In 1997 the Nissos Amorgos grounded in the Maracaibo Channel, Venezuela, resulting in 3,600 mt of crude oil escaping from the vessel. Numerous claims were made. The owners of the vessel and Gard, their P&I club, established a limitation fund of roughly USD 7.2 million, through Banco Venezolano de Credito SA, which was approved by the Venezuelan court.

The Convention on Civil Liability for Oil Pollution Damage of 1969 (the CLC) provides for compensation for parties who suffer loss as a result of marine oil pollution incidents.

The Convention on the Establishment of an International Fund for Compensation for Oil Pollution of 1971 (the Fund Convention) provides a second tier of compensation for parties who suffer loss by reason of oil pollution incidents, over and above the layer of compensation provided by the CLC.

The court summarised the general scheme of the CLC and the Fund Convention as follows: 

CLC

1. Shipowners are made strictly liable in respect of oil pollution damage, with very limited exceptions (art 3).

2. The amount of that liability is however limited to an amount calculated by reference to the tonnage of the vessel (art 5.1).

3. Shipowners may lose the right to rely on the limit of liability if the incident was due to their actual fault or privity (art 5.2).

4. Shipowners may avail themselves of the benefit of limitation by establishing a fund with the competent court for the limitation amount, and this may be constituted by means of a bank guarantee if acceptable to the court (art 5.3).

5. If they have established a fund, and are entitled to limit liability, the court shall order the release of any ship or other property of the owner which has been arrested (art 6.1).

6. The courts with exclusive jurisdiction in relation to Convention claims are the courts for the place in which the damage occurred (art 9.1).

7. Shipowners are required to have insurance in respect of this liability (art 7).

8. Claimants have a right of direct action against the insurer (here Gard) (art 7.8).

9. However, the insurer is entitled to rely on the limit of liability even where there is actual fault or privity on the part of the shipowner (art 7.8).

10. Where the amount of the limit of liability is insufficient to meet all claims, then each claimant is only entitled to recover its prorated share of its claim (art 5.4).

The Fund Convention

1. The Fund is to provide compensation in respect of amounts which are irrecoverable under CLC either because shipowners are not liable under CLC, or because the amounts in question cannot be recovered from shipowners, or because the limit under CLC is too little to provide adequate compensation (art 4.1).

2. The Fund's liability is limited to an amount of SDR 60 million (art 4.4.a).

3. In addition to the compensation payable to third parties, the Fund Convention provides for the payment to Shipowners of the top slice of the CLC liability (art 5.1).

4. The Courts with exclusive jurisdiction in relation to Convention claims are the courts for the place in which the damage occurred (art 7).

5. Where claims are made against the shipowner or its guarantor, then either party to the relevant proceedings may notify the Fund of those proceedings and if the Fund has had the opportunity to intervene, the Fund is bound by the facts and findings in that judgment even if the Fund has not in fact intervened (arts 7.5 and 7.6).

6. Where the amount of the limit of liability is insufficient to meet all claims, then each claimant is only entitled to recover its prorated share of its claim (art 4.5).

There is a time bar for the bringing of an action against the Fund of 'six years from the date of the incident which caused the damage', after the expiry of which any rights to compensation for persons or indemnification for the shipowner 'shall be extinguished' (art 6.1). There is a limited exception for claims for a 'top slice' indemnity under art 5.1 – in no case is such a claim to be extinguished 'before the expiry of a period of six months as from the date on which the owner or his guarantor acquired knowledge of the bringing of an action against him under the Liability Convention'. Art 5.1 is the only right of indemnity against the Fund conferred under the Fund Convention.

The Fund is an international legal organisation created pursuant to the Fund Convention and given the status of a corporation under English law by virtue of the International Organisations Act 1968 and a statutory instrument made pursuant to the provisions of that Act, namely the International Oil Pollution Compensation Fund (Immunities and Privileges) Order 1979 (the 'Order').

Between June 1997 and December 2000, Gard paid approximately USD 6 million in respect of claims made. Thereafter the claims were paid by the Fund, to a total of USD 18.5 million.

The underlying dispute in this case centred around a (belated) judgment of the Criminal Circuit of Zulia State, Maracaibo, Venezuela court in favour of the Republic of Venezuela in an amount equivalent to USD 60.25 million. This judgment against the owners and Gard appeared to be in disregard of the provisions of the CLC, and in particular the owners' right to limit liability and the barring effect of the constitution of a limitation fund.

In light of the judgment, Gard brought proceedings in Venezuela and England against the Fund. The claim in Venezuela sought a declaration that the (rogue) Venezuelan court judgment meant that the Fund was liable to the Republic of Venezuela for its claim and reimbursement of any payment made by Gard. The claim in England contended that, pursuant to the arrangements made between Gard and the Fund, Gard had a right of indemnity from the Fund in respect of any liability it had to the Republic of Venezuela in excess of the CLC limit. This was disputed by the Fund. Its position was that the Republic of Venezuela's claim was inadmissible and time barred.

The perceived need to seek a freezing order arose out of the fact of the imminent winding up of the Fund.

The issues which arose in the case were:

Immunity

1. Whether the Fund had immunity from the grant of freezing order relief;

2. Whether the Fund had immunity from the claim made (I) in England and (II) in Venezuela;

Freezing order relief

3. Whether Gard had a good arguable case in respect of its claim in England and/or in Venezuela;

4. Whether there was a real risk of dissipation.

Held: As to issue 1, the immunity conferred by s 6(1) of the Order is not a complete immunity, it is a qualified immunity. Immunity is only granted if and to the extent that the suit or legal process does not fall within one of the listed exceptions. The exceptions made clearly cover 'legal process' in respect of the excepted matters, and 'legal process' includes a freezing order. Therefore, the exceptions cover freezing orders.

In Hamblen J's judgment the words of the Order are not reasonably capable of the meaning put forward by the Fund and there is no ambiguity or obscurity. It follows that effect must be given to the terms of the Order. The Order does not grant immunity to the Fund from all freezing order relief, but only in respect of freezing order relief sought in respect of matters which do not fall within the s 6(1) exceptions or s 6(2).

As to issue 2(I), the court held that Gard could show a good arguable case that its claim fell within the s 6(1)(c) exception and therefore that the Fund had no immunity.

As to issue 2(II), the court held that on the material before the court, Gard could not show a good arguable case that the Venezuelan proceedings fall within the s 6(1)(b) exception, and the Fund accordingly had immunity in respect of the application for freezing relief made in relation those proceedings.

As to issue 3(I), the court held that Gard could satisfy the good arguable case threshold in England.

As to issue 4, the court was satisfied that this was a case in which a real risk of dissipation was established.

In conclusion, freezing order relief should be granted in respect of the claim made by Gard in the English proceedings, but not in respect of the claim made by Gard in the Venezuelan proceedings.