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Web Alert: Funding of interim payments for pollution claims in CLC states

04 November 2016

On 18 October an Agreement between the IG clubs and the 1992 Fund Assembly concerning interim payments was approved for immediate sign off. This Agreement is a result of several years of negotiations between the Fund and the IG clubs and is now the template agreement for IG clubs and the Fund to use in future pollution claims in CLC states to agree how interim payments should be treated by both paying parties.

Background

One of the principles which underlies the international pollution convention system is to ensure that compensation is paid as promptly as possible to those directly affected by oil pollution. This is reflected in a Memorandum of Understanding between the IG clubs and the IOPC Fund which provides that “the clubs and the Fund shall co-operate throughout with the aim of ensuring that compensation is paid as promptly as possible”. There is no obligation on the IG clubs to make interim payments but the longstanding practise has been for the IG clubs to reflect the spirit of the CLC by making interim payments to claimants.

However, there is a risk that a club may end up paying in excess of the CLC limit, even though under Article V(5) of the CLC such payments may be registered as claims against the limitation fund.

Standard terms relating to interim payments

The terms, as agreed by the 1992 Fund Assembly, seek to promote the efficient working of the compensation system by making compensation available to the victims of pollution as quickly as possible, whilst ensuring that the total amount paid is borne by the club/owners and the Fund in the proportions envisaged by the CLC.

The safeguards set out in Section II provide that any over-payment is to be rectified by a balancing payment in a reconciliation procedure between the club and the Fund at the end of the case, ensuring that neither party pays compensation in excess of their limit of liability under the CLC.

The Agreement also contains a waiver of immunity provision by referring any dispute arising out the Agreement to the High Court of England and Wales. However, it should be noted that any agreement in a future case that is based on the template Agreement will need to be signed off each time by the 1992 Fund Executive Committee (EC) before it has the Fund’s agreement.

Members should not hesitate to approach their usual club contact, or the authors, if at any time they have a query in relation to this publication.​