TULANE LAW SCHOOL LAW SCHOOL Rhodes, Greece Maritime Law, Law of the Sea & Ocean Management SUMMER,...

TULANE LAW SCHOOL

Rhodes, Greece

Maritime Law, Law of the Sea & Ocean Management

SUMMER, 2016

LGRC-4330-01 Int’l Conventions & Maritime Law (1 credit)

Professor Davies

These materials are intended for classroom and study purposes only for students enrolled in Tulane’s Rhodes Summer Program and may not be reproduced.

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TableofContents AppealinTheBraer

Pgs.3‐23

BerlingierionConventions

Pgs.24‐56

DeepwaterHorizonRemovalCosts,CivilDamages…

Pgs.57‐125

CommunedeMesquerv.TotalFranceSA

Pgs.126‐138

TheAegeanSea

Pgs.139‐170

TheBraer

Pgs.171‐176

TheMSCNapoli

Pgs.177‐181

TheSeaEmpress

Pgs.182‐195

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Davies, Martin 4/21/2014For Educational Use Only

DEEPWATER HORIZON: REMOVAL COSTS, CIVIL DAMAGES,..., 85 Tul. L. Rev. 889

© 2014 Thomson Reuters. No claim to original U.S. Government Works. 1

85 Tul. L. Rev. 889

Tulane Law Review

March, 2011

Symposium: Deep Trouble: Legal Ramifications of the Deepwater Horizon Oil Spill

DEEPWATER HORIZON: REMOVAL COSTS, CIVIL DAMAGES,CRIMES, CIVIL PENALTIES, AND STATE REMEDIES IN OIL SPILL CASES

Robert Force a1 Martin Davies d1 Joshua S. Force aa1

Copyright (c) 2011 Tulane Law Review Association; Robert Force; Martin Davies; Joshua S. Force

I. Introduction 890II. The Oil Pollution Act of 1990 895III. Liability, Persons Liable, Basis of Liability, and Defenses 896IV. Covered Removal Costs and Damages 906A. Removal Costs 907B. Damages 909C. Natural Resource Damages 911D. Economic Losses 927V. Limitation of Liability 943VI. Oil Spill Liability Trust Fund--Claims Against the Fund 949VII. Financial Security--Guarantors 953VIII. Criminal Sanctions 957IX. Civil and Administrative Penalties 964A. Administrative Penalties 964B. Civil Penalties Imposed Judicially 968X. The Relationship Among the Oil Pollution Act, State Law, and General Maritime Law 969A. Federalism Issues 969B. State Legislation 978

*890 I. Introduction

As late as the 1960s, not much concern was given to pollution of our waters. The Refuse Act 1 was not enacted with pollution

in mind, although later it was used to punish polluters. 2 There was no general federal legislation dealing with removal costs

or damages, let alone specific criminal statutes and civil penalties. 3 This situation changed in the early 1970s as explainedin the following excerpt:The FWPCA [Federal Water Pollution Control Act of 1972] is in part a modification and reenactment of the Water QualityImprovement Act of 1970 (WQIA), Pub.L.No. 91-224, 84 Stat. 91, amended and recodified at 33 U.S.C. §§ 1251-1376. WhenCongress passed the WQIA in 1970, the government had no effective remedy for recovering cleanup costs from oil spills onnavigable waters. The government had possessed no remedy at all until 1966, when Congress amended the Oil Pollution Actof 1924, ch. 316, 43 Stat. 604, to provide that the government could obtain a recovery, but only for grossly negligent or willfuldischarges. Act of Nov. 3, 1966, Pub.L.No. 89-753, § 211(a), 80 Stat. 1246, 1253. In section 108 of the WQIA Congressexpressly repealed the Oil Pollution Act.

. . . .

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Because the Oil Pollution Act did not provide an effective means for the government to recover its oil spill cleanup costs,Congress enacted section 1321(f)(1), which, as in effect at the time of the spill in this case, provided in pertinent part that the*891 owner or operator of any vessel from which oil or a hazardous substance is discharged in violation of subsection (b)(3)

of this section shall, notwithstanding any other provision of law, be liable to the United States Government for the actual costsincurred . . . for the removal of such oil or substance by the United States Government in an amount not to exceed $100 per grosston of such vessel or $14,000,000 whichever is lesser, except that where the United States can show . . . willful negligence or

willful misconduct . . ., such owner or operator shall be liable to the United States Government for the full amount of such costs. 4

The FWPCA was amended by the Clean Water Act of 1977 (CWA). 5 These statutes contained specific crimes for oil and

hazardous substance pollution of U.S. navigable waters, 6 created administrative 7 and civil 8 penalties, and imposed liability

for cleanup costs. 9 The statutes also reflected a compromise because, although they imposed liability without fault under therubric the “polluter pays,” those responsible for polluting our waterways were allowed to limit their liability according to a

specified formula. 10 Later amendments allowed the federal government to recover for damage to its natural resources, 11 and

states were given the right to recover cleanup costs 12 and for damage to natural resources. 13 No provision was made forremedies for private persons, but the statutes made it clear that they did not preempt existing remedies for damage to property.

The situation changed with the enactment of the Comprehensive Environmental Response, Compensation, and Liability Act

(CERCLA). 14 This statute carved out hazardous substances as warranting a separate regime that prohibited the discharge ofhazardous pollutants not only in navigable waters but also on land, *892 underground waters, drinking water, and into the

atmosphere. 15 Strict liability was retained, 16 as was a limitation of liability, 17 but the list of persons who were subject to

its terms expanded. 18

During this period of time, the international community was also at work formulating international regimes to deal withdischarges of oil into the world's waterways. One such regime, the International Convention for the Prevention of Pollution

from Ships, 19 is a regulatory scheme that is ultimately enforced through criminal sanctions. The United States has adopted

and implemented this convention. 20 There are two conventions on the civil liability side. One, the Protocol of 1992 to Amend

the International Convention on Civil Liability for Oil Pollution Damage (CLC), 21 imposes liability on shipowners for oil

pollution up to a limited amount based on the tonnage of the vessel discharging oil. 22 The other, the Fund Convention, 23

supplements the CLC by authorizing the payment of additional funds to cover the shortfall for cleanup costs and damages thatexceed the shipowner's liability under the CLC. The Fund Convention also has limits as to how much will be paid in any single

incident. 24 The shipowner's liability is usually covered by the shipowner's protection and indemnity (P&I) insurance. The Fund

Convention is subsidized by a tax on oil imports. 25

The United States is not a party to either the CLC or the Fund Convention. The ostensible reason the United States did not adoptthose conventions was that the limits of liability under the CLC and the Fund Convention were too low. To persuade the United

States to ratify these conventions, measures were prepared to raise the limits of *893 liability under the conventions. 26 TheEXXON VALDEZ incident off the coast of Alaska in 1989 ended any prospect, however, that the United States would adoptthe conventions. Three other major oil spills in the coastal waters of Rhode Island, the Delaware River, and the Houston ShipChannel quickly followed the EXXON VALDEZ spill. These four oil spills, within a three-month period, provided the impetus

for the United States' enactment of the Oil Pollution Act of 1990 (OPA or the Act). 27

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After the EXXON VALDEZ incident, the United States Congress recognized the inadequacy of the nation's existing oilspill liability laws and sought to enact a more comprehensive and responsive liability regime. As the Senate Committee onEnvironmental and Public Works observed:

What the Nation needs is a package of complementary international, national, and State laws that willadequately compensate victims of oil spills, provide quick, efficient cleanup, minimize damage to fisheries,wildlife and other natural resources and internalize those costs within the oil industry and its transportationsector.

Instead, there is a fragmented collection of Federal and State laws providing inadequate cleanup and damage remedies, taxpayersubsidies to cover cleanup costs, third party damages that go uncompensated, and substantial barriers to victim recoveries--such

as legal defenses, statutes of limitation, the corporate form, and the burdens of proof that favor those responsible for the spill. 28

Nevertheless, despite the EXXON VALDEZ incident, some interests continued to oppose any change in the laws or advocatedthat *894 liability should be imposed only on the basis of fault. Others supporting the adoption of new laws wanted to havestrict, unlimited liability. In the end, a compromise was reached that reflected the liability regime adopted under the CWA.OPA retained both strict liability and limited liability, thereby ensuring that polluters would pay for cleanup costs and damagesarising from oil spills but not crippling the regulated industries with unlimited liability. The limits of liability were substantiallyincreased, however, and the threshold for breaking the limitation (that is, taking away the right to limit) was substantiallylowered. In contrast, efforts to make the owners of oil share liability failed. Instead, an Oil Spill Liability Trust Fund was

established and funded by a tax on oil imports. 29

When OPA was being debated in the Congress, critics claimed that the United States was about to shoot itself in the foot. Theinternational community of oil interests and the insurance industry reacted with horror to OPA. It was said that liability underOPA was excessive compared to the CLC and that it would encourage litigation rather than prompt payment of claims suchas is done under the Fund Convention procedures. In addition, by refusing to preempt state liability legislation, it would beimpossible to predict the amount for which a vessel owner might be liable. Thus, argued the opponents, shipowners would notbe able to obtain insurance, and therefore, they could not and would not bring their vessels into U.S. waters. The result wouldbe devastating shortages of oil in the United States with resultant skyrocketing prices.

Of course, none of these dire predictions came to pass. Instead, after serious discharges of oil off the coasts of France fromthe ERIKA and Spain from the PRESTIGE, the international regimes have come to resemble OPA rather than vice versa. The

European Union (EU) moved, for example, toward the imposition of more severe sanctions against dischargers. 30 Likewise,although the scope of the CLC is limited to oil carried as cargo (unlike OPA, which applies to all oil), the international

community has expanded the coverage of its oil pollution laws to include bunker oil as well. 31 OPA was initially criticized,

moreover, for having limits of liability that were too high, *895 but now the international community has followed suit. 32

Needless to say, these developments suggest that one's perspective on the need for stricter and more comprehensive oil spilllaws depends, in large measure, upon “whose ox is being gored.”

II. The Oil Pollution Act of 1990

What is the current scheme in the United States for dealing with oil pollution? This Article examines the question from several

perspectives. These include the basic liability regime, including removal costs 33 and damages. 34 OPA has gone further thanany other statute in providing for both public and private remedies. The discussion will cover the basis for liability, parties

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responsible for paying removal costs and damages, defenses to liability, damages recoverable by governmental entities andprivate parties, limitation of liability, including loss of the right to limit, insurance, and other forms of financial responsibility.This Article will briefly address the claims procedure, including claims made against the Oil Spill Liability Trust Fund. ThisArticle will then discuss possible criminal prosecutions followed by administrative and civil penalties. Finally, this Article willlook at choice-of-law issues with particular attention devoted to the role of state laws.

The legal issues that emanate from the discharge of oil into the navigable waters of the United States are diverse and complex.This Article does not address practical issues relating to the removal of the oil, such as who, in fact, will remove the oil,who decides what measures must be taken in removing the oil, who decides when the removal efforts have been satisfactorilycompleted, and the roles and relationships among the U.S. government, state governments, responsible parties, third-partytortfeasors, and cleanup contractors.

*896 III. Liability, Persons Liable, Basis of Liability, and Defenses

Part I of this Article discusses removal costs and damages that may be recovered under federal law, principally under OPA.This discussion will identify persons who may be liable, the legal basis for liability, defenses, limitation of liability, heads ofdamages, and certificates of financial responsibility, including liability of guarantors. This Part will discuss claims made notonly against responsible parties but claims against the Federal Oil Spill Liability Trust Fund as well. This Part will also reviewpossible actions against negligent third parties under the general maritime law.

To begin, the Oil Pollution Act of 1990, as its title suggests, deals only with oil 35 pollution and not with other forms ofpollution. There are other statutes that apply to other substances that pollute our environment, such as CERCLA, which deals

with pollution from hazardous substances. 36 OPA applies to discharges 37 (that is, spills) from vessels 38 and facilities, 39 and

it classifies facilities as either *897 onshore 40 or offshore facilities. 41 Importantly, OPA defines a mobile offshore drilling

unit (MODU), such as the Deepwater Horizon, as “a vessel . . . capable of use as an offshore facility.” 42

OPA does not impose liability on everyone whose conduct may have contributed to an oil spill. Rather, the Act places liabilityonly on “responsible parties.” The definition of a responsible party for liability purposes under OPA depends upon the source ofthe discharge of oil. Where the discharge comes from a vessel, “any person owning, operating, or demise chartering the vessel”

is a responsible party. 43 Similarly, the responsible party for an onshore facility (other than a pipeline) is “any person owning

or operating” the onshore facility. 44 The responsible party for a discharge of oil from an offshore facility (other than a pipelineor deepwater port) is not, however, the owner or operator of the facility but, rather,*898 the lessee or permittee of the area in which the facility is located or the holder of a right of use and easement granted

under applicable State law or the Outer Continental Shelf Lands Act (43 U.S.C. 1301-1356) for the area in which the facility

is located (if the holder is a different person than the lessee or permittee). 45

The courts have construed OPA's definition of “responsible party” broadly. As one court has noted, the “[breadth] of the

definition is illustrated by the fact that the ‘OPA does not limit the number of responsible parties.”’ 46 Following the DeepwaterHorizon accident, for example, the United States Coast Guard designated BP Exploration & Production Inc., Transocean

Holdings Incorporated, and others as responsible parties. 47 Courts have held, moreover, that a discharge of oil from a dumb(unmanned and nonmotorized) barge makes not only the owner of the barge but also the owner of the tug a responsible party

under OPA. 48 In cases involving multiple responsible parties, their *899 liability is joint and several. 49 With one exception

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to be explained later (a sole-cause third party), the imposition of liability on any person other than a responsible party whosenegligence contributes to the discharge of oil must be based on legal sources other than OPA.

The Act addresses the standard of liability under OPA in § 2702(a), which provides that “each responsible party for a vessel ora facility from which oil is discharged, . . . is liable for the removal costs and damages specified in subsection (b) of this section

that result from such incident.” 50 It should be obvious that § 2702(a) does not make any reference to negligence or any otherterm that implies fault as a basis for liability. Rather, OPA embodies the principle that the “polluter pays” irrespective of fault.

In other words, OPA imposes “strict liability” on responsible parties from whose vessels or facilities oil has been discharged. 51

OPA recognizes only three limited defenses to liability. A responsible party has a complete defense to liability under the Actonly “if the responsible party establishes, by a preponderance of the evidence, that the discharge or substantial threat of adischarge of oil and the resulting damages or removal costs were caused solely by--(1) an act of God; (2) an act of war; [or]

(3) an act or omission of a third party.” 52 Importantly, to invoke any of these defenses, the external circumstance giving rise

to the defense must have been the “sole cause” of the discharge. 53 If the conduct of the responsible party contributed to thedischarge in the slightest degree, the defense may not be invoked. The wording of the defense is crucial because it does notrefer to fault, but rather to causation.

In United States v. West of England Ship Owner's Mutual Protection & Indemnity Ass'n (Luxembourg), 54 a barge ownersought to invoke the third-party defense to avoid liability for an oil spill under *900 the CWA. The barge discharged oil intothe Atchafalaya River when it struck an unmarked, submerged wreck while operating outside a marked and maintained channelin the river. The court accepted that navigating the tug that was towing the barge outside the channel was not negligent because

her master reasonably believed it was safer to do so to avoid the current and downbound traffic. 55 Nevertheless, the court heldthat because the tug's decision to navigate outside the channel was a proximate cause of the accident, the act or omission of a

third party (the owner of the wreck who had failed to remove or mark it) could not have been the sole cause of the oil spill. 56

As a result, the barge owner could not avoid liability for the spill.

These defenses are not merely limited, but they are also narrowly construed by the courts. 57 Consequently, responsible partiesare rarely successful in establishing a complete defense to liability under OPA. Few courts have considered the applicability of

the act of God defense, 58 and no reported opinions appear to have addressed the act of war defense under OPA. 59 Althoughresponsible parties have invoked the third-party defense more often, the limitations imposed by OPA on this defense as well asthe courts' narrow construction of the defense *901 have limited it as a means of avoiding liability under OPA. In light of theinformation that is presently available concerning the Deepwater Horizon accident, it is highly unlikely that any responsibleparty will be able to prove that the external circumstances underlying OPA's limited defenses were the sole cause of the oildischarge and resulting removal costs and damages.

For the act of God defense to prevail, it is not enough that the cause of the discharge be a physical phenomenon, such as a storm,even one that developed rapidly. OPA defines an “act of God” narrowly as “an unanticipated grave natural disaster or othernatural phenomenon of an exceptional, inevitable, and irresistible character the effects of which could not have been prevented

or avoided by the exercise of due care or foresight.” 60 As one court has held in acknowledging the limits of the defense:

Congressional intent is clearly that the “exceptional natural phenomenon” (i.e., the “act of God”) defensebe construed as much more limited in scope than the traditional common law “act of God” defense. Thedischarger's burden of proof on the defense of “exceptional natural phenomena” is much more onerous

than that required for common law or traditional “act of God” defense. 61 Thus a responsible party must

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prove that the natural phenomenon was “exceptional, inevitable, and irresistible” to assert the defense

successfully. 62

In Apex Oil Co. v. United States, barges under tow on the Mississippi River allided with the Vicksburg Highway 80 Bridge

and discharged slurry oil into the river. 63 The allision occurred after the captain of the tug towing the barges decided to transitthrough an auxiliary span in the bridge despite a strong current and a sharp bend in the river north of the bridge. The ownerof the barges accepted responsibility for the discharge but sought reimbursement of its removal costs and salvage from theOil Spill Liability Trust Fund. In seeking reimbursement, the barge owner invoked the “act of God” defense, claiming that“the flood of 1995 and exceptionally strong and unpredictable currents in the Vicksburg area of the LMR [Lower MississippiRiver] constituted an unanticipated grave natural disaster or other natural phenomenon, unavoidable even with the exercise of

*902 due care and foresight.” 64 The district court affirmed the Coast Guard's rejection of this defense, finding that the bargeowner was fully advised of the flood stage and current conditions on the river and nevertheless chose to navigate the perilous

conditions with an underpowered tug. 65

In Liberian Poplar Transports v. United States, 66 the United States Claims Court similarly rejected an act of God defenseunder the CWA. The spill occurred during oil transfer operations at the Chevron Hog Island facility in Philadelphia. Thevessel's captain allegedly checked the weather conditions on the radio before beginning the transfer operations, but the crew

did not monitor those conditions once the operations began. 67 The National Weather Service reported a severe thunderstormapproaching the city in the midst of the oil transfer operation. Heavy winds from the storm caused the vessel's mooring linesto part, pushing the vessel away from the pier and causing approximately 100 barrels of oil to be discharged into the Delaware

River even though the crew had shut down the cargo operations as soon as the storm struck. 68 The vessel owner invoked the“act of God” defense, contending that the storm could not have been anticipated because it was not well-forecasted and was notvisually foreseeable by the ship's watch. The court granted the United States summary judgment on this defense, finding that

the storm could have been anticipated if the crew had monitored the radio for weather conditions. 69

As noted previously, the defense to which responsible parties most often attempt to resort to avoid liability is the third-partydefense. Even this defense rarely enables a responsible party to avoid liability, however, both because of the limitations imposedupon it by the Act itself and the courts' narrow construction of the defense. OPA does not provide a complete defense to aresponsible party whenever any third party is the sole cause of a discharge of oil. Rather, the defense only applies to third parties“other than an employee or agent of the responsible party or a third party whose act or omission occurs in connection with any

contractual relationship with the responsible party.” 70 Further, the responsible party must establish, by a *903 preponderanceof the evidence, that it “exercised due care with respect to the oil concerned, taking into consideration the characteristics of theoil and in light of all relevant facts and circumstances” and also “took precautions against foreseeable acts or omissions of any

such third party and the foreseeable consequences of those acts or omissions.” 71

Cases in which such a third party solely causes a discharge of oil do exist, such as where a properly moored vessel is struck

by a negligently navigated vessel and discharges oil or where a vandal releases oil from a facility, 72 but they are few and farbetween. More often, oil is discharged as a result of a collision in which both vessels share some of the blame or the party thatcauses the discharge is an employee or agent of the responsible party or a party with whom the responsible party has a contractual

relationship. For example, in one case, a vessel was moored at a pier owned by a shipbuilding and repair company. 73 Duringa severe storm, the vessel sank. The Coast Guard subsequently hired a company to clean up the spill when the vessel ownerrefused to do so and billed the vessel's owner for these cleanup expenses. The owner argued that the vessel had been left in the

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custody of the shipbuilding and repair company, which was at least partially responsible for the spill. 74 The court rejected thiscontention because the vessel was left in the custody of the company pursuant to a contract between it and the owner, and the

third-party defense does not apply when there is a contractual relationship between the vessel owner and the third party. 75

The contractual relationship between the responsible party and third party need not necessarily be as direct as in the United

States v. J.R. Nelson Vessel, Ltd., case to fall within the defense's exception. 76 *904 Although few OPA cases have addressedthe question whether the contractual relationship must be direct, courts have divided on that issue in cases involving CERCLA'ssimilar third-party defense. Some courts in CERLCA cases have limited the defense to situations where the third party hasno relationship to the responsible party while others have permitted the defense, except if the third-party conduct occurred in

connection with the parties' contract. 77

At least one district court has adopted the former approach in a case under OPA. In International Marine Carriers v. Oil SpillLiability Trust Fund, the operator of a Naval vessel sought to recover the costs it incurred to clean up bunker fuel spilled

while being loaded at a third party's terminal pursuant to a “Declaration of Inspection.” 78 The district court affirmed the OilSpill Liability Trust Fund's denial of the operator's claim because of the contractual relationship between the operator and theterminal owner. The district court concluded that the Fund's determination that “the commercial contracts between IMC andthe Terminal, including the Declaration of Inspection, constitute an OPA contractual relationship within the meaning of section2703(a)(3)” was not unreasonable even though it was the United States that had contracted with the terminal to supply the

bunkers and not the operator. 79

OPA imposes several additional limitations on a responsible party's right to assert these defenses to liability. Even if aresponsible party can establish that one of the limited defenses applies, it may still lose the right to claim the defense if it fails or

refuses to report an incident about which it knows or has reason to know, 80 provide all reasonable cooperation to a responsible

official, 81 or, without sufficient cause, comply with federal removal and other orders. 82 These limitations further reduce thelikelihood of a responsible party successfully avoiding liability under OPA.

*905 Earlier it was said that only a responsible party, as defined in the Act, may be held liable under OPA. What about third-party tortfeasors? Where a third party is the sole cause of a discharge from another's vessel, it may be treated as the responsible

party. 83 Section 2702(d)(1) must be read carefully, however. This section basically gives the government the option of treatinga sole-cause third party as a responsible party. In other words, the government may designate the sole-cause third party as theresponsible party, but the statute does not require it. If the government elects to treat the owner or operator of the dischargingvessel or facility as the responsible party, and not the sole-cause third party, then in theory, the responsible party can denyliability and, when sued by the government to remove the oil, plead by way of defense that the third party solely caused thedischarge and implead the third party under Rule 14 of the Federal Rules of Civil Procedure.

In practice, that is ordinarily not how things work. As discussed previously, OPA imposes many limitations on the assertionof the third-party defense. In addition, it is in everyone's interest to have the oil removed as quickly as possible to reducethe possibility of further damage to the environment. If both the discharging party and the third party deny liability, then thegovernment will arrange to have the oil removed, and, in all likelihood, the government's cleanup will be more expensive thanif a private party had arranged for the removal. Moreover, serious adverse consequences may ensue from the responsible party'sfailure to cooperate or follow an order given by an appropriate government official, including not only the possible loss ofdefenses but also the loss of right to limited liability. Consequently, the owner or operator of the discharging vessel or facilitywill usually clean up the oil and then sue the sole-cause third party for indemnity.

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Indeed, § 2702(d)(1)(A) provides that a third party shall be treated as the responsible party only if the responsible party

“establishes” that the discharge was caused solely by the third party. 84 Subsection (B), in a sense, takes away what subsection(A) gives. Under § 2702(d)(1)(B), if the responsible party merely “alleges” that the discharge was caused solely by a third party,

then the responsible party must first pay the removal costs and damages. 85 The responsible party then becomes subrogated toall rights of the government and may seek indemnity from the third party. OPA does not affect, in general, *906 the traditional

rights to contribution and indemnity. 86 Thus, the Act does not preclude a party from claiming a right to recover some orall of its removal costs or damages from another party involved in the incident, whether based on contract or tort principles.Nevertheless, no contribution rights or indemnification agreement may transfer a responsible party's liability under the Act to

another person. 87

Finally, one important shortcoming of OPA as it relates to third-party liability should be noted. The Act does not deal at allwith non-sole-cause third parties. That is, if a discharging vessel or facility is negligent and a third party is also negligent, i.e.,is not a sole-cause third party, OPA does not address the third party's potential liability. Presumably, the liability of any such

third party would be decided under the general maritime law. 88

IV. Covered Removal Costs and Damages

Section 2702(a) of OPA provides for the recovery of both removal costs and damages from a responsible party for a vessel or

facility from which oil is discharged or that poses a substantial threat of a discharge. 89 The removal costs and damages must

result from an “incident,” 90 which the Coast Guard and at least one court have construed to mean only those removal costsand damages resulting “from a discharge of oil or from a substantial threat of a discharge of oil into navigable waters or the

adjacent shoreline.” 91 Section 2702(b) *907 defines the types of removal costs and damages that may be recovered from a

responsible party. That section also identifies the claimants who may recover different types of damages. 92 The provisions of§ 2702(b) reflect Congress's intent “to provide compensation for a wide range of injuries and are not so narrowly focused as to

prevent victims of an oil spill from receiving reasonable compensation.” 93

A. Removal Costs

Under U.S. law, vessels and facilities covered by OPA are required to have oil spill response plans and arrangements with

oil spill response contractors so that if a discharge occurs, intervention can be immediate. 94 Under the CWA, Congress has

charged the President with the responsibility of removing oil that has been released. 95 This duty has been delegated to EPA 96

and the Coast Guard. 97 If the government incurs costs in removing oil that has been discharged in violation of the CWA, itis entitled to be indemnified for those costs. If a private party incurs removal costs consistent with the National ContingencyPlan, it may also recover those costs.

Section 2702(b)(1) of OPA provides:(1) Removal costs

The removal costs referred to in subsection (a) of this section are --*908 (A) all removal costs incurred by the United States, a State, or an Indian tribe under subsection (c), (d), (e), or (l) of

section 1321 of this title, under the Intervention on the High Seas Act (33 U.S.C. 1471 et seq.), or under State law; and

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(B) any removal costs incurred by any person for acts taken by the person which are consistent with the National Contingency

Plan. 98

OPA defines “removal costs” as “the costs of removal that are incurred after a discharge of oil has occurred or, in any casein which there is a substantial threat of a discharge of oil, the costs to prevent, minimize, or mitigate oil pollution from such

an incident.” 99

Strictly speaking, responsible parties have no “right” to clean up a spill. As a matter of practice, most companies prefer toremove the oil they discharged, and the government prefers for them to do so as well. By undertaking the removal actions,companies may contain their costs and utilize their expertise and that of their cleanup contractors. There have been commentsand criticisms that the federal government did not do enough and allowed BP to call the shots in regard to the DeepwaterHorizon incident to stop the flow from the well and to clean up the oil in the Gulf. Nevertheless, the discharger and its contractoroften have greater expertise in this area than the government. The government, no doubt, relied so heavily on BP to devise theplans to cap the well in the Gulf spill for this reason. These types of arrangements work well for the government because theresponsible party, not the government, foots the bill for the cleanup.

Nevertheless, in such situations, the government retains a supervisory role, and in the end the government must approve theremoval strategy and methodology. The government monitors the cleanup activities and is entitled to reimbursement for its

monitoring activities, including the cost of personnel, equipment, etc. 100 In the end, it is the government that must be satisfiedwith the efforts the responsible party takes to shut down the discharge and clean up the oil. *909 If the government is not

satisfied, it can “federalize” the removal activities and take direct responsibility for cleaning up the site. 101 There is virtuallyno case law, however, litigating removal issues.

B. Damages

In addition to removal costs, a responsible party is also liable to pay damages under OPA. OPA is unique in federalenvironmental legislation because of the wide range of both public and private remedies it provides. Section 2702(b)(2) of OPA

sets forth the types of damages that may be recovered from a responsible party both by governmental and private claimants. 102

The types of damages recoverable vary according to the type of claimant, but in general may be broken down into those damagesrecoverable by governmental *910 entities and those recoverable by governmental entities and private persons.

The recovery of three types of damages under OPA is unique to governmental entities. First, federal, state, Indian tribal, andforeign trustees may recover damages for “injury to, destruction of, loss of, or loss of use of, natural resources,” including

reasonable assessment costs. 103 Second, the U.S. government, states, and political subdivisions of the states have the right torecover damages for the “net loss of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of

real property, personal property, or natural resources.” 104 Third, states and their political subdivisions are entitled to recover“net costs of providing increased or additional public services during or after removal activities, including protection from fire,

safety, or health hazards, caused by a discharge of oil.” 105

Other damages are available under OPA, however, to a broader range of claimants. Thus, any claimant who owns or leases real

or personal property may recover damages for injury to, or economic losses resulting from, the destruction of the property. 106

Any claimant who uses natural resources that have been destroyed, injured, or lost may also recover the loss of his or her

subsistence use regardless of who owns or manages the resources. 107 Lastly, “any claimant” may recover damages “equal to

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the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property,

or natural resources.” 108

Most of these heads of damages are straightforward and not controversial. For example, if a hotel owns a beach and the beachis saturated with oil, under § 2702(b)(2)(B), the owner may recover expenses incurred in cleaning up the beach or replacingthe sand. The owner may also recover lost revenues if guests cancel their reservations because the beach is unusable in itscontaminated condition. Subsections (D) and (F) likewise appear to be clear. If, for example, *911 the saturation of a publicbeach with oil results in a loss of rents or fees charged for the use of the beach or requires the deployment of additional policeto keep people off the beach, a state or municipality can recover those losses/costs under § 2702(b)(2)(D) and § 2702(b)(2)(F),respectively. Proving such losses or additional expenditures may not be a simple undertaking, but that is another matter.

The precise scope of the provision allowing for recovery of loss of “subsistence use” is not clear, and few cases have addressedit. In all likelihood, Congress intended to compensate native peoples and others, such as the Native Americans impacted bythe EXXON VALDEZ spill, who live off the fish they catch. One court has rejected claims under § 2702(b)(2)(C) by businessinterests, including a marine terminal and commercial dock, a marina, a boat charterer, and trucking, railroad, and shippingcompanies that suffered economic losses when a vessel unloading gasoline at a dock was damaged by an explosion and fire

and partially sank in the channel, blocking all commercial navigation. 109 The district court held that the plaintiff businesseshad not used the river for “subsistence use” because that “term relate[d] to use of a natural resource, such as water, to obtain

the minimum necessities for life.” 110

C. Natural Resource Damages

Two elements of the damages recoverable under § 2702(b)(2) are controversial and will likely produce significant difficultiesand litigation in the aftermath of the Deepwater Horizon incident. The first is § 2702(b)(2)(A), which entitles governments to

be compensated for injury to, or loss of, natural resources. 111 Some aspects of damage to natural resources can be quantifiedusing market techniques. If a species of wild fish is commercially harvested and an oil spill kills a verifiable number of thesefish, then the value of the dead fish can be established by the market for that species of fish. This type of assessment hascommercial integrity even if the fish are in federal waters and the government has no plans to harvest and sell them. *912Paying the market price does not replace the fish, however, and it may take years for replacements to mature.

Another problem arises from the fact that the same species of fish may have other values as well. The fish may be an endangeredspecies for which the government may have placed a quota on how many may be commercially harvested or even placed amoratorium on catching these fish at all. The fish may also be caught by recreational fishermen who have no commercial interestin the fish but derive great enjoyment in fishing. In fact, the fish may be of a species that has no commercial value but are prizedby sports fishermen. To take this example a step further, the fish may be tropical reef fish that are not caught at all but providea beautiful sight for scuba divers and snorkelers. Should all of these values be included in the calculation of natural resourcedamages? If so, how does one put a monetary value on these noncommercial values? How does one put a value on somethingsociety or some part of society values but not in a monetary sense?

There can be at least two responses to these questions. The easiest response is that you do not calculate in monetary terms valuesthat are nonmonetary. If something does not have a monetary value, then we should not try to put a monetary value on it becauseit is too arbitrary. This approach is the one taken by the CLC and Fund Conventions. The other approach is that we should dothe best that we can to put a monetary value on these noncommercial values. That approach is the one used in the United States.Nevertheless, in an actual case, how does one put an economic value on a noneconomic injury to natural resources held in trust

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for the public? When compensating for values that transcend market values or that cannot be fully measured by true marketvalues, on what basis are those values calculated?

Before examining statutes, regulations, and cases, a reference to some basic terms may be helpful. In the United States, natural

resources are regarded as having uses or as providing “services,” to use the terminology of the regulations. 112 That is, naturalresources *913 perform certain functions. When natural resources are destroyed or injured, the damages recoverable areintended to compensate for the loss of services the natural resources provide. Natural resources may be classified initially ashaving different uses: “active-use” and “passive-use” values.

Active-use or “use” values include both “consumptive” and “nonconsumptive” uses of natural resources, in which people useor take advantage of a resource. Consumptive uses involve the exploitation of natural resources, such as logging, fishing, anddesalinization to create potable water. Nonconsumptive uses involve uses of a natural resource where the resource remainsintact, such as bird watching and swimming in the ocean.

Passive-use values do not involve the current, active use of a natural resource. There are two primary passive-use values:

“option” and “existence” values. 113 Option value is where a person has no present intent to use a resource but wants to preserve

it in case he changes his mind; that is, he wants to preserve the option of using the resource. 114 Existence value reflects thegovernment's determination that society is enhanced by the mere existence of natural resources whether they can be exploited

or not and a recognition that society suffers a loss when a resource becomes rare or extinct. 115 For example, in the United

States we have enacted legislation to protect “endangered species,” 116 which at times imposes great costs on private interests,such as by restricting the use of a certain area of privately owned land to protect the habitat for an endangered species.

This approach to natural resources has been conceptualized in the view that damage to natural resources reduces the servicesthey provide not only in regard to use or active-use values but also with regard to passive-use values, that is, from the time oilis discharged until the time the resources are fully restored to their baseline conditions or until the resources are replaced and/orequivalent resources are acquired. Under U.S. environmental regulations implementing CERCLA and OPA, natural resources

are therefore *914 equated with the “services” 117 they provide to people or groups of people. For example, the amendedCERCLA regulations provide:

(c) Compensable value. (1) Compensable value is the amount of money required to compensate the publicfor the loss in services provided by the injured resources between the time of the discharge or release andthe time the resources are fully returned to their baseline conditions, or until the resources are replaced and/or equivalent natural resources are acquired. The compensable value can include the economic value of lostservices provided by the injured resources, including both public use and nonuse values such as existence

and bequest values. 118

The regulations promulgated by the National Oceanic and Atmospheric Administration (NOAA) in regard to damages in oilpollution incidents provide: “Services (or natural resource services) means the functions performed by a natural resource for

the benefit of another natural resource and/or the public.” 119 The regulations also state: “Restoration means any action (oralternative), or combination of actions (or alternatives), to restore, rehabilitate, replace, or acquire the equivalent of injured

natural resources and services.” 120

OPA defines the term “natural resources” in § 2701. 121 With regard to natural resource damages, § 2706 states:(a) Liability

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In the case of natural resource damages under section 2702(b)(2)(A) of this title, liability shall be --

(1) to the United States Government for natural resources belonging to, managed by, controlled by, or appertaining to theUnited States;

(2) to any State for natural resources belonging to, managed by, controlled by, or appertaining to such State or politicalsubdivision thereof;

(3) to any Indian tribe for natural resources belonging to, managed by, controlled by, or appertaining to such Indian tribe; and

(4) in any case in which section 2707 of this title applies, to the government of a foreign country for natural resources belongingto, managed by, controlled by, or appertaining to such country.

. . . .

(c) Functions of trustees

*915 (1) Federal trustees

The Federal officials designated under subsection (b)(2) of this section --

(A) shall assess natural resource damages under section 2702(b)(2)(A) of this title for the natural resources under theirtrusteeship;

(B) may, upon request of and reimbursement from a State or Indian tribe and at the Federal officials' discretion, assess damagesfor the natural resources under the State's or tribe's trusteeship; and

(C) shall develop and implement a plan for the restoration, rehabilitation, replacement, or acquisition of the equivalent, of thenatural resources under their trusteeship.

. . . .

(d)Measure of damages

(1)In general

The measure of natural resource damages under section 2702(b)(2)(A) of this title is --

(A) the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of, the damaged natural resources;

(B) the diminution in value of those natural resources pending restoration; plus

(C) the reasonable cost of assessing those damages.

(2) Determine costs with respect to plans

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Costs shall be determined under paragraph (1) with respect to plans adopted under subsection (c) of this section.

(3) No double recovery

There shall be no double recovery under this Act for natural resource damages, including with respect to the costs of damageassessment or restoration, rehabilitation, replacement, or acquisition for the same incident and natural resource.

(e) Damage assessment regulations

(1) Regulations

The President, acting through the Under Secretary of Commerce for Oceans and Atmosphere and in consultation with theAdministrator of the Environmental Protection Agency, the Director of the United States Fish and Wildlife Service, and theheads of other affected agencies, not later than 2 years after August 18, 1990, shall promulgate regulations for the assessment ofnatural resource damages under section 2702(b)(2)(A) of this title resulting from a discharge of oil for the purpose of this Act.

(2) Rebuttable presumption

Any determination or assessment of damages to natural resources for the purposes of this Act made under subsection (d) ofthis section by a Federal, State, or Indian trustee in accordance *916 with the regulations promulgated under paragraph (1)shall have the force and effect of a rebuttable presumption on behalf of the trustee in any administrative or judicial proceedingunder this Act.

(f) Use of recovered sums

Sums recovered under this Act by a Federal, State, Indian, or foreign trustee for natural resource damages under section 2702(b)(2)(A) of this title shall be retained by the trustee in a revolving trust account, without further appropriation, for use only toreimburse or pay costs incurred by the trustee under subsection (c) of this section with respect to the damaged natural resources.Any amounts in excess of those required for these reimbursements and costs shall be deposited in the Fund.

(g) Compliance

Review of actions by any Federal official where there is alleged to be a failure of that official to perform a duty under thissection that is not discretionary with that official may be had by any person in the district court in which the person resides or inwhich the alleged damage to natural resources occurred. The court may award costs of litigation (including reasonable attorneyand expert witness fees) to any prevailing or substantially prevailing party. Nothing in this subsection shall restrict any right

which any person may have to seek relief under any other provision of law. 122

OPA expressly provides that compensation for injury to natural resources may include “the cost of restoring, rehabilitating,

replacing, or acquiring the equivalent of, the damaged natural resources.” 123 Even without statutory authority, courts havetaken a flexible approach.

In Puerto Rico v. SS Zoe Colocotroni, 124 one of the earliest cases to examine the natural resource damage issue, suit wasbrought under Commonwealth law because the oil spill occurred before the federal provision on natural resource damages had

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gone into effect. The damage was to mangrove forests that had little commercial real estate value, but were important to theecology of the area. In reviewing the decision of the district court, the appellate court observed that the Puerto Rico legislatureobviously meant to sanction the difficult, but perhaps not impossible, task of putting a price tag on resources whose value cannotalways be measured by the rules of the market place. Although the diminution [in *917 value] rule is appropriate in most

contexts, . . . it does not measure the loss which the statute seeks to redress. 125

Later, the court recognized:

In recent times, mankind has become increasingly aware that the planet's resources are finite and thatportions of the land and sea which at first glance seem useless, like salt marshes, barrier reefs, and othercoastal areas, often contribute [in subtle] but critical ways to an environment capable of supporting both

human life and the other forms of life on which we all depend. 126

The district court awarded natural resource damages based on the price of replacing ninety-two million invertebrate organismsthat had been killed by the oil. The court of appeals reversed, finding this measure of damages to be unreasonable becausethe Commonwealth did not actually intend to replace those organisms. As a matter of fact, because the oil had remained inthe mangrove forests, any replacement would have resulted in the death of any newly acquired creatures. The court of appealsaffirmed, however, the district court's rejection of the Commonwealth's proposal to remove and replace the damaged mangrove

trees and oil-impregnated sediments, which the appellate court agreed was “impractical” and “inordinately expensive.” 127 Inremanding the case, the appellate court suggested, without ordering the district court to do so, that an appropriate measure ofdamages might be the acquisition of equivalent resources, that is, the creation of new mangrove forests in a different location

in an area unaffected by the oil spill. 128 The suggestion of the court of appeals has found favor with the federal agencies aswill be discussed below.

The President of the United States directly or indirectly appoints the officials who promulgate environmental regulations,including those that deal with assessing damages for pollution injury to natural resources. Therefore, the philosophy and policiesof the President and his advisors, in a broad sense, influence the content of the regulations. Where the President leans towardsbusiness interests and economic development, the environmental regulations will be weak, that is, less restrictive and less costly.The first regulations relating to oil and chemical pollution damages for injuries to natural resources were promulgated by anadministration that was pro-business. Those *918 regulations and what happened to them are discussed below. Before February5, 1996, damages for injury to, or destruction of, natural resources caused by oil or hazardous substances were calculated

according to regulations promulgated by the EPA, an agency within the Department of the Interior. 129 Thus, the regulationspromulgated before 1996 and, more importantly, judicial decisions determining the validity of the regulations are relevant todischarges of oil that injure natural resources.

Amongst other matters, the regulations mandate a Natural Resource Damage Assessment. The regulations provide for twodifferent types of assessment procedures--Type A and Type B procedures. “Type A procedures are simplified procedures forsmall cases. The current Type A procedures are computer programs, available in a limited range of cases, that model the fate of

a released substance in order to project the injuries caused by the release and calculate damages.” 130 Subsection 301(c)(2) ofCERCLA, the only provision that speaks directly to the form and content of Type A procedures, states that the “regulations shallspecify . . . standard procedures for simplified assessments requiring minimal field observation, including establishing measures

of damages based on units of discharge or release or units of affected area.” 131 Type B procedures outline an assessment

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process and assessment methods that trustees utilize on a case-by-case basis. 132 This form of assessment requires extensivefield investigation and extensive laboratory analyses in contrast with Type A procedures.

The background legislation and regulations regarding the damage assessment process were explained in National Ass'n

of Manufacturers v. U.S. Department of the Interior, 133 a case involving challenges to the Type A natural resourcedamage regulations promulgated by the U.S. Department of the Interior. The National Ass'n Manufacturers case involvedpreenforcement challenges. Pertinent sections of the court's opinion explain in detail the process for assessing natural resourcedamages.

Parts of these regulations were also challenged by some states and pro-environmental groups in the case of Ohio v. U.S.

Department *919 of the Interior. 134 This case considered in particular, whether the regulations could properly limit naturalresource damages to the lost-use value if the cost of restoring or replacing the resource would exceed that value and whetherlost-use values could be measured exclusively by market values when available. It is worth repeating that the statutes, eitherexpressly or by implication, authorize the recovery of damages for injury to natural resources for noneconomic losses and permitthe trustees to seek restoration, replacement, or acquisition of equivalent resources. The holding of the court is clear:

We hold that the regulation limiting damages recoverable by government trustees for harmed naturalresources to “the lesser of” (a) the cost of restoring or replacing the equivalent of an injured resource, or(b) the lost use value of the resource is directly contrary to the clearly expressed intent of Congress and istherefore invalid. We also hold that the regulation prescribing a hierarchy of methodologies by which thelost-use value of natural resources may be measured, which focuses exclusively on the market values for

such resources when market values are available, is not a reasonable interpretation of the statute. 135

The court states further:

The fatal flaw of Interior's approach, however, is that it assumes that natural resources are fungible goods,just like any other, and that the value to society generated by a particular resource can be accuratelymeasured in every case--assumptions that Congress apparently rejected. As the foregoing examination ofCERCLA's text, structure and legislative history illustrates, Congress saw restoration as the presumptively

correct remedy for injury to natural resources. 136

The second issue focused on the emphasis the regulations placed on market value in determining “use” value. The courtdescribed the regulations, as promulgated by the Department of the Interior, as follows:The regulations establish a rigid hierarchy of permissible methods for determining “use values,” limiting recovery to the pricecommanded by the resource on the open market, unless the trustee finds that “the market for the resource is not reasonablycompetitive.” If the trustee makes such a finding, it may “appraise” the market value in accordance with the relevant sections ofthe “Uniform Appraisal Standards for Federal Land Acquisition.” Only when neither the market value nor the *920 appraisal

method is “appropriate” can other methods of determining use value be employed. 137

In striking down the regulations, the court stated:

There are many resources whose components may be traded in “reasonably competitive” markets, but whose total use valuesare not fully reflected in the prices they command in those markets. Interior itself provides ample proof of the inadequacy of the“reasonably competitive market” caveat. For example, DOI has noted that “the hierarchy established in the type B regulation”

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would dictate a use value for fur seals of $15 per seal, corresponding to the market price for the seal's pelt. Another example ofDOI's erroneous equation of market price with use value is its insistence that the sum of the fees charged by the government forthe use of a resource, say, for admission to a national park, constitutes “the value to the public of recreational or other public usesof the resource,” because “these fees are what the government has determined to represent the value of the natural resource andrepresent an offer by a willing seller.” This is quite obviously and totally fallacious; there is no necessary connection betweenthe total value to the public of a park and the fees charged as admission, which typically are set not to maximize profits butrather to encourage the public to visit the park. In fact, the decision to set entrance fees far below what the traffic would bear isevidence of Congress's strong conviction that parks are priceless national treasures and that access to them ought to be as wide

as possible, and not, as DOI would have it, a sign that parks are really not so valuable after all. 138

Since February 5, 1996, natural resource damages resulting from marine oil pollution have been assessed in conformity with

regulations issued by NOAA. 139 These procedures are explained in the case of General Electric Co. v. U.S. Department of

Commerce. 140

One of the characteristics of the U.S. compensation scheme for injury to natural resources is that compensation may be recoveredfor the public's loss of services during the period of time while resources are being restored to baseline. OPA specifically

includes “loss of use of . . . natural resources” as a compensable item. 141 By contrast neither the CWA 142 nor CERCLA 143

expressly refers to loss of use. The courts have interpreted those statutes as authorizing recovery for loss of use, *921 however,

as illustrated by the case of Kennecott Copper Corp. v. U.S. Department of the Interior. 144

In October 2008, the Department of the Interior published regulations amending the CERCLA Type B regulations in response tothe D.C. Circuit's holding in Ohio and Kennecott. Although these regulations apply to the discharge of hazardous substances andnot to oil, they reflect the evolutionary process of formulating appropriate criteria for determining compensation for damage tonatural resources. The new regulations also demonstrate the current thinking of a major U.S. agency charged with implementingthe congressional decision that polluters should pay for damage to natural resources. Furthermore, the CERCLA regulations

and the OPA regulations are very similar in their approaches to this issue. 145

In these regulations, the term “restoration” is used “as an umbrella term for all types of actions that the natural resource damageprovisions of CERCLA and the [CWA] authorize to address injured natural resources, including restoration, rehabilitation,

replacement, or acquisition of equivalent resources.” 146 The regulations purport to shift from an approach that calculates “loss-of-use damages” based on a determination of the value of lost services (including passive-use values) pending restoration byexpanding the scope of the term “restoration” to include measures that provide alternative services, thereby compensating thepublic for the period that the public is denied use of the injured resource. The amended regulations attempt to avoid the needto quantify the cost of a loss of services, which may be difficult to do in some cases, by substituting measures that will permitproviding alternative services under the rubric of restoration.

Under this approach, there are two critical questions: (1) Which services will the public lose during the period of time it takes torestore the injured resource?, and (2) What steps can be taken to make the public whole by providing the public with equivalent,alternative services? 43 C.F.R. § 11.83(c) provides the key for addressing these questions:

(c) Compensable value. (1) Compensable value is the amount of money required to compensate the publicfor the loss in services provided by the injured resources between the time of the discharge or release and thetime the resources are fully returned to their baseline *922 conditions, or until the resources are replacedand/or equivalent natural resources are acquired. The compensable value can include the economic valueof lost services provided by the injured resources, including both public use and nonuse values such as

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existence and bequest values. Economic value can be measured by changes in consumer surplus, economicrent, and any fees or other payments collectable by a Federal or State agency or an Indian tribe for a privateparty's use of the natural resources; and any economic rent accruing to a private party because the Federalor State agency or Indian tribe does not charge a fee or price for the use of the resources. Alternatively,compensable value can be determined utilizing a restoration cost approach, which measures the cost ofimplementing a project or projects that restore, replace, or acquire the equivalent of natural resource serviceslost pending restoration to baseline.

(i) Use value is the economic value of the resources to the public attributable to the direct use of the services provided by thenatural resources.

(ii) Nonuse value is the economic value the public derives from natural resources that is independent of any direct use of theservices provided.

(iii) Restoration cost is the cost of a project or projects that restore, replace, or acquire the equivalent of natural resource serviceslost pending restoration to baseline.

(2) Valuation methodologies. The authorized official may choose among the valuation methodologies listed in this section toestimate appropriate compensation for lost services or may choose other methodologies provided that the methodology cansatisfy the acceptance criterion in paragraph (c)(3) of this section. Nothing in this section precludes the use of a combinationof valuation methodologies so long as the authorized official does not double count or uses techniques that allow any double

counting to be estimated and eliminated in the final damage calculation. 147

Among the valuation methodologies listed in the regulations is “contingent valuation.” 148 In Ohio, the court of appealsdescribed contingent valuation (CV), which is designed to capture noneconomic values and translate them into a dollar figure,as follows:The CV process “includes all techniques that set up hypothetical markets to elicit an individual's economic valuation of a naturalresource.” CV involves a series of interviews with individuals for the purpose of ascertaining the values they respectively attachto particular changes in particular resources. Among the several formats available to *923 an interviewer in developing thehypothetical scenario embodied in a CV survey are direct questioning, by which the interviewer learns how much the intervieweeis willing to pay for the resource; bidding formats, for example, the interviewee is asked whether he or she would pay a givenamount for a resource and, depending upon the response, the bid is set higher or lower until a final price is derived; and a “takeit or leave it” format, in which the interviewee decides whether or not he or she is willing to pay a designated amount of moneyfor the resource. CV methodology thus enables ascertainment of individually--expressed values for different levels of quality

of resources, and dollar values of individual's changes in well-being. 149

It has been strongly argued that CV methodology, although controversial, 150 is an appropriate technique for determining

nonuse values, such as option and existence values. 151 On the other hand, some have advocated a position that would forgo

reliance on CV evidence because it is controversial and subject to claims that it is grossly unreliable. 152 Instead, these CVcritics would simply permit the fact finder, jury or judge, to assess compensation for injuries to natural resources the same as

is done in all tort cases that allow plaintiffs to be compensated for noneconomic injuries. 153 The authors of this Article are notaware of a reported decision that has based damages on CV evidence.

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In fact, in the explanatory section of the amended regulation, the agency recognized the controversy surrounding contingentvaluation but explains:

Estimating option and existence value through the use of contingent valuation methodologies remainscontroversial. We note, however, that our revision's focus on compensating for public losses pendingrestoration with restoration actions rather than monetary damages for the economic value of the losses willprovide options for comparing *924 functional losses from resource injuries to functional gains expectedfrom restoration actions, which will reduce the need for trustees to seek to recover the monetary value of

passive economic losses such as option and existence value. 154

The amended regulations permit the use of other similar valuation methodologies, including “conjoint analysis,” which “[l]ikecontingent valuation, . . . is a stated preference method. However, instead of seeking to value natural resource service lossesin strictly economic terms, conjoint analysis compares natural resource service losses that arise from injury to natural resource

service gains produced by restoration projects.” 155

The approach adopted by the amended CERCLA regulations is similar to the approach in the regulations NOAA promulgatedto implement the natural resource damages provisions in OPA. The NOAA regulations contain the following definitions:

Restoration means any action (or alternative), or combination of actions (or alternatives), to restore,rehabilitate, replace, or acquire the equivalent of injured natural resources and services. Restorationincludes:

(a) Primary restoration, which is any action, including natural recovery, that returns injured natural resources and services tobaseline; and

(b) Compensatory restoration, which is any action taken to compensate for interim losses of natural resources and services thatoccur from the date of the incident until recovery.

Services (or natural resource services) means the functions performed by a natural resource for the benefit of another natural

resource and/or the public. 156

Further, the regulations provide simply:

(2) Trustees must consider a reasonable range of restoration alternatives before selecting their preferredalternative(s). Each restoration alternative is comprised of primary and/or compensatory restorationcomponents that address one or more specific injury(ies) associated with the incident. Each alternativemust be designed so that, as a package of one or more actions, the alternative would make the environmentand public whole. Only those alternatives considered *925 technically feasible and in accordance with

applicable laws, regulations, or permits may be considered. 157

A recent oil spill incident reveals how NOAA applies its regulations in assessing damages for injury to natural resources causedby the discharge of oil into the navigable waters of the United States. The M/T ATHOS I (ATHOS) sailed from Venezuelafor the Citgo Refinery in Paulsboro, New Jersey. The ATHOS was a single bottom, double-sided vessel, carrying a cargo ofthirteen million gallons of Bachaquero Venezuelan crude. As the vessel was being docked at the refinery, she struck severalsubmerged objects and spilled approximately 263,371 gallons of oil into the Delaware River. Over the following months, the

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oil spread downriver, threatening natural resources over 115 river miles and 280 miles of shoreline and affecting three states,

New Jersey, Pennsylvania, and Delaware. 158 In September 2009, NOAA and various other federal and state agencies issueda Final Restoration Plan and Environmental Assessment for the November 26, 2004, M/T Athos I Oil Spill on the Delaware

River near the Citgo Refinery in Paulsboro, New Jersey (Final Plan). 159

The trustees identified four areas of natural resource injuries: (1) shoreline, (2) bird and wildlife, (3) aquatic, and (4) recreational

resources. 160 The trustees assessed the magnitude of the injury and the time for full recovery:Injury assessments conducted by the Trustees and other experts identified the following injuries to natural resources andrecreational services from the spill:

• Shoreline--1,729 acres were very lightly, lightly, moderately, or heavily oiled.

• Tributaries--Six tributaries, with a total area of 1,899 acres, were exposed to very light to moderate oiling.

• Aquatic--412 acres were exposed to Athos oil.

• Birds--11,869 estimated dead (includes direct and indirect losses, a majority of which were swans and geese).

• Recreational services--An estimated 41,709 trips on the river were affected by the spill, with an estimated lost value of

$1,319,097. 161

*926 A determination was made that “active primary restoration” actions would be of little use because they would not

significantly accelerate recovery to baseline levels. Instead, the trustees chose natural recovery for primary restoration. 162

Further, inasmuch as the NOAA regulations allow for compensatory restoration pending full recovery of the injured resources,the trustees “identified and evaluated a wide range of project alternatives capable of restoring ecological services comparableto those lost due to injury to shoreline, aquatic, birds and wildlife, and recreational resources at or in the vicinity of the

discharge.” 163 Basically, this approach accepts the reality that the public will be denied access to certain injured naturalresource services until the resource is fully recovered and develops strategies to provide alternative natural resource servicesin the affected area. The projects selected to address the ATHOS spill include oyster reef enhancement, marsh restoration,grassland restoration, acquisition of a wet meadow, pond and pasture enhancement, shoreline restoration, habitat restoration,

dam removal, boat ramp installations, and trail and habitat improvements. 164 It is possible this “compensatory restoration”approach may be used, at least in Louisiana, finally to embark on a major, serious effort to prevent further loss and to restoreLouisiana's wetlands.

In the context of the Deepwater Horizon discharge, the assessment and calculation of natural resource damages will takeconsiderable time and effort. The first problem will be to establish what has been lost. In other words, how many fish andshellfish, such as shrimp and oysters, have been killed? A baseline must be established to determine the ultimate loss caused bythe discharge. For example, how many redfish existed before the discharge, and how many exist after the discharge? If fewerfish or shellfish remain than previously existed, it will then be necessary to determine if the diminution is attributable to thespill or to some other cause, such as algae blooms or fresh-water diversion.

*927 Because state and federal officials monitor certain species of fish, such as red snapper and redfish, to prevent theirdepletion and even impose limits on how many may be harvested, determining the preaccident baseline may be possible.Moreover, because these fish have a market value, setting a dollar amount on the loss of these natural resources may be easier

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than for other natural resources. These fish also provide recreation for many people, however, and the value of those servicesmust also be calculated. Determining the loss of the recreational value of even these types of fish may not be as easy asdetermining their lost market value.

Of course, for other fish, the stocks of which may not be monitored, the task will be more difficult. Similarly, there is also aproblem in evaluating the loss of creatures that have no commercial or recreational value, like pelicans. How will the loss ofa brown pelican, the state bird of Louisiana, be valued?

As difficult as these problems are, an even more difficult problem relates to evaluating the long-term effects of the spill.What effect will the spill have on future fish populations? For example, if a female fish has been killed and, therefore, cannotreproduce, society has not only lost that fish but future fish that she would have produced. Further, what effect, if any, willthe spill have on the food chain of redfish, snapper, and other commercial and recreational fish? How long will it take forcertain species to show the effects of their exposure to the oil? Because loss of use is a compensable element of natural resourcedamages, it will also be important to determine how long it will take depleted stocks of fish and shellfish to return to baseline.Regardless, do we even have the science to answer these questions? It is said that the salmon industry has recovered in Alaskaafter the EXXON VALDEZ incident but the herring industry has not. That incident occurred more than twenty years ago, andthe effects are still being felt. The issues will be further complicated by the size of the Deepwater Horizon discharge, thelargest in U.S. waters, and one that affects states from Texas to Florida.

D. Economic Losses

The second area of damages that may prove controversial is 33 U.S.C. § 2702(b)(2)(E), which authorizes recovery for “loss of

profits or impairment of earning capacity.” 165 In contrast to subsection (B), which allows recovery for injury to property andresultant economic *928 loss but restricts recovery to the owner or lessee of the property, subsection (E) authorizes recoveryof loss of profits or earning capacity by any claimant. The only restriction imposed by subsection (E) is that the loss must be

attributable “to the injury, destruction, or loss of real property, personal property, or natural resources.” 166 In other words, aclaimant may recover damages for its lost profits or impaired earning capacity even though the claimant does not own or lease

the damaged real property, personal property, or natural resources that have caused the claimant's loss. 167

The significance of this provision of OPA may be seen by comparing the recovery available under § 2702(b)(2)(E) to therecovery permitted under the general maritime law, as well as the laws of many states, for such losses. Before OPA's enactment,

courts followed the rule set forth by the United States Supreme Court in Robins Dry Dock & Repair Co. v. Flint 168 in evaluatingclaims for economic losses resulting from oil pollution. In Robins, the owner of a vessel chartered the vessel to another partyunder a time charter that provided that the vessel would be periodically placed in dry dock for maintenance. While dry docked,

the repair yard damaged the vessel's propeller, which delayed the vessel's return to service under the time charter. 169 The timecharterer sued the repair yard, claiming lost profits for the period of time it was unable to use the vessel.

The Supreme Court, in an opinion written by Justice Holmes for a unanimous court, denied the claim. The Supreme Court heldthat the time charterer had no claim against the repair yard in contract because it was neither a party to the owner's contract with

the repair yard nor a third-party beneficiary of that contract. 170 The charterer likewise had no claim in tort against the repairyard because the charterer did not own the vessel, and according to Justice Holmes, “no authority need be cited to show that, asa general rule, at least, a tort to the person or *929 property of one man does not make the tortfeasor liable to another merely

because the injured person was under a contract with that other, unknown to the doer of the wrong.” 171

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Following the Supreme Court's holding in Robins, lower federal courts have generally read Robins to have established a bright-line rule--the “Robins Rule”--precluding a plaintiff's recovery of purely economic losses in the absence of physical damage to

property in which the plaintiff had a proprietary interest. 172 The Robins Rule applies, in particular, to negligence claims underthe general maritime law. Accordingly, courts have denied recovery under maritime tort law for economic losses unaccompanied

by physical injury to a proprietary interest, that is, property the plaintiff either owned or leased. 173

In addition, in Middlesex County Sewerage Authority v. National Sea Clammers Ass'n, 174 the Supreme Court further limitedthe legal theories available for the recovery of purely economic losses caused by the pollution of navigable waters. The SupremeCourt held that a fish and shellfish harvesting organization, as well as one of its members, had no implied right of action under

the CWA to recover their economic losses. 175 Sea Clammers also refused to permit recovery under a common law nuisance

theory on the ground that the CWA preempted such actions. 176 A number of courts have extended that *930 holding to bar

similar claims under a maritime nuisance theory as well. 177

The lower federal courts have recognized only a limited number of exceptions to the Robins Rule in maritime cases. In particular,commercial fishermen have been permitted to recover for economic losses when oil or other pollution has closed the areas in

which they fished. 178 The master and crew of fishing vessels working under a lay-share agreement have similarly been allowed

to recover their lost profits. 179 Courts have also recognized a “common venture exception” in cases brought by cargo ownerswho have incurred general average and other expenses as a result of a collision involving the vessel carrying their cargo, even

if the cargo itself was not damaged. 180 Claims for economic losses that are intentionally caused fall under an exception to

the Robins Rule as well. 181 Because the exceptions to the Robins Rule are so limited, Robins would likely greatly limit therecoverable economic loss claims arising from the Deepwater Horizon if general maritime law were the only applicable law.

In enacting § 2702(b)(2)(E) of OPA, Congress plainly intended, however, to overrule Robins legislatively with respect to claimsfor lost profits and impairment of earning capacity resulting from oil spills. *931 The legislative history for OPA states thatthe “owner or operator of a vessel shall be liable . . . notwithstanding . . . the absence of any physical damage to the proprietary

interest of the claimant.” 182 Nevertheless, since the enactment of OPA, relatively few published opinions have addressedrecovery under § 2702(b)(2)(E) and especially the scope of recovery permitted by that provision. The courts that have addresseddamages under this section have generally either awarded lost profit damages or permitted such claims to proceed withouthaving to determine more than that § 2702(b)(2)(E) allows a claimant to recover lost profits resulting from damage to propertyor natural resources due to an oil spill whether or not the claimant owns the damaged property or natural resources. Thus, onecourt has recognized a drilling platform owner's right to recover for the loss of future production revenues when it had to shut

in its platform during the investigation of an oil spill from a damaged seismic cable. 183 Another district court has allowedeconomic loss claims by a claimant unable to access its production platform and others unable to conduct their businesses due

the shutdown of the Gulf Intracoastal Waterway following an oil spill caused by a barge striking a well in Bayou Perot. 184

Likewise, a grain elevator operator has been permitted to recover demurrage and other delay damages resulting from the Coast

Guard's closure of its loading berth following an oil spill. 185

The courts have not determined, however, how literally to read § 2702(b)(2)(E). Section 2702(b)(2)(E) states that “any claimant”

may recover for its loss of profits or impairment of earning capacity. 186 Does OPA allow any claimant who can show that anoil spill has caused it to suffer economic losses to recover--no matter how remote--or will the courts impose some limits onsuch recovery? In the context of a small, contained spill, this question may not be of *932 great significance or too difficultto answer. When confronted with a spill the magnitude and breadth of one like the Deepwater Horizon incident, which, at

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a minimum, has affected individuals and business across the Gulf Coast, this question becomes more important and difficultto answer.

As discussed above, OPA has certainly removed at least one of the prior impediments to the recovery of economic losses, i.e.,lost profits and impairment of earning capacity resulting from an oil spill. The claimant does not have to demonstrate that it

owned or leased the property or natural resources that have been damaged by the spill and that caused the claimant's losses. 187

OPA provides little, if any, guidance, however, as to what types of individuals and businesses may seek recovery for theirlost profits and how closely their losses must be tied to, or result from, the spill. OPA appears to have codified the common

law exception to the Robins Rule for commercial fishermen recognized by some courts. 188 Otherwise, neither the Act nor itslegislative history provides definitive guidance on the scope of the section.

The Deepwater Horizon accident has spawned economic loss claims that go well beyond the claims of commercial fishermenwho have lost income because the spill and the cleanup operations have closed the areas in which they catch fish and shellfishor the oil has, in fact, killed or contaminated the fish and shellfish. For example, claims have been brought by boat charterers,seafood wholesalers, seafood processors, and various businesses that supply equipment and goods to commercial fishermen.Seafood and other restaurants along the Gulf Coast and beyond have filed claims and lawsuits, seeking to recover their lostprofits caused by the spill. Hotels and beachfront resorts have likewise sought to recover their lost income because the spill has*933 damaged their beaches or otherwise driven tourists away from their communities. The owners of condominiums and

other property in areas affected by the spill have made claims for the diminution in the value of their property resulting fromboth physical damage to the property as well as the threat of the oil pollution. Obviously, few, if any, of these claims would becognizable under Robins, but which of these claims are or should be recoverable under § 2702(b)(2)(E)?

As noted previously, little jurisprudence exists to assist in answering this question. One potential source of guidance in applying§ 2702(b)(2)(E) is Judge Wisdom's dissent in Louisiana ex rel. Guste v. M/V Testbank. In Testbank, an inbound bulk carriercollided with the M/V TESTBANK in the Mississippi River Gulf Outlet, causing a discharge of a hazardous chemical intothe water. The Coast Guard closed the outlet to navigation from July 22, 1980 to August 10, 1980, thereby suspending all

fishing, shrimping, and related activities in the outlet and for 400 square miles of surrounding marsh and waterways. 189 Forty-one lawsuits were filed, presenting claims of shipping interests, marina and boat rental operators, wholesale and retail seafood

enterprises not engaged in fishing, seafood restaurants, tackle and bait shops, and recreational fishermen. 190 A majority of theen banc court affirmed the application of the Robins Rule to the plaintiffs' claims, finding that Robins supplied an appropriately

pragmatic, bright-line rule for the plaintiffs' economic loss claims. 191

Judge Wisdom, dissenting, disagreed that the Robins Rule applied to the plaintiffs' claims because, unlike in Robins, the allegedtortfeasor in Testbank had directly caused the plaintiffs' injuries, and they did not have to rely upon a claimed interference with

contract to recover. 192 Instead, Judge Wisdom opined that the plaintiffs' claims should be analyzed under the conventional tort

principles of foreseeability, proximate cause, and particular damage. 193 Judge Wisdom concluded:

In a maritime accident, a business suffers “particular” damages to the extent that the accident prevents thebusiness from engaging in primary maritime activities . . . . All other losses that are not peculiar to *934maritime activities are part of the general economic dislocation caused by the accident and are therefore

not “particular.” 194

Applying this rule, the dissent found that commercial fishermen who routinely operated in the areas temporarily closed by theCoast Guard and ships trapped or delayed by the closure should be able to recover for their economic losses. These losses

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were deemed foreseeable, proximately caused by the closure, and sufficiently distinct from the losses of the general public. 195

For land-based businesses, which presented more difficult cases, the “general test of recovery [was] whether their business ofsupplying a vital commodity or service to those engaged in the maritime industry ha[d] been interrupted by the collision, the

closure, or the embargo.” 196 Judge Wisdom concluded that under this test, marinas, dry docks, boat charterers, bait and tackle

shops, seafood processors, and seafood wholesalers should all be permitted to recover for their economic losses. 197 JudgeWisdom drew the line, however, at restaurants, which he found were “not providers of a vital service to the afflicted area[s]”

and did not have damages “sufficiently distinguishable from general economic dislocation to allow for recovery.” 198

In the context of a spill like the one caused by the Deepwater Horizon accident, Judge Wisdom's alternative rule, whileproviding a possible starting point, seems too narrow. For example, it is questionable whether, under Judge Wisdom's test, abeachfront hotel could recover its lost profits caused by a lack of reservations following the spill because it arguably did not

provide “a vital commodity or service to those engaged in the maritime industry.” 199 Nevertheless, under OPA, if a beachfronthotel owned a beach that became oiled because of the Deepwater Horizon accident and guests stayed away because they couldnot use the beach, the hotel could certainly recover for the physical damage to the beach as well as its lost profits arising from therelated loss of use of the beach. Why should an adjacent hotel that did not own the beach used by its guests be treated differently

under OPA? It is suggested that no rational or legal *935 distinction may be drawn between these two situations. 200 Boththe size of the spill and the scope of the area it affected are significantly greater than the United States Court of Appeals for theFifth Circuit confronted in Testbank. Consequently, the economic damages caused to a broader group of businesses, whetheror not they provide a vital commodity or service to the maritime industry, and across a greater geographical area should havebeen foreseeable due to the magnitude of this type of an accident and its location off the Gulf Coast of the United States.

Following the Deepwater Horizon accident and the ensuing oil spill, the Gulf Coast Claims Facility (GCCF) was established

by BP to administer claims by individuals and businesses for damages arising from the accident. 201 BP agreed to create a $20billion escrow account to pay claims submitted to, and approved by, the GCCF. The GCCF purports to be an “independent

claims facility,” which does not report to, or take direction from, BP although BP provides its funding. 202 The GCCF has takenvarying positions on the scope of economic loss claims that it will pay since its creation.

On August 23, 2010, the GCCF issued its Protocol for Emergency Advance Payments, setting forth the procedures foremergency advance payments by individuals and businesses for costs and damages incurred due to the Deepwater Horizonincident. Although the GCCF has often been criticized by claimants as being too slow and providing too limited a recovery, itsinitial claims protocol seemed, at least, to recognize a potentially broader range of recoverable damages under § 2702(b)(2)(E)than Judge Wisdom's rule may have allowed. The GCCF stated initially:

[The GCCF will] only pay for harm or damage that is proximately caused by the Spill. The GCCF's causationdeterminations of OPA claims will be guided by OPA and federal law interpreting OPA and the proximatecause doctrine. . . . The GCCF will take into account, among *936 other things, geographic proximity,

nature of industry, and dependence upon injured natural resources. 203

The Protocol for Emergency Advance Payments applied this causation analysis expressly to claims for lost profits and

impairment of earning capacity. 204 The GCCF indicated subsequently, however, that geographic proximity (or, presumably,

a lack of it) would not prevent “legitimate” business loss claims from being processed. 205

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Later, on November 22, 2010, the GCCF issued its Protocol for Interim and Final Claims, which the GCCF subsequently revised

on February 8, 2011. 206 The Protocol for Interim and Final Claims explains the causation analysis to be applied by the GCCFin different terms than the earlier protocol: “The GCCF will only pay for harm or damage that is proximately caused by the

Spill. The GCCF's causation determinations of OPA claims will be guided by OPA and federal law interpreting OPA.” 207 TheProtocol for Interim and Final Claims requires the spill to have proximately caused a claimant's damages as under the Protocolfor Emergency Advance Payments but does not provide any further guidance on what considerations will inform the GCCF'sdecisions. Unlike the Protocol for Emergency Advance *937 Payments, the Protocol for Interim and Final Claims does notstate that the GCCF will be guided by the “proximate cause doctrine” or considerations of geographic proximity, the nature ofthe claimant's industry, or its dependence upon injured natural resources. The GCCF's intention of relying solely upon “OPAand federal law interpreting OPA” in administering claims seems particularly puzzling as it relates to economic loss claimsbecause, as discussed previously, OPA does not expressly define which claimants or types of claimants may recover under §2702(b)(2)(E), and there is scant jurisprudence interpreting that provision of the Act.

Adding to the confusion over what standards the GCCF intends to apply to interim and final economic loss claims is the factthat, on the same day the GCCF issued its Protocol for Interim and Final Claims, a report prepared by Professor John C.P.Goldberg of Harvard Law School on liability for economic loss associated with the Deepwater Horizon accident was alsomade available. The GCCF's Protocol for Interim and Final Claims does not reference Professor Goldberg's report. Likewise,in his report, Professor Goldberg states:

[This report] is not provided to establish the terms on which GCCF funds ought to be distributed. . . .This report is instead intended to provide an assessment of the legal liability BP and/or its subsidiaries canbe expected to face if certain claims against it are pursued in courts of law--specifically, claims seekingcompensation for economic loss not predicated on personal injury or physical damage to the claimant's

property. 208

Nevertheless, in transmitting a copy of his report to the GCCF's administrator, Kenneth R. Feinberg, Professor Goldbergindicated that he was providing the report to Mr. Feinberg at his request.

The Goldberg Report focuses primarily on two aspects of a responsible party's potential liability for economic losses sufferedas a result of an oil spill under OPA. First, the report concludes that “a person may obtain compensation for economic lossfrom a party responsible for a spill if she can prove that her loss is ‘due to’ harm to property or resources that ‘result[s] from’

the spill, irrespective of whether she owns that property or those resources.” 209 Second, the *938 report defines the scopeof liability for such claims as limited only to “those economic loss claimants who can prove that they have suffered economicloss because a spill has damaged, destroyed or otherwise rendered physically unavailable to them property or resources that

they have a right to put to commercial use.” 210

The Goldberg Report starts from a premise that the scope of liability under § 2702(b)(2)(E) should be narrow: “A longstandingcanon of statutory construction holds that when statutes depart from common law (including admiralty law), those departures

should be construed narrowly.” 211 Indeed, the report construes recovery under this section narrowly in stating a test based uponwhether the claimant had a right to put the damaged property or natural resources to use. On the other hand, one might suggestthat by providing for the recovery of damages for economic loss unrelated to a claimant's ownership of property, Congressevidenced a clear legislative intent to overrule Robins for certain claims and in doing so, enacted remedial legislation that oughtto be construed liberally. Although the Goldberg Report proposes a principled construction of § 2702(b)(2)(E), its analysis ofpotential liability/recovery under that section is too narrow and even inconsistent in a number of respects. Indeed, the report'sanalysis arguably does not address claims that, at one extreme, may be expected to arise following most oil spills in navigable

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waters and, at the other extreme, the really tough claims presented by a spill of special magnitude, such as the DeepwaterHorizon incident.

First, the report's analysis is too narrow because it does not appear to permit recovery by many parties directly involved inproviding or servicing primary maritime activities even though those parties rely upon natural resources in conducting theirbusinesses. The Goldberg Report asserts:

OPA's economic loss provisions are best understood as expanding liability for economic loss beyond ownersand lessees of property that has been damaged to any person whose business's profitability depends on hisor her ability to exercise a right physically to obtain or use property or resources that are damaged or lostbecause of an oil spill. This would include, most obviously, commercial fishermen who are *939 deprivedof physical access to fishing stocks, or deprived of the use of boats and other equipment that they do notown or lease but that they use to fish. It would also extend liability to owners of commercial beachfrontproperty that is not itself contaminated with oil, but is located in the immediate vicinity of coastal watersor shorelines that have suffered pollution, and thus interferes with actual use of their properties as hotels,

resorts, and the like. 212

With the exception of commercial fishermen and a barge owner, however, most of the examples provided by the report do not

even involve maritime industries that would typically be expected to be impacted by oil spills in navigable waters. 213

Except by an expansive reading of the report's analysis, it does not include persons who are not commercial fishermen but area vital and integral part of the fishing and maritime industries, such as those who supply fishermen and their boats with thenecessaries required for fishing. The test adopted by the report would likewise not recognize recovery for those who form acritical link in the distribution of fish, such as processors and wholesalers. Businesses that service the maritime industry, suchas ship repairmen and dry docks, also fall outside the report's scope of recovery. As discussed previously, with regard to suchpersons, Judge Wisdom's dissent in the Testbank case presents a preferable approach, albeit even his test should only be usedas a starting point in addressing these economic loss claims.

OPA obviously deals principally with oil spills in the marine environment, but the Goldberg Report does not consider in anygreat detail the types of claims that would ordinarily arise in the context of the types of spills typically encountered in navigablewaters. The report concludes, for example, that a barge owner who could not access a river on which it usually operated itsbarges would “probably” fall into the category of parties who, upon a proper showing of loss *940 and causation, could

recover its lost profits. 214 Oil spills in many navigable bodies of water are likely to affect maritime commerce in preciselythis way, preventing commercial vessels from accessing or leaving ports or using waterways to transport cargo and therebyincurring demurrage, additional freight, or other costs. It is submitted that these types of claims, which ordinary spills coveredby OPA may be expected to cause, should fall within whatever test is devised for construing the scope of § 2702(b)(2)(E).The Deepwater Horizon incident presents an extraordinary situation resulting from a catastrophic release of oil and, therefore,represents a situation in which the ordinary scope of recovery under OPA may need to be expanded, not narrowed. The GoldbergReport does not address the unique maritime locale covered by OPA.

Second, the report's analysis may be inconsistent in its approach to the “universe” of potential claims it seeks to address. In oneof the hypothetical claims considered by the report, it would allow both the “hotel owner who loses profits because neighboringbeaches and waters that his customers tend to use are polluted, and the employee of that hotel who loses wages because of the

hotel's loss of business” to recover their lost income. 215 The conclusion that both the hotel owner and its employees should becompensated for their economic losses under § 2702(b)(2)(E) does seem to the authors of this Article to be correct. Nevertheless,

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the report's proposed construction of this section arguably does not lead to the result reached for either the hotel owner or theemployee. If the hotel does not own or lease the neighboring beach, it could be argued that the hotel's owner has no right to

access or use the damaged or threatened natural resources allegedly giving rise to its claim. 216 Similarly, even if the hotelowner *941 could assert a claim, it would be a greater reach under the report's analysis for the employee to demonstrate thathis economic wellbeing is based upon his right to access or use the neighboring beach or waters.

Third, the report could be said to punt on the really hard cases presented by the Deepwater Horizon incident and other oilspills. In addressing local business claims, such as a restaurant, real estate agent, and furniture store, the report states that “it

would be entirely appropriate to conclude that they should not recover.” 217 But the report's very next sentence goes on to say:

[T]heir commercial activities are very closely bound up with local economics that revolve around the use ofresources and property that have been damaged. And there is some reason to suppose that Congress, actingwith the Exxon Valdez spill very much in mind, was especially focused on the adverse economic effects of

spills on the residents of shoreline communities physically affected by a spill. 218

The latter observation is true and calls into question the preceding conclusion.

A moratorium on fishing, crabbing, and shrimping in the Gulf of Mexico affects the entire country. A large percentage of the fishand seafood consumed in the United States comes from the Gulf, and by limiting the supply, the availability and price of thesefoods will be adversely affected. The effect of an oil spill, especially one of the magnitude and scope of the Deepwater Horizonincident, on the local economy dwarfs these national consequences and has already been felt across a broad spectrum of localbusinesses. The word “local” must be analyzed realistically. For example, the economic link between a tourism-dependent citysuch as New Orleans and the fishing and seafood communities of South Louisiana is strong. The interpretation, *942 then,of § 2702(b)(2)(E) should be calibrated to reflect the full impact of the Deepwater Horizon incident. In this regard, it shouldbe noted that, even under the CLC and Fund Conventions, which are generally considered to be less generous than OPA, hotel

owners and restaurants that cater to tourists are permitted to recover their loss of profits. 219

Lastly, the approach to a relatively small, localized spill would be expected to have an economic impact in a smaller, morenarrowly circumscribed “community.” The converse may be said with regard to a larger, less localized discharge. When itcomes to unprecedented discharges such as the Deepwater Horizon, however, it may be that the “one size fits all” approachdoes not work. Instead, a more pragmatic approach may be required to determine which lines based upon geographic proximity,

for example, may have to be drawn. 220 Some hotels and restaurants in resort communities that were not directly impacted byoil may nevertheless have been threatened with the possibility of sustaining direct pollution damage, whereas other hotels andrestaurants further away from the spill may also have suffered economic losses as a result of general negative public perceptionabout tourism in the Gulf region or the safety of Gulf seafood. A court could allow the claims of the former, but not the latter,not as a matter of principle based on the language of the statute but on purely pragmatic grounds. That seems to be appropriatein a case as extraordinary as the Deepwater Horizon. Nevertheless, even in relation to claims falling on the wrong side of theline for recovery of economic loss, it might be appropriate to impose on the discharger the costs of an advertising campaign to

offset the negative publicity occasioned by its act. Such claims have been approved under the CLC and Fund Conventions. 221

*943 V. Limitation of Liability

One of the important components of OPA is its limitation of liability provisions. OPA's liability limits vary according to thesource of the pollution. Section 2704(a) of the Act currently states that the limits of liability for a responsible party are:

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(a) General rule

Except as otherwise provided in this section, the total of the liability of a responsible party under section 2702 of this title andany removal costs incurred by, or on behalf of, the responsible party, with respect to each incident shall not exceed --

(1) for a tank vessel the greater of --

(A) with respect to a single-hull vessel, including a single-hull vessel fitted with double sides only or a double bottom only,$3,000 per gross ton;

(B) with respect to a vessel other than a vessel referred to in subparagraph (A), $1,900 per gross ton; or

(C) (i)with respect to a vessel greater than 3,000 gross tons that is --

(I) a vessel described in subparagraph (A), $22,000,000; or

(II) a vessel described in subparagraph (B), $16,000,000; or

(ii) with respect to a vessel of 3,000 gross tons or less that is --

(I) a vessel described in subparagraph (A), $6,000,000; or

(II) a vessel described in subparagraph (B), $4,000,000;

(2) for any other vessel, $950 per gross ton or $800,000, whichever is greater;

(3) for an offshore facility except a deepwater port, the total of all removal costs plus $75,000,000; and

(4) for any onshore facility and a deepwater port, $350,000,000. 222

Section 2704 requires, however, that these limits be adjusted not less than every three years to reflect significant increases

in the Consumer Price Index. 223 Accordingly, the Coast Guard revised these limits, effective July 31, 2009, to provide thefollowing higher limits:

(a) Vessels. The OPA 90 limits of liability for vessels are --

*944 (1) For a single-hull tank vessel greater than 3,000 gross tons, the greater of $3,200 per gross ton or $23,496,000;

(2) For a tank vessel greater than 3,000 gross tons, other than a single-hull tank vessel, the greater of $2,000 per gross ton or$17,088,000.

(3) For a single-hull tank vessel less than or equal to 3,000 gross tons, the greater of $3,200 per gross ton or $6,408,000.

(4) For a tank vessel less than or equal to 3,000 gross tons, other than a single-hull tank vessel, the greater of $2,000 per grosston or $4,272,000.

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(5) For any other vessel, the greater of $1,000 per gross ton or $854,400.

(b) Deepwater ports. The OPA 90 limits of liability for deepwater ports are --

(1) For any deepwater port other than a deepwater port with a limit of liability established by regulation under Section 1004(d)(2) of OPA 90 (33 U.S.C. 2704(d)(2)) and set forth in paragraph (b)(2) of this section, $373,800,000;

(2) For deepwater ports with limits of liability established by regulation under Section 1004(d)(2) of OPA 90 (33 U.S.C.2704(d)(2)):

(i) For the Louisiana Offshore Oil Port (LOOP), $87,606,000. 224

Section 2704 contains two limitations provisions that are of particular relevance to the Deepwater Horizon incident. First, foroffshore facilities (other than deepwater ports), such as the Macondo well, the responsible party is liable for all removal costs

and up to $75,000,000 in damages under § 2702(b)(2). 225 Unlike the limits for vessels, the limit for offshore facilities does notinclude removal costs, for which OPA provides no limit. When Congress debated OPA, a number of senators opposed limiting

liability for removal costs and damages for spills emanating from an Outer Continental Shelf (OCS) facility. 226 In stating theirreasons for objecting to the proposed liability limits for those “who cause spills of oil” on the OCS, these senators *945 madea strong case for imposing unlimited liability for removal costs for such spills, as was ultimately adopted. Indeed, followingthe Deepwater Horizon accident, these views seem prescient:

There are several good reasons for maintaining one policy with respect to oil tankers and other facilitieshandling oil, but a different one with respect to OCS facilities.

First, spills from OCS facilities will by definition occur in areas which are environmentally sensitive, while tanker accidentsmay not.

. . . .

Second, like airline tragedies, although spills for OCS facilities may be infrequent, they will likely be catastrophic when theydo occur. Vessels--even extremely large ones such as the Amoco Cadiz and the Exxon Valdez--carry finite supplies of oil, andusually only a portion of the cargo is lost because it is compartmentalized. Such was the case with the Exxon Valdez, whichlost only a fraction of the total amount of oils she was carrying.

OCS spills, in contrast, can involve prodigious and seemingly unlimited quantities of crude oil. The size of such spills can beenough to fill hundreds [or] even thousands of tankers the size of the Exxon Valdez.

Finally, OCS spills are often difficult to control. 227

The damage claims that have been asserted following the discharge from the Macondo well as well as the $20 billion fundcreated by BP suggest--or maybe confirm--that the $75,000,000 limit is likewise insufficient now in light of contemporarydrilling activities.

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Second, a MODU, such as the Deepwater Horizon, a semi-submersible drilling rig, “being used as an offshore facility isdeemed to be a tank vessel with respect to the discharge, or the substantial threat of a discharge, of oil on or above the surface of

the water.” 228 If the removal costs and damages resulting from an incident involving a MODU exceed the amount for which

the responsible party is liable, then the MODU is deemed an offshore facility. 229 Thus, the responsible party for the offshorefacility, the lessee or permittee, becomes liable for any excess liability with respect to the oil discharged on or above the surface

of the water. 230

*946 These liability limits expressly apply to discharges of oil that are proscribed by the Federal Water Pollution Control Act

as amended by the CWA and OPA. OPA supersedes the general Shipowner's Limitation of Liability Act, 231 which does not

apply to vessels that discharge oil. 232 To the extent that non-OPA 233 claims exist under other laws, such as claims againstnon-sole-cause third parties under the general maritime law, the OPA limitations provisions do not apply, and the generallimitations provisions would apply to those parties who are shipowners. Not only does the substance of the general Shipowner'sLimitation of Liability Act not apply, but neither its procedural provisions nor Rule F of the Supplemental Rules for Admiralty

or Maritime Claims and Asset Forfeiture Actions apply. 234 For responsible parties, the inapplicability of those provisionsmeans the concursus procedure of the general Shipowner's Limitation of Liability Act and its implementation in Rule F may

not be invoked to enjoin multiple proceedings to force all claims into a single proceeding under OPA. 235

Another anomaly of OPA limitation occurs when a small vessel is the sole cause of a discharge from a much larger vessel, suchas an incident involving a tug boat and the vessel it is assisting. Even where a sole-cause third-party defense may be available,the discharging vessel is expected to remove the oil and then seek redress against the third party. In National Shipping Co.

of Saudi Arabia v. Moran Trade Corp. of Delaware, 236 a tug collided with the cargo ship it was assisting, causing the cargoship to discharge oil. The owner of the cargo ship *947 paid to have the oil removed and then sought indemnity from thetug owner. Under § 2702(d), a sole-cause third party may be held liable for a discharge of oil, but its liability is subject to the

limits in § 2704 that would apply to the third party's vessel. 237 As a result, the court calculated the third party's liability basedon its tonnage, and the cargo vessel owner was not entitled to a full indemnity, which would have exceeded the third party's

limitation amount under § 2702(d). 238

OPA also provides exceptions to the right of responsible parties to limit their liability. Thus a responsible party's right to limitits liability is not absolute, but the claimant bears the burden of proving one of the exceptions to break limitation. A responsible

party loses the right to limit its liability if its gross negligence or willful misconduct proximately caused the incident. 239

Likewise, the right to limit does not apply where the responsible party's violation of an applicable federal safety, construction, or

operating regulation proximately caused the incident. 240 These exceptions apply not only where the responsible party commitsan act of gross negligence or willful misconduct or violates an applicable regulation, but also if an agent or employee of the

responsible party or a person acting pursuant to a contractual relationship with the responsible party does. 241

The responsible party will also lose the right to limit its liability where it fails or refuses:

*948 (A) to report the incident as required by law and the responsible party knows or has reason to knowof the incident;

(B) to provide all reasonable cooperation and assistance requested by a responsible official in connection with removal activities;or

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(C) without sufficient cause, to comply with an order issued under subsection (c) or (e) of section 1321 of this title or the

Intervention on the High Seas Act (33 U.S.C. 1471 et seq.). 242

Congress adopted higher limits of liability in OPA because it viewed the limits under the Federal Water Pollution Control Act,as amended by the CWA, and the international regime as too low. It is doubtful, however, whether OPA's limitation provisionswill play any real role in respect of the Deepwater Horizon incident. BP has advised the federal district court before which thespill claims have been consolidated that it will waive its right to limit under OPA and that it has already paid claims in excess of

the statutory limit. 243 Although to date, Transocean, Anadarko, and MOEX have not similarly waived their rights to limitation

under OPA, BP urged them to do so “unequivocally” in its court filing. 244 Transocean has, in contrast, filed a limitation actionunder the Shipowner's Limitation of Liability Act with respect to the non-OPA claims that have been or may be asserted againstit. Any attempt to limit liability under OPA may nevertheless be futile because of the contractual relationships between andamong these parties and the various contractors who worked on the rig and the allegations that have surfaced about acts of

gross negligence and regulatory violations. 245

Following previous spills, the U.S. government and private parties have tried to assert rights under other statutes, common law,and general maritime law not only to create remedies but also to *949 circumvent the limits of liability contained in the FederalWater Pollution Control Act, as amended by the CWA, and now provided in OPA. In particular, claims have been asserted

under the Refuse Act 246 and for general maritime nuisance, among other theories. The courts have unanimously rejected these

efforts. 247 As stated by the court in United States v. Dixie Carriers, Inc., “Every court that has considered this issue has held

that the FWPCA provides the government's exclusive remedy for recovering oil spill cleanup costs.” 248

VI. Oil Spill Liability Trust Fund--Claims Against the Fund

The statute also sets up an Oil Spill Liability Trust Fund (OSLTF or Fund). OPA provides for this Fund to be used to pay claimsfor which the responsible party's limit of liability precludes a full recovery by someone who has sustained damages and also insituations of “mystery spills” where the responsible party cannot be identified. The Fund is administered by the United StatesCoast Guard under regulations, which are published in Title 33 of the Code of Federal Regulations, Part 136.

Section 2713 of the Act sets forth the procedures for making a claim against the Fund. Following a spill, the President,acting through the Coast Guard, identifies the responsible party, which is required to advertise that it has been designated the

responsible party and to provide information about how claims can be made against the responsible party. 249 A claimant mustfirst submit its claim for removal *950 costs or damages to the responsible party for payment before either making a claimagainst the Fund or filing suit under OPA against the responsible party. If the responsible party denies all liability for the claimor does not settle the claim by making payment within ninety days after the day the claim was presented or advertising wasbegun, whichever is later, then the claimant has an option. The claimant may either file a lawsuit against the responsible party,

or it may make a claim against the OSLTF. 250 A claim may be presented directly to the Fund, without first presenting it to theresponsible party, only if (1) the President has advertised or otherwise advised claimants, (2) a responsible party has a completedefense or has exceeded its limit of liability, entitling it to recovery pursuant to § 2708, (3) a State seeks recovery for removalcosts it has incurred, or (4) a U.S. claimant asserts a claim for damage for which the Fund is liable under § 2712(a) caused by

a discharge from a foreign offshore unit. 251

The election under § 2713(c) is a clear one because the statute precludes making a claim against the Fund during the pendency

of a court action. 252 Consequently, if a claimant files suit, it has temporarily waived its right to make a claim against the Fund.

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If a claim is not compensated or is not compensated in full through the claimant's lawsuit, then the claimant may subsequentlymake a claim against the OSLTF.

OPA's presentment requirement is not a mere procedural technicality, but is a mandatory condition precedent to filing suitagainst a responsible party. If a claimant does not comply with this requirement, its claim will be dismissed. As the United StatesCourt of Appeals for the Eleventh Circuit has held, “the clear text of § 2713 creates a mandatory condition precedent barring all

OPA claims unless and until a claimant has presented her claims in compliance with *951 § 2713(a).” 253 While some courtshave viewed § 2713(a)'s presentment requirement as “jurisdictional” in nature, others have characterized it as “more in accord

with an exhaustion of administrative process.” 254 The dismissal of an OPA action for failure to comply with the presentment

requirement is without prejudice to the claimant's right to refile its action after complying with the presentment procedure. 255

Nevertheless, in Abundiz v. Explorer Pipeline Co., the district court held that “a plaintiff's failure to make a proper presentmentof OPA claims to a defendant before filing a lawsuit, is not amenable to cure by amending his presentment of claims during

the pendency of the proceedings.” 256

In enacting this presentment requirement, Congress sought to promote settlement and avoid litigation. 257 The court in Johnsonv. Colonial Pipeline Co. noted, “Congress believed that lawsuits against parties are appropriate only ‘where attempts to reach a

settlement with the responsible party . . . were unsuccessful.’. . . The hope was to avoid costly and cumbersome litigation.” 258

As a result:

[T]he claim presented must inform the responsible party with some precision of the nature and extent of thedamages alleged and of the amount of monetary damages claimed. Otherwise, the responsible party will beunable to make an informed offer of its own, unable to engage in meaningful substantive negotiations, and

thus unable to settle the matter by agreeing to a final amount. 259

The Coast Guard regulations require, therefore, that “a claim must provide, inter alia, a general description of the nature andextent of the *952 impact of the oil spill and the associated damages, a list of the damages with a ‘sum certain’ attributed to

each type of damage listed, and evidence to support the claim.” 260

The requirement that the claim include a “sum certain” may present difficulties for claimants in circumstances similar to theDeepwater Horizon accident. As discussed earlier, the full scope of the damage caused by the spill may not be currentlyknown, and indeed, it may not even be clear when the extent of the damage may be measurable. For example, if a commercialfisherman does not know how long certain areas may be closed to fishing or what the effect of the spill may be on the fishpopulations either in the short term or long term, how can he calculate a “sum certain” for all of his losses caused by the spill?If stating a certain amount is a prerequisite to making a claim and thus to filing suit, the uncertainty concerning the full extentof the damage may be an impediment to claimants being able to test their claims in court. The Act provides, however, that

responsible parties must “establish a procedure for the payment or settlement of claims for interim, short-term damages.” 261

The recovery of any such interim, short-term damages does not “preclude recovery by the claimant for damages not reflected

in the paid or settled partial claim.” 262

Even though the courts have generally recognized presentment as a condition precedent to an OPA claim, certain types ofclaims fall outside the reach of this requirement. In Marathon Pipe Line Co. v. LaRoche Industries Inc., the district court held

that the presentment requirement did not apply to a responsible party's claim against a sole-cause third party. 263 Likewise,pursuant to §§ 2702(b)(1) and *953 2717(f)(2), the United States, a state, or an Indian tribe may bring an action for removal

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costs without first presenting a claim to the responsible party. 264 Most significantly, courts have held that the presentmentprocedure of § 2713 does not extend to claims brought under state law, which may be filed without first being presented to

the responsible party. 265

VII. Financial Security--Guarantors

One of the very important features of the Act is its requirement that responsible parties maintain evidence of financialresponsibility. Section 2716(a) requires the responsible party for any vessel over 300 gross tons using any place subject toU.S. jurisdiction, excluding non-self-propelled vessels that do not carry oil as cargo or fuel, and any vessel using the watersof the exclusive economic zone for transshipping or lightering oil destined for a place within the United States to comply with

regulations promulgated by the Secretary of Homeland Security evidencing financial responsibility. 266 In the Coast GuardAuthorization Act of 2010, Congress amended § 2716(a) to include “any tank vessel over 100 gross tons using any place

subject to the jurisdiction of the United States.” 267 The “evidence of financial responsibility [must be] sufficient to meet the

maximum amount of liability to which the responsible party could be subjected under section 2704(a) or (d)” of the Act. 268

If a responsible party owns or operates multiple vessels subject to the requirements of § 2716, OPA only requires it to furnishevidence of financial responsibility “to meet the amount of the maximum liability applicable to the vessel having the greatest

maximum liability.” 269 If a responsible party fails to comply with these requirements, the government may (1) withhold orrevoke clearance for the vessel, (2) deny entry to the United States or navigable waters or detain the vessel, or (3) seize and

forfeit the vessel. 270

*954 Section 2716 also imposes financial responsibility requirements on responsible parties for offshore facilities at specifiedlocations that are used for the exploration, drilling, production, or transportation of oil. The amount of financial responsibilityfor offshore facilities is “(i) $35,000,000 for an offshore facility located seaward of the seaward boundary of a State; or (ii)

$10,000,000 for an offshore facility located landward of the seaward boundary of a State.” 271 The President may increasethe amount, however, to a maximum of $150,000,000 if “justified based on the relative operational, environmental, human

health, and other risks posed by the quantity or quality of oil” involved. 272 Where a person is responsible for multiple offshorefacilities, it must establish evidence of financial responsibility only to satisfy the amount for the facility with the greatest

financial responsibility. 273

Acceptable methods for establishing financial responsibility include “evidence of insurance, surety bond, guarantee, letter

of credit, qualification as a self-insurer, or other evidence of financial responsibility.” 274 The Code of Federal Regulationsaddresses more explicitly the five different methods (i.e., (1) insurance, (2) surety bond, (3) self-insurance, (4) financial

guaranty, or (5) other evidence of financial responsibility) by which such a guarantee may be made. 275

OPA does not merely require responsible parties to maintain evidence of financial responsibility, but, importantly, it also allowsclaimants to assert claims for removal costs and damages directly against any guarantor who provides evidence of financial

responsibility for a responsible party. 276 A claimant may bring an *955 action directly against the guarantor of an offshorefacility, however, only if the responsible party has denied or failed to pay a claim on the basis of insolvency or filed a petitionfor bankruptcy or “the claim is asserted by the United States for removal costs and damages or for compensation paid by the

Fund.” 277 For example, in designating BP and Transocean as responsible parties, the Coast Guard also provided notice to aBP-related entity and an insurer of Transocean as those parties' guarantors.

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Where a claimant has brought suit directly against a guarantor, the guarantor may invoke only a limited number of defenses. Aguarantor may raise as a defense any rights or defenses the responsible party would have, certain authorized defenses, and thedefense that the responsible party's wrongful misconduct caused the incident. The guarantor may not invoke other defenses thatit might be able to assert in an action brought by the responsible party, such as the responsible party's breach of a condition of

coverage or the application of an exclusion in an insurance policy. 278 Nevertheless, OPA expressly limits a guarantor's liability

for removal costs and damages in the aggregate to the amount of the evidence of financial responsibility it provided. 279

The court's decision in Water Quality Insurance Syndicate v. United States 280 demonstrates the defenses available to aninsurer when it acts in the dual capacities of both guarantor and insurer. Water Quality Insurance Syndicate (WQIS) issueda $10 million insurance policy covering the barge MORRIS J. BERMAN. WQIS also executed a Certificate of FinancialResponsibility (COFR) for $806,550. The barge stranded on a reef and discharged 798,000 gallons of fuel oil onto a nearby

beach and surrounding waters. 281 Following this accident, WQIS paid the Oil Spill Liability Trust Fund the amount of theCOFR, $806,550, and an additional $3,700,000 for *956 removal costs incurred by the Fund. WQIS allegedly paid another

$5,051,826.90 to contractors for oil removal costs. 282

The owner and operator of the barge, the charterer and operator of its tug, and a shoreside manager were convicted of knowinglysending the tug to sea in an unseaworthy condition likely to endanger life. The United States Court of Appeals for the FirstCircuit reversed the shoreside manager's conviction, holding that although the evidence was sufficient to show that he knew the

tug was unseaworthy, it was not sufficient to establish that he knew its unseaworthy condition was likely to endanger life. 283

The corporate parties did not appeal their convictions. Subsequently, WQIS sought to recover its payments for removal costsfrom the Fund on the ground that the responsible parties' willful misconduct had caused the incident.

The district court held that WQIS was entitled to recover the amount it had paid pursuant to the COFR because the responsibleparties' decision knowingly to send the tug to sea in an unseaworthy condition and other wrongful acts that caused the accident

constituted reckless disregard and willful misconduct, a recognized and available defense under § 2716(f)(1)(C). 284 The districtcourt also concluded that WQIS could enforce a policy defense for willful misconduct to recover the amounts paid under the $10million insurance policy above the COFR amount. The National Pollution Funds Center had rejected this claim, arguing thatby way of subrogation, the insurer had only those rights that the responsible parties would have had and the responsible parties

had no right to recover from the Fund. 285 The court rejected this argument, holding that the insurer could bring a direct claim

against the Fund, under § 2712(a)(4), because the express terms of the policy did not require it to pay for the removal costs. 286

*957 VIII. Criminal Sanctions

All of the environmental crimes and administrative and civil penalties are contained in the Federal Water Pollution Control Actas amended by the CWA; there are no crimes in OPA. Section 1319 of the CWA, entitled “Enforcement,” sets forth civil andadministrative penalties (§ 1319(d)(g)) and criminal penalties (§ 1319(c)) for illegal discharges. Criminal penalties are imposedfor (1) negligent violations (§ 1319(c)(1)(A) through (B)), (2) knowing violations (§ 1319(c)(2)(A) through (B)), (3) knowingendangerment (§ 1319(c)(A) through (B)), and (4) false statements (§ 1319(c)(4)). As noted, either negligence or knowledge isexpressly required for the imposition of the statute's criminal penalties. These are not strict liability crimes.

With regard to negligent violations, § 1319(c)(1) provides, inter alia, that anyone who “negligently” violates specified sectionsof the CWA has committed an offense under the Act. Such a person will be punished by a fine of not less than $2500 but not

more than $25,000 per day of violation, or by imprisonment for not more than one year, or both. 287 The punishment for a

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second violation is a fine of not more than $50,000 per day of violation, imprisonment of not more than two years, or both. 288

Most of the specified sections deal with violations of the permitting provisions contained in the legislation and regulations,which allow persons to discharge hazardous substances in specified amounts.

With respect to the Deepwater Horizon incident, one of the specified statutes that may give rise to a prosecution for a negligentviolation is 33 U.S.C. § 1321(b)(3). That statute provides, in pertinent part:

The discharge of oil or hazardous substances (i) into or upon the navigable waters of the United States,adjoining shorelines, or into or upon the waters of the contiguous zone, or (ii) in connection with activitiesunder the Outer Continental Shelf Lands Act or the Deepwater Port Act of 1974, or which may affectnatural resources belonging to, appertaining to, or under the exclusive management authority of the UnitedStates . . ., in such quantities as may be harmful as determined by the President under paragraph (4) of this

subsection, is prohibited. 289

*958 Section 1321(b)(4) directs the President to promulgate regulations specifying the quantities of oil and hazardoussubstances that “may be harmful to the public health or welfare or the environment of the United States, including but not

limited to fish, shellfish, wildlife, and public and private property, shorelines, and beaches.” 290 The President has delegatedthis responsibility for defining harmful quantities of oil to the Environmental Protection Agency (EPA), which has promulgateda regulation that states, in part, that the amount of oil that is harmful is the amount that can “[c]ause a film or sheen uponor discoloration of the surface of the water or adjoining shorelines or cause a sludge or emulsion to be deposited beneath the

surface of the water or upon adjoining shorelines.” 291 It does not take much oil to form a sheen.

Those familiar with U.S. criminal law know that conduct that qualifies as negligence to support an ordinary action for damagesin tort usually does not satisfy the mens rea requirement necessary to support a criminal conviction. At common law, thenegligence had to be “criminal negligence,” sometimes described as “willful and wanton” negligence or “gross” negligence.The Model Penal Code retains the distinction between civil and criminal negligence by defining negligence as requiring proof

of “a gross deviation from the standard of care that a reasonable person would observe in the actor's situation.” 292 There isno reason, however, why Congress cannot criminalize ordinary negligence, and in the pollution area, courts have held that thecrime of negligently discharging oil or hazardous substances into the navigable waters of the United States requires only proofof ordinary negligence.

In United States v. Hanousek, 293 the trial judge instructed the jury that it could convict the defendant of a negligent violation

under § 1319(c) if it found “the failure to use reasonable care.” 294 The term “negligence” is not defined in the statute.Nevertheless, the court of appeals concluded that Congress could have specified “gross negligence” if that is what it intended.Congress had, in fact, used the term “gross negligence” in other parts of the statute. The court found *959 the language of the

statute to be clear and, thus, had no reason to examine its legislative history. 295

The defendant also contended that to allow him to be punished for ordinary negligence was a denial of due process. The courtrejected this argument as well, characterizing the statute as a “public welfare offense.” “Public welfare legislation is designedto protect the public from potentially harmful or injurious items, and may render criminal a type of conduct that a reasonable

person should know is subject to stringent public regulation and may seriously threaten the community's health or safety.” 296

The court concluded, “It is well established that a public welfare statute may subject a person to criminal liability for his or

her ordinary negligence without violating due process.” 297 The United States Court of Appeals for the Tenth Circuit has also

followed this approach. 298

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The Fifth Circuit in United States v. Ahmad, 299 a case dealing with a more serious crime that required proof of a “knowing”violation under the same statute, rejected the government's argument that statutes that criminalize pollution should be interpretedas public welfare offenses. One of the reasons the court gave was that the public welfare label is inappropriate for crimes that

are serious felonies that carry substantial periods of incarceration as a penalty. 300 It should be pointed out that a “negligent,”as contrasted with a “knowing,” violation is a misdemeanor, which carries a much lighter maximum period of incarceration.Justices Thomas and O'Connor dissented from the denial of certiorari in the Hanousek case, stating that the Supreme Court

should resolve the split in the circuits and should reject the public welfare justification for liberal interpretation. 301

Section 1319(c)(2) deals with knowing violations and provides that anyone who:

(A) knowingly violates [specified provisions] of this title, or any permit condition or limitation . . . issuedunder section 1342 of this title by the Administrator or by a State . . .; or

*960 (B) knowingly introduces into a sewer system or into a publicly owned treatment works any pollutant or hazardoussubstance which such person knew or reasonably should have known could cause personal injury or property damage or . . .which causes such treatment works to violate any effluent limitation or condition in a permit issued to the treatment worksunder section 1342 of this title by the Administrator or a State;

shall be punished by a fine of not less than $5,000 nor more than $50,000 per day of violation, or by imprisonment for not

more than 3 years, or by both. 302

The punishment for a second violation is by a fine of not more than $100,000 per day of violation, by imprisonment of not

more than six years, or by both. 303

Crimes in the Federal Water Pollution Control Act, as amended by the CWA, must be understood in the context of that Act.Most of the sections of the Act that criminalize negligent or knowing violations apply primarily to the discharge of hazardoussubstances rather than oil. Under this legislation, the federal government, in conjunction with the states, establishes a permittingsystem whereby generators of hazardous materials must apply to an appropriate governmental agency for a permit to disposeof or otherwise discharge hazardous substances into the navigable waters of the United States. The permits also regulate theamount of the discharge. Most prosecutions for environmental crimes present issues such as whether the discharger had or was

required to have a permit, or whether the discharge exceeded the permitted quantity, etc. 304

*961 By and large, there are no permits for discharging oil; that is, all discharges are prohibited. From a crimes perspective,the only issues are whether the defendant vessel or facility discharged oil into the navigable waters of the United States, whetherthe discharge was the result of the defendant's negligence, or whether the discharge was done with the defendant's knowledge.Obviously, proof the defendant purposely discharged the oil would satisfy any mens rea requirement. As has been discussed,negligent violations do not present complex legal issues, except for the issue of whether the civil or traditional criminal standardapplies, and no appellate court has held that the criminal standard applies.

With respect to the “knowing” element of environmental crimes, the reported cases are generally not relevant or helpful to mostoil spills because almost any discharge will constitute a violation. In the hazardous substance area, however, there may be issues

as to the elements of the offense to which the “knowing” requirement is applied. 305 Clearly, the discharger must know the

nature of the substance he is discharging. 306 On the other hand, must the polluter know that he is prohibited from discharging

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the substance, 307 that he may not discharge it without a permit, that he may not discharge it in the amount that exceeds the

permit limit, 308 or that he is discharging it in U.S. waters? 309

With regard to the Deepwater Horizon discharge in the Gulf of Mexico, all of the facts are not yet known, and some of whatis known is in dispute. Therefore, it would be inappropriate to speculate if *962 crimes were committed and who committed

them. 310 In terms of what is known and not controversial, it is unlikely that anyone committed a “knowing” violation. There isa difference between what a person knows and what a person in the exercise of due care ought to know. Both BP and Transoceansimply had too much at stake to “knowingly” blow up the rig and discharge millions of gallons of oil into the Gulf of Mexico.

What is less clear is whether or not any negligent violations were committed. Various allegations have appeared in the press,which, if provable, might support prosecutions for a negligent discharge of oil. It may be argued that conducting operations ina manner that departs from the customary manner, such as disregarding warnings and taking short cuts to save money, createdrisks that were known or should have been known to experts in the field. Furthermore, although it might be difficult to provethat a single negligent act or omission caused the catastrophe, it is possible that a series of negligent acts constitute a courseof negligent conduct that combined to bring about the tragic incident. A successful prosecution may hinge then on whethernegligence is defined as simple negligence or criminal negligence.

The state most immediately affected by the oil spill, Louisiana, is within the jurisdiction of the Fifth Circuit, and it is likely thatif a prosecution were to be brought it would be in a district court within the Fifth Circuit. As stated earlier, the Fifth Circuit, inthe Ahmad case, has rejected the “public welfare” approach in analyzing offenses requiring “knowledge.” Those offenses arefelonies that carry the potential for a substantial sentence of imprisonment. A “negligent” discharge offense is a misdemeanor,

however, that carries a maximum period of imprisonment of not more than one year. 311 Thus, the Fifth Circuit could use thosefacts--a negligent vs. knowing discharge and a misdemeanor vs. a felony--as a basis for distinguishing its mens rea approachto negligent and knowing violations. Nevertheless, as pointed out by the court in the Atlantic States case, the Supreme Court

*963 in Safeco Insurance Co. v. Burr 312 rejected the type of reasoning used by the court in Hanousek in concluding that,by using the term “gross negligence” in the civil penalty section of the statute and only the term “negligence” in the criminal

penalty section, Congress meant to exclude the Model Penal Code definition of negligence in the criminal statute. 313

In addition, § 1319(c)(4) makes it an offense to knowingly make false statements or to knowingly tamper with monitoringequipment. That section states:

Any person who knowingly makes any false material statement, representation, or certification in anyapplication, record, report, plan, or other document filed or required to be maintained under this chapter orwho knowingly falsifies, tampers with, or renders inaccurate any monitoring device or method required tobe maintained under this chapter, shall upon conviction, be punished by a fine of not more than $10,000,or by imprisonment for not more than 2 years, or by both. . . . [A second offense carries with it] a fine of

not more than $20,000 per day of violation, or by imprisonment of not more than 4 years, or by both. 314

Section 1321 of the CWA, entitled “Oil and Hazardous Substance Liability,” creates additional potential criminal liability.Section 1321(b)(5) provides for mandatory notification of a spill of oil or of a hazardous substance to an appropriate federalagency by any person in charge of the vessel or onshore or offshore facility responsible for causing the discharge as soon ashe has knowledge of it. A failure to give notice of such a discharge immediately is a crime punishable, upon conviction, bya fine in accordance with Title 18, imprisonment for not more than five years, or both. The required notification may not,however, be used against any person subject to the notice requirement in any criminal case, except a prosecution for perjury or

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for giving a false statement. 315 A corporation is a “person” under this section, and knowledge of an employee of the corporation

is knowledge of the corporation. 316 Nevertheless, the provision for “use *964 immunity” does not apply to a corporation,

which is not entitled to invoke the privilege against self-incrimination. 317

Other criminal statutes that might come into play are the Marine Mammals Protection Act, 318 the Endangered Species Act, 319

the Migratory Bird Treaty Act, 320 and the previously mentioned Refuse Act. 321 Although the U.S. government has filed suit

under the CWA and OPA, it has reserved the right to file actions under other statutes, including those referred to above. 322

IX. Civil and Administrative Penalties

Sections 1319(d) and (g) of the CWA provide for the imposition of civil and administrative penalties on persons who violatespecified sections of the Act. Unlike the criminal penalties, however, violations of § 1321(b)(3) are not included in these penaltyprovisions and do not apply to the Deepwater Horizon incident. Nonetheless, subsections 1321(b)(6) and (7) provide for theimposition of administrative and civil penalties, respectively. It is these provisions that will apply to the discharge of oil fromthe Deepwater Horizon incident. Administrative penalties are assessed in an administrative proceeding. In the case of marinepollution, the penalties are assessed by the Coast Guard. As an alternative to administrative penalties, the government may seekthe imposition of civil penalties. These penalties are imposed by a federal court in an ordinary civil proceeding.

A. Administrative Penalties

Subsection 1321(b)(6) deals with administrative penalties for violations of the Act and provides that any owner, operator, orperson in charge of any vessel or onshore or offshore facility that discharges oil or a hazardous substance in navigable watersin such quantities as may be harmful as determined by the President or who fails to comply with relevant regulations may beassessed a Class I or Class II civil penalty. The President has delegated the determination of “harmful” substances to the EPA.As discussed previously, the EPA has *965 promulgated a regulation that provides that discharges of oil are harmful if the

discharge causes “a film or sheen upon or discoloration of the surface of the water or adjoining shorelines.” 323

Whether a spill resulted in actual harm to the environment is irrelevant to the determination of whether Section 311's [1321(b)(3)] prohibition of discharges of oil in quantities which may be harmful has been violated. The only pertinent inquiry is whetherthe spill was in a quantity which may be harmful as determined by the EPA. Because EPA has determined that a spill of oilwhich creates a sheen is a quantity which ‘may be harmful,’ such a spill is subject to the penalty provisions of 33 U.S.C. §

1321 and 40 CFR Part 110.3. 324

Subsection 1321(b)(6) imposes strict liability. “[E]very court which has considered the question has so held.” 325 Accordingly,an owner or operator who causes a discharge is liable for a civil penalty pursuant to § 1321(b)(6) “even where it exercised all

due care and a third party's act or omission was the immediate cause of the spill.” 326 Thus, unlike liability for removal costsand damages, which, at least theoretically, provides for a sole-cause third party defense, the penalty provisions do not. This

civil penalty provision has nonetheless been held to be constitutional. 327

Subsection 1321(b)(6)(B) provides for two classes of administra-tive penalties: (i) Class I and (ii) Class II. A Class I penalty

may not exceed $15,000 [$16,000] for each violation with the maximum civil penalty not to exceed $40,000 [$37,500]. 328

The person to be assessed such a penalty must receive written notice of the proposal to assess the penalty and an opportunityto request a hearing on the proposed *966 penalty, which will “provide a reasonable opportunity to be heard and to present

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evidence.” 329 The hearing is not subject to the Administrative Procedure Act (APA), §§ 554 or 556 of Title 5, which providefor a full adjudicatory hearing. A Class II civil penalty may not exceed $15,000 [$16,000] “per day for each day during which

the violation continues” but the maximum penalty cannot exceed $190,000 [$177,500]. 330 Unlike Class I penalties, “a classII civil penalty shall be assessed and collected in the same manner, . . . as in the case of civil penalties assessed and collected

after notice and opportunity for a hearing on the record in accordance with section 554 of title 5.” 331

The Supreme Court has held that the report of an oil spill into navigable waters filed pursuant to § 1321(b)(5) can be used to

establish liability for civil penalties under § 1321(b)(6) of the CWA. 332 The use of a report for this purpose does not raise anissue of a violation of constitutional rights, such as the privilege against self-incrimination.Congress labeled the sanction authorized in [§ 1321(b)(6)] a “civil penalty,” a label that takes on added significance given itsjuxtaposition with the criminal penalties set forth in the immediately preceding subparagraph, [§ 1321(b)(5).] Thus, we have nodoubt that Congress intended to allow imposition of penalties under [§ 1321(b)(6)] without regard to the procedural protections

and restrictions available in criminal prosecutions. 333

By accepting Congress's designation of the proceeding as a “civil” proceeding, the Supreme Court ruled out, by implication,claims under the Double Jeopardy Clause, proof beyond a reasonable doubt, etc.

The right for significant public participation in the administrative penalty assessment process is provided for “interested persons”in § 1321(b)(6)(C). That subsection gives interested persons the right to (1) public notice, (2) presentation of evidence, and(3) a hearing on the proposed assessment of Class II civil penalties. The right to public notice carries with it a “reasonable

opportunity to comment on the proposed” penalty. 334 Anyone who comments on a proposed penalty is to receive notice ofany hearing on it and has the right to present evidence. If an order is issued without a hearing, a commenter may *967 petitionto set aside the order and be afforded a hearing on the penalty. If significant evidence is provided in support of the petition, theorder will be set aside and a hearing provided. If a hearing is denied, notice and reasons for the denial are required. An order

assessing a Class II civil penalty is final thirty days after its issuance or thirty days after a hearing is denied. 335

Coast Guard regulations prescribe the procedures to be followed in the administrative process. 336 In brief, a report of adischarge of oil is sent to the District Commander, who reviews the report to see whether or not there is a prima facie case forthe imposition of a penalty. If the District Commander finds that there is a prima facie case, a case file is prepared and forwardedto a Hearing Officer with a recommended action. The Hearing Officer reviews the file and makes a determination as to whethera violation appears to have occurred. If the Hearing Officer decides to go forward with the case, he must notify the party of thealleged violation, the amount of the maximum penalty, the general nature of the proceeding, the amount of penalty that appearsappropriate in the case, the right to examine all materials in the file, and the right to a hearing before the assessment of a penalty.

Upon requesting a hearing, a party may review the file and may introduce evidence at the hearing at which he may be representedby counsel. If a penalty is imposed, the party may appeal its imposition or its amount to the Commandant of the Coast Guard.If the Commandant upholds the penalty, the party may seek judicial review of a Class I penalty within thirty days in the UnitedStates District Court for the District of Columbia or the district where the violation occurred. Review may be sought for a ClassII penalty in the United States Court of Appeals for the District of Columbia Circuit or the circuit where the person resides or

transacts business. 337 Judicial review is not de novo, and courts will uphold the penalty “if supported by substantial evidence

in the record and if the assessment is neither arbitrary nor capricious.” 338

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*968 If a person fails to pay a civil penalty after a final assessment or a court-entered final judgment, the Attorney General,upon request, is authorized to file a civil action in a district court to recover the amount of the assessment plus interest, costs, and

penalties. 339 Pursuant to § 1321(b)(6)(I), the Administrator or Secretary is authorized to issue subpoenas for the attendanceand testimony of witnesses and for the production of relevant documents. On a failure to comply with such a subpoena, suitmay be brought in a district court for an order to enforce the subpoena, and a failure to comply with the court's order will subject

the defendant to punishment as a contempt of the order. 340

B. Civil Penalties Imposed Judicially

Civil penalties that may be imposed only by a court are set forth in § 1321(b)(7)(A), which provides that any person who isthe owner, operator, or person in charge of any vessel or onshore or offshore facility from which oil or a hazardous substanceis discharged “shall be subject to a civil penalty in an amount up to $40,000 [$37,500] per day of violation or an amount up

to $1,100 per barrel of oil or unit of reportable quantity of hazardous substances discharged.” 341 Under § 1321(b)(7)(B), aperson who fails to carry out removal of a discharge properly or fails to comply with an order under § 1321 “shall be subjectto a civil penalty in an amount up to $40,000 [$37,500] per day of violation or an amount up to 3 times the costs incurred by

the Oil Spill Liability Trust Fund as a result of such failure.” 342 Under § 1321(b)(7)(C), failure to comply with establishedregulations subjects a person to a civil penalty in an amount up to $40,000 [$37,500] per day of violation. Subsection 1321(b)(7)(D) provides that where the violation was the result of gross negligence or willful misconduct, the responsible person “shallbe subject to a civil penalty of not less than $130,000 [$140,000], and not more than $4,000 [$4300] per barrel of oil or unit

of reportable quantity of hazardous substance discharged.” 343

Subsection 1321(b)(7)(E) provides: “An action to impose a civil penalty under this paragraph may be brought in the districtcourt of the *969 United States for the district in which the defendant is located, resides, or is doing business, and such court

shall have jurisdiction to assess such penalty.” 344 Under subsection (F): “A person is not liable for a civil penalty under thisparagraph for a discharge if the person has been assessed a civil penalty under paragraph (6) [administrative penalty] for the

discharge.” 345 Likewise, civil penalties may “not be assessed under both this section and section 1319 of this title.” 346

The Administrator, Secretary, or the court, in determining the amount of a civil penalty to assess under paragraphs (6) and (7),must consider the following factors:

[1] the seriousness of the violation or violations,

[2] the economic benefit to the violator, if any, resulting from the violation,

[3] the degree of culpability involved,

[4] any other penalty for the same incident,

[5] any history of prior violations,

[6] the nature, extent, and degree of success of any efforts of the violator to minimize or mitigate the effects of the discharge,

[7] the economic impact of the penalty on the violator, and

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[8] any other matters as justice may require. 347

Under § 1321(b)(12), when an owner, operator, or person in charge of a vessel is liable for a civil penalty or when it may besubject to a civil penalty, the Secretary of the Treasury shall, upon the request of the Secretary of the Department of HomelandSecurity or the Administrator, refuse or revoke the vessel's (1) clearance, (2) permit to proceed, and (3) permit to depart, as

applicable. The required clearance or permit may be granted upon the filing of a satisfactory bond or other surety. 348

X. The Relationship Among the Oil Pollution Act, State Law, and General Maritime Law

A. Federalism Issues

The relationship between the federal statutory remedies provided by OPA and those provided by state law and general maritimelaw is *970 complex. At first sight, the position seems to be straightforward. OPA explicitly and emphatically states that

neither OPA nor the Shipowners' Limitation of Liability Act 349 is intended to preempt state law. OPA provides that states are

not precluded from imposing “additional liability or requirements” with respect to pollution by oil within their territory. 350

Nothing in either federal act shall be construed as affecting or modifying the obligations or liabilities of any person under

state law, “including common law,” 351 and nothing in either federal act affects the authority of a state to impose additional

liability, fines, or penalties relating to the discharge of oil. 352 Similarly, OPA does not affect either “admiralty and maritimelaw” or the admiralty and maritime jurisdiction of U.S. district courts, “saving to suitors in all cases all other remedies to which

they are otherwise entitled.” 353 The intention of Congress seems clear: the remedies provided by OPA, state law, and generalmaritime law should be cumulative. As will soon be shown, most states have responded enthusiastically to OPA's invitation tolegislate. Unfortunately, wishing does not make it so. The relationship between federal statute, general maritime law, and statelaw has long raised complex questions of federalism and those questions do not simply go away because of the nonpreemptionprovisions in OPA.

The first question that must be addressed is whether Congress and the states are constitutionally permitted to act in this way. In

Knickerbocker Ice Co. v. Stewart, 354 the Supreme Court held that the Admiralty Clause of the United States Constitution 355

affirmatively prevents Congress from delegating to the states the authority to pass laws interfering with the national uniformity

of maritime law. 356 Although Knickerbocker Ice has long been the subject of caustic criticism, both by academics 357 and

judges, 358 it has never been *971 overruled. 359 Some writers have argued that OPA's authorization of recovery under state

liability laws is unconstitutional because of Knickerbocker Ice. 360 To evaluate that proposition, it is necessary to examine the

decision of the Supreme Court in Askew v. American Waterways Operators, Inc. 361

In Askew, a coalition of shipowners and industry groups brought suit to enjoin application of a Florida state statute imposingliability on responsible parties for cleanup costs associated with oil pollution and for damage incurred by the state and privateindividuals. The plaintiffs argued that the Florida statute intruded unconstitutionally into the federal maritime domain, whichwas then occupied by the Water Quality Improvement Act, which imposed strict liability for cleanup costs incurred by the

federal government. The plaintiffs relied on Knickerbocker Ice and also the Admiralty Extension Act, 362 which provides thatfederal admiralty jurisdiction extends to cases of injury or damage on land caused by a vessel on navigable waters. The AskewCourt unanimously rejected the plaintiffs' arguments, holding that neither Knickerbocker Ice nor the Admiralty Extension Actprecluded the state from legislating. In relation to the Admiralty Extension Act, the Court stated, “[S]ea-to-shore pollution--historically within the reach of the police power of the States--is not silently taken away from the States by the Admiralty

Extension Act, which does not purport to supply the exclusive remedy.” 363

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The federal Water Quality Improvement Act contained a saving provision very similar to those that now appear in OPA,specifically stating that nothing in the Act preempted any state from imposing *972 liability, nor did it affect any state or

local law not in conflict with the Act. 364 The Askew Court said that such a waiver of preemption provision must be regarded

as valid, unless the rule of Southern Pacific Co. v. Jensen 365 and Knickerbocker Ice “is to engulf everything that Congress

chose to call ‘admiralty.”’ 366

The Water Quality Improvement Act dealt only with cleanup costs incurred by the federal government; it did not, as OPAdoes, impose civil liability for damage caused by oil pollution. There was thus no potential conflict between federal law, whichdealt only with federal cleanup costs, and state law, which dealt with state cleanup costs and civil liability. Strictly speaking,then, Askew does not speak directly to the situation that now prevails, where both Congress and the states have legislated to

impose civil liability and penalties. 367 Nevertheless, the Askew doctrine is quite clear: unless Congress intended to provide anexclusive maritime remedy (which it has not, in the case of OPA), states can exercise their traditional police power to imposeliability for ship-to-shore pollution. That would seem to be enough to validate OPA's waiver of preemption provision, which

is in very similar terms to the one considered in Askew. 368

Also, it can be argued that a waiver of preemption provision such as those found in OPA does not violate Knickerbocker Ice'sprohibition against delegation of federal statutory authority to the states. Standing aside to let the states exercise their traditional

police powers does not constitute delegating authority to them to do so. In Pacific Merchant Shipping Ass'n v. Aubry, 369 theUnited States Court of Appeals for the Ninth Circuit held that the waiver of preemption provision in the federal Fair Labor

Standards Act 370 did not constitute a delegation of authority to the states, but simply made clear congressional intent not todisturb the traditional exercise of the states' police powers with respect to wages and hours and, therefore Knickerbocker Icedid not *973 control the case. Precisely the same argument could be made in the context of OPA, particularly in the light ofwhat Askew said about the states' historical police powers to regulate ship-to-shore pollution.

The Supreme Court considered the effect of the OPA savings provisions in United States v. Locke. 371 The Court stated, “Theevident purpose of the saving clauses is to preserve state laws which, rather than imposing substantive regulation of a vessel's

primary conduct, establish liability rules and financial requirements relating to oil spills.” 372

As a result, it seems clear that the concurrent operation of federal and state legislation is constitutionally permissiblenotwithstanding Knickerbocker Ice. Concurrent operation of OPA and state common law is another matter. Askew held thatthe Admiralty Extension Act did not silently take away the “police power” of the states. Although opinions differ widely about

the breadth of the concept of “police power,” 373 it is always understood as referring to the legislative competence of the states,not the jurisdiction of state courts to decide disputes by application of state common law. Askew's holding that states maylegislate to provide remedies in relation to ship-to-shore pollution does not automatically establish that state courts may applystate common law remedies to cases of ship-to-shore pollution.

Legislative competence and judicial jurisdiction are very different things, dealt with in different Articles of the Constitution;the relationship between state and federal power need not necessarily be the same in relation to each. That is one of the lessons

of Erie Railroad Co. v. Tompkins: 374 a federal court sitting in diversity can apply a federal statute if one has been passed,but where none is applicable, the court must apply state common law, even if the federal government has the power, not yet

exercised, to legislate. The position could be the reverse in admiralty, where the “reverse Erie” doctrine 375 usually prevails: itcould be that a state court can apply a state statute if one has been passed, but where none is applicable, the court must apply*974 federal general maritime law. If Askew were to be read as automatically authorizing the application of state common

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law as well as state statutes in areas within the states' traditional police power, it would effectively overrule Southern Pacific

Co. v. Jensen, 376 despite the fact that the Askew Court itself said that “Jensen . . . has vitality left.” 377

One of the authors of this Article has previously argued that any remaining vitality should be strangled out of Jensen and thatit should be overruled because (among other reasons) it overlooked the fact that, from the beginning of the United States,

state courts were permitted to provide common law remedies in cases that were within the admiralty jurisdiction. 378 UntilJensen is overruled, however, it is arguable that state courts can only apply state common law in ship-to-shore pollution casesin the narrow class of cases that are exceptions to the Jensen uniformity principle--i.e., if the state law does not contravenethe essential purpose expressed by an act of Congress, or work material prejudice to the characteristic features of the general

maritime law, or interfere with the proper harmony and uniformity of that law in its international and interstate relations. 379

The Admiralty Extension Act provides that cases of ship-to-shore damage fall within the admiralty jurisdiction, and the general

rule is that “[w]ith admiralty jurisdiction comes the application of substantive admiralty law,” 380 unless the exception to theJensen uniformity principle can be satisfied. Of course, a court determined enough to apply state law can still find that all kinds

of things fall within the exception to the Jensen uniformity principle. 381

It might be objected that OPA specifically states that nothing in the Act shall be construed as affecting or modifying the

obligations or *975 liabilities of any person under state law, “including common law.” 382 The Act also states, however, thatnothing therein affects admiralty law or the admiralty and maritime jurisdiction of U.S. district courts with a “saving to suitors”

provision. 383 OPA does not, and probably could not, provide that state common law shall apply. The waiver of preemptionprovision simply says that nothing in OPA preempts state common law--if state common law has any application at all. It isthe Admiralty Extension Act that affects state common law, by making ship-to-shore pollution claims fall within the admiraltyjurisdiction and thus become subject to the Jensen uniformity doctrine. OPA does not affect the operation of the AdmiraltyExtension Act.

At this point, yet another complication arises. The usual position is that state courts exercising admiralty jurisdiction must

apply federal statutes and federal general maritime law, not state common law. With one exception, 384 however, federal courts

have consistently held that OPA “preempts” 385 the general maritime law in relation to the liability of the responsible party,

notwithstanding the saving provision in OPA. 386 General maritime law remains relevant in relation to the liability of defendantsother than the responsible party, such as, in the Deepwater Horizon litigation, Halliburton, Transocean, and Cameron. If thegeneral maritime law does not apply to the liability of the responsible party for ship-to-shore oil pollution (BP), in the caseof the Deepwater Horizon blowout, what is left in federal law to preempt application of state common law in the admiraltyjurisdiction? The answer can only be OPA itself. That returns us to the beginning of the analysis: does OPA preempt statecommon law? The simple answer would seem to be “no” because of the waiver of preemption provision that refers to state

law “including common law.” 387

*976 A better answer (at least while Jensen survives) is that it is still necessary to ask the Jensen uniformity question: doesthe state law in question interfere with the uniformity of national maritime law? There is more to the relationship betweenfederal maritime law and state law than a simple preemption analysis of the kind sketched out in the last paragraph. Jensenitself did not use the language of preemption--the word does not appear anywhere in the majority opinion or the two dissents.Preemption questions arise when federal and state laws overlap, and it must therefore be determined whether they can coexist.

Rightly or wrongly, 388 the Jensen doctrine is that the power to make maritime law lies exclusively with Congress and federalcourts, subject only to the exception that the states can make or apply law that does not interfere with the national uniformity ofmaritime law. That is not preemption: it is constitutional allocation of nonoverlapping law-making power within a federation.Congress cannot change that position by the waiver of preemption provision in OPA because according to Jensen at least, the

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nonapplication of state law is required by the Constitution. State law can only be applied in the admiralty jurisdiction if it doesnot interfere with “the proper harmony and uniformity” of federal maritime law. Ship-to-shore pollution is in the admiraltyjurisdiction because of the Admiralty Extension Act. Thus, state common law claims in relation to ship-to-shore pollutionshould only be allowed to the extent that they are consistent with the scheme in OPA (in relation to the liability of a responsibleparty, such as BP) and the national uniformity of general maritime law (in relation to the liability of other defendants likeHalliburton or Cameron).

The Supreme Court's comments about the OPA savings provisions in Locke shed little light on the question of the proper role

for state common law. The Locke Court referred to saving of “state laws,” 389 and it might be inferred from the use of the pluralthat the Court had in mind state legislation, not common law, which is usually referred to as “state law.” It would be unwise toread too much into a passing turn of phrase, though. Another clue might lie in the following passage:

Limiting the saving clauses as we have determined respects the established federal-state balance in mattersof maritime commerce between the subjects as to which the States retain concurrent powers *977 andthose over which the federal authority displaces state control. We have upheld state laws imposing liabilityfor pollution caused by oil spills. See Askew v. American Waterways Operators, Inc., 411 U.S., at 325. Our

view of OPA's saving clauses preserves this important role for the States, which is unchallenged here. 390

The “state laws” upheld in Askew were legislation, not common law. Ironically, and conversely, the “state law” displaced inJensen was legislation, not a state common law rule--to this extent, Askew is one of several Supreme Court cases chippingaway at the Jensen doctrine. In the first sentence quoted above, the Court distinguishes areas in which the states have concurrentpowers and those in which federal authority displaces state control. Askew shows, and Locke agrees (albeit obiter), that statelegislation on ship-to-shore pollution falls into the former category, but it may be argued that, unless and until Jensen isoverruled, the application of judge-made law in the admiralty jurisdiction falls into the latter category. As one of the authors haspreviously written, however, the argument for reading Jensen to continue to displace state common law remedies in pollutionincidents following Askew is of dubious validity.

Needless to say, the arguments for and against application of state common law are likely to be tested in the litigation arisingfrom the Deepwater Horizon blowout because state common law is the only available vehicle for punitive damages awards.Lower courts have held that punitive damages are not available under OPA, a proposition that may also be retested in the

Deepwater Horizon litigation. 391 Punitive damages are available under general maritime law, 392 but general maritime law

is “preempted” by OPA at least in relation to the responsible party but not, tellingly, for other defendants. 393 Also, as the nextSubpart shows, two and possibly three of the four states most affected by the oil pollution from the blowout have no legislationsupplementing OPA, so it is the common law or nothing in those jurisdictions if claimants want to recover any remedy otherthan what *978 OPA gives. For example, a claim for lost property value not arising from physical damage (e.g., loss in marketvalue of a beachfront condominium) would not fall within any of the types of damage recoverable under OPA and is not knownto the general maritime law, either. If such a claim were available under state common law, the question would then squarelyarise whether such a claim would be permissible in the admiralty jurisdiction.

Some courts have held that OPA can coexist with state legislation. 394 That seems appropriate given what was said in Askewand Locke. Some courts have held that OPA can coexist with state common law claims in negligence and nuisance but

without considering the effect of the Admiralty Extension Act or Jensen uniformity analysis. 395 No court has yet consideredthe relationship among OPA, state common law, the Admiralty Extension Act, and Jensen. The litigation ensuing from theDeepwater Horizon blowout seems certain to provide an opportunity. If the right parts of the litigation reach the Supreme Court,

the Court may get an opportunity to clash with Jensen head-on, something it has generally been reluctant to do in the past. 396

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B. State Legislation

As noted above, most states have responded enthusiastically to OPA's invitation to legislate. Thirty of the fifty states have a

coastline on an ocean or one of the Great Lakes. 397 Of those, all but six have *979 some kind of legislation imposing liabilityfor vessel-sourced pollution.

Statutes imposing strict and unlimited civil liability for cleanup costs, natural resource damages, and private losses caused by

oil pollution, including purely economic losses, have been passed in Alaska, 398 California, 399 North Carolina, 400 and Rhode

Island. 401 There is strict and unlimited liability in South Carolina, too, although civil liability for private loss in that state maybe limited to personal injury, property damage, and losses consequential upon property damage--i.e., thereby excluding purely

economic losses. 402 Washington imposes strict and unlimited liability for cleanup costs and “damages to persons or property,public or private,” which appears to be limited to personal injury, property damage, and losses consequential upon property

damage. 403 Similarly, Maryland, 404 Massachusetts, 405 and Oregon 406 impose strict and unlimited liability for cleanup costsand damage to real and personal property; Maryland and Massachusetts also impose strict and unlimited liability for natural

resource damages. 407 Florida imposes strict but limited liability for cleanup costs, but strict and unlimited liability for natural

resource damages, damage to real and personal property, and losses consequential upon property damage. 408

*980 Strict but limited liability for private losses caused by oil pollution is imposed by statute in Delaware, 409 New Jersey, 410

New York, 411 Texas, 412 and Virginia. 413 Of those states, only Virginia allows all claims for loss of income or the means of

producing income, no matter how caused. 414 Florida only allows claims for losses consequential upon property damage, 415

although there is an exception for economic losses suffered by commercial fishermen. 416 Delaware, New Jersey, and New Yorkallow claims for loss of income from activities related to real or personal property or natural resources damaged or destroyed,provided that the claim exceeds 10% (in Delaware, 15%) of the amount derived by the claimant from that property or natural

resources. 417 Texas allows for claims by claimants owning, operating, or employed by commercial fishing, oystering, crabbing,or shrimping vessels, or seafood processing concerns “and others similarly economically reliant on the use or acquisition of

natural resources.” 418

Rather oddly, Louisiana's Oil Spill Prevention and Response Act contains an extensive definition of the word “damages,” adefinition of “responsible party,” and a provision limiting the liability of a responsible party for “damages and removal costs” tosums identical to those in OPA, but the Act contains no provision that actually imposes liability for damages on the responsible

party. 419 It can be inferred that the legislative intention was to impose civil liability for damages, or else there would have beenno point in defining the relevant terms or limiting liability. Nevertheless, the omission of an operative provision is an oversight,to put it mildly. Given that Louisiana was the state most affected by the Deepwater Horizon blowout, it can confidently beexpected that before long there will be an answer to the question whether statutory liability can be implied, rather than expressed.Even *981 if the statute does impose liability, it no longer imposes liability for purely economic losses. The statute used tocontain a provision equivalent to that in OPA referring to loss of profits or impairment of earning capacity due to damage to

property or natural resources, but that provision was removed by amendment in 1995. 420

Strict liability for cleanup costs and (in most cases) natural resource damage is imposed by Connecticut, 421 Georgia, 422

Hawaii, 423 Illinois, 424 Maine, 425 Michigan, 426 New Hampshire, 427 Wisconsin, 428 and (possibly) Puerto Rico, 429 butthere are no statutory provisions in those jurisdictions imposing liability for losses suffered by private individuals. New

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Hampshire's statute provides, however, that tort liability for negligent or intentional damage to property caused by an oil

discharge shall be 1.5 times the damages sustained. 430

There appears to be no legislation imposing liability for ship-sourced marine pollution in Alabama, 431 Indiana, 432

Minnesota, 433 Mississippi, 434 Ohio, 435 or Pennsylvania. 436

Thus, of the four states most directly affected by the Deepwater Horizon blowout--Louisiana, Mississippi, Alabama, andFlorida--only Florida (and possibly Louisiana) has enacted legislation that *982 supplements the provisions of OPA. Manystate common law claims have already been filed. These claims will (or ought to) require consideration of the federalismquestions described above.

Footnotes

© 2011 Robert Force, Martin Davies, and Joshua S. Force.

a1 Niels F. Johnsen Professor of Maritime Law; Director Emeritus, Tulane Maritime Law Center, Tulane University School of Law.

The authors wish to express their appreciation to Ruth M. Force for her research assistance. Mrs. Force is a retired Assistant U.S.

Attorney and received her LL.B. degree from the University of Pennsylvania.

d1 Admiralty Law Institute Professor of Maritime Law, Tulane University School of Law; Director, Tulane Maritime Law Center.

aa1 Member, Sher Garner Cahill Richter Klein & Hilbert, L.L.C.; Adjunct Assistant Professor of Law, Tulane University School of Law;

J.D., Harvard Law School; B.A., Haverford College. Sher Garner represents a number of claimants in the pending litigation related

to the Deepwater Horizon incident.

1 33 U.S.C. §407 (2006).

2 See, e.g., Wyandotte Transp. Co. v. United States, 389 U.S. 191, 1967 AMC 2553 (1967); United States v. Standard Oil Co., 384

U.S. 224, 1966 AMC 1122 (1966); United States v. Republic Steel Corp., 362 U.S. 482, 1961 AMC 545 (1960).

3 United States v. Dixie Carriers, Inc., 627 F.2d 736, 738, 1982 AMC 409, 410-12 (5th Cir. 1980).

4 Id. at 738-39, 1982 AMC at 410-14.

5 See 33 U.S.C. §§1251-1376.

6 Id. §1319(c).

7 Id. §1321(b)(6).

8 Id. §1321(b)(7).

9 Id. §1321(b)(10)(F)(1).

10 United States v. M/V Big Sam, 681 F.2d 432, 441, 1983 AMC 2730, 2742-44 (5th Cir. 1982); United States v. Dixie Carriers, Inc.,

627 F.2d 736, 739, 1982 AMC 409, 412-13 (5th Cir. 1980); Steuart Transp. Co. v. Allied Towing Corp., 596 F.2d 609, 613, 1979

AMC 1187, 1191-92 (4th Cir. 1979).

11 33 U.S.C. §1321(f)(4).

12 See supra text accompanying notes 9, 11.

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13 33 U.S.C. §1321(f)(4).

14 42 U.S.C. §§9601-9675 (2006).

15 Id. §9601(8). Contemporaneous efforts to enact oil pollution legislation failed. S. Rep. No. 101-94, at 1-2 (1989), reprinted in 1990

U.S.C.C.A.N. 722, 723.

16 See 42 U.S.C. §9607(a).

17 Id. §9607(c).

18 See id. §9607(a).

19 Int'l Mar. Org. [IMO], International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) (Oct. 2, 1983) (entered

into force in the United States).

20 33 U.S.C. §§1901-1915 (2006).

21 Protocol of 1992 To Amend the International Convention on Civil Liability for Oil Pollution Damage, Nov. 27, 1992, 1956 U.N.T.S.

255 [hereinafter CLC]; International Convention on Civil Liability for Oil Pollution Damage, Nov. 29, 1969, 973 U.N.T.S. 3.

22 CLC, supra note 21, at 287.

23 Protocol of 1992 To Amend the International Convention on the Establishment of an International Fund for Compensation for Oil

Pollution Damage, Nov. 17, 1992, 1953 U.N.T.S. 373 [hereinafter Fund Convention]; International Convention on the Establishment

of an International Fund for Compensation for Oil Pollution Damage, Dec. 18, 1971, 1110 U.N.T.S. 57.

24 Fund Convention, supra note 23, at 374.

25 Id. at 376.

26 Alan Khee-Jin Tan, Vessel-Source Marine Pollution: The Law and Politics of International Regulation 318-22 (2006).

27 Id.; see also S. Rep. No. 101-94, at 2-3 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 724. The Deepwater Horizon accident has

similarly led to calls to amend or modify numerous maritime laws, including OPA, the Shipowners' Limitation of Liability Act,

the Jones Act, the Death on the High Seas Act, and general maritime law. The legislative proposals have ranged from eliminating

or significantly increasing limits of liability to adding recovery for nonpecuniary damages to expanding the recovery of punitive

damages under maritime law. See Bryant E. Gardner, Window on Washington: Deepwater on the Horizon, 8 Benedict's Mar. Bull.

91 (2010); Bryant E. Gardner, Window on Washington: Treading DEEPWATER, 8 Benedict's Mar. Bull. 186 (2010).

28 S. Rep. No. 101-94, at 1-2 (1989), reprinted in 1990 U.S.C.C.A.N. at 723; see also Apex Oil Co. v. United States, 208 F. Supp. 2d 642,

651-52, 2002 AMC 493, 501-04 (E.D. La. 2002) (discussing OPA's legislative history); Lawrence I. Kiern, Liability, Compensation,

and Financial Responsibility Under the Oil Pollution Act of 1990: A Review of the First Decade, 24 Tul. Mar. L.J. 481 (2000); Steven

R. Swanson, OPA 90 + 10: The Oil Pollution Act of 1990 After Ten Years, 32 J. Mar. L. & Com. 135 (2001); John M. Woods, Going

on Twenty Years--The Oil Pollution Act of 1990 and Claims Against the Oil Spill Liability Trust Fund, 83 Tul. L. Rev. 1323 (2009).

29 26 U.S.C. §9509 (2006).

30 See Directive 2005/35, of the European Parliament and of the Council of 7 September 2005 on Ship-Source Pollution and on the

Introduction of Penalties for Infringements, 2005 O.J. (L 255) 11 (EC).

31 Compare 33 U.S.C. §2701(23) (2006) with International Convention on Civil Liability for Bunker Oil Pollution Damage, Mar. 23,

2001, [2009] A.T.S. 14.

32 Article V of the CLC now provides:

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1. The owner of a ship shall be entitled to limit his liability under this Convention in respect of any one incident to an aggregate

amount calculated as follows:

(a) 4,510,000 units of account for a ship not exceeding 5,000 units of tonnage;

(b) for a ship with a tonnage in excess thereof, for each additional unit of tonnage, 631 units of account in addition to the amount

mentioned in subparagraph (a); provided, however, that this aggregate amount shall not in any event exceed 89,770,000 units of

account.

CLC, supra note 21, at 287-89.

33 The terms “removal costs” and “cleanup costs” are used interchangeably in this Article.

34 33 U.S.C. §2702(b).

35 OPA defines “oil” broadly as

oil of any kind or in any form, including petroleum, fuel oil, sludge, oil refuse, and oil mixed with wastes other than dredged spoil, but

does not include any substance which is specifically listed or designated as a hazardous substance under subparagraphs (A) through

(F) of section 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601) and which

is subject to the provisions of that Act [42 U.S.C. 9601 et seq.].

33 U.S.C. §2701(23) (alteration in original).

36 42 U.S.C. §§9601-9675 (2006).

37 A “‘discharge’ means any emission (other than natural seepage), intentional or unintentional, and includes, but is not limited to,

spilling, leaking, pumping, pouring, emitting, emptying, or dumping.” 33 U.S.C. §2701(7). OPA applies only to discharges of oil into

or upon the navigable waters of the United States (including the territorial sea), the adjoining shoreline, and the exclusive economic

zone. Id. §2702(a). The subject of navigable waters can be controversial. See, e.g., Am. Petroleum Inst. v. Johnson, 541 F. Supp.

2d 165 (D.D.C. 2008). OPA does not apply to discharges of oil that affect groundwater. Rice v. Harken Exploration Co., 250 F.3d

264, 269-70 (5th Cir. 2001).

38 A “‘vessel’ means every description of watercraft or other artificial contrivance used, or capable of being used, as a means of

transportation on water, other than a public vessel.” 33 U.S.C. §2701(37).

39 Under OPA, a “facility” is

any structure, group of structures, equipment, or device (other than a vessel) which is used for one or more of the following purposes:

exploring for, drilling for, producing, storing, handling, transferring, processing, or transporting oil. This term includes any motor

vehicle, rolling stock, or pipeline used for one or more of these purposes.

Id. §2701(9); see United States v. Viking Res., Inc., 607 F. Supp. 2d 808, 816 n.24, 818 (S.D. Tex. 2009) (noting that “there is

virtually no applicable case law elaborating on this definition” but holding that a collection of tanks used to store oil constituted

an onshore facility).

40 An “‘onshore facility’ means any facility (including, but not limited to, motor vehicles and rolling stock) of any kind located in, on,

or under, any land within the United States other than submerged land.” 33 U.S.C. §2701(24); see, e.g., Kenan Transp. Co. v. U.S.

Coast Guard, No. 1:04-CV-3186-WSD, 2006 WL 1455658 (N.D. Ga. May 19, 2006) (treating a tanker truck, from which oil was

discharged as a result of an accident with a pickup truck, as an onshore facility under OPA).

41 “Offshore facility” is defined as

any facility of any kind located in, on, or under any of the navigable waters of the United States, and any facility of any kind which is

subject to the jurisdiction of the United States and is located in, on, or under any other waters, other than a vessel or a public vessel.

33 U.S.C. §2701(22).

42 Id. §2701(18).

43 Id. §2701(32)(A); see, e.g., United States v. J.R. Nelson Vessel, Ltd., 1 F. Supp. 2d 172, 1998 AMC 2249 (E.D.N.Y. 1998), aff'd, 173

F.3d 847, 1999 AMC 2997 (2d Cir. 1999) (imposing liability on vessel owner as responsible party). At least one court has held that

the captain of a vessel is not an “operator” for liability purposes under OPA. Green Atlas Shipping SA, TMM Co. v. United States,

103

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306 F. Supp. 2d 974, 981, 2003 AMC 2817, 2824-25 (D. Or. 2003). Congress has recently amended the definition of responsibility

party in §2701(32)(A) for a vessel to include “the owner of oil being transported in a tank vessel with a single hull after December

31, 2010,” except, until 2015, certain vessels unloading oil, in bulk, at a deepwater port or offloading oil, in lightering activities, in

certain established lightering zones. 46 U.S.C. §3703a(b)(3) (2006); Coast Guard Authorization Act of 2010, Pub. L. No. 111-281,

§713, 124 Stat. 2905, 2988 (2010).

44 33 U.S.C. §2701(32)(B). In contrast to the holding in Green Atlas, 306 F. Supp. 2d at 981, 2003 AMC at 2824-25, an individual has

been held to be an “operator” of an onshore facility for liability purposes where he directed the facility's activities and was involved

in decisions concerning its compliance with environmental regulations. United States v. Jones, 267 F. Supp. 2d 1349, 1355-56 (M.D.

Ga. 2003) (citing Browning-Ferris Indus. of Ill., Inc. v. Ter Maat, 195 F.3d 953, 956 (7th Cir. 1999) (a CERCLA case)).

45 33 U.S.C. §2701(32)(C). Under OPA, a “lessee” is “a person holding a leasehold interest in an oil or gas lease on lands beneath

navigable waters ... or on submerged lands of the Outer Continental Shelf, granted or maintained under applicable State law or [under]

the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.).” Id. §2701(16). OPA defines a “permittee” as “a person holding

an authorization, license, or permit for geological exploration issued under section 11 of the Outer Continental Shelf Lands Act (43

U.S.C. 1340) or applicable State law.” Id. §2701(28). By placing liability on lessees and permittees, Congress sought to correct a

deficiency in title III of the Outer Continental Shelf Lands Act Amendments of 1978, which held the owner or operator of an Outer

Continental Shelf (OCS) facility liable even though the facility owner or operator was often an independent drilling contractor and

not the actual holder of the rights to produce the oil. S. Rep. No. 101-94, at 11-12 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 733.

46 Smith Prop. Holdings, 4411 Conn. L.L.C. v. United States, 311 F. Supp. 2d 69, 81 (D.D.C. 2004) (quoting United States v. Bois

D'Arc Operating Corp., No. 98-157, 1999 WL 130635, at *3 (E.D. La. Mar. 10, 1999)).

47 On April 28, 2010, the United States Coast Guard notified BP Exploration & Production Inc. (BP) and Transocean Holdings

Incorporated (Transocean) that the offshore facility and MODU had been identified as sources of an oil discharge and identified

those companies as responsible parties. The Coast Guard also provided notice to BP Exploration & Production Inc.'s and Transocean

Holdings Incorporated's respective guarantors: BP Corporation North America Inc. and QBE Underwriting Ltd. (Lloyd's Syndicate

1036). Subsequently, between May 27, 2010, and January 11, 2011, the Coast Guard sent nine bills for removal costs incurred

by the Coast Guard to the following responsible parties and guarantors: BP Exploration & Production Inc., BP Corporation North

America, Inc., Transocean Holdings Incorporated, QBE Underwriting Ltd. (Lloyd's Syndicate 1036), Anadarko E&P Company, LP,

Anadarko Petroleum Corporation (Anadarko), and MOEX Offshore 2007 LLC (MOEX). See Oil Spill Cost and Reimbursement Fact

Sheet, RestoreTheGulf.com (Jan. 11, 2011), http:// www.restorethegulf.gov/release/2011/01/11/oil-spill-cost-and-reimbursement-

fact-sheet. Anadarko and MOEX are parties to a joint operating agreement with BP for the Macondo well.

48 E.g., Puerto Rico v. The M/V Emily S., 13 F. Supp. 2d 147, 150, 1998 AMC 2726 (D.P.R. 1998).

49 In re Settoon Towing, LLC, No. 07-12623, 2010 WL 2545270, at *3 (E.D. La. June 16, 2010); GMD Shipyard Corp. v. M/V Anthea

Y, No. 03 Civ.2748-RWS, 2004 WL 2251670, at *12 n.3, 2004 AMC 2760, 2776-77 n.3 (S.D.N.Y. Oct. 6, 2004); Apex Oil Co. v.

United States, 208 F. Supp. 2d 642, 654, 2002 AMC 493, 505-07 (E.D. La. 2002); S. Rep. No. 101-94, at 11-12 (1989), reprinted in

1990 U.S.C.C.A.N. at 733; H.R. Rep. No. 101-653, at 2-3 (1990) (Conf. Rep.), reprinted in 1990 U.S.C.C.A.N. 779, 780.

50 33 U.S.C. §2702(a) (2006) (emphasis added).

51 Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220, 226, 2008 AMC 284, 287-89 (D.D.C. 2007); Apex Oil, 208 F.

Supp. 2d at 652, 2002 AMC at 503-04.

52 33 U.S.C. §2703(a). In addition to these defenses, OPA also provides that a responsible party is not liable to a claimant whose gross

negligence or willful misconduct caused the incident. Id. §2703(b).

53 Id. §2703(a).

54 872 F.2d 1192, 1989 AMC 1497 (5th Cir. 1989).

55 Id. at 1194, 1989 AMC at 1498-1500.

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56 Id. at 1198-1200, 1989 AMC at 1505-10.

57 See Apex Oil Co. v. United States, 208 F. Supp. 2d 642, 654, 2002 AMC 493, 506 (E.D. La. 2002) (“‘These defenses are narrowly

construed, and only in the situation where the discharge was totally beyond the control of the discharging vessel would the responsible

party be excused from liability.”’ (quoting United States v. English, No. CV00-00016ACKBMK, 2001 WL 940946, at *4, 2001 AMC

1756, 1759-60 (D. Haw. Mar. 28, 2001))); cf. W. of Eng., 872 F.2d at 1198, 1989 AMC at 1505 (“Liability exceptions under section

1321(f)(1) must be narrowly construed to effectuate Congress' strict liability scheme.”); United States v. LeBeouf Bros. Towing, 621

F.2d 787, 789-90, 1981 AMC 1947, 1948-50 (5th Cir. 1980) (interpreting narrowly third-party defense under the CWA); Burgess v.

M/V Tamano, 564 F.2d 964, 982, 1977 AMC 1892, 1919-21 (1st Cir. 1977) (holding that CWA defenses must be narrowly construed

to protect legislative purpose).

58 Apex Oil, 208 F. Supp. 2d at 654, 2002 AMC at 506 (recognizing that “[a]lthough there have been few, if any, cases construing the

OPA definition of ‘act of God,’ there is a substantial body of law interpreting that term pursuant to the CWA, 33 U.S.C. §1251 and

CERCLA, 42 U.S.C. §9607” and analogizing to those statues in rejecting application of the defense).

59 OPA does not define “act of war,” and its legislative history does not provide any insight into what specific acts Congress intended

this defense to cover. Cf. United States v. Shell Oil Co., 294 F.3d 1045, 1061-62 (9th Cir. 2002) (rejecting oil companies' act of war

defense for pollution allegedly resulting from government's activities in regulating wartime production of aviation fuel). In Shell,

the Ninth Circuit observed that “little authority” existed to guide its decision and noted that “the term ‘act of war’ appears to have

been borrowed from international law, where it is defined as a use of force or other action by one state against another which [t]he

state acted against recognizes ... as an act of war, either by use of retaliatory force or a declaration of war.” Id. at 1061 (internal

quotation marks omitted).

60 33 U.S.C. §2701(1) (2006).

61 Apex Oil, 208 F. Supp. 2d at 652-53, 2002 AMC at 503-05.

62 Id. at 653, 2002 AMC at 504-05.

63 Id. at 645, 2002 AMC at 493-95.

64 Id.

65 Id. at 657, 2002 AMC at 509-11.

66 26 Cl. Ct. 223, 1992 AMC 2253 (1992).

67 Id. at 224, 1992 AMC at 2253-54.

68 Id. at 224-25, 1992 AMC at 2254.

69 Id. at 226, 1992 AMC at 2257.

70 33 U.S.C. §2703(a)(3) (2006).

71 Id. §2703(a)(3)(A)-(B).

72 See, e.g., Gatlin Oil Co. v. United States, 169 F.3d 207 (4th Cir. 1999) (addressing claims for reimbursement of removal costs and

damages, pursuant to 33 U.S.C. §2708(a)(1), where a vandal jammed open above-ground fuel storage tanks, releasing 20,000-30,000

gallons of oil).

73 United States v. J.R. Nelson Vessel, Ltd., 1 F. Supp. 2d 172, 173-74, 1998 AMC 2249, 2249-50 (E.D.N.Y. 1998), aff'd, 173 F.3d

847, 1999 AMC 2997 (2d Cir. 1999).

74 Id. at 174-75, 1998 AMC at 2250-52.

105






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75 Id. at 175, 1998 AMC at 2251-52.

76 In 2004, Congress amended OPA to add a definition of the term “contractual relationship.” See 33 U.S.C. §2703(d). CERCLA

contains a similar definition in 42 U.S.C. §9601(35) (2006). Congress intended this limitation “to preclude defendants from avoiding

liability by claiming a third party was responsible, when that third party had a contractual relationship with the defendant and was

acting, in essence, as an extension of the defendant.” S. Rep. No. 101-94, at 12-13 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 734.

In other words, OPA places the burden on the owner or operator of a discharging vessel or facility to ensure that it contracts with

responsible individuals, whether employees or independent contractors, or to protect itself against possible losses through indemnity

agreements. The responsible party is deemed to have ultimate control over third parties it hires throughout the performance of the

job. See United States v. LeBeouf Bros. Towing, 621 F.2d 787, 789-90, 1981 AMC 1947, 1948-50 (5th Cir. 1980) (holding that a

tug does not constitute a third party with respect to a barge it tows).

77 See Int'l Marine Carriers v. Oil Spill Liab. Trust Fund, 903 F. Supp. 1097, 1105-06, 1995 AMC 2072, 2081-84 (S.D. Tex. 1994)

(collecting cases).

78 Id. at 1099-1100, 1995 AMC at 2072-75. The district court's opinion provides little, if any, detail about the terms of the Declaration

of Inspection.

79 Id. at 1106, 1995 AMC at 2083-85 (emphasis added).

80 33 U.S.C. §2703(c)(1).

81 Id. §2703(c)(2).

82 Id. §2703(c)(3).

83 Id. §2702(d)(1)(A).

84 Id.

85 Id. §2702(d)(1)(B).

86 Id. §§2709-2710; see In re Alex C Corp., Nos. 00-12500-DPW, 01-12186-DPW, 2010 WL 4292328, at *13-14 (D. Mass. Nov. 1,

2010).

87 33 U.S.C. §2710(c); see also S. Rep. No. 101-94, at 14-15 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 736.

88 One district court has held that OPA is the exclusive remedy for any public or private claimant seeking recovery for damages covered

by OPA and thus preempts any general maritime law claims against non-sole-cause third parties. See Gabarick v. Laurin Mar. (Am.)

Inc., 623 F. Supp. 2d 741, 750-51, 2009 AMC 1014, 1026-28 (E.D. La. 2009). OPA itself does not support this holding, however,

by expressly precluding claims against non-sole-cause third parties, who are not subject to liability under the Act. Likewise, the

court's holding seems inconsistent with Congress's stated purpose, in enacting OPA, of ensuring that victims of oil spills are fully

compensated. See S. Rep. No. 101-94, at 1-4 (1989), reprinted in 1990 U.S.C.C.A.N. at 723, 725.

89 33 U.S.C. §2702(a). OPA does not apply to claims for personal injury, wrongful death, or collision damages. See Gabarick, 623 F.

Supp. 2d at 745-46, 2009 AMC at 1018-20.

90 OPA defines an “incident” as “any occurrence or series of occurrences having the same origin, involving one or more vessels,

facilities, or any combination thereof, resulting in the discharge or substantial threat of discharge of oil.” 33 U.S.C. §2701(14).

91 Gatlin Oil Co. v. United States, 169 F.3d 207, 211-12 (4th Cir. 1999) (permitting plaintiff that cleaned up oil spilled when a vandal

jammed open the plaintiff's above-ground storage tanks to recover removal costs consistent with the National Contingency Plan,

costs incurred to comply with directions from the federal coordinator, and damages resulting from the spill, including loss of earnings

and earning capacity caused by carrying out those directions, but not damages resulting from a fire caused by the release of the oil,

including the destruction of a warehouse, bulk plant, inventory, other property, loading dock, and several vehicles); see also Ala. State

106



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Docks Dep't v. Compania Antares de Navegacion, No. CIV.A. 97-427-CB-C, 1998 WL 1749264, at *4-5, 1999 AMC 309, 313-16

(S.D. Ala. Aug. 27, 1998) (holding wharfage fees were not caused by discharge of oil and, therefore, were not recoverable under

OPA by dock owner where vessel that had previously discharged oil was merely docked at plaintiff's facility but did not discharge

oil while docked at the facility). But see Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220, 229, 2008 AMC 284,

292 (D.D.C. 2007) (“The ‘incident,’ therefore, is not the oil spill. Under the plain language of the statute, the incident is what caused

the spill. More importantly, the ‘incident’ may be a ‘series of occurrences' resulting in the oil spill.”).

92 33 U.S.C. §2702(b).

93 S. Rep. No. 101-94, at 12-13 (1989), reprinted in 1990 U.S.C.C.A.N. at 734.

94 33 U.S.C. §1321(j)(5).

95 Id. §1321(c). The CWA was amended in conjunction with the enactment of OPA to require the President to clean up or arrange for the

cleanup of oil or hazardous substances, unless the President determines that the responsible party is properly and promptly cleaning

up the discharge and has the financial resources and technical capability to do so. See S. Rep. No. 101-94, at 7-8 (1989), reprinted in

1990 U.S.C.C.A.N. at 729; see also H.R. Rep. No. 101-653, at 44-45 (1990) (Conf. Rep.), reprinted in 1990 U.S.C.C.A.N. at 824-25.

96 Exec. Order No. 12,777, 56 Fed. Reg. 54,757, 54,763 (Oct. 22, 1991).

97 Id.

98 33 U.S.C. §2702(b)(1).

99 Id. §2701(31). The terms “‘remove’ or ‘removal’ mean [] containment and removal of oil or a hazardous substance from water and

shorelines or the taking of other actions as may be necessary to minimize or mitigate damage to the public health or welfare, including,

but not limited to, fish, shellfish, wildlife, and public and private property, shorelines, and beaches.” Id. §2701(30).

100 United States v. Hyundai Merch. Marine Co., 172 F.3d 1187, 1190, 1999 AMC 1521, 1524-25 (9th Cir. 1999). In Hyundai, the

Ninth Circuit held that to recover its monitoring costs as “removal costs,” the government did not have to prove that the costs were

necessary, prudent, or reasonable, only that its actions were not arbitrary and capricious. Id. at 1191, 1999 AMC at 1525-27; see also

United States v. Jones, 267 F. Supp. 2d 1349, 1363-64 (M.D. Ga. 2003).

101 See, e.g., Kearny Barge Co. v. Global Ins. Co., 943 F. Supp. 441, 457, 1997 AMC 715, 737-39 (D.N.J. 1996); see also United States

v. J.R. Nelson Vessel, Ltd., 1 F. Supp. 2d 172, 173, 1998 AMC 2249, 2249-50 (E.D.N.Y. 1998), aff'd, 173 F.3d 847, 1999 AMC

2997 (2d Cir. 1999).

102 33 U.S.C. §2702(b)(2) provides:

(2)Damages

The damages referred to in subsection (a) of this section are the following:

(A)Natural resources

Damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the

damage, which shall be recoverable by a United States trustee, a State trustee, an Indian tribe trustee, or a foreign trustee.

(B) Real or personal property

Damages for injury to, or economic losses resulting from destruction of, real or personal property, which shall be recoverable by a

claimant who owns or leases that property.

(C) Subsistence use

Damages for loss of subsistence use of natural resources, which shall be recoverable by any claimant who so uses natural resources

which have been injured, destroyed, or lost, without regard to the ownership or management of the resources.

(D) Revenues

Damages equal to the net loss of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property,

personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political

subdivision thereof.

(E) Profits and earning capacity

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Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal

property, or natural resources, which shall be recoverable by any claimant.

(F) Public services

Damages for net costs of providing increased or additional public services during or after removal activities, including protection from

fire, safety, or health hazards, caused by a discharge of oil, which shall be recoverable by a State, or a political subdivision of a State.

103 Id. §2702(b)(2)(A). OPA defines “natural resources” as “land, fish, wildlife, biota, air, water, ground water, drinking water supplies,

and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States

(including the resources of the exclusive economic zone), any State or local government or Indian tribe.” Id. §2701(20). Natural

resources damages are addressed further in this Article. See infra Part IV.C.

104 33 U.S.C. §2702(b)(2)(D).

105 Id. §2702(b)(2)(F).

106 Id. §2702(b)(2)(B).

107 Id. §2702(b)(2)(C).

108 Id. §2702(b)(2)(E). The recovery of damages for lost profits and earning capacity is discussed further. See infra Part IV.D.

109 In re Cleveland Tankers, Inc., 791 F. Supp. 669, 678, 1992 AMC 1727, 1740-42 (E.D. Mich. 1992).

110 Id. at 678 n.7, 1992 AMC at 1742 n.7.

111 The U.S. government has filed suit against nine defendants seeking a declaration that the defendants are liable for natural resource

damages. Complaint, United States v. BP Exploration & Prod. Inc., No. 2:10-CV-04536 CJB-SS (E.D. La. Dec. 15, 2010).

112 In Kennecott Utah Copper Corp. v. United States Department of the Interior, the court explained the concept of services:

In the 1986 Regulations, [the Department of the] Interior developed a concept called “services” for measuring the level of restoration

of an injured resource. The resulting rules quantified the damages to the injured resource in terms of the extent to which natural

resource services have been reduced as a result of the injuries. Under the services approach, the restoration level of an injured resource

is measured by looking at the level of services the resource provided rather than the physical and biological characteristics of the

resource.

88 F.3d 1191, 1220 (D.C. Cir. 1996) (citations omitted) (internal quotation marks omitted).

113 Ohio v. U.S. Dep't of the Interior, 880 F.2d 432, 464 (D.C. Cir. 1989).

114 Id. at 475 n.72.

115 Id. at 476 n.73.

116 Endangered Species Act, 16 U.S.C. §§1531-1544 (2006).

117 As will be explained, the CERCLA regulations originally applied both to discharges of oil and to releases of hazardous substances.

Beginning in 1996 separate regulations for oil were promulgated by NOAA.

118 43 C.F.R. §11.83(c) (2010).

119 15 C.F.R. §990.30 (2010).

120 Id.

121 See supra text accompanying note 103.

122 33 U.S.C. §2706 (2006) (emphasis added).

108

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123 Id. §2706(d)(1)(A).

124 628 F.2d 652, 1981 AMC 2185 (1st Cir. 1980).

125 Id. at 674, 1981 AMC at 2214-16.

126 Id.

127 Id. at 676, 1981 AMC at 2218-19.

128 Id. at 678, 1981 AMC at 2221-22.

129 43 C.F.R. §§11.10-.93 (2010).

130 Natural Resource Damages for Hazardous Substances, 73 Fed. Reg. 57,260 (Oct. 2, 2008).

131 42 U.S.C. §9651(c)(2) (2006).

132 Id.

133 134 F.3d 1095 (D.C. Cir. 1998).

134 880 F.2d 432 (D.C. Cir. 1989).

135 Id. at 438.

136 Id. at 456-57.

137 Id. at 462 (citations omitted).

138 Id. at 463 (citations omitted).

139 15 C.F.R. §§990.10-.66 (2010).

140 128 F.3d 767, 770-71 (D.C. Cir. 1997).

141 33 U.S.C. §§2702(b)(2)(A), 2706(d)(1)(B) (2006).

142 Id. §1321(f)(4).

143 42 U.S.C. §9607(a)(4)(C), (f) (2006).

144 88 F.3d 1191 (D.C. Cir. 1996).

145 See Natural Resource Damages for Hazardous Substances, 73 Fed. Reg. 57,265 (Oct. 2, 2008).

146 Id. at 57,260.

147 43 C.F.R. §11.83(c)(1)-(2) (2010) (emphasis added).

148 Id. §11.83(c)(2)(vii).

149 880 F.2d 432, 475 (D.C. Cir. 1989) (citations omitted). The regulations similarly define contingent valuation as: “all techniques that

set up hypothetical markets to directly elicit an individual's economic valuation of a natural resource. Can determine: (A)Use values

and explicitly determine option and existence values; and (B)Lost use values of injured natural resources.” 43 C.F.R. §11.83(c)(2)(vii).

150 Report of the National Oceanic and Atmospheric Administration (NOAA) Panel on Contingent Valuation, 58 Fed. Reg. 4602 (Jan.

15, 1993).

109

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151 A strong case supporting CV techniques is made in Jeffrey C. Dobbins, Note, The Pain and Suffering of Environmental Loss: Using

Contingent Valuation To Estimate Nonuse Damages, 43 Duke L.J. 879 (1994).

152 See Contingent Valuation: A Critical Assessment (Jerry A. Hausman ed., 1993).

153 Allen Kanner & Tibor Nagy, Measuring Loss of Use Damages in Natural Resource Damage Actions, 30 Colum. J. Envt'l L. 417,

441 (2005).

154 Natural Resource Damages for Hazardous Substances, 73 Fed. Reg. 57,259, 57,261 (Oct. 2, 2008) (to be codified at 43 C.F.R. pt. 11).

155 Id. at 57,267 (emphasis added); see also 43 C.F.R. §11.83(c)(2) (2010) (listing permitted valuation methodologies, including

contingent valuation, conjoint analysis, habitat equivalency analysis, and resource equivalency analysis).

156 15 C.F.R. §990.30 (2010).

157 Id. §990.53.

158 See Case: Athos Spill, PA, NJ, and DE, DARRP.NOAA.gov, http:// www.darrp.noaa.gov/northeast/athos/index.html (last visited

Feb. 26, 2011).

159 NOAA et al., Final Restoration Plan and Environmental Assessment 5 (2009), http://www.darrp.noaa.gov/northeast/athos/pdf/

Athos_Final_RP.pdf [hereinafter Final Plan].

160 Id.

161 Id. at vii.

162 Id. at 5.

163 Id. at 42. “Overall, federal and state agencies have received $27.5 million to restore conditions for fish, birds, sensitive habitats,

wildlife and recreational use of the Delaware River areas impacted in 2004 by an oil spill from the vessel Athos I.” Commission To

Receive $1.3 Million To Help Restore Delaware River from 2004 Oil Spill Impacts, Pa. Fish & Boat Comm'n (Nov. 24, 2010), http://

www.fish.state.pa.us/newsreleases/2010press/athos_settle.htm. This amount includes funds awarded by the Oil Spill Liability Trust

Fund to make up the shortfall between the cost of the restoration projects and the responsible parties' limited liability. Id.

164 See Final Plan, supra note 159, at viii-ix.

165 33 U.S.C. §2702(b)(2)(E) (2006).

166 Id.

167 In re Taira Lynn Marine Ltd. No. 5, 444 F.3d 371, 382, 2006 AMC 1055, 1064-66 (5th Cir. 2006); Ballard Shipping Co. v. Beach

Shellfish, 32 F.3d 623, 631, 1994 AMC 2705, 2717-18 (1st Cir. 1994) (citing H.R. Rep. No. 101-653, at 4 (1990) (Conf. Rep.),

reprinted in 1990 U.S.C.C.A.N. 779, 781)); Dunham-Price Group, LLC v. Citgo Petroleum Corp., No. 2:07 CV 1019, 2010 WL

1285446, at *2 (W.D. La. Mar. 31, 2010); In re Settoon Towing LLC, No. 07-1263, 2009 WL 4730969, at *4 (E.D. La. Dec. 4, 2009).

But see In re Cleveland Tankers, Inc., 791 F. Supp. 669, 678-79, 1992 AMC 1727, 1740-42 (E.D. Mich. 1992) (holding claimants

could not recover under §2702(b)(2)(E) because they had not alleged “‘injury, destruction, or loss' to their property”).

168 275 U.S. 303, 1928 AMC 61 (1927).

169 Id. at 307, 1928 AMC at 61-62.

170 Id. at 307-08, 1928 AMC at 61-63.

171 Id. at 309, 1928 AMC at 63.

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172 See, e.g., Taira Lynn, 444 F.3d at 377, 2006 AMC at 1057-59; Ballard, 32 F.3d at 625, 1994 AMC at 2707-09; Louisiana ex rel. Guste

v. M/V Testbank, 752 F.2d 1019, 1022, 1985 AMC 1521, 1525-26 (5th Cir. 1985) (en banc). But see Testbank, 752 F.2d at 1040,

1985 AMC at 1556 (Wisdom, J., dissenting) (“Robins held only that if a defendant's negligence injures party A, and the plaintiff

suffers loss of expected income or profits because it had a contract with A, then the plaintiff has no cause of action based on the

defendant's negligence.... In the instant case, however, some of the plaintiffs suffered damages whether or not they had a contractual

connection with a party physically injured by the tortfeasor. These plaintiffs do not need to rely on a contract to link them to the tort:

The collision proximately caused their losses, and those losses were foreseeable.”).

173 See, e.g., Reserve Mooring Inc. v. Am. Commercial Barge Line, LLC, 251 F.3d 1069, 1070-72, 2001 AMC 1853, 1853-57 (5th Cir.

2001) (holding Robins barred mooring facility's claim for loss of income when sunken barge blocked access to facility); Ballard,

32 F.3d at 625, 1994 AMC at 2707-09 (holding that shellfish dealers had no claim for economic losses caused by oil spill under

maritime law). But see Sekco Energy, Inc. v. M/V Margaret Chouest, 820 F. Supp. 1008, 1012, 1994 AMC 1515, 1515 (E.D. La.

1993) (allowing drilling platform owner to proceed with maritime negligence claim for loss of revenues suffered when well had to

be shut in following rupture of seismic cable and discharge of mineral oil even though platform itself was not damaged).

174 453 U.S. 1 (1981).

175 Id. at 11-15; cf. In re Exxon Valdez, 270 F.3d 1215, 1230, 2002 AMC 1, 15-17 (9th Cir. 2001).

176 Sea Clammers, 453 U.S. at 11, 21-22.

177 See Testbank, 752 F.2d at 1030-31, 1985 AMC at 1538-42; Conner v. Aerovox, Inc., 730 F.2d 835, 841-42, 1984 AMC 2507, 2516-17

(1st Cir. 1984); In re Oswego Barge Corp., 664 F.2d 327, 343, 1982 AMC 769, 789-90 (2d Cir. 1981). But see Cropwell Leasing Co.

v. NMS, Inc., 5 F.3d 899, 901, 1994 AMC 343, 344-45 (5th Cir. 1993) (vacating the district court's dismissal of the government's

general maritime law claims).

178 See, e.g., Adams v. Star Enter., 51 F.3d 417, 424-25 (4th Cir. 1995); Ballard, 32 F.3d at 625 n.1, 1994 AMC at 2708 n.1; Union

Oil Co. v. Oppen, 501 F.2d 558, 570-71, 1975 AMC 416, 434-35 (9th Cir. 1974). In Testbank, the Fifth Circuit discussed, but did

not expressly adopt, this exception because the claims of the commercial fishermen who had brought suit following the accident

were not before it on appeal. 752 F.2d at 1021 n.2, 1027 n.10, 1985 AMC at 1523 n.2, 1555 n.10. But see id. at 1034, 1985 AMC at

1545-46 (Williams, J., concurring) (“The commercial fishermen properly recover because their livelihood comes from a ‘resource’

of the water which was polluted.”).

179 See Yarmouth Sea Prods. Ltd. v. Scully, 131 F.3d 389, 398-99, 1998 AMC 825, 837-40 (4th Cir. 1997); Miller Indus. v. Caterpillar

Tractor Co., 733 F.2d 813, 818-20, 1984 AMC 2559, 2564-69 (11th Cir. 1984); Carbone v. Ursich, 209 F.2d 178, 181-82, 1954

AMC 169, 173-76 (9th Cir. 1953).

180 See Aktieselskabet Cuzco v. The Sucaresco (The Toluma), 294 U.S. 394, 404-05, 1935 AMC 412, 416-18 (1935); Amoco Transp. Co.

v. S/S Mason Lykes, 768 F.2d 659, 668, 1986 AMC 563, 575-77 (5th Cir. 1985); Conti Corso Schiffahrts v. M/V Pinar Kaptanoglu,

414 F. Supp. 2d 443, 447-50, 2006 AMC 1068, 1070-75 (S.D.N.Y. 2006); see also Venore Transp. Co. v. M/V Struma, 583 F.2d

708, 710-11, 1978 AMC 2146, 2148-50 (4th Cir. 1978) (holding that time charterer that paid charter hire during period vessel was

undergoing repairs for damage sustained in collision could sue owner of vessel that caused collision to recover charter hire).

181 Ballard, 32 F.3d at 625 n.1, 1994 AMC at 2708 n.1.

182 S. Rep. No. 101-94, at 14-15 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 736; H.R. Rep. No. 101-653, at 4 (1990) (Conf. Rep.),

reprinted in 1990 U.S.C.C.A.N. 779, 781 (“The claimant need not be the owner of the damaged property or resources to recover

for lost profits or income. For example, a fisherman may recover lost income due to damaged fisheries resources, even though the

fisherman does not own those resources.”).

183 Sekco Energy, Inc. v. M/V Margaret Chouest, 820 F. Supp. 1008, 1012, 1994 AMC 1515, 1515 (E.D. La. 1993).

184 In re Settoon Towing, LLC, No. 87-1263, 2009 WL 4730969, at *4 (E.D. La. Dec. 4, 2009).

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185 FGDI, LLC v. M/V Lorelay, 193 F. App'x 853, 855 (11th Cir. 2006) (per curiam); see also S. Port Marine, LLC v. Gulf Oil Ltd.,

234 F.3d 58, 66-68, 2001 AMC 609, 618-22 (1st Cir. 2000) (finding sufficient evidence to support lost profit claims for lost slip

revenues and business interruption, including diversion of plaintiff's work force, but insufficient evidence to support claims for loss

of goodwill and business stress).

186 33 U.S.C. §2702(b)(2)(E) (2006).

187 See sources cited supra notes 167, 182. The recovery provided by 33 U.S.C. §2702(b)(2)(E) applies only to economic loss claims

brought against OPA responsible parties. Claimants seeking to recover such damages from other parties that may have contributed to

the spill will have to assert their claims under general maritime law or, possibly, state law. With respect to those claims, the Robins

Rule and the limited exceptions to that rule may still apply.

188 H.R. Rep. No. 101-653, at 4 (1990) (Conf. Rep.), reprinted in 1990 U.S.C.C.A.N. 779, 781 (“[Under §2702(b)(2)(E), the] claimant

need not be the owner of the damaged property or resources to recover for lost profits or income. For example, a fisherman may

recover lost income due to damaged fisheries resources, even though the fisherman does not own those resources.”); cf. Golnoy

Barge Co. v. M/T Shinoussa, Civ. A. Nos. H-90-2414, 90-2476, 90-2488, 91-180, 1993 WL 735038, at *3, 1994 AMC 1378, 1382

(S.D. Tex. Aug. 17, 1993) (“[C]ommercial fishermen recover not for injury to the fish stocks, but for physical interference with their

opportunity to fish. It is only during the closure period and in the closed area that the spill actually interferes with their ability to fish.”).

189 Louisiana ex rel. Guste v. M/V Testbank, 752 F.2d 1019, 1020, 1985 AMC 1521, 1522-23 (5th Cir. 1985) (en banc).

190 Id. at 1020-21, 1985 AMC at 1522-25.

191 Id. at 1021, 1985 AMC at 1523-25.

192 Id. at 1039-46, 1985 AMC at 1553-66 (Wisdom, J., dissenting).

193 Id. at 1046, 1985 AMC at 1565-66. Particular damage, a requirement of public nuisance law, means that a party has suffered an injury

that is distinct from the injury suffered by the community at large.

194 Id. at 1049, 1985 AMC at 1569-72.

195 Id. at 1049-50, 1985 AMC at 1569-73.

196 Id. at 1050, 1985 AMC at 1571-73.

197 Id.

198 Id. at 1050-51, 1985 AMC at 1571-75; see also id. at 1050, 1985 AMC at 1572-73 (“[A]ll would agree that a seafood restaurant in

New Orleans should not recover for a loss of business from consumers' concern over contaminated products.”).

199 Id. at 1050, 1985 AMC at 1572-73.

200 135 Cong. Rec. H7954-02, H7956 (daily ed. Nov. 2, 1989) (statement of Rep. Studds) (stating that the Act “guarantees that our

fishermen and beachfront property owners will be compensated promptly and in full for any oil spill damages they might suffer”); id.

H7962 (Statement of Rep. Ortiz) (“For many individuals and business owners along the coast, time is money.”); id. H7966 (statement

of Rep. Stangeland) (“The polluter should pay and the victim should receive full compensation for direct, proven damages. This

includes ... economic damages to third parties such as fishermen and beachfront property owners.”).

201 Frequently Asked Questions, Gulf Coast Claims Facility, §1.1, http://gulfcoastclaimsfacility.com/faq#Q1 (last visited Feb. 26, 2011).

202 Id. §1.1-.2.

203 Gulf Coast Claims Facility Protocol for Emergency Advance Payments, Gulf Coast Claims Facility, §II(F) (Aug. 23, 2010), http://

www.gulfcoastclaimsfacility.com/proto_1.php; see In re Great Lakes Dredge & Dock Co., 624 F.3d 201, 202, 212 (5th Cir. 2010)

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(discussing proximate cause doctrine under general maritime law and holding that “[t]o be foreseeable, the harm alleged must bear

some proximate relationship with the negligent conduct such that it can reasonably be said to be within the ‘scope of the risk’ created

by that conduct”).

204 See Understanding the GCCF's Eligibility Criteria for Emergency Advance Payments, Gulf Coast Claims Facility, §II (Aug. 23,

2010), http:// www.gulfcoastclaimsfacility.com/proto_2.php. The protocol provided further:

Geographic proximity [would] primarily be based on whether the claimant's loss occurred in a community or municipality adjacent to

a beach, shoreline, marsh, bay or tributary of the Gulf where oil or oil residues came ashore or appeared in the waters. Determinations

regarding proximity focus on where the claimant's work or business activity takes place (or normally takes place)--not an individual's

or business's mailing address.

Id. The nature of the claimant's business was supposed to be “evaluated based on the information provided by the claimant, such as

whether the claimant is in the seafood processing industry, a supplier of commercial fisherman, a supplier of recreational users of

the waters of the Gulf, or a tourist-oriented business such as a motel.” Id.

205 Feinberg Announces Clarification Regarding Geographic Proximity, Gulf Coast Claims Facility (Oct. 4, 2010), http://

gulfcoastclaimsfacility.com/press7.php.

206 See Gulf Coast Claims Facility Protocol for Interim and Final Claims, Gulf Coast Claims Facility (Feb. 8, 2011), http://

gulfcoastclaimsfacility.com/proto_4. The GCCF intends its claims process and protocols to comply with OPA and OPA's standards.

Id. §I(A)-(B).

207 Id. §II(G).

208 John C.P. Goldberg, Liability for Economic Loss in Connection with the Deepwater Horizon Spill 6 (2010), available at http://

nrs.harvard.edu/urn-3:HUL.InstRepos:4595438.

209 Id. at 3. This conclusion rests, in large part, on the language of §2702(b)(2)(E), which permits a claimant to recover “[d]amages equal

to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property,

or natural resources.” 33 U.S.C. §2702(b)(2)(E) (2006). Nevertheless, the report seems to adopt a narrow view of the damages

recoverable under the Act in stating that OPA imposes liability with respect to damages that result from an oil spill or discharge.

Section 2702(b)(2) provides that a responsible party is liable for removable costs and damages “that result from such an incident.”

Compare Goldberg, supra note 208, at 15-17 & n.36, with cases cited supra note 91.

210 Goldberg, supra note 208, at 3, 25-38.

211 Id. at 31.

212 Id. at 32 (emphasis added).

213 See id. at 12-14 (providing examples of the “Universe of Potential Pure Economic Loss Claimants”). As discussed further infra, the

report largely ignores individuals and businesses that use and rely upon navigable waters in conducting their commercial activities

and whose economic losses OPA sought to address. See, e.g., 135 Cong. Rec. H7954-02, H7963 (daily ed. Nov. 2, 1989) (statement

of Rep. Hughes) (“In my own State of New Jersey, the fishing and the tourist industry would be devastated by a major oil spill.

Damage to the ecosystem would be severe. But just as severe will be the economic impact on those who rely on the ocean for their

livelihoods.”); 135 Cong. Rec. S9900-01, S9915 (daily ed. Aug. 3, 1989) (statement of Sen. Reid) (stating that the EXXON VALDEZ

spill “completely distorted the economies of the cities and villages around Prince William Sound”).

214 Goldberg, supra note 208, at 40.

215 Id.; see also 135 Cong. Rec. H7898-02, H7900 (daily ed. Nov. 1, 1989) (statement of Rep. Jones) (providing a section-by-section

analysis of H.R. 3394).

Finally, subsection (b)(2)(E) allows recovery for loss of earnings due to injury to property or natural resources. The claimant need not

be the owner of the property or resources to bring the claim for lost earnings, as required by common law. This means, for example,

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that an employee at a coastal motel may have standing to make a claim for damages even though the employee owns no property

which has been injured as a result of an oil spill.

Id.

216 Unlike the original Protocol for Emergency Advance Payments, which expressly considered geographic proximity in assessing claims,

the Goldberg Report opines that

there is no particular reason to think that claimants more closely connected to the spill in time and space will, as a class, be in a

better position to offer [sufficient] evidence [of actual loss and causation], or that claimants farther removed from the spill will be

less well-positioned to offer such evidence.

Goldberg, supra note 208, at 15. The report's conclusions send conflicting signals about how considerations such as geographic

proximity to a spill should be treated in determining which claimants have a right to seek recovery. On the one hand, the report states,

at the very outset, that “operators of beach resorts in areas physically unaffected by a spill, but that nonetheless suffer economic loss

because of a general downturn in the tourism resulting from the spill, are among those who are not entitled to recover under OPA.”

Id. at 3. Nonetheless, the report categorizes a beachfront hotel that has “suffered a loss of business because tourists, in light of the

effects of the spill on the immediate area in which his hotel is situated, have decided to vacation elsewhere” as a claimant who clearly

stands to recover. Id. at 12 (emphasis added).

217 Id. at 41.

218 Id. at 41-42.

219 See Int'l Oil Pollution Comp. Fund, Claims Manual §3.4 (Dec. 2008), http://www.iopcfund.org/npdf/2008%20claims

%20manual_e.pdf.

220 Another pragmatic factor that might be considered by a court is the realistic possibility that a party might be able to mitigate its

damages. See Louisiana ex rel. Guste v. M/V Testbank, 752 F.2d 1019, 1050, 1985 AMC 1521, 1572-73 (5th Cir. 1985) (Wisdom,

J., dissenting).

221 Int'l Oil Pollution Comp. Fund, supra note 219, §3.5.2. The legislative history of OPA indicates, moreover, that Congress was

concerned that a major spill could have a significant impact on tourism in many areas of the country. See, e.g., 135 Cong. Rec.

H7954-02, H7971 (daily ed. Nov. 2, 1989) (statement of Rep. Hutto) (“As a Representative of the State of Florida I have many

serious concerns for oilspill prevention and cleanup. The economy of the State of Florida depends heavily on the tourism industry.

Aside from the obvious environmental devastation which would result from an oilspill off our coast, tourism is also directly tied to

the world's most beautiful beaches. Therefore, the cleanup and removal process following any oilspill off our coast is of paramount

importance to the State of Florida.”); 135 Cong. Rec. S9916-01, S9922 (daily ed. Aug. 3, 1989) (statement of Sen. Kerry) (“[I]t will

take several years and perhaps decades to completely understand the impact of the spill in Alaska. What will the economic impact of

lost tourism, the impact to the fisheries and the livelihood of the fishermen really be?”); see also sources cited supra note 213.

222 33 U.S.C. §2704(a) (2006) (emphasis added). The limits in §2704(a)(1) do not apply to tank vessels that only carry animal fat or

vegetable oil as cargo or that are designated oil spill response vessels in their certificates of inspection and are used solely for removal.

Id. §2704(c)(4).

223 Id. §2704(d)(4).

224 33 C.F.R. §138.230 (2010).

225 33 U.S.C. §2704(a)(3). Section 2704 provides further:

Notwithstanding the limitations established under subsection (a) of this section and the defenses of section 2703 of this title, all

removal costs incurred by the United States Government or any State or local official or agency in connection with a discharge or

substantial threat of a discharge of oil from any Outer Continental Shelf facility or a vessel carrying oil as cargo from such a facility

shall be borne by the owner or operator of such facility or vessel.

Id. §2704(c)(3).

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226 See S. Rep. No. 101-94, at 26-27 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 748-49 (additional views of Sens. Chaffe, Lieberman,

Graham, and Durenberger).

227 Id. (citing the Santa Barbara blowout on January 14, 1969 and the IXTOC I blowout on June 3, 1989, which occurred in the Gulf

of Mexico, as examples supporting these statements).

228 33 U.S.C. §2704(b)(1).

229 Id. §2704(b)(2).

230 S. Rep. No. 101-94, at 11-13 (1989), reprinted in 1990 U.S.C.C.A.N. at 733-34; Colin de la Rue & Charles B. Anderson, Shipping

and the Environment: Law and Practice 249 (2d ed. 2009). The lessee or permittee remains liable as well for a discharge of oil from

the MODU that occurs below the surface of the water. S. Rep. No. 101-94, at 12-13 (1989), reprinted in 1990 U.S.C.C.A.N. at 734.

231 46 U.S.C. §§30501-30512 (2006).

232 S. Rep. No. 101-94, at 5-6, 14-15, 18-19 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 727, 736, 740; H.R. Rep. No. 101-653, at 3

(1990) (Conf. Rep.), reprinted in 1990 U.S.C.C.A.N. 779, 781.

233 Section 2702(a) provides: “Notwithstanding any other provision or rule of law, ... each responsible party.” 33 U.S.C. §2702(a)

(emphasis added). Section 2704 states: “Except as otherwise provided in this section, the total of the liability of a responsible party ...

shall not exceed.” Id. §2704(a). Finally, §2718(c) provides: “Nothing in this Act, the Act of March 3, 1851 (46 U.S.C. 183 [The

Shipowner's Limitation of Liability Act]) ... shall in any way affect, or be construed to affect, the authority of the United States ...

to impose additional liability.” Id. §2718(c)(1) (emphasis added).

234 Bouchard Transp. Co. v. Updegraff, 147 F.3d 1344, 1349-52, 1998 AMC 2409, 2414-20 (11th Cir. 1998); Metlife Capital Corp. v.

M/V Emily S., 132 F.3d 818, 819, 1998 AMC 635, 635-37 (1st Cir. 1997); see also Robert Force & Jonathan M. Gutoff, Limitation

of Liability in Oil Pollution Cases: In Search of Concursus or Procedural Alternatives to Concursus, 22 Tul. Mar. L.J. 331 (1998).

235 See sources cited supra note 234.

236 Nos. 96-1741, 96-1824, 1997 WL 560047, 1998 AMC 163 (4th Cir. Sept. 9, 1997) (per curium) (unpublished table opinion) (1998).

237 33 U.S.C. §2702(d)(2)(A). If the acts or omissions of the third party that caused the incident do not involve a vessel owned or operated

by the third party, then the third party's liability is subject to the limits that would apply to the responsible party of the vessel or

facility that discharged the oil if it were liable. See In re Alex C Corp., Nos. 00-12500-DPW, 01-12186-DPW, 2010 WL 4292328,

at *11-14 (D. Mass. Nov. 1, 2010).

238 Nat'l Shipping, 1997 WL 560047, at *3-4, 1998 AMC at 168-70.

239 33 U.S.C. §2704(c)(1)(A). OPA does not define “gross negligence” or “willful misconduct.” Few courts have addressed the meanings

of these terms, and they have not defined the terms synonymously. See, e.g., Tug Ocean Prince, Inc. v. United States, 584 F.2d 1151,

1162-63, 1978 AMC 1786, 1802-05 (2d Cir. 1978) (adopting definition of “willful misconduct” from the Warsaw Convention in

construing term under the CWA: “an act, intentionally done, with knowledge that the performance will probably result in injury, or

done in such a way as to allow an inference of a reckless disregard of the probable consequences”); Water Quality Ins. Syndicate

v. United States, 632 F. Supp. 2d 108, 112, 2009 AMC 1943, 1948 (D. Mass. 2009) (defining “gross negligence” as “an extreme

departure from the care required under the circumstances or a failure to exercise even slight care”); Water Quality Ins. Syndicate v.

United States, 522 F. Supp. 2d 220, 229, 2008 AMC 284, 292-93 (D.D.C. 2007) (following Tug Ocean Prince). In Tug Ocean Prince,

the Second Circuit found that although any one of the petitioner's acts alone would not constitute willful misconduct, its various

inactions and gross disregard of potential harm combined to establish willful misconduct. 584 F.2d at 1164, 1978 AMC at 1805.

240 33 U.S.C. §2704(c)(1)(B).

241 Id. §2704(c).

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242 Id. §2704(c)(2).

243 Statement of BP Exploration and Production Inc. re Applicability of Limit of Liability under Oil Pollution Act of 1990, In re Oil

Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on Apr. 20, 2010, MDL No. 2179, 2010 WL 4151003 (E.D. La.

Oct. 18, 2010).

244 Id. BP also reserved its right to seek reimbursement or contribution from these other responsible parties and from third parties for

claims, costs, expenses, and liabilities arising from the incident and spill.

245 See generally National Academy of Engineering and National Research Council, Interim Report on Causes of the Deepwater HorizonOil Rig Blowout and Ways To Prevent Such Events (2010) (outlining causes for incident); Memorandum from Ctr. for Catastrophic

Risk Mgmt., Dep't of Civil & Envtl. Eng'g, Univ. of Cal., Berkeley, to Nat'l Comm'n on the BP Deepwater Horizon Oil Spill &

Offshore Drilling (Nov. 24, 2010); Richard Lazarus, Executive Director of the National Commission on the BP Deepwater HorizonOil Spill and Offshore Drilling, Letter to the Editor, Times Picayune (New Orleans), Dec. 1, 2010, at B4.

246 33 U.S.C. §§407, 411-413.

247 See Milwaukee v. Illinois, 451 U.S 304, 317-19 (1981); Middlesex Cnty. Sewerage Auth. v. Nat'l Sea Clammers Ass'n, 453 U.S. 1,

10, 21-22 (1981); Conner v. Aerovox, Inc., 730 F.2d 835, 839-42, 1984 AMC 2507, 2512-18 (1st Cir. 1984); In re Oswego Barge

Corp., 664 F.2d 327, 342-44, 1982 AMC 769, 787-92 (2d Cir. 1981); Steuart Transp. Co. v. Allied Towing Corp., 596 F.2d. 609,

614-18, 1979 AMC 1187, 1192-1200 (4th Cir. 1979).

248 627 F.2d 736, 738, 1982 AMC 409, 410-12 (5th Cir. 1980).

249 See 33 U.S.C. §2714. The responsible party or guarantor has five days to deny its designation as a responsible party and, upon

its failure to do so, must advertise the designation and procedures by which claims may be presented to it within fifteen days of

the designation. If the responsible party does not advertise, the President is responsible, at the expense of the responsible party

or the guarantor, for advertising the designation and procedures by which claims may be presented to the responsible party. The

advertisement must continue for no fewer than thirty days. Id. §2714(b)(1). Section 2714(b)(2) provides that the advertisement “shall

state that a claimant may present a claim for interim, short-term damages representing less than the full amount of damages to which

the claimant ultimately may be entitled and that payment of such a claim shall not preclude recovery for damages not reflected in

the paid or settled partial claim.” Id. §2714(b)(2). Under §2714(c), if (1)during the five-day period both the designated responsible

party and the guarantor deny the designation, (2)the source of the discharge or threat was a public vessel, or (3)the President cannot

designate the source, then “the President shall advertise or otherwise notify potential claimants of the procedures by which claims

may be presented to the Fund.” Id. §2714(c). OPA does not impose a mandatory duty on the President to designate a responsible party

but, instead, only requires the President to designate a responsible party “where possible and appropriate.” Smith Prop. Holdings,

4411 Conn. L.L.C. v. United States, 311 F. Supp. 2d 69, 83 (D.D.C. 2004) (quoting 33 U.S.C. §2714(a)); see also United States v.

Murphy Exploration & Prod. Co., 939 F. Supp. 489, 492, 1996 AMC 2883, 2886-88 (E.D. La. 1996).

250 33 U.S.C. §2713(c). A party may not avoid the presentment requirement by merely pointing out that the person designated as the

responsible party has filed a limitation of liability proceeding in which they deny any responsibility whatsoever. See Gabarick v.

Laurin Mar. (Am.) Inc., No. 08-4007, 2009 WL 102549, at *2 (E.D. La. Jan. 12, 2009).

251 33 U.S.C. §2713(b)(1).

252 Id. §2713(b)(2).

253 Boca Ciega Hotel, Inc. v. Bouchard Transp. Co., 51 F.3d 235, 240 (11th Cir. 1995); see also Gabarick v. Laurin Mar. (Am.) Inc.,

623 F. Supp. 2d 741, 745, 2009 AMC 200 1014, 1018-20 (E.D. La. 2009); Berthelot v. Boh Bros. Constr., No. Civ.A. 05-4182, 2006

WL 2256995, at *6 (E.D. La. July 19, 2006); Abundiz v. Explorer Pipeline Co., No. Civ.3:00-CV-2029-H, 2003 WL 23594054, at

*2 (N.D. Tex. Mar. 7, 2003); Abundiz v. Explorer Pipeline Co., No. Civ.3:00-CV-2029-H, 2002 WL 2030880, at *2-3 (N.D. Tex.

Sept. 3, 2002); LeBoeuf v. Texaco, 9 F. Supp. 2d 661, 665 (E.D. La. 1998).

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254 LeBoeuf, 9 F. Supp. 2d at 665; see also Russo v. M/T Dubai Star, No. C 09-05158, 2010 WL 1753187, at *2, 2010 AMC 1401,

1404-05 (N.D. Cal. Apr. 29, 2010). Compare Marathon Pipe Line Co. v. LaRoche Indus. Inc., 944 F. Supp. 476, 477 (E.D. La. 1996),

with LeBoeuf, 9 F. Supp. 2d at 665.

255 See Boca Ciega Hotel, 51 F.3d at 240; Abundiz, 2003 WL 23594054, at *2.

256 2003 WL 23594054, at *3.

257 Johnson v. Colonial Pipeline Co., 830 F. Supp. 309, 310, 1994 AMC 2702 (E.D. Va. 1993) (AMC reporter summarizing case).

258 Id. at 310-11 (quoting H.R. Rep. No. 101-242, pt. 2, at 66 (1989)) (citing 135 Cong. Rec. H7962, H7965 (daily ed. Nov. 2, 1989)

(statements of Rep. Hammerschmidt and Rep. Lent)).

259 Id. at 311.

260 Id.

261 33 U.S.C. §2705(a) (2006).

262 Id. The GCCF has developed a proposed methodology for calculating final payments based upon (1)documented losses and (2)“a

[future losses] factor to value the risk of possible future losses as determined by the retained experts.” Gulf Coast Claims Facility,

Final Rules Governing Payment Options, eligibility and Substantiation Criteria, and Final Payment Methodology 3 (Feb. 18, 2011),

http://www.gulfcoastclaimsfacility.com/DRAFT_FINAL_RULES_ ONLY.pdf. This methodology was available for comment from

February 2-16, 2011, and, not surprisingly, drew numerous comments taking issue with the proposed methodology. See Comments

Regarding the Announcement of Payment Options, Eligibility and Substantiation Criteria, and Final Payment Methodology, Gulf

Coast Claims Facility, http://www.gulfcoastclaimsfacility.com/methodology (last visited Feb. 27, 2011).

263 944 F. Supp. 476, 477-80 (E.D. La. 1996). The district court noted: “OPA's only presentation requirement on a responsible party

applies to a responsible party's claims against the Fund, not against an alleged sole cause third party. See §§2708 and 2713.” Id.

at 478 n.3.

264 United States v. M/V Cosco Busan, 557 F. Supp. 2d 1058, 1061, 2008 AMC 1360, 1363-64 (N.D. Cal. 2008).

265 See, e.g., Russo v. M/T Dubai Star, No. C 09-05158, 2010 WL 1753187, at *3, 2010 AMC 1401, 1404-05 (N.D. Cal. Apr. 29, 2010)

(collecting cases); Williams v. Potomac Elec. Power Co., 115 F. Supp. 2d 561, 565 n.3 (D. Md. 2000).

266 33 U.S.C. §2716(a).

267 Coast Guard Authorization Act of 2010, Pub. L. No. 111-281, §712, 124 Stat. 2905, 2988 (2010) (creating a new §2716(a)(3)).

268 33 U.S.C. §2716(a)(2).

269 Id.

270 Id. §2716(b). The government may also seek to impose civil administrative penalties on any person who fails to comply with the

requirements of §2716 or, in lieu of or in addition to such penalties, may secure judicial relief to compel compliance with that section,

including termination of the noncomplying person's operations. See id. §2716(a).

271 Id. §2716(c)(1)(B). Section 2716(c)(2) deals with the establishment and maintenance of financial responsibility required to meet the

maximum amount of liability of responsible parties with respect to deepwater ports. OPA does not impose a similar requirement of

maintaining evidence of financial responsibility on responsible parties for onshore facilities. See United States v. Viking Res., Inc.,

607 F. Supp. 2d 808, 822 n.47 (S.D. Tex. 2009).

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272 Id. §2716(c)(1)(C); see also 30 C.F.R. §253.13(b) (2010) (setting the oil spill financial responsibility for covered offshore facilities

located on and off the OCS, which range from $10,000,000 to $150,000,000, depending upon the location and the facility's worst-

case oil spill discharge volume).

273 33 U.S.C. §2716(c)(1)(D).

274 Id. §2716(e).

275 See 33 C.F.R. §138.80 (2010); United States v. Inter-Bay Towing Co., No. Civ.A. H-03-5727, 2005 WL 3995989, at *5, 2006 AMC

581, 586 (S.D. Tex. Aug. 8, 2005) (“[A] Certificate of Insurance is not a recognized guarantee of financial responsibility.”).

276 33 U.S.C. §2716(f)(1).

277 Id. §2716(f)(2).

278 Id. §2716(f)(1).

279 Id. §2716(g). In a situation in which the guarantor is the responsible party's insurer, the amount of the evidence of financial

responsibility (i.e., the Certificate of Financial Responsibility issued by the guarantor), which is based upon the responsible party's

potential maximum liability under OPA, assuming it can limit its liability under §2704, could be less than the limits of liability of

an insurance policy issued to the responsible party. See Water Quality Ins. Syndicate v. United States, 522 F. Supp. 2d 220, 226

n.6, 2008 AMC 284, 289 n.6 (D.D.C. 2007) (noting that “Plaintiff is an OPA ‘guarantor’ only up to the amount of the Certificate

of Financial Responsibility, $806,550”); cf. Montauk Oil Transp. Corp. v. S.S. Mut. Underwriting Ass'n (Berm.), 859 F. Supp. 669,

675-77, 1995 AMC 1114, 1121-26 (S.D.N.Y. 1994) (distinguishing between a claim brought under an insurance policy and one

brought under a COFR in a CWA case).

280 522 F. Supp. 2d 220, 2008 AMC 284.

281 Id. at 224, 2008 AMC at 285-86.

282 Id. at 225, 2008 AMC at 286-88.

283 Id. at 224-25, 2008 AMC at 285-88 (citing United States v. Rivera, 131 F.3d 222, 1998 AMC 609 (1st Cir. 1997) (en banc)).

284 Id. at 230, 2008 AMC at 293-94.

285 Id.

286 Id. at 231-32, 2008 AMC at 294-96. The court noted that although the Act precludes a claimant from recovering removal costs or

damages caused by the claimant's gross negligence or willful misconduct, “[t]he statute does not purport to exempt the Fund from

liability for claims of guarantors and insurers such as plaintiff, which asserts that a policy defense exempts it from liability.” Id. at

232, 2008 AMC at 296 (citing 33 U.S.C. §2712(b) (2006)).

287 33 U.S.C. §1319(c)(1). See generally Eva M. Fromm, Commanding Respect: Criminal Sanctions for Environmental Crimes, 21 St.

Mary's L.J. 821 (1990) (outlining criminal provisions of different regulatory regimes).

288 33 U.S.C. §1319(c)(1).

289 Id. §1321(b)(3) (citations omitted).

290 Id. §1321(b)(4).

291 40 C.F.R. §110.3 (2010).

292 Model Penal Code §2.02(2)(d) (1985).

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293 176 F.3d 1116 (9th Cir. 1999).

294 Id. at 1120 (internal quotation marks omitted).

295 Id. at 1121.

296 Id. (citation omitted) (internal quotation marks omitted).

297 Id.

298 See United States v. Ortiz, 427 F.3d 1278 (10th Cir. 2005). The Ninth Circuit approach has also been followed in United States v.

Atlantic States Cast Iron Pipe Co., Crim. No. 03-852 (MLC), 2007 WL 2282514, at *14 n.17 (D.N.J. Aug. 2, 2007).

299 101 F.3d 386 (5th Cir. 1996).

300 Id. at 391.

301 Hanousek v. United States, 528 U.S. 1102 (2000) (Thomas, J., dissenting from denial of writ of certiorari).

302 33 U.S.C. §1319(c)(2) (2006).

303 Id.

304 See, e.g., United States v. Atl. States Cast Iron Pipe Co., Crim. No. 03-852 (MLC), 2007 WL 2282514, at *1 (D.N.J. Aug. 2, 2007).

The system has been explained as follows:

The CWA creates a joint federal and state permitting program for those who discharge pollutants into the waters of the United States.

33 U.S.C. §1342. Permits issued under this program are called National Pollutant Discharge Elimination System (“NPDES”) permits.

The CWA prohibits, inter alia, the discharge of any pollutant into those waters except in compliance with an NPDES permit. 33 U.S.C.

§§1311(a) & 1342. By agreement with the EPA, the NPDES water permit program is administered in New Jersey by the New Jersey

Department of Environmental Protection (“NJDEP”). Pursuant to that authority, NJDEP issued water permits to Atlantic States that

authorized discharges of surface stormwater run-off, and discharges of water from a specified cooling tower, into municipal storm

sewers located on the Atlantic States property. The permits imposed limitations on the type and amount of pollutants that could be

discharged from the facility. The CWA counts in the indictment charged the named defendants with knowingly violating the CWA by

causing petroleum-contaminated wastewater to be pumped so as to enter storm drains that led to the Delaware River during specified

time periods, without a permit authorizing such discharges.

Section 1319(c)(2)(A) creates a felony offense for a knowing violation of Section 1311(a), or of any conditions or limitations of an

NPDES permit issued under Section 1342. However, as with the case law under analogous provisions of [Resource Conservation

and Recovery Act] and other environmental statutes, the courts have struggled to determine how far down the statutory language the

“knowingly” requirement travels in various factual settings.

Id. at *29 (footnote omitted) (citation omitted).

305 Most of the reported cases involving “knowing” violations are discussed in Atlantic States. See id. at *30-34.

306 United States v. Ahmad, 101 F.3d 386, 390-91 (5th Cir. 1996).

307 E.g., United States v. Wilson, 133 F.3d 251, 262 (4th Cir. 1997); United States v. Sinskey, 119 F.3d 712, 716 (8th Cir. 1997); United

States v. Hopkins, 53 F.3d 533, 541 (2d Cir. 1995); United States v. Weitzenhoff, 35 F.3d 1275, 1283-86 (9th Cir. 1994) (as amended).

308 See Sinskey, 119 F.3d at 716; Hopkins, 53 F.3d at 541. Compare Weitzenhoff, 35 F.3d at 1284 n.5, with United States v. Cooper,

173 F.3d 1192, 1201 (9th Cir. 1999).

309 Compare United States v. Cooper, 482 F.3d 658, 660 (4th Cir. 2007), with Wilson, 133 F.3d at 262.

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310 The National Commission appointed by the President to investigate the incident identifies nine decisions that would support a finding

of some degree of negligence. Nat'l Comm'n on the BP Deepwater Horizon Oil Spill & Offshore Drilling, Report to the President

ch. 4 (Jan. 11, 2011), http:// www.oilspillcommission.gov/final-report.

311 The definition of felony is now found in section 4A1.2(o) of the Sentencing Guidelines: “For the purposes of §4A1.2(c), a ‘felony

offense’ means any federal, state, or local offense punishable by death or a term of imprisonment exceeding one year, regardless of

the actual sentence imposed.” U.S. Sentencing Guidelines Manual §4A1.2(o) (2010). This definition is used in multiple places in the

guidelines and is consistent with the classification scheme found at 18 U.S.C. §3581, which treats all offenses punishable by less

than one year imprisonment as misdemeanors. 18 U.S.C. §3581(b)(6)-(8) (2006).

312 551 U.S. 47 (2007).

313 United States v. Atl. States Cast Iron Pipe Co., Crim. No. 03-852 (MLC), 2007 WL 2282514, at *14 n.17 (D.N.J. Aug. 2, 2007).

314 33 U.S.C. §1319(c)(4) (2006).

315 Id. §1321(b)(5).

316 Apex Oil Co. v. United States, 530 F.2d, 1291, 1292-93, 1976 AMC 2118, 2118-21 (8th Cir. 1976).

317 United States v. Allied Towing Corp., 578 F.2d 978, 980, 1981 AMC 896, 896 (4th Cir. 1978).

318 16 U.S.C. §§1361-1423h (2006).

319 Id. §§1531-1544.

320 Id. §§703-712.

321 33 U.S.C. §§407, 411-413 (2006).

322 Complaint, United States v. BP Exploration & Prod. Inc., No. 2:10-CV-04536 CJB-SS (E.D. La. Dec. 15, 2010).

323 See supra text accompanying note 291. Chevron, U.S.A., Inc. v. Yost, 919 F.2d 27, 29-30 (5th Cir. 1990), and United States v. Boyd,

491 F.2d 1163, 1166, 1973 AMC 1498, 1500-01 (9th Cir. 1973), both upheld this test.

324 Yost, 919 F.2d at 30 (quoting Orgulf Transp. Co. v. United States, 711 F. Supp. 344, 347 (W.D. Ky. 1989)).

325 United States v. Marathon Pipe Line Co., 589 F.2d 1305, 1307, 1980 AMC 2928, 2929-31 (7th Cir. 1978).

326 United States v. Tex-Tow, Inc., 589 F.2d 1310, 1316, 1980 AMC 2936, 2942 (7th Cir. 1978); see also United States v. Tex. Pipe

Line Co., 611 F.2d 345, 347 (10th Cir. 1979); Marathon Pipe Line Co., 589 F.2d at 1307, 1980 AMC at 2929-31.

327 United States v. Coastal States Crude Gathering Co., 643 F.2d 1125, 1127 (5th Cir. Unit A Apr. 1981); Tex-Tow, Inc., 589 F.2d

at 1315-16, 1980 AMC at 2941-42.

328 There is a problem with these penalty schemes. The penalties provided by statute are adjusted to account for inflation. The amounts

in the text reflect the adjustments provided in 33 C.F.R. §27.3 (2010). Those amounts are addressed to Coast Guard proceedings. The

amounts that are bracketed are addressed to the Administrator of the EPA, which have been adjusted pursuant to 40 C.F.R. §19.4

(2010). As can be seen, in some cases, the numbers differ. The differences are present not only in regard to the assessment of penalties

by the respective agencies, but there are differences in the amount that may be assessed by courts.

329 33 U.S.C. §1321(b)(6)(B)(i) (2006).

330 Id. §1321(b)(6)(B)(ii); 33 C.F.R. §27.3 (adjusting dollar amounts for penalties).

331 33 C.F.R. §27.3.

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332 United States v. Ward, 448 U.S. 242, 249 (l980).

333 Id.

334 33 U.S.C. §1321(b)(6)(C)(i).

335 Id. §1321(b)(6)(C)(iii).

336 33 C.F.R. §§1.07-1 to -85 (2010). The procedures are described in United States v. Healy Tibbitts Construction Co., 713 F.2d 1469,

1472-73 (9th Cir. 1983), and Colbro Ship Management Co. v. United States, 84 F. Supp. 2d 253 (D.P.R. 2000) (not an oil spill case).

337 33 U.S.C. §1321(b)(6)(G); see also BP Exploration & Oil, Inc. v. U.S. Dep't of Transp., 44 F. Supp. 2d 34, 36-37 (D.D.C. 1999).

338 Healy Tibbitts Constr. Co., 713 F.2d at 1475. 33 U.S.C. §1321(b)(8) provides a list of factors that may be considered in assessing

administrative and civil penalties. These factors will be discussed in the following Part on civil penalties.

339 33 U.S.C. §1321(b)(6)(H).

340 Id. §1321(b)(6)(I).

341 Id. §1321(b)(7)(A). The U.S. government has filed suit against nine defendants seeking to recover civil penalties. Complaint, United

States v. BP Exploration & Prod. Inc., No. 2:10-CV-04536 CJB-SS (E.D. La. Dec. 15, 2010).

342 33 U.S.C. §1321(b)(7)(B).

343 Id. §1321(b)(7)(D).

344 Id. §1321(b)(7)(E).

345 Id. §1321(b)(7)(F).

346 Id. §1321(b)(11).

347 Id. §1321(b)(8). As to the reasonableness of a fine imposed administratively, see BP Exploration & Oil, Inc. v. U.S. Department of

Transportation, 44 F. Supp. 2d 34, 41 (D.D.C. 1999).

348 33 U.S.C. §1321(b)(12).

349 46 U.S.C. §§30501-30512 (2006).

350 33 U.S.C. §2718(a)(1)(A).

351 Id. §2718(a)(2).

352 Id. §2718(c).

353 Id. §2751(e).

354 253 U.S. 149 (1920).

355 U.S. Const. art. III, §2.

356 In re Exxon Valdez, 767 F. Supp. 1509, 1515, 1991 AMC 1482, 1490 (D. Alaska 1991) (“Congress' power to legislate concerning

rights and liabilities within the maritime jurisdiction and remedies for their enforcement arises from the Constitution and is

nondelegable.” (citing Knickerbocker Ice, 253 U.S. at 164)).

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357 David Currie called Knickerbocker Ice and its companion case, Washington v. W.C. Dawson & Co., 264 U.S. 219 (1924),

“aberrations.” David P. Currie, Federalism and the Admiralty: “The Devil's Own Mess,” 1960 Sup. Ct. Rev. 158, 191; see also

William Cohen, Congressional Power To Validate Unconstitutional State Laws: A Forgotten Solution to an Old Enigma, 35 Stan.

L. Rev. 387, 402-03 (1983) (“constitutional law derelicts”); Michael F. Sturley, Maritime Cases About Train Wrecks: Applying

Maritime Law to the Inland Damage of Ocean Cargo, 40 J. Mar. L. & Com. 1, 23-24 (2009) (“[T]he now-discredited principles of

Knickerbocker Ice”; “the Knickerbocker-Dawson era has passed”).

358 See, e.g., Ceres Terminals, Inc. v. Indus. Comm'n of Ill., 53 F.3d 183, 184, 1995 AMC 2141, 2143 (7th Cir. 1995) (describing

Knickerbocker and Dawson as “opinions that exist more as spectral apparitions than as living forces in the law”); Am. Dredging

Co. v. Miller, 510 U.S. 443, 459, 1994 AMC 913, 925 (1994) (Stevens, J., dissenting) (describing the Knickerbocker Ice doctrine

as a “truly remarkable conclusion”).

359 David J. Bederman, Uniformity, Delegation and the Dormant Admiralty Clause, 28 J. Mar. L. & Com. 1, 25 (1997).

360 Stephen R. Eubank, Patchwork Justice: State Unlimited Liability Laws in the Wake of the Oil Pollution Act of 1990, 18 Md. J. Int'l

L. & Trade 149, 167-71 (1994); Matthew P. Harrington, Necessary and Proper, but Still Unconstitutional: The Oil Pollution Act's

Delegation of Admiralty Power to the States, 48 Case W. Res. L. Rev. 1, 34-52 (1997).

361 411 U.S. 325, 1973 AMC 811 (1973).

362 46 U.S.C. §30101 (2006) (original version at ch. 526, §740, 62 Stat. 496 (1948)).

363 Askew, 411 U.S. at 343, 1973 AMC at 825.

364 Id. at 329, 1973 AMC at 814-15 (quoting 33 U.S.C. §1161(o) (1970)).

365 244 U.S. 205, 1996 AMC 2076 (1917).

366 Askew, 411 U.S. at 344, 1973 AMC at 825.

367 For that reason, Stephen Eubank has argued that Askew is “inapplicable” and that “OPA 90 Must Meet Knickerbocker Ice Head

On.” Eubank, supra note 360, at 164-65.

368 Harrington, supra note 360, at 51, disagrees, saying that “Askew's holding is ultimately of little value when considering OPA's non-

preemption clause ... because the preemption clause at issue in Askew said nothing about state power to abrogate maritime rights and

remedies.” The nonpreemption clause in OPA also says nothing about abrogating maritime rights and remedies, unless one thinks

that a potential responsible party has a “right” not to be held liable.

369 918 F.2d 1409, 1421, 1991 AMC 2797, 2813 (9th Cir. 1990).

370 29 U.S.C. §218 (2006).

371 529 U.S. 89, 2000 AMC 913 (2000).

372 Id. at 105, 2000 AMC at 923; see also 33 U.S.C. §1251(b) (2006) (“It is the policy of the Congress to recognize, preserve, and protect

the primary responsibilities and rights of States to prevent, reduce, and eliminate pollution.”).

373 See, e.g., Santiago Legarre, The Historical Background of the Police Power, 9 U. Pa. J. Const. L. 745 (2007); Christopher Supino, The

Police Power and “Public Use”: Balancing the Public Interest Against Private Rights Through Principled Constitutional Distinctions,

110 W. Va. L. Rev. 711, 722-28 (2008).

374 304 U.S. 64 (1938).

375 Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 223, 1986 AMC 2113, 2126-27 (1986).

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376 244 U.S. 205, 216, 1996 AMC 2076, 2084-85 (1917).

377 Askew v. Am. Waterways Operators, Inc., 411 U.S. 325, 344, 1973 AMC 811, 825 (1973).

378 See Robert Force, Choice of Law in Admiralty Cases: “National Interests” and the Admiralty Clause, 75 Tul. L. Rev. 1421 (2001);

Robert Force, Deconstructing Jensen: Admiralty and Federalism in the Twenty-First Century, 32 J. Mar. L. & Com. 517 (2001).

379 Jensen, 244 U.S. at 216, 1996 AMC at 2084-85.

380 Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 545, 1995 AMC 913, 927 (1995) (quoting E. River S.S.

Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 864, 1986 AMC 2027, 2031-32 (1986)).

381 See, e.g., Ballard Shipping Co. v. Beach Shellfish, 32 F.3d 623, 627-28, 1994 AMC 2705, 2710-14 (1st Cir. 1994) (finding no

preemption of a Rhode Island state statute permitting recovery of purely economic loss, despite general maritime law rule precluding

such recovery); In re Exxon Valdez, 270 F.3d 1215, 1250-53, 2002 AMC 1, 42-47 (9th Cir. 2001) (same); In re Nautilus Motor

Tanker Co., 900 F. Supp. 697, 700-01 (D.N.J. 1995) (same). All were pre-OPA cases.

382 33 U.S.C. §2718(a)(2) (2006).

383 Id. §2751(e).

384 Puerto Rico v. The M/V Emily S., 13 F. Supp. 2d 147, 1998 AMC 2726 (D.P.R. 1998).

385 Although many of the cases use the language of preemption, it is not appropriate when considering whether a federal statute displaces

preexisting federal law. In that context, there is no presumption against preemption but rather a simple inquiry into whether Congress

intended the statute to supplant the general maritime law. S. Port Marine, LLC v. Gulf Oil Ltd., 234 F.3d 58, 65-66, 2001 AMC

609, 617-19 (1st Cir. 2000).

386 Id.; In re Settoon Towing LLC, No. 07-1263, 2009 WL 4730969 (E.D. La. Dec. 4, 2009); Gabarick v. Laurin Mar. (Am.) Inc., 623 F.

Supp. 2d 741, 744-46, 2009 AMC 1014, 1016-21 (E.D. La. 2009); United States v. Egan Marine Corp., 2009 AMC 1178, 1180-83

(N.D. Ill. 2009); Tanguis v. M/V Westchester, 153 F. Supp. 2d 859, 867, 2001 AMC 2652, 2661-62 (E.D. La. 2001); Nat'l Shipping

Co. of Saudi Arabia (NSCSA) v. Moran Mid-Atl. Corp., 924 F. Supp. 1436, 1446-49, 1996 AMC 2604, 2616-22 (E.D. Va. 1996).

387 33 U.S.C. §2718(a)(2).

388 Wrongly, as one of the authors has previously argued: see supra text accompanying note 378.

389 See United States v. Locke, 529 U.S. 89, 105, 2000 AMC 913, 923 (2000); 33 U.S.C. §2718(a)-(c).

390 Locke, 529 U.S. at 106, 2000 AMC at 923-24.

391 S. Port Marine, LLC v. Gulf Oil Ltd., 234 F.3d 58, 64, 2001 AMC 609, 615-17 (1st Cir. 2000); Clausen v. M/V New Carissa, 171

F. Supp. 2d 1127 (D. Or. 2001); see also In re Alex C Corp., Nos. 00-12500-DPW, 01-12186-DPW, 2010 WL 4292328, at *9 n.18

(D. Mass. Nov. 1, 2010) (citing S. Port Marine, 234 F.3d at 65, 2001 AMC at 617-19).

392 See Exxon Shipping Co. v. Baker, 554 U.S. 471, 2008 AMC 1521 (2008).

393 See supra text accompanying note 385. Punitive damages are available under general maritime law, but, at least under certain

circumstances, they cannot exceed the amount of compensatory damages. See Exxon, 554 U.S. at 513 n.27, 2008 AMC at 1550 n.27.

394 United States v. Massachusetts, 493 F.3d 1, 20-21, 2007 AMC 1705, 1727-28 (1st Cir. 2007); Dostie Dev., Inc. v. Arctic Peace

Shipping Co., No. 95-808-CIV-J-MMP, 1996 WL 866119, at *3-4 (M.D. Fla. Aug. 14, 1996).

395 Russo v. M/T Dubai Star, No. C 09-05158, 2010 WL 1753187, at *5-6, 2010 AMC 1401, 1409-11 (N.D. Cal. Apr. 29, 2010); Isla

Corp. v. Sundown Energy, L.P., No. 06-8645, 2007 WL 1240212, at *2 (E.D. La. Apr. 27, 2007); Dostie Dev., 1996 WL 866119, at

*3-4. In Williams v. Potomac Electric Power Co., 115 F. Supp. 2d 561 (D. Md. 2000), it was held that OPA did not preempt state

123

















































common law claims. Id. at 565. However, that case involved an oil leak from a shorebased pipeline into marshland. Id. at 562-63.

So neither the Admiralty Extension Act nor Jensen had any part to play.

396 That is, apart from scattered references in various nonadmiralty contexts to Justice Holmes' famous comment, “The common law is

not a brooding omnipresence in the sky, but the articulate voice of some sovereign or quasi-sovereign that can be identified.” S. Pac.

Co. v. Jensen, 244 U.S. 205, 222, 1996 AMC 2076, 2088-89 (1917) (Holmes, J., dissenting). The Supreme Court has not considered

Jensen since American Dredging Co. v. Miller, 510 U.S. 443, 1994 AMC 913 (1994). Despite Justice Stevens' scathing concurrence,

which likened Jensen to Lochner v. New York, 198 U.S. 45 (1905), the majority declined to overrule Jensen because neither petitioner

nor respondent had invited it to do so. Am. Dredging, 510 U.S. at 447 n.1, 1994 AMC at 916 n.1.

397 Five states border the Pacific Ocean: Alaska, California, Hawaii, Oregon, and Washington. Nineteen states border the Atlantic Ocean

or the Gulf of Mexico: Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Massachusetts, Mississippi,

New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, and Virginia. Six

states border the Great Lakes but not the Atlantic Ocean: Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin. Five more

states border parts of the Mississippi River that are navigable to commercial shipping, but neither an ocean nor one of the Great

Lakes: Arkansas, Iowa, Kentucky, Missouri, and Tennessee.

398 Alaska Stat. §§46.03.822, 46.03.824 (2010).

399 Cal. Gov't Code §8670.56.5 (West 2010). Damages for loss of income or profits are available only if the claimant derives at least

25% of his or her earnings from the property or natural resource damaged. Id. §8670.56.5(h)(6).

400 N.C. Gen. Stat. §§143-215.94BB, 143-215.94CC (2010).

401 R.I. Gen. Laws §46-12.3-2 (2010).

402 S.C. Code Ann. §§48-43-600, 48-43-820 (2010) impose unlimited strict liability for “damage or injury” suffered as a result of oil

pollution. “Damage or injury” is not defined. South Carolina does not allow recovery of purely economic losses in tort, which may

confine the interpretation of the word “damage” to property damage. Sapp v. Ford Motor Co., 687 S.E.2d 47, 49-51 (S.C. 2009).

403 Wash Rev. Code Ann. §90.56.370(1) (West 2010).

404 Md. Code Ann., Envir. §§4-408 to -409 (LexisNexis 2010). The definition section, §4-401(c)(2), contains an extensive definition of

“damages,” including natural resource damages, economic losses, lost revenues, etc., but there is no operative provision imposing

liability for “damages” other than damage to real and personal property.

405 Mass. Gen. Laws ch. 21E. §5 (2010).

406 Or. Rev. Stat. Ann. §§468B.305, 468B.310 (West 2010).

407 Md. Code Ann., Envir. §4-409; Mass. Gen. Laws ch. 21E, §5.

408 Fla. Stat. Ann. §§376.031(5), 376.12(1)-(2), (4)-(5) (West 2010).

409 Del. Code Ann. tit. 7, §6208(a)-(b) (West 2010).

410 N.J. Stat. Ann. §58:10-23.11g(a)-(b) (West 2010).

411 N.Y. Nav. Law §181(1), (3) (McKinney 2010).

412 Tex. Nat. Res. Code Ann. §§40.153, 40.157, 40.202 (West 2009).

413 Va. Code Ann. §62.1-44.34:18(C) (2010).

414 Id. §62.1-44.34:18(C)(4).

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415 Fla. Stat. Ann. §376.031 (West 2010).

416 Curd v. Mosaic Fertilizer, LLC, 39 So. 3d 1216, 1222, 2010 AMC 2211, 2217-19 (Fla. 2010).

417 Del. Code Ann. tit. 7, §§6207(a)(6), (b)(5), 6208(a) (West 2010); N.J. Stat. Ann. §58:10-23.11g(a)(3)-(5) (West 2010); N.Y. Nav.

Law §181(2)(c)-(e) (McKinney 2010).

418 Tex. Nat. Res. Code Ann. §40.003(7)(A)(iii) (West 2009).

419 La. Rev. Stat. Ann. §§30:2454(5), (22), 30:2479(A) (2010).

420 1995 La. Acts 740, §2.

421 Conn. Gen. Stat. Ann. §22a-451 (West 2010) (cleanup costs only).

422 Ga. Code Ann. §12-5-51(b) (2010).

423 Haw. Rev. Stat. Ann. §128D-6 (LexisNexis 2010).

424 415 Ill. Comp. Stat. §25/5 (West 2010) (cleanup costs only).

425 Me. Rev. Stat. Ann. tit. 38, §552 (2009).

426 Mich. Comp. Laws Ann. §324.9505 (West 2010) (cleanup costs only).

427 N.H. Rev. Stat. Ann. §146-A:3-a (2010).

428 Wis. Stat. Ann. §283.87(1) (West 2009).

429 P.R. Laws Ann. tit. 24, §§595, 600 (2010).

430 N.H. Rev. Stat. Ann. §146-A:10 (2010).

431 Alabama has passed the Alabama Act Regarding Liability of Persons Responding to Oil Spills, Ala. Code §6-5-332.2 (2010), which

makes oil spill responders immune from liability, but has not passed legislation imposing liability on polluters.

432 Ind. Code §13-24-1-4(a) (2010) imposes strict liability for cleanup costs on the owner or operator of a “petroleum facility.” The

extensive definition of “petroleum facility” in Ind. Code §13-11-2-161 does not include ships or other vessels.

433 Minn. Stat. ch. 115E (2010) is entitled “Oil and Hazardous Substance Discharge Preparedness.” It imposes duties in relation to

preparedness but does not impose civil liability.

434 Mississippi has passed the Mississippi Liability of Persons Responding to Oil Spills Act, Miss. Code Ann. §49-18-1 to -5 (2010),

which makes oil spill responders immune from liability, but has not passed legislation imposing liability on polluters.

435 Ohio's Water Pollution Control Act, Ohio Rev. Code Ann. ch. 6111 (West 2010), has no provisions relating to vessel-sourced

pollution.

436 Pennsylvania has passed the Pennsylvania Oil Spill Responder Liability Act, 35 Pa. Cons. Stat. Ann. §6023.1 (West 2010), which

makes oil spill responders immune from liability, but has not passed legislation imposing liability on polluters.

85 TLNLR 889

End of Document © 2014 Thomson Reuters. No claim to original U.S. Government Works.

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EUROPEAN COURT OF JUSTICE(GRAND CHAMBER)

24 June 2008——————

COMMUNE DE MESQUERv

TOTAL FRANCE SA AND ANOTHER

Case C-188/07

Before CWA TIMMERMANS, President,A ROSAS, K LENAERTS and L BAY LARSEN,

Presidents of Chambers, and R SILVA DE

LAPUERTA, K SCHIEMANN, P KURIS, E LEVITS, AO CAOIMH, P LINDH, J-C BONICHOT, T VON

DANWITZ and C TOADER (Rapporteur), JudgesJ KOKOTT, Advocate General

European Union law — Waste management — Oiltanker spilling fuel oil cargo into sea causing pollu-tion of French coast — Whether fuel oil ‘‘waste’’ —Whether fuel oil ‘‘waste’’ when spilled into sea andmixed with water and sediment — Whether seller offuel oil and charterer of vessel can be liable fordisposal costs as ‘‘producer’’ or ‘‘holder’’ of productfrom which the waste came — Directive 75/442/EECon waste — International Convention on CivilLiability for Oil Pollution Damage 1969 — Inter-national Oil Pollution Compensation Fund Conven-tion 1971.

On 12 December 1999 the oil tanker Erika, flying theMaltese flag and chartered by Total International Ltd,sank off Finistere, spilling part of her cargo and oilfrom her bunkers at sea and causing pollution of theAtlantic coast of France. The heavy fuel oil cargo hadbeen the subject of a sale by Total International Ltd toan Italian company, ENEL, for use as fuel for electricityproduction. In order to carry out its contract withENEL, Total International Ltd had purchased the heavyfuel oil from Total France SA and had chartered Erikato carry it from Dunkirk, France to Milazzo, Italy.

Article 15 of Directive 75/442/EEC on waste pro-vided that, in accordance with the ‘‘polluter pays’’principle, the cost of disposing of ‘‘waste’’ should beborne by the ‘‘holder’’ and/or ‘‘the previous holders orthe producer of the product from which the wastecame’’. The term ‘‘waste’’ was defined in article 1 asmeaning ‘‘any substance or object in the categories setout in annex I which the holder discards or intends or isrequired to discard’’. The categories in annex I included‘‘Materials spilled’’ (Q4), ‘‘Residues from raw materi-als extraction and processing’’ (Q11) and ‘‘any materi-als, substances or products which are not contained inthe above categories’’ (Q16).

Directive 2006/12/EC drew up a codification ofDirective 75/442 in order to clarify matters. It repeatedthe relevant provisions of articles 1 and 15 of Directive75/442 but was not adopted until after the events in thepresent case took place.

Article 2 of Directive 68/414/EEC imposed an obli-gation on member states to maintain minimum stocksof crude oil and/or petroleum products, as amended byDirective 98/93/EC which laid down such an obligationinter alia to cope with any shortages or supply crises,and treated fuel oils as a category of petroleumproducts.

French Law (article 2 of Law No 75-633)provided:

Any person who produces or holds waste underconditions likely to produce harmful effects on soils,flora and fauna, to damage sites or landscapes, topollute the air or water, to cause noise and odoursand, in general, to harm human health or the environ-ment, is obliged to dispose of it or have it disposed ofin accordance with the provisions of this Chapter,under the conditions required to avoid the aboveeffects.

The disposal of waste includes the operations ofcollection, transport, storage, sorting and treatmentrequired for the recovery of reusable elements andmaterials or energy, and for the deposit or dischargeinto the natural environment of all other productsunder the conditions required to avoid the harmfuleffects mentioned in the previous paragraph.

On 9 June 2000 the Commune de Mesquer broughtproceedings against the Total companies in the Tribunalde commerce de Saint-Nazaire, seeking inter alia aruling that the companies should, pursuant to Law No75-633, be liable for the consequences of the damagecaused by the waste spread on the territory of themunicipality and be ordered to pay the costs incurredby the municipality for cleaning and anti-pollutionmeasures, namely â69,232.42.

The action was unsuccessful. The Commune deMesquer appealed to the Cour d’appel de Rennes whichconfirmed the decision, taking the view that the heavyfuel oil did not constitute waste but was a combustiblematerial for energy production manufactured for aspecific use. The Cour d’appel de Rennes accepted thatthe heavy fuel oil thus spilled and mixed with water andsand formed waste, but nevertheless considered thatthere was no provision under which the Total com-panies could be held liable, since they could not beregarded as producers or holders of that waste. Themunicipality appealed to the Cour de cassation whichreferred the following questions to the ECJ for apreliminary ruling:

1. Can heavy fuel oil, as the product of a refin-ing process, meeting the user’s specificationsand intended by the producer to be sold as acombustible fuel, and referred to in [Directive68/414] be treated as waste within the meaning ofArticle 1 of [Directive 75/442] as . . . codified by[Directive 2006/12]?

2. Does a cargo of heavy fuel oil, transported by aship and accidentally spilled into the sea, constitute— either in itself or on account of being mixed withwater and sediment — waste falling within categoryQ4 in Annex I to [Directive 2006/12]?

3. If the first question is answered in the negativeand the second in the affirmative, can the producer ofthe heavy fuel oil [Total France SA] and/or the seller

672 LLOYD’S LAW REPORTS [2008] Vol 2

PART 12 Commune de Mesquer v Total France SA [ECJ

126

and carrier (Total International Ltd) be regarded asthe producer and/or holder of waste within themeaning of Article 1(b) and (c) of [Directive2006/12] and for the purposes of applying Article 15of that directive, even though at the time of theaccident which transformed it into waste the productwas being transported by a third party?

————Held by ECJ that:(1) The concept of waste was not to be interpreted

restrictively and could cover all substances ‘‘discarded’’by their owner, even if they had a commercial value andwere collected on a commercial basis for recycling,reclamation or reuse. An example of a substance thathad been or was intended to be ‘‘discarded’’ was aproduction residue which had not been sought as such(see paras 38 to 41).

(2) On the other hand, goods, materials or rawmaterials resulting from a manufacturing or extractionprocess which was not primarily intended to producethat item might constitute not a residue but a by-productintended to be exploited or marketed on economicallyadvantageous terms in a subsequent process withoutprior processing. Directive 75/442 did not apply tomaterials which had an economic value as productsregardless of any form of processing and which weresubject to the legislation applicable to such products.However, the reasoning concerning by-products wasconfined to situations in which the reuse of materialswas not a mere possibility but a certainty, without priorprocessing and as an integral part of the productionprocess. In addition to the criterion of whether asubstance constituted a production residue, a secondrelevant criterion for determining whether or not thesubstance was waste was thus the degree of likelihoodthat the substance would be reused without priorprocessing. If, in addition to the mere possibility ofreusing the substance, there was also an economicadvantage to the holder in so doing, the likelihood ofsuch reuse was high. In that situation the substance inquestion could no longer be considered a substancewhich its holder sought to ‘‘discard’’ and had to beregarded as a genuine product (see paras 42 to 45);————Palin Granit Oy and Vehmassalon kansanter-veystyon kuntayhtyman hallitus Case C-9/00 [2002]ECR I-3533 considered.

(3) In the present case the substance in question wasobtained as a result of the process of refining oil.However, that residual substance was capable of beingexploited commercially on economically advantageousterms. Accordingly, the answer to the first question wasthat a substance such as the heavy fuel oil at issue in thepresent case did not constitute waste within the mean-ing of Directive 75/442 where it was exploited ormarketed on economically advantageous terms and wascapable of actually being used as a fuel withoutrequiring prior processing (see paras 46 to 48).

(4) The second question was whether hydrocarbonsaccidentally spilled into the sea and becoming indis-solubly mixed with seawater and sediment constitutedwaste within the meaning of Directive 75/442 orwhether they were to be classified as heavy hydro-carbons within the meaning of the International Con-vention on Civil Liability for Oil Pollution Damage1969 (the Liability Convention) and the International

Convention on the Establishment of an InternationalFund for Compensation of Oil Pollution Damage 1971(the Fund Convention) so as to be covered exclusivelyby those conventions. The exploiting or marketing ofhydrocarbons accidentally spilled at sea which spreador formed an emulsion in the water or agglomeratedwith sediment was very uncertain. Even assuming thatit was technically possible, such exploiting or market-ing would in any event imply prior processing opera-tions which, far from being economically advantageousfor the holder of the substance, would be a significantfinancial burden. It followed that such hydrocarbonsaccidentally spilled at sea were to be regarded assubstances which the holder did not intend to produceand which he ‘‘discarded’’, albeit involuntarily, whilethey were being transported, so that they fell to beclassified as waste within the meaning of Directive75/442 (see paras 57 to 59);

(5) Accordingly, the answer to the second questionwas that hydrocarbons accidentally spilled at sea fol-lowing a shipwreck, mixed with water and sedimentand drifting along the coast of a member state untilbeing washed up on that coast, constituted waste withinthe meaning of Directive 75/442 where they were nolonger capable of being exploited or marketed withoutprior processing (see para 63).

(6) The third question asked whether, in the event ofthe sinking of an oil tanker, the producer of the fuel oilspilled at sea and/or the seller of the fuel and chartererof the ship carrying the fuel might be required to bearthe cost of disposing of the waste thus generated, eventhough the fuel was transported by a third party, namelythe carrier by sea. The owner of the ship was inpossession of the hydrocarbons immediately beforethey became waste, and might thus be regarded ashaving produced the waste and accordingly a ‘‘holder’’within the meaning of Directive 75/442. However, thecost of disposing of the waste could be borne by one ormore ‘‘previous holders’’. The national court mightconsider that the seller of the hydrocarbons and chart-erer of the ship carrying them had ‘‘produced’’ wasteand accordingly was a ‘‘previous holder’’ of the wasteif the seller-charterer contributed to the risk that thepollution caused by the shipwreck would occur, partic-ularly if he failed to take measures to prevent such anincident, such as measures concerning the choice ofship (see para 78).

(7) In circumstances such as those of the presentcase, the cost of disposing of the waste was to be borneeither by the ‘‘previous holders’’ or by the ‘‘producer ofthe product from which’’ the waste in question came.While member states had the choice of form andmethods, they were obliged to ensure that their nationallaw allowed that the cost of disposing of the waste beallocated either to the previous holders or to theproducer of the product from which the waste came.That did not preclude member states from laying down,pursuant to their relevant international commitmentssuch as the Liability Convention and the Fund Conven-tion, that the shipowner and the charterer could beliable only up to maximum amounts depending on thetonnage of the vessel and/or in particular circumstanceslinked to their negligent conduct. Nor did it preclude acompensation fund with resources limited to a max-imum amount for each accident from assuming liability,

673LLOYD’S LAW REPORTS[2008] Vol 2

[ECJCommune de Mesquer v Total France SAECJ]

127

pursuant to those international commitments, in placeof the ‘‘holders’’ for the cost of disposal of the waste.However, if the cost of disposal was not borne by thatfund, or could not be borne because the ceiling forcompensation had been reached, and that, in accor-dance with the limitations and/or exemptions of liabil-ity laid down, the national law of a member state,including the law derived from international agree-ments, prevented that cost from being borne by theshipowner and/or the charterer even though they wereto be regarded as ‘‘holders’’ within the meaning ofDirective 75/442, such a national law would then haveto make provision for that cost to be borne by theproducer of the product from which the waste came.However, in accordance with the ‘‘polluter pays’’ prin-ciple, such a producer could not be liable to bear thatcost unless he had contributed by his conduct to the riskthat the pollution caused by the shipwreck would occur(see paras 79, 80 and 82).

(8) The obligation of a member state to take all themeasures necessary to achieve the result prescribed bya Directive was a binding obligation. The Communitywas not bound by the Liability Convention or the FundConvention. Directive 75/442 (unlike Directive2004/35/EC) did not contain any provision that it wasnot to apply to an incident or activity in respect ofwhich liability or compensation fell within the scope ofthe Liability Convention or the Fund Convention (seeparas 83, 85 and 88);

————Peralta Case C-379/92 [1994] ECR I-3453and R (International Association of Independent TankerOwners (Intertanko)) v Secretary of State for TransportCase C-308/06 [2008] 2 Lloyd’s Rep 260 considered.

(9) Accordingly, the answer to the third question wasthat, for the purposes of applying article 15 of Directive75/442 to the accidental spillage of hydrocarbons at seacausing pollution of the coastline of a member state:

— the national court might regard the seller ofthose hydrocarbons and charterer of the ship carryingthem as a producer of that waste within the meaningof article 1(b) of Directive 75/442, and thereby as a‘‘previous holder’’ for the purposes of applying thefirst part of the second indent of article 15 of thatdirective, if that court, in the light of the elementswhich it alone was in a position to assess, reached theconclusion that that seller-charterer contributed tothe risk that the pollution caused by the shipwreckwould occur, in particular if he failed to take meas-ures to prevent such an incident, such as measuresconcerning the choice of ship;

— if it happened that the cost of disposing of thewaste produced by an accidental spillage of hydro-carbons at sea was not borne by the Fund, or couldnot be borne because the ceiling for compensationfor that accident had been reached, and that, inaccordance with the limitations and/or exemptions ofliability laid down, the national law of a memberstate, including the law derived from internationalagreements, prevented that cost from being borne bythe shipowner and/or the charterer, even though theywere to be regarded as ‘‘holders’’ within the meaningof article 1(c) of Directive 75/442, such a nationallaw would then, in order to ensure that article 15 ofthat directive was correctly transposed, have to make

provision for that cost to be borne by the producer ofthe product from which the waste thus spread came.In accordance with the ‘‘polluter pays’’ principle,however, such a producer could not be liable to bearthat cost unless he had contributed by his conduct tothe risk that the pollution caused by the shipwreckwould occur.

——————

The following cases were referred to in thejudgment:Air Liquide Industries Belgium SA v Ville de Sera-

ing and Province de Liege Joined CasesC-393/04 and C-41/05 [2006] ECR I-5293;

ARCO Chemie Nederland Ltd v Minister van Volk-shuisvesting Joined Cases C-418/97 andC-419/97 [2000] ECR I-4475;

Commission of the European Community v IrelandCase C-494/01 [2005] ECR I-3331;

Inter-Environnement Wallonie ASBL v Region Wal-lonne Case C-129/96 [1997] ECR I-7411;

Marleasing SA v La Comercial International deAlimentation SA Case C-106/89 [1990] ECRI-4135;

Niselli Case C-457/02 [2004] ECR I-10853;Palin Granit Oy and Vehmassalon kansanterveyst-

yon kuntayhtyman hallitus Case C-9/00 [2002]ECR I-3533;

Peralta Case C-379/92 [1994] ECR I-3453;R (International Association of Independent Tanker

Owners (Intertanko)) v Secretary of State forTransport Case C-308/06 [2008] 2 Lloyd’sRep 260;

Saetti and Frediani Case C-235/02 [2004] ECRI-1005;

Van de Walle v Texaco Belgium SA Case C-1/03[2004] ECR I-7613;

Van der Weerd v Minister van Landbouw JoinedCases C-222/05 to C-225/05 [2007] ECRI-4233.

——————

This was a reference by the French Cour decassation to the European Court of Justice oncertain questions relating to the interpretation ofDirective 75/442/EEC on waste.

The further facts are stated in the judgment of thecourt.

Judgment was reserved.

Tuesday, 24 June 2008

——————


ECJ] Commune de Mesquer v Total France SA [ECJ

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JUDGMENT

EUROPEAN COURT OF JUSTICE:1. This reference for a preliminary ruling con-

cerns the interpretation of articles 1 and 15 of andAnnex I to Council Directive 75/442/EEC of 15July 1975 on waste (OJ 1975 L 194, p 39), asamended by Commission Decision 96/350/EC of24 May 1996 (OJ 1996 L 135, p 32) (‘‘Directive75/442’’).

2. The reference was made in the course ofproceedings between the Commune de Mesquer(municipality of Mesquer) and Total France SA andTotal International Ltd (‘‘the Total companies’’)concerning compensation for the damage caused bythe waste spread on the territory of that municipal-ity following the sinking of the oil tanker Erika.

Legal context

International law

3. The International Convention on Civil Liabil-ity for Oil Pollution Damage adopted at Brussels on29 November 1969, as amended by the Protocolsigned in London on 27 November 1992 (OJ 2004L 78, p 32) (‘‘the Liability Convention’’), governsthe liability of shipowners for damage caused bythe spillage of persistent oil from oil tankers. Itintroduces the principle of strict liability on theirpart, limited to an amount calculated by referenceto the tonnage of the ship, and establishes a systemof compulsory liability insurance.

4. Under article II(a) of the Liability Convention,the Convention applies to pollution damage causedin the territory, including the territorial sea, of acontracting state, and in the exclusive economiczone of a contracting state established in accor-dance with international law or, as the case may be,in an area beyond and adjacent to the territorial seaof that state determined by that state in accordancewith maritime law and extending not more than 200nautical miles from the baselines from which thebreadth of its territorial sea is measured.

5. Under article III(4) of the Liability Conven-tion, ‘‘no claim for compensation for pollutiondamage under this Convention or otherwise may bemade against . . . any charterer (howsoeverdescribed, including a bareboat charterer), manageror operator of the ship . . . unless the damageresulted from their personal act or omission, com-mitted with the intent to cause such damage, orrecklessly and with knowledge that such damagewould probably result’’.

6. The International Convention on the Establish-ment of an International Fund for Compensation forOil Pollution Damage adopted at Brussels on 18December 1971, as amended by the Protocol signed

in London on 27 November 1992 (OJ 2004 L 78,p 40) (‘‘the Fund Convention’’) complements theLiability Convention by establishing a system forcompensating victims.

7. The International Oil Pollution CompensationFund (‘‘the Fund’’), which is financed by contribu-tions from the oil industry, can cover up to 135million SDR (special drawing rights) for an inci-dent before 2003. Under article 4 of the FundConvention, victims may bring claims for com-pensation before the courts of the contracting statewhere the damage has been caused, in particularwhere the Liability Convention does not provide forany liability for the damage in question or wherethe shipowner is insolvent or released from liabilityunder that Convention.

8. The Protocol of 2003 to the InternationalConvention on the Establishment of an Interna-tional Fund for Compensation for Oil PollutionDamage 1992 (OJ 2004 L 78, p 24) establishes aninternational supplementary fund for compensationfor oil pollution damage, to be named ‘‘The Inter-national Oil Pollution Compensation Supplemen-tary Fund 2003’’, which together with the Fundmakes it possible to cover up to 750 million units ofaccount in respect of any one incident after 1November 2003.

Community law

Directive 75/442

9. According to the third recital in the preambleto Directive 75/442, the essential objective of allprovisions relating to waste disposal must be theprotection of human health and the environmentagainst harmful effects caused by the collection,transport, treatment, storage and tipping of waste.

10. Article 1 of Directive 75/442 provides:For the purposes of this Directive:

(a) ‘‘waste’’ shall mean any substance orobject in the categories set out in Annex Iwhich the holder discards or intends or isrequired to discard.

The Commission . . . will draw up . . . a listof wastes belonging to the categories listed inAnnex I . . .

(b) ‘‘producer’’ shall mean anyone whoseactivities produce waste (‘‘original producer’’)and/or anyone who carries out pre-processing,mixing or other operations resulting in achange in the nature or composition of thiswaste;

(c) ‘‘holder’’ shall mean the producer of thewaste or the natural or legal person who is inpossession of it;. . .



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(e) ‘‘disposal’’ shall mean any of the opera-tions provided for in Annex II, A;

(f) ‘‘recovery’’ shall mean any of the opera-tions provided for in Annex II, B;

(g) ‘‘collection’’ shall mean the gathering,sorting and/or mixing of waste for the purposeof transport.

11. Article 8 of Directive 75/442 provides:Member States shall take the necessary meas-

ures to ensure that any holder of waste:— has it handled by a private or public

waste collector or by an undertaking whichcarries out the operations listed in Annex II Aor B, or

— recovers or disposes of it himself inaccordance with the provisions of thisDirective.

12. Article 15 of Directive 75/442 provides:In accordance with the ‘‘polluter pays’’ princi-

ple, the cost of disposing of waste must be borneby:

— the holder who has waste handled by awaste collector or by an undertaking asreferred to in Article 9,

and/or— the previous holders or the producer of

the product from which the waste came.13. Categories Q4, Q11, Q13 and Q16 in Annex

I to Directive 75/442, ‘‘Categories of waste’’, readas follows:

Q4 Materials spilled, lost or having undergoneother mishap, including any materials, equip-ment, etc, contaminated as a result of themishap. . .

Q11 Residues from raw materials extractionand processing (eg mining residues oil fieldslops, etc). . .

Q13 Any materials, substances or productswhose use has been banned by law. . .

Q16 Any materials, substances or productswhich are not contained in the abovecategories.14. Annex II A to the Directive, ‘‘Disposal

operations’’, is intended to list disposal operationssuch as they occur in practice, while Annex II B,‘‘Recovery operations’’, is intended to list recoveryoperations in the same way.

15. Directive 2006/12/EC of the European Par-liament and of the Council of 5 April 2006 on waste(OJ 2006 L 114, p 9), which draws up a codification

of Directive 75/442 in order to clarify matters,repeats the above provisions in articles 1 and 15 andAnnexes I, II A and II B. Directive 2006/12 was notadopted until after the events that are the subject ofthe main proceedings, however, so that it does notaffect those proceedings.

Directive 68/414/EEC

16. Article 2 of Council Directive 68/414/EEC of20 December 1968 imposing an obligation onmember states of the EEC to maintain minimumstocks of crude oil and/or petroleum products (OJ,English Special Edition 1968(II), p 586), asamended by Council Directive 98/93/EC of 14December 1998 (OJ 1998 L 358, p 100), which laysdown such an obligation inter alia to cope with anyshortages or supply crises, treats fuel oils as acategory of petroleum products.

Directive 2004/35/EC

17. Recital 10 in the preamble to Directive2004/35/EC of the European Parliament and of theCouncil of 21 April 2004 on environmental liabilitywith regard to the prevention and remedying ofenvironmental damage (OJ 2004 L 143, p 56) readsas follows:

Express account should be taken of the Eura-tom Treaty and relevant international conven-tions and of Community legislation regulatingmore comprehensively and more stringently theoperation of any of the activities falling under thescope of this Directive.

18. Article 4(2) of Directive 2004/35 provides:

This Directive shall not apply to environ-mental damage or to any imminent threat of suchdamage arising from an incident in respect ofwhich liability or compensation falls within thescope of any of the International Conventionslisted in Annex IV, including any future amend-ments thereof, which is in force in the MemberState concerned.

19. Annex IV to Directive 2004/35 reads asfollows:

INTERNATIONAL CONVENTIONS RE-FERRED TO IN ARTICLE 4(2)

(a) the International Convention of 27November 1992 on Civil Liability for OilPollution Damage;

(b) the International Convention of 27November 1992 on the Establishment of anInternational Fund for Compensation for OilPollution Damage;

. . .



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Decision 2004/246/EC

20. On 2 March 2004 the Council adoptedDecision 2004/246/EC authorising the memberstates to sign, ratify or accede to, in the interest ofthe European Community, the Protocol of 2003 tothe International Convention on the Establishmentof an International Fund for Compensation for OilPollution Damage, 1992, and authorising Austriaand Luxembourg, in the interest of the EuropeanCommunity, to accede to the underlying instru-ments (OJ 2004 L 78, p 22).

21. Recital 4 in the preamble to Decision2004/246 reads as follows:

Pursuant to the Supplementary Fund Protocol,only sovereign States may be party to it; it is nottherefore possible for the Community to ratify oraccede to the Protocol, nor is there a prospectthat it will be able to do so in the near future.22. Articles 1(1) and 4 of Decision 2004/246

read as follows:Article 11. The Member States are hereby authorised to

sign, ratify or accede to, in the interest of theEuropean Community, the Protocol of 2003 tothe International Convention on the Establish-ment of an International Fund for Compensationfor Oil Pollution Damage 1992 (the Supplemen-tary Fund Protocol) subject to the conditions setout in the following Articles.. . .

Article 4Member States shall, at the earliest opportu-

nity, use their best endeavours to ensure that theSupplementary Fund Protocol, and the under-lying instruments, are amended in order to allowthe Community to become a Contracting Party tothem.

National law

23. Article 2 of ‘‘Loi no 75-633 relative al’elimination des dechets et a la recuperation desmateriaux’’ (Law No 75-633 on the disposal ofwaste and the recovery of materials) of 15 July1975 (JORF, 16 July 1975, p 7279), now article L541-2 of the Code de l’environnement (Code of theEnvironment), provides:

Any person who produces or holds wasteunder conditions likely to produce harmfuleffects on soils, flora and fauna, to damage sitesor landscapes, to pollute the air or water, to causenoise and odours and, in general, to harm humanhealth or the environment, is obliged to disposeof it or have it disposed of in accordance with theprovisions of this Chapter, under the conditionsrequired to avoid the above effects.

The disposal of waste includes the operationsof collection, transport, storage, sorting and treat-ment required for the recovery of reusable ele-ments and materials or energy, and for thedeposit or discharge into the natural environmentof all other products under the conditionsrequired to avoid the harmful effects mentionedin the previous paragraph.

The dispute in the main proceedings and thereference for a preliminary ruling

24. On 12 December 1999 the oil tanker Erika,flying the Maltese flag and chartered by TotalInternational Ltd, sank about 35 nautical milessouth-west of the Pointe de Penmarc’h (Finistere,France), spilling part of her cargo and oil from herbunkers at sea and causing pollution of the Atlanticcoast of France.

25. It appears from the order for reference andthe observations submitted to the court that theItalian company ENEL concluded a contract withTotal International Ltd for the delivery of heavyfuel oil intended to be used as fuel for electricityproduction. In order to carry out the contract, Totalraffinage distribution, now Total France SA, soldthe heavy fuel oil to Total International Ltd, whichchartered the vessel Erika to carry it from Dunkirk(France) to Milazzo (Italy).

26. On 9 June 2000 the Commune de Mesquerbrought proceedings against the Total companies inthe Tribunal de commerce de Saint-Nazaire (Com-mercial Court, Saint-Nazaire), seeking inter alia aruling that the companies should, pursuant to LawNo 75-633, be liable for the consequences of thedamage caused by the waste spread on the territoryof the municipality and be ordered jointly andseverally to pay the costs incurred by the munici-pality for cleaning and anti-pollution measures,namely â69,232.42.

27. The action was unsuccessful, and the Com-mune de Mesquer appealed to the Cour d’appel deRennes (Court of Appeal, Rennes), which by judg-ment of 13 February 2002 confirmed the decision atfirst instance, taking the view that the heavy fuel oildid not in this case constitute waste but was acombustible material for energy production manu-factured for a specific use. The Cour d’appel deRennes accepted that the heavy fuel oil thus spilledand mixed with water and sand formed waste, butnevertheless considered that there was no provisionunder which the Total companies could be heldliable, since they could not be regarded as produc-ers or holders of that waste. The municipalityappealed on a point of law to the Cour de cassation(Court of Cassation).

28. Since it considered that the case raised aserious problem of interpretation of Directive



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75/442, the Cour de cassation decided to stay theproceedings and refer the following questions to thecourt for a preliminary ruling:

1. Can heavy fuel oil, as the product of arefining process, meeting the user’s specifica-tions and intended by the producer to be sold asa combustible fuel, and referred to in [Directive68/414] be treated as waste within the meaningof Article 1 of [Directive 75/442] as . . . codifiedby [Directive 2006/12]?

2. Does a cargo of heavy fuel oil, transportedby a ship and accidentally spilled into the sea,constitute either in itself or on account of beingmixed with water and sediment waste fallingwithin category Q4 in Annex I to [Directive2006/12]?

3. If the first question is answered in thenegative and the second in the affirmative, canthe producer of the heavy fuel oil (Total raffinage[distribution]) and/or the seller and carrier (TotalInternational Ltd) be regarded as the producerand/or holder of waste within the meaning ofArticle 1(b) and (c) of [Directive 2006/12] andfor the purposes of applying Article 15 of thatdirective, even though at the time of the accidentwhich transformed it into waste the product wasbeing transported by a third party?

The questions referred for a preliminary ruling

Admissibility

29. The Total companies submit that the refer-ence for a preliminary ruling must be declaredinadmissible in so far as the Commune de Mesquerhas already received compensation from the Fundand consequently has no legal interest in bringingproceedings. In those circumstances the request fora preliminary ruling is hypothetical.

30. It is settled case law that questions on theinterpretation of Community law referred by anational court, in the factual and legislative contextwhich that court is responsible for defining and theaccuracy of which is not a matter for the court todetermine, enjoy a presumption of relevance. Thecourt may refuse to rule on a question referred by anational court only where it is quite obvious that theinterpretation of Community law that is soughtbears no relation to the actual facts of the mainaction or its purpose, where the problem is hypo-thetical, or where the court does not have before itthe factual or legal material necessary to give auseful answer to the questions submitted to it (see,to that effect, Van der Weerd v Minister vanLandbouw Joined Cases C-222/05 to C-225/05[2007] ECR I-4233, para 22 and the case lawcited).

31. Moreover, according to settled case law, it isfor the national court hearing a dispute to determineboth the need for a preliminary ruling in order toenable it to deliver judgment and the relevance ofthe questions which it submits to the court (AirLiquide Industries Belgium SA v Ville de Seraingand Province de Liege Joined Cases C-393/04 andC-41/05 [2006] ECR I-5293, para 24 and the caselaw cited).

32. It may be seen from the documents in thecase that the Commune de Mesquer has indeedreceived payments from the Fund, made followingthe claim for compensation it brought against interalia the owner of Erika and the Fund. Thosepayments were the subject of settlements by whichthe municipality expressly agreed not to bring anyactions or proceedings, on pain of having to repaythe sums paid.

33. It is apparent that the Cour de cassation hadthat information before it, but nonetheless did notconsider that the dispute in the main proceedingshad ceased or that the Commune de Mesquer hadlost its legal interest in bringing proceedings, anddid not decide not to refer its questions to the courtfor a preliminary ruling.

34. In those circumstances the questions put bythe Cour de cassation must be answered.

The first question

35. By its first question, the referring court seeksto know whether heavy fuel oil sold as a combusti-ble fuel may be classified as waste within themeaning of article 1(a) of Directive 75/442.

36. The Total companies, the member stateswhich have submitted observations, and the Com-mission take the view that the question should beanswered in the negative. Only the Commune deMesquer submits that such heavy fuel oil is to beclassified as waste and that the substance in ques-tion falls, moreover, within the category of danger-ous and illegal products.

37. It should be recalled that under article 1(a) ofDirective 75/442 any substance or object in thecategories set out in Annex I to the Directive whichthe holder discards or intends or is required todiscard is to be regarded as waste.

38. Thus, in the context of that Directive, thescope of the term ‘‘waste’’ turns on the meaning ofthe term ‘‘discard’’ (Inter-Environnement WallonieASBL v Region Wallone Case C-129/96 [1997]ECR I-7411, para 26), and consequently, in accor-dance with the court’s case law, those terms mustbe interpreted in the light of the aim of the Directive(ARCO Chemie Nederland Ltd v Minister vanVolkshuisvesting Joined Cases C-418/97 andC-419/97 [2000] ECR I-4475, para 37), which, inthe words of the third recital in the preamble to the



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Directive, consists in the protection of humanhealth and the environment against harmful effectscaused by the collection, transport, treatment, stor-age and tipping of waste, having regard to article174(2) EC, which provides that Community policyon the environment is to aim at a high level ofprotection and is to be based, in particular, on theprecautionary principle and the principle that pre-ventive action should be taken (see Niselli CaseC-457/02 [2004] ECR I-10853, para 33).

39. The court has also held that, in view of theaim pursued by Directive 75/442, the concept ofwaste cannot be interpreted restrictively (see ARCOChemie Nederland Ltd, para 40).

40. That concept can cover all objects andsubstances discarded by their owner, even if theyhave a commercial value and are collected on acommercial basis for recycling, reclamation orreuse (see, in particular, Palin Granit Oy andVehmassalon kansanterveystyon kuntayhtyman hal-litus Case C-9/00 [2002] ECR I-3533, para 29 andthe case law cited).

41. In this respect, certain circumstances mayconstitute evidence that a substance or object hasbeen discarded or of an intention or requirement todiscard it within the meaning of article 1(a) ofDirective 75/442. That will be the case in particularwhere the substance used is a production residue,that is to say, a product not sought as such (ARCOChemie Nederland Ltd, paras 83 and 84). The courthas thus said that leftover stone from extractionprocesses of a granite quarry which is not theproduct primarily sought by the operator in princi-ple constitutes waste (Palin Granit Oy, paras 32and 33).

42. However, goods, materials or raw materialsresulting from a manufacturing or extraction proc-ess which is not primarily intended to produce thatitem may constitute not a residue but a by-productwhich the undertaking does not wish to discard butintends to exploit or market on economicallyadvantageous terms in a subsequent process with-out prior processing (see Palin Granit Oy, para 34,and order in Saetti and Frediani Case C-235/02[2004] ECR I-1005, para 35).

43. There is no reason to apply the provisions ofDirective 75/442 to goods, materials or raw materi-als which have an economic value as productsregardless of any form of processing and which, assuch, are subject to the legislation applicable tothose products (see Palin Granit Oy, para 35, andorder in Saetti and Frediani, para 35).

44. However, having regard to the obligation tointerpret the concept of waste widely in order tolimit its inherent nuisance and harmful effects, thereasoning concerning by-products should be con-fined to situations in which the reuse of goods,

materials or raw materials is not a mere possibilitybut a certainty, without prior processing and as anintegral part of the production process (PalinGranit Oy, para 36, and order in Saetti and Fre-diani, para 36).

45. In addition to the criterion of whether asubstance constitutes a production residue, a secondrelevant criterion for determining whether or notthe substance is waste within the meaning ofDirective 75/442 is thus the degree of likelihoodthat the substance will be reused without priorprocessing. If, in addition to the mere possibility ofreusing the substance, there is also an economicadvantage to the holder in so doing, the likelihoodof such reuse is high. In that case, the substance inquestion can no longer be considered a substancewhich its holder seeks to ‘‘discard’’ and must beregarded as a genuine product (see Palin Granit Oy,para 37).

46. In the case at issue in the main proceedings,it appears that the substance in question is obtainedas a result of the process of refining oil.

47. However, this residual substance is capableof being exploited commercially on economicallyadvantageous terms, as is confirmed by the fact thatit was the subject of a commercial transaction andmeets the buyer’s specifications, as the referringcourt points out.

48. The answer to the first question must there-fore be that a substance such as that at issue in themain proceedings, namely heavy fuel oil sold as acombustible fuel, does not constitute waste withinthe meaning of Directive 75/442, where it isexploited or marketed on economically advanta-geous terms and is capable of actually being used asa fuel without requiring prior processing.

The second question

49. By its second question the referring courtseeks essentially to know whether heavy fuel oilthat is accidentally spilled into the sea following ashipwreck must in such circumstances be classifiedas waste within the meaning of category Q4 inAnnex I to Directive 75/442.

Observations submitted to the court

50. The Commune de Mesquer, with which theFrench and Italian governments and the Commis-sion substantially agree, takes the view that wheresuch hydrocarbons are discharged into the sea, andall the more so if they are mixed with water andsediment, they must be classified as waste withinthe meaning of Directive 75/442.

51. The Total companies submit that the mixtureconsisting of hydrocarbons, water and sediment



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from the coast constitutes waste only if there is anobligation to dispose of or recover accidentallyspilled hydrocarbons as such and they are indis-solubly mixed with the water and sediment.

52. The Belgian government submits that theproducts thus spilled at sea should be classified notas waste within the meaning of Directive 75/442but as heavy hydrocarbons within the meaning ofthe Liability Convention and the Fund Convention.The United Kingdom government, while acceptingthat such hydrocarbons may be classified as wastewithin the meaning of that Directive, considers itpreferable for the accidental spillage of hydro-carbons at sea to be covered exclusively by theLiability Convention and the Fund Convention, sothat Directive 75/442 does not apply in suchcircumstances.

Findings of the court

53. It should be noted, to begin with, that AnnexI to Directive 75/442 provides lists of substancesand objects that may be classified as waste. How-ever, the lists are only intended as guidance, and theclassification of waste is to be inferred primarilyfrom the holder’s actions and the meaning of theterm ‘‘discard’’ (see Van de Walle v Texaco BelgiumSA Case C-1/03 [2004] ECR I-7613, para 42).

54. The fact that Annex I to Directive 75/442,entitled ‘‘Categories of waste’’, refers in point Q4 to‘‘Materials spilled, lost or having undergone othermishap, including any materials, equipment, etc,contaminated as a result of the mishap’’ thus merelyindicates that such materials may fall within thescope of waste. It cannot therefore suffice to clas-sify as waste hydrocarbons which are accidentallyspilled at sea and cause pollution of the territorialwaters and then the coastline of a member state(see, to that effect, Van de Walle, para 43).

55. In those circumstances, it must be examinedwhether such an accidental spillage of hydrocar-bons is an act by which the holder discards themwithin the meaning of article 1(a) of Directive75/442 (see, to that effect, Van de Walle, para 44).

56. Where the substance or object in question isa production residue, that is to say, a product whichis not itself wanted for subsequent use and whichthe holder cannot reuse on economically advanta-geous terms without prior processing, it must beregarded as a burden which the holder ‘‘discards’’(see Palin Granit Oy, paras 32 to 37, and Van deWalle, para 46).

57. In the case of hydrocarbons which are acci-dentally spilled and cause soil and groundwatercontamination, the court has held that they do notconstitute a product which can be reused withoutprior processing (see Van der Walle, para 47).

58. The same conclusion must be reached in thecase of hydrocarbons which are accidentally spilledat sea and cause pollution of the territorial watersand then the coastline of a member state.

59. It is common ground that the exploiting ormarketing of such hydrocarbons, spread or formingan emulsion in the water or agglomerated withsediment, is very uncertain or even hypothetical. Itis also agreed that, even assuming that it is techni-cally possible, such exploiting or marketing wouldin any event imply prior processing operationswhich, far from being economically advantageousfor the holder of the substance, would in fact be asignificant financial burden. It follows that suchhydrocarbons accidentally spilled at sea are to beregarded as substances which the holder did notintend to produce and which he ‘‘discards’’, albeitinvoluntarily, while they are being transported, sothat they must be classified as waste within themeaning of Directive 75/442 (see, to that effect,Van der Walle, paras 47 and 50).

60. Moreover, the applicability of that Directiveis not called into question by the fact that theaccidental spillage of hydrocarbons took place noton the land territory of a member state but in itsexclusive economic zone.

61. Without there being any need to rule on theapplicability of the Directive at the place where theship sank, it suffices to observe that the hydro-carbons thus accidentally spilled drifted along thecoast until they were washed up on it, so beingdischarged on the member state’s land territory.

62. It follows that, in the circumstances of thesinking of an oil tanker such as those at issue in themain proceedings, Directive 75/442 applies rationeloci.

63. Consequently, the answer to the secondquestion must be that hydrocarbons accidentallyspilled at sea following a shipwreck, mixed withwater and sediment and drifting along the coast ofa member state until being washed up on that coast,constitute waste within the meaning of article 1(a)of Directive 75/442, where they are no longercapable of being exploited or marketed withoutprior processing.

The third question

64. By its third question the referring court seeksto know whether, in the event of the sinking of anoil tanker, the producer of the heavy fuel oil spilledat sea and/or the seller of the fuel and charterer ofthe ship carrying the fuel may be required to bearthe cost of disposing of the waste thus generated,even though the substance spilled at sea was trans-ported by a third party, in this case a carrier bysea.



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Observations submitted to the court

65. The Commune de Mesquer submits that inthe main proceedings, for the purposes of theapplication of article 15 of Directive 75/442, theproducer of the heavy fuel oil and the seller of thatfuel oil and charterer of the ship carrying it must beregarded as producers and holders, within themeaning of article 1(b) and (c) of that Directive, ofthe waste resulting from the spillage into the sea ofthat substance.

66. According to the Total companies, in circum-stances such as those at issue in the main proceed-ings, article 15 of Directive 75/442 does not applyto the producer of the heavy fuel oil or to the sellerof the oil and charterer of the ship carrying thatsubstance, in that, at the time of the accident whichconverted the substance into waste, it was beingcarried by a third party. Furthermore, that provisionalso does not apply to the producer of the heavyfuel oil simply because he produced the productfrom which the waste came.

67. The French government, with which theItalian government and the Commission agree inpart, takes the view that the producer of the heavyfuel oil and/or the seller of the oil and charterer ofthe ship carrying that substance may be regarded asproducers and/or holders of the waste resultingfrom the spillage at sea of that substance only if theshipwreck that converted the cargo of heavy fuel oilinto waste was attributable to various actions cap-able of making them liable. The Commission adds,however, that the producer of a product such asheavy fuel oil may not, merely because of thatactivity, be regarded as a ‘‘producer’’ and/or‘‘holder’’ within the meaning of article 1(b) and (c)of Directive 75/442 of the waste generated by thatproduct on the occasion of an accident duringtransport. He is nonetheless obliged under thesecond indent of article 15 of that Directive to bearthe cost of disposing of the waste, in his capacity as‘‘producer of the product from which the wastecame’’.

68. According to the Belgian government, theapplication of Directive 75/442 is excluded becausethe Liability Convention applies. Similarly,the United Kingdom government considers that thecourt should not answer this question, in that thecase at issue in the main proceedings relates toissues of liability for the spillage of heavy fuel oil atsea.

Findings of the court

69. In circumstances such as those of the mainproceedings, having regard to the aim of Directive75/442 as stated in the third recital in the preambleto the Directive, the second indent of article 15 ofthe Directive provides that, in accordance with the

‘‘polluter pays’’ principle, the cost of disposing ofthe waste is to be borne by the previous holders orthe producer of the product from which the wastecame.

70. Under article 8 of Directive 75/442, any‘‘holder of waste’’ is obliged to have it handled bya private or public waste collector or by an under-taking which carries out the operations listed inAnnex II A or B to the Directive, or to recover ordispose of it himself in accordance with the provi-sions of the Directive (Commission of the EuropeanCommunity v Ireland Case C-494/01 [2005] ECRI-3331, para 179).

71. It follows from those provisions that Direc-tive 75/442 distinguishes the actual recovery ordisposal operations, which it makes the responsibil-ity of any ‘‘holder of waste’’, whether producer orpossessor, from the financial burden of those opera-tions, which, in accordance with the ‘‘polluterpays’’ principle, it imposes on the persons whocause the waste, whether they are holders or formerholders of the waste or even producers of theproduct from which the waste came (Van de Walle,para 58).

72. The application of the ‘‘polluter pays’’ princi-ple within the meaning of the second sentence ofthe first subparagraph of article 174(2) EC andarticle 15 of Directive 75/442 would be frustrated ifsuch persons involved in causing waste escapedtheir financial obligations as provided for by thatDirective, even though the origin of the hydro-carbons which were spilled at sea, albeit uninten-tionally, and caused pollution of the coastalterritory of a member state was clearlyestablished.

The terms ‘‘holder’’ and ‘‘previous holders’’

73. The court has held, in the case of hydro-carbons spilled by accident as the result of a leakfrom a service station’s storage facilities which hadbeen bought by that service station to meet itsoperating needs, that those hydrocarbons were infact in the possession of the service station’smanager. The court thus found that, in that context,the person who, for the purpose of his activity, hadthe hydrocarbons in stock when they became wastecould be regarded as the person who ‘‘produced’’them within the meaning of article 1(b) of Directive75/442. Since he is at once the possessor and theproducer of that waste, such a service stationmanager must be regarded as its holder within themeaning of article 1(c) of that Directive (see, to thateffect, Van de Walle, para 59).

74. In the same way, in the case of hydrocarbonsspilled by accident at sea, it must be held that theowner of the ship carrying those hydrocarbons is infact in possession of them immediately before they



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become waste. In those circumstances, the ship-owner may thus be regarded as having producedthat waste within the meaning of article 1(b) ofDirective 75/442, and on that basis be categorisedas a ‘‘holder’’ within the meaning of article 1(c) ofthat Directive.

75. However, that Directive does not rule out thepossibility that, in certain cases, the cost of dispos-ing of waste is to be borne by one or more previousholders (Van de Walle, para 57).

Determination of the persons liable to bear thecost of disposing of the waste

76. In the main proceedings, the question whicharises is whether the person who sold the goods tothe final consignee and for that purpose charteredthe ship which sank may also be regarded as a‘‘holder’’, a ‘‘previous’’ one, of the waste thusspilled. The referring court is also uncertainwhether the producer of the product from which thewaste came may also be responsible for bearing thecost of disposing of the waste thus produced.

77. On this point, article 15 of Directive 75/442provides that certain categories of persons, in thiscase the ‘‘previous holders’’ or the ‘‘producer of theproduct from which the waste came’’, may, inaccordance with the ‘‘polluter pays’’ principle, beresponsible for bearing the cost of disposing ofwaste. That financial obligation is thus imposed onthem because of their contribution to the creation ofthe waste and, in certain cases, to the consequentrisk of pollution.

78. In the case of hydrocarbons accidentallyspilled at sea following the sinking of an oil tanker,the national court may therefore consider that theseller of the hydrocarbons and charterer of the shipcarrying them has ‘‘produced’’ waste, if that court,in the light of the elements which it alone is in aposition to assess, reaches the conclusion that thatseller-charterer contributed to the risk that thepollution caused by the shipwreck would occur, inparticular if he failed to take measures to preventsuch an incident, such as measures concerning thechoice of ship. In such circumstances, it will bepossible to regard the seller-charterer as a previousholder of the waste for the purposes of applying thefirst part of the second indent of article 15 ofDirective 75/442.

79. As noted in para 69 above, in circumstancessuch as those of the main proceedings, the secondindent of article 15 of Directive 75/442 provides, byusing the conjunction ‘‘or’’, that the cost of dispos-ing of the waste is to be borne either by the‘‘previous holders’’ or by the ‘‘producer of theproduct from which’’ the waste in question came.

80. In this regard, in accordance with article 249EC, while the member states as the addressees of

Directive 75/442 have the choice of form andmethods, they are bound as to the result to beachieved in terms of financial liability for the costof disposing of waste. They are therefore obliged toensure that their national law allows that cost to beallocated either to the previous holders or to theproducer of the product from which the wastecame.

81. As the Advocate General observes in point135 of her opinion, article 15 of Directive 75/442does not preclude the member states from layingdown, pursuant to their relevant international com-mitments such as the Liability Convention and theFund Convention, that the shipowner and the chart-erer can be liable for the damage caused by thedischarge of hydrocarbons at sea only up to max-imum amounts depending on the tonnage of thevessel and/or in particular circumstances linked totheir negligent conduct. That provision also doesnot preclude a compensation fund such as the Fundwith resources limited to a maximum amount foreach accident from assuming liability, pursuant tothose international commitments, in place of the‘‘holders’’ within the meaning of article 1(c) ofDirective 75/442, for the cost of disposal of thewaste resulting from hydrocarbons accidentallyspilled at sea.

82. However, if it happens that the cost ofdisposal of the waste produced by an accidentalspillage of hydrocarbons at sea is not borne by thatfund, or cannot be borne because the ceiling forcompensation for that accident has been reached,and that, in accordance with the limitations and/orexemptions of liability laid down, the national lawof a member state, including the law derived frominternational agreements, prevents that cost frombeing borne by the shipowner and/or the charterer,even though they are to be regarded as ‘‘holders’’within the meaning of article 1(c) of Directive75/442, such a national law will then, in order toensure that article 15 of that Directive is correctlytransposed, have to make provision for that cost tobe borne by the producer of the product from whichthe waste thus spread came. In accordance with the‘‘polluter pays’’ principle, however, such a producercannot be liable to bear that cost unless he hascontributed by his conduct to the risk that thepollution caused by the shipwreck will occur.

83. The obligation of a member state to take allthe measures necessary to achieve the result pre-scribed by a Directive is a binding obligationimposed by the third paragraph of article 249 ECand by the Directive itself. That duty to take allappropriate measures, whether general or partic-ular, is binding on all the authorities of the memberstates including, for matters within their jurisdic-tion, the courts (see Marleasing SA v La ComercialInternational de Alimentation SA Case C-106/89



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[1990] ECR I-4135, para 8, and Inter-Environne-ment Wallonie ASBL, para 40).

84. It follows that, in applying national law,whether the provisions in question were adoptedbefore or after the Directive or derive from inter-national agreements entered into by the memberstate, the national court called on to interpret thatlaw is required to do so, as far as possible, in thelight of the wording and the purpose of the Direc-tive, in order to achieve the result pursued by theDirective and thereby comply with the third para-graph of article 249 EC (see, to that effect, Mar-leasing, para 8).

85. Moreover, contrary to the arguments putforward by the Total companies at the hearing, theCommunity is not bound by the Liability Conven-tion or the Fund Convention. In the first place, theCommunity has not acceded to those internationalinstruments and, in the second place, it cannot beregarded as having taken the place of its memberstates, if only because not all of them are parties tothose conventions (see, by analogy, Peralta CaseC-379/92 [1994] ECR I-3453, para 16, and R(International Association of Independent TankerOwners (Intertanko)) v Secretary of State for Trans-port Case C-308/06 [2008] 2 Lloyd’s Rep 260, para47), or as being indirectly bound by those conven-tions as a result of article 235 of the United NationsConvention on the Law of the Sea, signed atMontego Bay on 10 December 1982, which enteredinto force on 16 November 1994 and was approvedby Council Decision 98/392/EC of 23 March 1998(OJ 1998 L 179, p 1), para 3 of which confinesitself, as the French government pointed out at thehearing, to establishing a general obligation ofcooperation between the parties to the convention.

86. Furthermore, as regards Decision 2004/246authorising the member states to sign, ratify oraccede to, in the interest of the Community, theProtocol of 2003 to the Fund Convention, it sufficesto state that that decision and the Protocol of 1993cannot apply to the facts at issue in the mainproceedings.

87. It is true that Directive 2004/35 expresslyprovides in article 4(2) that it is not to apply to anincident or activity in respect of which liability orcompensation falls within the scope of any of theinternational conventions listed in Annex IV, whichmentions the Liability Convention and the FundConvention. The Community legislature, as statedin recital 10 in the preamble to that Directive, foundit necessary to take express account of the relevantinternational conventions regulating more compre-hensively and more stringently the operation ofany of the activities within the scope of thatDirective.

88. However, Directive 75/442 does not containa similar provision, even in the codified versionresulting from Directive 2006/12.

89. In the light of the above considerations, theanswer to the third question must be that, for thepurposes of applying article 15 of Directive 75/442to the accidental spillage of hydrocarbons at seacausing pollution of the coastline of a memberstate:

— the national court may regard the seller ofthose hydrocarbons and charterer of the shipcarrying them as a producer of that waste withinthe meaning of article 1(b) of Directive 75/442,and thereby as a ‘‘previous holder’’ for thepurposes of applying the first part of the secondindent of article 15 of that Directive, if that court,in the light of the elements which it alone is in aposition to assess, reaches the conclusion thatthat seller-charterer contributed to the risk thatthe pollution caused by the shipwreck wouldoccur, in particular if he failed to take measuresto prevent such an incident, such as measuresconcerning the choice of ship;

— if it happens that the cost of disposing ofthe waste produced by an accidental spillage ofhydrocarbons at sea is not borne by the Fund, orcannot be borne because the ceiling for com-pensation for that accident has been reached, andthat, in accordance with the limitations and/orexemptions of liability laid down, the nationallaw of a member state, including the law derivedfrom international agreements, prevents that costfrom being borne by the shipowner and/or thecharterer, even though they are to be regarded as‘‘holders’’ within the meaning of article 1(c) ofDirective 75/442, such a national law will then,in order to ensure that article 15 of that Directiveis correctly transposed, have to make provisionfor that cost to be borne by the producer of theproduct from which the waste thus spread came.In accordance with the ‘‘polluter pays’’ principle,however, such a producer cannot be liable to bearthat cost unless he has contributed by his conductto the risk that the pollution caused by theshipwreck will occur.

Costs

90. Since these proceedings are, for the parties tothe main proceedings, a step in the action pendingbefore the national court, the decision on costs is amatter for that court. Costs incurred in submittingobservations to the court, other than the costs ofthose parties, are not recoverable.

On those grounds, the Court (Grand Chamber)hereby rules:

1. A substance such as that at issue in the mainproceedings, namely heavy fuel oil sold as a



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combustible fuel, does not constitute wastewithin the meaning of Council Directive75/442/EEC of 15 July 1975 on waste, asamended by Commission Decision 96/350/EC of24 May 1996, where it is exploited or marketedon economically advantageous terms and is capa-ble of actually being used as a fuel withoutrequiring prior processing.

2. Hydrocarbons accidentally spilled at seafollowing a shipwreck, mixed with water andsediment and drifting along the coast of a mem-ber state until being washed up on that coast,constitute waste within the meaning of article1(a) of Directive 75/442, as amended by Deci-sion 96/350, where they are no longer capable ofbeing exploited or marketed without priorprocessing.

3. For the purposes of applying article 15 ofDirective 75/442, as amended by Decision96/350, to the accidental spillage of hydro-carbons at sea causing pollution of the coastlineof a member state:

— the national court may regard the sellerof those hydrocarbons and charterer of the shipcarrying them as a producer of that wastewithin the meaning of article 1(b) of Directive75/442, as amended by Decision 96/350, andthereby as a ‘‘previous holder’’ for the pur-poses of applying the first part of the secondindent of article 15 of that Directive, if thatcourt, in the light of the elements which italone is in a position to assess, reaches the

conclusion that that seller-charterer contrib-uted to the risk that the pollution caused by theshipwreck would occur, in particular if hefailed to take measures to prevent such anincident, such as measures concerning thechoice of ship;

— if it happens that the cost of disposing ofthe waste produced by an accidental spillageof hydrocarbons at sea is not borne by theInternational Oil Pollution CompensationFund, or cannot be borne because the ceilingfor compensation for that accident has beenreached, and that, in accordance with thelimitations and/or exemptions of liability laiddown, the national law of a member state,including the law derived from internationalagreements, prevents that cost from beingborne by the shipowner and/or the charterer,even though they are to be regarded as ‘‘hold-ers’’ within the meaning of article 1(c) ofDirective 75/442, as amended by Decision96/350, such a national law will then, in orderto ensure that article 15 of that Directive iscorrectly transposed, have to make provisionfor that cost to be borne by the producer of theproduct from which the waste thus spreadcame. In accordance with the ‘‘polluter pays’’principle, however, such a producer cannot beliable to bear that cost unless he has contrib-uted by his conduct to the risk that the pollu-tion caused by the shipwreck will occur.



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QUEEN’S BENCH DIVISION(ADMIRALTY COURT)

5 November; 9 December 2008——————

METVALE LTD AND ANOTHERv

MONSANTO INTERNATIONAL SARL ANDOTHERS

(THE ‘‘MSC NAPOLI’’)

[2008] EWHC 3002 (Admlty)

Before Mr Justice TEARE

Charterparty (Slot) — Limitation of liability — Con-tainer vessel beached on south coast of England —Whether slot charterer entitled to limit liability —Whether limitation fund constituted by owner ofvessel deemed to be constituted by slot charterers —Convention on Limitation of Liability for MaritimeClaims 1976.

In January 2007 MSC Napoli, a large containervessel, suffered damage in heavy weather and wasbeached on the south coast of England. On 27 February2007 the claimants constituted a limitation fund underthe 1976 Limitation Convention in the sum of£14,710,000. On 31 July the court made a generallimitation decree.

Hapag-Lloyd AG (HPL) and Stinnes Linien GmbH(Stinnes) were slot charterers of the vessel from Medi-terranean Shipping Co under separate slot charteragreements.

Preliminary issues were determined: (1) as towhether HPL and Stinnes, as slot charterers, were‘‘shipowners’’ for the purposes of article 1 of theConvention and were entitled to limit their liability; andif so (2) whether the limitation fund constituted wasdeemed to be constituted by HPL and Stinnes.

Article 1(1) of the Convention provided that ‘‘Ship-owners . . . as hereinafter defined’’ might limit theirliability. Article 1(2) defined the term ‘‘shipowner’’ asmeaning ‘‘the owner, charterer, manager or operator ofa seagoing ship’’. Article 9 provided that the limits ofliability should apply to the aggregate of all claimswhich arose on any distinct occasion against the personor persons mentioned in article 1(2). Article 11(3)provided that a fund constituted by one of the personsmentioned in article 9 should be deemed to be consti-tuted by all such persons.————Held by QBD (Admlty Ct) (TEARE J) that:

(1) In accordance with the ordinary meaning of theword charterer and in the light of the evident object andpurpose of the Convention, a slot charterer was withinthe definition of shipowner and entitled to limit hisliability (see para 21);————CMA CGM SA v Classica Shipping Co Ltd[2004] 1 Lloyd’s Rep 460 and The Tychy [1999] 2Lloyd’s Rep 11 considered.

(2) A fund constituted by one of the persons men-tioned in article 9 was to be deemed constituted by all

persons mentioned in article 9. The fund was consti-tuted by the claimant. The claimant was the owner of aseagoing ship, MSC Napoli, and was therefore a personmentioned in article 1(2) and accordingly a personmentioned in article 9. HPL and Stinnes, being thecharterers of the vessel, were persons mentioned inarticle 1(2) and accordingly persons mentioned inarticle 9. It followed that the fund was deemed to beconstituted by HPL and Stinnes (see para 23).

——————

The following cases were referred to in thejudgment:CMA CGM SA v Classica Shipping Co Ltd (CA)

[2004] 1 Lloyd’s Rep 460;Tychy, The (CA) [1999] 2 Lloyd’s Rep 11.

——————

This was the determination of preliminary issuesin the limitation action brought by Metvale Ltd andMetvale Limited Partnership consequent upon thebeaching of the vessel MSC Napoli. The issues tobe determined were whether slot charterers of thevessel were entitled to limit their liability andwhether the limitation fund constituted by theclaimants was deemed constituted by the slotcharterers.

Nigel Jacobs QC, instructed by Fishers, for HPL;Peter Ferrer, instructed by Jackson Parton, forStinnes.

The further facts are stated in the judgment ofTeare J.

Judgment was reserved.

Tuesday, 9 December 2008

——————

JUDGMENT

Mr Justice TEARE:1. In January 2007 MSC Napoli, a large container

vessel, suffered damage in heavy weather and wasbeached on the south coast of England. That casu-alty has given rise to considerable claims againstthe owners of MSC Napoli (‘‘the claimants’’) inexcess of £100 million. On 27 February 2007 theclaimants constituted a limitation fund (‘‘the fund’’)under the Convention on Limitation of Liability forMaritime Claims 1976 (‘‘the Convention’’) in thesum of £14,710,000. On 31 July the court made aGeneral Limitation Decree.

2. On 13 March 2008 the Admiralty Registrarordered the trial of two preliminary issues:


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(i) Whether Hapag-Lloyd AG (‘‘HPL’’) and HStinnes Linien GmbH (‘‘Stinnes’’) are shipown-ers for the purposes of article 1 of the Conventionon Limitation of Liability for Maritime Claims1976 (‘‘the Convention’’) and are entitled to limittheir liability under the Convention and under theMerchant Shipping Act 1995.

(ii) Whether, if the answer to (i) is yes, thelimitation fund constituted in this action isdeemed to be constituted by HPL under and forthe purpose of the Convention and under theMerchant Shipping Act 1995.3. This is the trial of those preliminary issues.

The second issue does not mention Stinnes but Iassume that the question raised also applies tothem.

4. HPL were slot charterers of the vessel fromMediterranean Shipping Co (‘‘MSC’’) under a slotcharter agreement dated 29 August 2006. HPLissued its own bills of lading or seaway bills inrespect of 172 laden containers. The bills providedfor German law and jurisdiction. Stinnes were alsoslot charterers of the vessel from MSC pursuant toa slot charter agreement dated 15 October 2006.Stinnes issued 24 bills of lading which also pro-vided for German law and jurisdiction.

5. Claims have been notified against HPL andStinnes by the holders of the bills issued by HPLand Stinnes. HPL and Stinnes have lodged claimsagainst the fund (by way of ADM20 forms) inrespect of their claims for an indemnity in respectof cargo claims brought against them, the loss anddamage of their own containers, general averageand salvage claims and certain transhipmentclaims.

6. Most of the holders of bills issued by HPL andStinnes have lodged claims against the fund by wayof ADM20 forms. A very small number of claim-ants have instructed German lawyers but none hasissued proceedings in Germany. Extensions of timehave been granted by HPL until 20 January 2009.

7. No party has sought to challenge HPL’s andStinnes’ right to limit. However, in the event thatHPL and Stinnes are entitled to limit their liabilityand the fund is deemed to have been constituted bythem then the German courts will be asked to directenforcement of any claims brought in Germanyagainst HPL and Stinnes to the fund. It is thereforenecessary that this court give careful considerationto the claims of HPL and Stinnes to limit theirliability because its decision will or may affectclaimants in the German courts.

The convention

8. The most material provisions of the conven-tion are as follows:

Article 1: Persons entitled to limit liability1. Shipowners and salvors, as hereinafter

defined, may limit their liability in accordancewith the rules of this Convention for claims setout in Article 2.

2. The term ‘‘shipowner’’ shall mean theowner, charterer, manager or operator of a sea-going ship.. . .

Article 2: Claims subject to limitation1. Subject to Articles 3 and 4 the following

claims, whatever the basis of liability may be,shall be subject to limitation of liability:

(a) claims in respect of loss of life orpersonal injury or loss of or damage to prop-erty (including damage to harbour works,basins and waterways and aids to navigation),occurring on board or in direct connectionwith the operation of the ship or with salvageoperations, and consequential loss resultingtherefrom;

. . .Article 9: Aggregation of claims1. The limits of liability determined in accor-

dance with Article 6 shall apply to the aggregateof all claims which arise on any distinctoccasion:

(a) against the person or persons mentionedin paragraph 2 of Article 1 and any person forwhose act, neglect or default he or they areresponsible or

(b) against the shipowner of a ship render-ing salvage services from that ship and thesalvor or salvors operating from such ship andany person for whose act, neglect or default heor they are responsible or

(c) against the salvor or salvors who are notoperating from a ship or who are operatingsolely on the ship to, or in respect of which,the salvage services are rendered and anyperson for whose act, neglect or default he orthey are responsible.2. The limits of liability determined in accor-

dance with Article 7 shall apply to the aggregateof all claims subject thereto which may arise onany distinct occasion against the person or per-sons mentioned in paragraph 2 of Article 1 inrespect of the ship referred to in Article 7 and anyperson for whose act, neglect or default he orthey are responsible.. . .

Article 11: Constitution of the Fund1. Any person alleged to be liable may con-

stitute a fund with the Court or other competentauthority in any State Party in which legal


[TEARE JThe ‘‘MSC Napoli’’QBD (Admlty Ct)]

178

proceedings are instituted in respect of claimssubject to limitation. The fund shall be consti-tuted in the sum of such of the amounts set out inArticles 6 and 7 as are applicable to claims forwhich that person may be liable, together withinterest thereon from the date of the occurrencegiving rise to the liability until the date of theconstitution of the fund. Any fund thus consti-tuted shall be available only for the payment ofclaims in respect of which limitation of liabilitycan be invoked.

2. A fund may be constituted, either by depos-iting the sum, or by producing a guaranteeacceptable under the legislation of the State Partywhere the fund is constituted and considered tobe adequate by the Court or other competentauthority.

3. A fund constituted by one of the personsmentioned in paragraph 1(a), (b) or (c) or para-graph 2 of Article 9 or his insurer shall bedeemed constituted by all persons mentioned inparagraph 1(a), (b) or (c) or paragraph 2,respectively.. . .

Article 13: Bar to other actions1. Where a limitation fund has been consti-

tuted in accordance with Article 11, any personhaving made a claim against the fund shall bebarred from exercising any right in respect ofsuch a claim against any other assets of a personby or on behalf of whom the fund has beenconstituted.

The first preliminary issue

9. The first issue to be determined is whetherHPL and Stinnes are shipowners within the mean-ing of article 1(2) of the Convention. The definitionof shipowner includes charterer. HPL and Stinnesare slot charterers and therefore claim to be ship-owners within the meaning of article 1(2).

10. It appears from Legal Issues Relating to TimeCharterparties, chapter 14 on ‘‘Containerisation,slot charters and the law’’ by Christopher HancockQC, that the concept of a slot charter was developedin the late 1960s. They are now very common.HPL, for example, has slot charter agreements withmost of the world’s largest container ship operatorsand owners.

11. BIMCO (the Baltic and International Mar-itime Council) has described a slot charter in theseterms:

The feature of a slot charterparty as a contractof carriage is unique in the sense that, whereasthe slot charterparty is neither a time charterpartynor a voyage charterparty, it bears some sim-ilarity to both types of contract. As such, a slot

charterparty can be said to be a hybrid type ofcontract. It may be mentioned that, as distinctfrom a time charterparty when the entire vessel isbeing chartered, the slot charterers are onlyhiring space on a vessel and they are thereforenot acting as operators as under a time charter-party and usually have no control over theoperation of the vessel.

12. HPL’s slot charter agreement with MSC iscontained in an Implementing Agreement dated 29August 2006. It describes MSC as the slot provideror vessel provider and HPL as the slot charterer. Aslot is defined as the space on any vessel for thestowage of containers. Clause 2, Geographic Scope,and clause 3, The Service, provide that the agree-ment applies to MSC’s service between certainports in north-west Europe and the UK on the onehand and certain ports in South Africa on the otherhand. Clause 4.1 provides that MSC shall charter tothe slot charterer a total slot allocation of 300 slotsor 4,200 tonnes per vessel voyage leg, whichever isused first. Clause 7.1 provides that the slot chartererwill pay ‘‘slot charter hire’’ in respect of all slotsused or not used. The rate is fixed for 36 months.Clause 25 provides that the agreement is governedby English law. A form of slot charterparty isannexed to the Implementing Agreement. Clause13.1 provides for the charterers to issue bills oflading for goods occupying the slots.

13. Stinnes’ slot charter agreement with MSC isin the same form though some details (for exampleduration) are different.

14. Thus it appears that HPL’s and Stinnes’ slotcharter agreements with MSC have some featuresin common with a time charter. They last for aperiod of time and hire is paid for the use of cargocarrying capacity. It is not however comparable to atime charter in that the charterer does not direct thevessel where to go. Clause 5.1 of the ImplementingAgreement provides that the itinerary of each voy-age shall be as mutually agreed. In this respect it ismore akin to a voyage charter or consecutivevoyage charter.

15. The manner in which the convention shouldbe interpreted has been described by the Court ofAppeal in CMA CGM SA v Classica Shipping CoLtd [2004] 1 Lloyd’s Rep 460 at para 10 perLongmore LJ:

. . . the duty of a Court is to ascertain theordinary meaning of the words used, not just intheir context but also in the light of the evidentobject and purpose of the convention. The Courtmay then, in order to confirm that ordinarymeaning, have recourse to what may be calledthe travaux preparatoires and the circumstancesof the conclusion of the convention . . . Suchrecourse may confirm that ordinary meaning. It



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may also sometimes determine that meaning butonly when the ordinary meaning makes theconvention ambiguous or obscure or when suchordinary meaning leads to a manifestly absurd orunreasonable result.16. Article 1(2) defines shipowner as including

charterer. It is easy to see why. The object orpurpose of the convention is to encourage theprovision of international trade by way of seacarriage; see CMA CGM SA v Classica Shipping CoLtd at para 11. The convention encourages suchtrade by limiting the liabilities which arise on adistinct occasion. Such liabilities obviously includecargo claims. If charterers who had issued bills oflading as carriers were not within the definition ofshipowner cargo claimants could direct their claimsat the charterers and so avoid the limit on ashipowner’s liability. The charterers would have aclaim against the shipowner but he would be able tolimit his liability, thus leaving the charterers to bearthe excess of the cargo claim over the limit. Theinclusion of charterers within the definition ofshipowners ensures that this does not happen. Thusin CMA CGM SA v Classica Shipping Co Ltd it wassaid (at para 16) that ‘‘the main (if not the sole)purpose of according a charterer the right to limithis liability must have been to enable him to limithis liability to a cargo owner in just the same wayas a shipowner had previously been able to limit hisliability’’.

17. It is clear from CMA CGM SA v ClassicaShipping Co Ltd that charterer in article 1(2)includes a time charterer. Indeed, the ordinarymeaning of the word charterer is apt to include anytype of charterer, whether demise, time or voyagecharterer. There is no reason why it should not alsoinclude a slot charterer. Standard textbooks refer toslot charters when discussing types of charters; seeVoyage Charters, 3rd Edition, para 1.1 and Scruttonon Charterparties, 21st Edition, article 30. There isgood reason for a slot charterer being within thedefinition. Were slot charterers not within the defi-nition, slot chartering, which is an established and,to judge from its growth, an efficient way oforganising the carriage of goods, would or mightfall into disuse. A slot charterer’s inability to limitliability would not encourage the provision ofinternational trade by way of sea carriage, whichwas the object and purpose of the convention.

18. The Court of Appeal in CMA CGM SA vClassica Shipping Co Ltd expressly left open thequestion whether ‘‘charterer’’ included a slot chart-erer; see para 18. It was suggested by counsel inthat case that it cannot have been intended that aslot charterer could limit his liability since ‘‘itwould be absurd that his limit would have to becalculated by reference to the whole tonnage of thevessel when he had never been contracted to have

that tonnage available to him’’. In The Law andPractice of Admiralty Matters by Derrington andTurner attention is drawn at para 10.44, though withno enthusiasm, to a literal reading of the phrase‘‘charterer of a . . . ship’’ which might suggest thatthe definition did not include the charterer of a partof a ship.

19. I do not regard either of these points ascompelling. As to the first point the limit of liabilityis a limit in respect of the aggregate of all theliabilities of those within the definition of ship-owner arising on a distinct occasion. There maythus be several persons seeking the benefit of thatsingle limit; eg the registered owner, the timecharterer and several slot charterers. There is there-fore nothing absurd in a slot charterer being able tolimit by reference to a limit calculated by referenceto the whole tonnage of the vessel. As to the secondpoint a literal meaning must give way to a purpo-sive construction; and the latter construction, forthe reasons already given, points to a slot chartererbeing within the definition of charterer. In anyevent, it was held in The Tychy [1999] 2 Lloyd’sRep 11 that a slot charterer was within the phrase‘‘charterer of . . . the ship’’ in the Supreme CourtAct 1981, section 21(4)(b), relating to the arrest ofships. Clarke LJ saw no difficulty in describing acharterer of part of a ship as the charterer of theship; see page 22 col 2.

20. Both of the above points are mentioned inLimitation of Liability for Maritime Claims byGriggs, Williams and Farr, 4th Edition, at page 11.The authors prefer the view that a slot charterer isable to limit as being within the definition ofshipowner. However, they say that the travauxpreparatoires to the convention suggest that thosewho drafted the convention intended to restrict theright to limit to those who controlled the whole ofthe ship. In the light of that suggestion The TravauxPreparatoires of the LLMC Convention 1976 and ofthe Protocol of 1996 published by the ComitéMaritime International in November 2000 andedited by Francesco Berlingieri was studied bycounsel. Charterers had been given the benefit ofthe right to limit in the 1957 Convention. At thattime slot charterers were probably not known butby 1976 they probably were known. But no discus-sion of the meaning of charterers was found in thetravaux preparatoires. The discussion centred onpersons not included in the 1957 Convention.Those persons were ‘‘contractors’’, such as owners,shippers and receivers of cargo, persons renderingservices in the loading, stowing or discharging ofthe ship and salvors; see pages 33 and 34. It wasagreed that only salvors be added to the list ofpersons entitled to limit. At a later stage in thediscussions the Polish and Irish delegates proposed


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that any person rendering services in direct connec-tion with the navigation and management of theship be entitled to limit. These proposals wererejected; see pages 40 and 41. No support for thesuggestion made in Limitation of Liability forMaritime Claims by Griggs, Williams and Farr, 4thEdition, at page 11 was found.

21. I have therefore concluded that, in accor-dance with the ordinary meaning of the wordcharterer and in the light of the evident object andpurpose of the convention, a slot charterer is withinthe definition of shipowner and therefore entitled tolimit his liability.

The second preliminary issue

22. The second issue is whether the fund isdeemed to be constituted by HPL and Stinnes.

23. Pursuant to article 11(3) of the convention afund constituted by one of the persons mentioned inarticle 9 or his insurer shall be deemed constitutedby all persons mentioned in article 9. The fund was

constituted by the claimant. The claimant is theowner of a seagoing ship, MSC Napoli, and istherefore a person mentioned in article 1(2) andaccordingly a person mentioned in article 9. HPLand Stinnes, being the charterers of MSC Napoli,are persons mentioned in article 1(2) and accord-ingly persons mentioned in article 9. It follows thatthe fund is deemed to be constituted by HPL andStinnes.

24. Whilst that is clear, there is no clarity as towhether the person who has put up the fund isentitled to any form of contribution from those whotake the benefit of the fund as ‘‘shipowners’’. Theconvention does not deal with that matter, at anyrate expressly. Whether there is any right to con-tribution or restitution may have to depend on thegeneral law.

Conclusion

25. My answer to both preliminary issues isyes.



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TULANE LAW SCHOOL LAW SCHOOL Rhodes, Greece Maritime Law, Law of the Sea & Ocean Management SUMMER,...

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