Addressing The Gaps in Arctic Governance, by Mark E. Rosen and Patricio Asfura-Heim

ARCTIC SECURITY INITIATIVE
HOOVER INSTITUTION
Addressing the Gaps in Arctic Governance

by Mark E. Rosen and Patricio Asfura-Heim Arctic Security Initiative www.hoover.org/taskforces/arctic-security
The Arctic is undergoing an extraordinary transformation that is likely to result in various types of increased human activity in the Arctic marine environment for a much greater portion of the year. Much of that increased human activity will be taking place either offshore in the form of oil and gas drilling or, in the littoral areas, in the form of shipping traffic to specific destinations (especially oil and gas sites and mines) and the potential for transit shipping from Asia to Europe. The fisheries, mineral, and hydrocarbon resources are likely to be a magnet for various types of shipping and offshore activities. This inevitably leads to questions of whether these activities can be conducted safely and, if something goes wrong, whether there will be sufficient capacity to respond to an incident. Similarly, are there policies and procedures in place to ensure that those responsible for such incidents are both legally obligated to pay and have the financial wherewithal to do so? For a variety of reasons, the rules governing such activities in the Arctic are not well-coordinated and there is no recognized regional or international authority that can ensure that Arctic participants are properly trained, equipped, insured, and capitalized to pick up the pieces if something goes wrong. The Arctic littoral nations have taken note of some of these problems; however, it is questionable whether the approaches now being taken will be sufficiently timely and robust to keep pace with the risks associated with increased human activity. To prevent any backsliding on the critical principles of management and ownership set forth in the 1982 Law of the Sea Convention (UNCLOS), it is clear that the Arctic states need to do more to proactively manage risks lest states outside of theArcticregion push for a more globalized management structure which, in the last analysis, will redound poorly to the security and economic interests of theUnited
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States and other Arctic littoral countries. If a serious incident involving a ship or oil rigwere to occur today, it is quite likely that there would be insufficient assets to respond to that emergency, clean up the mess, and compensate those who are injured. For this reason, active and coordinated management is essential to prevent disharmony and dissension among the Arctic littoral states. Much has been written concerning developments at the International Maritime Organization (IMO) to develop a Polar Code that will enable ships to weather the Arctic marine environment. While there is no question that this is a positive step, thePolar Code is some years off and there are, in the view of the authors, significant gaps in the Code particularly as relates to mandatory insurance for ships that enter the Arctic. For this reason, one major recommendation is that the Arctic states use their inherent Port State Control authority to insist that ships which enter the Arctic carry adequate insurance (well in excess of current IMO limits), are not allowed to evade responsibility because of the various limits on liability schemes, and force majeure defenses, and are subject to external Oil Companies International Marine Forum (OICMF) and Protection and Indemnity (P&I) Club inspections to ensure that the shipsare complying with all relevant equipment standards. Oil rigs and associated structures are not part of the IMO liability scheme; rather theyare exclusively regulated by the relevant coastal country. Because an incident involving a rig would likely exceed the maximum amounts of liability insurance that a country would mandate and the high probability that the impacts of a rig blowout would be regional (vs. localized), we recommend replication of the system in use in theNorth Sea in which producers are required to join an association that both inspectsrigs and accumulates a fund to respond to incidents and to pay claims if an incident occurs. Replication of that system with an agreement among producers and anassociated government-to-government agreement that confirms the producer arrangement is something that should be done immediately. This voluntary producer association could also be a ready source of funding for the pre-positioning of response equipment and assets. The 2009 Arctic Marine Shipping Assessment documents that there are serious shortcomings in the Arctic as pertains to reliable charts, weather and ice forecasts, logistics bases, and other types of navigational aids. Search and rescue (SAR) coordination and exercise activities have been progressing well, but the harsh environment and huge distances involved raise questions as to whether these are sufficient to satisfy demand if human activity continues to increase. Given that extensive investments are required to make the area safe, is it equitable and appropriate for the five coastal countries1 to bear all of the expenses of making Arctic waters safe? Our view is that it is not appropriate for the Arctic littoral states to bear all of these expenses and we recommend that the Arctic council establish a mechanism for seeking contributions from other commercial actors (including insurers) to pay for infrastructure improvements. The Cooperative Mechanism
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formedfor the Strait of Malacca is a useful template. Also, given that the Russian Northern Sea Route (NSR) is the most developed route in the region, the Arctic Council should seek to adopt that route for international navigation and invite Russiato go to the IMO and have the NSR approved as an internationally approved routeing measure. From the standpoint of husbanding scarce resources and responseforces, this approach seems in the short term to be the best approach topromote safe transit activity and safety at sea.
Introduction
The Arctic is warming twice as fast as the rest of the planet.2 Rising temperatures in turn are opening the Arctic to increased human activity like never before. It is a foregone conclusion that as the Arctic Ocean3 becomes free of ice for longer periods of time, there will be market pressures for the vast resources in the Arctic to be exploited. These resources include hydrocarbons both onshore and offshore, minerals, fisheries, and access for purposes of tourism and navigationalconvenience. The rapid melting of the Arctic Ocean is quickly creating a variety of new and unique challenges that have the potential to cause significant damage if they remain unaddressed. According to the United Nations EnvironmentalProgram, increased vessel traffic and resource extraction will increasethe threat to the ecological integrity of the area which could have a deleterious impact on the regions indigenous population.4 Risk reduction measures are needed now to incent responsible development of Arctic resources and deter imprudent ventures. Unfortunately, the Arctic governance structures are comparatively underdeveloped and have not kept pace with the physical changes taking place. Insufficient navigational aids, hydrographic surveys required for adequate charts, infrastructure, search and rescue, and cleanup capacity (in the event of an oil spill or other incident that results in water pollution) are well documented. Moreover, liability schemes affecting all categories of ships transiting the Arctic are not sufficient to ensure that sufficient funds are available for cleanup and restoration costs should an accident occur. Exacerbating this problem is the fact that any type of mishap would occur in a relatively closed sea. One need only look at some of the root causes of the global financial crisislack of an adequate regulatory scheme, inadequate capitalization, and severe trans-boundary impactsto realize that a serious pollution incident from either a rig or a tanker in the Arctic would have political and economic impacts beyond the immediate area of the spill. Given that management of Arctic resources and protection of the marine environment is beyond the capacity of individual states or even the five primary littoral countries, it seems incumbent upon policy makers to make an objective assessment of areas of risk associated with increased human activity in the Arctic especially oil and gas extractive activitiesand to quickly mitigate the risks that they can control.
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The extraordinary changes that are taking place in the Arctic present a number of plausible and positive futures for the local inhabitants, the five littoral states that border the Arctic Ocean, and the world community that will benefit from increased access to resources to serve a growing world population. The purpose of this paper isto focus on the back end of the problem: namely, how do governments and the private sector manage the risks associated with increased activity, recognizing that accidents can and will happen? Similarly what are the types of market-based incentives that can be used to promote financially responsible development of Arctic resources and to deter states from enacting unilateral schemes that will create new problems or regulatory sink holes? As a starting point, we provide a brief overview of the unique challenges posed by operations in the Arctic and detail the environmental risks associated with increased human activity in the area. Second, we identify gapsin terms of prevention, response, and recoveryin the existing regulatory regime that protects the Arctic environment and regulates activity in the Arctic Ocean. Lastly, we propose options foraddressing these gaps or mitigating their impact.
A Sense of Urgency: The New Arctic Environment and the Risks of Increased Human Activity
The average annual temperature in the Arctic is rising faster than predicted.5 While estimates vary, most experts predict the Arctic Ocean will likely be free of summer ice within mere decades.6 This constitutes a unique circumstance in which, essentially, a new ocean is being created. Nations with interest in the region are now examining the emerging strategic opportunities and challenges resulting from this development.7 Already, several countries, along with corporations like ExxonMobil and Royal Dutch Shell, are preparing to exploit the regions enormous oil and natural gas reserves.8 Vast fisheries are being opened to commercial harvesting (often without regulation) and countries such as China are constructing large bulk carriers and tankers to take advantage of newly opened navigational routes.9 These changes have added urgency to claims to sovereignty over the Arctic Ocean and, as a result, littoral Arctic states such as Russia and Canada have increased military personnel inthe region in order to protect their interests.10
Increased Activities: Vessel Traffic and Resource Extraction

The net effect of the regression of Arctic ice is that larger areas of the Arctic Ocean will be accessible from both land and sea for a larger percentage of the year. Melting ice could also potentially open up multiple trans-Arctic routes, including the Northeast Passage along Russias northern border (referred to herein as the Northern Sea Route) and the Northwest Passage, which runs through the Canadian Arctic Islands. This scenario raises the possibility of saving days of sailing between major trading blocs, and provides a tempting alternative to countries that currently depend on shipping through the Strait of Malacca and the Suez or Panama canals.11 Ifthe Arctic were to become a viable shipping route, the political and economic
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ramifications might extend far beyond the immediate area. For example, lower shipping costs could be advantageous for China (at least its northeast region), Japan, and South Korea because their manufactured products exported to Europe or the East Coast of North America could become less expensive relative to other emerging manufacturing centers in Southeast Asia, such as India. Borgensen writes in Foreign Affairs that Anchorage and Reykjavik could sometime become the high-latitude equivalent of Singapore and Dubai.12 In addition to new navigation routes, changes to the Arctic brought about by warmingtemperatures would likely allow more offshore exploration for oil and gas. According to a 2008 study conducted by the U.S. Geological Survey, an estimated 22percent of the worlds undiscovered oil and natural gas lies above the Arctic Circle.13 Private capital is moving to the Arctic: Shell and Cairn Energy have already invested over $1billion and the Russian national oil company Gasprom is reportedly poised to invest similar sums in partnership with ConocoPhillips, ExxonMobil, ENI, and Statoil.14 Similarly, glacier shrinkage onshore might expose land containing deposits of gold, iron ore, rare earth, or other minerals that were previously inaccessible. Both individual and cooperative survey projects are underway by littoral countries to support their national claims to extended Continental Shelf areascontaining large hydrocarbon and mineral resources.
Unique Operating Risks and Increased Environmental Vulnerability

Normal maritime activities in the Arctic carry considerably more risk than those conducted in more clement areas. The International Maritime Organization (IMO) and other international study groups15 cite poor weather conditions, relative lack of current and reliable charts, spotty communications and navigational aids, and cold temperatures (which reduce the effectiveness of shipboard systems) as major impediments to safety of navigation. Sea spray and the attendant formation of ice onsuperstructures also affect vessel or oil rig stability. Despite warming temperatures, the Arctic will still be subject to severe weather conditions for the foreseeable future, especially in winter, that will make it both costly and challenging to safely produce, store and transport oil, gas, and minerals from newly discovered deposits.16 The near absence of deepwater ports and other types of shore-based infrastructure (berthing, fuel, shore power, repair services, etc.) only compounds theharsh environmental operating conditions. Given its unique (nearly a closed sea) and remote geography, the Arctic Ocean is more vulnerable to environmental calamity than other oceanic areas. If trans-Arctic shipping were to occur on a frequent basis, it would certainly increase overall risk of oil pollution in the region. In past decades, many of the worlds largest oil spills were from oil tankers, which nowadays can carry over twomillion barrels of oil. Oil well blowouts from deep offshore oil extraction operations have also been a source of major oil spills, now eclipsing the largest tanker spills. Data from numerous studies indicate that the effects of the spillage of oil or other noxious substances
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into Arctic waters are probably more severe than in other regions.17 The Research Council of Norway issued a 2012 Report, Long-term Effects of Discharges to Sea fromPetroleumRelated Activities, which examined the long-term effects of oil spills and oil-polluted wastes from drilling activities. This ten-year study examined the effects of oil and gas drilling (and associatedextractive activities) in the Barents Sea, and other higherlatitudes adjacent to the Arctic Ocean, and concluded:
Trapping of oil in ice makes the pollution longer-lasting, and makes it possible for
theoil to be transported over long distances

The use of heavy fuel oils (HFO) by most ships vs. distillates inhibits the natural
ability of the ocean to absorb spills and incidental discharges

Ship exhaust generates emissions of substances such as sulfate and other
aerosols, soot, and other particulate matter that may affect local/regional climate and accelerated ice melting by influencing solar radiation in air masses and on snow andice. For this reason, the Arctic Council has made oil pollution arising from drilling, transport, and storage of oil a high policy concern.18 The technology necessaryfor cleanup operations at temperatures commonly experienced in the Arctic is currently lacking. Moreover, ecological recovery from environmental disasters likeoiland chemical spills in the region is particularly challenging as low temperatures slowchemical breakdown of contaminants.19
Unique Legal Risks

In addition to the operational challenges posed by the Arctics unique geography and climate, accidents in the Arctic are more legally difficult to resolve because their impact is likely to be felt by more than just one of the five littoral countries: Norway, Russia, the United States, Canada, and Denmark. Also, because of principles of flag state control and the robust transit rights (innocent passage, transit passage) and thehigh seas freedoms codified in the 1982 Convention on Law of the Sea (UNCLOS), there is a strong probability that some polluters would be legal citizens of nonArctic states and beyond the direct enforcement jurisdiction of the littoral states.20 By comparison, the Exxon Valdez and the BP Deepwater Horizon tragedies were localized in the sense that the pollution in both of these incidents emanated from a U.S. flag vessel (or licensee in the case of the Deepwater Horizon rig) and the effects of the incident were largely localized to the U.S. shoreline. These two incidents were also unique in that both BP and ExxonMobil (local actors) paid well in excess of theirstatutory limits on liability for business reasons (BP) and to avoid criminal prosecution (ExxonMobil).21 Shells decision in February 2013 to put its exploration activities in the U.S. continental shelf on hold was motivated, according to its CEO, by a desire to ensure that this
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new frontier was developed in a responsible way lest Shell might suffer serious reputational damage22 if there was a mishap. Examination of Shells decision to take a pause in its drilling activities leaves no question that an unstable and unsupportive regulatory23 and political environment contributed to this decision. Shell was subjected to multiple investigations by Congress, the Department of Justice, and the Department of Interior and was also under pressure from local citizens to make offers of strict and unlimited liability in the event of a mishap. To satisfy both constituenciesexplorers and coastal communitiesa predictable and wellfunded regulatory environment in which there are checks and balances is essential. Private sector actors that profit from extractive or navigational activities must be adequately capitalized to ensure that they have the financial wherewithal to pay for their mistakes. Likewise, the legal/regulatory environment needs to take into account the fact that much of the risk in extractive activities results from the lack of an infrastructure to respond to an incident. Given that, responsible regulation should include methods to capture in a predictable way the financing needed to prepare for remediation, salvage, and response as opposed to handing out subpoenas to appear before judicial and legislative bodies.
Minding the Gaps: An Analysis of the Arctic Regulatory Regime

Maritime experts question whether the current regulatory regime is sufficiently robust to prevent runaway competition for resources and the associated degradation of the Arctic environment. There is a dearth of mandatory international standards specifically designed for navigation in the Arctic. On top of this, the current system for financial compensation for cleanup and losses due to ship-source pollution is fragmented and inadequate.24 Significantly, no convention addresses losses created by oil rig accidents.25 Moreover, not all Arctic states are parties to important liability conventions and all relevant conventions are not in force. (See Appendix).
Overview of the Arctic Regulatory Regime

This section provides a brief overview of the Arctic regulatory regime and identifies significant areas of weakness. Options for addressing gaps in the regulatory regime are then proposed and assessed in the subsequent section. Unlike in Antarctica,26 there is no overarching legal convention for the Arctic. The regime that now governs the region is a mlange of legal arrangements including national domestic laws, bilateral agreements, global treaties (such as UNCLOS), customary law, and a variety of international maritime conventions negotiated under the auspices of the International Maritime Organization, including the International Convention for the Prevention of Pollution from Ships (MARPOL), The Safety of Life at Sea Convention (SOLAS), and The Standards of Training, Certification and Watchkeeping (STCW). Regional governing bodies like the Arctic Council are best characterized as forums for scientific collaboration and the issuance of guidance documents (vs. regulations). Shipowners, cargo owners, insurers, port authorities, and trade and labor union associations, among others, might also ordinarily play
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an indirect role as market participants in determining when and where shipping in the Arctic should occur and under what conditions. However, since the Arctic is not yet a venue for sustained shipping traffic very few commercial standards have evolved.27 The Arctic is still perceived as distant and remote and no concerted effort has been taken by the international business or legal communities to address the underdeveloped regulatory environmenteven though the physical environment ischanging rapidly!
Domestic Laws and Regional Agreements

The Arctic is a region dominated by the existing national legal systems of the eight Arctic states, which cover not only their land areas but also their marine territories. Each Arctic nations domestic laws govern mining and hydrocarbon development within their jurisdictional limits as well as protection of the marine environment, although the extent of legal development among the eight countries is far from uniform.28 UNCLOS establishes clear jurisdictional lines between flag states and coastal states as well as the legal demarcation of various maritime zones. To the limits of a coastal states continental shelf, which is at least 200 nautical miles (nm) from the low water mark on the coastline, coastal states exercise sovereignty over management and exploitation of the living and non-living resources, control over marine scientific research, and authority to enact laws and regulations to protect themarine environment/marine resources. (Article56, UNCLOS). It was on this basis, for example, that the United States and Canada justified their enactment of regulationsbanning ships that are not using low sulfur diesel near their coastlines.29 Of course, UNCLOS gives coastal states these expansive sovereign rights subject to the rights of maritime states to transit through these waters and exercise high seas freedoms, including the rights to lay and maintain submarine cables and pipelines. (Article58, UNCLOS). Global maritime treaties (see next section) have influenced the content of various Arctic states domestic environmental laws; but states must formally incorporate these global rules into their national maritime regulations for them to be binding on their ships and licensees.30 Regarding ships, in most Arctic waters the flag state is granted exclusive jurisdiction with only limited exceptions. That flag state mustensure that its ships conform to international standards concerning safety at sea, pollution control, training and labor matters, and communication regulations.31 UNCLOS permits a state to fix conditions for granting its nationality (i.e., flying its flag) to ships so long as there exists a genuine link between the flag state where the vessel is registered and the shipowners.32 As is well known, the genuine link requirement is honored more in the breach than in the observance by many shipowners who have chosen to register their ships in so-called open registry countries. Some regional and bilateral cooperative agreements regulate the Arctic environment.33 Canada, the United States, and Mexico are parties to the North
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American Agreement on Environmental Cooperation.34 That trilateral agreement is linked to the NAFTA agreement and establishes a process for making complaints against another state for failing to enforce appropriate environmental laws and standards, particularly when lax enforcement results in a trans-boundary impact.35 Another notable regional convention, particularly from a European point of view, is the 1992 Convention for the Protection of the Marine Environment of the NorthEast Atlantic (OSPAR),36 which applies to the North-East Atlantic and obliges the contracting parties to take all possible steps to prevent and eliminate marine pollution and to take the necessary measures to protect the maritime area against adverse effects caused by human activities in order to safeguard human health and conserve marine ecosystems. This particular mandate has caused great controversy among a number of affected industries because of the inherent difficulties in trying to harmonize the environmental laws of various states and otherwise remain compliant with UNCLOS.37 However, some aspects of the OSPAR Convention are worthy of discussion, most notably the Offshore Pollution Liability Agreement (OPOL) among all of the major oil and gas licensees to commercially uphold their licensors commitments in OSPAR.38 In OPOL each of the offshore producers contributes to a fund that has been set aside for the costs of responding to an oil spill and to pay claims arising out of any offshore platform or pipeline incidents involving an installation in the territory of any of the listed countries. In addition, there are numerous bilateral understandings between individual Arctic states on issues such as fisheries, wildlife, and protection from pollution.39 The Arctic states have generally not entered into cooperative management regimes for non-living resources.
Global Treaties
Nearly all global conventions dealing with navigation and the protection of the marine environment have application in the Arctic. Examples of such binding treaties include the 1982 United Nations Convention on the Law of the Sea (UNCLOS), the 1973International Convention for the Prevention of Pollution from Ships and its 1978 Protocol referred to as MARPOL,40 the 1974 International Convention on Safety of Life at Sea (SOLAS),41 the 1972 Convention on the Prevention of Marine Pollution,42 and the 1989 Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and their Disposal.43 In addition, the International Maritime Organization (IMO) is currently developing a mandatory Polar Code. Some experts believe that the Arctic is already sufficiently governed by a binding legal regime, namely UNCLOS. We disagree. UNCLOS is the constitution for oceans governance but it lacks detail, necessitating reliance upon existing maritime treaties and supplemental instruments provided that they are consistent with UNCLOS. Today, all of the Arctic littoral countries are members of this global agreement except for the United States which holds that the 1982 LOS Convention isreflective of customary international law.
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Part XII of the UNCLOS addresses protection and preservation of the marine environment. All states are obliged to take measures necessary to prevent pollution and to ensure that activities under their jurisdiction do not cause damage to the environment or to other states. UNCLOS requires that states adopt domestic laws that control marine pollution resulting from vessels and ocean-dumping.44 Article234 is the only Articleof UNCLOS that specifically regulates the polar regions. Specifically: Coastal States have the right to adopt and enforce non-discriminatory laws and regulations for the prevention, reduction and control of marine pollution from vessels in ice-covered areas within the limits of the exclusive economic zone, where particularly severe climatic conditions and the presence of ice covering such areas for most of the year create obstructions or exceptional hazards to navigation, and pollution of the marine environment could cause major harm to or irreversible disturbance of the ecological balance. Such laws and regulations shall have due regard to navigation and the protection and preservation of the marine environment based on the best available scientificevidence. Article234 is geared at preventing, reducing, and controlling marine pollution from vessels in ice-covered areas within a states exclusive economic zone and enables coastal states to pass and enforce non-discriminatory rules to control vessel-source pollution.45 Of course, this clause is limited in that it only recognizes the authority of one of the Arctic coastal states to enact regulations for those areas that are covered with ice most of the year. This inevitably leads to confusion as to outer limits of this authority and whether it even makes sense to enact a regulation for only ice-covered areas since ice- and non-ice-covered areas are inextricably partof the same marine environment. Likewise, given the capital-intensive nature of shipping, it makes no practical sense to promulgate rules affecting ships that operate only in parts of the Arctic since ships often leave areas of heavy icing to goto areas which are essentially free of ice much of the year. Maritime nations have adopted various international treaties that establish standards for ships in terms of safety, pollution prevention, and security. Most of these general standards were established at the International Maritime Organization (IMO), as noted above, in the SOLAS Convention, MARPOL, which was adopted in 1973 and modified in 1978, and the Standards for Training, Certification, and Watchkeeping for Seafarers (SCTW), which was adopted in 1978 and amended in 1995.46 Depending on which body in IMO approves a particular enactment, the measure will enter into force either immediately or after a specified number of states have ratified the instrument. Even though these instruments have global applicability, it is ultimately up to the ratifying flag state to enforce these standards via their own marine enforcement agencies; although, by default, port states can enforce these standards versus foreign flagships if they are entering port in that particular state.
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All of the Arctic littoral countries are parties to and enforce the three conventions noted above. Enforcement normally occurs when a vessel arrives in port for its portstate control inspections. During those inspections, inspectors verify the ships documentation and its certificates of compliance with relevant law, particularly those relating to pollution controls. Local authorities can and will conduct physical inspections to ensure that the actual condition of the ship conforms to the representations made in the certificates which the ship carries. Even though enforcement rests with the flag state as a matter of law, marine insurers, and P&I clubs (owner associations that also provide reinsurance to shipowners), and cargo owners will also enforce many of these IMO standards through insurance or contractual restrictions or via inspection regimes to lessen their potential liability.47 P&I clubs will routinely conduct annual inspections of the vessels that are part of theirclub to ensure that shipowners are complying with the relevant IMO standards. Also, cargo owners have established vetting programs for oil tankers and chemical carriers under the auspices of OCIMF.48 The associated Ship Inspection Report Program (SIRE) utilizes independent surveyors that are OCIMF accredited and who inspect ships in any port in the world. Inspections follow a common form and are entered in a computer database open to OCIMF members. If a ship lacks current inspections, it is ineligible to carry cargoes for any of the member companies.
The Arctic Council

The Arctic Councils soft law approach to regulating the Arctic began with the Declaration on Protection and Arctic Environment Protection Strategy (AEPS), a voluntary mechanism adopted in 1991 by the eight Arctic countries.49 The AEPS strategy relied on cooperation from member states and participation in voluntary activities. In order to improve the effectiveness of the AEP and overcome some ofitsweaknesses, the Arctic Council was created in 1996. The Arctic Council exists as a regional governance body devoted to environmental protection and sustainable development. The council is not a legal organizationit has no set of offices or dedicated personnel. Instead, it is a high-level forum meant to promote cooperation and coordination, as well as to develop guidance for operating in the Arctic environment. It consists of the eight Arctic states: Canada, Denmark (including Greenland and the Faroe Islands), Finland, Iceland, Norway, Russia, Sweden, and the United States. In 2013, India, Italy, China, Japan, Singapore, and South Korea were given observer status.50 The council does not have a legal personality which means that it cannot make legally binding agreements with other member nations or enter into contractual arrangements. States are free to take action, singly or collectively, independently of the council.51 All decisions of the Arctic Council and its subsidiary bodies are by consensus of the eight member states. Programs mandated by the Arctic Council are executed by five working groups composed of representatives from sectorial
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ministries, government agencies, and research organizations. The chairmanship of the council and accompanying secretariat rotates among member states.52 The council has no enforcement authority and its organizing instruments contain very few substantive commitments of the signatories to take concrete action.53 Basic responsibility for the implementation of regional policies lies with the states and their sub-regional administrations.54 For example, the Emergency Prevention, Preparedness and Response (EPPR) working group provides guidelines for responding to oil spills; however, the response to an actual oil spill is still up to each individual nation. In addition to lack of enforcement capability or central planning, the councilsuffers from chronic underfunding. Financial arrangements of the Arctic Council are based on voluntary contributions by its member countries.55 Despite these inefficiencies, the Arctic Council has contributed to better governance of the region throughthe development of guidelines and plans for the Arctic. The Arctic Council also facilitates cooperation with international organizations like the United Nations andthe European Union.
The International Maritime Organization and the Polar Code

The IMO acts as secretariat for most international maritime conventions and facilitates their implementation through the adoption of industry standards, codes, and guidelines which aim at operationalizing of the relevant international rules and standards.56 The IMO also is the UN technical organization that is responsible for anticipating new issues in oceans governance and adopting international shipping rules and standards to address emergent issues in marine safety, navigational efficiency, and prevention of marine pollution.57 The IMO is currently attempting to create a mandatory code of safety rules for shipsnavigating in both polar regions. The Polar Code is being developed in considerationof existing conventions that encompass safety (SOLAS) and environmentalprotections (MARPOL). The move to develop a mandatory code followed the adoption bythe IMO Assembly, in 2009, of Guidelines for Ships Operating in Polar Waters (Resolution A.1024(26)).58 The code is being designed tocover the full range of design, construction, equipment, operational, training, search and rescue, and environmental protection matters relevant to ships operatingin the inhospitable waters. The IMOs Sub-Committee on Ship Design and Equipment has been tasked with coordinating the development of the code in conjunction with the Maritime Safety Committee (MSC) and Marine Environment Protection Committee (MEPC).59 The IMOs original goal was to have the Polar Code finalized in 2014, although it does not appear that the code will be finalized until well into 2015, at best.60 As discussed in detail below, there are press reports of significant differences between the relevant parties on the issues of whether the code will: require zero discharges from ships (a Canadian demand); whether to ban the use of heavy fuel oils; prescribe mandatory training for masters and crew; exempt certain vessels from the code; and require
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vessels to obtain sailing permits in addition to other certification requirements. The code also will incorporate a wide range of mandatory safety, ice-hardening, and navigation and safety equipment standards. Resolution of all outstanding issues and finalization of the Polar Code in 2015 is anything but certain. Additionally, in order for the Polar Code to be legally binding on all IMO member states, it needs to be formally adopted by amendments to existing instruments (SOLAS or MARPOL)61 or as a single instrument. If adopted as a single instrument, it can be referred to a diplomatic conference which is convened by IMO and is subject to the usual UN procedures for adoption of diplomatic instruments.62 Alternatively, the instrument can be adopted as a non-treaty regulation by the IMOs Assembly63 (upon the recommendation of the relevant IMO committees) and enter into force immediately. According to U.S. Coast Guard officials, the current plan is for the relevant portions of the code to be adopted by the relevant IMO committees (MSC) and (MEPC) as amendments to SOLAS, MARPOL, and STCW using the tacit consent procedures. In these, the committees use silence procedures to adopt the text and then there is a cooling off period of between six months and two years for the parties to levy an objection. Those next full committee meetings are slated to takeplace in mid-2014. Even though this process fixes the text quickly, these nontreaty instruments are not legally binding upon shipowners unless or until states incorporate the measure into their domestic law. When and if the Polar Code is finalized, it would primarily be enforced via global port state control inspections.
Limitations of Arctic Governance: Prevention, Response, and Recovery Gaps

Though many global and regional agreements tangentially apply to the Arctic, the current governance regime appears inadequate for dealing with increased vessel traffic and resource extraction and for protecting the environment.64 Our assessment of the existing regulatory regime reveals three overarching weaknesses in the system: 1)insufficient regulations and infrastructure to prevent accidents, 2)almost no investment in adequate response capabilities, and 3)improperly funded liability schemes.
Prevention of Accidents
There are persistent threats to the safety of vessel traffic in the Arctic. Channelmarking buoys and other floating visual aids are not generally deployable in Arctic waters because moving ice sheets continuously shift their positions. As a consequence, vessel captains need to rely on marine surveys and ice charts. For some areas in the Arctic, these surveys and charts are nonexistent, out of date, or inaccurate.65 These gaps in navigational aids, charts, infrastructure, as well as searchand rescue and cleanup capacity (in the event of an oil spill or other incident that results in water pollution), are extensively documented with concern in the 2009Arctic Marine Shipping Assessment (AMSA) that was commissioned andapproved by the Arctic Council.66
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Considerable investment in navigation-related infrastructure is required if transArctic shipping is to become a reality. In addition to better navigational charts and aids, ubiquitous ship-to-shore communication infrastructure is needed. Some have also called for refueling stations for transshipment traffic where cargo could be transferred to and from ice-capable vessels at both ends of Arctic routes depending on prevailing ice conditions. A second gap in terms of accident prevention is the inability of littoral states to enforce stringent safety standards against vessels not flying their flag. Under UNCLOS, coastal states have almost no legal rights to regulate ships that are transiting through their waters. Article21 provides that coastal states may not adopt rules adversely affecting innocent passage except those relating to protection of the environment and they shall not apply to the design, construction, manning, or equipment of foreign ships unless they are giving effect to generally accepted international (IMO) rules or standards.67 As noted, there are currently no mandatory IMO standards which require special polar hardening or crew training and enforceable global standards (e.g., the Polar Code) are many years off. A coastal state may only undertake physical inspection of a foreign ship where a violation has resulted in a substantial discharge causing or threatening significant pollution of the marine environment.68 Actual arrest and detention of a foreign ship is only allowed if a violation causes major damage or a threat of major damage to the coastline, interests, or resources of the coastal state.69 While SOLAS, MARPOL, and other IMO instruments include provisions regarding theoperation of ships in ice-infested waters, they are not specific to the polar regions. The IMO has, however, issued guidelines for ships operating in Arctic ice-covered waters. These guidelines are only recommendations, not requirements, and they also only pertain to passenger and cargo ships of 500 gross tons or more engaged in international voyages. They currently do not apply to fishing vessels, military vessels,pleasure yachts, and smaller cargo ships. The fragmented nature of worldwide ship ownerships is an additional hurdle that states will encounter in seeking to enforce domestic regulations to protect their Arctic coastlines. Much of the worlds merchant fleet is registered under so-called flags of convenience (FOC) in states like Panama, Liberia, the Bahamas, the Marshall Islands, Malta, Cyprus, and other open registry countries. It is common for cargo ships to be owned by one company, operated by a second company (which markets the ships space), and managed by a third, which may supply the crew and other services a ship requires to sail. All too often, these operating entities are legally incorporated in differentcountries. These legal cut-out arrangements practically ensure that shipowners will not have their personal assets at risk if something goes wrong. At a minimum FOC registration enables shipowners to take advantage of more advantageous taxation and employment regulatory regimes than are present in their actual state of residence. But more often than not, FOC registration provides
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unscrupulous shipowners legal cover to avoid modern mariner training requirements and to circumvent applicable IMO standards for ship design, equipage, and operation70 since enforcement of prevailing standards by some of the aforementioned FOC states is weak to nonexistent. Coastal states have almost no recourse to enforce these standards upon FOC ships in their waters unless these ships are entering port and enforcement takes place pursuant to a port state control inspection to ensure that the ship is complying with relevant regulations. No special port state controls currently exist to address this vexing enforcement problem for ships that are entering Arctic waters and may need to comply with even higher standards of material and personnel readiness.
Response to Accidents
Climate change in the Arctic can be expected to increase human activities in the region and therefore higher accident rates. Unfortunately, there is very little response capability available for lifesaving, emergency ship repair, salvage,or cleanup. Because of the sparse infrastructure in the Arctic, poor weather conditions, and large distances which need to be traversed, staging a response in the Arctic will be a major challenge for the littoral nations who will, in all likelihood,have to respond to an incident to protect their coastal resources. Massive investment will likely be required to build appropriate infrastructure along transit locations for shipsheltering and as staging areas for search and rescue. Conditions in the Arctic region impose unique challenges for the few existing personnel who are now charged with oil spill response and cleanup duties. According to the former Commander of the 17th Coast Guard District (Alaska), we are not prepared for a major oil spill [over 100,000 gallons] in the Arctic environment.The Coast Guard has no offshore response capability in Northern or Western Alaska.71 Response time is a critical factor for oil spill recovery. With eachhour, spilled oil becomes more difficult to track, contain, and recover, particularly in icy conditions, where oil can migrate under or mix with surrounding ice, making extraction extremely difficult. Also, the harsh conditions in the Arctic, as well as other environmental factors, may preclude the use of proven cleanup andcontainment techniques, including in-situ burning and use of dispersants.72 In recent years, progress has been made in the form of new guidance and recommendations for operating safely in the Arctic, but response-specific regulations have not been promulgated. The recent conclusion of an Arctic Council-brokered SAR agreement is a good first step but the infrastructure and material needed for lifesaving, oil spill containment/cleanup, and rig blowout response have not been pre-positioned in sufficient quantities to provide any level of assurance that an adequate response could be mounted. Indeed, even the advanced OSPAR Convention mechanism (which applies in some portions of the European Arctic) does not require the state parties to allocate resources for emergency response planning or earmark funds to pay for cleanup after an accident has occurred. Instead, OSPAR
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largely relieson the associated OPOL agreement among the producers to meet their sovereign responsibilities to respond to incidents in their EEZ/continental shelf.73 The Arctic Council has been trying to get in front of this issue. It concluded negotiations in Reykjavik in October 2012 of a legally binding agreement on Cooperation on Marine Oil Pollution Preparedness and Response in the Arctic.74 Thisfirst step was taken because of the realization among the Arctic states that increased shipping and oil company presence is a fact of life, and action was necessary to preserve the Arctic waters and coastlines.75 The agreement establishes points of contact for mounting a response and commits parties to planning and exercises. It also contains legally binding commitments for states to:
Maintain a national system for responding to oil pollution incidents Establish an appropriate oil spill response capability and mechanism to
coordinate responses
Empower a competent national authority to have authority to receive reports
ofincidents and execute response plans

Consider requests from other states for logistical and other support when an
incident occurs
Permit other states access to their land and ocean territory to mount a response Pay their own costs associated with response (without reimbursement) unless
aprior agreement is made

Conduct joint exercises and hold periodic meetings.
It is quite clear that the planning and coordination activities that are envisioned under the new agreement will help in delineating the capabilities of the signatories of the agreement and identifying material and policy gaps. However, environmentalists are correct in saying that it falls far short.76 There are no binding commitments of funds to upgrade infrastructure or to commit ships/personnel to a cleanup effort. Nor is there a binding commitment on how to reciprocally regulate oil and gas extraction activities in sovereign territories so that the burden of preparing for and mounting a proper response can be shifted from governments (where it now sits by default) to thecommercial licensees engaged in extractive activities.
Recovery/Reconstitution Issues (Polluter Liability)

One of the most difficult issues facing the legal and policy community is the issue of Arctic trans-boundary pollution impacts given the unique geography of the Arctic as a closed sea. Also, because of principles of flag state control and high seas freedoms
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enshrined in UNCLOS, there is a fair probability that a shipowner or rig owner involved in an incident will be a citizen of a non-Arctic state and may be beyond the effective enforcement jurisdiction of all the affected Arctic coastal states. Even if a coastal state is able to effectuate an arrest of the offending vessel, the vessel will likely be grossly underinsured (relative to the costs of responding and cleaning up) or shipowners may be beyond the legal reach of affected coastal inhabitants because they are protected by the laws of their flag states. These laws enable them to both limit their liability and to register their ships as limited liability entities which, practically speaking, means that the value of the ships hull after an accident is all thatcan legally seized.
Shipowners Limits on Liability Schemes and Insurance (Summarized in the Appendix)

There are two basic liability regimes for shippingone for general shipping and a separate one for tankers. Most of the worlds merchant fleets are governed by the IMO legal framework, as detailed in the Appendix. The 1976 Convention on Limits of Liability for Maritime Claims77 is a widely followed IMO standard. It establishes limits (caps) on an owners liability for loss of life, personal injury, and property damage claims. There are separate limits for passenger vessels. For a 70,000-ton ship, the owners maximum liability is approximately 45million (SDR) for personal injury claims and 25million Special Drawing Rights (SDR) for property claims. Additionally, most ships have to comply with the 2001 Bunker Fuel Convention which addresses spills from non-tanker vessels that cause oil pollution damage. However, an owners liability under the Bunker Convention is capped by the Limits on Liability Convention. U.S. flag vessels follow a more archaic formula that is rooted in old admiralty law and codified in the Limitations on Vessel Owners Liability Act.78 Under that statute, an owners liability is capped at $420per ton plus the value of the vessel at the end of the voyage plus pending freight. A U.S. shipowners liability for release of bunker fuel is governedby the limits in OPA-90. For tankers (a primary concern in this study), the liability of U.S. flagships is governed by OPA-9079 which regulates oil pollution from both tankers and oil rigs. The OPA-90 system is complex; however, in general terms, tanker operators are strictly liable for oil pollution releases from a tanker or an oil rig. The current limits of liability are $75million for offshore oil rigs and roughly $22million for doublehulled tankers. As more particularly described in the Appendix, these limits do not exonerate an owner from removal costs, civil penalties (if significant fault is involved in the incident), and claims by state and local governments. Also, amounts recoverable from a U.S.-flagged entity are augmented with funds on deposit with theU.S. Oil Spill Liability Trust Fund.80 For our purposes, however, it is important to consider that most nations follow the IMOsystem which has different standards for an owners basic liability, liability caps, and backup funding. The relevant IMO conventions are collectively known as the
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CLC-IOPC Fund regime and include the 1969 Civil Liability Convention (CLC)81 and the 1971 Fund Convention.82 The 1969 CLC and the 1971 Fund Convention were subsequently amended, leading to the adoption of the 1992 CLC, the 1992 Fund Convention, and the 2003 Supplementary Fund Protocol. These two conventions co-exist internationally: the basic liability of the shipowner is established in the CLC Convention whereas the FUND convention (which in fact refers to an IMO administered fund) provides a tiered financial backstop for claims which exceed theowners basic liability. Compensation is available for pollution damage from oil suffered in the EEZ of a one ofthe parties to the FUND convention regardless of the flag of the tanker, the ownership of the oil, or the place where the incident occurred. Complicating the analysis is the fact that even though a particular flag state is part of the IMO scheme, not all flag states are party to the most modern version of the CLC Convention or party to the 2003 Supplementary FUND Protocol. Nonetheless, to give readers a general idea of the amounts that would be available to pay for cleanup and claims inthe event of a mishap, Table 1 below provides a summary. TABLE 1: Maximum amounts of compensation available in respect of any one pollution incident (values expressed inmillion SDR) under different international legal instruments in force and number of contracting states.83
Tanker Size (grosstonnage) 5,000 10,000 50,000 100,000 140,000 150,000 200,000 Contracting States 1969 CLC as amended 0.665 1.33 6.65 13.3 14 14 14 37* 1992 CLC (post 2003) 4.510 7.665 32.905 64.455 89.695 89.770 89.770 124 1992 Fund Conv. (post 2003) 203 203 203 203 203 203 203 105 2003 Supplementary Fund Protocol 750 750 750 750 750 750 750 27
* Includes several states that are also party to both the 1992 CLC and 1992 Fund Convention and several states that are also party to the 1992 CLC, but not the 1992 Fund Convention. Includes one state that has denounced the convention effective 25 May 2012. The 1992 CLC and 1992 Fund Convention will enter into force in 2012 for a further four states that have recently acceded. The 2003 Supplementary Fund Protocol will enter into force in 2012 for one further state. Maximum amount, including compensation paid under 1992 CLC.
Maximum amount, including compensation paid under the 1992 CLC and 1992 Fund Convention.
SDR = Special Drawing Right. The relevant unit of account is the Special Drawing Right (SDR) as defined by the International Monetary Fund. As of 3 January 2012, the relevant exchange rate is 1 SDR = US$1.542930.
Source: UNCTAD, Liability and Compensation for Ship Source Oil Pollution, 2012. Available at http://unctad.org/en /PublicationsLibrary/dtltlb20114_en.pdf.
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The predicate for liability under the CLC is strict liability. That means that the shipowner is liable for any damages irrespective of fault, and that the CLC conventions will channel all claims against the shipowner. There are important exceptions to the shipowners liability for acts of war, natural disaster, the intentional acts of third parties, or negligence on the part of civil authorities in maintaining the lights of navigational aids. In exchange for these strict liability promises, the shipowner will be able to limit its liability to an amount that correlates with the tonnage of the ship. Under the 1992 CLC Convention, the maximum liability of a shipowner is roughly $135million. On top of shipowners liability (which the shipowner will address through mandatory insurance equal to its limits of liability), there is the second tier of compensation from the IMO FUND Convention to pay claimants when claims exceed the amounts of the shipowners liability, the shipowner is insolvent, or the shipowner is legally excused from payment (tanker sank as a result of act of war). Unfortunately, payments (which can reach $330million) under the 1992 Fund Convention may not be available for pollution damage that occurs in a non-contracting state (like the United States). For states that are party to the 2003 Supplementary Fund Protocol, additional compensation up to $1.15billion may be available to pay claims arising in their maritimeterritories. Shipowners will purchase maritime insurance to address their potential liability underthe above-described limits of liability schemes for damages for loss of cargo, personal injuries to passengers or crewmembers, and pollution damage claims.84 For all intents and purposes, procurement of insurance is mandatory for most shipowners because this is an item which flag states and port state control authorities will verify when a ship enters port and because marine mortgage holders and charters will require owners to maintain coverage.85 Because marine insurers tend to provide coverage only for quantifiable risks such as cargo loss or hull and equipment damage, they are loath to cover more indeterminate risks such as third party risk (to other ships following a collision) or oil pollution. As a consequence, shipowners will usually address their potential liability for pollution claims by joining a P&I club that functions as a shipowners cooperative association. P&I clubs are similar to a mutual or cooperative insurance company in which policy owners have banded together to form an association to provide insurance coverage for certain types of risks to all of the members of the association. Coverages vary, although the London P&I Club, one ofthelargest, provides excess liability coverage up to $1billion of coverage for oil pollution claims and $2.06billion for non-oil pollution claims.86 Most P&I clubs are based in the United Kingdom but there are also clubs in the United States, Japan, Sweden, and Norway. Thesethirteen clubs have also formed an International Group of Clubs. The International Group coordinates policy positions among the various clubs and, most importantly, provides reinsurance to their fellow clubs in the event individual claims to asingle club exceed $60million. P&I clubs primarily exist to pay the claims of their member shipowners. In 2012, the London P&I Club paid over $106million in claims, and GARD paid $204million during
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the same period. In contrast, the independent China Shipowners Mutual Assurance Association87 paid $50million in claims in 2011 (1,800 claims). Many of the payouts occurred as a result of marine pollution incidents or in situations in which a shipowner was subjected to legal proceedings that would impose liability vs. the shipowner for its liability in excess of the insurance that it is required to carry by its flag state. There is far less uniformity when it comes to rig operators because they are regulated only by individual coastal states. Unlike shipowners, rig operations do not have P&I clubs to act as a financial backstop and, as of yet, no comprehensive international instrument exists to deal with standards for licensing oil rigs, and their corresponding limits of liability/mandatory insurance requirements, although many offshore producers88 are members of the OCIMF system and, as such, use OCIMF inspectors to ensure that offshore rigs and terminals comply with industry safety and environmental standards.89 In 2001, drafts were circulated at the IMO for the establishment of an International Convention on Offshore Activities and the IMO Secretariat and the IMO Legal Committee endorsed the need for such a global instrument. Those efforts stalled and no global liability and compensation system exists for rig operations. Since negotiation of a global agreement dealing with oil rigs has proven to be an elusive goal, some regional agreements have been reached. The Convention for the Protection of the marine Environment of the North-East Atlantic of 1992 (the OSPAR Convention) applies in the North Atlantic.90 The agreement requires the fifteen state parties to take appropriate measures to prevent pollution from rigs; however, it falls short of providing for strict liability for their rig licensees for cleanup and general damage costs. There is also the associated OPOL agreement among sixteen major offshore operators in the EU and Norway. It makes available a fund of $250million per incident for incidents in the North Sea and some parts of the Arctic. Other regional agreements exist for the Mediterranean, the Baltic Sea area, and the Persian Gulf, but none appear to either impose strict liability on rig operators or to create a trust fund that is available to pay cleanup costs and claims. As things now stand, the liability schemes affecting all categories of ships and oil rigs operating in the Arctic are grossly inadequate to ensure that sufficient funds are available for cleanup and restoration costs should an accident occur. By way of illustration, the estimated costs of the still-unresolved Exxon Valdez incident were between $7 and $10billion; Deepwater Horizon will likely top $40billion; and the recent blowout of a rig in the Timor Sea resulted in a $2.4billion claim by Indonesia (only one of the affected states). If one could conjure a situation in which a tanker was involved in an accident and it fell under the IMO scheme, the absolute maximum amount of money that would be available is about $2billion between P&I coverage and a payout under the FUND convention (assuming the spill occurred in a country that is party to the IMO FUND scheme). If there was a rig blowout in the U.S. EEZ, for example, then the maximum amount payable by the U.S.-flagged rig operator (absent evidence of culpable negligence or criminal neglect)
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would be approximately $75million91 plus access to an additional $1billion from the Federal Oil Spill Liability Trust Fund. Even though OPA-90 and the IMO FUND conventions have been modified to reflect current costs of a major oil spill, it is clear that there are major gaps in the liability schemes (particularly as relates to rigs) and that the amounts allocated are insufficient to pay cleanup costs. Moreover, several of the Arctic states are not party to the abovedescribed existing maritime liability and compensation agreements. And, as currently envisioned, the Polar Code does not provide mechanisms for financial remediation incase of accidents. The Arctic Councils recent agreement concerning oil spill response is silent on the question of how the costs of cleanup willbe financed and how injured parties are to be compensated. To ensure that Arcticcleanup and damage claims can be resolved in a responsible manner, oil and gas extractive activities will need better risk underwriting.
Addressing the Gaps

In this section, we examine the gaps discussed in preceding sections and propose some concrete suggestions to address them. Loosely borrowing from the U.S. governments approach for the protection of critical infrastructure,92 the issues (andtheir solutions) are grouped and analyzed as follows:
Prevention Issues. Given that there is likely to be increased human activity in the
Arctic, what is the best approach for financing the infrastructure and other costs to address safety of navigation concerns for both transit and destination shipping? There is really no dispute that many areas of the Arctic Ocean need to be surveyed; the real question is who should do it and who should pay. Similarly, what steps should be taken to ensure that those that use the marine environment in the Arctic have the correct type of equipment and crew training, recognizing that many flag states will either not have the regulatory will, or desire, to impose expensive training and equipment standards on their flag vessels? Also, are there things that can be done to prevent accidents from occurring on rigs, pipelines, and other offshore facilities?93
Response Issues. The Arctic has great untapped hydrocarbon, mineral, fishery,
and timber resources that will serve as a strong demand signal for an increased range of maritime activities. Moreover, the Arctic is becoming a popular destination spot for tourists and a conduit for local shipping traffic to supply coastal communities. The recent conclusion of an Arctic Council-brokered SAR agreement is a good first step, but there is very little response capacity available for lifesaving, emergency ship repair or salvage, oil spill containment, and rig blowout response. How will this response capacity be developed and financed?
Recovery/Reconstitution Issues. If there is an oil spill or some other significant
mishap, there is a high probability that its effects will not be limited to a single
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country. As things now stand, the liability schemes affecting all categories of ships transiting the Arctic are inadequate to ensure that sufficient funds are available for cleanup and restoration costs should an accident occur. The same can also be said of oil rig operations. Given that, and to avoid a situation in which there is a regulatory race to the bottom94 in which some countries to gain a competitive advantage do not capture all of the potential costs of a mishap in their license fees, can a uniform approach be taken among the Arctic countries to avoid the issues of underfunded and conflicting liability schemes for actors who are involved in mineral or hydrocarbon extraction?
A Precondition to Action: Strengthen the Arctic Council

Before looking at the three main issue areas, a necessary condition for implementing any of the options is to upgrade the Arctic Council. Even though there is a certain amount of hype associated with Chinas and other states aggressive efforts to become observers of the council,95 the fact remains that the council has no legal personality or status. This is understandable given the terms of the 2008 Ilulissat Declaration,96 whichis credited as an important council founding document. That declaration, by the five coastal states bordering the Arctic Ocean, reaffirms that sovereign rights in the Arctic are predetermined by UNCLOS and that the affected states remain committed to th[at] legal framework.... In other words, since UNCLOS predetermined most rights, there was no compelling need for additional rule-making by the council or otherwise. The document also stated that the five Arctic littoral states would work together including through the IMO to strengthen additional measures and develop new measures to improve safety of maritime navigation and prevent or reduce the riskof ship based pollution.... The inevitable question that arises is whether it makes continued sense to pursue enhanced governance on a multilateral basis (as envisioned in the Ilulissat Declaration) or to enhance the status and power of the Arctic Council. The councilis currently made up of the eight Arctic nationsCanada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United Statesand recently granted observer status to India, Italy, China, Japan, Singapore, and South Korea.97 In any event, the Arctic Council structure is the only game in town and valuable time would be lost98 in trying to establish a new multilateral structure that, in the end, would involve time-consuming and potentially fractious debates over who should be included in the structure. Furthermore, given that the only states which are not among the five Arctic Ocean littoral statesFinland, Sweden, and Icelandcan all make claims to geographic proximity and trans-boundary effects to their respective EEZs if an incident were to occur, it makes good sense to incorporate all eight states into a multilateral structure. These states have a political orientation that is likely to support conservation and environmental protection as Arctic resources are developed. Not including all of the Arctic Council members would conceivably put atrisk the contributions of the three additional participants in the recently concluded ArcticSearch and Rescue Agreement. Finally, and to be discussed in greater detail below, a key tool which Arctic States can use to enforce enhanced
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shipping standardsis port state control agreements and inspections. If all of these states are included in an enhanced port state control regime, that will curtail the number of ports where merchant ships flagged outside the region can call for logistics support orto load/unload cargo and not be subject to inspection. The desired shape of the Arctic Council is certainly open to debate; but a couple of basicprinciples should guide the reshaping effort:
Claims to ocean territory and associated resources need to be guided by the
principles in UNCLOS. This confirms the basic holding of the 2008 Ilulissat Declaration that national claims will be determined by reference to the UNCLOS principles and its institutions.
To the maximum extent possible, the International Maritime Organization (IMO), and
the instruments that it oversees, such as SOLAS, MARPOL, COLREGs, etc., need to be the default process for any types of governance affecting shipping and other maritime activities and the Arctic Council. However, there also needs to be a frank realization that the IMO process will frequently not produce a satisfactory outcome in a reasonable period of time because of the endemic bureaucratic delays encountered atthe IMO or because of blocking actions by outsiders who will try to obstruct governance measures that they perceive will cost them money.99 Given those dynamics, the Arctic Council should be prepared to broker multilateral agreements among the Arctic Council members. Membership in the Arctic Council, including observers, needs to be predicated on adherence to shared values regarding responsible development that does not compromise protection of the environment of marine and coastal areas. It also needs to be predicated on the notion that states, andtheir licensees, must make financial and in-kind investments in equipment and infrastructure to make the Arctic a safe venue for development. Put another way, financial solvency should precede activity.
There is no imperative for the Arctic Council to establish an economic or political
union along the lines of the European Union or its institutions (the EU Court of Justice, the European Commission, etc.). The Arctic Councils jurisdiction should be limited to regulation of activities that take place in the marine environment or are likely to directly affect the marine environment and which, if there were an incident, would have a likely trans-boundary impact.
There is no imperative for a grandiose Arctic Convention that replicates the
Antarctic Treaty or the Outer Space Treaty for the simple reason that most areas in the Arctic are under the jurisdiction of the individual members of the Arctic Council. Moreover, too much time would be wasted in attempting to solve the issues discussed in this paper in a comprehensive UN negotiation. A massive UN negotiation would also inject considerable uncertainty and instability into the current legal regime and could, in the end, deter prudent development.
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It does not now appear that the council has the capacity to function as an executive entity that is responsible for acting as a multinational policy broker. However, to be able to meet the dynamic changes which are taking place and keep pace with development, it probably makes sense to establish an executive arm of the Arctic Council that would have permanent employees who are charged with implementing the will of the Arctic Council in regulatory enactments and in representing the Arctic Council internationally at organizations like the IMO, the International Hydrographic Organization, and the International Telecommunications Union. One model that shouldbe given close examination is the structure of the U.S./Canada JointCommission which is charged with managing and protecting shared waters (e.g.,the Great Lakes and the Columbia River). The Joint Commission implements about a dozen treaties and international agreements and also, as a commission, has some limited rule-making authority.100 Assuming that the commission model is adopted, it is best that the commission befunded by direct contributions of the Arctic Council governments. It will later be suggested that the Arctic Council be empowered to collect funds on behalf of the member countries to finance things like improvement of navigation aids. In that case, seeking contributions from regulated industries is appropriate since improvements in navigational technology are a tangible benefit to industry. In the case of the commission, the intent is that it will operate on behalf of sovereign countries and industry should not be involved in the funding of such inherently governmental activities. As for costs, the Arctic Council should simply divide the costs of the commission on a prorata basis among the permanent members. Since the costs of such a commission should be modest, it makes little point to establish elaborate formulae for allocating costs for theseactivities. Observers in the Arctic Council should also be assessed. Decision making in the Arctic Council and its associated commission should be by consensus to the maximum extent possible. As is the case in NATO and the Council of Europe, which are consensus-based organizations, silence procedures should also be considered as a method of achieving consensus outcomes. Very simply, a proposal with strong support is deemed approved unless any member raises an objection to its enactment before a certain date. For matters which cannot pass due to an absence of consensus (as enhanced with silence procedures), consideration should be given to establishing a voting scheme in which less than consensus can result in a decision by the Arctic Council or its supporting commission. Arguments can be advanced for a variety ofdifferent schemes, but it would seem that any majority voting scheme would need to give preference to countries with Arctic Ocean coastlines, namely, the United States, Canada, Russia, Greenland (Denmark), and Norway (Svalbard Island Administrator). To be able to implement many of the recommendations in this report, the Arctic Council acting itself, or via a commission, would need to have the authority to enter into contracts and international agreements, own property, receive and administer funds and, as indicated, have legal personality so that it is able to represent the
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Arctic Council at international bodies like the IMO. Giving the Arctic Council legal personality should not imply that the council (or commission) would directly enforce the rules that it establishes. On the contrary, the council (or commission) would havethe authority to pass rules/regulations which would then be transmitted for each ofthe member countries to implement via domestic legislation or rule-making and each nations marine safety organization (coast guard) would then enforce these decisions. In cases in which amember country refused to implement a decision of the council (or commission) in a reasonable period of time, it should trigger mandatory dispute settlement procedures orremoval of the country from the council. Our realization that the Arctic Council is the only suitable body to broker a variety of Arctic issues is not unique. It is instructive that the vice president for Shell Oil, in testimony before the Senate in March 2013101 on lessons learned from Shells offshore Arctic drilling program (which was put on hold in May), indicated in his testimony that: The Arctic Council is proving to be a viable forum for Arctic nations to come to agreement on mutually beneficial programs that can make a significant contribution to maritime safety and protection of the environment. The Arctic Council has several relevant working groups.... Given the proximity of oil and gas basins and the likelihood of oil and gas development stretching across national borders, the Arctic Council is best positioned to encourage harmonization of regulatory standards covering industrial development in theArctic.102 Similarly, in an April 2012 Risk Insight Report prepared by Chatham House-Lloyds entitled Arctic Opening: Opportunity and Risk in the High North,103 the authors opined that future investment in the Arctic will be hesitant unless a comprehensive regulatory approach is developed. They made the following summation concerning the proper role of the Arctic Council: Comprehensive and rigorous risk management is essential for companies seeking to invest in the Arctic. Those companies that can manage their own risks, using technologies and services most adapted to Arctic conditions, are most likely to be commercially successful. A long-term and comprehensive regulatory approachincorporating national governments, bodies such as the Arctic Council, and industry bodiesis necessary for effective risk management, mandating cross-Arctic best practices and defining public policy priorities on what constitutes appropriate development.104 [Emphasis added.]
Prevention Issues, Possible Solutions Mandatory Adoption of Existing IMO Guidance Instruments and Industry (OCIMF and P&IClub) Inspection Regimes There is ample agreement that the conditions in the
Arctic are harsh and that ships, oil rigs, terminals, and other structures are subject
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to unusual risks. In 2009, the IMO established Guidelines for Ships Operating in Polar Waters.105 This was done in conjunction with other enactments including the 2006 Enhanced Contingency Planning Guidance for Passenger Ships Operating in Areas Remote from SAR Facilities,106 the 2007 Guidelines for Voyage Planning for Passenger Ships Operating in Remote Areas,107 and the 2006 Guide for Cold Water Survival.108 All of these measures are voluntary. The three guidelines mentioned above would, if mandatorily adopted for all maritime traffic in the Arctic, dampen a significant number of concerns that unprepared ships would enter the Arctic seas and suffer some other type of casualty that risks pollution of the marine environment or loss of life (of individuals on the ships or responders). There are a few ways that this could be accomplished but the most effective method would be for the Arctic Council to eliminate the permissive language in the three instruments and proffer the revised instruments to the eight Arctic Council members as a mandatory port state control MOU (Memorandum of Understanding) which each would adopt for all ships entering their worldwide ports. This approach follows the Regime of Port State Control, i.e., port access is conditioned oncompliance with applicable IMO Guidelines,109 although there would need to be limiting language that ships would be subject to the polar requirements only if they ever sailed into the Arctic geographic region.110 It would also be interesting, indeed advisable, for the Arctic Council to ask the Arctic Council observers to be part of the system. In addition to the technical features noted in the three IMO instruments, the Arctic port state control MOU could incorporate the other enforcement features:
General inspection of a ships records for verification of compliance with its IMO
(flagstate) operating certificates, records of completion of required maintenance items, and no overdue maintenance items established in a prior flag or port state control inspection;
Verification that the ship has insurance, is a member of a P&I club (as applicable),
andhas current inspections;

Verification, if the ship is a tanker or chemical carrier, that the vessel is compliant
with the OCIMF (SIRE) inspection regime and that the inspections are up to date;
Expanded inspection of ships from high-risk registries; Quizzing of the crew and inspection of training records to ensure an understanding
of the operational aspects of the IMO polar guidelines;

Mandatory pre-arrival notice of a ships entry into the Arctic zone of applicability; Mandatory publication of vessel planning guidance as part of the pre-arrival
notice;
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Compilation of a data base which accumulates data on all ships reporting arrival
intothe zone and the inspection results; and

Mandatory sharing of information on ships found to be high risk and ordered to
leavethe port or internal waters. Port state control enforcement is predicated upon strict inspection of the ship and crew when they are either in port in a member country or in a coastal states internal waters. These requirements cannot be imposed remotely when a ship is in transit in either the high seas or in innocent passage through the territorial sea of a coastal state. Therefore, in order for these strict measures to work, the inspection regime needs to be imposed upon a ship entering any port or internal waters of the MOU parties versus limiting compliance only to ships calling on Arctic ports.111
Provisional Application of the Polar Code The Polar Code is still in the midst of negotiation at the International Maritime Organization. Press reports indicated that Canada,112 in particular, has been especially aggressive in seeking the instruments passage and in making sure it is mandatory for all ships that enter the Arctic. As notedpreviously, the codes development is behind scheduleNorwegian officials project that the Design & Engineering Committee (DE) will not complete its work until2014, which means that adoption by the Assembly could not take place until it meets in November of 2015.113 If the code is adopted using the tacit consent procedures by the relevant IMO Committees (Maritime Safety Committee (MSC) and Marine Environmental Protection Committee (MEPC)) in 2014, then it would likely be well into 2015 or 2016 before the instrument enters into force.
Preliminary indications are that the code will apply to all waters north of 60 degrees latitude. In addition to sharply limiting the allowable amount of discharges that are permitted, the code will very likely improve upon the existing guidelines and provide clear definition of a ships conformity with the uniform International Association ofClassification Societies (IACS) Polar Class114 and current ice conditions. There are likely to be provisions included which prescribe redundant navigational equipment requirements for ships operating in the region (given the special problems of navigating in the polar region), mandatory installation of Class A automatic identification system (AIS),capability to send and receive ice broadcast information, and some shipboard radar with capability to detect localized ice. Above and beyond those changes, it is difficult to predict exactly what will be agreed upon because of the serious differences which exist among the negotiators over a number of issues, particularly the Canadian demand that there be zero shipboard discharges in the Arctic. There are also serious differences over whether ships that are currently involved in the Arctic trade will be grandfathered from the polar class requirements. Given that formalization of the Polar Code is not immediately in the offing and questions remain whether the Code will have immediate and direct application to all
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SOLAS and MARPOL ships, the question remains whether the United States and other Arctic Council members should do something in the near term. Unquestionably, the interests of the United States and all other Arctic Council members are best served by enactment of an IMO sanctioned Polar Code that incorporates the most rigorous technical, operational, and environmental standards noted in the previous paragraph. But, consistent with the previous recommendation to implement the current Arctic Guidelines, it makes sense for the Arctic Council, on behalf of theArctic States, to also provisionally apply the current draft of the Polar Code usingthe port state control mechanism. This could be done once the code is finalized by the requisite IMO committee (DE) and while the code is either awaiting approval by the IMO Assembly (if that approach is still used) or after it has been adopted by the competent IMO committees and is awaiting sufficient ratifications. In either case, the councilworking through individual port state control authoritiescould implement some or all of the relevant provisions115 when ships enter the ports of one of the council members or their internal waters. Or, taking the case of Canadian demands for a zero-discharge regime as an example, the council members could adopt a similar provision exceeding the standards in the current draft of the code if deemed appropriate by the Arctic Council members. Doing so in support of a fellow Arctic council country is probably good policyand may also help to shape any final negotiations of the Code atthe IMO.
Arctic Council Adoption of the Northern Sea Route There seems to be a consensus that for the foreseeable future the Northern Sea Route (NSR), which traverses the coastline of Russia, is the only commercially viable route for transit and destination shipping to oil and gas and mining areas. As extensively discussed above, there are safety of navigation challenges in the Arctic because shipping routes are not instrumented, charted/surveyed, and are not radio-guarded by coastal public safety officials to provide safety related information (current weather and ice reports) or safety services. Given the very high costs of developing suitable routes through Arcticwaters, the Arctic Council should make route development a high priority.
There have been isolated runs through the Northwest Passage, which traverses islands in the Canadian Arctic. However, much of that route remains inaccessible for much of the year and there has been little effort by Canadian officials to offer its use for commercial purposes. The NSR is another matter. Russia officials have supported commercial development of the route and a special governing body Glavsevmorput (Chief Directorate of the Northern Sea Route) was established in 1932 to supervise navigational matters and to build Arctic ports. Also, an International Northern Sea Route Programme (INSROP)116 comprised of scholars and maritime experts from Russia, Norway, and Japan was established in June of 1993 to increase the knowledge base of the NSR from Novaya Zemlya in the west to the Bering Strait in the East. The basic conclusion of the program, back in 1999, is that a substantial increase in international commercial shipping (in the route) is feasiblein economic, technological and environmental terms provided that Russia adopts a reasonable tariff policy for the route, modern icebreakers are available, and that passage is limited to ice-hardened cargo vessels.
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Since publication of the final INSROP report, there have been substantial increases in shipping trafficdue to physical changes in Arctic watersand Russia has formalized its regulations for transiting vessels. In 2009, the first two international commercial cargovessels traveled north of Russia between Europe and Asia.117 In 2011, thirtyfour ships passed through the route (over half reported mostly ice-free conditions). In 2012, forty-six ships made the passage and the Wall Street Journal reports thatin the summer of 2013, 393 transit permits were issued.118 Russian authorities are making future development of the NSR a priority to enable development of its Arctic resources, particularly in the oil and gas arena. The Russian Duma enacted federal legislation (Law No. N132-03) concerning the NSR in July 2012.119 That law formally established the geographic coordinates of the route and authority of the Northern Sea Route Administration to issue permits and otherwise manage the operation of the NSR. That law also confirmed that charges for ice-breaking service will be based only on amount of services actually delivered.120 The January 17, 2013 Regulation,121 implementing Law No. N132-03, contains details on the permitting process and mandatory reporting requirements. The regulation also stipulates that the NSR Administration may, as part ofthe permitting process, require that ships be escorted by an icebreaker or embark an ice pilot depending on the prevailing ice conditions. Now, transiting ships pay only for the costs of services directed by the authority. In terms of a policy recommendation, the Arctic Council, on behalf of the members, should strongly consider adopting the Northern Sea Route as the preferred navigational route that ships take through the Arctic and to concentrate SAR and other response assets nearby the route. In taking that action, the Arctic Council should respect Russian control over the NSR and recognize Russias regulatory jurisdiction over mattersrelating to safety of navigation.122 Such recognition should be conditioned upon Russian authorities agreeing that they will not enact regulations or tariffs which are excessive or unduly burdensome or which have the practical effect of suspending the right of ships to pass through the Russian EEZ and territorial sea under the regime of high seas freedoms or innocent passage, respectively. Furthermore, once there is basic agreement among the Arctic Council members that the NSR Regulation is reasonable and should be adopted, then the Russian Federation should be encouraged to have the route formally presented to the IMO for adoption as a routeing measure123 under SOLAS ChapterV.124 Adoption of the NSR, and the sanctioning of the current practices of requiring prior application and the mandatory pilotage/ice-breaking services, will be criticized by some as inconsistent with the UNCLOS provisions on innocent passage since Articles17to21 prohibit coastal states from enacting regulations which have the practical effectof restricting vessels from exercising their right of innocent passage.125 Right now, Russia legally justifies the NSR Regulations by citing Article234 of the LOS Convention pertaining to ice-covered areas. Some portions of the route also appear to traverse the landward sides of some Russian straight baselines; hence, those waters can be classified as internal waters and Russia has every right to establish whatever rules it wishes to
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condition access to those areas. In our view, a legal juxtaposition of Article234, the regime of internal waters; Article21, relating to non-discriminatory regulations affecting innocent passage; and Articles 73 and 194, regarding the rights of coastal states to enact regulations to protect their marine resources/protect the marine environment provide authority for Russia to develop and reasonably regulate the NSR. Should Russia wish to continue to maintain an advance notice/application, coupled with mandatory fees for ship services, the Arctic Council should support that scheme. The costs to Russia for charting, instrumenting, and operating this route are daunting and most features of the 2013 NSR regulation can be logically related to enhancing safety of navigation and protection of the marine environment. Obviously, if the NSR were formally sanctioned by the IMO as a routeing measure under SOLAS ChapterV, that would eliminate any debate as to whether the current NSR regulations are overreaching. The adoption of the NSR is not meant to imply that there will not be shipping outside of that route, particularly in the case of destination shipping to resource areas. In the case of such locations, the individual countries have every incentive to ensure that these ports are safe for navigation and can insist that the companies engaged in the extractive activities either pay outright for necessary port improvements or enter into public/private partnerships to pool public funds and private sector funds to ensure that these ports and their approaches are safely accessed. Also, to the extent that there may be concerns regarding the physical condition of a ship, since the ship will be landing to either receive or discharge cargo, the port state can make use of the various recommendations in this report to condition access to its port on adherence to any reciprocal marine safety or financial responsibility regulations which it wishes impose on ships entering its ports.
Replication of the OPOL Agreement in the Arctic Supported by an Improved OSPAR Arrangement The OSPAR Convention of 1992126 and the associated Offshore Pollution Liability Association Agreement (OPOL)127 establish both a government-to-government relationship among the sixteen states (including the EU) involved in offshore oil and gas activities in the North-East Atlantic and an associated agreement among the major offshore operators. The OSPAR Convention establishes a legally binding system in AnnexIII wherein each of the states commits to require all of its offshore licensees to commit to specific environmental standards (air, water, land, and rig based) and use of best available oil drilling technologies. Each party to OSPAR commits to an active permitting process and to maintaining publicly available records of its licensing actions. Lastly, all of the states commit to a program of rig monitoring and inspection by inspectors and by maritime aircraft and vessels to ensure that the rigs are being responsibly operated. The OSPAR agreement uses a Commission to perform some independent water quality monitoring and inspections.
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As noted previously, issues pertaining to harmonization of conflicting national standards (U.S. vs. Canada vs. EU, etc.) has been a primary focus of OSPAR implementation officials leading to considerable consternation with industry which is caught in middle of each member states environment ministry arguing for the primacy of its regulatory approaches and standards. Also, given that Russia is part of the Arctic equation, it is doubtful due to the nature of their environmental laws and practices that one could ever achieve harmonization. For these reasons, expansion or direct replication of the existing OSPAR Convention is not recommended because it would lead to protracted debates over the dominance of one regulatory standard and would divert important attention away from building a system which relies upon genuine financial solvency and market-based tools (insurance, inspections, fear of liability) to drive the result. Also, the associated OPOL agreement among the North Sea oil producers is the financial glue that holds the arrangement together and it should be replicated to address relevant prevention, response, and recovery issues. Given the lessons learned from the current issues facing implementation of OSPAR, a much scaled back government-to-government agreement along the lines of the OSPAR Convention and a new OPOL agreement that includes the United States, Russia, and Canada128 would be a viable approach among the various Arctic littoral countries when it comes to the licensing of rigs and associated structures. As noted in the Appendix, there is currently very little symmetry in the current regulatory approaches and the following is recommended: As relates to prevention issues, the government-to-government agreement would:
Establish a legal mandate that all state parties will maintain an active licensing
program and vigorously enforce their national laws to control marine pollution and otherwise meet their obligations under UNCLOS 235
Require each state to maintain a transparent repository of the applicable licensing
rules and conditions that is available to all Arctic Council member states and other stakeholders
Require all platform and terminal licensees to be active members of the OICMF
system because it has its own platform inspection system and it develops and enforces relevant industry standards
Require all platform and terminal licensees to be members of the Arctic OPOL
agreement that conducts water and other monitoring activities as financial responsibility controls within the overall zone of application as well (discussed below). Because of the above-mentioned difficulties in harmonizing the diverse environmental standards of the various countries and sovereignty considerations. this structure
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intentionally bypasses giving the government-to-government entity any direct regulatory authority. Given that, use of the OPOL to perform an environmental monitoring function, on behalf of the member governments and industry, to validate the work of each nations regulatory authority would seem to be an important ingredient in building mutual trust and confidence in each state partys regulatory system.
Arctic Council Establishment of a Navigational Safety Improvement Fund Another method that could be used to raise funds for installing navigational aids and to conduct surveys is a replication of the Cooperative Mechanism of the Straits of Malacca and Singapore. States that are major users of the navigational aids in the Straits of Malacca and Singapore are encouraged to become members of the mechanism. The legal basis for that arrangement is Article43 of the LOS Convention which inter alia states that states bordering straits and those states which make use of a strait should establish an agreement to establish and maintain navigational aids. In roughly 1999, the Japanese and Singapore governments discussed the need for such a fund although user states except for the Nippon Foundationwere content to leave it to the states bordering the straits to assume responsibility for maintaining navigational aids (including instrumentation of traffic separation schemes).129
In 20062007, a new framework agreement was launched in conjunction with the IMOs Protection of Vital Shipping Lanes initiative. That initiative recognizes that the burdens of keeping these sea-lanes open should be financially apportioned among user states. The Cooperative Mechanism has undertaken studies and updated traffic separation schemes in the straits. Most importantly, the Mechanism established an Aids to Navigational Fund which is funded by each of the flag states130 that is a party to the arrangement.131 The fund has received $15million in deposits and has been funded by both regional users such as Japan, Korea, India, and China as well as others outside theregion including Greece (due to its large flag-of-convenience fleet), Germany, Norway,andthe European Commission. The Cooperative Mechanism represents historic cooperation between states bordering a strait used for international navigation and user states, as well as other interested stakeholders. Heretofore, coastal states had to assume all of the burdens of keeping these waterways safe or risk having incidents in their littoral areas. The involvement of the IMO was slow in coming but reflects recognition that the Strait of Malacca is a maritime superhighway and is in need of safety measures. Traffic in the strait is heavy on the order of 70,000 transits per year which includes the passageof elevenmillion barrels of oil through the strait on a daily basis.132 With the exception of Greece, none of the flag-of-convenience countries have made contributions to the fund, calling into question whether the voluntary contribution mechanism can work inthe long term given that UNCLOS prohibits states from levying mandatory fees ortolls on ships transiting through international straits.133
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As far as the Arctic Council is concerned, formation of a cooperative mechanism that is patterned after the Strait of Malacca organization is certainly appropriate. Articles234 and 235.1 of the LOS Convention certainly provide a philosophical foundation for pursuing this type of cooperative model. Indeed, the Arctic Council should consider issuing a mandate to all of its members and observers that they must participate in the cooperative mechanism to be considered members in good standing of the council.134 And, to be discussed elsewhere, such a mechanism would foster cooperation by helping to involve marine insurers (including the P&I clubs) in efforts to reduce risk in those areas of the Arctic in which there is a need for navigational aids.135 Marine insurers and the P&I clubs certainly have a direct financial interest in reducing risks to safety of navigation and therefore a financial incentive to be active participants in the proceedings of the cooperative mechanism and funding itsactivities.
Response Issues and Possible Solutions

Most of the cost and capacity-building issues associated with response can be categorized in one of two areas:
Costs associated with responding to ship or oil rig casualty to effectuate a
lifesavingrescue, or
Costs associated with responding to a ship or oil rig casualty to contain an oil
spillorsome other type of marine pollution incident. These are both issues that the Arctic Council has addressed via the 2011 Agreement on Cooperation in Aeronautical and Maritime Search and Rescue in the Arctic (SAR Agreement)136 and the recently concluded Agreement on Marine Oil Pollution Preparedness and Response in the Arctic137 (Pollution Response Convention). These agreements are positive first steps in addressing the response challenges in the event of a casualty and improving interoperability among military (SAR) response forces.138 However, neither agreement commits the member governments to establish forward operating bases, commit forces, preposition equipment, or otherwise commit funds tothe establishment and maintenance of a comprehensive response capacity.
Enhancing Ship or Oil Pollution Response Capacity In 2012, the U.S. Department of Interior authorized Shell Oil to drill exploratory wells in the Beaufort and the Chukchi Seas in the U.S. EEZ, which is adjacent to the coastline of Alaska. As a condition of Shell being authorized to do this drilling, the U.S. Department of the Interior imposed avarietyof Arctic specific conditions including:
[D]eployment of subsea containment systems..., limitations on the Chukchi Sea drilling season to provide time for open-water emergency response, a blackout on drilling activity during the subsistence hunts in the Beaufort Sea, and surrounding vessels with pre-laid boom during fuel transfers. DOIs Bureau of Safety and Environmental Enforcement (BSEE) had inspectors onboard both
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of Shells rigs around the clock throughout drilling operations, and the U.S. Coast Guard was a constant presence in the Arctic as well.139 In addition to meeting the preceding federal standards, Shell deployed its own fleet of vessels and support craft including nineteen tugs/vessels, twenty aircraft, seven hundred personnel (part of the incident command structure), and a suite of various types of oil spill response equipment.140 What is clear from the above is that in order for oil and gas activities to be safely conducted, significant infrastructure investments have to be made before offshore resources can be exploited. These investments can be done on a one-off basis in connection with each exploration license, although it is probably much more cost effective for a body, such as an Arctic Council task group, to conduct strategic planning which identifies the areas of greatest risk and then develops a master response plan, taking an all hazards approach with heavy emphasis on responding to maritime disasters or oil pollution incidents.141 A coordinated response plan is an inexpensive first step that the Arctic Council should take to ensure that the planning activities of individual states are complementary. However, the biggest issue facing the Arctic Council countries, individually and collectively, is finding a way to fund establishment of sufficient infrastructure and response capacity to respond to a large pollution incident emanating from a rig or drilling support structure(s). It is easy to forecast exceptionally large costs to construct response infrastructure and to pre-position sufficient cleanup supplies and equipment to support an integrated support plan. Given that, it does not appear financially feasible to exclusively rely upon the shipowner-funded cooperative mechanism recommended above to pay for these response costs. Rather, the financial burden of upgrading infrastructure and response capacity should fall upon oil and gasand mining licensees. Two basic options emerge: Option 1: Arctic Council as Coordinator. In this option the council would conduct regional planning with each of the council members and then establish regional response standards. To ensure that countries are working diligently towards pursuit of a common response framework, the planning documents would need to establish some financial goals that each member state would assume in order to adequately fund its nations participation. This option builds upon the 2013 Oil Pollution Response Agreement but would take it a step further by establishing equipment and technical standards that would be used by each of the countrys pollution response forces and a legally binding commitment that all of the countries pledge mutual aid and assistance to one another in the event of an emergency.142 Or, as is the case in the SAR agreement, each country could have designated areas where it has responsibility for response, irrespective of national boundaries, so that response capacity can be dispersed to those locations where it is most needed. Funding for this option would be accomplished via fees collected by national authorities from their oil, gas, and mineral licensees,143 with the monies deposited in a trust fund that national
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authorities would use to finance the acquisition and pre-positioning of response capacity.144 This particular option is likely to be the simplest to implement because it relies upon collective actions by individual governments. It is less likely to stimulate unhelpful political discussions to the effect that countries are ceding their sovereignty or spending scarce funds on an international organization. Option 2: Arctic Council SurrogateOPLA Orchestrated with P&I Club Help. In this option, the council would sanction creation of an action entity that would be responsible for both planning for future incidents and responding to them. This recommendation could be implemented with framework language in the same government-to-government agreement (loosely based on OSPAR) mentioned above in the Prevention section. The obvious candidate is the Offshore Pollution Liability Association (OPLA) Ltd.145 that implements the OSPAR agreement in the North Sea. OPLA functions as a limited liability association and is responsible for administering the liability fund (discussed below), conducting inspections of rigs in conjunction with OICMF, purchasing response equipment and supplies, and entering into access agreements with member states to provide cleanup or response actions up to $250million incost. A hybrid arrangement is obviously possible with the Arctic Council assuming the emergency planning role and the notional OPLA serving as the funding arm of the Council to pay for the pre-positioning of response supplies and the lease of suitable response vessels and aircraft. And, to the extent that the notional OPLA did not feel it financially prudent to either purchase or lease an aircraft or vessel, it could enter into agreements with any of the council members to acquire that airlift or vessel support on a reimbursable basis. Other permutations are possible including vesting all of these responsibilities in a governmental arm of the Arctic Council, although industry is much more likely to be comfortable funding an OPLA-like organization.146 Assuming one chose to go the association route, the OSPAR-like international agreement would contain a requirement that all oil, gas, and mineral licensees would be required to join the association and comply with the OPLA governance requirements including that operating costs would be assessed against all of the commercial entities which joined the association. Similarly the P&I clubs, on behalf of shipowners who operate in the Arctic on destination or transit routes, would also be invited to contribute to the OPLAs operation since the OPLA organization would be capable of responding to marine pollution incidents from both ships and rigs (and associated storage tanks and pipelines).147 Since the notional OPLA is not under the control of any single sovereign, there is a greater probability that other interested states (such as the Arctic Council observers) would be in a position to make financial contributions to the procurement and operation of this common response capacity. This option also has had some proven success in the North Sea and there is no reason why it cannot be replicated in the Arctic.148
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Increasing Lifesaving and Rescue Capacity

Because military forces and military platforms have traditionally conducted SAR operations, the 2011 SAR agreement and its operating exercises seem to be on the correct trajectory. If human activity in the Arctic continues at the current pace, then an increased military/SAR footprint is probably justified so that forces have accessto bases of operation that are properly supplied and proximate to the site of an emergency. As noted above, there are a couple of ways in which mineral and oil and gas licensees can make contributions to an Arctic Council infrastructure fund. However, some funds realized from assessments for infrastructure improvements from energy companies should be earmarked for providing financial support to multinational SAR forces for their costs of facilities, berthing of equipment, operation of aircraft, and preposition ofsupplies. The very harsh operating conditions in the Arctic will result in unusual demands on people and machines. For that reason, as well as because the eight Arctic states already have committed some military forces and infrastructure to the lifesaving endeavor, the primary source of funding can and should remain with the national governments. These forces are instrumentalities of their sending states and there should be no question that the military forces are national assets under the control of sovereign governments.149 That said, the 2011 SAR agreement makes no mention of military forces being able to seek reimbursement for SAR services that they renderto a non-Arctic Council ship that is in distress. Strong consideration should be given toamending the SAR agreement to include a provision in which the Arctic Council, on behalf of the SAR participants, is legally empowered to demand reimbursement from any corporate entity, shipowner, etc., that receives assistance. The SAR Agreement should also provide that any such reimbursements for a countrys incremental costs should be credited back to the country(ies) that actuallyfurnishedthe assistance.150 As much as possible, recommendations have been offered which assess the cost(s) of response upon those who are need of public services. The preceding recommendations do not eliminate the possibility that a rogue vessel that is not from one of the Arctic Council states (or a state participating in the Cooperative Mechanism) suffers a casualty and is in need of lifesaving or some other sort of response to control the incident, as was the case involving the loss of the Malaysian-flagged Selendang Ayu which broke apart and sank in Arctic waters in 2004. Elimination of free ridership is a major goal of this study, but in this one instance no reasonable proposals can be put forth to close this governance gap by conditioning response upon advance payment from the flag state. While that could be attempted, it would be highly problematic as a matter of international law,151 due to the mandates upon ships captains and coastal states in Article98 of UNCLOS and the International Convention on Maritime Search and Rescue152 to respond to distress calls. Given this general duty and given the fact that early response is almost always advisable to prevent a ship from breaking up and/or to control the spread of marine pollution, the Arctic states will unfortunately have to
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shoulder many of these burdens by both funding their own participation in the recently concluded Arctic SAR agreement and either acquiring or building the infrastructure thatwill enable the Arctic SAR agreement to be properly implemented.
Recovery and Reconstitution Issues and Possible Solutions

A key finding of this report is that responsible development of Arctic resources must be predicated upon a realistic regime for holding individuals financially accountable for pollution incidents. As documented in the Appendix, the national standards for holding individuals liable are greatly variable from country to country and the general standards in UNCLOS are exceptionally broad when it comes to who can and should pay in the event of a calamity. Maritime actors are able to legally limit their liability by carrying only enough insurance to meet their statutory liability limitand by registering their ships (or rigs) as limited liability corporations so that the owners general assets are not placed at risk. There are exceptions for licensees that drill on the U.S. continental shelf153 but, in general, liability limits for most marine actors are pitifully small. There are also great practical difficulties in being able to actually satisfy a legal judgment that is rendered in Country A against an individual or corporation in Country B that is responsible for pollution incidents which have trans-boundary effects.154 When Chatham House-Lloyds examined this issue, it concluded in a section ominously titled Whose Liability? Which Liability Regime? that: The question of an appropriate liability regime among oil companies operating in the Arctic is contested amongst local populations, environmental campaigners, oil companies and central and federal governments.155 Finally, differences exist in the types of damages that are compensable and whether force majeure is a complete defense to liability (and payment by either the shipowner or its insurers). In assessing remedial steps, one should recall the three natural groupings ofactors whose conductcould give rise to a marine pollution incident: 1. General Shipping. Most ships are governed by the IMO International Limits on Liability Convention, although ships flagged in the United States and Russia are governed by national laws which more or less follow the IMO scheme of allowing a shipowner to have cap on liability for damages to the marine environment (cleanup costs and payment of damages to fishermen) and to passengers and other third parties.156 Interestingly, the IMOcharacterizes the limits in the IMO liability scheme of between $32.2million and $37.5million (depending on ship type) as unbreakable, i.e., that shipowners will never pay beyond that limit. Also, most ships have to comply with the 2001 Bunker Fuel Convention which addresses spills from non-tanker vessels causing oil pollution damage, although their liability is capped overall by the Limits on Liability Convention.157 2. Tankers. Most tankers around the world are governed by the IMO MARPOL Convention and the 1969 Convention on Civil Liability for Oil Pollution Damage (CLC). Tankers flaggedin the United States are governed by OPA-90.158 Under the IMO scheme, vessels greater than 2,000 tons must maintain mandatory insurance equal to their potential liability which is now approximately $135million.159
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Environmental liability for shipowners under the IMO scheme is limited to economic losses caused by the pollutionand cleanup costs. 3. Rigs and Associated Pipelines, Tanks, and Terminals. There is as yet no international instrument on liability and compensation resulting from spills from offshore oil rigs, pipelines, and associated production systems. Liability is a matter entirely governed by the laws of the coastal states including the standards for liability (strict liability ornegligence based)160 and any limits on that liability. As noted in the Appendix, OPA-90 is the relevant U.S. law applied to U.S. licensees and the limit of liability under that statute is $75million.161 Among states, there is very little symmetry except that in the North Sea, which is covered by the OSPAR Convention and OPOL, a $250million fund has been established to pay any damagesand cleanup costs. Note: For those ships which are members of a P&I club, an additional $1billion is available to cover claims of the shipowners which exceed the limits of their basic insurance coverage, or liability which exceeds their limits of liability. To address these conflicting systems any Arctic Council sponsored approach should:
Remind states of their real world obligations under UNCLOS 235 that the activities
which they license are financially responsible and that there are mechanisms in place to gain prompt access to their judicial systems to pay for those injured as a result of a marine pollution incident;
Provide clear guidance to those involved in maritime activities on the limits of
their liability and the standards of such liability, particularly given the fact that the Arctic is arelatively closed sea and an incident could result in suits being filedin multiple countries;162
Assure sufficient funds (given the high costs of cleaning up a large pollution
incident) topay the costs of responding to an incident and satisfying the claims ofthose who areinjured;
Designate a viable non-judicial mechanism for persons (and governments
providingfirst-responder assistance) to file claims for cost reimbursement or to seek economic redress for injuries that they may have suffered as a result of an incident. One possibility is to enlist the aid of the Arctic Council to establish a set of rules that each country would adopt in order to harmonize their laws with one another due to the multiplicity of actors and the disparate liability issues. Were this the EU, such an option would be viable because of the EU principle of direct application wherein EU regulations have immediate effect in the member states legal system and require no
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implementing legislation. While there is commonality of interests in matters relating to the Arctic, the widely disparate nature of the legal systems (especially the U.S. OPA-90 approach) among the Arctic Council members makes it impossible to envision such an approach being effective in the either the near or long term. Accordingly, the following options are offered as ways to bridge the legal gaps without requiring any of the Arctic Council member states to embark on a time-consuming and politically volatile process of harmonizing all of their domestic laws with those of other countries.163
Option 1: Replication of the OPOL Agreement to Provide a Uniform Multinational Approachto Liability and Claims This option would envision replication of the dual OSPAR-OPOL approach for the Arctic, although the OSPAR component would need to be vastly restructured and reconstituted. It would consist of two agreements: one between the states parties who agree to enforce the terms of the agreement with their flag shipping and their oil and gas licensees, and the other an OPOLlike operating agreement among other interested non-governmental parties in the Arctic, including oil and gas exploration companies, the large mineral extraction companies that attract destination shipping, and theP&I clubs.164 The OPOL operating association would collect fees from all of those involvedin Arctic activities, accumulate funds to establish a realistic cleanup and claims fund,165 serve as a fund repository for marine insurance or P&I club payouts, and establish a simplified claimsprocedure which is open to any Arctic citizen who is adversely affected by apollution incident.
To support the operation of this fund, there would need to be a new, legally binding agreement very loosely patterned on the OSPAR agreement in which the Arctic Council governments pledge governmental support for the OPOL operating agreement. In particular,that government-to-government agreement would:
Legally recognize the primacy of the OPOL liability mitigation scheme, i.e., commit
that all of their flag vessels and offshore platform and terminal licensees must join the OPOL to do business in the Arctic and must contribute funds to the OPOL liability and response fund;
Establish overall limits of liability for the OPOL fund (on a per-incident basis)166
and revise limits of liability for individual participants (oil rigs, terminals, tankers,etc.) thatcould, in the case of ships, trump IMO and OPA-90 limits. It would be up to themarket participants in OPOL to decide how to fund increased liability limitsinexcess of IMO and OPA-90by either requiring additional insurance, P&I club membership, or direct contribution to the OPOL fund;
Sanction some process or organization (Lloyds) to make an annual assessment of
theamounts that must be accumulated by the OPOL to satisfy all reasonable and
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foreseeable cleanup costs and claims from serious pollution incidents for a particular year;167
Pledge reimbursable access to government response and SAR assets in the
event of an incident;
Legally recognize the primacy of the intergovernmental claims process
(individual claimants could file administrative claims for reimbursement with OPOL for their damagesarising from a pollution incident);168
Legally recognize a strict liability standard for any oil pollution incident
resulting in a release of oil, gas, or bunker fuel into Arctic waters and elimination of any force majeure defenses;169 and
Impose mandatory insurance requirement(s) as well as P&I club membership for
flag vessels or licensed rigs that operate in the Arctic with any such payouts going back to OPOL to pay cleanup costs or claims. This option does not directly capture the vessels from non-Arctic states. Those vessels wouldvery likely follow the IMO system in terms of any insurance that they carry to meet their IMO limits on liability. The practical effect would be that the only amount that could be recovered against such a shipowner would be the insurance policies which satisfy the owners liability limits unless the owner has been sloppy and has not organized its corporate form in such a way as to prevent any attachable assets from being in the jurisdiction where the accident occurs.170 Similarly, even though a ship might have P&I coverage to address the shipowners liabilityabove and beyond the limits set forth in the liability conventionsthe P&I clubs would not pay more than the owner is legally responsible for under the legal regime of the flag state. Given that issue, one might consider requiring states that are routinely present in the Arctic, or have an interest in Arctic affairs (like Arctic Council observers) to become parties to the notional OPOL scheme and to use port state control inspections to ensure that all ships making calls in any port of an Arctic Council member have proof that they have the minimum insurance required under the OPOL-like scheme. The certification would also confirm that each shipowner has contributed to the liability fund, and subscribed to the strict liability principles described above. As is the case with provisional enforcement of the current Arctic Guidelines or the Polar Code, the Arctic Council members have a sovereign right to take this action. They can reasonably assert that, in exchange for the commercially reasonable liability limits (and insurance/P&I coverage), Arctic Council governments are promising material and rescue assistance and working capital to quickly contain the effects of an incident and addressthe claims in an expeditious manner.
Option 2: Establishing an Insurance Addendum to the Polar Code Coupled with an OPOL-Like Arrangement for Terminals and Offshore Installations. If one were to confront the remediation issues via a global IMO approach, the best option would
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be to negotiate an addendum to the Polar Code that covers all shipping, essentially trumps thecurrent IMO liability conventions, and establishes strict liability and minimum insurance limits (by ship class and type of cargo) for any ship that enters Arctic waters.171 If this were a global commitment, then all ships would have to have a certificate of insurance that they have the required coverage(s) and this could be verified in any port state control inspection around the world, and would also be an inspection item for P&I club membership. An obvious benefit of such an approach (which is linked to the Polar Code material and training requirements) is that it would capture ships from those flag states that are unconnected with the Arctic Council or Arctic affairs, including flag-of-convenience vessels. Another benefit would likely be that if the insurance and liability standards are global, that might help to lower the cost to individual participants since one can envision a higher number of market participants. Taking this one step further, flag states that become legally bound to the Polar Code would commit to appoint points of contact (or a central point of contact at the IMO) to serve as recipients of any pollution claims emanating from one of their flag vessels. This would eliminate the requirement that individuals would have to go into the courts of the flag state to effect a collection and could be used to file claims against vessels that are involved in a mishap in which oil or noxious materials are spilled, or in cases in which the ship incidentally discharges oil or some other noxious material in the course of operations. The only drawback of this particular approach is that it doesnt address the problem of oil rig liability. Accordingly, the above described OPOL arrangement for just oil rigs and terminals would have to accompany the concept of a polar insurance addendum to the Polar Code lest there be a major gap in liability protection. As suggested above, the Arctic Council could broker this agreement which would be open for signature by the Arctic Council states that license rigs, pipelines, or terminals. The OPOL Association (comprised of all Arctic rig operators) would be funded via license fees and association assessments to develop both response and remediation capacity to administer a liability. Since the coastal states may balk at the cost of establishing a suitably large liability fund because it would scare away responsible licensees, it might be appropriate for the Arctic Council to stimulate the formationof a special P&I club that could act both as a regulatory agent of the rig licensees and provide reinsurance contribution to the OPOL association up to a specified level. As much as it would be desirable to have a global approach and address this issue via the Polar Code, the author believes that Option 1 is clearly preferable because it can be implemented in a reasonable period of time and because it is patterned on a successful template for the North Sea.
Conclusion
Much of the original theoretical work for oceans governance was done by Myres McDougal and William T. Burke at Yale University. Writing in their landmark 1962
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work, The Public Order and the Oceans,172 McDougal and Burke recounted the historical development of the Law of the Sea and suggested the types of governance structures that were necessary to accommodate increasing pressures on the sea as the result of human activity. In the simplest sense, they assert that oceans governance is based on a scheme of mutual tolerance of the activities of others coupled with shared use of and shared competence over the great common resources and a rational system of handling disputes.173 The 1982 Law of the Sea Convention was, in the view of most theorists, a great triumph because it brilliantly codified these core principles by decoupling the concept of resource jurisdiction from the rights of the international community to exercise transit and other freedoms in the water column. It also did an excellent job of anticipating a range of issues relating to marine pollution and resourceexploitation. Unfortunately, it appears we have reached the point where states are unwilling or unable to embrace the core principles of mutual tolerance and shared use because of population, political, and other pressures. Similarly, rational resolution of disputes is today an aspiration and not a reality when it comes to matters at sea. The ancient fable of a group of monkeys on one end of seesaw is relevant: a single monkey may be able to race to the other end and pluck grapes fromvines on an overhanging tree, but if all of the monkeys suddenly race no monkey gets any grapes.174 There is plenty of room for debate on how to address the various issues discussed in this paper, but there should be no debate on the following points:
The rate of change in the Arctic is much more rapid than originally envisioned; The rights and entitlements of the various Arctic countries and other
stakeholders to both regulate activities in Arctic waters and respond to incidents are seriously limited by climactic conditions, sparse infrastructure, and sparse legal authority; and
The rights and ability of the various Arctic countries and other stakeholders
to prevent, respond, and pay for accidents far outstrip available resources. As much as some would like to recommend that the Arctic Council remain low key, it is interesting that this paper reaches the same independent judgment as do senior oil and gas and insurance executives that a more activist and collaborative council is required. If we allow all parties having an interest in Arctic affairs to work independently and they unilaterally scurry together to the other side of seesaw, a tipping point will be reached in which the door to future Arctic development is quickly closed shut. Put another way, now is the time to collaboratively plan for theworst rather than backing into a crisis with no resources or plan.
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Appendix
TABLE A-1: Regulatory Regime for Oil Rigs & Exploration Projects
Licensor Primary law United States Russia Canada Canada Oil and Gas Operations Act of 1985 Greenland (Denmark) OPOL 2012 (only covers the NorthSea) Norway OPOL 2012 for NorthSea Act 29 of 1996 Oil Pollution Liability Agreement (OPOL) 2012* OPOL 2012 for North Sea Act of 22 Mar 85
OPA-90 regulates a Federal law of the Russian vessel or facility which ArcticZone 2012 (draft); poses a risk of discharge 95Russian Law on CS or makes one. U.S. EEZ (exclusive economic zone) and CS(continental shelf) Max limit required is approximately $150M. Russian CS
Application
All of Canadian OPOLNorth Sea Arctic (NORDREG Greenland CS Law Zone) Royal Decree of 7June 1963 Evidence of financial responsibility (insurance or self-insure) Strict liability OPOL Regime for North Sea To get license rig operator must have $10B in assets. OPOL Regime for North Sea Strict liability
OPOLNorth Sea (Norway CS)
OPOLNorth Sea
Insurance
Insurance amounts negotiable under 1995 law
OPOL for North Sea Licensees must be financially responsible. Insurance levels notaddressed OPOL regime for North Sea Areas Strict liability although can be mitigated for force majeure See OPOL Non-OPOL Cases: Unlimited liability although upper limit can be reduced if anabsence of fault None found unless under OPOL regime OPOL Regime in theNorth Sea
To gain OPOL coverage must pay into the OPOL. Assoc. pays in First Instance. Member reimburses thefund. Not specified but seems to be strict liability. Member exonerated for incidents caused by any natural phenomena $250M per incident (Damages and cleanup costs split this fund equally: $125M to pay 3rd-party claims and 125M to pay cleanup costs.
Basis for a licensees liability
Strict liability for removal 1995 CS law suggests costs and 3rd-party strictliability. injuries unless force majeure $35M for responsible parties; $75M for leaseholders (can be adjusted by regulation). Claims by state/local govts not included Yes, Oil Spill Liability Trust Fund $1B Yes, extensive clawback language in 40 USC2701(26) vs. lenders, investors in the drilling enterprise Gross negligence. Civil Penalties of at least $25Kper day Admin claims must first be presented; suit in federal court where spill occurred. Foreign claimants can sue in DCDistrict Court Yes, if reciprocal treatment is given. Applies to covered U.S. actors if incident in foreign waters States can impose additional fines, penalities if incident occurs within their jurisdiction Unlimited liability civil and criminal (press accounts and 1995 law)
Liability caps
$30M overall; $40M in Arctic for loss/damage and remediation unless proof of negligence.
See OPOL Unlimited liability in non-OPOL cases although a proportionate limit can be set
Government backstop Pierce corporate veil if licensee is insolvent? Avoiding caps (clawback) Where suit orclaim
No Probably
No fund set aside None found unless under OPOL regime Probably; licenseemust be financially responsible NA OPOL Regime in North Sea
NA Single cause of action vs. the owner. Piercing difficult
NA
OPOLNO No caps outside of OPOL regime OPOL limit for North Sea cases Claim filed in court where the effluence or discharge occurred OPOL No limits in Danish law vs. foreign parties suit vs. polluter
OPOLNO Unlimited liability OPOL system for North Sea Cases Administrative claim seems to be the requirement OPOL Regime No limits on foreign claimants under Norweigian law
No. Cap sticks in all cases if member pays dues Must file an administrative claim with the association. Disputes go to arbitration. English law governs
Unknown
Where effluence or discharge occurred
Foreign partiesas claimants?
Unknown
No restrictions noted.
No restrictions on foreign parties filing claims. Payment is based on where the pollution incident occurs.
Comments
Legal regime bifurcated between federal and regional governments who may, as per some analysts, impose differing standards on rig operators.
OPOL Parties: Amoco; Burmah; BP; Total; Conoco; Esso; Gulf Oil; Mobil; Shell; Philipps; Signal Oil; Siebens Oil; Texaco; North Sea Sun Oil; Cluff Oil.
*http://www.opol.org.uk/agreement.htmapplies in the jurisdiction of the designated state. Presumably this means the EEZ and CS of each state party; http://www.npd.no/en/Regulations/Acts/Petroleum-activities-act/#Section 7-4.
Mark Rosen and Patricio Asfura-Heim
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TABLE A-2: Regulatory Regime for Tankers*

Flag state Primary law Insurance United States OPA-90, 33 USC 2701 (1994) Vessel owner must maintain sufficient insurance to meet liability limits Strict Liability for removal costs and 3rd-party injuries unless caused by war, force majeure $3K per ton single-hulled, $1,900 per ton double-hulled; cap at $22M absent gross negligence, violation of a federal safety law proximately causing accident Yes, Oil Spill Liability Trust Fund $1Bto assist with claims. Collected from licensees Russia IMO CLC 92 and Fund 92 IMO Canada IMO Conv. IMO Greenland (Denmark) IMO 92 and 2003 Protocol IMO Norway IMO 92 and 2003 Protocol IMO IMO Rule Intl Liability Convention, As Amended, 92 and 96; fund increased in 2003 Vessels >2,000 tons must maintain insurance. Part of port state control inspections Liability limits negligent acts; recklessness or intentional conduct vitiates the limits $7M plus $1,000 for every ton >5,000t. For ships >140Kt, = $135M (varies based on SDR rate). IMO Fund supplements
Basis
IMO
IMO
IMO
IMO
Liability caps forshipowner
IMO
IMO
IMO
IMO
Govt backstop
IMO
Canadas Marine Liability Act provides an additional $157M in backstop. Pushes total to$1.3B IMO
IMO Fund
IMO Fund
Liability Fund ConventionBackstop if offending vessels state is a party. Fund provides another $330M. A new supplementary fund pushes the backstop limit to $1.15B (unclear if the fund is fully capitalized) Strong language protecting a single cause of action vs. a single owner. No claims against the owners agents or servants Reckless/intentional conduct but generally no. In the state of a member of the convention. IMO provides coverage to any state party where an incident occurs (assuming ship is covered by the convention)
Piercing corporate veil? (Sec 2716) i.e., limiting liability to just the owner Avoiding caps Where suit orclaim Extra-territorial effect
Yes, extensive clawback language in 40USC 2701(26) vs. lenders, investors inthe ship/tanker operation Gross negligence & civil penalties $25Kper day U.S. District Court where spill occurred U.S. law aggressive; requires all vessel owners that use U.S. ports or EEZ to transship oil to meet U.S. minimums for financial responsibility USCG can deny port entry/access to U.S. inland waters to any tanker that doesnt meet liability limits.
IMO
IMO
IMO
IMO IMO IMO
IMO IMO IMO
IMO IMO IMO
IMO IMO IMO
Comments
IMO
IMO
IMO
IMO
Flag state must honor judgment against its flag vessels in another state that is party to the convention.
* The international oil pollution liability regime consists in the aggregate of five separate parts: the International Convention on Civil Liability for Oil Pollution Damage of 1969, the Protocol to Amend the International Convention on Liability for Oil Pollution Damage of 1992, the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage of 1992, the International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea of 1996, and the International Convention on Liability for Bunker Oil Pollution Damage of 2001. A copy of the convention and list of ratifications is published by Gard, CLC, and FundConvention, (2012) http://www.gard.no/ikbViewer/Content/3210767/Bunkers%20Convention%20and%20ratifications%20March%202012.pdf. The limits in this convention are for oil which is carried as cargo. In March 2001, the International Maritime Organization passed a new International Convention on Liability for Bunker Oil. Pollution damage to supplement the CLCs. Under the Bunker Convention, the owner of a ship is strictly liable; unfortunately, the liability limits are set by the flag state although the Bunker Convention does require all ships to have a certificate of insurance equaltotheir liability under the flag states law. http://www.gard.no/ikbViewer/Content/3210767/Bunkers%20Convention%20and%20ratifications %20March%202012.pdf.
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TABLE A-3: Regulatory Regime for General Shipping

Flag state Primary law United States Not party to IMO. Limitations of Vessel Owners Liability Act Russia Not party to IMO Conv. Canada IMO Conv. ratification of 96 Protocol pending Greenland (Denmark) IMO Convention 96 Protocol pending ratification IMO Norway IMO Convention (expressly excludes drill rigs from limits) IMO IMO Rule Intl Limits of Liability Convention, 1976 (London); Limits Updated in a 1996 protocol
Insurance
Vessel owner must maintain sufficient insurance to meet liability limits Strict liability for removal costs and 3rd-party injuries unless caused by war, force majeure
Not addressed
IMO
No mandatory requirement except for passenger vessels (2002 protocol) Does not address liability, only establishes an owners right to limit liability. Not applicable to oil tanker or nuclear ships. If owner posts his maximum, his vessel cannot be arrested. (Article13) Complex formula; separate bands for claims of loss of life & property damage. Expressed in SDRs. Todays max is about $20M for personal injury and $11.2 million for property damage. Passenger ships have a separate max of about $37.5M. Salvage claims could reduce recovery fund None
Basis
Owner is liable for all costs. No limits except for property damage
IMO
IMO
IMO
Liability caps forshipowner
Limit based on value of vessel + pending freight at the end of the voyage. If amount inadequate to pay personal injuryclaims, statute bumps up limit to $420 per ton. Oil pollution claims governed by OPA-90 No.
If flag state allowslimits based on tonnage, then that limit applies for property damage only None
IMO
IMO
IMO
Is there a government liability or cleanupfund? Piercing corporate veil? (Sec 2716) i.e., limiting liability tojust owner Avoiding caps Where suit orclaim Extra-territorial effect
None
IMO
IMO
Yes, extensive clawback; cannot use corp. form to limit liability for life/personal injury claims Acts by design and/or neglect vitiate the owners limits US District Court where spill occurred Foreign shipowners can get the benefit of U.S. law; in some cases foreign law can be applied. Complex USCG can deny port entry/ access to U.S. inland waters that doesnt meet liability limits
All
Canada law more protective of investors.
IMO
IMO
Strong language protecting a single cause of action vs. a single owner. No claims against the owners agents or servants. Reckless/intentional conduct but generally no. Article 4 The caps follow the ship wherever suit filed vs. the vessel IMO provides coverage to any state party where an incident occurs (assuming ship is covered by the convention) Flag state must honor judgment against its flag vessels in another state party to the convention
NA ? Russian ships would presumably have unlimited liability
IMO IMO IMO
IMO IMO IMO
IMO IMO IMO
Comments
IMO
IMO
IMO
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Notes
1 For the purposes of this paper, there are five countries that have coastlines that border the Arctic Ocean: the United States, Canada, the Russian Federation, Denmark (Greenland), and Norway. In addition to these five littoral states, three additional states that are geographically affected by the Arctic are parties to the Arctic Council which is a political organization to coordinate Arctic matters. The terms of reference for the Arctic Council and its membership are discussed below. 2 Lloyds Register, et al., Global Marine Trends 2030 (report, 2013) 47. Available at http://www.google.com/url?sa =t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&ved=0CDIQFjAB&url=http%3A%2F%2Fwww.qinetiq.com %2Fwhat%2Fcapabilities%2Fmaritime%2FDocuments%2FGlobalMarineTrends2030Report.pdf&ei=IAEyUsQQruPgA -2rgaAI&usg=AFQjCNEJFRVXbNGlvckeXplJ_7ePuv_AxQ&sig2=f16-KnGCi71nNoNOlWYlsw&bvm=bv.52109249,d.dmg. 3 There is no agreed upon definition of the Arctic Ocean. Since a major focus of this paper is on shipping and shipping safety, the IMOs definition in its Guidelines for Ships Operating in Ice-Covered Waters will be used. The IMO defines Arctic waters are those: located north of a line from the southern tip of Greenland and thence by the southern shore of Greenland to Kape Hoppe and thence by a rhumb line to latitude 6703'9 N, longitude 02633'4 W and thence by a rhumb line to Srkapp, Jan Mayen and by the southern shore of Jan Mayen to the Island of Bjrnya, and thence by a great circle line from the Island of Bjrnya to Cap Kanin Nos and thence by the northern shore of the Asian Continent eastward to the Bering Strait and thence from the Bering Strait westward to latitude 60 North and following the 60th North parallel eastward as far as and including Etolin Strait and thence by the northern shore of the North American continent as far southas latitude 60 North and thence eastward to the southern tip of Greenland; and in which sea ice concentrations of 1/10coverage or greater are present and which pose a structural risk to ships. Douglas Burnett, a maritime lawyer with thefirm Sanders, LLP, suggests one might also consider the use of the Institute Warranties Clause found in most charter parties. Sailing outside of the Warranties limits voids insurance unless additional coverage has been purchased to navigate outside the warranties defined area. The North American Warranty bars navigation on the Pacific coast above 54 degrees 30minutes north and west of 130 degrees 30 minutes west. Navigation in Greenland waters is also warranty-barred. Onthe Atlantic coast of North America the warranty applies north of 53 degrees 10 minutes west and also restricts entry into the St. Lawrence approaches, the Saint Lawrence Seaway, and the Great Lakes. Navigation north of 70 degrees north is warranty-barred except for direct voyages to Norwegian ports or Kola Bay. The Bering Sea and East Asian waters northof46 degrees are warrant-barred, as are ports and places in Siberia (except Vladivostock and Nakhodka). 4 Linda Nowlan, Arctic Legal Regime for Environmental Protection, IUCN (International Union for the Conservation of Nature), IUCN Environmental Policy and Law Paper no. 44, Environmental Law Program (2001), (hereinafter Nowlan) available at http://weavingaweb.org/pdfdocuments/EPLP44EN.pdf; and http://www.unep.org/regionalseas/programmes /independent/arctic/instruments/r_profile_pame.pdf. 5http://www.thearcticinstitute.org/2013/03/the-arctic-council-underpinning.html. 6 Scott G. Borgerson, The Coming Arctic Boom: As the Ice Melts the Region Heats Up, Foreign Affairs 92, no. 4 (July/August 2013): 7677. According to Borgerson, most recent satellite estimates have the Arctic being ice free in the summers in as early as 2035, although more sophisticated simulations have moved this date up to 2020. (Hereinafter Borgerson). 7 Captain Peter Troedsson, A Coast Guard for the Emerging Arctic, Council on Foreign Relations (May 31, 2013). (Hereinafter Troedsson). 8 A 2009 report by the United Stated Geological Survey (USGS) predicted that over 90billion barrels of oil, 1,669trillion cubic feet of natural gas, and 44billion barrels of natural gas liquids are located in the Arctic, 84percent of which could be found offshore. Thus far, however, a mad rush to harvest these resources has not materialized. Companies have secured licenses and, in some cases, drilled exploratory wells, but their behavior has been cautious. See http://www.thearcticinstitute .org/2013/03/the-arctic-council-underpinning.html. The lack of a stable trans-boundary regulatory regime is certainly one likely factor contributing to caution. 9 See S. Rainwater, Race to the North: Chinas Arctic Strategy and Its Implications, Naval War College Review66, no. 2 (2013).
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10 In March 2009 Russia announced plans to establish a military force to protect its Arctic interests. See Tom Parfitt, Russia plans military force to patrol Arctic as cold rush intensifies, Guardian 28 (March 28, 2009), http://www.guardian .co.uk/world/2009/mar/28/russia-gas-oil-arctic-nato, accessed March 28, 2012; Canada is opening up an Arctic military training center in Resolute Bay in an attempt to bolster its territorial claims. See Charles K. Ebinger and Evie Zambetakis, The Geopolitics of Arctic Melt, International Affairs 85, no. 6 (2009): 1215 1232. 11 Ebinger and Zambetakis, id. Rainwater, supra note 9, reports that China views Arctic passage routes as a method of ameliorating their Malacca dilemma of having most of their raw materials pass through that single strait. It is also widely reported that China continues to make strategic investments in Greenland and Iceland because of their mineral potential and ports respectively. Borgerson, supra note 7 at 84 85. 12Borgerson, supra note 6 at 78. 13Troedsson, supra note 7. 14Borgerson, supra note 6 at 80. 15 Arctic Council, Arctic Marine Shipping Assessment 2009, AMSA Executive Summary with Recommendations (April29, 2009). Accessed March 29, 2013 at http://ine.uaf.edu/accap/documents/AMSAGovernanceArcticShipping.pdf (hereinafter AMSA Report). 16 Warming that causes permafrost to melt also poses challenges to onshore activities because ground structures, such as pipelines and other infrastructure that depend on footings sunk into the permafrost for support, often become unstable when there is permafrost melt. 17 For example, see Zoe A. Eppley and Margaret A. Rubega, Indirect Effects of an Oil Spill: Reproductive Failure in a Population of South Polar Skuas following the Bahia Paraiso Oil Spill in Antarctica, Marine Ecology Progress Series 67, no.1 (1990) available at http://www.int-res.com/articles/meps/67/m067p001.pdf; and http://www.dnv.com/industry /maritime/publicationsanddownloads/publications/updates/arctic/2012/01_2012/Ten_years_of_research_into_the _effects_of_discharges_from_the_petroleum_industry.asp. Report, see p. 5. 18 See e.g., Nowlan, supra note 4 at p. 8, 1415. 19http://www.unep.org/regionalseas/programmes/independent/arctic. 20 Of course, in situations in which a polluter was caught in flagrante delicto engaged in illegal discharges or a vessel was involved in a collision and was disabled, then the coastal state would have rights under UNCLOS to arrest the vessel or otherwise take enforcement action. 21 For a discussion of the ExxonMobil payments (which were a complex mix of punitive damages and civil penalties underthe Clean Water Act), see Exxon Shipping Co., v. Baker, et al., 554 U.S. 471 (2008). See generally, A. Swartz, Exploring the Framework of Oil Liability Law, Tulane Law School (unpublished paper), 2012. Available at http://www.law .tulane.edu/uploadedFiles/Academics/Lectures/Exploring%20The%20Framework%20of%20Oil%20Liabilitity%20Law.pdf. 22 CSIS Washington D.C., February 28, 2013 (Remarks of Royal Dutch Shell CEO Peter Voser). 23 Local residents in Alaska were, for example, seeking Shells commitment to waive its limits on liability in OPA-90 and accept strict liability for any of their activities and those of their contractors. See also N. Cunningham, Offshore Oil Drilling in the Arctic, American Security Project, August 2012. Available at http://americansecurityproject.org/ASP%20Reports /Ref%200076%20-%20Offshore%20Oil%20Drilling%20in%20the%20Arctic.pdf. 24 Governance of Arctic Shipping, Arctic Marine Shipping Assessment, AMSA Executive Summary with Recommendations, April 29, 2009. Accessed March 29, 2013 at http://ine.uaf.edu/accap/documents/AMSAGovernanceArcticShipping.pdf (hereinafter AMSA Report).
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25 Id. and Rosen, Arctic Legal Issues Briefing, Hoover Institution, May 2, 2013. 26 The 1959 Antarctic Treaty entered into force in 1961 and sets aside Antarctica as a scientific preserve which isbeyond the national jurisdiction of any state. The United States has been a party to the treaty since 1960. Citation: 12 UST 794 / 402 UNTS 71 / 19 ILM 860 (1980) / UKTS 97 (1961). 27 Supra note 24. 28 Both Canada and Russia have enacted regulations that govern shipboard passage in their respective polar areas. Canadas NORDREG establishes a mandatory ship reporting system and a zero-discharge rule for all ships in the Canadian Arctic. See http://www.ccg-gcc.gc.ca/eng/MCTS/Vtr_Arctic_Canada. The United States does not believe that NORDREG is consistent with UNCLOS. See Roach and Smith, Excessive Maritime Claims, Vol. 66, U.S. Naval War College International Law Studies 66 (1994): 207215. To be discussed in greater detail below, the Russian Federation has developed an elaborate regulatory regime governing the passage of ships through its Northern Sea Route. This is incontrast with U.S. laws and policies concerning the Arctic which are relatively underdeveloped. 29 See generally Environment Canada Regulations (July 2011). Available at http://www.ec.gc.ca/lcpe-cepa/default .asp?lang=En&n=694C8126-1. Coastal state regulation of air pollution from ships is not without controversy since sulfur oxide and other emissions from ships are regulated by an IMO-brokered regulation found in MARPOL Annex VI which, under Article94 and 211, has traditionally been considered to be under the province of flag states. Of course, flag states cede their rule-making authority by joining in the promulgation of standards at the IMO which is indirectly called out in UNCLOS 211 as the competent international organization for the promulgation of vessel operation and equipment standards. 30 Supra note 25. 31 Supra note 17 and accompanying text. 32 The concept of genuine link is derived from Article5 of the 1958 UN Convention on the High Seas which provides: Each state shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and forthe right to fly its flag. Ships have the nationality of the state whose flag they are entitled to fly. There must exist a genuine link between the state and the ship; in particular the state must effectively exercise its jurisdiction and control inadministrative, technical, and social matters over ships flying its flag. This principle of flag state control has been reaffirmed in Article91 of UNCLOS. For more discussion, see R. Churchill, The Meaning of the Genuine Link Requirement in Relation to the Nationality of Ships (October 2000). In particular see section 3.4.1. which analyses pastdecisions by the ICJ in the Nottenbohm, IMCO, and Barcelona Traction cases which discuss the genuine link concept.The Churchill paper is available at http://www.itfglobal.org/seafarers/icons-site/images/ITF-Oct2000.pdf. 33 The Maritime Safety Committee, a technical committee of the IMO, adopted a new mandatory ship reporting systeminthe Barents region in 2012. The new mandatory ship reporting system will enter into force on 1 June 2013. Seehttp://www.imo.org/MediaCentre/hottopics/polar/Pages/default.aspx. 34 The NAFTA Treaty can be found at 32 I.L.M 289 and 605 (1003). The North American Agreement on Environmental Cooperation can be found at 32 I.L.M. 1480 (1993). The text of this NAFTA side agreement can be found at http://www .naaec.gc.ca/eng/agreement/agreement_e.htm. 35 Day to day responsibility for enforcement of the agreement is with the Commission on Environmental Cooperation (CEC). For a description of their duties (see Part Six in particular) go to: http://www.cec.org/Page.asp?PageID =122&ContentID=2735&SiteNodeID=567&BL_ExpandID=36 2345 UNTS 67, 32 ILM 1069 (1993). Text available athttp://www.ospar.org/content/content.asp?menu=00340108070000_000000_000000. 37 Douglas R. Burnett, Squires and Sanders, LLC., OSPARHow Not to Regulate (2013). Copy on file with the author. 38 Text available at http://www.opol.org.uk/agreement.htm. For a fact sheet on the agreement and the association which administers it go to http://www.opol.org.uk/about.htm.
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39Nowlan, supra note 4 at 1315. 40 12 ILM 1319 (1973) TIAS No. 19. 561, 34 UST 3407. Adoption: 1973 (Convention), 1978 (1978 Protocol), 1997 (ProtocolAnnex VI); Entry into force: 2 October 1983 (Annexes I and II). Summary available at http://www.imo.org/about /conventions/listofconventions/pages/international-convention-for-the-prevention-of-pollution-from-ships-(marpol).aspx. 41 32 UST 47, 1184 UNTS 278. Adoption: 1 November 1974; Entry into force: 25 May 1980. Summary available at http://www.imo.org/about/conventions/listofconventions/pages/international-convention-for-the-safety-of-life-at-sea -(solas),-1974.aspx. 42 1046 UNTS 120, 11 ILM 1294. Adoption: November 13, 1972; Entry into force: August 30, 1975; 1996 Protocol: Adoption: November 7, 1996; Entry into force: March 24 2006. Summary available at http://www.imo.org/about /conventions/listofconventions/pages/convention-on-the-prevention-of-marine-pollution-by-dumping-of-wastes-and -other-matter.aspx. This convention is also known as the London Dumping Convention or LC 72. 43 1673 UNTS 126; 28 ILM 657. Text Available at http://www.basel.int/TheConvention/Overview/TextoftheConvention /tabid/1275/Default.aspx. 44 Article192 states that States have the obligation to protect and preserve the marine environment. Article194 explainshow nations can achieve those goals by cooperation. Articles 197201 (called the Global Regional Cooperation) setthe guidelines of how states should cooperate as part of international organizations. Other relevant Articles include 207on pollution from land-based sources, 211 on vessel-source pollution, 208 and 209 on seabed activities, and Article212 on atmospheric pollution. 45 Olav Schram Stokke, A Legal Regime for the Arctic?: Interplay with the Law of the Sea Convention, Marine Policy 31, no. 4, (2007): 402 408. 46 Summary available at http://www.imo.org/ourwork/humanelement/trainingcertification/pages/stcw-convention.aspx. 47 Verifying compliance with the IMO standards is beneficial to cargo owners, charter parties, insurers, or P&I clubs because: (a)it reduces the likelihood that something will go wrong or, if something does go wrong, the crew and ship are sufficiently resilient to respond; and (b),it increases the chance that an owner will be able to limit its liability in the event of a mishap. If these interested parties are uninterested or detached from these compliance responsibilities, there is a much greater probability that civil and criminal authorities will find the relevant owner(s) grossly negligent if there is a future incident. 48 The OCIMF was formed in April 1970 after the 1967 Torrey Canyon incident of 1967 in which a Liberian flag tanker vessel became shipwrecked off the western coast of Cornwall, England resulting in significant environmental damage. The cause of the accident was operator error and a design flaw in the ships steering controls. At that time, oil producers were hesitant to continue to carry oil cargoes because of concerns that the shipping operators would put the base oil production business at risk. The OCIMF system and its inspection regimes were designed to provide an independent assurances to cargo owners (oil companies) that ships carrying their product were meeting all of the relevant design, equipment, and operational standards. 49 A copy of the AEPS strategy is available at http://www.arctic-council.org/index.php/en/document-archive/category /4-founding-documents The term soft law is given to agreements that do not stipulate mandatory compliance, concrete rights, or obligations. They consist of standards, commitments, joint statements, or declarations of policy or intention. 50 Steven Lee Myers, Arctic Council Adds 6 Nations as Observer States, Including China New York Times, May15, 2013. http://www.nytimes.com/2013/05/16/world/europe/arctic-council-adds-six-members-including-china.html. 51Nowlan, supra note 4 at 4. 52 AMSA Report, supra note 15 at 9 and 13.
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53Nowlan, supra note 4 at 9. 54 AMSA Report, supra note 15 at 810, 15, 66 67. 55Nowlan, supra note 4 at 1415. 56 AMSA Report, supra note 15 (Executive Summary and Recommendations). 57 A. M. Natova, The Relationship between the United Nations Convention on the Law of the Sea and IMO Conventions, Nippon Foundation (2005). Available at https://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source =web&cd=2&ved=0CDcQFjAB&url=https%3A%2F%2Fwww.un.org%2Fdepts%2Flos%2Fnippon%2Funnff_programme _home%2Ffellows_pages%2Ffellows_papers%2Fnatova_0506_bulgaria.pdf&ei=P0fUUar0DYit0AGDt4BQ&usg =AFQjCNHuuDZMko4U0aX9O51I2p9KH-cagA&sig2=RFiSslu0yPzAPCPZ_vhAQQ. 58http://www.imo.org/MediaCentre/hottopics/polar/Pages/default.aspx. 59 For an excellent description of the IMOs structure and its committee structure, see Jens-Uwe Schroder and Anish Hebbar, International Standard Setting through the IMO, World Maritime University, Malmo, Sweden (2012). Available athttp://www.balticmaster.org/media/files/general_files_693.pdf. 60 For additional information on the IMOs progress towards finalization of the Polar Code, see H. Deggim, IMO Marine Technology Section, April 25, 2013. Available at http://www.imo.org/MediaCentre/HotTopics/polar/Documents/polar %20RINA%2004-13.pdf. 61 If done in this way, then entry into force of an amendment to one of these major treaties is governed by the regime set forth in the treaty itself; namely, ratification by a specified number of states. At that point, the measure is technically in force for all of the parties to the major treaty even though a particular state has not implemented the amendment in itsdomestic law or issued regulations to its marine safety organization to enforce the measure. 62Deggim, supra note 52. 63 The assembly is IMOs most senior body. It meets once every two years. 64Nowlan, supra note 4. 65 AMSA Report supra note 15 at 156 159. 66 Full citation at supra note 15. The International Maritime Organization (IMO) has similarly concluded that ships operating in the Arctic are exposed to unique risks including poor weather conditions, relative lack of good charts, spotty communications and navigational aids, and cold temperatures which reduce the effectiveness of numerous components ofthe ship ranging from deck equipment, emergency machinery/winches, sea suctions, and the added drag on such equipment as well as the hull, propulsion, and auxiliary systems when ice forms on the vessel. 67 Article234 gives coastal states rights to enact non-discriminatory laws for the prevention of pollution in ice-covered areas but they do not extend to design, manning, or construction standards. 68 See Articles 211 and 220 of UNCLOS. 69 See Article220.6 of UNCLOS. 70 See generally William Langewiesche, The Outlaw Sea: A World of Freedom, Chaos, and Crime (New York: Farrar, Straus& Giroux, 2004). 71 R. ORourke, Changes in the Arctic: Background and Issues, Congressional Research Service (June 15, 2012): 27.
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72 There is room for debate whether oil rig operations in the Arctic are less risky than elsewhere since the continental margin off the coasts of the United States, Canada, and Russia are comparatively shallow vs. current offshore oil venues in waters like the Gulf of Mexico which are many thousands of feet deep. Even though these shallow water drilling operations allow for great direct human observation and hands-on activity by divers, there is some reporting that the wellhead pressures in the Arctic are likely to be much greater and a blowout would result in a larger spill in a small amount of time. 73 To be discussed in detail below, parts of the OSPAR framework and OPOL agreement should be templates for action by the Arctic states. The point of the quoted matter above is that even the mature OSPAR Convention, which deals with liability concerns in the North Sea, still does not establish any government-to-government responsibilities. This is unfortunate because UNCLOS tasks coastal states with ensuring that activities in their EEZ and CS do not cause harm to their adjacent coastal states or the marine environment. In particular, Article235 of UNCLOS establishes the principle that coastal states are responsible for fulfilling their obligation to protect the marine environment as well as to provide access totheir legal systems to assure prompt and adequate compensation should something result in a compensable harm. 74 Emails between the author and the U.S. Department of State of April 3, 2013; Swedish Ministry of Foreign Affairs Briefing by Ambassasor Mikael Eriksson (Nov 2012) copy on file with the author. The genesis of the agreement was an Arctic Council Declaration on May 12, 2011 to establish a Task Force on Arctic Marine Oil Pollution Preparedness and Pollution. The actual agreement was negotiated in 2012. Signature of the Agreement occurred in May of 2013 in Kiruna, Sweden. See infra note 115 and accompanying text for more information concerning this instrument. 75 Iceland Review Online, November 10, 2012 edition. Statement of Icelandic Counselor for Arctic Affairs Jonas Gunnar Allansson. 76 Anna Kireeva, Toothless oil spill preparedness agreement, Barents Observer, April 4, 2013 [online edition] reports thatGreenpeace describes the document as absolutely useless and lacking in specific duties, requirements for equipment, and well shut-in. Available at http://barentsobserver.com/en/arctic/2013/04/toothless-oil-spill-preparedness -agreement-04-04. 77 Entered into force in May 2004. Summarized at http://www.imo.org/about/conventions/listofconventions/pages /convention-on-limitation-of-liability-for-maritime-claims-(llmc).aspx. 78 46 U.S.C. Appendix 181 et seq. 79 33 U.S.C. Sec 2701 (1994). The Oil Pollution Act (OPA) was signed into law in August 1990, largely in response to public concern following the Exxon Valdez incident. For a summary of OPA-90 as it relates to both oil rigs and tankers, seethe Appendix and http://www.epa.gov/emergencies/content/lawsregs/opaover.htm#overview. 80 See generally http://www.uscg.mil/npfc/About_NPFC/opa.asp. 81 International Convention on Civil Liability for Oil Pollution Damage 1969. See generally UNCTAD, Liability and Compensation for Ship Source Oil Pollution, 2012. Available at http://unctad.org/en/PublicationsLibrary/dtltlb20114 _en.pdf. See infra notes 134137 for additional citations. 82 International Convention for the Establishment of an International Fund for Compensation for Oil Pollution Damage,1971. 83 UNCTAD report, supra note 81 at 13. 84 Put another way, insurance follows an owners potential liability under, say, OPA-90 or the IMO scheme. There are noseparate international instruments which prescribe how much insurance is reasonable or prudent since shipowners will almost never buy more insurance than is absolutely required to conform to their potential limits of liability. Responsible shipowners deal with their excess liability by joining a P&I club. 85 Banks holding the marine mortgage that allows the ship to be bought in the first instance stipulate in most cases that the owner must operate with insurance. Charterers also will not charter vessels that cannot prove they have insurance.
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86 The actual size of the P&I club reserves vary. The Norwegian GARD has total assets of $2.5billion (although GARD is both a P&I club and an insurance underwriter). http://www.gard.no/ikbViewer/page/financial-matters. By contract, the Chinese Shipowners Mutual Assurance Association has total fixed and portfolio assets of roughly $950million. http://www .cpiweb.org/en_gongzuohuibao/ziliao11/balance_e.htm. 87 The China Club, headquartered in Beijing, describes itself as a major underwriter in Asia and operates as an independent P&I club. In their annual report they claim, Although CPI is still not a member of Pool Clubs the coverage provided by CPI is, in principle, identical to that provided by a Pool Club in respect of both scope and limits. CPI maintains very close links with some major Clubs in the Pool through a co-insurance arrangement. These claims could not be verified. 88 OCIMF coverage extends to oil tankers, barges, terminals, and offshore marine operations. See OCIMF at http:// www.ocimf.com/Organisation/Objectives. 89 Since IMO only regulates vessels, this mandate encompasses inspection to ensure conformity with industry safety and environmental standards. OCIMF uses the Offshore Vessel Particulars Questionnaire (OVPQ) to conduct these inspections and also issues technical bulletins to operators. For further background, see http://maritimewiki.org/wiki/Offshore_Vessel _Inspection_Database_(OVID). 90 Full citations and detailed discussion at notes 126 128 and 145 148 and accompanying text. 91 The OPA-90 limit does not cap liability for an offshore operators cost in removing oil from the marine environment. Foran excellent discussion of the current limits on liability under U.S. law and actual costs associated with recent Rig disasters, see U.S. Coast Guard, Oil Pollution Act Liability Limits in 2012 (report to Congress, Oct 18, 2012. Available athttp://www.uscg.mil/npfc/docs/PDFs/Reports/Liability_Limits_Report_2012.pdf. 92 The U.S. government takes an all hazards approach to the protection of critical infrastructure. The principles are codified in the National Infrastructure Protection Plan (2009). Available at http://www.dhs.gov/national-infrastructure -protection-plan. 93 Throughout this paper, when we refer to a rig or offshore facility we intend that this be defined broadly to include anyfixed or mobile platform, tank, terminal, or pipeline being used for the purpose of exploring for, producing, treating, storing, or transporting oil or national gas from the seabed or it subsoil to market. 94 The potential for a regulatory race to the bottom can happen in a number of different ways. Scenario 1 might involve asituation in which a country outside of the Arctic (e.g., China) purchases oil or mining concessions from a country that isvery eager to have foreign direct investment. In exchange for this large cash infusion, the coastal state could make concessions on the standards under which it licenses exploration and extractive activities. Another way in which regulatory competition occurs is during competition among the coastal countries to lure in responsible companies. Most countries would welcome this type of investment from a reputable oil company like Shell and it is not unreasonable to expect that other states will offer a lower bar in terms of required guarantees, absence of DOJ prosecutions, public support, etc., in exchange for Shells commitment of resources to explore their continental shelf. Otherstates would be in the position of having to match those bar-lowering terms in order to attract responsible developers. Finally, regulatory race to the bottom is a commonplace occurrence on the high seas if one considers the issues associated by the extensive use of flags of convenience (FOC) among over 50 percent of the worlds merchant fleet. For some shipowners the use of FOC registration is done for tax reasons and to lower marginal labor costs; but otherwise, the ships are operated in full conformity with IMO standards. However, Antigua/Barbuda, the Bahamas, Cambodia, the Cayman Islands, Honduras, Malta, Panama, and St. Vincent/Grenadines are well known for offering lax regulatory environment and ships from these countries have much higher than normal detention (for pollution incidents and substandard material condition) and accident rates. 95 Xinhau News Service, Arctic Council Observer Status Guarantees Chinas Legitimate Rights, May 16, 2013. http://news.xinhuanet.com/english/indepth/2013-05/16/c_132387742.htm. 96http://www.oceanlaw.org/downloads/arctic/Ilulissat_Declaration.pdf.
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97 Steven Lee Myers, Arctic Council Adds 6 Nations as Observer States, Including China, New York Times, May15, 2013. Accessed on September 10, 2013 at http://www.nytimes.com/2013/05/16/world/europe/arctic-council-adds-six -members-including-china.html. 98 Time, in this context, is relative to the pace of increased human activity in the Arctic. 99 Almost none of the open registry (FOC) states have littoral interests in the Arctic yet they have political clout and an equal vote at the IMO with each one of the Arctic Council members. Since adopted IMO measures can have global applicability (either by the terms of their adoption or incorporation of the standards by maritime insurers or port state control authorities) those shipowners that have chosen FOC registries to save money on operating costs and regulatory compliance would very likely have an incentive to try to defeat, or water down, measures like the Polar Code or a special IMO liability regime for the Arctic since it could increase their costs ofoperation. 100 For a set of the Rules of the Procedure, go to http://www.ijc.org/en_ /Rules_of_Procedure. The rules of procedure haveattributes addressing governance and jurisdiction as well as provisions to ensure that the nationals of both countrieshave an opportunity to be heard on issues and be informed of their decisions. 101 Testimony of Peter E. Slaiby, vice president, Shell Alaska, before the Senate Committee on Commerce, Science andTransportation on March 27, 2013. 102 Ibid., 9. 103 Available at http://www.chathamhouse.org/publications/papers/view/182839. 104 Ibid., 9. 105http://library.arcticportal.org/id/eprint/1475. 106 MSC.1/Circ. 1184 20/6/2006. Available at http://www.imo.org/blast/blastData.asp?doc_id=6432&filename =1184.pdf. This guideline was adopted by the IMO Assembly on January 3, 2008. In the resolution adopting the guidelines, the IMO Assembly invites governments to bring the annexed guidelines to the attention of masters of ships entitled to flythe flag of their States, shipowners, ship operators and managers, shipping companies, maritime pilots, training institutions, tour operators, ice-patrol and ice-breaking services and all other parties concerned, for information and action as appropriate.... In other words, compliance with the guidelines is only mandatory if adopted by the flag state and enforcedby the flag state. 107 IMO Assembly Resolution A.999 (25). This resolution also invites countries to comply. Copy available at http://imodocs.com/txt/data_www/texts/A999_25e.php3. 108 IMO MSC Circular 20/6/2006. This information circular was approved by the IMO Maritime Safety Committee. Copy available at http://www.imo.org/blast/mainframemenu.asp?topic_id=327&offset=266. 109 Under international law, including UNLOS (Arts 2, 8, 2, esp. Art 211.3, 218), coastal states have a nearly unfettered right to establish the terms and conditions under which a ship may enter a coastal states port or internal waters. Internal waters include areas which are on the landward side of any legitimate straight baselines which a coastal state may establish. In various memoranda of understanding, states have entered into compacts wherein states will reciprocally condition access to their ports on a ships compliance with specified IMO standards. If a ship fails to demonstrate compliance, then it can be ordered out of the port (or internal waters) or detained. The two largest port state control MOUs are the Paris MOU (now known as the 2011 Paris MOU New Inspection System) which has twentyseven flag members and the Tokyo MOU which has eighteen countries. If one were to follow a parallel structure with that used in other regions, one might call the brokered agreement the Arctic MOU. 110 As noted above, there is no uniform definition of the Arctic. For the purposes of this type of enforcement/regulatory instrument, a geographic test would need to be established to comply with the LOS Convention requirements that there needs to be due publicity of any port state control regulations. For ease of reference, using60 degrees North Latitude as
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the demarcation for applicability of the Arctic MOU would be appropriate orusing the formulation contained in note 4 above. Suffice it to say, some thought needs to be given to this issue because paragraph G-3.3 of the 2009 IMO Guidelines for Ships Operating in Polar Waters defines the area differently by excluding areas adjacent to the East Coast of Greenland and the waters surrounding Iceland and coastline of Norway. 111 The main reason why these inspection criteria need to be applied to all ports is that ships transiting the Arctic will very often not visit any ports because the current port infrastructure is so underdeveloped. Particularly in the case with transit shipping, there is no business reason that a ship would call upon an Arctic port since none of those ports are near logistics hubs where cargo can be unloaded and forwarded to market. 112 CBC News Canada, Mar 31, 2013. Accessed on May 28, 2013 at http://www.cbc.ca/news/canada/story/2013/03 /31/canada-arctic-shipping-pollution.html. Canada, in particular, is seeking to reduce and/or eliminate all discharges from shipsthat are now permitted under MARPOL. 113 Normally the Assembly will recommend measures to the member states for adoption. However, the IMO President separately suggested that perhaps a Diplomatic Conference composed of SOLAS/ MARPOL/ AFS/ BWM Parties sometime in the near future will be convened to adopt the international instrument. The Norwegian Assessment of the Code was provided by Turid Stemre, senior advisor, Norwegian Maritime Authority. Briefing before the 13th International Ice Charting Working Group. Briefing accessed on May 29, 2013 at http://www.google.com/url?sa=t&rct=j&q=&esrc =s&frm=1&source=web&cd=2&ved=0CDAQFjAB&url=http%3A%2F%2Fwww.norden.org%2Fsv%2Fnordiska-raadet %2Forganisation-och-struktur%2Futskott%2Fmiljoe-och-naturresursutskottet%2Fkalender%2Fmoete-i-miljoe-och -naturresursutskottet-30201331-mars-2011-i-stockholm%2Fsafety-at-sea-i-polar-regions-2013-the-polar-code-turid-b. -stemre-sjoefartsdirektoratet-norge&ei=ZAYyUu7hOfje4APk-oDICg&usg=AFQjCNHOMMbpj0wk6vhfKYXTlwoLIHWyuQ &sig2=CGwQFgNSwzNmJG6hANe6aQ. For a discussion as to when IMO instruments enter into force, see http:// www.imo.org/About/Conventions/Pages/Home.aspx. 114 The International Association of Classification Societies (IACS) Unified Requirements for Polar Ships are applied to ships constructed of steel and intended for navigation in ice-infested polar waters. Ships which comply with structural and machinery requirements can be allocated to one of seven polar classes, each linked to type of ice conditions and timing of operation, e.g. year-round operation in moderate multi-year ice conditions (PC2) or summer/autumn operation in thin first-year ice which may include old ice inclusions (PC7). 115 Given that there are extensive press reports that the Russians are resistant to the zero discharge and new material requirements for its legacy coastal fleets that supply local communities in the Russian Arctic, it would certainly make sense to grandfather the operation of those vessels in specified geographic locales and/or duringcertain times ofthe year depending on whether icing is less of an issue. It is not beyond possibility that oneof the local operators would get in trouble; but, there is a far greater risk to marine safety and the marine environment when foreign shipsenter Arctic watersand they are unaware of the operational risks and lack systems that are sufficiently robust tocombat those risks. 116 The INSROP Website can be accessed at http://www.fni.no/insrop. 117 The ships were part of the Bremen based Beluga Group. They cited a 4000 nm reduction in transit distance from Rotterdam to Ulsan, Korea. 118 http://en.wikipedia.org/wiki/Northern_Sea_Route. Accessed on May 25, 2013. Most of the transits have involved ships carrying petroleum products, many involving trade between Russia and China. See Igor Alexeev, The Arctic has never been so important, OPEDNEWS.com, March 7, 2013; Costas Paris, Ship Travels Arctic from China to Europe, WallStreet Journal, August 20, 2013 at B6. 119 http://www.arctic-lio.com/nsr_legislation. The Northern Sea Route Federal Law was actually a series of amendments tovarious provisions of the general Russian Law pertaining to administration of its maritime regions.Citations to those prior acts can be found therein. http://www.arctic-lio.com/docs/nsr/legislation/federal _law_nsr.pdf.
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120 Past iterations of the law, and implementing regulation, stipulated that ships would pay a flat transit fee in which thecosts of ice-breaking services were mandatorily assessed as a condition to passage. 121http://www.arctic-lio.com/docs/nsr/legislation/20130425185806en-Rules_unof.pdf. 122 Empowering Russia to act as the administrator of the NSR is not that much different from UNCLOS recognition of Turkeys role as administrator of the 1936 Montreux Convention which regulates passage through the Turkish straits. The Montreux Convention regulates both the passage of warships and commercial vessels. The powers given to Turkish authorities in that convention and later domestic and IMO regulations, are similar to those which Russia is exercising with one exception relating to mandatory pilotage. The text of Montreux prohibits Turkish authorities from requiring the embarkation of a pilot, although Turkey will often delay a ships transit for days if it does not embark a pilot so that it can clear the route. That provision regarding no pilotage is frankly an unhelpful historic relic that should have been long-abandoned given the large number of serious accidents involving large ships moving through a very challenging navigational waterway. 123 For background on routeing measures, see http://www.imo.org/ourwork/safety/navigation/pages/shipsrouteing .aspx. Routeing measures include both recommended routes as well as traffic separation schemes. The procedures for seeking IMO adoption of a route are set forth in MSC/Cir 1060 which can be found at http://www.imo.org/OurWork /Safety/Navigation/Documents/1060.pdf. 124 Reprinted at http://www.imo.org/ourwork/facilitation/documents/solas%20v%20on%20safety%20of %20navigation.pdf. See Regulation 10 as pertains to Mandatory Measures. 125 See C. Cinelli, The Law of the Sea and the Arctic, Arctic Review on Law and Politics 2, no. 11 (2012), available athttp://site.uit.no/arcticreview/files/2012/11/AR2011-1_Cinelli.pdf. 126http://www.ospar.org/content/content.asp?menu=01481200000000_000000_000000. 127 The original agreement is dated September 4, 1974. It has been amended numerous times since then. For the current version please go to http://www.opol.org.uk/agreement.htm. OPLA is an association comprised of all oil and gas producers and operators in the relevant treaty area who both pay a participation fee and adhere to strict liability. 128See infra discussion about the liability limits for the OPOL arrangement that helps to support each nations current obligations under the OSPAR Convention. Because of the anticipated large costs and great technical difficulties in responding to an Arctic oil spill of any magnitude, a more robust OPOL arrangement is necessary than the current system inplace for the North Sea. For that reason, an entirely new OPOL agreement is probably necessary. 129http://www.scj.go.jp/en/sca/activities/conferences/conf_8_projects/pdf/o4.pdf. 130 The committee members include the three littoral states, China, India, Japan, the Republic of Korea, Saudi Arabia, the United Arab Emirates, International Foundation of Aids to Navigation, International Maritime Organization, Malacca Strait Council, and Nippon Foundation. http://www.mpa.gov.sg/.../annex_a_factsheet_on_co-operative_mechanism.pdf. The fund has awebsite which lists all of the contributors. Please see http://www.cooperativemechanism.org.my/index .php?option=com_content&view=article&id=42:contributions&catid=26:cooperative-mechanism&Itemid=39. 131 The Cooperative Mechanism consists of three components, namely, (i) Cooperation Forum that serves as a platform for dialogue between the littoral states and the international maritime community on issues of common interest in the straits; (ii) Project Coordination Committee that coordinates the implementation of straits projects. These projects are identified and agreed upon through the Cooperation Forum to promote safety of navigation and environmental protection inthe straits; and (iii) the Aids to Navigation Fund which receives direct financial contributions from the international maritime community to maintain marine navigational aids in the straits. This statement concerning the role of the Cooperative Mechanism and its structure is taken verbatim from its website. Accessed on June 2, 2013 at http://www.cooperativemechanism.org.my/index.php?option=com_content&view=article&id=27&Itemid=29.
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132 See M. Rusli, Navigational Hazards in International Chokepoints: A Study of the Straits of Malacca and Singapore,Australian National Center for Ocean Resources (2011). http://www.ijhssnet.com/journals/Vol._1_No ._6%3B_June_2011/13.pdf. 133 Ibid. 134 Participation in this context means both political participation and providing funding into something resembling the Malacca Strait NAVAIDS Trust Fund. 135 It is envisioned that the Arctic Trust Fund would only provide funding in areas outside of the NSR that are in heavy current or projected use by international shipping. NAVIADS inside of the NSR would be funded via fees collected by the NSR Administration for the costs of installing and maintaining NAVAIDS along the route and for the expenses of ice pilotsand/or icebreaker services. 136 Signed in Nuuk on April 21, 2011. Available at http://www.arctic-council.org/index.php/en/document-archive /category/20-main-documents-from-nuuk. 137 Signed in Kiruna, May 2013. http://www.arctic-council.org/index.php/en/document-archive/category/425-main -documents-from-kiruna-ministerial-meeting. 138 In September of 2012, the first live SAREX was held among the eight Arctic Council members in remote portions of Greenlands East Coast. These activities and others are overseen by an Arctic Council Search and Rescue Task Force that iscochaired by the United States and Russia. 139 Testimony of Tommy P. Beaudreau, assistant secretary for lands and mineral management, U.S. Department of Interior, before the Senate Committee on Commerce, Science and Transportation, Subcommittee on Oceans, Fisheries andCoast Guard, March 27, 2013. 140 Testimony of Peter E. Slaiby, vice president, Shell Alaska, before the Senate Committee on Commerce, Science and Transportation on March 27, 2013. 141 One template that should be given consideration is the United States National Response Framework (formerly the National Response Plan). The framework is the playbook which FEMA uses in organizing a multi-agency/ jurisdiction response to an incident. The framework has undergone multiple revisions following a variety of national disasters including hurricanes (Sandy and Katrina) as well oil pollution incidents (Deepwater Horizon). Given the complexity of managing theselarge disasters involving a diversity of federal actors as well as state and local participants, the council would do well to closely scrutinize the framework as a methodology for managing an Arctic disaster. The framework is available at http://www.fema.gov/national-response-framework. 142 This principle of mutual assistance can be found in the 2013 Agreement on Marine Oil Pollution but the provisions are much too vague. Implementing agreements that spell out the categories of logistic and material support and the precise reimbursement terms are necessary. If one were to follow the model used in the United States in mutual agreements between various jurisdictions to share heavy equipment (such as fire trucks and airplanes), the receiving country would be responsible for only the incremental cost of providing the assistance such as fuel, consumables, and contractor costs. 143 Even though mining activities present less risk than oil and gas activities, a considerable amount of destination shipping is projected to enter Arctic waters to service large mining operations. If one of these ships were to be involved in a casualty, there is high probability of marine pollution from either bunker fuel or the ships cargo which, depending on the materials being produced at the particular mine, could be quite toxic. These licensees should alsobe assessed. 144 The science of oil cleanup in Arctic waters is not well understood. Given that fact, some limited funding for research into remediation techniqueswith a goal of adopting a standardized remediation approach that all member nations can embraceis also advisable.
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145 The OPOL agreement functions in support of the OSPAR Convention which is an international agreement betweenindividual states. OPOL, on the other hand, is a standing agreement among oil producers and operators to meetthe obligations of each state party to have policies and procedures in place to address liability and response issues.The operating arm of OPOL is a limited liability association. Its charter can be found at http://www.opol.org .uk/memorandum.htm. 146 Because large sums of money are involved in acquiring necessary response equipment and supplies for the Arctic region, industry is much more likely to be sanguine with the use of an association which is transparent and subject to audit and suit if funds are used inappropriately. Also, since it is envisioned that the association will be involved in some standard-setting and conducting inspections on behalf of the OPLA-like organizationindustry is likely to be much more comfortable having an association performing this regulatory role rather than an international organization. 147 Since P&I clubs are the ones who ultimately would bear much of the financial burden of responding to large pollution claims, they are obvious invitees to this system. Their financial contribution to the operations of the OPOL-run system can be rationalized in that they are directly benefiting from the establishment of a well-funded response capability since it ultimately reduces their risk of payout. Insurers of hulls and cargoes may also have a financial inducement to join this arrangement but it isnt immediately apparent to the author that they have a compelling financial reason to do so. 148 Some thought was given to simply expanding the existing OPOL agreement to include the Arctic. That course is not recommended because the startup costs of establishing capability in the Arctic will be quite great. So too, the current $250million liability cap (on cleanup and liability payments) in the North Sea OPOL agreement is much too low given the serious technical difficulties in containing an incident in the Arctic. 149 The forces should also remain government ones in case it is necessary to effectuate and enforce action (arrest) against either the vessel or the ships captain for violating the laws of the coastal state. 150 At a minimum, the costs of fuel and other consumables should be assessed. 151 J. Tauman, Rescue at Sea, But Nowhere to Go: the Cloudy Legal Waters of the Tampa Crisis Pacific Rim Policy Journal 11, no. 2 (March 2002). 152 International Convention on Maritime Search and Rescue, April 27, 1979 (entered into force on June 22, 1985) 1403 UNTS, [hereinafter SAR Convention]. Available at: treaties.un.org/doc/Publication/.../volume-1405-I-23489 -English.pdf. 153 OPA-90 is written in such a way that the drilling licensee is ultimately liable so the use of corporate cut-outs is normally not effective. Also, even though OPA-90 has limits on liability ($75million in the case of offshore rig operators),there are no limits on claims in state courts; the limit on liability doesnt affect the removal costs nor does itaffect any civil or criminal penalties that may be assessed. For an excellent discussion of the interactions of these limits, see James Nichols, Oil Pollution Act of 1990 (OPA): Liability of Responsible Parties, Congressional Research Service, June 2, 2010. Available athttp://www.nationalaglawcenter.org/assets/crs/R41266.pdf. 154 There are both practical difficulties of having to negotiate different legal standards in the various Arctic countries and very high entry costs for individuals seeking to legally prosecute a claim in a foreign country. Additionally, none of the states, so far as can be determined, have agreed to some sort of claims procedures whichwould standardize the process and lower the costs of filing a claim in national courts. The NATO claims procedure is one such example of an international claims process, although such processes are commonplace ininternational law. 155 Chatham House-Lloyds, supra note 102 at 39 40. 156 The Limits on Liability Convention can be found at http://www.imo.org/about/conventions/listofconventions /pages/convention-on-limitation-of-liability-for-maritime-claims-(llmc).aspx. Another IMO convention concerning shipowner liability for pollution resulting from the discharge of hazardous and noxious substances (know popularly as HNS 2010) is not yet in force. It generally covers risks to life and property resulting from the discharge of solid
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materialsand chemicals. When in force the limit will be approximately $180million. See generally http://www .hnsconvention.org/Pages/Home.aspx. 157 The text of the International Convention on Civil Liability for Bunker Oil Pollution Damage 2008 can be found at http://www.imo.org/About/Conventions/ListOfConventions/Pages/International-Convention-for-the-Prevention-of -Pollution-from-Ships-(MARPOL).aspx. 158 33 U.S.C. 2701 (1994). Discussed in detail in notes 72 81 and accompanying text. 159 The separate IMO fund accumulated from levies on oil cargoes supplements compensation to $315million. This convention is known as the 1992 FUND Convention. See above, notes 77 83 and accompanying text. Foradditional background go to http://www.imo.org/About/Conventions/ListOfConventions/Pages/International-Convention-on-the -Establishment-of-an-International-Fund-for-Compensation-for-Oil-Pollution-Damage-(FUND).aspx. 160 The OPOL Agreement has a quasi-strict liability system except that an owner may be relieved of any liability (and the association relieved of any duty to pay) for incidents caused by natural phenomena. U.S. law has a liability cap of $75million, although these caps can be avoided if there is evidence that the operator violated the terms of the license or was grossly negligent. Also, OPA-90 does not extinguish any claims that might be filed against a licensee in state courts. Inany new agreement, the natural phenomena excuse needs to be eliminated and the government-to -government agreement needs to either trump OPA-90 or conform to it. 161 As noted previously, judgments in state court are unaffected by the federal limit. Also, the limit does not apply toremoval costs or civil penalties. But in the case of Deepwater Horizon it is important to note that BP, for business reasons, elected to waive the $75million federal limit. See Joe Nocera, Justice, Louisiana Style, New York Times, Opinion Section (online edition), July 9, 2013. 162 Such fears of unlimited or uncontrollable liability undoubtedly may have affected the decision by Shell to take a pause on its exploratory efforts in the Beaufort and Chukchi Seas in February of 2013. 163 This is not to suggest that some of the recommendations will not need implementing legislation or regulatory action by marine safety and environmental protection agencies in the individual countries. However, passage of these one-off measures (implementation of a stand-alone agreement) is likely to be much more easily accomplished than attempting to engage in a massive codification of each states domestic laws to make them complementary. 164 Since P&I clubs provide coverage to shipowners for claims exceeding their required insurance and also function asshipowners associations, including P&I clubs in the membership scheme seems an excellent way of helping to enhance thelegal stature of the association. Since P&I clubs now play a very important role in policing their membership to ensure that ships comply with all relevant material and operational standards, it stands to reason that they would do the same if they were part of an Arctic-centric organization. In other words they have a similar financial interest and ensuring that club ships entering the Arctic meet all relevant design, equipment, and training standards. Only those P&I clubs that have members that venture into the Arctic are logical participants in this scheme. 165 A fund in excess of $2billion would appear to be reasonable since the purpose of establishing this fund and claims procedure is to supplement the laws of coastal countries when it comes to a pollution incident in the Arctic. Given that the United States requires licensees to assume roughly $75million in liability costs plus provide access to anOil Spill Liability Trust Fund of $1billion, a figure well in excess of $1.1billion seems necessary to assuage concerns that this Arctic-specificarrangement is insufficiently protective of the marine environment. 166 Three liability caps appear reasonable: $23billion in the case of a rig operator/drilling licensee; $1.35billion in the case of a tanker; and $250million in the case of non-tanker shipping (includes the cost of a bunker oil spill). 167 This is essential since the OPOL arrangement will be ineffective if it is insufficiently capitalized. To be properly capitalized there needs to be some external standard that OPOLs risk managers can follow.
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168 Depending on the appetite of the member states, one might make the OPOL claims process the exclusive remedy for any claims arising from a serious pollution incident in order to prevent insurgent actions by enterprising lawyers in the various countries to circumvent the claims process by resorting to their national courts. Obviously, if claimants are given an option to go to national courts and those judgments have to be satisfied from OPOL assets, it defeats the integrity of a unitary liability and claims system. If a compromise had to be struck, one might consider current OPOL process. 169 The provisions in the IMO liability convention and OPA-90 which excuses shipowners or rig operators from liability for acts of god or other instances of force majeure has no business being in an agreement concerning the Arctic where extreme weather events and harsh operating conditions are a daily occurrence. 170 If a vessel is arrested in a country which is a party to the Limitations of Liability Convention, Article5 provides that any party must release a detained vessel if the shipowner has given bail or security equal to its full liability limits. 171 The limits should approximate those discussed in notes 165 and 166 above. Of course, shipowners would be able to limit their liability for an amount equal to the greatly increased minimum insurance limits. 172 Myres S. McDougal and William T. Burke, The Public Order of the Oceans (New Haven: Yale University Press, 1962). Ifone were to follow a parallel structure to that used in other regions, it could be called the Arctic MOU. 173 Ibid., 1138. 174 Ibid., 52.
Copyright 2013 by the Board of Trustees of the Leland Stanford Junior University
The publisher has made an online version of this work available under a Creative Commons Attribution-NoDerivs license 3.0. Toview a copy of this license, visit http://creativecommons.org/licenses/by-nd/3.0. Efforts have been made to locate the original sources, determine the current rights holders, and, if needed, obtain reproduction permissions. On verification of any such claims to rights in the articles reproduced in this book, any required corrections or clarifications will be made in subsequent printings/editions. Hoover Institution Press assumes no responsibility for the persistence or accuracy of URLs for external or third-party Internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate orappropriate. First printing 2013 191817161514137654321 This publication is a chapter from The Opening Arctic: Shaping a Safe, Secure and Prosperous Future, soon to be published byHoover Institution Press, edited by David Slayton.
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About the Authors
Arctic Security Initiative

When combined with economic and political developments, the changing Arctic is the most significant physical global event since the end of the last Ice Age. An unresolved strategic territory, the increased activity suggests that the region could become the subject of intensive negotiations and possible friction and confrontation relating to resources, ocean access, and sovereignty. In light of those changes and challenges, the Hoover Institution Arctic Security Initiative has been put in place to address the strategic and security implications ofincreased activity and to identify opportunities for shaping a safe, secure, and prosperous Arctic. For more information about the Arctic Security Initiative, visit usonline at www.hoover.org/taskforces/arctic-security.
Mark E. Rosen Mark E. Rosen is a senior legal adviser at CNA Corporation, inwhich capacity he provides corporate law support to CNAand international advice tovarious clients regarding maritime boundary disputes, marine law enforcement, and oceans policy. He teaches at George Washington School ofLaw and is a University of Virginia School of Law (LLM) and University of Georgia (JD)graduate. He was a columnist for Intellibridge and SEAPOWER magazines.
Patricio Asfura-Heim Patricio Asfura-Heim is a senior analyst with the Center for NavalAnalyses who has spent atime supporting U.S. Marine and Department of State rule-of-law operations in Iraq and Afghanistan. He has been published by Foreign Affairs, the United States Institute of Peace, Stability Operations Magazine, and Politico. He graduated fromthe Catholic University of Americas Columbus School ofLaw and is a member of the Washington, DC, bar.
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Stanford University

Addressing The Gaps in Arctic Governance, by Mark E. Rosen and Patricio Asfura-Heim

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ARCTIC SECURITY INITIATIVE

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Increased Activities: Vessel Traffic and Resource Extraction

Addressing the Gaps in Arctic Governance

Unique Operating Risks and Increased Environmental Vulnerability

Addressing the Gaps in Arctic Governance

theoil to be transported over long distances

ability of the ocean to absorb spills and incidental discharges

Unique Legal Risks

Addressing the Gaps in Arctic Governance

Minding the Gaps: An Analysis of the Arctic Regulatory Regime

Overview of the Arctic Regulatory Regime

Addressing the Gaps in Arctic Governance

Domestic Laws and Regional Agreements

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

The Arctic Council

Addressing the Gaps in Arctic Governance

The International Maritime Organization and the Polar Code

Addressing the Gaps in Arctic Governance

Limitations of Arctic Governance: Prevention, Response, and Recovery Gaps

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

ofincidents and execute response plans

aprior agreement is made

Recovery/Reconstitution Issues (Polluter Liability)

Addressing the Gaps in Arctic Governance

Shipowners Limits on Liability Schemes and Insurance (Summarized in the Appendix)

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps

Addressing the Gaps in Arctic Governance

A Precondition to Action: Strengthen the Arctic Council

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

andhas current inspections;

of the operational aspects of the IMO polar guidelines;

Addressing the Gaps in Arctic Governance

intothe zone and the inspection results; and

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Response Issues and Possible Solutions

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance

Increasing Lifesaving and Rescue Capacity

Addressing the Gaps in Arctic Governance

Recovery and Reconstitution Issues and Possible Solutions

Addressing the Gaps in Arctic Governance

Addressing the Gaps in Arctic Governance