Protection of the marine environment



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Claims for punitive damages

OPA is also silent as to the availability of punitive damages Plaintiffs who could assert general maritime claims pre-OPA enactment may plausibly allege punitive damages under general maritime for several reasons. First, ''[p]unitive damages have long been available at common law" and "the common-law tradition of punitive damages extends to maritime

claims.'' Townsend, 129 S. Ct. at 2569.
Congress has not occupied the entire field of oil spill liability in light of the OPA provision preserving admiralty and maritime law, '[e]xcept as otherwise provided." 0PA does not mention punitive damages; thus, while punitive damages are not available under OPA, the Court does not read OPA's silence as meaning that punitive damages are precluded under general maritime law. Congress knows how to proscribe punitive damages when it intends to, as it did in the commercial aviation exception under the Death on the High Seas Act, 46 U.S.C. § 30307(b) ("punitive damages are not recoverable").
There is also nothing to indicate that allowing a claim for punitive damages in this context would frustrate the OPA liability scheme. As stated above, claims against the Responsible Party must comply with OPA’s procedure, regardless of whether there is also cause of action against the Responsible Party under general maritime law. However, the behavior that would give rise to punitive damages under general maritime law – gross negligence- would also break OPA’s limit of liability. See 33 U.S.C. § 2704 (a). Thus, the imposition of punitive damages under general maritime law would not circumvent OPA’s limitation of liability.
Finally on this issue, the Court notes Justice Stevens’ concurrence in Baker in whc8ih he wrote that the Trans-Alaska Pipeline Authorization Act (“TAPAA”) which provided “the liability regime governing certain types of Alaskan oil spills, imposing strict liability but also capping recovery.” “did not restrict the availability of punitive damages.” 554 U.S. at 518, 128 S.Ct. 2605. Although the issue of whether TAPAA precluded an award of punitive damages was not squarely before the Court’s conclusion. OPA, like TAPAA creates a liability regime governing oil spills, impose strict liability on the Responsible Parties, includes liability limits, and is silent on the issue of punitive damages.
Thus, OPA does not displace general maritime law claims for those Plaintiffs who would have been able to bring such claims prior to OPA's enactment. These Plaintiffs assert plausible claims for punitive damages against Responsible and non-Responsible parties.
Negligence claims against Anadarko and MOEX
Anadarko and MOEX, the non-operating lessees for the Macondo well, have joined in the arguments made by other Defendants. However, these two Defendants advance additional, independent reasons supporting their Motions to Dismiss. In essence, Defendants argue that under the Joint Operating Agreement ("JOA'') existing between BP and themselves,

BP was the operating partner, responsible for the drilling of the Macondo well. Anadarko or MOEX had no personnel present aboard the DEEPWATER HORIZON and assert they had no right to control BP's conduct.


Ainsworth v. Shell Offshore, Inc. lays out the analysis for evaluating Plaintiffs' negligence claim against Anadarko and MOEX. 829 F.2d 548 (5th Cir. 1987). "[A] principal generally is not liable for the offenses an independent contractor commits in the course of performing its contractual duties." Id. at 549. There are two recognized exceptions to this general principle, in the case of an ultra-hazardous activity, or when the principal retains or exercises operational control. Id. at 550. Offshore drilling operations are not considered ultra-hazardous. Id. As to operational control, the Court in Ainsworth did not find that this exception was met even when the principal had a company man present on the platform. In this case, it is not alleged that either Anadarko or MOEX had anyone resent on the DEEPWATER HORIZON. Under the JOA, BP was solely responsible for the drilling operations. Any access to information that Anadarko and MOEX may have had did not give rise to a duty to intercede in an independent contractor's operations-especially because Plaintiffs have not alleged in their Complaint that Non-Operating Defendants had access to any information not already available to BP and Transocean personnel either onshore or on the rig.
Plaintiffs attempt to avoid dismissal by suggesting that they do not argue for vicarious liability of the Non-Operating Defendants, but rather that Anadarko and MOEX were directly negligent. However, adding a "direct-duty" label to their claims does not add merit to them. See Dupre v. Chevron U.S.A. Inc., 913 F.Supp. 473, 483 (E.D.La.1996) (rejecting plaintiffs' attempt to disguise a vicarious liability claim as one of direct duty because doing so "would amount to an end-run around a large body of Fifth Circuit precedent finding no 'operational control' despite some knowledge of risk or involvement with safety issues and the presence of 'company men' on the contractor's rig"). Simply put, Plaintiffs have failed to allege a plausible general maritime negligence claim against the two Non-Operating Defendants. All general maritime negligence claims against Anadarko and MOEX must be dismissed.31
11. Although minority interest lessees, Anadarko and MOEX contest their status as responsible Parties. Neither has been formally named as a Responsible Party at this time
12. Because it is plausible that Anadarko and MOEX will be found to be Responsible Parties and thus liable under OPA, OPA claims are not dismissed.
Presentment under OPA
Defendants also seek to dismiss all OPA claims because the B1 Master Complaint does not properly allege that the B1 Claimants have complied with the "presentment" requirements of OPA. Defendants argue that presentment to the Responsible Party is either a jurisdictional requirement or, alternatively, a mandatory condition precedent before filing suit.
The Court finds that the text of OPA clearly requires that OPA claimants must first "present" their OPA claim to the Responsible Party before filing suit. The "Claims Procedure" section of OPA reads:

(a) Presentation

Except as provided in subsection (b) of this section, all claims for removal costs or damages shall be presented first to the responsible party or guarantor of the source designated under section 2714(a) of this title . . . .

(c) If a claim is presented in accordance with subsection (a) of this section and-

(1) each person to whom the claim is presented denies all liability for the claim, or

(2) the claim is not settled by any person by payment within 90 days after the date upon which

(A) the claim was presented, or

(B) advertising was begun pursuant to section 2714(b) of this title, whichever is later,


the claimant may elect to commence an action in court against the responsible party or guarantor or to present the claim to the Fund.
33 U.S.C. § 2713 (emphasis added).
The text of the statute is clear. Congress intended presentment to be a mandatory condition precedent to filing suit. See Boca Cieqa Hotel, Inc. v. Bouchard Transp. Co., Inc., 51 F.3d 235 (11th Cir.1995) (presentment is a mandatory condition precedent to filing suit under OPA); Gabarick v. Laurin Maritime (America), Inc., 2009 WL 102549 (E.D. La. 2009) (noting that the purpose of the claim presentation procedure is to promote settlement and avoid litigation).
In summary on this issue, the Court finds that presentment is a mandatory condition precedent with respect to Plaintiffs' OPA claims.32 The Court finds that Plaintiffs have sufficiently alleged presentment in their B1 Master Complaint, at least with respect to some of the Claimants. For the reasons stated above, the Court does not intend to engage in the process of sorting through thousands of individual claims at the present time to determine which claims have or have not been properly presented.33
NOTE
On October 1, 2012, the District Court, Judge Carl Barbier, issued a ruling in the Deepwater Horizon Oil Spill case involving three classes of claimants. See In re Oil Spill by Oil Rig "Deepwater Horizon", 902 F. Supp. 2d 808 (E.D. La. 2012). The first class of plaintiffs, known as "Pure Stigma" claimants, were owners, lessors and lessees of real property who

alleged they suffered damages from the Gulf of Mexico oil spill in the form of a reduction in their property values. The properties of these claimants were not physically touched by the oil and were not sold. The court ruled that these claimants failed to state a claim under OPA, federal maritime or state law, and the defendants' motions to dismiss were granted by the court. Consider OPA sections 2702 (b)(2)(B) and ( E) . Was the court's ruling correct?


A second class of claimants, known as BP Dealer claims, were claimants who alleged that they were in the business of marketing BP branded fuels and that they lost money because of consumer animosity toward BP after the spill. The court ruled that these BP Dealer claims were not viable under state or general maritime law and also were not viable under OPA subsections (B) or (E). Was this correct? The ruling under subsection (B) was based on the fact that the BP Dealers' property was not physically touched by the oil; the ruling under subsection (E) was based on the lack of any causal role the destruction of resources or property played in producing the damages.
The third class of claimants, known as Recreation Claimants, were recreational fishermen, recreational divers, beachgoers, and recreational boaters that alleged they suffered damages to their enjoyment of life from their inability to use portions of the Gulf of Mexico for recreational and amusement purposes. The court dismissed these claims as well under OPA as well as state and maritime law. Was this the correct ruling?
What about claimants whose property lost value because of the spill and who sold their property for the diminished value? What about the real estate brokers involved in these transactions who suffered reduced profits in these sale transactions?


NOTES AND QUESTIONS


  1. Applicability. Compare the applicability of the CLC and OPA. While the CLC applies only to spills from ships which carry oil in bulk as cargo---laden tankers. What about OPA? Would any international liability regime apply to a discharge from an offshore oil or gas facility such as the rig Deepwater Horizon?

  2. Bunker oil spills. In 2001, the International Convention on Civil Liability for Bunker Oil Pollution Damage was promulgated by IMO. This Convention entered into force in 2008; the US is not a party. Does OPA cover bunker oil spills?

  3. Liability. Who is liable for damages under the CLC? Who is liable under OPA?

  4. Defenses and exclusions to liability. Are any exclusions or defenses to liability applicable under the CLC or OPA?

  5. Limitation of Liability. For the owners of the SS Persian Festiva, what liability limits apply under OPA? Under the CLC? Under what conditions can the limits under OPA be disregarded? See O PA section 2704(c).

  6. Limitation of Shipowners' Liability Act. Can the owners of the 55 Persian Festiva invoke the US Limitation of Shipowners' Liability Act to further limit liability under OPA 90? In international law shipowners enjoy the right to limit liability for certain damages under the International Convention on Limitation for Liability for Maritime Claims (1957, 1976, and 1996), but Article 3 of this Convention, Article 3, excludes limitation for pollution claims.

  7. Categories of recoverable damages. What categories of da mages are recoverable under the CLC? Under OPA?

  8. Elements of proof for each damage category. Read OPA section 2702 with ca re. Section 2702( a )requires proof that all removal costs a n d damages claimed "result from" the oil pollution incident. Moreover, each subsection of section 2702 (b) contains additional elements of proof that must be carried by claimants. Parse each of these subsections for the additional elements of liability.

  9. Clean-up and removal responsibility. The International Convention on Oil Pollution Preparedness, Response, and Cooperation (OP RC) of 1990 requires states to have oil spill response and clean-up plans in place. In the United States the US Coast Guard has this responsibility. The U S and Canada have concluded a n agreement to create a Canada-US Joint. Marine Pollution Contingency Plan for response to a transborder spill of oil or a hazardous substance. See http://www.uscg.mil, accessed 20 November 2012.

  10. Spills of hazardous and noxious substances. I n United States law, a separate liability regime, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 USC sees. 9601 et seq., permits recovery of response costs and damages from responsible parties in cases of spills of hazardous or noxious substances. On the international level, IMO has promulgated an International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances (1996) ( HNS Convention), but the HNS Convention has not received the n umber of ratifications needed to come into force.

  11. Damage recovery by Canadian claimants. Canada is a party to the CLC and Fund Conventions as incorporated into Canadian law by the Marine Liability Act (S.C.2001, C. 6), section 5 1. Under

Canadian law and the Conventions, a four tier liability scheme will apply. First, under the CLC as amended, SDR 89.77 million in Canadian dollars will be available to pay claims. This sum will typically be covered by compulsory insurance carried by the ship, so that in practice this amount will be paid by the insurer, a protection and indemnity (P&I) club. Second, if outstanding claims exceed this sum, the second tier of money available to pay claims is the International Oil Pollution Compensation Fund (IOPC Fund) created under the Fund Convention. The maximum amount available under the IOPC is SDR 203 million, inclusive of the tier one compensation. Third, Canada is a party to the Supplemental Fund Agreement of 2003, which provides an additional amount up to a maximum of SDR 750 million, inclusive of the compensation available under tiers one and two. Under Canadian law a fourth tier of compensation is available: Canada's Ship Source Compensation Fund provides a maximum of Canada $ 155 million when funding from the first three liability tiers is exhausted, exclusive of the funding from tiers one, two and three. The fund's administrator must attempt to recover reimbursement to this fund by the responsible party. Canada would set up a claim procedure to which Canadian claimants would apply that would be separate from the claim procedure in the United States under OPA.

  1. Damage recovery by US claimants. Under OPA US claimants must first present their claims to the responsible pa or parties. In the case of the 55 Persian Festiva, the maximum amount available to pay claimants (unless the limit can be broken) is $600 million. OPA requires that ships carry mandatory insurance to pay claims. 33 USC sec. 2716. Claims not paid within 90 days by the responsible parties may be presented to the U S Oil Pollution Liability Trust Fund, which may pay claims up to a maximum of $1 billion per incident. (26 USC sec. 9509(c)).

  2. State law liability. OPA section 2718 i s a savings clause for state law. Do you agree with the Deepwater Horizon court's ruling that state law did not apply in that case?

  3. Liability under the general maritime law. The general maritime law provides a ca use of action for damages ca used by negligent conduct. There are important differences between liability under OPA and liability under the general maritime law, such as the applicability of the Robins Dry Dock ruling. Do you agree with the court's analysis regarding the OPA savings clause section 2751 (e) and the issue of preemption of the general maritime law by OPA?

  4. Punitive damages. Are punitive damages available under OPA or the general maritime law? In the final episode of the litigation sparked by the wreck of the Exxon Valdez, Exxon Shipping Co. v. Baker, 554 US 471 (2008), punitive damages are available under the general maritime law but are limited to a 1 to 1 ratio with compensatory damages.

  5. Recovery by Canadian claimants under OPA . Note that OPA section 2707 permits recovery by foreign claimants. What are the conditions to such recovery? Before OPA was enacted, the United States reimbursed Canada for damages incurred in a transboundary oil spill in St. Lawrence Seaway. See United States v. Oswego Barge Corp., 664 F . 2 d 327 (2d Cir. 1981).

  6. OPA claim procedure. The claim procedure under OPA requires presentment of claims to the responsible parties and filing claims in court. I n the Deepwater Horizon litigation, most claims were consolidated by the Judicial Panel on Multidistrict Litigation in the Eastern District of Louisiana, which divided the various claims into pleading "bund les." Both individual and class action claims may be filed. The Deepwater Horizon claims are also being handled in an extrajudicial forum. After a meeting with President Barack Obama in June 2010, BP agreed to create a fund of $20 bill ion to compensate victims of the disaster and to disburse this money through a specially created entity, the Gulf Coast Claims Facility (GCCF), which is constituted as "an independent claims facility for the submission and resolution of claims of individuals and businesses for costs and damages incurred as a result of discharges due to the Deepwater Horizon incident." See http:l/www.gulfcoastclaimsfacility.com, accessed 20 November 2012. BP has designated Kenneth Feinberg, Esq. as claims administrator of this $20 billion fund. Mr. Feinberg is fully responsible for the administration and disbursement of the fund and is charged to act independently of BP. Claims are processed by the GCCF according to rules devised by the administrator. Claimants may file claims both with the GCCF and the court, but a claimant can accept only one avenue of compensation.

  7. Claim procedure under the international regime. By contrast, the claims procedure of the international regime. is left to national courts; a claim may be fi led only in the state in which the damage occurs. Once the CLC fund established i n the national courts is exhausted, the IOPC Fund will establish local offices in the country involved to pay claims. The IOPC claims process is essentially a n out-of-court settlement in which claims are handled according to criteria in the IOPC Claims Manual, adopted by the Fund's Assembly of Parties.

  8. Pure economic loss damages. Many of the claimants in the 55 Persian Festiva hypothetical problems will present claims for purely economic losses without any accompanying proprietary damages. Many of these losses will be very real: commercial fishermen who cannot fish; motels and restaurants and other marine-dependent businesses will suffer financial hardship. American law has long a p plied a bright-li ne---no recovery-rule for purely economic losses under the authority of the decision of the Supreme Court i n Robins Dry Dock v. Flint, 275 US 303 (1927), and this holding is widely applied under the general maritime law34 and state law.35 What is the status of the Robins Dry Dock rule under OPA according to the court's opinion in the Deepwater Horizon case? But what is the limit to recovery for purely economic losses? Is the court's ruling too broad? One way the court could have limited recovery of purely economic losses would be the following: Under OPA section 2702, two levels of proof are required to recover purely economic losses. A first level of proof is required by section 2702(a), which requires that the losses must "result from" the pollution incident. This language should be interpreted as a requirement of proximate as well as actual causation that must be proved as a condition to liability. If we interpret section 2702(a) as requiring p roof of proximate causation, we limit the open-endedness of recovery for purely economic losses. A second level of proof is required to recover economic loss damages under section 2702 ( b )(2)( E): the claimant must prove that the loss is "due to the injury, destruction, or loss of real property, personal property, or natural resources." Should this "due to" language be interpreted to require a claimant to prove ownership of the damaged property or natural resources? This is the key issue---Robins Dry Dock says yes; the court in the Deepwater Horizon opinion says no. Which is correct? The problem is that if we answer this question "no" do we compensate all purely economic losses in the case of an oil spill? If we interpret section 2702(a) to require economic loss claimants under section 2702 (b)(2)(E) to prove proximate causation, we limit purely economic loss recovery to those claimants who can show foreseeability and pass other proximate cause tests. How does the international law regime handle purely economic losses? According to the Claims Manual of the IOPC, the Fund evaluates economic losses according to the following criteria:

    • The geographical proximity of the claimant’s business activity to the contaminated area;

    • The degree to which the claimant's business i s economically dependent on the affected coastline;

  • The extent to which the claimant had alternative sources of supply or business opportunities; The extent to which the claimant's business forms an integral part of the economic activity of the area affected by the spill.

Thus the Fund pays economic claims on a selective basis. Are these similar to proximate cause criteria that an American court may well use?




  1. Criminal, administrative and civil penalties. The US Clean Water Act authorizes the imposition of substantial criminal, administrative and civil penalties in a case of an oil spill or a spill of a hazardous substance. 33 U SC sees. 1319 to 1321. I n t h e Deepwater Horizon case, a settlement was reached on November 15, 2012, on criminal penalties against BP, which pleaded guilty to 14 criminal counts and agreed to pay the sum of $4 billion over five years. Two BP supervisors were also indicted for manslaughter because of the deaths of 11 workers on the Deepwater Horizon rig. BP and other companies involved are being sued by the US Department of Justice for liability for civil penalties of up to $ 20 billion.


NOTE ON NATURAL RESOURCE DAMAGES
Both United States law and international law provide for the recovery of damages to natural resources, but the process of recovery and measurement differs greatly.
1. United States law. In the United States, both OPA 90 [33 U SC sec. 2702] and CERCLA [42 USC sec. 9607(f) (1)] provide for recovery of natural resource damages. OPA defines natural resources broadly as including, "land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other resources belonging to, or otherwise controlled by the United States (including the resources of the exclusive economic zone), any State, or local government or Indian tribe or foreign government." Sec. 2701(20). Only government entities designated by the President or authorized officials as trustees --federal, state, tribal, and foreign---may recover such natural resource damages. See sec. 2702(b) and

sec. 2706 (b) (1)-(5). The responsibilities of trustees are set out in Sec. 2706 (c) and 40 CFR sec. 300.615. Liability for natural resource damages is strict, joint and several and is placed upon the responsible parties. Sec. 2702(a). Note that natural resource liability under OPA is limited to the amounts specified under the Act, but the limits do not apply if the incident was proximately caused by gross negligence or willful misconduct or violation of a federal safety regulation. Sec. 2704.


Note that the standard of liability for natural resource damages as set out in sec. 2702(a) and (b)(2). Section 2702(a) requires that the damages must "result from" the pollution incident.
OPA regulations (15 CFR Part 990) provide a three step process for determining natural resource damages as detailed in the Flow Chart of the NRDA Process: a Preassessment Phase, a Restoration Planning Phase, and a Restoration implementation Phase.
In the Preassessment Phase the trustees must determine the scope of their jurisdiction under OPA and decide if it is appropriate to try to restore the damages resources. The trustees determine whether there are injuries to natural resources that have not been remedied and whether there are feasible restoration actions available to fix the injuries. 15 CFR Subpart D.
In the Restoration Planning Phase the trustees prepare a Notice of Intent to Conduct Restoration, which is delivered to the responsible parties and, after injury identification and quantification and consideration of alternative options for restoration, a Final Restoration Plan is adopted after public review and comment. Restoration alternatives are evaluated on the basis of their cost, the extent to which they meet the goal of returning the resources to their baseline condition, the likelihood of success, the extent to which future injury will be avoided, the extent to which the option benefits multiple resources, and their effect on public health. 15 C F R sec. 990.54.
In the Restoration Implementation Phase the trustees implement the designated restoration plan and monitor its effectiveness. Restoration can include restoring, replacing, rehabilitating, or acquiring the equivalent of the natural resources harmed or destroyed by the pollution incident. 15 CFR sec. 990.30. Two kinds of restoration are called for: (1) primary restoration is restoring the resource where the injury occurred; (2) compensatory restoration is action or payment to make up for the interim or perm anent loss of a resource. OPA regulations also permit emergency restoration actions and early restoration actions. These are forms of compensatory restoration that may be necessary or advisable to carry out actions designed to restore habitat, shore lines, marine ecosystems or to enhance human uses of the polluted area without waiting for the adoption of the Final Restoration Plan. 15 CFR sec. 990. 26. In the case of the BP Deepwater Horizon incident, BP agreed to make available the sum of $1 billion for early restoration activities in the affected area of the Gulf of Mexico. See Press Release of April 2 1, 20 11, http://www.restorethegulf.gov/release, accessed 12 November 2012. The responsible parties must pay the cost of both primary and compensatory restoration as detailed in the Final Restoration Plan. On judicial or administrative review, the Final Restoration Plan benefits from a rebuttable presumption of validity. Sec. 2706 (e)(2).
Natural resource damages recoverable from the responsible parties under OPA include: (1) the cost of restoring, rehabilitating, replacing, or acquiring the equivalent of the damaged natural resources; (2) the diminution of value of those natural resources pending restoration; and (3) the reasonable cost of assessing those damages. Sec. 2706(d). Upon completion of the Final Restoration Plan, trustees may present a demand for compensation to the responsible parties, who must respond to this demand within 90 days. 15 CFR sec. 990.62. If the responsible parties for some reason cannot be made to pay, the bill for NRDA can be presented to the Oil Pollution Liability Trust Fund. Sec. 2712.
Because most NRDA cases have been settled before trial, reported cases on natural resource damages are rare. A leading case that antedates OPA is Puerto Rico v. SS Zoe Colocotroni, 456 F. Supp. 1327, aff’d in part, 628 F. 2d 652 (1st Cir. 1980). In this case, involving a spill of some 5000 tons of crude oil in the Bahia Sucia, a local bay, the Court of Appeals ruled that the correct standard for the recovery of natural resource damages is "the cost reasonably to be incurred by the sovereign or its designated agency to restore or rehabilitate the environment of the affected area to [its] pre-existing condition, or as close thereto as is feasible without grossly disproportionate expenditures." The court also ruled that the common law rule measuring damages as the difference in monetary value of the property before and after the event causing the injury was inadequate. However, the court also rejected the lower court's use of replacement value of non-commercially valued organisms as a measure of damages because these creatures "would replenish themselves naturally if and when restoration---either artificial or natural---took place."
Thus the correct measure of damages for primary restoration appears to be the reasonable cost of implementing the selected option of restoration or rehabilitation of the resources or of acquiring equivalent resources. The most controversial aspect o f NRDA is the problem of valuing the diminution of value of the resources pending restoration---compensatory restoration. How should these losses be measured? OPA regulations require a method called "resource scaling" : the trustees determine the scale of actions required to make the environment whole. Using resource-to-resource and service-to-service scaling an estimate can be made of the cost of producing the natural habitat and the services that are equivalent to those that have been lost. 15 CFR sec. 990.53. If, however, resource scaling is deemed insufficient or infeasible, a second option is "valuation scaling"---an attempt to measure the value of the lost habitat and services. Valuation scaling o pens the door to unconventional and controversial valuation techniques such as "contingent valuation" (CVM). CVM uses personal interviews, telephone interviews, and mail surveys to ask individuals their willingness to pay for a given resource contingent on the existence of a hypothetical situation: for example, how much would you expect to pay to assure the preservation of the native bird life in a given coastal marsh. CVM is defended by environmentalists as a method of measuring the immeasurable: the "non-use value", "passive value", "inherent value" or "existence value" of natural resources. See Frank B. Cross, Natural Resource Damage Valuation, 42 Vand. L. Rev. 269 (1989). But many criticize CVM as producing wildly inaccurate estimates of value because individuals are asked to respond to hypothetical situations about which they have little information or experience. See Charles J. Di Bona (President of the American Petroleum Institute), 1992 Issues in Science and Technology SO.
The debate over CVM is unresolved, but no court seems to have accepted CVM as a measurement technique. In State of Ohio v. Department of the Interior, 880 F. 2d 432 (D.C. Cir. 1989), a case involving judicial review of the NRDA rules adopted under CERCLA, the court did not invalidate the regulations permitting the use of CVM and other hypothetical valuation techniques, but invalidated a rule requiring the trustees to choose between "the lesser of' restoration cost and diminution of use and non-use values, because this "lesser of' rule violated the intent of the Congress to prefer restoration. In General Electric Co. v. US Department of Commerce, 128 F. 3d 767 (D.C. Cir. 1997), the court largely rejected an industry attempt to invalidate the OPA CVM regulations, so both the OPA a n d CERCLA regulations as they now stand have survive d court challenges. However, several courts

specifically confronted with. CVM have rejected CVM surveys as speculative and unreliable. For exam ple, in United States v. Montrose Chemical Corp., No. CV 90-3122-R (C.D. Cal . Apr. 17, 2000) ( No. 1914), the court excluded a CVM survey offered by the government to measure lost existence values with regard to two species of birds (bald eagles and peregrine falcons) and two species of fish (white croaker and kelp bass). See also

Idaho v. Southern Refrigerated Transp., Inc., No. 88-1279, 1991 US Dist. Lexi s 1869 (D. Idaho 1991).
Thus the measurement of this statutorily mandated damage category is open to question.
2. International law. The CLC and the Fund Convention liability regimes sharply restrict the recovery of natural resource damages. In 1980, the Funds' Assembly adopted Resolution 3 [ FUND/A/ES. 1/13], which states: "the assessment of compensation to be paid by the Fund is not to be made on the basis of an abstract quantification of damage calculated in accordance with theoretical models." This resolution was inspired by the fact that, following the grounding of the tanker Antonio Gramsci in the Baltic Sea, the Soviet government claimed environmental damages based on the formula-2 Russian rubles per

cubic meter of polluted waters. In addition, the 1992 CLC and Fund Conventions provide that "compensation for impairment of the environment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken." CLC Art. 1(6) and Fund Convention Art. 1(2).


Despite these limits, famous cases have found ways to grant more generous natural resource damages. In 1985, when the tanker Patmos sank off the coast of Calabria (Italy), and the IOPC rejected claims for natural resource damages, the Italian government brought suit in the Italian courts against the IOPC and the tanker's insurer, the UK P&I club. The court of first instance rejected the claim, but this decision was reversed by the Court of Appeal, which interpreted the CLC 1969 Art. 1(6) to allow equitable claims for damage to the environment which may be established by a panel of experts. Although the experts

appointed by the court found damages to fishing activities in the amount of British Pounds Sterling (BPS) 465,000 (about $700,000), the court without explanation awarded a final judgment of BPS 827,000. Tribunal of Messina, Judgment of 24 June 1985 [1986] Dir. Mar. 439 and I OPC Annual Report 1990, p. 23-27. I n the case of the tanker Haven, which in 1991, caught fire and spilled some 10,000 tons of oil into the Gulf of Genoa (Italy), the IOPC also rejected natural resource damages, sparking a suit by Italian government. In the event, the Court of First Instance interpreted the CLC and Fund Conventions to perm it natural resource d a m ages and awarded 40 million lire in damages (about $20 million), a decision which the IOPC termed "absurd". [FUND/EXC48/4 (1996)]. See Tribunal of Genoa, Judgment of 29 May 1991 [1991 Dir. Mar. 793. On appeal the Italian government claimed that the damages should be increased to 883,435 million lire. In the end, the shipowner and the UK P&l Club, the insurer, made an ex gratia payment of 25 million lire in addition to the 40 million lire in damages to the Italian government to settle the case. See IOPC Annual Report 1999, para. 10.2.


3. Canadian law. Canada is a party to the 1992 CLC and Fund Conventions and, accordingly, Section 51(2) of the Canada Marine Liability Act (S.C. 2001, c. 6) provides that natural resource damages are limited to the "costs of reasonable measures of reinstatement actually undertaken or to be undertaken." However, in the Canfor case, British Columbia v. Canadian Forest Products, Ltd., 2004 SCC 38, (2004] 2 SCR 74, the Supreme Court of Canada ruled that in principle environmental damages may be recovered by the Canadian government for damage to publicly owned natural resources beyond the commercial value of the resources involved. The Canfor case was a non-maritime tort action for damages brought by the government of British Columbia seeking compensation from a company responsible for causing a forest fire that destroyed about 1,500 hectares of public forest lands. Although the claim for environmental damages was dismissed, the court did so for lack of evidence and stated that British Columbia could have obtained the damages sought had it provided proper pleading and evidence. The court did not provide any guidance on how natural resource damages should be measured.
In the case of Problem 7-8 would you advise the Canadian government to sue in tort under Canadian law to recover natural resource damages in excess of those permitted under international law?
Could the government of Canada use OPA 90 to recover a greater amount of natural resource damages than that permitted under international law? See OPA section 2707.


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