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Mr. Knight: If the Minister cannot answer straight away, I invite him to do so in his winding-up speech. The international convention is reviewed and amended from time to time. When a review or amendment takes place, is it by majority voting or does the UK have a veto if it does not like what is proposed?

Dr. Ladyman: I will indeed confirm that in my winding-up speech, but I understand that we do not have a veto. However, it is the normal practice that we work closely with the other states and try to achieve a consensual way forward. It is usually possible to achieve that.
 
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Unfortunately, the compensation available—£168 million—is not always sufficient. Under the system, full payment for claims has often been delayed until the full extent of the damage is known and the final costs of an incident can be assessed more accurately, a process that can take a number of years. We experienced such delays following both the Braer and the Sea Empress incidents.

In the case of the worst incidents, when total costs exceed the amount of compensation available under the system, claimants may never receive full payment. The total cost of the 2002 Prestige incident, which affected Spanish, French and Portuguese coasts, far exceeds the limit of the basic regime, and it is expected that victims will never receive more than 30 per cent. of their claims. The membership of the international regime agreed that it was necessary to address that fundamental shortcoming and the supplementary fund protocol was developed.

Tom Brake: The Minister may be about to deal with my point. The supplementary fund, together with the original fund, will amount to £600 million, but the cost of the Prestige damage was £700 million. Even with the new arrangements, it would appear that, in the event of a repetition of that incident or an incident on the same scale, the fund would not cover it.

Dr. Ladyman: That may be so. The hon. Gentleman is right that the total compensation that will be available from the supplementary fund will add £453 million for oil pollution victims, which means that, according to the latest prices, £621 million should be available. Those matters will, however, be kept under review. The legislation that we will pass today will allow us to use the supplementary fund, but it will also allow us to engage in further negotiations about the amount of the fund, and to agree to increases in future years through secondary legislation.

I am pleased to report that the United Kingdom played a prominent part in helping to develop the necessary reforms. The supplementary fund came into force in March last year and has so far been ratified by 15 states including most of our European neighbours. Through the Bill, we can ensure that the UK can also enjoy the additional financial protection that the fund can provide. The Bill allows the UK to implement the supplementary fund protocol and the Government intend to do that as soon as possible.

Mr. Julian Brazier (Canterbury) (Con): We strongly support the Bill. The Minister has stressed the role of the UK in promoting the fund. What sanctions does he envisage in the long term applying to countries such as Panama and Liberia that will effectively be free riders?

Dr. Ladyman: The hon. Gentleman talks of free riders, but if those countries do not ratify the fund, they will not be able to take advantage of it. Only nations that will be party to the convention will have to contribute to it or be able to benefit from it. We shall talk to all concerned, through the International Maritime Organisation and other mechanisms, to ensure that there is wide collaboration.

Mr. Brazier: Surely the Minister appreciates that it is the people who need the money who will lose it if a
 
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company registered in Liberia has a big oil spill and goes bust. People in this country who cannot be compensated will be the losers as a result of that free riding.

Dr. Ladyman: The risk will be spread among all the nations of the world. The extent of the fund as defined under the convention will always be available. Even if a company went broke, we would still have access to the money that was to be contributed to the supplementary fund. The hon. Gentleman may be thinking of the 1992 international convention on civil liability for oil pollution damage—known as the liability convention—which requires a shipowner to be insured for personal liability. I shall have to check on what happens when someone does not carry that necessary liability insurance. I may be able to give the hon. Gentleman the information later during the debate.

It is expected that the costs of all but the most extreme incidents will continue to be covered by the existing fund. The main benefit of the Bill is that the supplementary fund will enable claims to be met from the existing fund without delay. In the vast majority of cases, it will no longer be necessary to delay payment until the overall costs of the incident are determined, because the supplementary fund will be there to provide additional compensation as necessary. That should ensure that claimants are spared the frustration, and indeed the hardship, of delays in full payment.

Following enactment of the Bill, the United Kingdom would be able to join the supplementary fund protocol and benefit from the financial protection offered by it within a relatively short time. Until that happens, the UK cannot gain access to the substantial additional benefits conferred by the protocol. If an incident of the magnitude of the Prestige or the Erika affects our shores, the compensation available through the existing regime may well be inadequate. That explains why I am so keen for the Bill to be enacted as soon as possible.

The supplementary fund protocol would be implemented in the UK by secondary legislation. An Order in Council has been drafted and copies are available from the Library. It contains detailed provisions implementing the supplementary fund protocol in the UK. The provisions are technical and amend those in the Merchant Shipping Act 1995 relating to the international convention on the establishment of an international fund for compensation for oil pollution damage 1992—known as the fund convention—to extend them to the supplementary fund protocol. The order will require major oil receivers in the UK to contribute to the supplementary fund just as they currently do in respect of the existing fund. Contributions will be needed only if the £168 million available from the existing fund proves insufficient.

UK oil importers already contribute to the existing international fund. They were consulted in 2004 on the proposal to implement the supplementary fund protocol. The oil industry clearly favours a predictable and international approach to providing compensation for oil pollution damage and supports implementation of the supplementary fund protocol as part of a wider strategy to improve the existing regime.

As recently as last week, tanker owners agreed to share the costs of the supplementary fund, thereby reducing the burden on the oil industry. We fully
 
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support that move. It is vital for the compensation regime to be funded in a sustainable, equitable manner, with the right balance between shipowner and cargo interests. If all parties are not satisfied by the contribution arrangements, that could in the long term be very damaging to the international regime. The agreement proposed by tanker owners will help to ensure the continued success of the regime. It is due to be adopted by the governing body of the supplementary fund in February.

The Bill also provides for the implementation of future instruments governing compensation for oil pollution damage. As I said earlier, the original instruments were superseded some years ago. The fundamental principles of the regime remained unchanged, but improvements were made to, for example, widen the scope of application. The regime now provides for reasonable environmental reinstatement measures. It has also developed considerably in respect of compensation for the economic consequences of an oil disaster; it was originally conceived as being primarily concerned with clean-up. No doubt it will continue to evolve. Indeed, it must if it is to remain viable and successful, and meet legitimate claims. It is therefore important for the Bill to provide for any future instruments that may be developed to improve the regime still further. Such instruments are, of course, agreed only after extensive debate in which the industries concerned participate fully.

The UK Government will always want the option of being part of the international regime at the earliest opportunity. That is why the Bill provides for the UK to become a party to any instrument that modifies or replaces the existing regime. Of course, such a power would not be used before the usual public consultation and regulatory impact assessment exercises had been carried out. The provision was included so that the Government of the day could, if they so decided, implement any new, internationally negotiated instruments governing oil pollution compensation without first having to pursue primary legislation. Parliament would retain active scrutiny of the future proposal by virtue of the affirmative resolution procedure, which would apply to any secondary legislation made under the provision.

The last provision relating to compensation for oil pollution is a minor amendment relating to the existing international fund as contained in the Merchant Shipping Act 1995. The 1995 Act includes a provision relating to the time within which claims must be brought against the existing international fund. To ensure that the provision in the Act is interpreted consistently with the text of the fund convention, the Bill modifies the language used in section 178 to follow the wording of the treaty more closely. The Bill also provides for a power to make secondary legislation regulating air pollution from ships. It does so by amending section 128 of the Merchant Shipping Act 1995, so removing a doubt on the current scope of that section. The secondary legislation would implement annexe VI to the international convention for the prevention of pollution from ships, commonly known as the MARPOL convention. Again, we are seeking to implement domestically what we have negotiated internationally.

The secondary legislation would apply the series of internationally agreed technical standards which form annexe VI to UK-flagged vessels. The aim of those
 
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standards is to reduce air pollution from shipping through controls of emissions of nitrogen oxides, sulphur oxides and ozone-depleting substances.

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