The first respondent in the Supreme Court proceedings, Environmental Protection Engineering SA (EPE), provided marine, land, and coastal environment protection services. Following the sinking of the Greek-flagged tanker, Alfa 1, owned by Via Mare SC, the shipowner appointed EPE on 5 March 2012 to undertake anti-pollution and cleaning up operations in the area of Elefsina Bay affected by the oil spill.

The Alfa 1 was used for the carriage of bulk oil, having a carriage capacity of 3,262 m³ of bulk oil, equivalent to 3,233 mt of heavy fuel oil. At the time of the sinking, the vessel was carrying 1,498.998 mt of Mazut oil no 3 (HFO 380 cst), 299.025 mt of Mazut oil no 1 (HFO 180 cst) and 274.580 m³ (equivalent to 236.139 mt) of marine gas oil. Aigaion Insurance Co SA (Aigaion), the appellant in the Supreme Court proceedings, had insured the ship for civil liability for pollution damage pursuant to art 7 of the International Convention on Civil Liability for Oil Pollution Damage (the CLC 1992), and had accordingly issued a certificate (commonly known in maritime practice as a 'blue card') dated 23 September 2011 and addressed to the Piraeus Central Port Authority (Directorate of Marine Environment Protection). This blue card certified that insurance cover was in force for the vessel from 22 September 2011-22 September 2012, satisfying the provisions of art 7 of the CLC 1992. Based on this certificate, the Piraeus Central Port Authority (being the competent authority of Greece, the flag State of the Alfa 1) issued a certificate of insurance or other financial security in relation to civil liability for oil pollution damage pursuant to art 7.2 of the CLC 1992, dated 7 October 2011, certifying that an insurance contract was in force for the ship.

EPE undertook pollution prevention operations, the pumping of petroleum products from the sunken ship, as well as cleaning operations, performing these operations in an appropriate manner on the instructions of the shipowner and the Elefsina Port Authority. The shipowner refused to remunerate EPE for its services, amounting to EUR 15,853,962.30. EPE sued, requesting that both the shipowner and Aigaion be ordered to pay. Aigaion's defence was that it had insured the civil liability of the shipowner due to pollution pursuant to the CLC 1992, which concerns cases where the ship actually carried persistent oil in excess of 2,000 mt; whereas, in this case, the ship was carrying less than 2,000 mt of persistent oil as cargo at the time of the accident. Thus, the shipowner was not obligated to maintain insurance pursuant to art 7 of the CLC 1992, and consequently there was no room for the application of art 7.8 of the CLC 1992, which provides that any claim for compensation for pollution damage may be brought directly against the insurer or other person providing financial security for the owner's liability for pollution damage. The Court of first instance rejected this argument, ruling that the carried amount of oil does not constitute a condition for the establishment of the insurer's liability pursuant to the CLC 1992. The Court of Appeal affirmed this aspect of the first instance decision, holding that where the oil cargo being carried by a Greek or foreign ship to a Greek port, bay or sea terminal is less or equal to 2,000 mt, the shipowner is nonetheless obliged to insure its ship, pursuant to art 9 of Law 314/1976, which gave domestic effect to the CLC 1969, and later the CLC 1992, in Greece. Pursuant to art 9 of Law 314/1976, insurance is mandatory, regardless of the cargo being carried. (See Decision 187/2018 (CMI2315).) Aigaion appealed to the Supreme Court.

Held: Appeal dismissed. The conclusion reached by the Court of Appeal is correct, but its reasoning is incorrect.

In order to cover pollution risks from the maritime transport of oil, the CLC was signed in 1969. The Convention was ratified by Greece pursuant to Law 314/1976, as amended by the 1976 Protocol (ratified by Presidential Decree 81/1989) and the 1992 Protocol (ratified by Presidential Decree 197/1985). This Convention is called, following the abovementioned Protocols, the CLC 1992: Decision No 23/2006 of the Plenary Session of the Supreme Court (CMI335). According to the definitions of art 1 of the CLC 1992, which constitutes an integral part of Greek domestic law, and prevails over any other contrary provision of law pursuant to art 28.1 of the Greek Constitution:

1. 'Ship' means any sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo, provided that a ship capable of carrying oil and other cargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo and during any voyage following such carriage unless it is proved that it has no residues of such carriage of oil in bulk aboard. ...

5. 'Oil' means any persistent hydrocarbon mineral oil such as crude oil, fuel oil, heavy diesel oil and lubricating oil, whether carried on board a ship as cargo or in the bunkers of such a ship.

Article 3.1 of the Convention provides that:

Except as provided in paragraphs 2 and 3 of this Article, the owner of a ship at the time of an incident, or, where the incident consists of a series of occurrences, at the time of the first such occurrence, shall be liable for any pollution damage caused by the ship as a result of the incident.

Furthermore, art 7 provides, among other things, that:

1. The owner of a ship registered in a Contracting State and carrying more than 2,000 tons of oil in bulk as cargo shall be required to maintain insurance or other financial security, such as the guarantee of a bank or a certificate delivered by an international compensation fund, in the sums fixed by applying the limits of liability prescribed in Article V, paragraph 1 to cover his liability for pollution damage under this Convention. ...

8. Any claim for compensation for pollution damage may be brought directly against the insurer or other person providing financial security for the owner’s liability for pollution damage. In such case the defendant may, even if the owner is not entitled to limit his liability according to Article V, paragraph 2, avail himself of the limits of liability prescribed in Article V, paragraph 1. He may further avail himself of the defences (other than the bankruptcy or winding up of the owner) which the owner himself would have been entitled to invoke. Furthermore, the defendant may avail himself of the defence that the pollution damage resulted from the wilful misconduct of the owner himself, but the defendant shall not avail himself of any other defence which he might have been entitled to invoke in proceedings brought by the owner against him. The defendant shall in any event have the right to require the owner to be joined in the proceedings. ...

11. Subject to the provisions of this Article, each Contracting State shall ensure, under its national legislation, that insurance or other security to the extent specified in paragraph 1 of this Article is in force in respect of any ship, wherever registered, entering or leaving a port in its territory, or arriving at or leaving an off-shore terminal in its territorial sea, if the ship actually carries more than 2,000 tons of oil in bulk as cargo.

According to the CLC 1992, two types of 'vessels' are defined: a) 'any sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo'; and b) 'a ship capable of carrying oil and other cargoes', ie a 'combined cargo' ship. The proviso in this definition concerns only ships for combined cargoes, ie those that are 'capable of carrying oil and other cargoes', and not all ships in general. Therefore, in order for the ships described in the first type (tankers) to be characterised as such, actual carriage of bulk oil as cargo is not required as a condition: Decision No 23/2006 of the Plenary Session of the Supreme Court (CMI335). In other words, a structural criterion is adopted for this type of ship. Thus, tankers are covered by the definition whether they sail in ballast, or whether they do not sail at all, but remain laden or unladen in port. Furthermore, from the combination of the definition of 'ship' and the definition of 'oil' in art 1.5, which includes oil 'whether carried on board a ship as cargo or in the bunkers of such a ship', it follows that the CLC 1992 applies not only when bulk oil is being carried as cargo, but also in the case of a spill of oil carried as bunkers by a ship defined as above (ie not by any other type of ship).

The CLC 1992 establishes a regime of shipowner strict liability for damage caused by maritime pollution due to leaks or spills of oil from its ship, since no fault on behalf of the shipowner is required for the establishment of its liability. It is a liability arising from risk, ie a liability that is connected to the particularly dangerous activity of oil carriage via tankers. This provision constitutes a manifestation of the general 'polluter pays' principle of international legislation for environmental protection, according to which the person who caused the marine pollution should provide compensation for the damage caused by it. The shipowner’s liability is not only strict but also exclusive, since the relevant compensation claims may be brought only against the shipowner, excluding at the same time the parallel application of other provisions, alongside the provisions of the CLC 1992 (art 3.4).

However, being the result of a compromise of opposing interests, this regime combines severity as regards the establishment of liability with a quantitative limitation of such liability based on the ship's tonnage, as provided in article 5. In other words, the CLC 1992 grants the shipowner the right to limit its liability up to a certain amount, based on the ship's tonnage, as a counterbalance to the particularly strict liability from risk that applies to the shipowner. This possibility for the shipowner is precluded only when the event that caused the damage resulted from its personal intention or gross negligence, pursuant to art 5.2, in which case its liability is unlimited. However, the possibility of use of the favourable provision of limitation of liability is conditional on the establishment of a fund equal to the total amount of the shipowner’s liability following limitation. It should be noted that pollution incidents are, usually, a result of accidents during which the ship is either rendered a total loss, or sustains serious damage which drastically decreases its value, thus being insufficient to cover the shipowner’s obligations, especially when the ship belongs to a one-ship company. To this end, the CLC 1992, aiming to secure the compensation of parties who have suffered pollution damage, established the shipowner's obligation to insure its civil liability for damage that falls under the scope of application of the Convention, up to the amount that corresponds to the limit of liability as provided in art 5.

Furthermore, in order to render this coverage more effective, art 7.8 provides a right for direct claims to be brought by affected parties against the insurer. However, the existence of this right is conditional on insurance cover, meaning that without the existence of an insurance contract, no insurer's liability can be established, but after the signing of the contract, the legal position of the third party becomes independent, meaning that it is not affected by flaws which vitiate the existence or the validity of the insurance contract. The third party's right of a direct claim is fortified by prohibiting the submission of objections against it arising out of the insurance contract, since this provision prohibits, with a few exceptions, anyone from raising against the third party those objections that the insurer would have been entitled to invoke in proceedings brought by the shipowner against it. The validity of the insurance cover shall not cease for any reasons other than the expiry of the time period and upon the lapse of three months from the relevant notice to the authorities. Any objection regarding the expiration or termination of the insurance cannot be brought against the affected third party if the conditions of the Convention have not been complied with.

At the same time, in order to ensure the effectiveness of the insurance cover, the issuance of certification was established as a means of control. Each Contracting State is obliged to issue a certificate proving that insurance or other financial security is in force for ships flying its flag, with the minimum contents provided by the Convention. Each Contracting State must also prohibit ships flying its flag from trading without a certificate. As a general rule, insurance companies issue a so-called 'blue card', which affirms that the insured shipowner has obtained insurance cover for damage provided in the Convention. Based on this document, the Contracting States issue a certificate, which remains on board the ship. Pursuant to decision No 3232.10/04/1996 of the Minister of Mercantile Marine (Official Government Gazette B/111/23-02-1996), issued in accordance with arts 7 and 12 bis of Presidential Decree 197/1996, a common form of the certificate of insurance or other financial security was established regarding civil liability for oil pollution damages pursuant to the CLC 1992. Consequently, the issuance by the competent authorities of a Contracting State of a certificate provided for in the Convention, based on the affirmation of the insurer, without providing in it any reservation or condition, means that insurance cover under the conditions of the CLC 1992 remains in force, and that this insurance cover was agreed in the context of the obligatory insurance of the shipowner's civil liability pursuant to art 7.1.

Furthermore, following negotiations and the compromise of opposing interests, and in order for dry bulk carriers that occasionally carried small amounts of oil at the time not to be burdened with mandatory insurance, art 7.1 established a quantitative limit for mandatory insurance that concerns only the latter, and not the application of the Convention provisions in general. It follows from the contents of the above provision and from the purpose it serves, ie the increased protection of parties affected by pollution, that the shipowner's obligation to insure its civil liability from pollution damages refers to every tanker with a carrying capacity of more than 2,000 tons of bulk oil, since, as mentioned above, the definition of the term 'ship' in the CLC 1992 extends to all tankers that are capable of carrying bulk oil as a cargo, regardless of actual carriage. Therefore, the particular financial security relates to the ship's ability to carry persistent oil in excess of 2,000 tons. On the alternative interpretation, the pollution risk arising from a spill of persistent oil found in bunkers would remain uninsured for tankers sailing in ballast (without carrying cargo), notwithstanding the fact that these tankers are considered 'ships' pursuant to the Convention. In addition, the above criterion of the tanker's carrying capacity constitutes, in any case, a stable factor, in comparison with the opaque and unstable criterion of cargo that was actually carried at the time of the pollution. Besides, a stable criterion, ie the ship's tonnage, is also used by the international legislator for limitation of the shipowner's liability to the amount provided for in art 5, which equals the amount of the required insurance cover. It is obvious that the issuance of a certificate of insurance by the competent authorities, and its validity for a certain period of time, depends on the existence of the relevant civil liability insurance contract, and not on the actual carriage of bulk oil cargo in excess of 2,000 tons. This would be contrary to the purpose of the Convention since, in spite of the shipowner’s strict liability, it would obligate a third party which had suffered pollution damage to prove the actual cargo of the ship at the time of the pollution incident, thus facing an obvious danger in borderline situations. The above interpretation is supported by art 7 of Law 3393/2005, which ratified the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 and established civil liability insurance based on the ship's tonnage. Specifically, the particular provision dictates that: 'The registered owner of a ship having a gross tonnage greater than 1,000 tons registered in a State Party shall be required to maintain insurance or other financial security, such as the guarantee of a bank or similar financial institution, to cover the liability of the registered owner for pollution damage ...'.

Moreover, in light of the obligation of Contracting States to prohibit the commercial operation of ships flying their flag if they have not been provided with a certificate, and in order to avoid distortion of competition, an obligation is established in art 7.11 for the Contracting States to extend this insurance obligation via national legislation to any ship, wherever registered, entering or leaving a port in their territory, or arriving at their territorial sea, which is actually carrying more than 2,000 tons of oil in bulk as cargo. To this extent, every Contracting State acknowledges the certificates that have been issued by other Contracting States, even if these certificates concern ships not flying the flag of the issuing Contracting State. This procedural provision in art 7.11 regarding the control of the ships mentioned therein, and expressly referring to the actual carried quantity of oil in excess of 2,000 tons, supports the abovementioned interpretation, namely that art 7.1 - where, in contrast, there is no mention of the actual carried quantity - imposes mandatory insurance of ships on the basis of the exclusive criterion of their carriage capacity. By comparing the two provisions, it is evident that the legislator aimed at regulating differently the two cases regarding conditions for imposing obligatory insurance. This is so, because the obligation of control, imposed on the Contracting States, is 'subject to the provisions' of the same article, providing, as far as it concerns ships registered in a Contracting State, the shipowner’s obligation to maintain an insurance based on the stable criteria of the ship’s carrying capacity, the insurance period, the issuance of the certificate, etc. Therefore, the control provided in art 7.11 refers to the insurance obligation of ships that are not registered in a Contracting State ('any ship, wherever registered'), for which, in principle, no obligation for civil liability insurance exists, since they do not fall within the scope of the CLC 1992. However, their insurance is imposed by national legislation as a safeguard in order to prevent distortion of competition and by choosing the criterion of the actual carried amount of cargo, ie whether the ships are actually carrying, in the particular case, an amount of oil in excess of 2,000 tons as cargo. In other words, obligatory insurance of ships that are registered in Contracting States is imposed, pursuant to the CLC 1992, based on the criterion of their carriage capacity, whereas for ships that are not registered in Contracting States to which no equivalent obligation applies, obligatory insurance is imposed by virtue of national legislation if they actually carry an oil cargo of more than 2,000 tons. Thus, typically, insurance is obligatory only for ships that are registered in States that have ratified the Convention. However, insurance is made mandatory for other ships as well, regardless of their place of registration, if they are about to operate in the territorial waters of the Member States of the Convention.

According to the above, affected third parties will have a right of direct claim against the insurer if a pollution incident is caused by a tanker registered in a Contracting State able to carry more than 2,000 tons of bulk oil as cargo, whose shipowner has obtained obligatory insurance cover for pollution damage pursuant to art 7.1 of the Convention, and where the competent authorities have issued, following the insurer's affirmation, a certificate affirming the insurance of the ship.

Pollution caused by laden tankers capable of carrying bulk persistent oil up to 2,000 tons and by ships and seagoing craft that do not move and do not transport oil, but are predominantly used as permanent storage tanks, and are usually owned by companies without the necessary financial means to contribute to pollution prevention, even though the damage caused by such pollution is of equal importance, producing as a result a high financial burden on the State, remains outside the scope of obligatory insurance. This legislative gap was covered by art 11.7 of Law 2881/2001, which added art 9 to Law 314/1976, titled 'Compulsory insurance of liability for oil pollution damage arising from ships or sea-going craft that do not fall under the above provisions' and which provides as follows:

1. The owner of a Greek or foreign ship or floating craft, that calls at, or sails from, a Greek port or bay or sea terminal and carries bulk oil up to 2,000 tons, or which is permanently or temporarily moored in Greek territorial waters (without performing carriage) and its cargo tanks are used for the storage or the processing of bulk oil regardless of its quantity, is obligated to maintain in force insurance or other financial security (and to keep on board a relevant certificate) equal to at least the limit of his liability, resulting from the multiplication of the gross tonnage of the ship or the floating craft by 600 Special Drawing Rights Units, as defined by the International Monetary Fund, in order to cover his civil liability arising from pollution damage within Greek territory. The term oil, mentioned in the present article, includes both petroleum residues and petroleum mixtures with water.

2. In respect of the other issues the provisions of the present law apply, as well as any executive provisions issued pursuant to the present law.

3. The form of the abovementioned certificate and any other matter related to the application of the provisions of the present article is decided by way of a decision of the Minister of Mercantile Marine.

It follows that Law 314/1976, as amended by Law 2881/2001, provides for: on the one hand, compulsory insurance of the shipowner's civil liability pursuant to the CLC 1992, which, in particular, applies to ships registered in Member States with the capacity to carry an amount of bulk oil in excess of 2,000 tons; and, on the other hand, compulsory insurance of civil liability, pursuant to national legislation, for ships, regardless of their flag, that carry an amount of persistent oil equal to or less than 2,000 tons. This concerns two special but distinguishable cases of strict civil liability, relating to distinct examples of certification and different maximum quantifiable limits of liability and compulsory insurance. As a result, the insurer's contractual liability is dependent on the provisions based on which the shipowner insured its civil liability for pollution caused by its ship.

The judgment of the Court of Appeal, which dismissed Aigaion’s objection of lack of capacity to be sued, and accepted that the insurance contract between the shipowner and Aigaion was mandatory, and that EPE had a right of direct action against Aigaion deriving from the contract of insurance agreed upon between Aigaion and the shipowner, was correct as a matter of conclusion, and resulted in a correct order. However, the justification for the decision was mistaken. This is so because the shipowner's obligation to insure the ship does not derive from art 9 of Law 314/1976, as accepted by the Court of Appeal, but is based on the substantive provisions of art 7 of the CLC 1992 for the reasons mentioned above, which are applicable in the light of the factual allegations that were accepted by the Court, ie that the tanker was able to carry bulk oil in excess of 2,000 tons, that the shipowner had insured its civil liability for pollution damage in accordance with the CLC 1992 with Aigaion, that Aigaion had issued a certificate (blue card) concerning the validity of the insurance contract which satisfied the requirements of art 7 of the CLC 1992 and that, based on this document, the Piraeus Central Port Authority had issued, pursuant to art 7.2, a certificate of insurance affirming that an insurance contract satisfying the requirements of art 7 was in force regarding the ship for the relevant period.