Koichi Miyahiro
Manager of Public Relations Division

The Japanese Law for Liability for Oil Pollution Damages which partially revised the current law in response to International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Bunker Convention) and Nairobi International Convention on the Removal of Wrecks, 2007 (Wreck Removal Convention) will be enforced in 2020. This note provides an overview of the reform act.

1. Key points of the reform act

1. P&I insurance to be compulsory
   Shipowners shall maintain a P&I insurance with the amount insured equal to the amount of Limits of Liability under the Shipowners’ Limitation of Liability for Maritime Claims. The reform act will expand the scope of vessels to include vessels greater than 1,000 gt for bunker oil pollution damage and vessels of 300 gt or more for damage of wrecks.
2. Direct action to insurers
   Any claim for costs of bunker oil pollution or removal of wrecks may be brought by claimant directly against the P&I insurer for the shipowner. The insurer shall not invoke any defence which have been brought in the proceedings of direct action by the claimant against the insurer and can not refuse compensation due to violations of the insurance contract by the shipowner.
3. Reciprocal approval of foreign court decisions
   Any judgement given by a court with jurisdiction in accordance with the Conventions shall be recognised in any contracting state. The decisions of the states are valid in Japan. By this, the judgment will be approved by other states, allowing claimant a seizure of assets and ensuring prompt compensation.

2. Background on the reform act

In 2013, in the case of “AN FENG 8” a Cambodianregistered general cargo vessel which grounded in Aomori Prefecture and spilled fuel oil, the insurer refused to cover damages on the grounds of breaching the clause of risks generally excluded, claiming that shipowner had not properly implemented measures to prevent the spread of contamination. As such, Aomori Prefecture incurred costs of ¥360 million as a result of oil spill control measures and the removal of wrecks. Even if an insurance is maintained, there were many similar cases in which the claimant was unable to recover adequate compensation for all damages, such as when shipowners and insurers overseas refused payment due to clause of risks generally excluded from the insurance contract. Hence the current law was reformed to ratify the Bunker Convention and the Wreck Removal Convention.

3. Vessels for compulsory insurance or other financial security

Shipowners shall be required to maintain the following "financial security certificates" issued by the Ministry of Land, Infrastructure and Transport of Japan on board the vessel. To apply for each financial security certificate, a P&I insurance policy must be in place that meets the Limits of Liability specified for each loss covered.

1. Financial security certificate for bunker oil pollution damage by vessels other than tankers Vessels of greater than 1,000 gt
   (excluding all non-self propelling vessel)
2. Financial security certificate for damages caused by the removal of wrecks
   Vessels of 300 gt or more
   (Excluding non-self propelling vessel; subject to reporting if the international gross tonnage is maintained)
3. CLC certificates
   ※Regulations remain unhanged as the CLC.
   Tankers carrying more than 2,000 tons of crude oil in bulk

Procedures for issuing financial security certificates by Ministry of Land, Infrastructure and Transport of Japan have not yet been announced, so we will inform you as soon as we obtain a detailed notice.