Prestige pollution incident: London Club update

London P&I Club has responded to press commentary on last week’s Spanish Court judgment involving the 2002 loss of and pollution from the Prestige. The Club noted that the Prestige was a conventional pre-MARPOL persistent oil tanker entered by her Owners with the Club continuously from 1988 to her loss in the Bay of Biscay in 2002. The ship had been classed from build with ABS and had the approval of one oil major.

The vessel sank in November 2002 while carrying a cargo of 77,000mts of heavy fuel oil from St Petersburg to the Far East.

While crossing the Bay of Biscay in adverse conditions the ship developed a sudden list to starboard as water entered the mid-ship starboard ballast tanks, following an assumed side shell failure. The Club noted that “pollution was minimal in the initial stages of the incident”.

Refuge was requested from Spain, but was denied. Instead the vessel was required to be driven “unsympathetically” out to sea where, six days (and two storms) later she sank together with the then-remaining cargo. “Pollution regrettably affected much of the northern coast of Spain and the Southern Atlantic coast of France”, the Club said.

With Spain and France both being parties to the CLC and Fund Conventions, joint claims handling offices were established with the Fund in Spain and France. The Owners’ CLC limit of $26.7m was lodged in cash with the Court in Spain in June 2003. The Fund provides supplementary compensation of about $144m.

Claims for pollution damage were presented for about $2.3bn, and assessed by the Fund experts at about €350m.

The Public Prosecutor in Spain commenced criminal proceedings against the senior crewmembers and a representative of the state (in respect of the denial of refuge), on grounds of alleged disobedience and for serious pollution damage. As a consequence of this the civil claims arising were attached to the criminal action.

After a nine-month trial all of the defendants were acquitted of causing the pollution. It was determined that, whatever weakness in the ship had existed, they could not be identified and therefore were not known. As a consequence of the acquittal, there was no civil liability finding.

A number of parties, including Spain’s Public Prosecutor, appealed on points of law. Following a one-day hearing the Spanish Supreme Court (Criminal Division) reversed the acquittal of the Master on grounds he must have known it was reckless to perform the intended voyage. The Owners were found vicariously liable for the Master’s negligence.

The CLC Convention, under which the Insurer Club benefits from the CLC limit (here, $26.7m) irrespective of the alleged conduct of the Owners, was said to be applied. However, the Court also held that under Spanish criminal law, the Club was directly liable for the Owners recklessness up to the policy limit of $1bn.

The case was then referred by the Supreme Court back to the trial court to determine the quantum of the recoverable claims.

Meanwhile the Master continues to pursue an appeal to the European Court of Human Rights on the basis that his conviction was unfair.

Last Thursday the trial court issued its judgment on the quantum aspects of the case. The various claims were assessed at around €1.66bn, which London Club noted was “materially greater than the Fund experts’ assessments noted above” (€350m) and was therefore “disappointing”. The trial court quantum includes about €1.63bn assessed in respect of the Spanish and French States and about €25m for the non-State claimants. The Club’s liability limit of $1bn was reiterated; as a Member of the International Group, the Club benefits from the reinsurance purchased collectively.

Moving forward, the Club said that judgments obtained and legal proceedings progressing in other jurisdictions would be relevant. These include:

  • A contested judgement already obtained by the Club from the English Court of Appeal against Spain and France. This recognizes that the Club has no direct liability to the States claims other than permitted by the CLC Convention. London Club said that this judgment was irreconcilable with the Spanish judgments and should provide a basis to resist enforcement;
  • The Master’s action before the European Court of Human Rights. The Club said that this was relevant because enforcement of a judgement obtained unfairly would be contrary to public policy. The extremely superficial nature of the one-day Supreme Court hearing, was, the Club said, an example of an unfair process.

The Club said that. together with its IG partners and other interested parties, it would continue to give close attention to the wider implications of the judgement. It said that it was concerned at the direction taken by the Spanish Court “including its by-passing of an established international Convention”. London Club said that the development underscored the importance of initiatives, including the adoption of concerted action by ship-owners, insurers, the IMO and IOPC Funds to encourage states not only to sign up to the International Convention regimes, but also to respect and to apply these correctly and consistently; in a way the recent judgments in the Prestige had failed to do.