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Friday, December 1, 2006
Wheels need oiling

South Africans are heavily – and needlessly – exposed to a large-scale oil tanker pollution catastrophe because draft legislation allowing South Africans to claim from the International Oil Pollution Compensation Fund has not been passed into law.

Patrick Holloway, Maritime Law Partner at Webber Wentzel Bowens, Cape Town, says, “If a large oil tanker ran aground near a major city such as Cape Town, it could be an economic disaster for the region and the country as a whole.
“Not only could it cause extensive property damage, but it would adversely impact on many local businesses, international trade, tourism, fishing and possibly even power supply that would take the economy years to recover from.”
Mr Holloway notes that currently the only avenue of compensation is a claim against the ship-owner, which due to a ship owner’s right to limit liability in certain circumstances, may cover only a fraction of the costs of a clean up and the balance would have to be paid by the South African tax payer.
“Those suffering direct or consequential loss as a result of an incident such as fishermen, hoteliers or restaurateurs and others reliant on a clean environment could receive only limited compensation or none at all, resulting in substantial loss of income and job losses.”
He says that another overlooked potential ramification of an incident such as an oil spill is that Koeberg nuclear power station might have to shut down as sea water is required to cool the turbines, resulting in an exacerbation of the power supply problems in the region.
“As things stand, the law currently massively under provides in terms of the ability to recover for the losses that may be suffered and the costs that could be incurred from a large scale oil spill.”
Compensation for pollution damage caused by spills from oil tankers is governed by an international regime under the auspices of the International Maritime Organisation.
“The 1992 Protocol to the Civil Liability Convention sets the international parameters for claims in the event of the loss of an oil tanker at a maximum of approximately R2 310 million.
“However, South Africa has not incorporated the Protocol into our law, thereby leaving this country and its citizens in the exposed position of only being able to claim up to a combined maximum of R148 million, under the Marine Pollution Act of 1981.
“Should a ship owner succeed in limiting liability this could be considerably less. This may prove to be woefully short of the hundreds of millions or even billions of rands, required to compensate the state for a comprehensive clean up operation and its citizens for the loss and damage they may have suffered,” he adds.
The Prestige and Erica disasters in Spain and France for example resulted in claims against the International Oil Pollution Convention Fund of over R700 million and R546 million respectively. The highest sum of claims arising from a single incident has been approximately R1 516 million arising from an incident in Japan.”
Mr Holloway says that the problem could be addressed quite simply by passing the three draft bills that are currently with the state law advisers, thereby incorporating the international conventions into our law.
“These bills have been circulating for more than two years and despite the obvious critical need to rectify the situation, there appears to be no political will to do so.
“The situation is particularly disconcerting in the light of the World Cup showcase in 2010. We need to ensure that we remain a preferred tourist destination. Environmental damage caused by an oil spill would be unfortunate, the inability to claim compensation from the International Fund combined with the cost of hosting such an event could be disastrous.”
He points out that even if the bills were passed tomorrow, it would take the better part of a year for the regulations, giving practical effect to the legislation, to become effective. “Only then would South Africans have access to the international compensation funds.”

Copyright © Insurance Times and Investments® Vol:19.6 1st December, 2006
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