Prestige: pollution incident update

Members may have seen press and other reports about a recent judgment in Spain concerning the 2002 loss of, and pollution from, the Prestige. This note explains the judgment, the ongoing international legal proceedings and the wider implications for shipowners, insurers and other industry stakeholders.

Note on the Prestige judgment

The Prestige was a conventional pre-MARPOL persistent oil tanker entered by her owners with London P&I continuously from 1988 until her loss in the Bay of Biscay in 2002. The ship was classed from build with ABS and had the approval of one oil major.

In November 2002, the Prestige was carrying 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. Pollution was minimal in the initial stages of the incident. Refuge was requested from Spain but denied. Instead, the vessel was required to be driven out to sea and, six days and two storms later, she sank together with the remaining cargo. Pollution regrettably affected much of the northern coast of Spain and the southern Atlantic coast of France.

Assessment of pollution claims

Spain and France are 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 US$26.7m was lodged in cash with the Court in Spain in June 2003. The Fund provides supplementary compensation of about US$144m. Claims for pollution damage were presented for about US$2.3bn and assessed by the Fund experts at about EUR350m.

The Spanish proceedings

The Public Prosecutor 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 serious pollution damage. As a consequence, the civil claims arising attached to the criminal action. After an exhaustive nine-month trial, all of the defendants were acquitted of causing the pollution. It was determined that whatever weakness in the ship existed could not be identified and therefore was not known. As a consequence, there was no civil liability finding.

A number of parties, including the 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 the grounds that 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 London P&I benefits from the CLC limit irrespective of the alleged conduct of the owners, was said to apply. However, the Court also held that under Spanish criminal law, London P&I was directly liable for the owners' recklessness up to the policy limit of US$1bn.

The case was referred back to the trial court to determine the quantum of the recoverable claims. In the meantime, the Master is pursuing an appeal to the European Court of Human Rights on the basis that his conviction was unfair.

Quantum proceedings

The trial court has now issued its judgment on the quantum aspects of the case. The various claims have been assessed at around EUR1.66bn, which is materially greater than the Fund experts' assessments and is therefore disappointing. This includes about EUR1.63bn assessed in respect of the Spanish and French States and about EUR25m for the non-state claimants. London P&I's liability limit of US$1bn is reiterated. As a member of the International Group, the Club benefits from the reinsurance purchased collectively, which extends to US$1bn for pollution claims.

Next steps

Judgments obtained and legal proceedings on foot in other jurisdictions will be relevant. These include:

1. A contested judgment already obtained by London P&I from the English Court of Appeal against Spain and France. This recognises that the Club has no direct liability to the States' claims other than as permitted by the CLC Convention. This judgment is irreconcilable with the Spanish judgments and should provide a basis to resist enforcement.

2. The Master's action before the European Court of Human Rights. This is relevant because enforcement of a judgment obtained unfairly would be contrary to public policy. The extremely superficial nature of the Supreme Court hearing is cited as an example of an unfair process.

At the same time, London P&I, together with its International Group partners and other interested parties, will continue to give close attention to the wider implications of the judgment. We are concerned at the direction taken by the Spanish Court, including its bypassing of an established international Convention. This development underlines the importance of initiatives, including concerted action by shipowners, insurers, the IMO and IOPC Funds, to encourage states not only to sign up to the international convention regimes, but also to respect and apply them correctly and consistently, in a way the recent judgments in the Prestige have failed to do.