HNS Convention - Strict Liability Coming To The LNG Industry? (eBook)

Published Date

January 2005

HNS Convention - Strict Liability Coming To The LNG Industry? (eBook)

(Excludes any applicable taxes)

A discussion of the background to the IMO Convention on Hazardous and Noxious Substances and the impact it is likely to have when it comes into force. (10pp)

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A terrorist attack involving a vessel delivering LNG to a recently opened UK terminal does US$400 million of damage. Although not involved in any stage of the delivery, Spanish LNG importers are collectively liable for approximately US$170 million of the damage, while the UK importers have no liability whatsoever.

Is this scenario likely to become a reality? From a technical standpoint, many in the industry believe it unlikely that a terrorist attack could cause a loss of LNG containment to such an extent. However, from a legal standpoint, if the Hazardous and Noxious Substances Convention comes into effect as expected and such damage were to occur, then liability distribution as described above is plausible.

The International Maritime Organization's Hazardous and Noxious Substances Convention (the "Convention") is an international treaty providing more than US$380 million in compensation to victims of a casualty involving the carriage by sea of hazardous and noxious substances ("HNS")

For the Convention to become law and affect the LNG industry, twelve states representing a certain tonnage of cargo must ratify it. Although only seven countries have ratified the Convention as of January 2005, the EU Council mandated that all EU countries ratify the Convention by June 2006. If such ratification occurs as expected, the Convention could be applicable to LNG companies trading into Europe and other regions as early as 2008. Therefore, it would be prudent for industry participants to consider its effects on the industry as a whole and on individual LNG shipowners, buyers and sellers.

The following article discusses the background behind the Convention from the standpoint of the LNG industry and offers a few example scenarios to suggest some of the possible impacts it may have during the next few years.

Paper Delivered by:
Philip R. Weems
(King & Spalding LLP)

Prepared for:
Gastech Bilbao 2005

For over 45 years, the Gastech Exhibition & Conference has been at the forefront of the international gas and LNG market. This world-renowned event is regarded as the most significant meeting place for gas and LNG professionals, where the global industry gathers to do business.

Gastech hosts major IOCs, NOC’s, global utility companies, EPC contractors, shipbuilders, pipeline companies, manufacturers, distributors, technology and service providers, all who play an active role in the global energy value chain.

Title: HNS Convention - Strict Liability Coming To The LNG Industry? (eBook)
Product Code: 4433g079
Published Date: January 2005

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