International Legal Framework for Regulation of Offshore Activities in the Adriatic Sea: Liability and Compensation

1. International Legal Framework for Regulation of Offshore Activities in the Adriatic Sea: Liability and Compensation Mitja Grbec

2. What is offshore? Offshore: means situated in the territorial sea, the Exclusive Economic Zone (EEZ) or the continental shelf of a state within the meaning of UNCLOS. Continental Shelf: the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territorry to the outer edge of the continental margin, or a distance of 200 nm from the baselines where the outed edge of the continental margin does not extend up to that distance (ipso facto-no need for a specific declaration)

4. EEZ (Part V of UNCLOS) Article 55 Specific legal regime of the exclusive economic zone The exclusive economic zone is an area beyond and adjacent to theterritorial sea, subject to the specific legal regime established in this Part,under which the rights and jurisdiction of the coastal State and the rights andfreedoms of other States are governed by the relevant provisions of this Convention (UNCLOS) Article 57 Breadth of the exclusive economic zone The exclusive economic zone shall not extend beyond 200 nautical milesfrom the baselines from which the breadth of the territorial sea is measured.

5. Functional jurisdictions? … b) jurisdiction as provided for in the relevant provisions of this Convention with regard to: (i) the establishment and use of artificial islands, installations and structures; (ii) marine scientific research; (iii) the protection and preservation of the marine environment; c) other rights and duties provided for in thisConvention. The EEZ is a resource and non resource zone (important functional jurisdictions of the costal state)!

9. MEDITERRANEAN GEOGRAPHY & LOS • There are no points in the Mediterraneanwhere the coasts of two States are more than 400 nmi apart. • The limited maritime space available also means that almost every extension of jurisdiction creates new neighbours and triggers the need for delimitation of actual or potential zones of sovereign rights and/or jurisdiction with adjacent and opposite States. • Due the proximity between Mediterranean States, the extension of jurisdiction by one coastal State, in most cases, affects the interests of more than just another neighbouring State (e.g. Central Mediterranean). • No space in the Mediterranean Sea for an outer continental shelf (Article 76 of UNCLOS), nor for an ‘International Area’ (Part XI of UNCLOS).

10. Enclosed or semi-enclosed sea (Part IX UNCLOS)? Article 122 (UNCLOS) Definition For the purposes of this Convention, "enclosed or semi-enclosed sea“means a gulf, basin or sea surrounded by two or more States and connectedto another sea or the ocean by a narrow outlet or consisting entirely orprimarily of the territorial seas and exclusive economic zones of two or more coastal States.

11. Mediterranean & Adriatic as juridical (semi) enclosed seas? Both the Mediterranean and the Adriatic are classified, on the basis of Part IX of UNCLOS (Article 122), as legal enclosed or semi-enclosed seas. Both seas are surrounded by more than one State, are linked to another sea or ocean through a narrow outlet (or outlets) and, in case of proclamation of EEZs or other zones of jurisdiction, their surface would not just primarily, but most likely entirely be made up of EEZs and/or other jurisdictional zones of the surrounding States.

12. Article 123 (UNCLOS) Cooperation of States bordering enclosed or semi-enclosed seas: States bordering an enclosed or semi-enclosed sea should cooperate witheach other in the exercise of their rights and in the performance of their dutiesunder this Convention. To this end they shall endeavour, directly or through an appropriate regional organization...: (a) to coordinate the management, conservation, exploration andexploitation of the living resources of the sea;….

13. Article 123 (UNCLOS - continued) …..(b) to coordinate the implementation of their rights and duties withrespect to the protection andpreservation of the marine environment; (c) to coordinate their scientific research policies and undertake whereappropriate joint programmes of scientific research in the area; (d) to invite, as appropriate, other interested States or internationalorganizations to cooperate with them in furtherance of the provisions of this article.

14. …… The classification of the Mediterranean and Adriatic as ‘juridical’ enclosed or semi-enclosed seas brings with it an enhanced requirement for its coastal States to cooperate in the implementation of their rights and duties under UNCLOS with particular emphasis (but not limited...)on the areas of cooperation expressly referred to in Article 123. Is there an obligation to co-operate with regard to offshore exploration and exploitation within the Adriatic Sea? Liability and compensation?

15. Adriatic Sea • Due to its relatively long and narrow shape, the Adriatic is deeply indented into the European mainland and linked to the rest of the Mediterranean Sea (Ionian Sea) only through the Strait of Otranto • The Adriatic marine environment is extremely sensitive and represents an almost unique ecosystem(...slowexchangeofwatersthroughthestraitofOtranto) • Its living resources can be generally qualified as ‘highly diversified, with numerous species but low abundance’ which makes the Adriatic’s ecosystem particularly vulnerable. • The political map of the sub-region still represents a division between EU Members States and other States. Important to note that all Adriatic member States aspire to join the EU (importance of EU acquis).

17. Adriatic (Offshore) • Due to the geographical characteristics of the Adriatic and the Mediterranean in general, it is almost certain that even an incident of much lower proportions than the one experienced in the Gulf of Mexico would have a devastating effect on the Adriatic marineenvironment and its coastal zones, …..and would most likely affect the territories and/or zones of jurisdiction of more than one Adriatic State.

18. International Legal Framework for Regulation of Offshore Activities in the Adriatic: L&C • No global conventionapplicable (IMO-no compellingneedfortheadoptionof a global treaty, Art. 235 UNCLOS), • Barcelona System(i.e. ‚“OffshoreProtocol“, in forcesince 2011, butratified so far (only) byAlbania, Sloveniaand EU), • EU law(i.e. Directive 2013/30/EU on thesafetyofoffshoreoiland gas operations, Directive 2004/35/EC on environmentalliabilitywithregard to thepreventionandremedyingofenvironmentaldamage-ELD), applicable to thethree Adriatic EU memberStates (CRO, SI, IT) • Nationallegislationsof Adriatic States?

19. UNCLOS Article 235 (Responsibility and liability) (2). States shall ensure that recourse is available in accordance with their legal systems for prompt and adequate compensation or other relief in respect of damage caused by pollution of the marine environment by natural or juridical persons under their jurisdiction. (3). With the objective of assuring prompt and adequate compensation in respect of all damage caused by pollution of the marine environment, States shall cooperate in the implementation of existing international law and the further development of international law relating to responsibility and liability for the assessment of and compensation for damage and the settlement of related disputes, as well as, where appropriate, development of criteria and procedures for payment of adequate compensation, such as compulsory insurance or compensation funds.

20. Barcelona System: Liability& Compensation Barcelona Convention (ratified by Adriatic States) Article 16 of the (framework, 2005) Barcelona Convention The Contracting Parties undertake to cooperate in the formulation and adoption of appropriate rules and procedures for the determination of liability and compensation for damage resulting from the pollution of the marine environment in the Mediterranean Sea Area.

21. 2008 of the Guidelines for the Determination of Liability and Compensation for Damage Resulting from Pollution of the Marine Environment in the Mediterranean Sea Area - Adopted at the 15th Meeting of the State parties to the Barcelona Convention in 2008 (UNEP(DEPI)/MED.IG.17/10, 18 January 2008, p. 133. ...While not having a legally binding character per se, these Guidelines are intended to strengthen cooperation among the Contracting Parties for the development of a regime of liability and compensationfor damage resulting from pollution of the marine environment in the Mediterranean Sea Area and to facilitate the adoption by theContracting Parties of relevant legislation…

22. 2008 Mediterranean Guidelines… • The Parties opted for a soft-lawinstrument, therefore for the voluntary unification of their provision in the field of liability and compensation through the incorporation into their national legislation of a set of provisions for damage resulting from pollution of the Mediterranean, based as much as possible on the provisions of the Guidelines. • The latter are of general nature and may be applied to all areas of marine pollution covered by the Barcelona System, with the exception of those which have been already regulated at the international level (e.g. by the CLC and FUNDS Conventions, the Bunkers Convention, HNS...)

23. ..continued.. It should be noted that liability for damage covered by the Guidelines, which covers also environmental damage,is channelled on the operator. The liability of the latter is strict, although States mayestablish limits of liability on the basis of international treaties or relevant domestic legislation. For the purposes of these Guidelines ‘environmental damage’ means a [measurable] adverse change in a natural or biological resource or [measurable] impairment of a natural or biological resource service which may occur directly or indirectly.’

24. 2008 Guidelines (continued..) • The parties to the Barcelona Convention for the time being could not however agree to the inclusion in the Guidelines of a set of provisions regarding the requirement of a compulsory insurance, nor on the establishment of a ‘Mediterranean Compensation Fund’,but instead left this question open for the future. • Guideline K, para. 18: ‘The Contracting Parties, after a period of five years from the adoption of these Guidelines, may, on the basis of an assessment of the products available on the insurance market, envisage the establishment of a compulsory insurance regime

25. Offshore Protocol (Barcelona Convention) • Adopted in 1994, entryintoforce on 24 March 2011 (ratified so far in the Adriatic byAlbania + the EU), • the Offshore Protocol is a comprehensive document covering areas such as licensing of operators, contingency planning, mutual assistance in cases of emergency, transboundary pollution and monitoring within the entire Mediterranean Sea, including the continental shelf …… • One of the most criticizedprovision of the Offshore Protocol has been the ‘channelling of liability’ on operators and the requirement for them to ‘have and maintain insurance cover or other financial security in order to ensure compensation for damages caused by the activities covered by the Protocol’

26. Offshore Protocol (Barcelona Convention) Article 27 LIABILITY AND COMPENSATION 1) The Parties undertake to cooperate as soon as possible in formulating and adopting appropriate rules and procedures for the determination of liability and compensation for damage resulting from the activities dealt with in this Protocol, in conformity with Article 16 of the Convention. How soon is as soon as possible?

27. Offshore Protocol (Art.27) 2. Pending development of such procedures, each Party:…. • (a) Shall take all measures necessary to ensure that liability for damage caused by activities is imposed on operators, and they shall be required to pay prompt and adequate compensation; • (b) Shall take all measures necessary to ensure that operators shall have and maintain insurance cover or other financial security of such type and under such terms as the Contracting Party shall specify in order to ensure compensation for damages caused by the activities covered by this Protocol.

28. Offshore Protocol (Art.27) …Art. 27 reflects, one of the basic principles of contemporary environmental law, the ‘polluter pays principle’… It is peculiar that the delegations of EU and France at the time of the adoption of the Offshore Protocol expressed a ‘reservation pending consideration’ centred exactly on Article 27(2) of the Protocol imposing the mentioned two requirements upon operators Although entering into force in 2011, the Offshore Protocol has been so far ratified (only) by the EU (following the 2010 Gulf of Mexico dissaster) and Albania, Cyprus, Lebanon, Libya, Morocco, Syria, Turkey...)

29. EU Law (Offshore: Liability and Compensation) • Offshoreprotocol to the Barcelona Convention • Directive 2013/30/EU on thesafetyofoffshoreoiland gas operationsandamending • Directive 2004/35/EC on environmentalliabilitywithregard to thepreventionandremedyingofenvironmentaldamage-(ELD-EnvironmentalLiabilityDirective) Environmentaldamage (ELD): - Damage to protected species and natural habitats, which is any damage that has significant adverse effects on reaching or maintaining the favourable conservation status of such habitats or species…

30. Directive 2013/30/EU on the safety of offshore oil and gas operations Amends the ELD by extending the scope of “water damage” definition to cover “marine waters” under Directive 2008/56/EC (Marine Strategy Framework Directive-extension of the geographical scope of application to zones of sovereign rights and jurisdiction)

31. …strict liability for Environmental damage (licensee) Art. 7 Without prejudice to the existing scope of liability relating to the prevention and remediation of environmental damage pursuant to Directive 2004/35/EC, Member States shall ensure that the licensee is financially liable for the prevention and remediation of environmental damage as defined in that Directive, caused by offshore oil and gas operations carried out by, or on behalf of, the licensee or the operator. What about compulsory insurance? What about civil liability (pure and/or consequential loss)?

32. Art. 4 (3) of the Directive • Member States shall ensure that the licensing authority does not grant a licence unless it is satisfied with evidence from the applicant that the applicant has made or will make adequate provision, on the basis of arrangements to be decided by Member States, to cover liabilities potentially deriving from the applicant’s offshore oil and gas operations. Such provision shall be valid and effective from the start of offshore oil and gas operations. • Member State shall require applicants to provide, in an appropriate manner, evidence of technical and financial capacity and any other relevant information relating to the area covered by the licence and the particular stage of offshore oil and gas operations. • ………..

33. Art. 4 (3) of the Directive • Member States shall facilitate the deployment of sustainable financial instruments and other arrangements to assist applicants for licences in demonstrating their financial capacity pursuant to the first subparagraph. • Member States shall, as a minimum, establish procedures for ensuring prompt and adequate handling of compensation claims including in respect of compensation payments for trans-boundary incidents. • The Member States shall require the licensee to maintain sufficient capacity to meet their financial obligations resulting from liabilities for offshore oil and gas operations.

34. Conclusions In order to protect the potential victims of oil pollution deriving from offshore drilling in the Adriatic (including for example the extremely important tourism sector), it would seem imperative for all Adriatic States to impose the liability on operators and particularly to ensure that theyhave adequate insurance (financial) cover. It is therefore suggested that (all) Adriatic States should ratify the Offshore Protocol to Barcelona Convention and endeavour to cooperate in the implementation of its provisions,with a special emphasis on Article 27 regulating liability and compensation.

35. Conclusions ….Adriatic States couldendeavour to cooperate in the drafting of a unified set of provisions (legislation) channelling the liability for such type of pollution on the operator (strict liability) and providing furthermore for exceptions and limits of liability and the requirement for compulsory insurance on offshoreoperators exploiting the Adriatic seabed and subsoil. Regionalarrangementbased on new IMO Gudelines?