HNS Convention: Shipowner/Insurer Liability Limits

The HNS Convention creates the first international compensation regime dedicated to casualties involving hazardous and noxious substances carried by sea. As with the other liability conventions, it imposes strict liability on the shipowner, subject to defined exceptions, and gives claimants a direct right of action against the insurer or other provider of compulsory financial security, in exchange for expressly defined limits to that liability. This convention follows the successful CLC/Fund model for oil pollution from tankers, but its scope is wider, covering more than 2,000 substances, and it responds not only to contamination, but also to fire, explosion, loss of life, personal injury and property damage. 

The limitation regime is split into two tiers. The first is the shipowner’s limit of liability, calculated by reference to the ship’s tonnage, which is subject to a cap.The second tier, provided by the HNS Fund, may respond when shipowner compensation is unavailable or where claims exceed the owner’s limit. The maximum compensation is 250 million SDR per incident, inclusive of amounts paid under the shipowner tier. 

Calculating the shipowner’s HNS limit

In a feature unique to the HNS Convention, Article 9 distinguishes between bulk and packaged HNS. For bulk HNS, the limit is 10 million SDR for a ship not exceeding 2,000 GT, plus 1,500 SDR for each tonne from 2,001 to 50,000 GT and 360 SDR for each tonne above 50,000 GT, capped at 100 million SDR. 

For packaged HNS, the figures are 11.5 million SDR, 1,725 SDR and 414 SDR respectively, capped at 115 million SDR. The packaged calculation also applies where damage is caused by both bulk and packaged HNS, or where it cannot be determined which caused the damage. 

Tonnage is gross tonnage calculated by reference to the 1969 Tonnage Convention. 

What is an SDR?

The Special Drawing Right is the IMF unit of account. For the US dollar illustrations below, 1 SDR is valued at approximately US$1.36, based on the IMF’s published currency-units-per-SDR rate for 16 October 2026. This is only illustrative as the conversation is subject to change based on currency value fluctuations. Under Article 9, the conversion into the relevant currency is made by reference to the SDR value on the date the owner’s limitation fund is constituted. 

HNS liability limits by vessel size

Comparison with the CLC/Fund regime

The 1992 CLC has the same broad architecture: strict registered-owner liability, compulsory insurance, direct action and tonnage-based limitation, followed by collective compensation under the 1992 Fund Convention. Its present shipowner limits are 4.51 million SDR for ships up to 5,000 units of tonnage; above that threshold, 631 SDR is added for each additional unit up to a maximum of 89.77 million SDR at 140,000 units. The 1992 Fund ceiling is 203 million SDR. In addition to that, in some states, claimants have access to the Supplementary Fund, providing significantly higher levels of compensation. 

The scope of the CLC is considerably narrower as it only addresses pollution damage from persistent oil carried in bulk as cargo by qualifying tankers, whereas HNS addresses a broader range of cargoes and physical hazards. The HNS Convention excludes pollution damage as defined in the CLC, preventing duplicate recovery for the same CLC pollution damage. A more detailed comparison of the CLC and the HNS conventions will be the subject of a future article.

Why the Bunkers Convention is different

The 2001 Bunkers Convention also uses strict liability, compulsory insurance and direct action; however, there is no HNS- or CLC-style  second-tier fund. Limitation depends on the applicable national or international regime, commonly LLMC where implemented. Under the 2012 amendments to the 1996 LLMC Protocol, property claims begin at 1.51 million SDR for a ship up to 2,000 GT, with additions of 604 SDR per tonne from 2,001 to 30,000, 453 SDR from 30,001 to 70,000 and 302 SDR above 70,000. The applicable version and domestic implementation must be checked in each case. 

A mixed casualty: HNS cargo and bunker oil

The question that then arises is: what happens in the event of an incident potentially involving two or more of the conventions? Assume a 30,000 GT chemical tanker grounds, breaching a cargo tank containing qualifying bulk HNS, with its bunker tanks containing HFO. 

Damage attributable to the cargo release may fall within HNS. In this example, the first-tier limit would be 52 million SDR, followed by possible access to the HNS Fund within the aggregate 250 million SDR ceiling. However, pollution damage attributable to the ship’s bunker fuel would fall within the scope of the Bunker Convention and the applicable limitation law, without an international supplementary fund. Ship’s bunker fuel is not HNS cargo merely because it is hazardous and the HNS regime concerns only substances carried as cargo, as opposed to fuel intended for operation or propulsion of the ship. Where separate consequences can be identified, claims should, in theory, be allocated by reference to the source of the loss and the type of claim, with the effect that damage attributable to the bunker spill in this example should not be covered by the HNS convention limitation regime and fund. There is some uncertainty as to how claims will be treated where the cause of the loss is genuinely indistinguishable, and this would likely be a matter for the local courts to decide in the event of an incident.