The existing and possible increased levels of atmospheric and oceanic radioactivity could have a serious practical, commercial and legal impact across the shipping industry, for shipowners, charterers and cargo owners together with port authorities, regulators and safety agencies both inside and outside Japan. This article looks at some of the main considerations that may arise.
Following the explosion at the Fukushima power plant on 11 March, the Ministry of Land, Infrastructure, Transport and Tourism of Japan has confirmed that as of 23 March 2011 all international sea ports not damaged by the earthquake and tsunami are operating normally and no health risk is detected around the ports, based on the results of measurements of radiation levels by local governments; as at the date of this briefing this still appears to be the case. The major international ports closest to the Fukushima plant are the ports in the Tokyo Bay area. The Port of Tokyo which is 225km away from the Fukushima plant was reporting as at 31 March 2011 the highest increased annual exposure to radiation of 0.88 millisieverts (mSv) per year. There are 1,000 mSv in one sievert (Sv); this measurement is used in setting radiological protection standards. To put this in perspective, people are on average exposed to somewhere between 2 – 3 mSv per year from natural background radiation and an airline crew which flies the New York to Tokyo circuit via the polar route is exposed to around 9 mSv per year. The lowest level at which any increase in cancer is clearly evident is an exposure of 100 mSv per year. The Japanese authorities have advised vessels to keep a 30km distance from the Fukushima plant, although US authorities recommended a more cautious 80km distance and many other maritime regulatory authorities as well as some flag states have implemented wider exclusion zones which far exceed the recommendations coming from Japan. The IMO is currently monitoring the situation with the assistance of the World Meteorological Organisation (WMO), the Intergovernmental Oceanographic Commission of UNESCO, the International Hydrographic Organisation (IHO), the International Association of Marine Aids to Navigation and Lighthouse Authorities (IALA) and the NAVAREA and METAREA coordinators in the immediate and adjacent regions (including Australia, the Russian Federation and the United States). The status of the automated alerts regarding the exclusion zones and navigational and meteorological warnings issued by the Worldwide Navigational Warning Service (WNWS) are also being regularly updated. At this stage, therefore, radiation levels in the major ports appear not to create any cause for serious concern. Many of the world’s major dry-bulk carriers, container lines and tanker firms have confirmed that they intend to continue to visit Japanese ports falling outside the exclusion zones. Another potential and perhaps more significant risk is that posed by the carriage of potentially radioactive cargo sourced from closer to the Fukushima plant (and it is for this reason that the global container company APL has recently announced that it intends to scan all containerised exports leaving Japan prior to loading in an attempt to protect its employees). In particular there are concerns with regard to food originating in 12 prefectures in the Fukushima area. The EU has adopted controls stipulating that all products from these prefectures have to be tested before leaving Japan and will be subject to random testing in the EU. Each consignment of food or feed from Japan also has to be accompanied by a declaration (to be provided by the Japanese authorities) attesting that the product does not contain levels of radionuclides that exceed the EU’s maximum permitted levels. Feed and foodstuffs not in compliance with the maximum permitted radiation levels will be safely disposed of or returned to the country of origin.
Issues for Ports
Both within and outside Japan, port authorities may need to consider what powers they have to require shipowners and operators to declare potentially radioactive cargo, or to ensure that ships and cargo have undergone appropriate cleaning. More and more ports are developing and publishing procedures. Rotterdam is the largest container port in Europe and over the weekend of 3/4 April, the Rotterdam Port Authority confirmed that it intends to carry out radiation checks on all ships arriving from Japan and it is currently anticipated that the first of the ships headed to Europe from Japan after 11 March is due to arrive in Europe in mid-April. What ports can or cannot do will depend on the specific legislation in each country governing the port, although most will have powers to impose emergency measures, particularly on safety grounds. For those affected, it may be that measures which are found not to be reasonable and proportionate, or implemented without following proper procedures, can be successfully challenged. In Germany, the authorities of the port of Hamburg are working on emergency plans and considering the possibility of refusing contaminated vessels access to the port. Such a docking prohibition could be legally based on general public safety law in Germany which gives the authorities the right to prohibit the entry to the port in case of threat to public health. There are currently no binding radiation thresholds for cargo ships. It is likely that emergency plans will contain a threshold level but the thresholds currently discussed would be lower than the typical dose of radiation a person might receive during a long distance flight. Governments may also be able to impose specific regulations, subject to the same safeguards. By way of example, in the UK, the Merchant Shipping Act 1995 (the Act) provides discretion to the Secretary of State to give certain safety directions to persons such as the shipowner, ship’s master or harbour authority if there is a risk to safety or of pollution by a hazardous substance (which includes radioactive materials) onboard a ship. Directions include instructions that a cargo is or is not to be unloaded or discharged and that a ship is or is not to be moved. This would affect a ship and/or cargo contaminated by radiation if the radiation levels are high enough to present a sufficient public health and safety risk. If action taken in accordance with a safety direction either was not deemed to be reasonably necessary or caused loss or damage which could not be justified (e.g. in a situation where radiation levels were too low to present sufficient risk) the Act expressly provides that the Secretary of State must pay compensation to any person who suffered loss or damage as a result of the action under the safety direction. However, if a ship is found actually to be contaminated, then such a claim is unlikely to succeed.
Insurance issues
Most cargo, hull and P&I insurance contracts contain exclusions for damage or delay by nuclear risks, including radiation, such as those contained in the Institute Radioactive Contamination, Chemical, Biological, Biochemical And Electromagnetic Weapons Exclusion Clause. The insurance position may be relatively straightforward for any cargoes and ships actually damaged by radioactive contamination, but coverage disputes could easily arise in other situations, especially when considering claims that do not involve actual contamination. For example, if a port is found to be unsafe for a vessel because of legislation imposed as a result of fears over fallout from Fukushima, do the typical nuclear exclusions apply to a claim under a charterers’ liability policy? The answer to these issues will lie in a proper consideration of the policy terms set against findings of fact as to the proximate cause of the loss.
Liability and compensation
The Vienna Convention on Civil Liability for Nuclear Damage of 1963 and the Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960 (along with subsequent amending conventions/protocols) set out an international liability regime to provide compens
ation for nuclear damage. These conventions in general adhere to the principles of strict liability of the nuclear operator; exclusive liability of the operator of a nuclear installation; compensation without discrimination based on nationality, domicile or residence; mandatory financial coverage of the operator’s liability; exclusive jurisdiction of the courts in the state in which the nuclear accident occurs; and limitation of liability in amount and in time. Japan is not party to any international liability convention but its law generally conforms to similar principles. According to the World Nuclear Association plant operators in Japan must provide a financial security amount of JPY 120 billion (USD 1.4 billion). For claims in excess of this, the government provides coverage, and liability is unlimited. Strict liability is not imposed on the operator where a leak is caused by a natural disaster such as an earthquake or tsunami, and in such cases it is the government to whom injured parties must look for compensation. It seems likely that most claims for direct damage to property in Japan resulting from the nuclear explosion at the Fukushima power plant will be brought in the Japanese courts and will be subject to Japanese law. However, for the international shipping community, there may be ways and means to seek recovery of losses under contracts subject to English law. Consequently, it may be helpful to look briefly at some decisions of the English courts as regards liability arising from nuclear incidents.
In Merlin v British Nuclear Fuels [1990] 2 Q.B. 557 [1], the English courts rejected a home owner’s claim for damages under the Nuclear Installations Act 1965 as a result of the reduction in value of their house due to radioactive contamination following the Sellafield disaster. Radioactive contamination of the house was not enough to constitute physical damage, and a claim for economic loss did not fall within the terms of the statute. However, in Blue Circle Industries v MoD, compensation was ordered to be paid for the reduction to the value of Blue Circle’s land as a result of radioactive contamination which was above regulatory levels. More recently, the Scottish case of Magnohard Ltd v United Kingdom Atomic Energy Authority [2004] S.C. 247 recognised there was potential for recovery of compensation and expenses incurred as a result of cleaning up contamination to a beach following radiation leakage from Dounreay power station. There is therefore perhaps some precedent under English law for considering increased levels of radioactivity on ships or cargoes as being physical damage for which compensation, in the form of loss of value and cleaning costs, might be recoverable, where the exposure was due to breach of contract or negligence.
Conclusions
Last month’s earthquake and tsunami have devastated local communities and cost countless lives. However, Japan is still very much open for business. Despite the concerns over radiation leaks the increase in radiation levels are still very low and most shipowners and operators are continuing to trade with and support Japan while putting appropriate safeguards in place. It seems likely that the fallout from Fukushima will be felt far and wide, and perhaps in unexpected ways, across the shipping industry. For all those involved in shipping the Fukushima disaster will require evaluation and assessment of commercial and operational arrangements and risks, and the implementation of practical measures in response. The issues outlined above are not exhaustive. Each situation is likely to require its own analysis, and those involved may need to seek appropriate advice and guidance from professional bodies and national administrations. However, with a degree of commonsense and commerciality most parties affected should be able to reach agreement as to how the risks and costs of such measures should fairly be allocated. Ultimately, the impact on the industry will in reality be determined by what it perceives as the extent of the risk, whether or not that perception reflects the actual effects of the natural disaster. It is however to be hoped that the international commercial and official reaction continues to be driven by pragmatism and a desire to assist Japan in its recovery.
In a box
This abridged version was based on an original article previously published in Norton Rose’s Legal Seas – the full article can be obtained at the following link http://www.nortonrose.com/knowledge/publications/2011/pub36455.aspx?lang=en-gb