Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Dispute Cases on Compensation for Vessel-induced Oil Pollution Damage

Fa Shi [2011] No. 14

May 4, 2011

(Adopted at the 1509th meeting of Judicial Committee of the Supreme People's Court on January 10, 2011)

The Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Dispute Cases on Compensation for Vessel-induced Oil Pollution Damage (hereinafter these "Provisions") have been adopted at the 1509th meeting of Judicial Committee of the Supreme People's Court on January 10, 2011 and have come into force as of July 1, 2011.

For the correct trial of dispute cases on compensation for vessel-induced oil pollution damage, in accordance with the laws and regulations, including the General Principles of the Civil Law of the People's Republic of China, the Tort Law of the People's Republic of China, the Marine Environment Protection Law of the People's Republic of China, the Maritime Law of the People's Republic of China, the Civil Procedure Law of the People's Republic of China, the Special Procedure Law of the People's Republic of China on Admiralty as well as the relevant international treaties executed by the People's Republic of China or to which the People's Republic of China is a party, these Provisions have been formulated in connection with the trial practice.

Article 1 In the event that the occurrence of vessel-induced oil pollution incident has caused or threatens to cause oil pollution damage to the territorial waters of the People's Republic of China and other maritime areas under the jurisdiction of the People's Republic of China, and the people's court will hold trials of the related dispute cases on compensation for vessel-induced oil pollution damages, these Provisions shall apply.

Article 2 In the event that the party concerned takes legal action on the oil pollution damage caused by persistent oil grease loaded in the tanker, and applies for the establishment of compensation liabilities fund for oil pollution damage, the relevant cases shall be brought under the jurisdiction of the maritime court of the locality where the vessel-induced oil pollution incidents take place.
In the event that the vessel-induced oil pollution accident attributable to the persistent oil grease loaded in the tanker should occur outside of the territorial waters of the People's Republic of China and other maritime areas under the jurisdiction of the People's Republic of China, and therefore should have caused or threaten to cause oil pollution damage to the territorial waters of the People's Republic of China and other maritime areas under the jurisdiction of the People's Republic of China, and the party concerned takes legal action on the oil pollution damage caused by oil pollution accident, and applies for the establishment of compensation liabilities fund for oil pollution damage, the relevant cases shall be under the jurisdiction of the maritime court of the locality that sustains the consequence of the oil pollution damage or where oil pollution prevention measures have been adopted.

Article 3 In the occurrence of oil pollution damage caused by oil leakage from two or more than two vessels, and the harmed person requests the owners of the oil-leaking vessel to be liable to compensation, if the damages could be reasonably separated according to the factors such as the amount of oil leakage and the environmental hazards of the oil leaks, the owners of the oil-leaking vessel shall be respectively liable to compensation; if the damages caused respectively cannot be reasonably separated from one another or liabilities, the owners of the oil-leaking vessel shall be jointly and severally liable, except for the case that the owners of the oil-leaking vessel are exempt from liabilities according to law.
If the owners of the oil-leaking vessel shall be jointly and severally liable to the harmed person, it is imperative to determine the corresponding amount of compensation according to the size of their respective responsibilities; if it is difficult to determine the size of responsibilities, the owners shall equally share the liabilities. If any one owner of the oil-leaking vessel has to pay an amount of compensation in excess of his fair share, such owner shall have the right to recourse against other owners of the oil-leaking vessel.

Article 4 In the occurrence of oil pollution damage caused by oil leakage attributable to head-on collision of vessels due to mutual faults, the harmed person may request the owners of the oil-leaking vessel to bear the entire compensation liabilities.

Article 5 In the occurrence of oil pollution damage caused by persistent oils in oil tanker load, the compensation ceiling shall be determined in accordance with the provisions of the Administrative Provisions for Preventing the Watercraft Pollution on the Ocean Environment and the 1992 International Convention on Civil Liability for Oil Pollution Damage.
In the occurrence of oil pollution damage caused by persistent fuel loaded in the tanker or the fuel loaded in non-tanker the ceiling for the limited compensation liabilities shall be determined in accordance with the provisions on the limited maritime liabilities set forth in the Maritime Law.

Article 6 If it is proven that the oil pollution damage is caused by the intentional acts or omission of the ship owners or indiscreet acts or omission of the ship owners albeit knowing that their such acts or omission may likely lead to such damage, although the ship owners claim for the limitation of compensation liability, the people's court shall not support such claim.

Article 7 In the event that the oil pollution damage is intentionally caused by the ship owners and the harmed person requests the insurer or financial guarantor covering compensation liability in the wake of vessel-induced oil pollution damage, the people's court shall not support such request.

Article 8 If the harmed person directly takes legal action against the insurer or financial guarantor covering compensation liability in the wake of vessel-induced oil pollution damage, the insurer or financial guarantor covering compensation liability in the wake of vessel-induced oil pollution damage may claim against the harmed person for the ship owners' defense.
Except for the case that ship owners intentionally cause oil pollution damage, the insurer or financial guarantor covering compensation liability in the wake of vessel-induced oil pollution damage should claim against the harmed person in favor of the ship owners' defense, the people's court shall not support.

Article 9 The scope of compensation for vessel-induced oil pollution damage shall include: (1) the costs incurred from preventive measures in order to prevent or mitigate the vessel-induced oil pollution damage, as well as further loss or damage caused by the preventive measures; (2) property damage other than the ship itself caused by vessel-induced oil pollution incidents and the loss of income arising therefrom; (3) the loss of income arising from environmental damage caused by oil pollution; (4) the costs of the reasonable measures that have been taken or will take for the rehabilitation of the contaminated environment.

Article 10 The cost of preventive measures and any further loss or damage caused by such preventive measures, shall be reasonably determined by the people's court taking into consideration of the factors such as the scope and extent of pollution, pollution, amount of oil spillage, rationality of preventive measures, and the costs of staff involved and the equipment used in the decontamination operation.

Article 11 With regard to the pollution prevention measures adopted for the sake of the ship in distress, the main purpose of the operation is only to prevent or mitigate oil pollution damage; the costs incurred therefrom shall be accounted as the costs of preventive measures.
If the operation is performed for the dual purposes to rescue the ship in distress and other property and to prevent or mitigate oil pollution damage, it is imperative to divide reasonably the cost of preventive measures and the cost of rescue operation based on the proportion of primary and secondary purposes of the operation; if there is no reasonable basis for distinction between primary and secondary purposes, the relevant costs shall be apportioned equally, but the cost incurred after the elimination of pollution risk shall not be deemed as the cost of preventive measures.

Article 12 If the vessel oil leaking causes contamination of properties such as other vessels, fishing gear and aquaculture facilities, and the harmed person requests the responsible person for oil pollution to compensate for the reasonable expenses incurred from cleaning and repairing the contaminated properties, the people's court shall support.
If the contaminated property cannot be cleaned or repaired, or the cleaning and repairing costs exceed its value, so the harmed person requests the responsible person for oil pollution to compensate for the reasonable replacement expenses, the people's court shall support, provided, however, the people's court shall make reasonable deductions with reference to the proportion between the actual use life and the expected use life of the contaminated property.

Article 13 If the harmed person cannot carry out its normal production and operation due to contamination of its properties from vessel-induced oil pollution, the losses of its income shall be calculated to the extent of the reasonable period of time required for cleaning, repairing or replacement of the properties.

Article 14 Marine fisheries, coastal tourism and other business entities or individuals using or beside the requests for coverage of their loss of income attributable to environmental pollution, if the aforementioned parties meet all the following conditions, thus proving the direct causal relationship between their loss of income and environmental pollution, the people's court shall support: (1) the requesting party's production and business activities are located at or near the contaminated area; (2) the requesting party's production and business activities are mainly dependent upon the contaminated resources or shoreline; (3) it is difficult for the requesting party to find alternative resources or business opportunities; (4) the requesting party's production and business activities are deemed as part of the relatively stable local industry.

Article 15 If the harmed person is engaged in aquaculture or marine fishing without the permission of the relevant administrative authorities, and if such harmed person claims for loss of income, the people's court shall not support; but the people's court shall support the request for compensation of the reasonable expenses incurred from cleaning, repairing or replacement of the cultivation or fishing facilities.

Article 16 If the harmed person claims for loss of income attributable to contaminated property or environmental pollution, it is imperative to calculate the same period the average net income during the past three years less the actual net income during the period of damage, and make reasonable determination with due consideration to other relevant factors that affect the income.
If it is impossible to determine the loss of income according to the provisions of the preceding paragraph, it can be reasonably determined with reference to the relevant statistical data and information of the government departments or the same period average income in the same region or of the similar producers and operators.
If the harmed person takes reasonable measures to avoid loss of income, and seeks for compensation for the costs of reasonable measures, the people's court shall support whereas to the extent of the amount of income loss avoided by it.

Article 17 In the event of environmental damage caused by vessel-induced oil pollution incidents, the compensation for environmental damage shall be limited to the amount of expenses incurred from the reasonable rehabilitation measures that have been actually taken or will be taken. The costs for rehabilitation measures shall include the reasonable monitoring, assessment and research expenses.

Article 18 If the vessel has maintained valid liability insurance or obtained the corresponding financial guarantee for oil pollution damage, the harmed person suffering from oil pollution damage should claim for a maritime lien, the people's court shall not support such claim of the harmed person.

Article 19 With regard to the compensation request for compensation for oil pollution damage caused by persistent fuel loaded in the tanker or the fuel loaded in non-tanker, the provisions of the limitation of maritime liability set forth in the Maritime Law shall apply.
With regard to the oil pollution damage set forth in the preceding paragraph caused by the same maritime accident and other damages whose compensation liability can be limited according to the provisions of Article 207 of the Maritime Law, whereby the ship owners claim for limited compensation liability within the same limitation of liability in accordance with the provisions of Chapter XI of the Maritime Law, the people's court shall support.

Article 20 To avoid oil pollution damage from non-persistent oil loaded in the tanker or the fuel loaded in non-tanker, the capsized, stranded or distressed vessel shall be lifted, removed or subject to measures of neutralization to render it harmless, whereby the ship owners claim for limited compensation liability in accordance with the provisions of Chapter XI of the Maritime Law, the people's court shall not support.

Article 21 In the wake of oil pollution damage caused by persistent oil in the tanker load, the ship owners, the insurer or financial guarantor covering compensation liability claim for limited liabilities, it is imperative to set up oil pollution damage liability limitation fund.
If the oil pollution damage liability limitation fund is set up in the form of cash, the amount of fund shall equal the amount of limited compensation liabilities as provided in the Regulation on the Prevention and Control of Vessel-induced Pollution to the Marine Environment and the 1992 International Convention on Civil Liability for Oil Pollution Damage. If the fund is set up in the form of guarantee, the amount of guarantee shall equal the amount of fund and the interest accrued thereupon during its life of operation.

Article 22 If the ship owners, the insurer or financial guarantor for vessel-induced oil pollution damage liabilities should apply for the establishment of oil pollution damage liability limitation fund, and the interested parties have proposed objections to the ship owners' claim for limited compensation liabilities. The objection shall be submitted in writing during the objection period provided in sub-clause (1) of Article 106 of the Special Maritime Procedure Law, whereas the submission of the objection shall not affect the proposed establishment of the Fund.

Article 23 With regard to the oil pollution damage caused by persistent oil in the tanker load, if the interested party doesn't propose objection to the ship owners' claim for limited compensation liability during the objection period, Upon the establishment of the limited compensation liability fund for oil pollution damage, the maritime court shall lift the preservation measures in respect of ship owners' property or return the guarantee provided for lifting the preservation measures.

Article 24 With regard to the oil pollution damage caused by persistent oil in the tanker load, if the interested party proposes objection to the ship owners' claim for limited compensation liability during the objection period, the people's court shall, upon effectiveness of the court decision on recognizing the ship owners' right to limited compensation liability, lift the preservation measures in respect of the ship owners' property or return the guarantee provided for lifting the preservation measures.

Article 25 With regard to the oil pollution damage caused by persistent oil in the tanker load, if upon taking legal action the harmed person claims that the ship owners have no right to limited compensation liability, with regard to the dispute that whether the ship owners have the right to limited compensation liability, the maritime court may at first commence the trial and render the judgment.

Article 26 With regard to the oil pollution damage caused by persistent oil in the tanker load, if the harmed person fails to apply for credit registration during the prescribed credit registration period, the harmed person shall be deemed as having waived the right to accept compensation from the limited compensation liability fund for oil pollution damage.

Article 27 If the limited compensation liability fund for oil pollution damage is insufficient to compensate for the oil pollution damage, the payments shall be allocated pro rata according to the determined amount of compensation.

Article 28 With regard to the oil pollution damage caused by persistent oil in the tanker load, the ship owners, the insurer or financial guarantor covering vessel-induced oil pollution damage apply for establishing the limited compensation liability fund for oil pollution damage, and the harmed person applies for credit registration and accepting compensation, if no clause addresses this issue in these Provisions, the provisions of the Special Maritime Procedure Law and the related judicial interpretation shall apply.

Article 29 If before the allocation of the limited compensation liability fund for oil pollution damage, the ship owners, the insurer or financial guarantor covering vessel-induced oil pollution damage have at first compensated for the oil pollution damage, it is allowed to apply in writing for subrogation claim from the Fund. The subrogation claim shall be limited within the scope of compensation and shall not exceed the amount of compensation available to the compensation accepting person according to law.
After accepting the subrogation claim application, the maritime court shall notify in writing all interested parties that have claimed against the limited compensation liability fund for oil pollution damage. If the interested parties have any objection on the applicant' claim for the right of subrogation, the interested parties shall propose the objection in writing within fifteen days from the date of receiving the notice.
If the maritime court decides that the applicant's right to subrogation claim is established, the maritime court shall rule to recognize the same; if the applicant claims for the right of subrogation lack factual or legal basis, the court shall rule to reject the application. If the parties concerned refuse to accept the ruling, the parties concerned may appeal within ten days from the date of receiving the ruling order.

Article 30 If the ship owners request to participate in the allocation of limited compensation liability fund for oil pollution damage in connection with their initiative to cover the reasonable costs or reasonable sacrifices incurred from preventing or mitigating oil pollution damage, the people's court shall support, and shall handle the cases mutatis mutandis with reference to the provisions of sub-clauses (2) and (3) of Article 29 of these Provisions.

Article 31 The terminologies of these Provisions shall have the following meaning:
(1) Vessels shall mean the ocean ships and other maritime mobile devices not used for military or government official affairs, including the oil tankers and non-tankers sailing on international and domestic sea routes. Of which the tanker means the vessels built or renovated for the transport of bulk persistent oils and other vessels with the actual loading of bulk persistent oil cargo.
(2) Oils mean hydrocarbon mineral oil and its residue, limited to the persistent oil cargo under transport as goods loaded on board, and the persistent and non-persistent fuel loaded on board for use to drive the vessel's operation, excluding the non-persistent oil cargo loaded on board as goods under transport.
(3) Ship oil pollution incidents mean the oil pollution damages caused by vessel-induced oil leakage, or one single or series of events that pose serious and urgent threat of oil pollution damage though without oil leakage, a series of events attributable to the same reason shall be deemed as the same incident.
(4) The insurer or financial guarantor for vessel-induced oil pollution damage liabilities mean the insurer or financial guarantor covering the liabilities of the vessel party whose leaking oils give rise to or directly cause oil pollution damage threat.
(5) Limited compensation liability fund for oil pollution damage means the Limited Compensation Liability Fund for vessel-induced oil pollution damage under establishment application by the insurer or financial guarantor for liabilities to oil pollution damage caused by the persistent oil in the tanker load.

Article 32 If the judicial interpretation issued by this Court before the enforcement of these Provisions is inconsistent with these Provisions, these Provisions shall prevail.
In the event that the people's court hold retrial of the cases of last instances before the enforcement of these Provisions, these Provisions shall not apply.