Small Tanker Oil Pollution Indemnification Agreement (STOPIA)

29 November 2004 No.04-012

We refer to our previous circular No.03-005 of 3 June 2004 entitled "International Supplementary Fund for Compensation to the 1992 Oil Pollution Compensation Fund Convention" With respect to the Small Tanker Oil Pollution Indemnification Agreement (STOPIA) and the Supplementary Fund Protocol (3rd Tier Protocol), the Club's Board of Directors decided, at their meeting on 29 November, the following:-

In order to permit the implementation of the STOPIA scheme at the same time the 3rd Tier Protocol comes into force, the Board of Directors approved:
1)the finalization of the STOPIA agreement to be concluded voluntarily amongst Shipowners
2)the finalization of the additional provisions for the Memorandum of Understanding (MoU) between each Club in the International Group of P&I Clubs (IG) and the IOPC Fund
3)the introduction of a new STOPIA Special Clause in the Club Rules


1) Purpose
The 3rd Tier Protocol increases the liability of the IOPC Fund for oil pollution damage. Presently, this increased level of liability will be borne solely by oil receivers. In consideration of this greater liability assumed by oil receivers, and to maintain the stability of the 1992 International Convention on Civil Liability for Oil Pollution Damage (1992 CLC) and the 1992 Oil Pollution Compensation Fund Convention (1992 FC), Shipowners have volunteered to increase their contribution to oil pollution damage. This will be achieved by indemnifying the 1992 Fund for a portion of its liability to claimants for damage caused by vessels of less than 29,548G/T. In so doing, STOPIA maintains the balance of contributions between the oil and shipping industries for oil pollution claims. It also preserves the existing 1992 CLC/FC regimes which have proven effective in providing prompt indemnification to eligible claimants.

2)Eligible ship
A tanker regulated by the 1992 CLC of not more than 29,548G/T which is insured by a Club into the International Group Pool (IG Pool) is eligible for STOPIA. Such tankers automatically participate in STOPIA without the need for any special procedure in accordance with Special Clause 3) below. It is expected that Japanese coastal tankers entered in our Naiko Class (Naiko Tankers) may choose to participate in STOPIA.

3)Introduction of the Special Clause and its purpose
To achieve the purpose set out in 2.1) above, it is important to ensure that all eligible ships are entered in STOPIA. It is also expected that as many Naiko Tankers as possible will subscribe to STOPIA. Accordingly, a Special Clause will be introduced which will stipulate that any eligible tanker shall automatically be entered in STOPIA and that the Club may not provide cover for oil pollution should the vessel be withdrawn from STOPIA (please see Annex I).

A participating owner may withdraw from STOPIA on giving not less than three months' written notice to the Club. This will result in a reduction of cover as contained in the Special Clause mentioned above.

5)Indemnification of the 1992 Fund
Indemnification arises when a tanker entered in STOPIA causes pollution damage in a Protocol State which results in liability under both 1992 CLC/FC. In such cases, its owner will indemnify the 1992 Fund the aggregate amount-up to 20 million SDR - of the compensation paid by the 1992 Fund, less the vessel's limitation under the 1992 CLC (please see Annex II). The Club shall provide cover for such member's liability under STOPIA (the Club shall guarantee the member's liability to the 1992 Fund under the MoU described in 1.2) above).

STOPIA will incept simultaneously with the entry-into-force of the 3rd Tier Protocol. It will terminate on giving three months' written notice by the IG to the 1992 Fund. It will also terminate if there is a material change to the system of compensation established under the 1992 CLC/FC.

7)Benefits and burdens
Whilst STOPIA is a voluntary agreement for only small tanker owners, its objective is to maintain the broadly accepted current international conventions system, including the 1992 CLC/FC. Thus, all types of vessels will benefit and, consequently, any additional risk under STOPIA will be shared amongst all ships reinsured through the IG Pool. As our Naiko Class tankers are not reinsured through the IG Pool, the Club is planning to establish a system to share the additional risk fairly amongst all members.

The 1992 CLC/FC entered into force in 1996 as a successor to the 1969 CLC and 1971 Fund. Following the oil spill from the "Erika" in December 1999, strong opinions emerged, mainly from European countries, which sought a sufficient level of indemnification for oil pollution damage. Consequently, the then international liability and compensation regime was revised. As a result, the Legal Committee of IMO adopted, in October 2000, amendments to the conventions which raised by 50% both of the limitation figure under the 1992 CLC and the maximum amount of compensation under the 1992 FC. These amendments entered into force on 1 November 2003. Additionally, at the Diplomatic Conference of the IMO in May 2003, the 3rd Tier Protocol was adopted to raise the maximum amount of compensation available for oil pollution damage to 750 million SDR, including the amount compensation paid under the 1992 CLC/FC.

Cargo receivers in the Protocol States will pay the increased compensation in 3rd Tier. In order to maintain an equitable balance between contributions of the oil and shipping industries, a proposal was made to increase voluntarily the minimum limit of liability for small tankers up to about 30,000G/T under the CLC from 4.51 million SDR to 20 million SDR. The proposals were approved by the Boards of each IG Club (our decision was made on 3 June 2002). However, Shipowners and the IG reserved their right to withdraw the voluntary scheme if any essential element of the existing convention regime affecting tanker owners's liabilities were amended.

In the meantime discussions about reviewing the 1992 CLC/FC are still continuing at the meeting of the IOPC Fund Working Group. It is anticipated that the 3rd Tier Protocol will enter into force in early 2005 before any conclusion is made on the issue whether to continue the revision process. Under such circumstances, the Club's Board of Directors made the decision in paragraph 1 above.

4.Further notice
The IG is discussing with the IOPC Fund the details of the STOPIA agreement and the additional provisions of the MoU. In case of any changes in the STOPIA scheme as explained above, we will inform the Members in due course. We will also inform the relevant Members of necessary procedures by a separate circular.

Annex 1


A member insured in respect of a ship which is a "relevant ship" as defined in the Small Tanker Oil Pollution Indemnification Agreement (STOPIA) shall, unless the Association otherwise agrees in writing, be a party to STOPIA for the period of entry of that ship in the Association.

Unless the Association has agreed in writing or unless the Association in its discretion otherwise determines, there is no cover under the Rule 25 of the Association in respect of such a ship so long as that Member is not a party to STOPIA.

The proviso prescribed in the Rule 35.1 (2) is applicable to STOPIA.