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of contracting parties. The proof of financial responsibility assures that legal rights under the convention will be translated into economie compensation and that the victim will not be at the mercy of the vessel wer's solvency.
The convention also provides for direct action against the insurer or other provider of financial security and entitles such person to moke only the defenses available to the vessel owner, in addition to the defense that the damage occurred from the willful misconduct of the owner himself.
When the convention comes into force and the international certihvate system is operating, most tankers traveling in or near our waters will be covered by insurance, whether or not they enter U.S. ports or are otherwise subject to the jurisdiction of U.S. laws. This will be of significant benefit. For example, petroleum shipments from l'enezuela to Canada travel in the waters adjacent to our territorial seus and could cause damage within those waters. In the absence of an international agreement, we could not under U.S. law effectively require tankers in the Venezuelan-Canadian trade to comply with U.S. financial responsibility requirements.
The corerage of these vessels by the certificate system will insure that money is available to pay compensation. This assurance gains added significance in light of the provisions of the convention which Tuarantee that the provider of the financial security will in fact be arressable to our courts. I will discuss the effect of liability limits in a minute, but I would first like to point out one feature of the limita iion provision that will in effect provide this guarantee. Under the un vention, jurisdiction will lie in the courts of any country in which polluten dabiage occurs. Whenever a suit is brought in such a court, the vessel owner or the person providing financial security, must deprisit a sum equal to the limit of his potential liability with the court ; if he fails to do so, he cannot claim the benefit of the limit. Under the scheme of the convention, the incentive to claim the benefit of the limication should insure that funds will be available whenever a court has
medjursidiction. I might mention at this point that the certificate can only produce mults for the victim if insurance is in fact available. For this reason, the realities of the marine insurance industry play a role that cannot le iquored. As soon as we start talking about marine insurance, we aritonetically think in terms of limitations on liability, and this brings ja tothe third point. Licitation of Liability
The mention provides for a limit of $31 ner gross registered ton with a maximum of $14 million. This sum will represent an exclusive fred for recovery against a tanker for civil damage sustained by gorernments and private parties for cleanup costs and for damage to terty. The limit does not apply to actions against third parties or partions against nontankers and does not govern any criminal penalHe which may be imposed under national law.
The limits provided for in the convention are twice those provided br the 1957 Brussels Convention on Civil Liability. The doubling of the limits and the imposition of strict liabiity represent a significant forward step on the part of international maritime liability law. Although it could be argued that these limits are not adequate to cover
all the potential damage that could result from a catastrophic mishap, our past experience indicates that they are ample to cover the likely incidents of
oil pollution. In fixing liability limits, the conference considered not only the extent of the predictable damage, but also the availability of insurance to cover the fiability. Without insurance, there can be no guarantee that funds will be available to victims. Many delegates at Brussels were concerned that uninsurable liability might produce a multitude of oneship corporations, greatly reducing the possibility of recovery. Victims would then have to rely on U.S. courts to “pierce the corporate veil," a risky proposition at best. Additionally, a certification system could function effectively only if insurance was available.
I might add that the United States was directly instrumental in negotiating limits of liability as high as those which ultimately emerged, and without yielding on the principle of strict liability.
RELATIONSHIP TO 1970 ACT
The convention represents an international attempt to achieve essentially the same objectives as those sought on a national basis by the Water Quality Improvement Act of 1970. The goal of both is to prevent or minimize pollution damage and to compensate the victims of damage when an oil spill occurs. There are, however, some differences in approach and also some differences of a technical nature, so that the act will have to be amended in some places in order to make it consistent with the convention.
Let me indicate a few of the differences between the act and the convention.
1. Vessels Covered The application of the convention is limited to vessels actually carrying oil in bulk as cargo and does not cover dry cargo vessels. The act covers all vessels. This difference should not create any problems since the act will continue to apply to dry cargo vessels after the Convention is in force.
2. Limits of Liability The convention limits liability to $134 per ton, while the act provides for a limit of only $100 per ton. Thus, the convention would increase the liability in the case of tankers of 140,000 gross registered tons or less, and the act would have to be amended to provide for this increased liability.
The convention provides an exclusive remedy for the payment of both governmental and private claims, while the act covers only Government cleanup costs. It might of course be argued that the act is more favorable from the standpoint of private claimants, since it does not preclude their right of action against the vessel without limitation. I think this argument is defective. First of all, without the convention the private claimant's right to recover against the vessel is limited by 46 U.S.C. 183 to the salvage value of the vessel after the incident occurs, which of course may well be zero. Moreover, the private right
of action which the act preserves may in fact be a right without a remedy, particularly with respect to foreign flag vessels. The private
claimant may be entirely unable to reach assets of the foreign owner; Ouly 2
even if assets are available, however, it seems unreasonably burdensome HISINI
to expect a private litigant to engage in a difficult and expensive search for these assets. Additionally, although private claims under the Conrention will be paid out of the same $14 million fund available for
gorernmental claims, we believe that Government cleanup costs will Tirarely if ever even approach the $14 million figure. A significant sum
of money should remain available after cleanup costs for the payment of private claims. Moreover, as cleanup technology becomes more eficient and developed, we expect costs will go down. Under these circumstances, I believe the convention creates a remedy for private
claimants which does not exist in the absence of international agreeir. ment and which in most instances will be adequate to cover the damage.
4. Area of Applicability The convention expands the area in which a right of compensation may be enforced. The act applies only to damage resulting from a spill within the territorial waters or contiguous zone of the United States, while the convention applies to a spill occurring anywhere on the high seas resulting in damage to U.S. territory or territorial waters. Thus, under the act, there is no effective remedy against a vessel responsible for a spill occurring more than 12 miles from the coast of the United States.
5. Nature of Liability The liability of the convention is more strict than that embodied in the act. The act provides a defense for acts of third parties, while the Convention does not. This means that if a small tugboat or fishing Fessel collides with a tanker in the fog, and the fault lies entirely with the smaller vessel, the tanker is not liable under the act while he would be liable under the convention. In my opinion, the availability of a third-party-act defense brings us back to the old concept of liability based on negligence; it is no longer strict liability.
6. Civil Action
The convention permits direct action by a claimant against an insurer, and provides that the insurer will not be able to plead any defenses that he may have against the owner other than that the damage resulted from the willful misconduct of the owner himself. The act on the other hand allows the insurer to plead against the claimant all defenses that he would have against the owner.
Let me summarize a few points. The adoption of the strict liability standard and the financial responsibility provision will afford coastal interests in the United States greater protection than is currently available under U.S. law. The ratification of this international agree. ment will allow U.S. citizens to recover damages against vessels responsible for oil spills beyond the jurisdiction of the United States. Ind the convention limits the defenses available to an insurer in a direct action suit by a damaged claimant.
Let me say in conclusion that the Department of State believes it to be most important that the U.S. Government participate in international efforts to control and prevent pollution damage, and to compensate the victims of that damage. Failure to ratify this convention, coming after repeated failures by us to ratify similar maritime conventions in the past, would seriously undermine the ability of the United States to negotiate effective international agreements of this nature in the future. It is a matter of demonstrating our readiness to cooperate with other nations in combating marine pollution damage. We are more and more aware that the threat to our environment is an international problem, and cannot effectively be dealt with by a multiplicity of unilateral statutes all embodying different standards and different obligations. Moreover, the U.S. Government has consistently taken the position that the law of the sea must be dealt with by multilateral action rather than unilateral legislation. Our failure to ratify this convention would directly contradict imporant international negotiations now underway at the initiation of the United States to halt restrictions on the freedom of the seas through everwidening assertions of national jurisdiction and unilateral claims.
I will try to answer any questions you or members of your subcommittee may have on the points I have just made.
Thank you, Mr. Chairman. Senator MUSKIE. In your statement you didn't cover the question of preemption. I gather that if we ratified the convention, the convention then would preempt all areas covered by the convention, whether or not they are in addition covered by domestic legislation or by State legislation?
Mr. NEUMAN. That is correct, Mr. Chairman. In the absence of implementing legislation, the convention having been ratified and proclaimed by the President and having entered into force, would supersede any inconsistent provisions of Federal or State law. We would believe, of course, that should the Senate decide to give its advice and consent to the convention, and looking toward the day when the convention comes into force, that the Congress would then consider whatever implementing legislation might be necessary to reconcile the few differences between the convention and the act.
Senator MUSKIE. So that with respect to any State which has enacted legislation dealing with oil pollution, the effect of our ratifying the convention would be to wipe those laws off the books?
Mr. NEUMAN. To the extent of any inconsistency between the State law and the convention, I believe that is right. As in the case of all treaties entered into by the United States, whenever there is inconsistency between the laws of the several States and the treaty, which is the law of the land, the treaty must prevail.
Senator MUSKIE. In the absence of inconsistency, would the State law be enforceable ?
Mr. NEUMAN. In the absence of State law being inconsistent with the treaty, I believe the State law would be enforceable.
Senator MUSKIE. So the parties would have a choice of proceeding under the convention or under the State law?
Mr. NEUMAN. I believe that is so when the provisions they are proceeding under are not inconsistent.
Senator Muskie. That would be also true of the other parts of the act of 1970? Mr. NEUMAN. I believe so. Senator Mtskie. The convention applies, as you have said, only to tankers or carriers of oil as bulk cargo? Mr. NEUMAN. That is right, sir. Senator Muskie. So that with respect to dry cargo vessels, or other vessels which do not come under the convention, the provisions of the Water Quality Improvement Act of 1970 would apply?
Mr. Necmax. That is correct, Mr. Chairman.
Mr. NEUMAN. That is correct, Mr. Chairman. The most important
Mr. Necman. No; I think the two elements are comparable, Mr.
Senator Muskie. We are not talking about that at this point. We are talking about whether $134 per ton is higher or lower than $100 per ton, in the light of the fact that it has a different scope of coverage. You have rather clearly said you think $134-per-ton limit is higher. We got into an extended discussion of this in the House-Senate conference on the Water Quality Improvement Act of 1970. The House conferres undertook to argue that the 100-per-ton limit was higher than the $134-per-ton limit and, as a result, not acceptable because it might not be insurable.
So the House conferees had a different view than you. Actually I don't see how you can make a comparison or reach a conclusion as to which is higher. It is going to depend on the particular incident and the extent of private claims as against the cost of Government cleanup. The answer isn't always going to be the same. In some instances the private claims may be negligible and in other cases they may be normous, and the balance would then be determined as to which is the higher coverage for the Government and which gives a higher Menge for private. It is going to vary, isn't it, from incident to incident? Mr. Necman. Yes, it will vary, Mr. Chairman. In drawing the comparison, obviously one figure is higher than the other. You might say that we are comparing apples and oranges. I am trying to go beyond the simple comparison and indicate the effectiveness of the private claimant's remedy which is limited, of course, by U.S. law to the salvage value of the vessel.