On 5 March 2012, a Greek-flagged tanker, Alfa 1, owned by Via Mare SC, sank while carrying 1,498.998 mt of Mazut oil no 3 (HFO 380 cst), 299.025 mt of Mazut oil no 1 (HFO 180 cst) and 274.580 m3 (equivalent to 236.139 mt) of marine gas oil. The shipowner contracted with a clean-up company, Environmental Protection Engineering SA (EPE), to undertake the decontamination and cleaning up of the sea and shore areas affected by the shipwreck. The clean-up company initiated legal proceedings against the shipowner and its insurer, seeking to be paid EUR 15,853,962.30 for its work.

The Piraeus Court of First Instance (in Decision 1943/2015) partially accepted EPE's claim. All the parties appealed the decision. The IOPC Fund intervened in support of EPE and against the shipowner and the insurer. It did this because, after the first instance decision, it had paid EPE EUR 12 million. To that extent, EPE assigned its legal claim to the IOPC Fund.

The Piraeus Court of Appeal (in Decision 187/2018) dismissed the two defendants' appeals while accepting EPE's appeal and the intervention of the IOPC Fund. Having set aside the judgment at first instance, the Court of Appeal allowed the action and ordered the defendant companies to pay EPE, jointly and severally, EUR 15,853,962.30.

The IOPC Fund appealed to the Supreme Court against the insurer, the shipowner, and EPE.

Held: The decision of the Court of Appeal is annulled, with the exception of the third defendant, for whom the appeal is dismissed.

The Supreme Court reviewed the decision of the Court of Appeal in the light of arts 2.1.a, 2.1.b, 4.1, 4.1.a, 4.1.b, 4.1.c, 7.6 and 9.1 of the Fund Convention 1992, and arts 1, 1.1, 1.5, 3.1, 3.4, 5, 5.1, 5.1.a, 5.1.b, 5.2, 5.3, 5.5, 5.6, 7, 7.1, 7.2, 7.2.a, 7.2.b, 7.2.c, 7.2.d, 7.2.e, 7.5, 7.8, 7.9, 7.10, 7.11, and 9 of the CLC 1992, and concluded the following:

Greece ratified the Fund Convention 1971, as amended by the Protocols of 1976 and 1992, in Law 1638/1986. These instruments were incorporated into national law by the Presidential Decree 270/1995. The Fund Convention 1971 as amended, now the Fund Convention 1992, created and organised the Fund into a legal entity from contributions provided for therein (Supreme Court Decision in plenary session 23/2006) (CMI335).

Article 30 of Presidential Decree 666/1982, as amended by Presidential Decree 494/1989, provides that:

In proceedings concerning actions for damages against the shipowner or its guarantor, in accordance with art 9 of the CLC 1969, for damages caused by pollution or preventive measures taken in Greek territory, including territorial waters ... the IOPC Fund, as provided for by the Fund Convention 1971, ratified by Law 1638/1986, shall have the capacity to be a party and may appear in court in its own name represented by its Director. The provisions of the Civil Procedure Code shall apply to the invitation to or notice of proceedings and the intervention of the IOPC Fund.

The CLC 1969 was ratified by Greece, as amended by the Protocol of 1976, by Law 314/1976 and brought into effect by Presidential Decree 81/1989. The 1992 Protocol was ratified by Presidential Decree 197/1995, and is now named the CLC 1992 (Supreme Court Decision in plenary session 23/2006). The CLC 1992 constitutes, according to art 28.1 of the Constitution, an integral part of domestic law and prevails over any contrary provision of law.

From arts 2.1.a, 2.1.b, 4.1, 4.1.a, 4.1.b, 4.1.c, 7.6 and 9.1 of the Fund Convention 1992 and arts 5.5 and 5.6 of the CLC 1992, it follows that the IOPC Fund has a legitimate interest in intervening in any pending dispute concerning a claim for compensation for marine pollution falling within the scope of the CLC 1992 and the Fund Convention 1992. Further, in the event that the Fund pays compensation for pollution damage falling within the scope of these Conventions, it is subrogated to the rights of the injured party against the shipowner and its insurer.

According to arts 1.1, 1.5, 3.1, 5.1, 5.1.a, 5.1.b, 5.3, 7.1, 7.2, 7.2.a, 7.2.b, 7.2.c, 7.2.d, 7.2.e, 7.5, 7.8, 7.9, 7.10 and 7.11 of the CLC 1992, with regard to the definition of 'ship', two types of ship are defined, namely: (a) 'a sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo'; and (b) 'a ship capable of carrying oil and other cargoes', ie a 'mixed cargo' ship. The relevant reservation in this definition concerns only mixed cargo ships, and not all ships in general, and therefore the ships in category (a) (tankers), in order to be classified as such, are not required to be capable of carrying oil in bulk as cargo (Supreme Court Decision in plenary 23/2006). In other words, a construction criterion is adopted for them and tankers are thus covered by the definition, whether they are traveling ballasted or not, or are in port loaded or unloaded.

Furthermore, from the above definition of ship in category (a), in conjunction with the definition of 'oil' in art 1.5 of the CLC 1992, which includes oil 'whether it is carried on board a ship as cargo or in the bunkers of such a ship', it follows that the CLC 1992 applies not only when oil is carried in bulk as a commodity, but also in the case of a spillage of oil carried as fuel from a ship in the sense described in category (a) (ie not from any other type of ship).

It follows from the same provisions that the CLC 1992 establishes the objective liability of the shipowner for damages caused by marine pollution due to leakage or spillage of oil from his ship, since no fault on its part is required to establish its liability. This is a liability for risk, ie, a liability linked to the particularly dangerous activity of transporting oil in tankers. This provision is an expression of the general principle of international environmental protection law that 'the polluter pays', according to which the person who caused the marine pollution is liable to pay compensation for the damage caused by it. The liability of the shipowner established above is not only objective but also exclusive, since the relevant claims for compensation may be brought only against it, to the exclusion of the parallel application, together with the provisions of the CLC 1992, of other provisions as per art 3.3 of the CLC 1992.

However, this provision combines strictness in establishing liability with a quantitative limitation of liability on the basis of the tonnage of the ship provided for in art 5 of the CLC 1992. To compensate for the very strict liability for risk attributable to the shipowner, the CLC 1992 allows it to limit its liability up to a certain amount, depending on the capacity of the ship. This possibility for the shipowner is excluded only if the harmful event was caused by its own fault or gross negligence, in accordance with art 5.2 of the CLC 1992, in which case it is liable without limitation. However, a precondition for the possibility of the shipowner using the favourable provision to limit its liability is the creation of a fund corresponding to the total amount representing its liability as it is calculated after its limitation.

Furthermore, to make the insurance coverage more effective, art 7.8 of the CLC 1992 foresees a right of direct action by injured third parties against the insurer. This direct claim of the third party victim is based on the above provision, but a precondition for the creation of this right is an insurance contract, in the sense that the insurer's liability cannot be established without the existence of an insurance contract. However, once a contract has been concluded, the legal position of the third party victim is autonomous, which means that it is not affected by defects affecting the existence or validity of the insurance contract. The third party's direct claim is shielded by the prohibition on raising against it objections arising from the insurance relationship, since the above provision precludes, with a few exceptions, the raising against third party of those objections which the insurer would be entitled to raise in proceedings brought by the shipowner against it.

The validity of the insurance provided may not be terminated except on expiry of the period of validity and after three months have elapsed since the notification to the competent authorities. No objection to the expiry or termination of the insurance may be raised against the third party victim if the requirements of the CLC 1992 have not been complied with.

At the same time, in order to ensure the effectiveness of the insurance cover provision has been made, at the level of preventive control, for the issue of an attestation certificate. Each contracting State is required to issue to ships registered in that State a certificate attesting that insurance or other financial security of the minimum amount required by the international Convention is in force, and to prohibit ships flying its flag from carrying out commercial operations without first obtaining such a certificate. As a rule, the insurance companies issue a so-called 'blue card', by which they confirm the coverage of the insured owner for the damage provided for in the contract, and on the basis of this document the contracting States issue the certificate, which is always carried on the ship.

According to national ministerial decision, issued in accordance with arts 7 and 12bis of the Presidential Decree 197/1996 (CLC 1992), a common type of insurance certificate or other financial security was established in respect of civil liability for oil pollution damage under the CLC 1992. Consequently, the issuance by the competent authorities of a contracting State of the certificate provided for by the CLC 1992, on the basis of the above-mentioned relevant certificate of the insurer, without any other term or condition being imposed thereon, means that there is in force insurance in accordance with the conditions of the CLC 1992 and, consequently, as is required for the safety of transactions, that the insurance contract was concluded in the context of the compulsory insurance of the civil liability of the shipowner provided for in art 7.1 of the CLC which allows the third party victim to bring a claim directly against the insurer.

Furthermore, in order not to burden bulk cargo vessels which occasionally transport small quantities of oil with compulsory insurance, art 7.1 of the CLC 1992 sets a quantitive limit for compulsory insurance, but only for that instance, and not for the implementation of the provisions of the CLC 1992. It follows from the content of the above provision, in conjunction with the purpose it serves to increase the protection of the third party victim from pollution, that the obligation of shipowners to insure their civil liability for pollution damage applies to every tanker whose carrying capacity exceeds 2,000 mt of oil in bulk, since, as has been pointed out, the definition of 'ship' under the CLC 1992 covers all tankers capable of carrying oil cargo in bulk, irrespective of their actual carriage and, consequently, the financial security requirement is linked to the capacity of the ship to carry a quantity of persistent oil in excess of 2,000 mt.

Otherwise, the risk of pollution from tankers sailing under ballast would remain uninsured, even though they are considered 'ships' under the CLC 1992. Moreover, the above criterion of the tanker's carrying capacity is, in any event, a fixed quantity compared with the fluid and unstable size of the cargo actually carried at the time of pollution. Moreover, a fixed criterion, namely that of the tonnage of the ship, is also used by the international legislator to limit the liability of the shipowner to the amount provided for in art 5 of the CLC 1992, which is equal to that of the required insurance cover.

Furthermore, the period of validity of the certificate issued by each contracting State for ships registered in that State, which is linked to the duration of the insurance contract, is meaningful and consistent with the safety of transactions when it is determined on the basis of fixed criteria, such as the carrying capacity of the ship, and not on the basis of occasional and unstable criteria, such as the actual quantity of oil carried at the time of pollution. It is obvious that the issuance by the competent authorities and the validity of the insurance certificate for a certain period of time is dependent on the existence of the required civil liability insurance contract and not on the actual transport of a cargo of oil in excess of 2,000 mt. This would be contrary to the purpose intended by the CLC 1992, since, despite the objective responsibility of the shipowner, it would obligate the third party victim to prove the actual cargo at the time of pollution, with obvious risk in marginal cases.

Furthermore, an obligation is placed upon contracting States (art 7.11 of the CLC 1992) to extend by national law the obligation to insure to any ship, irrespective of its flag, entering or leaving a national port or entering territorial waters and actually carrying a cargo of oil in bulk of more than 2,000 mt. In this context, each contracting State must recognise certificates issued by other contracting States, even if they relate to ships not registered in that State. This provision, which expressly refers to the actual quantity of oil carried in excess of 2,000 mt, reinforces the interpretation that art 7.1 of the CLC 1992 imposes compulsory insurance coverage on ships solely on the basis of their carrying capacity, since a comparison of the two provisions reveals a clear drafting intention for different treatment of the two cases as regards the criteria of the imposing of obligatory insurance.

The insurance company alleged at first and second instance that it lacked passive locus standi, since it had insured the shipowner's civil liability for pollution under the CLC 1992, which relates to cases where the ship is actually carrying more than 2,000 mt of oil. Here, the ship was carrying a cargo of persistent oil of less than 2,000 mt at the time of the accident and, consequently, the shipowner was not obliged to maintain insurance in accordance with art 7 of the CLC 1992. Thus, art 7.8 of the CLC 1992, which provides for a direct action against the insurer by a third party victim did not apply.

This argument was rejected at first instance. The Court of Appeal was correct in its decision in upholding that decision, but its reasoning was incorrect. The shipowner's obligation to insure the vessel is not based on art 9 of the Law 314/1976, as the Court of Appeal held, but is based on the relevant substantive provisions of art 7 of the CLC 1992. This erroneous reasoning creates a precedent that is manifestly unfavourable to the Fund, since it is only on the basis of the CLC 1992 and the Fund Convention 1992 that the appellant is subrogated to the rights of the claimant, to which it paid part of its claim against the shipowner and its insurer.

[See further Aigaion Insurance Co SA v Environmental Protection Engineering SA, Supreme Civil and Criminal Court (Areios Pagos), Decision 784/2021, A2 Civil Chamber ((CMI1548).]