On the Establishment of a Fund Guarantee System for Emergency Response Mechanism to Shipboard Oil Spill in China*

Mei Hong

On the Establishment of a Fund Guarantee System for Emergency Response Mechanism to Shipboard Oil Spill in China*

Mei Hong**

In China,the organizations involved in starting the emergency response mechanism to cope with ship oil spillage cannot be compensated timely for their relevant expenditures,due to the lack of fund to deal with emergencies of this kind,which in turn results from the lack of the guarantee system of the fund.The immediate consequence of the lack of guarantee system is the inefficiency and retardedness of emergency responses to ship oil spillage.The concept of establishing a fund-guarantee system consists of the sources of the fund,its coverage and administration,the procedures of application and payment,among others.

Ship oil spill emergency response mechanism;Fund security system for oil spill emergency response mechanism;Special fund for oil spill emergency response mechanism

Ⅰ.The necessity to establish a fund guarantee for oil spill emergency response system

A.Current situations

Though the emergency response to shipboard oil spillage has been given increasing concern by the Chinese government,for example working mecha-nisms like monitoring,emergency clean-up etc.has been set up,we still find that oil spill emergency response mechanisms of China are far from perfect.In particular,China has not really established a fund guarantee for emergency response mechanism.

Due to the lack of fund support,it have been seriously affected the emergency salvage and clean-up operation.Because the relevant governmental agencies take almost full responsibility to deal with casualties and bear the high expenditure for clean-up.On the other hand,they can’t receive the reimbursement from time to time.Several recent,major oil spills in the China Sea have caused severely environmental damage.The costs for clean-up will be huge,it is unreasonable to let the national finance authority take cares of this and taxpayer finally bears the cost ultimately.Clearly,it will also jeopardize the national fiscal system soon or later.

Therefore,it has become imperative to establish the fund guarantee for emergency response mechanism to shipboard oil spillage.However,there is still no specific legislation on it.On March 1,2010,The Regulation of the People’s Republic of China on the Prevention and Control of Marine Pollution from Ships(the Regulation)came into force and provides that,the Oil Pollution Compensation Fund in China shall be set up and the specific measures shall be promulgated by the State Council.But the Regulation on Collection and Use Oil Pollution Damage Fund so far has not been introduced.In its draft,it provides that the domestic oil pollution damage compensation fund mainly deal with afterward compensation.None of the above mentioned legislations provide a comprehensive,timely financial security for the emergency response mechanism to oil spillage.

Since the absence of Fund Guarantee for Emergency Response Mechanism,The Capacity of emergency response for oil spillage is very vulnerable and can’t meet the needs under current situation.According to statistics,the clean-up rate for prevention of oil pollution arising from an international shipboard oil incident is above 70%,while the clean-up rate in China’s coastal is only 7%.①Yang Shengshi,The Capacity of Oil Spill Emergency Response in China and its Scheme for Future,China Maritime Safety,issue 3,2009,p.40.In China’s coastal,most of the shipboard oil spillages rely on self-purification capacity of ocean to clean up.The necessary materials and equipments for the emergency response in oil spillage incident are insufficiency and also difficult to be updated timely because of financial distress.The personnel andteam for emergency response are not very well trained.As a result of the absence of the special fund,Chinese emergency response capacity has not been sufficiently and sustainably developed.The clean-up capacity of emergency response for oil spillage is far from to meet the requirements.

B.It is imperative to establish a fund guarantee for emergency response mechanisms in China.

China have been consecutively elected as a Category A Council Member of the International Maritime Organization(IMO)for 11 times up to November 27,2009.①The Council of IMO is consisted of 40 Member States elected by the Assembly,acts as the governing body,10 States of which with the largest interest in providing international shipping services belong to Category(a).But,as the oil import and export power,so far she hasn’t established a domestic oil fund;nor joined the Convention on the International Oil Pollution Compensation Fund.China should establish a special fund by referring to the advanced experience of international oil spill emergency response systems.Consequently,it will ensure that the cost of emergency response and clean-up operations are promptly reimbursed.Since the fund can give oil spill response operations long-term,stable financial support.It will also encourage the operations and improve the capacity of emergency response to oil spill.

1.The risk of maritime oil spills is increasing.

With China’s economic development,the demand for oil has been increasing rapidly.According to the statistics from the General Administration of Customs PRC,China has become the world’s second largest oil importer and consumer since 2003.In 2008,China imports 200.67 million tons oil(including crude oil,refined oil,liquefied petroleum gas and other petroleum products).It increases of 9.5%comparing the data of 2007,183.28 million tons.②Net import volume of China’s fuel oil climbed to 200 million tons with increasing 9.5%, visiting date on 9 Feb,2009,http://www.dh.gov.cn/bofcom/433480298882138112/ 20090209/220176.html.In 2009, the figure is 218.885 million tons.③China’s oil consumption ranked second in the world in 2009,visiting date on Mar 2,2010, http://www.cinic.org.cn/shownews.php?id=73959.Over 90%of oil imports are transported by sea to China,Chinese domestic oil tankers cannot meet the total demand,so it also attracts a large number of foreign tankers.There are 111 Chinese tankers engage in international transport with about 3.5 million tons’total loading capacity and 676 coastal tankers with about 2.7 million tons’total loading ca-pacity.①Feng Yizhen,Lin Hongmei,China’s coastal waters are facing the risk of Ship-induced pollution,China Ocean,9 Feb,2007.Taking 2007 as an example,there are 2.667 million trips entering and leaving china port,and 186 thousand of which are tanker ships.On average, Tankers sail through China’s coastal waters more than 400 trips per day with carrying more than 3 million tons of oil.②Zhu Jing,Xu Shiming,Keeping ocean clean and sharing blue territory,Review of Ship-induced pollution prevention of China,China Water Transport,29 May,2009.With very large tankers coming in and out of our coastal waters,there is an increasing risk of major oil spill pollution.

In addition,there are still a number of coastal tankers with low-standard single-hull,some of which tend to be aging and have been lagging behind on technical performance.Due to this situation,it further increases the risk of oil pollution incidents③Liu Gongchen,To establish an oil spill compensation system consistent with China,Collected papers of Forum of marine affair of Ministry of Transportation,2005..According to statistics,from 1998 to 2008,there were 733 shipboard pollution incidents in China’s territorial waters,109 of which occurred in 2008.These incidents in 2008 leaked 354 tons of oil material and caused huge damage to marine environment.④Zhao Hu,How China copes with the risk of oil spill,China water transport,20 November,2009.To strengthen the protection of marine environment,improve the safety of oil tankers and reduce the risk of oil pollution,the Ministry of Transportation issued an announcement advancing the date,by which single-hulled tankers must be removed from domestic service.This shows the Chinese government’s determination on protection of marine environment.However,we must clearly realize that the potential oil spill risk become more and more seriously with economic boom in china.

2.The existing system of compensation for oil pollution damage isn’t adequate to ensure the funding needs of emergency response mechanism.

In accordance with Art 53 of the new Regulation on the Prevention and Control of Marine Pollution from Ships,all ships navigating in the waters under the jurisdiction of the People’Republic of China shall cover the insurance of civil liability for oil pollution damage by vessel or obtain the corresponding financial guarantee,except for those vessels of less than 1000 tonnages which carry the non-oil substance.The Regulation confirms that a domestic oil pollution compensation fund will be founded through imposing levies on persistent oil cargo owners or their agents.The Measures of the People’s Republic of Chi-na for the Implementation of Civil Liability Insurance for Vessel-induced Oil Pollution Damage,which have came into force since October 1,2010.In article 2,it provides that ships navigating in the Chinese waters,which carry oil substance,and more than 1000 tonnages which carry the non-oil substance,shall cover the insurance of civil liability for oil pollution damage by vessel or obtain the corresponding financial guarantee.The fund so far is still under construction.In short,as International practice of oil spill compensation shows,it is far from enough to cover oil pollution.The ratio of oil spill damage compensation is lower than required.Emergency response against shipboard oil spillage suffers from a lack of financial security.Currently,the capacity to respond to emergencies needs to be improved.①Xu Shiming,Emergency response mechanism against Ocean Pollution in China,China Ship Survey,issue 1,2010,p.120.

C.It is not proper time for China to join the Convention on the International Oil Pollution Compensation Fund.

The international compensation regime for oil pollution arose and developed principally from public pressure following major oil tanker disasters.It includes International Oil Pollution Compensation Fund Convention,also known as the“Fund Convention”.The purpose of the Fund Convention is to establish a fund to provide compensation for pollution damage to the extent that the protection afforded by the 1992 Liability Convention is inadequate.The fund only offer an afterward compensation,but it can cover the cost for emergency response to oil spill.Although there are some deficiencies in fund convention,it works very well,since the fund was set up.According to the fund convention, the oil industry that has large import volumes must contribute to the Fund.It maybe is not proper time for China to accept the Fund convention.Based on the above three arguments,it is time for China to establish the fund guarantee for emergency response mechanism to shipboard oil spillage.

Ⅱ.The feasibility of establishing a special oil spill emergency response fund

A.The legal basis for establishing a special oil spill emergency response fund

The purposes to establish the special fund are to strengthen oil spill emergency response mechanism,to reduce the damage and protect marine environment.Legal foundation in this connection mainly related to the Constitutionlaw of PRC,Marine Environmental Protection Law,the Regulation on the Prevention and Control of Marine Pollution from Ships,Maritime Law,Special Maritime Procedure Law,International Convention on Civil Liability for Oil Pollution Damage,and other international conventions.

Article 26 of Constitution provides that the state protects and improves the environment in which people live and the ecological environment.It prevents and controls pollution and other public hazards.In according with article 18(3)of Marine Environmental Protection Law,the State administrative department in charge of maritime affairs shall be responsible for drawing up a contingency scheme to cope with any nation-wide major vessel oil spill accidents on the sea and report to the administrative department in charge of environment protection under the State Council for the record.The same legislation also provides that Ports,docks,loading and unloading spots and shipyards must draw up oil spill pollution contingency scheme and shall be equipped with corresponding contingency equipment and devices.More specific provided by article 66 of marine environmental law,quoted as follow:

“The State shall perfect and put into practice the civil liability system of compensation for vessel-reduced oil pollution,and shall establish a fund system for vessel-induced oil pollution insurance and oil pollution compensation based on the principle of the vessel owner jointly undertaking the risks of any vesselinduced oil pollution compensation liability.”Special Maritime Procedure Law stipulates that the following maritime claims may apply for arresting ships, such as,payment for compensation of such damage caused by the ship to the environment;the reasonable cost for the measures taken actually or preparing to take for restoring the environment;loses the third party suffered or will probably suffer due to such damage;and the damage,fees or loses which are similar in nature specified in this Item.Article 56 of the Regulation confirms that a domestic oil pollution compensation fund will be founded through imposing levies on persistent oil cargo owners or their agents.It stipulates that the owners or agents who receive the goods of persistent oil substance transported by sea in waters under the jurisdiction of the People’s Republic of China shall contribute to the fund for oil pollution damage.The specific measures on the collection,using and administration of the fund for oil pollution damage shall be jointly formulated by the finance department of the State Council and the administrative department of communications of the State Council.The state will set up the administrative commission of the fund for oil pollution damage to handle affairs such as the compensation made with the fund for oil pollutiondamage.The administrative commission of the fund for oil pollution damage will be consisted of relevant administrative authorities and the main merchants who contribute to the fund for oil pollution damage.The Regulation also covers oil pollution response planning;oil spill clean-up arrangements;reporting and emergency handling of pollution incidents;investigation and compensation of pollution incidents etc..

At the international level,the legal framework involves in International Convention on Civil Liability for Oil Pollution Damage,The Protocol of 1992, (CLC1992),Establishment of an International Oil Pollution Compensation Fund Convention,The Protocol of 1992,(Fund 1992),International Convention on Civil Liability for Bunker Oil Pollution Damage,2001(Bunker Convention). China ratified CLC1992 in 1999 and Bunker Convention at the end of 2008.China is not a State party to the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage. Fund 1992 only applies to the Hong Kong Special Administrative Region. CLC1992 and Bunker Convention provide the doctrine of strict liability and set forth the scope of oil pollution’s compensation,in according with article 1(6)of CLC 1992,Pollution damage means loss or damage caused outside the ship carrying oil by contamination resulting from the escape or discharge of oil from the ship,wherever such escape or discharge may occur,and includes the costs of preventive measures and further loss or damages caused by preventive measures.①Si Yuzhou,Maritime law,Beijing:Law press,2003,p.320.

B.Feasibility study on establishing the special fund contributed by the oil cargo owners

1.A jurisprudential analysis on establishing the special fund contributed by the oil cargo owners

According to traditional theory of tort law,compensation for damages is based on the determination of who was at fault and to what extent.But the practice of oil spill claim showed the traditional fault system was out of date,so IMO adopted no-fault liability,i.e.the doctrine of strict liability,in CLC 1969. Under no-fault system,it is the one who bring the pollution that shall take the responsibility,regardless of the ship owner is at fault.Meanwhile,it also provides the rules of limitation of liability and compulsory insurance for ship owner.Therefore,the loss arising from oil spill is often greater than the compensation.For example,Super tanker‘Exxon Valdez’hit Bligh Reef in PrinceEdward Sound and spilled more than 11 million gallons of crude oil on March, 1989.The total costs of Exxon Valdez,including both cleanup and also“fines, penalties and claims settlements,”ran as much as$8 billion USD.But the amounts of compensation will not more than 60 million USD under CLC 1969①Lin Xiaomei,On the International Oil Pollution Compensation Fund,Supplement to the Journal of Sun Yatsen University,issue 8,2007..

Since the mid 20th century,the“polluter pays”principle came into being. This principle obliges the polluter to“bear the costs of measures to reduce pollution decided upon by public authorities to ensure that the environment is in an acceptable state.”②Xu Guoping,AStudy of Legal System on Oil Pollution Compensation,Peking University Press,2006.p.20～21.If this principle is not applied to covering,the costs of restoration of environmental damage,either the environment remains un-restored or the State,and ultimately the taxpayer,has to pay for it.Therefore,a first objective is to make the polluter and the benefiter liable for the damage he has caused.If polluters need to pay for damage caused,they will cut back pollution up to the point where the marginal cost of abatement exceeds the compensation avoided.Thus,environmental liability results in prevention of damage and in internalization of environmental costs.Liability may also lead to the application of more precaution,resulting in avoidance of risk and damage,as well as it may encourage investment in R&D for improving knowledge and technologies.”③Posner,R.A,Economic Analysis of Law,CITIC Publishing House,2003,p.167.

Based upon the collective principle and the“benefiter pays”principle,IMO formulated International Fund for Compensation for Oil Pollution Damage. Nowadays,more than 90%oil companies contribute for the payment of supplementary compensation through the 1992 IOPC Fund.

2.A financial Feasibility on Establishing the Special Fund Contributed by the Oil Cargo Owners

Comparing to the rapid development of shipping industry in China,oil spill emergency response system has lagged far behind and can not meet the needs of the current situation.Some governmental agencies,like Ministry of Transportation,National Development and Reform Commission,Ministry of Finance,State Environmental Protection Administration,Ministry of Ministry of Foreign Affairs,Ministry of Agriculture and especially Maritime Safety Administration, made a lot of effort to establish a domestic oil pollution compensation fund.According to the draft of Regulation on Collection and Use Oil Pollution DamageFund,which prepared by Ministry of Finance and Ministry of Transportation, the fund will be founded through imposing levies CNY 0.3 per ton on persistent oil cargo owners.China Petrochemical Corporation(SINOPEC)and China National Petroleum Corporation(CNPC)are two largest oil cargo receivers, 80%of oil cargoes belong to them.①Song Jiahui,Precaution,Salvage and Compensation System against ship-induced Pollution,Dalian Maritime University Press,2006.That also means Sinopec,CNPCand China National Offshore Oil Corporation(CNOOC)will be great contributors to the special fund.According to the statistic,Sinopec recorded total amount profit of over CNY133.3 billion in 2005 and CNY 185.7 billion in 2006.The net profit of the first half year of 2009 was CNY 33.19 billion despite of the economic crisis.The net profit of SINOPEC was CNY 39.6 billion in 2005.In 2009,the five major oil companies,CNPC,SINOPEC,CNOOC,SINOCHEM, SHAANXI YANCHANG PETROLEUM,recorded revenues of CNY 3.12 trillion from main business,a decrease of 5.6%compared with the total profit of CNY 268.042 billion in 2008.②Ministry of Industry,Oil and Chemical Industry Improve Steadily in 2009,at http:// www.chinanews.com.cn/ny/news/2010/02-20/2127336.shtml,20 February 2010.In 2008,China imported about 200 million tons of oil.If we set this amount for calculation basis,oil importers need to pay CNY 57 million per year as compensation fund.③Peng Li,Oil giants may bear the major responsibility to marine environmental liability, China Chemical Industry News,10 November,2009.In 2009,China imported 218.885 million tons of oil,so the oil importers shall contribute about CNY 60 million.④China’s oil consumption ranked second in the world in 2009,at http://www.cinic.org. cn/shownews.php?id=73959,2 March 2010.In comparison with USA,the emergency response amounted fund to 50 million U.S.dollars,it is about 1/20 of the total oil pollution Trust Fund with 1 billion U.S.dollars.Obviously,it may have some negative impact to oil cargo owners,but it is not difficult for them.

Ⅲ.The Conception of Establishing a Special Fund for E-mergency Response to Shipboard Oil Spillage

Oil spill emergency response is a positive measure taken to cope with ship oil spill.The special fund of oil spill emergency response is essentially a portion of the Oil Pollution Compensation Fund appropriated specially for the purpose of providing more effective financial security for oil spill emergency response.Therefore,the special fund for oil spill emergency response mechanism is closely related to the Oil Pollution Compensation Fund.

The fund-guarantee system proposed herein for emergency response mechanism to deal with shipboard oil spill consists of the sources of fund,its administration and payment,etc.

A.The Raising of the Special Fund for Oil Spill Emergency Response Mechanism and Its Coverage

1.The Diversified Fund-raising

Special fund for oil spill emergency response is derived from the same sources as is the ship oil pollution compensation fund,thus to raise the fund,a wide range of financing mechanisms is desirable.So it will be shared by more than one party.The main sources of fund include:

The oil cargo owners are responsible for the shipment of the petroleum by sea.As mentioned earlier,the imposition on the owners is not only justifiable legally but also feasible in international practice.The contribution from the oil cargo owners should comprise the main sources of the special fund.In the compensation made by the International Oil Pollution Compensation Fund after the emergency response,the fund mainly comes from the contributions from the oil companies by way of contracting states,who receive the contributions.The oil spill emergency response fund in United States is mainly appropriated from the specified amount of tax levied on the oil imported and produced at home,5% per barrel;Canada raises its emergency fund by imposing 15 cents per metric ton on the petrol imported by sea.Therefore,following the international practice,we can set up specific criteria to levy tax on the oil cargo owners and their agents to raise the special fund of oil spill emergency response by receiving the contribution in the waters of our jurisdiction.The oil cargo owners and their agents to be levied tax on here include those ship persistent oil supplies(including crude oil,fuel oil,heavy diesel oil and lubricant oil,and other persistent hydrocarbon mineral oil)by sea.The criteria of contributions lies with relevant authorities based on the actual situation of our country.Some scholars also proposed that the special fund of ship oil spill emergency include not only tax from maritime transport,but also contributions of the ship owners and their agents of inland shipping.At the 2005 national conference of the marine system on pollution-prevention and risk-management,Liu Gongchen,Deputy Secretary of the Chinese Maritime Safety Administration,numbered it among the chief tasks of 2005-2006 to strengthen prevention of risks in inland river transportation and to effectively exercise the maritime supervisory functions.According to Ar-ticle 40 of the Regulations for Prevention and Control of Inland Water Pollution from Ships(coming into force from January 1,2006),“oil tankers of 150 gross tonnage and above,the oil barge of 400 gross tonnage and above and nonoil tankers,non-oil barge’s team shall hold approved by the maritime administration‘Shipboard Oil Pollution Emergency Plan.’Oil tankers less than 150 tonnage need to make oil pollution emergency plan.”And according to Article 30 of the Water Pollution Control Act of the PRC(coming into force from March 20,2000),“Ships,due to accident,having caused or may cause water pollution,maritime administration authorities shall organize forced or compulsory towing and salvage Clear.Expenditures ensued therefore should be borne by the ship accident.”In other words,the inland waters ships fall under the management of the maritime authorities,and the oil spill contingency plans are also obligatory,hence the principle is there that the polluter pays for the emergency response.At present,China has a total of 1497 oil tankers on domestic routes with a capacity of 7.236 million dwt;inland oil tanker Total 3750,capacity was 1.737 million dwt.①Chen Bowei,To accelerate the domestic routes out of single hull tankers mandatory,Water Management,2009 No.3,p.34.With oil transportation increasingly implemented through pipelines in China,inland water transportation of oil diminishes year by year.However,there are still chances of oil spill in the course of inland water transportation.Although the proportion of inland water transportation is relatively small and there is no laws governing matters of contributions,we approve of the idea that oil shippers of inland water transportation should be included in raising contributions,considering that the emergency response is also necessary should there be any oil spillage or any detrimental effect on the ecological environment caused by the oil cargo owners.

Financial grant from the state comprises part of the initial fund.Grant from government provides substantial support to the Ship Oil Spill Response Fund(SOSRF)as a special national fund.The way of raising fund models that of the United States,which loaned to the Oil Spill Liability Trust Fund when the fund was established.The establishment and improvement of the domestic oil spillage emergency response with government’s grant has been implemented in Liaoning,Shenzhen and other places and has produced good result.The Maritime Safety Administration of Liaoning Province applied to the provincial government,and obtained the latter’s approval to set up a“special maritime search and rescue fund”.According to the application,from 2005 the provincial gov-ernment grants CNY 1 million each year to the fund.This fund is designed to award the non-professional rescue organizations that stand out the relief effort. It also covers the oil spill emergency response.①Liu Licai,Liu Yunzhe etc.,the first release of our province,advanced search“reward”,at http://news.sina.com.cn/s/2006-04-2/03078673824s.shtml,1 March 2010.In a similar vein,Shenzhen lists the funds for search and rescue at sea and pollution-prevention in the general budget.As such,the municipal government allocates 6 million each year for marine pollution-prevention and emergency response at sea.②Du Chuan,China has established emergency response system involved in pollution problems and related measures,ship pollution prevention and regional cooperation in high-tech Conference and the first“port of Cup”ship pollution prevention Best Paper Award winning paper album,2003.

The purpose of setting up a SOSRF is to provide financial guarantee for the emergency response to ship oil spillage.Following the principle of collective burden,the costs and expenses of environmental damage should be borne by all the polluters of the same type,which originated from environmental damage compensation practices,the liability of pollution caused by ship oil spillage should be undertaken by all the oil cargo owners that fall within the scope of the oil spill emergency response.At the same time,the prevailing criteria of liability dealing with oil pollution caused by oil spillage is strict liability,therefore,all liable ship owners shall bear the obligation to pay contributions to the special fund.In the light of the compulsory insurance system regarding the civil liability in oil pollution,the contributions ship owners undertake can be drawn from the insurance premiums the ship owners insured against oil pollution damage.The ship owners will not bare any other liabilities.There are other ways of raising the fund:a)the compensation funds from the party that is responsible for the oil spillage.According to the principle that polluter undertakes liability,the administration office of oil spill emergency response fund can make payment first and later on make claim to the polluters for compensation; b)penalty.All ships failing to cover oil pollution liability insurance will be imposed on a fine,and this fine can be transferred to the fund;c)the profit from the operation of the fund(interest,for example).Under proper administration, the fund can bring some profit from investment.Another source of the fund is public contribution.Since the special fund for oil spill emergency response is for the public interest,public contributions are also an effective source of funds.

Public donations have special significance to the fund-raising.Dalian,anorthern city in China,established a special fund for oil spillage emergency regarding unknown shippers in 2007.This fund(totaled CNY 2.51 million)comprises voluntary donations from 48 organizations related to ships.By June 2008,Dalian has coped with 6 cases of emergencies caused by unknown resources with this fund.Dalian’s example sufficiently embodies the efficacy of the Oil Spill Emergency Response Fund.Donations out of public interest represent the public’s awareness of environmental protection,on the one hand;they also play a very significant role in oil spillage emergency response,especially in the case of oil spillage caused by unknown resources,on the other hand. Dalian’s practice illuminates the way for us to raise the Special Fund of Ship Oil Spill Response,that is,donations from the public may comprise a significant source.

2.The Coverage of Ship Oil Spill Emergency Response Special Fund

The fund is established mainly to provide fund for ship oil spillage emergency response:monitoring,decontamination,and rewards,on the one hand;it also provide fund for the improvement of ship oil spillage emergency response: purchase of facilities,staff training,the efficient functioning of the mechanism. Specifically:

First,the advance for oil spill emergency response.After Oil spillage,the fund can provide financial security for the emergency response actions,such as the monitoring of the affected area,decontamination,emergent relief,etc.In the case that the responsible party for the oil spill accident is definite,the expenditure in the form of advance can be covered by the party on recourse according to legal procedures.Before advance,it is necessary to examine and approve the actions involved in the emergency response to be taken in order to see they are necessary for the oil spillage.

Second,the payment for the oil spillage is caused by unknown resources.

Third,the payment for the reasonable cost is caused by the emergency response.The so-called reasonable cost includes the cost of measures taken to guard against,alleviate,and reduce persistent oil spill,and the damage these measures may bring about to the third party.The parties involved can have an accreditation body or the court of law determine the reasonable cost upon the agreement of all the parties.

Fourth,the normal operational costs for the fund management are needed.

B.The Concept of the Management of the Special Fund of the Oil Spill Emergency Response

Considering the connection between the special fund for ship oil spill e-mergency response and the Oil Pollution Compensation Fund to be established in China,and the International Oil Pollution Compensation Fund,which China may enter into in future,the management of our special fund for oil spill emergency response can model the management of the International Oil Pollution Compensation Fund and that of the Oil Spill Liability Trust Fund of the United States;or we may set up regulations of management in accordance with the“Regulation of the Collection and Use of Ship Oil Pollution Compensation Fund”.

1.The Management and Use of Special Fund of the Oil Spill Emergency Response

Both the International Oil Pollution Compensation Fund and the Trust Fund of Oil Spillage Liability are established under relevant laws,with a special managerial agency.They are entitled to have their own rights and obligations since they enjoy the status of independent legal person.According to the paragraph 3 of Article 5 of Marine Environment Protection Law of the People’s Republic of China,The state administrative department of marine affairs shall be responsible for organizing investigations and monitoring of and exercising surveillances over the marine environment and conducting scientific research therein;it shall also be in charge of environmental protection against marine pollution damage caused by offshore oil exploration and exploitation and by the dumping of wastes into the sea.The Harbour Superintendency Administration of the People’s Republic of China shall be responsible for supervising,investigating and dealing with the discharge of pollutants from vessels and for exercising surveillance over the waters of the port areas;it shall also be in charge of environmental protection against pollution damage caused by vessels.According to Article 71 of the same law,in case of the sea accident of a vessel that has caused or may cause major pollution damage to the marine environment,the State administrative department for maritime affairs is entitled to adopt enforcement measures to avoid or reduce the pollution damage.In case of any sea accident took place on the high sea that has resulted in major pollution damage to a sea area under the jurisdiction of the People’s Republic of China or in case of any vessel or facilities on the sea that threaten to pollute such sea area,the State administrative department for maritime affairs is entitled to adopt necessary measures sufficient to cope with the pollution that has actually taken place or may possibly take place.According to Article 4 of The Regulation of the Prevention of Remedy of Marine Environmental Pollution by Ships,the authorities in charge of communication and transportation of State Council are incharge of the prevention and remedy of marine environmental pollution caused by the non-military ships in their respective administrative waters and by the non-military ships and non-fishing ships in the harbor waters.Maritime administration authorities are in charge of the supervision and administration of the marine environmental pollution in accordance with the provisions.

Article 19 of“The Regulations of the Collection and Use of Ship Oil Pollution Compensation Fund(draft)”provides that the Management Board for Oil Pollution Compensation Fund,which is established by the State,accepting compensation issues related to the Oil Pollution Compensation Fund.The National Management Board for the Oil Pollution Compensation Fund consists of delegates from the Ministry of Transport,Ministry of Finance,Ministry of Agriculture,State Environmental Protection Administration,State Oceanic Administration,and the representatives of the oil owners who contribute to the Oil Pollution Fund.It is affiliated to the Ministry of transportation.The Board has an Executive Committee and a Secretariat responsible for routine affairs. The Secretariat is affiliated to the Maritime Safety Administration of China.

The management and use of the special fund for oil spill emergency response can be performed in accordance with the stipulations in The Regulations of the Collection and Use of Ship Oil Pollution Compensation Fund(draft). The management of its use can take example of the practices of the United States.That is,setting up a national center of the oil spill emergency response, establishing offices by involving the marine transport department and environment protection department as its standing organization in respective marine region to deal with oil spillage,defining the division of power and responsibility for centers of all levels,enhancing communication and coordination.In case of oil spillage,these offices will act promptly to communicate and coordinate with each other to facilitate the oil spillage emergency response.

2.Management and Legal Status of the Oil Spill Emergency Response Special Fund

Special Fund for Ship Oil Spill Response can,taking example of the practice of the United States,establish a management center for marine oil spillage emergency response fund in the Marine Safety Administration of China and grant it with the status of legal person.This center is specifically responsible for the collection and the use of the fund.The center is entitled to the collection and disposal of contributions.It can also open legal proceedings as a party.

As a special fund,the Center receives supervision from the Ministry of Finance and the Ministry of transport.The General Assembly has the supremepower,including being responsible for the management of the contributions, deciding the quota of contribution,collecting and disposing the contributions. The General Assembly enlists delegates from the Ministry of Finance,Ministry of Agriculture,State Environmental Protection Administration,State Oceanic Administration,and the representatives of the owners who contribute to the fund.Its members are elected by the General Assembly.Secretariat is the standing department dealing with the routine work of the Fund.Its main duty is to raise funds on behalf of the Emergency Response Fund according to the fund-raising plan,and pay the fees involved in the emergency response according to the coverage of the Fund.Additionally,it also is responsible for coordinating marine security departments of different regions to take action in case of emergencies.Since the Ship Oil Spill Response Fund is granted with the status of legal person,it can bear material responsibility for its own obligations with its own property and participate in legal proceedings in its own name.

C.The Application for Special Fund of Oil Spill Emergency Response and the Payment

1.The Procedure Design for the Application for Special Fund of Oil Spill E-mergency Response Mechanism

The procedural provisions of a legal institution are the safeguard of the implementation of substantive provisions.Only in accordance with statutory procedures can the fund system be implemented openly and justly.The Oil Pollution Act of 1990(referred to as OPA1990)of the United States in principle provides procedures for making claims to the fund.It also set the time limit of 3 years of making claims for decontamination and damage.The U.S.coast guard has formulated a Guidebook to Make Claims based on the Oil Pollution Act of 1990.The Regulations of the Collection and Use of Ship Oil Pollution Compensation Fund(draft)of China just provides roughly that the organizations and individuals eligible for indemnity or the compensation conditions can apply to the Fund Management Committee in written form to make a claim,which,after accepting the application,shall form a panel to examine and verify the claim items and determine the specific amount of compensation.It also provides the time limitation for claims to Oil Pollution Fund which is three years.①Han Lixin,Ship Oil Pollution Compensation Fund of the collection and management approach to improve the proposed use of“containing”,China Maritime Law,January, 2008,p.302.

Therefore,regarding the management of the special fund for emergency re-sponse mechanism,we can consult the aforementioned practice of the United States,that is,we firstly stipulate the principles as to the procedures for the use of oil spill emergency response fund.Secondly,we authorize relevant departments under the State Council jointly to formulate the procedures,or authorize the maritime administrative authorities to formulate the procedures. The procedures will come into force upon the approval of the State Council. The Procedures of using fund can be formulated separately based on the different projects.①Hu Zhengliang,Establishment of Oil Pollution Compensation Fund of the legal issues, Visiting date on March 9,2010,at http://smuiml.shmtu.edu.cn/comments.php?act= show&id=104.The procedure design for the advance of the special fund for clean-up costs includes the following:

Regarding the scope of accidents for which advance is applicable,the first thing to do is to articulate that the special scope where the Fund is applicable. The spatial coverage where the Fund is applicable is the waters under China’s jurisdiction,including the territorial sea,exclusive economic zone and inner water.Secondly,the advance is also applicable to the oil spillage damages caused by shippers carrying crude oil and fuel oil.Finally,the advance is applicable to claims within the jurisdiction of the courts of China to which Chinese laws apply.

Regarding the scope of applicants for advance,the right to apply for advance can be entrusted to the office of oil spillage prevention and response in order to ensure the fund’s normal operation.The time limit of the application can be defined with the period after the oil spillage takes place and before compensation is made considering the functional aspects of the advance.The data an applicant shall submit in the application include the time of the accident,the location,the ships involved,types of oil that is responsible for the pollution damage,the degree and range of the pollution,the sum to be applied,etc.The Fund Management Center’s investigation of the accident,the result of the review of the data of application can be done by the related panels appointed by the Center and inform the applicants of the result in written form.The payment and settlement of the advance is carried out in accordance with the rules and regulations of the financial management and under the supervision of audit departments.In addition,the procedures should be made explicit and definite as to the applicant’s right of reconsideration when his application is denied and the contract of the right-transfer agreement between the fund management centerand claimant.

The payment procedure of the compensation of the special fund includes the following:

The scope of the claimant:the victims of oil pollution accidents occurring in waters under China’s jurisdiction,including the national or local governments,individuals,corporations,among others.The time limit of the claim:consulting the practice of domestic and international regulations,we may set the time limit of the claim for three years.Environmental Protection Law of PRC stipulates that the time limit for filing an action for environmental pollution compensation is three years from the date on which the party knows or should have known the pollution damage.The time limit the International Oil Pollution Compensation Fund stipulates for the claims for oil pollution incidents is also three years.The claim letter and evidence submitted by the claimant:the documents present facts in detailed data;the evidence for claim should be attached with invoices,bills and other financial documents.The investigation of the accident and the assessment of the damage conducted by the Center:the investigation and assessment should be conducted in accordance with the data submitted for claim.Resolutions of acceptance or denial of claim for compensation: the claimant shall be informed of the resolution of acceptance or denial in written form.When the claimant refused to accept compensation decisions,he or she has the right to file a lawsuit.

The approval procedures for application for fund to improve oil spill response capability can be limited to the fund management center and the office of oil spill prevention and response.The office of oil spill prevention and response can regularly apply to the fund management center for such fund.According to the actual demand for facilities for capacity-building,team construction,and operation of the organizations,the office should also formulate the qualifications of applicants,the time limit for the application,and the data to be submitted by the application and applicant,all of which should be presented to the Center for approval.The fund management center informs of the office and prevention and response of the examination and supplementation of the data of the application,the notification of review result;it also transfers the payment of the expenditures to the office.

2.The Payment Procedure of the Special Fund for Shipboard Oil Spillage

The modes of payment depend on the purposes of fund to be used for.For emergency operations,the Fund should provide advance to the organizations involved in the emergency response for salvation,supervision,disposal,etc.Asfor capital used in taking preventive measures,reducing,controlling and removing oil contamination,the organization involved in relevant responses apply to the Fund for compensation and the Fund shall confirm the amount and make payment after going through related procedures.For the cost input and the applications for reasonable claim,the Fund shall confirm the amount and make payment after forming a panel to review all the items involved in the cost input and in the applications.

Since the total amount of the special fund for oil spillage emergency response is limited,it is necessary to set a limit to the amount of fund in single use.①Special fund of oil spill emergency response is effective security measures,but not a panacea.This provision is mainly to avoid the condition that single-use credit more than the total fund will result in no funds to operate the fund.From the International Oil Pollution Compensation Fund and the U.S. Oil Pollution Trust Fund,we can find there is a provision concerning the amount of fund to be used a single time,and the Fund has subrogation right.②The subrogation right is a civil right,different from the priority.The priority does not shift with transfer of the subrogation right.Their practiceis much the same as the provisions in the Marine Law concerning the ships engaged in international maritime transportation.Under the draft of the regulation,the upper limit of compensation is CNY 50 million for one single accident oil pollution.Otherwise,a major oil pollution accident will claim the full amount of the Fund.

From the data of the accidents occurred in recent years,there is a significant increase in amount in terms of a single vessel.Take the 2004 Pearl River oil spillage for example.Only the clean-up expenditures were as much as CNY 10.6 million.In stipulating the limit to the amount of compensation in the use of special fund,China’s national conditions must be taken into consideration.It shall be neither too high nor too low.Too high,it will burden the contributors; too low it will not be effective.

The subrogation of the International pollution damage compensation fund is laid down in the provision of Article 9,CLC1992.This article stipulates that the Fund shall acquire by way of subrogation the right of the payee that the owner or guarantor of ship enjoys in accordance with the Liability Convention. OPA1990 of U.S.also laid down the subrogation:the payment of compensation or debt of the Oil Pollution Liability Trust Fund entrust the U.S.government the subrogation of the claimants or States to access the responsible party to recover the payment.Consulting the above mentioned practices,we may alsoprovide the right of subrogation in the Special Fund of Ship Oil Spill Response. The right of Subrogation is entrusted to management center of ship oil spill emergency response,that is,the Fund acquires,through subrogation,the payee’s right to claim to the responsible party,or its liability insurer,or other financial guarantor.

In short,the special fund of oil spill emergency response mechanisms will be an innovation in our marine environmental protection and oil spill emergency response.The purpose of the fund lies not in its establishment,but in its benign operation.Only by consulting mature international experience in conjunction with China’s actual situation can China fulfill her intention in establishing of the fund,and get well prepared for the connection with the world in the future. As practice has proved,to achieve a good legal system,not only is the scientific design of the system necessary when it is in conception,but also a constant refection and summary is necessary when it is put into practice.Additionally,the system should be amended to work better in time when the actual circumstances under which the system functions change.①Hu Zhengliang,Establishment of Oil Pollution Compensation Fund of the legal issues,at http://smuiml.shmtu.edu.cn/comments.php?act=show&id=104,9 March 2010.

(Senior Editor:ZHENG Zhi-hua Editor:Stephen Pire;ZHOU Yao)

*The research is the phased result of the Social Sciences Research Project of the University in Shandong Province“Fund Guarantee System for Emergency Response Mechanism to Shipboard Oil Spill”(No.J09WK58).

**Mei Hong,J.D.,Teaching Fellow of Law and Politics School of Ocean University of China,Email:maritime007@163.com.