EXTENSION OF RIGHTS OF FUND BY SUBROGATION (Hansard, 15 April 1994)

§ Ms Walley
I beg to move, That the clause be now read a Second time.

§ Madam Deputy Speaker
With this it will be convenient to consider the following amendments: No. 8, in schedule 3, page 16, line 41, at end insert—

'1974 c. 43. Merchant Shipping Act 1974 Section 8(3).'

No. 9, in schedule 3, page 16, line 42, column 3, at beginning insert— 'In Schedule 4, paragraph 21(b).'

§ Ms Walley
I move the new clause with some pleasure and sincerely hope that it is supported by the hon. Member for St. Ives (Mr. Harris) and the Minister responsible for shipping.
This morning, we have heard a lot about many different shipping incidents that resulted in improvements in ship safety and prevented similar disasters. We have heard references to the Torrey Canyon disaster. The Bill was introduced by the hon. Member for St. Ives and is not part of the Government's legislative programme. The new clause and amendments were tabled because of the Braer disaster in the Shetlands. Everyone involved thought that no matter what damage was done and the extent to which 570 it could be cleared up—we were relieved that so much of it was cleared up—we should learn from the experience and ensure that necessary changes were made at the first opportunity, including ratification of the IMO conventions.
I should like to think that what we are doing here today is the latest in a long line of improvements. I am thinking especially of a disaster that took place 82 years ago today. While I am speaking, Ball Green primary school in my constituency is holding a remembrance service because so many lives were lost when the Titanic sank on her maiden voyage from Southampton to New York. The fact that those primary school pupils are learning the lessons of that historic disaster makes it even more important for us to learn from history and from what happened in the Braer disaster. For that reason, I am pleased to bring the new clause and amendments to the attention of the House.
The new clause is largely technical and is designed to help the International Oil Pollution Fund to continue to pay compensation quickly to the victims of oil spillages. It removes an inconsistency between the practice of the fund and domestic legislation, by giving the fund the right to recover any compensation that it pays when it is not legally obliged to do so.
It is vital that victims of oil spillages receive compensation as promptly as possible, as it helps to safeguard local communities and jobs from the economic effects of an incident—that is what happened with the communities in the Shetlands. The fund recognises the fact that it is vital and endeavours to minimise delay in the payment of compensation. It does not wait for proof of liability from the shipowner or other parties, which could take months or years. Neither does the fund wait for shipowners or others to pay compensation up to the limit of their liability before it makes payments.
Unfortunately, the fund's commendable policy of paying victims rapidly could, in certain circumstances, give rise to difficulties in recovering the money from liable parties. The new clause would remove that possibility and has arisen as a result of our constructive debate in Committee, when the Government recognised that further improvements could be made to the Bill.
It may be helpful to the House if I explain the legislative background. Compensation for damage caused by oil spills from laden tankers is governed by two international conventions—the 1969 international convention on civil liability for oil pollution damage and the 1971 international convention on the establishment of an international fund for oil pollution damage.
The 1969 convention governs the liability of tanker owners for such damage. The convention lays down the principle of strict liability for tanker owners and imposes a system of compulsory liability insurance. Shipowners are normally entitled to limit their liability. The extent of the limit is linked to the tonnage of the ship. For example, the limit on the liability of an owner of a 50,000 tonne ship is about £6.3 million. After the entry into force of the 1992 protocol to the 1969 liability convention, the limit will be about £20.8 million.
The 1971 convention provides a regime for compensating victims when the compensation available under the 1969 civil liability convention is inadequate.
There are rare circumstances in which the compensation available from shipowners may not be adequate. They are exempt from liability when the damage results from an act of war or a grave natural disaster, when it is wholly caused 571 by sabotage perpetrated by a third party or when it is wholly caused by the failure of authorities to maintain navigational aids.
Shipowners may also be unable to meet their financial obligations, although the requirement for compulsory insurance for laden oil tankers should make that unlikely.
The fund is most often called into play when it is clear that the cost of compensation is, or is expected to be, greater than the limit on the shipowner's liability. The precise division of financial responsibility between the fund, the shipowner and any other liable parties may not be clear immediately following an oil spillage. However, victims cannot usually wait for that to be resolved. Compensation for lost income is often needed quickly if further economic hardship is to be avoided. That is the important point and it is why the fund developed the practice of paying compensation before the question of liability had been resolved. That practice was important in compensating salmon farmers in the Shetlands, for example, and we must appreciate its importance.
The wording of the 1971 convention gives the fund the right of subrogation. When the fund compensates victims for oil pollution damage, it obtains the right to reclaim compensation from the shipowner if it is proved that he or she is liable. However, there is some ambiguity about when the right may be exercised. The 1971 convention could be interpreted to mean that the fund can subrogate the rights of claimants only if payment was made after the fund's liability had been established. The new clause makes it clear that the right can be exercised irrespective of when the payment was made.
After the Braer incident, the fund acted very quickly to compensate victims of the resulting pollution. It was under no legal obligation to act so quickly. Fortunately, in that case, it was able to obtain an undertaking from the shipowner, but that may not always be the case.
For that reason, we want to ensure that the safeguards will be available. If we are to ensure that the fund can continue to act in such a way, the ambiguity that I described must be resolved and we now have an opportunity to do so. The new clause will achieve that and reaffirm our commitment to the marine environment and compensation for the victims of oil pollution and I commend it to the House.

§ Mr. Harris
I warmly welcome the new clause tabled by the hon. Member for Stoke-on-Trent, North. As she said, she drew our attention to the problem in the Standing Committee and I am glad that she has tabled the new clause to deal with it.
I hope that the House will feel able to adopt the new clause. The hon. Member for Stoke-on-Trent, North mentioned the Braer disaster and the workings of the fund in regard to that tragedy. I understand that the fund has paid out no less than £26 million to deal with the consequences of that disaster, and I welcome the hon. Lady's brief words on the subject.

§ Mr. Norris
I am grateful to the hon. Member for Stoke-on-Trent, North (Ms Walley) for presenting some useful amendments that will, happily, set right an anomaly in the Bill. I agree entirely with her remarks and it is useful that the Bill should be improved in that way. I commend the new clause to the House.