In 1984 IMO convened a conference to consider a new instrument dealing with compensation for accidents involving hazardous and noxious substances (HNS) but the issue proved to be so complex that the attempt had to be abandoned. Because of the heavy workload of the Legal Committee, it was not until 1996 that the matter could be considered again, but this time the attempt was successful. The International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996 will make it possible for up to 250 million SDR to be paid out to victims of disasters involving HNS (such as chemicals).
The regime established by the HNS Convention is largely modelled on the existing regime for oil pollution from tankers set up under the International Convention on Civil Liability for Oil Pollution Damage 1992 (the "CLC") and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1992 (the "Fund Convention"), which covers pollution damage caused by spills of persistent oil from tankers.
The HNS regime is governed by one Convention, the purpose of which is to provide adequate, prompt and effective compensation for loss or damage to persons, property and the environment arising from the carriage of HNS by sea. The HNS Convention covers both pollution damage and damage caused by other risks, e.g. fire and explosion.
Under the HNS Convention the shipowner is liable for the loss or damage up to a certain amount, which is covered by insurance (1st tier). A compensation fund (the HNS Fund) will provide additional compensation when the victims do not obtain full compensation from the shipowner or his insurer (2nd tier). The HNS Fund will be funded by those companies and other entities which receive HNS after sea transport in a Member State in excess of the thresholds laid down in the Convention.