INSIGHT: HNS Convention

Introduction

The International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea 1996 ("HNS") has not yet entered into force. However it has the support of a number of states and an HNS Correspondence Group formed by the International Maritime Organisation ("IMO") is addressing a number of implementation issues and encouraging early entry into force.

The Correspondence Group has also overseen the publication in November 2015 of a brochure "The HNS Convention – Why it is needed" which explains the purpose and benefit of the Convention. The Protocol to the Convention has so far been ratified by five states and in July 2019 the IMO reported that a number of other states had made significant progress so that further ratifications are anticipated. The target date for entry into force is 2022.

The GHS pictograms for HNS labelling for an aquatic hazard, a toxic substance and flammable material. Source: ITOPF

Background

The International Convention on Civil Liability for Oil Pollution Damage 1969 (the Civil Liability Convention or "CLC") entered into force over 40 years ago and established an international scheme for pollution damage caused by tankers carrying persistent oil. The 1969 Convention has now been superseded by the 1992 Civil Liability Convention but the basic structure has been retained. CLC is funded by shipowners and their insurers (P&I Clubs) and, in the rare cases where claims exceed the amount for which shipowners and insurers can limit liability under CLC, supplementary compensation is available which is paid for by the oil industry under the Fund Convention 1992 which is administered by the International Oil Pollution Compensation Fund (IOPC Fund) which is based in London.

The compulsory insurance regime in CLC has also provided the model for two other Conventions governing liability for oil pollution caused by ships bunkers (International Convention on Civil Liability for Bunker Oil Pollution Damage 2001) and for wreck removal (Nairobi International Convention on the Removal Of Wrecks 2007). Both of these Conventions have entered into force.

Although the HNS Convention was adopted by IMO in 1996 it did not receive enough support from states due to a number of shortcomings and a Protocol was adopted in 2010 which introduced a number of amendments designed to address these concerns. The consolidated text can be found on this page, together with a shorter overview.

Convention basics

The HNS Convention follows CLC in imposing strict liability on shipowners with very limited defences in return for which shipowners are entitled to limit liability to an amount calculated according to the vessel's tonnage up to a maximum of either SDR 100 million (for cargo carried in bulk) or SDR 115 million (for packaged cargo). The limits are expressed in SDRs or Special Drawing Rights to avoid being dependent of a single currency. One SDR is currently equivalent to approximately USD1.4.

If admissible compensation claims exceed the applicable limit of the shipowner's liability, compensation is available which is funded by cargo interests. This will be administered by the HNS Fund which would be operated on similar lines to the IOPC Fund. The total compensation available from both sources will be SDR 250 million.

A key element of the HNS Convention is that shipowners are required to have insurance in place which cover their liability under the Convention. The insurer is in effect a guarantor and must meet claims brought against it by third party claimants. The compulsory insurance structure is familiar from CLC and other IMO liability conventions.

Definition, reporting and contributions

CLC and the Bunkers Convention apply to pollutants which can be relatively easily defined. In contrast the HNS Convention covers a very wide range of cargoes with over 2,000 substances falling within the scope of HNS. These are listed in the definition in Article 1 paragraph (a) which in turn refers to various IMO conventions and codes (including the IMDG Code). The definition includes oils, other liquid substances defined as noxious or dangerous, LNG, LPG; liquid substances with a flashpoint not exceeding 60˚C; dangerous, hazardous and harmful materials and substances carried in packaged form or in containers and solid bulk materials defined as possessing chemical hazards. The IOPC Fund has created an HNS Finder which can be found in the section "Resources" below.

The Convention requires states to provide annual reports on contributing cargo and also file a report at the time of ratification. The diversity of HNS means that cargoes are divided into separate categories and a significant amount of administration is involved on the part of states. Entry into force of the Convention is dependent upon States finding an acceptable solution to cargo reporting and collection of contributions.

Entry into force

The Convention will enter into force eighteen months after ratification by at least twelve States. In April 2017 Norway became the first state to ratify the 2010 Protocol to the Convention followed by Canada, Turkey and Denmark in 2018. The most recent state to ratify was South Africa in July 2019. These five states represent 3.54% of world tonnage.

It is also required that:

Four States must each have a registered tonnage of at least 2 million GT (this requirement has now been met)
- and -
Contributors in the States that have ratified the Convention must have received during the preceding calendar year a minimum of 40 million tonnes of cargo consisting of bulk solids and other HNS liable for contributions

Parts of the Convention fall within the EU's exclusive competence in the area of maritime transport. In December 2015, the Council of the European Union adopted two Council Decisions authorising EU Member States to ratify or accede to the 2010 HNS Convention, if possible within four years. In April 2016, the EU Parliament indicated that it wanted to impose an obligation on Member States to ratify the Convention no later than four years from the date of entry into force of the Council decision. The Parliament formally adopted the Council Recommendations in April 2017, a step welcomed by the European Community Shipowners' Association (ECSA) which strongly supports entry into force of the Convention.

HNS Correspondence Group

Workshop in March 2016

The Correspondence Group led by Canada held a workshop in Montreal attended by 11 States together with the IMO, IOPC Fund and a number of industry stakeholders including the International Group. A wide number of issues were discussed, in particular the key question of cargo reporting. More information about the workshop can be found in the Report made to the IOPC Fund which can be found on this page.

The Future

The Correspondence Group is encouraging states to collaborate and to coordinate efforts to trigger the entry into force criteria. The target ratification date is 2020 which would allow the Protocol to enter into force in 2022. The International Group of P&I Clubs is monitoring the position and members will be notified as and when the entry into force date is known.