committee in March 1992 that the HNS Convention should be extended to cover all nuclear substances attracted very little support.
 Eg, low-level radioactive material used for medicinal purposes or in watchmaking.
 See Doc LEG/CONF 10/8/1.
 The IAEA’s comments on this issue were discussed at the 65th session of the Legal Committee in September 1991: see Doc LEG 65/3/3.
 Art 2(3).
 N Gaskell, ‘The Draft Convention on Liability and Compensation for Damage Resulting from the Carriage of Hazardous and Noxious Substances’ in P Wetterstein and A Beijer (eds), Essays in Honour of Hugo Tiberg (1996) 225, 257.
 ‘any damage’.
 ‘damage, … other than damage by contamination of the environment’.
 Except to the extent that the aggregate of such claims exceeds two-thirds of the total amount of the limits of liability established under art 9(1).
 Unless it falls within the scope of the Civil Liability Convention or the IMDG Code or the Code of Safe Practice for Solid Bulk Cargoes: art 4(3). The exception is to avoid the possibility of compensation being awarded twice for the same damage.
 Civil Liability Convention, art II; Fund Convention, art 3.
 Art 3(c)
 Arts 3(a)(ii) and 4(a)(ii), respectively.
 Arts 3(b) and 4(b), respectively.
 See Doc LEG 74/13 –.
 Art 1(1).
 Art 4(4).
 Art 4(5), in which case it is obliged to notify the Secretary-General of IMO as the depositary of the Convention, specifying the terms and conditions upon which it has done so.
 Art 4(6).
 Art 4(4) is modelled on art 236 of the United Nations Convention on the Law of the Sea, 1989 (UNCLOS) (see Doc LEG 76//3/6 for a discussion on this point by the Legal Committee) while art 4(5) owes its format to art 4(2) of the International Convention on Salvage, 1989 (this was originally a proposal put forward to the Legal Committee by Mexico: see Doc LEG 66/WP 4 of 18 March 1992.
 Art 5(1).
 Art 5(2).
 Doc LEG/CONF 10/6(a) of 21 July 1995.
 The accepted majority view being that small ships have the potential to create a much greater risk of pollution than their tonnage would indicate.
 This has always been accepted as a basic principle: see, eg, Report of the Legal Committee on the Work of its 58th session, Doc LEG 58/12 .
 Art III(1).
 Author’s italics.
 Art 7(2)(a).
 Art 7(2)(b).
 Art 7(2)(c).
 A similarly worded provision is contained at art III(3) of the Civil Liability Convention.
 See draft art 6(2)(d) in Doc LEG/CONF 10/6(a).
 As provided for in art 7(6).
 Report of the Legal Committee on the Work of its 66th session, Doc LEG 66/9 .
 Report of the Legal Committee on the Work of its 72nd session, Doc LEG 72/9 .
 Civil Liability Convention, art III(4).
 Art 7(5). This mirrors art 4(2) of the 1992 Protocol to the Civil Liability Convention that extended the list of persons exempted from suit.
 Art III(5).
 Art 7(6).
 Report of the Legal Committee on the Work of its 67th session, Doc LEG 67/9 .
 Art 7(4).
 Art 12(1).
 Cf art VII(2) Civil Liability Convention.
 Cf amendments to art VII(2) introduced by art 7 of the 1992 Civil Liability Protocol.
 Art 12(4); cf art 7(2) Civil Liability Protocol.
 Art 12(7); cf art VII(7) Civil Liability Convention.
 The Special Drawing Right (SDR) is the unit of account used in the Convention and is the same SDR used in the International Monetary Fund (IMF). At the present time, 1 SDR is roughly equivalent to $2 Australian.
 Especially the United Kingdom, France and Germany.
 Led by Greece.
 Press release from the International Chamber of Shipping, 2 May 1996.
 Bulletin of the European Council of Transport Users, 10 May 1996.
 LEG/CONF 10/6(a), art 9.
 Primarily the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC) and its 1924 and 1957 versions, but also national liability regimes.
 LEG/CONF 10/6(a), draft art 9(3).
 Doc LEG 66/4/1.
 The example given was a scenario in which a ship was rammed by a hazardous and noxious substances carrier, resulting in loss of life among seafarers or passengers on the rammed ship, but where there was no direct causal link between the deaths and the hazardous and noxious substances.
 A de Bievre, Lloyds List (19 June 1996) 9.
 At the same time that it adopted the HNS Convention the Diplomatic Conference also adopted a Protocol to the 1976 LLMC, art 7(1)(b) of which allows states, at the time of signature, ratification, acceptance, approval or accession, or at any time thereafter, to reserve the right to exclude from the application of the Convention claims for damage within the meaning of the HNS Convention. This formulation will enable states, pending the entry into force of the HNS Convention, to take advantage of the increased limits under the 1996 Protocol. Thereafter, if a reservation to this effect is made, hazardous and noxious substances claims will be regulated solely by the HNS Convention freeing the funds available under the 1996 LLMC Protocol for use in satisfying non-hazardous and noxious substances-based claims.
 Art 9(3).
 Art 10(1).
 Art 10(2).
 Art 11.
 Art 9(8).
 Art 13(2).
 Art 30(1).
 Art 29(2).
 Art 30(2)(c).
 Art 30(2)(e).
 Art 31.
 Art 35(1).
 These functions have been closely modelled on art 18 of the Fund Convention. The terms ‘President’ and ‘Vice-President’ in para (a) of art 26 were employed instead of ‘Chairman’ and ‘Vice-Chairman’ in an attempt to use gender-neutral language throughout the text, a suggestion first raised by the Australian delegation in the Legal Committee: Report of the Legal Committee on the Work of its 72nd session, Doc LEG 72/9 .
 Doc LEG 71/3/4.
 Art 13(1)(a).
 Art 14(1)(c).
 Art 14(1)(a).
 Art 7(2)(d).
 Art 14(1)(b).
 Doc LEG 69/3, Annex, art 12(3)(b); this, despite being based on art 4(2)(b) of the Fund Convention which places the onus on the claimant.
 Doc LEG 71/3/2.
 This appears in the HNS Convention as art 14(3)(b).
 Art 14(3)(a).
 Art 14(5).
 Art 14(6).
 The term ‘receiver’ as defined in art 1(4)(a) means the person who physically receives contributing cargo discharged in the ports or terminals of a state party, or a person deemed by national law to be a receiver.
 Art 17(2).
 Art 17(1).
 See art 16.
 Liquified natural gases of light hydrocarbons with methane as the main constituent.
 Liquified petroleum gases of light hydrocarbons with propane and butane as the main constituents.
 See, eg, Docs LEG 66/4/5 submitted by Indonesia; LEG 67/3/8 submitted by Malaysia; LEG 67/3/9 submitted by Brunei Darussalam and LEG 67/3/10 submitted by Australia.
 Doc LEG 67/WP 2.
 Doc LEG 68/4/4.
 A working group was established at one stage during the deliberations of the Legal Committee to consider criteria for establishment and operation of separate accounts, and at the 70th session the Chairman of the Group of Technical Experts submitted a text with draft criteria (eg, the stability of the sector for the proposed account and its effects on the viability of the remaining accounts) but these were rejected by the Committee.
 A proposal presented by the United Kingdom to the 68th session of the Legal Committee in which it nominated as the four separate accounts oil, LNG, other bulk chemicals and packaged hazardous and noxious substances clearly represented a vote of no confidence as to the viability of LPG as an independent sector: Doc LEG 68/4/11.
 See Gaskell, above n 30, 292.
 Art 19(3).
 Art 19(4).
 Art 18(1).
 Art 21(1).
 Art 21(2).
 Art 21(4).
 Arts 23 and 21(5); cf 1971 Fund Convention, art 14.
 Art 37(1).
 Art 37(2).
 Art 37(3).
 Art 37(4).
 Canada, Denmark, Finland, Germany, Netherlands, Norway, Sweden and the United Kingdom.
 The Russian Federation deposited this instrument with IMO on 20 March 2000.
 J Wren, ‘The Hazardous and Noxious Substances Convention, 1996’ (paper presented at the twelfth World LP Gas Forum, Delhi, 28–29 October 1999).
 The terms of reference for the Group are to be found in Doc LEG 80/11, Annex 2.
 Doc LEG 81/11 .