HNS Convention gets a nudge

IT’S ABOUT TIME

HNS CONVENTION • EFFORTS TO GET THE HNS CONVENTION INTO FORCE HAVE A LONG HISTORY. EUROPE’S SHIPOWNERS AND THE EUROPEAN COMMISSION ARE GIVING IT A PUSH

SHIPOWNERS IN EUROPE are calling for governments to get on and ratify the 2010 International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS Convention). The message was sent by the European Community Shipowners’ Associations (ECSA) during European Shipping Week 2020 this past February, where representatives from the European Commission, the International Maritime Organisation (IMO), the International Oil Pollution Compensation (IOPC) Funds and many industry bodies were in attendance.

Discussions at the event centred on how the Convention will – once it is ratified and in place – strengthen the international liability framework. There was also the opportunity to hear the experiences of states that have already ratified the Convention.

“The HNS Convention is an important part of the international maritime liability and compensation regime as it establishes a comprehensive scheme covering pollution damage from hazardous and noxious substances carried by ships. The shipping industry strongly supports its ratification,” said ECSA secretary general, Martin Dorsman.

Viggo Bondi, chairman of ECSA’s Legal Advisory Committee, added: “To date, Denmark is the only EU member state that ratified the Convention and today we heard why it considered ratification very important and how it had prepared for ratification. We were encouraged to hear today that a number of other EU member states, including France, Netherlands and Belgium, plan to ratify in the near future. We encourage all other member states to progress their efforts to ratify the Convention as soon as possible. In this way the EU will lead by example and enable the Convention’s entry into force. This is important as shipping is the most international of industries and it needs global rules and a level playing field.”

WHERE WE ARE The 2010 HNS Convention establishes a comprehensive, uniform and global set of liability rules covering pollution damage from hazardous and noxious substances carried by ships, as well as the risks of fire and explosion, loss of life, personal injury and loss of or damage to property. In the case of larger pollution incidents, where the damages exceed the limit of the shipowner, the HNS Fund pays “top up” compensation. This two-tier liability regime ensures better protection and compensation for potential victims of an incident.

The HNS Convention is seen as being increasingly important as the carriage of HNS by sea is growing by almost all ship types including container ships, chemical tankers, and LNG and LPG tankers.

At least 12 states must ratify the Convention for it to enter into force, of which four must each have at least 2m grt under their flag. So far only five states have ratified the Convention: Norway, Canada, Turkey, Denmark and South Africa – although four of these do meet the 2m grt benchmark.

In April 2017, the Council of the European Union authorised member states to ratify the Convention, with the exception of the aspects related to judicial cooperation in civil matters. They were urged to do so “within a reasonable time” and, if possibly, by no later than 6 May 2021.

GO BACK FURTHER The HNS Convention has a much longer history; it was first drawn up in 1996, modelled on existing oil spill compensation conventions and schemes, but expanded to cover all manner of chemicals and other substances named in the International Maritime Dangerous Goods (IMDG) Code. At present there is no comprehensive regime to address claims from incidents involving these substances.

With a shortage of ratifications, an international conference was held in April 2010 to revise the HNS Convention in order to address the practical problems that were causing many states to hold back from ratifying it. That conference agreed the 2010 Protocol, which is now referred to as the 2010 HNS Convention.

The UK P&I Club recently observed that, despite the 2010 Protocol, states have remained reluctant to support the Convention. “For various (mostly economic) reasons, the system of compensation under the oil pollution Conventions does not constitute a proper model for compensation caused by chemical cargoes carried by sea,” the Club observed. “There are essential differences between the position of the oil industry and of the chemical industry with regards to the sharing of responsibility for marine incidents between these industries and the shipping industry.”

Another longstanding issue is the inclusion of LNG in the scope of the HNS Convention. This is the first time an international liability regime will make LNG shipowners and cargo title holders strictly liable for accidents and would drastically increase the liability of those parties to third parties in states that are party to the Convention.

PROBLEMS AHEAD The HNS Convention will provide for two tiers of compensation in the event of damage as a result of a casualty. The first tier imposes liability on the shipowner, which will normally be covered under P&I insurance. The second tier consists of the HNS Fund, into which certain importers of HNS will be obligated to contribute following a casualty. The amount of such contributions will be based, among other factors, on the amount of HNS imported by each such cargo title holder in the calendar year immediately preceding the calendar year in which the casualty occurs.

Both tiers involve strict liability. This means that the liability of the shipowner is established regardless of fault. Thus, unless one of the limited defences under the Convention is applicable, a shipowner who causes a casualty in the territory of a state party, involving HNS, will be liable in accordance with the Convention. This will apply regardless of whether it would otherwise have been liable in accordance with the general principles of fault and negligence. This is a marked difference compared to other compensation regimes, such as the Civil Liability Convention (CLC), which are invoked to limit a shipowner’s liability in the event that the shipowner is legally at fault.

“Although the second tier of the Convention is similar to that of the 1992 Fund Convention, it is clear that administration of the HNS Convention will be more complicated,” the UK P&I Club says. “This is due to the variety of products covered and the difficulty in ascertaining who is the receiver of the HNS cargo (and in cases of LNG, the cargo title holder).” Indeed, tracking the volumes of an immense range of products received by a huge number of companies, all of which will vary from year to year, will be a massive undertaking.

RATIFICATION OF THE HNS CONVENTION HAS BEEN

SLOW, PARTLY DUE TO THE COMPLEXITY OF THE SECTORS

COVERED, WHICH IS BEING MADE MORE COMPLEX BY