Conclusion

Most tankers in the current Chinese coastal oil shipping market are small and old vessels, which are characterized by high incident rates and low compensation capacity. The requirement of compulsory insurance for the owners of those small tankers, and the establishment of direct action against the insurer can ensure full and prompt compensation for oil pollution victims. However, according to Article 5 of the Oil Pollution Liability Insurance Regulation, the insured value for tankers carrying persistent oil as cargo in bulk should be not lower than the amount of limitation for oil pollution damage provided by the 1992 CLC. Thus, the limitation for a ship not exceeding 5000 units of tonnage should be not lower than 4.5 million SDR. Some scholars hold that 95.5% of the tankers flying the Chinese flag are small tankers not exceeding 5000 tonnes, and that the amount of oil spillage from these small tankers is usually less than that from tankers of a huge size, so that it is not fair for owners of small tankers to be charged insurance fees which are equivalent to the insurance fees for tankers with 5000 units of tonnage (Han 2007). Besides this, as stated in the section above, most coastal oil shipping enterprises in China are small ones that cannot afford high insurance fees. The high insurance fees will possibly aggravate the risk of bankruptcy of these small coastal oil shipping enterprises and force them to withdraw from the Chinese coastal oil shipping market.