Compensation for oil pollution damage

In connection with cases on compensation for oil pollution damage, International Oil Pollution Compensation Funds - IOPC Funds - have been established.

The IOPC funds are an international compensation scheme, compensating those who have suffered an economic loss following oil discharges from tankers.

The funds were established and have been developed on an ongoing basis by United Nations' International Maritime Organization (IMO) as a reaction to the very serious oil pollution incidents that have occurred since the 1960s.

The economy of the funds

When there are oil discharge incidents from tankers, the owner must pay compensation for the damage up to a certain limit. Damage beyond this limit will be covered by the funds – if the damage arises in a State that is a Party to the funds. The IOPC Funds are financed through contributions from recipients of heavy oil carried by sea.

There are three IOPC Funds: the 1971 Fund, the 1992 Fund and the Supplementary Fund, which all have different maximum amounts for compensation and different member States.

The Supplementary Fund was established as a supplement to the compensation from the 1992 Fund, which covers damages up to approx. DKK 1.8 billion. Membership of the Supplementary Fund is voluntary, and any State Party to the 1992 Fund can become a member.

The 1971 Fund was the first Oil Pollution Compensation Fund that was established. Today, it has been replaced by the other two funds, but it still considers individual cases related to incidents that have arisen previously.

Denmark at the front

Denmark is a member of all the funds and was one of the leading forces behind the establishment of the Supplementary Fund, which became effective in 2005. Its purpose is to ensure that the money is sufficient to cover the expenses of larger pollution damage and it covers up to approx. DKK 6.7 billion.

The Supplementary Fund is relevant in connection with incidents where the damages exceed approx. DKK 1.8 billion. Fortunately, such accidents are rare, but in very unfortunate cases, it is important that there is sufficient money to cover the damages. This applies to a loss of income in the fishing industry, a loss of income in the tourist industry and public expenses for cleaning up oil.