Second, there is agreement that the sum of $30 million should be considered as the "tentative" overall limit per incident.

Third, there is a general consensus that, under the treaty, victims should be allowed compensation even though the spillage and damage were caused by an act of God, or an act of a third party, or negligence of a government. The only exception still under consideration is acts of war.

Fourth, there is agreement that the fund from which damages of up to $30 million per incident will be paid should be constituted primarily from contributions by cargo; that is, the oil industry. I think this is a very important risk distribution approach. Oil ought to pay its share. After all, it is deriving profits from the carriage of the cargo from one origin to one destination.

To be sure, there are still many problems that will need to be worked out before the new treaty can be fully drafted. For example, the oil industry is reportedly supporting the new treaty but only on condition that it will not have the effect of reducing the maritime industry's liability under the treaty which is before you now.

The maritime industry, on the other hand, seems to be making some effort, via this new treaty, to reduce the extent of the liability imposed on it under the treaty before you now. They would like to reduce the amounts from the $134-per-ton amount to the amounts which are in the 1957 convention; namely, $67 a ton.

Whatever the outcome of this interindustry dispute might be, the very fact that it is going on suggests the inadvisability of giving advice and consent to the treaty before you now. For not only might the terms of this treaty in fact be changed by the new treaty, but even more important-were we to ratify this treaty, we would greatly dissipate our bargaining power in working for a new treaty with a limit of at least $30 million under terms of absolute liability.

The far better approach to this problem would be for this committee to await the outcome of the negotiations on the new treaty and then to take both treaties under consideration simultaneously. And during the negotiations, this committee can and should lend its weight to assure that the final result adequately and properly protects the interests of the American public.

This committee should be aware that any treaty ratified by the United States on this subject would very likely "preempt the field" and thus put into question the legality of State antipollution acts such as were recently adopted in both Maine and Washington. It is not without interest that during the hearings leading up to the enactment of the Water Quality Improvement Act, the industry expressly requested that any bill ultimately enacted "preempt the field" as against other Federal statutes as well as State acts. See hearings on H.R. 4148 and related bills before the House Committee on Public Works, 91st Congress, first session. 475-476 (1969). Congress expressly rejected this request when it adopted section 11(o) (2) of the act. If preemption is to be permitted through the ratification of a treaty, that treaty, unlike the treaty before you now, ought fully and adequately to protect the American public.

In his testimony yesterday, Mr. Neuman of the Department of State said he was not sure that this new treaty will ever become a reality. I think it is fair to say that the only way this new treaty might become a reality is if the treaty before you now is not ratified at this time.

Our refusal to ratify this treaty at this time will give us the bargaining power to go into that conference and to use the strength of our Government to effect a treaty with a limit that adequately protects the American public.

III. The Insurance Industry

Over the course of the past 2 years, all of us have repeatedly been advised, in one way or another, that while the Congress might decide that a particular limit is necessary, that decision is of little relevance because the real issue is the capacity of the marine insurance market.

We have also been advised, in one way or another, that the maximum capacity of that market cannot now or perhaps ever exceed some $14 million; and if absolute liability were to be adopted, the capacity might shrink to as low as $5 million. Since any decision by this committee cannot help but be affected by these conditions, I believe that a few words about them are essential.

Initially, it is fair to say that the marine insurance industry is a service industry which ought to provide service, not dictate law. The aviation insurance industry, unlike the marine insurance industry, shows how this is done.

In 1966, the limits of international airline liability for personal injury and death under the Warsaw Convention were raised from $8,300 per passenger to $75,000 per passenger-a ninefold increase presumably requiring a ninefold expansion in capacity. In addition, the terms of liability were changed from a presumption of negligence to absolute liability with no exceptions which presumably required an even further expansion of capacity.

These new terms and limits went into effect almost overnight. Yet the aviation insurance industry was there immediately to perform the service it was asked to perform.

In recent years, the aviation insurance industry, together with the airline industry itself, have been making gigantic strides to meet the requirements of the jumbo jets. In testimony before this committee, Mr. Clarence Pell told you of the airline industry effort to create the Air Transport Insurance Co. of which he is the director.

The purpose of creating this company was to meet possible exposure of $100 million which could result from the crash of just one jumbo jet. This is in contrast to the marine insurance industry, which tells us that only $14 million is maximum for one tanker.

A recent article in the Wall Street Journal (July 9, 1970, p. 4) disclosed that, for the first time, an American life insurance company, Prudential, with assets of some $27.8 billion, has been enlisted in the effort to provide reinsurance adequate for the jumbo jets.

While all this progress is being made in aviation, the maritime industry and the maritime insurers seem to be doing no more than issuing pronouncements that, so far as they are concerned, nothing more can be done; indeed, marine insurance capacity worldwide is diminishing. American shipowners turn to London; London says "no"; and that seems to be that.

But there is something seriously wrong with an industry that watches supertankers become even more super, yet does little about increasing the insurance capacity necessary to meet the needs of these tankers. I do not pretent to know the answer to this problem. But I do know that an answer must be found.

If American airlines can enlist, for the first time, the aid of American life insurance companies, why cannot American shipowners do the same? Why should American shipowners be so tied to the London clubs that whatever the London clubs say must necessarily become the law for the American shipowners and the American public?

With all the financial resources available in this country, it seems to me almost inconceivable that we cannot build a viable and adequate marine insurance market here. Building such a domestic market would also answer the balance-of-payments problem which is often advanced by the industry as a reason justifying inadequate terms and limits of liability.

I know of at least one prominent marine insurance underwriter in this country who is prepared to make such an effort. If this committee would like to meet with him, it would be my pleasure to arrange such a meeting. Perhaps there are others, too. Whatever the case, however, the present state of affairs is highly inadequate and must be changed. The significant issue facing this committee is whether it should encourage this change by not favorably recommending on the treaty at this time, or whether it should simply accept the present conditions, along with the treaty, as inevitable. I, for one, have no doubt that, if we are to witness any future change in this area, that change will come about only if we do not ratify the treaty at this time.

I believe that this action alone would have the effect of forcing the maritime and marine insurance industries to reexamine their past practices, and hopefully, to move forward in the same direction as their colleagues are in aviation.

The argument is often made that because no port in the United States can presently accommodate tankers much in excess of 100,000 dead weight tons, a limit of $100 or $121 per ton subject to a $14 million ceiling is entirely adequate for this country and within the capability of the present marine insurance market. This fails to take into consideration, however, the probability that dredgng will take place in many U.S. ports, not to mention the possibility of supertankers standing a few miles offshore and unloading their cargo into pipelines. In short, it is inevitable that if supertankers are built and available, they will sooner or later enter the U.S. trade.

IV. Terms of Liability

At least some of the members of this committee are aware that, in circumstances of oil pollution damage, I have always favored and supported a system of absolute liability on the part of the shipowner or operator. I believe this type of liability has very important aspects to it which are essential for the protection of the American public. Adopting this type of liability would mean that in the event of an oil spill, the shipowner or operator would be liable even if the spill was caused by an act of God, war, or third party. Such a theory of liability is fully consistent with modern tort law principles placing the risks of damage on the individual or enterprise that is in the best position to administer, distribute, and absorb such risks.

As between an innocent owner of coastal property and an owner of an oil tanker, it is eminently fair to put on the oil tanker owner the risks of pollution damage to the property caused by an oil spill from the tanker-even when the spill is caused by an act of God, war or third party. For no matter what the cause of the spill may have

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been, the tanker owner was in the best, if not the only, position to insure and to thus distribute the costs of bearing such risks on the owner of the oil cargo or on the ultimate consumer of the oil.

Clearly, as between the tanker owner carrying the oil and the innocent victim who may not even use oil on his coastal property, fundamental principles of equity would demand that the victim be compensated, no matter what may have been the cause of the spill. The U.S. Government faced much this same problem in 1966, when it demanded that absolute liability be the rule of law for all passenger liability claims resulting from international airline accidents. I was at that time in the Department of State and was fully involved in the proceedings which led toward adoption of this principle under the Warsaw Convention.

The Government then decided that innocent passengers or their survivors should receive compensation even when the airline accident may have been due to an act of God, war or third party. That is the rule of law applicable today in international air transportation. And it is pleasing to note that the U.S. Government is today officially in favor of this same rule in the event a new convention is adopted regarding passenger liability in aviation.

It seems to me, however, that appropriate as that rule is in international air transportation, it is even more appropriate in oil pollution cases. For in air transportation one might always argue that by agreeing to board the airline, the passenger assumes a certain risk and hence should himself bear losses resulting from acts of God, war or third party.

But in oil pollution cases, the victim never boarded the tanker. Indeed, he never assumed any risk at all in relation to the tanker. In other words, if absolute liability has been adopted in international air transportation-and I believe properly so-then, a fortiori, it should be adopted in oil pollution cases.

It could be argued that the Water Quality Improvement Act is inadequate in this regard, because it did allow exceptions from liability for losses caused by acts of God, war, or third party. But I do not believe that such an argument is necessarily correct. For as between the U.S. Government and the tanker owner, it may well be fair to conclude that the Government, as part of its governmental responsibilities, ought rightfully to bear the risks where the tanker owner was in no way at fault.

But to accept this conclusion in the context of Government claims against the tanker owner is no authority at all for accepting the same conclusion in the context of private party claims against the tanker owner. Obviously, a private party stands in totally different shoes than the U.S. Government.

In other words, while there might well be justification for placing certain risks on the Government when the spill results from an act of God, war, or third party, there is considerably less if indeed any justification for placing those risks on a private party in a similar situation.

This is why I believe that it is specious for the State Department and the industry to argue that, simply because the terms of liability are about the same in both the legislation and the treaty, the legislation is no better-or no worse than the treaty. (In only one respect is there

any noticeable difference in this aspect between the treaty and the legislation. In excepting acts of third parties, the legislation speaks in terms of acts or omissions of a third party whether or not negligent. The treaty, on the other hand, phrases the exception in terms of "an act or omission done with intent to cause damage by a third party." In this limited and technical sense, it may be said that the treaty terms are slightly more advantageous to a claimant than the terms of the legislation.)

In fact, the treaty is considerably worse than the legislation because, unlike the legislation, the treaty covers actions by private parties. Accordingly, the terms of liability in the treaty should have contained no exceptions to liability and, like present law in international air transportation, should have been based upon the modern principle of absolute liability. I might add that this is precisely the direction in which the draftsmen of the new $30 million treaty are presently moving. This, then, is my final reason for opposing ratification of the treaty at this time.

T. Conclusion

I have attached to this testimony a chart which I believe graphically demonstrates the extent to which the industry has succeeded in whittling down its liability from that which was originally provided for in 1967 in S. 2760, to that which was finally adopted in Public Law 91-224, the Water Quality Improvement Act of 1970.

On the basis of this chart alone, the public can deduce the immense and repeated pressures that must have been placed on the members of this committee by representatives of the industries involved. Because of the complexity of the issues, it is likely that there was very little pressure from the other public side.

In the face of this imbalance, however, I believe that this committee and the Congress are to be congratulated for having been able nevertheless to come up with the first major and largely satisfactory reform of our archaic maritime laws.

All of us are aware that legislation is the art of the possible. I believe that the public can thank this committee for having done all that was possible at the time. My only request now is that the committee take no action which would further and substantially whittle away from those limits that were finally adopted in the Water Quality Improvement Act.

I should like to conclude with one final thought. Having worked in the Department of State for well over 5 years and having negotiated many treaties in international air and maritime law, I fully appreciate the need and desirability of international uniformity of law. Indeed, I know of only a few people who desire and would work toward this goal with more enthusiasm and dedication than I.

But at the same time, I firmly believe that, as a Government, we cannot and should not pursue that goal "at any price." It is often argued, that without international uniformity in an area of this type, the situation could become "chaotic." But this argument is practically always made by those who seek to justify adoption of a treaty containing limitations of liability that do not meet minimum American standards for compensating victims of accidents, whether in the air, or on the sea, or along the coast.