## Facts

- The tanker *Braer* grounded off Shetland on January 5, 1993, releasing substantial quantities of crude oil and fuel oil.
- The government issued emergency food-protection orders creating and later expanding a large exclusion zone affecting fishing and fish farming around Shetland.
- Landcatch Ltd. reared salmon smolts at freshwater sites on the Scottish mainland, about 500 km from Shetland, and alleged a significant share of its smolts were normally sold to Shetland salmon farmers.
- Landcatch claimed that, because Shetland farmers ceased buying smolts following the spill and exclusion zone, Landcatch culled fish, sold remaining smolts at reduced prices, incurred additional rearing costs, and incurred expenses pursuing compensation.
- Landcatch sued (1) the International Oil Pollution Compensation Fund (IOPC Fund) under the UK legislation implementing the Fund Convention and (2) the shipowner (and related parties) under the UK legislation implementing the Civil Liability Convention; the actions were heard together at first instance.
- The Lord Ordinary dismissed both actions; Landcatch appealed as to the shipowner and the Fund.

## Issues

1. Whether a direct action against the IOPC Fund was incompetent or premature because the Fund’s liability is contingent on prior establishment and quantification of the shipowner’s liability.
2. Whether Landcatch’s losses—driven by disrupted demand from Shetland customers—constituted compensable “damage caused by contamination” / “pollution damage” under the relevant statutory scheme.
3. Whether a broad “but for” causation approach would impermissibly expand statutory compensation to remote economic losses.
4. Whether the Fund’s conduct in post-spill claims handling waived, or created a personal bar against, its pleas that the Fund action was premature.
5. Whether expenses incurred in pursuing compensation could form part of recoverable “loss” within “pollution damage.”

## Decision

- The court refused the appeal and affirmed dismissal of both actions.
- The standalone action against the IOPC Fund was premature because the Fund’s liability is supplementary and arises only after the shipowner’s liability is established and shown to be insufficient under the statutory framework.
- Landcatch’s claimed losses were characterized as relational (secondary) economic loss and held not to fall within statutory “pollution damage.”
- The court rejected Landcatch’s “but for” construction of causation as inconsistent with the statutory purpose because it would permit an unbounded chain of claims.
- The court found no waiver or personal bar preventing the Fund from insisting on statutory preconditions for Fund liability.
- The court did not permit the claim to proceed on items described as expenses of pursuing compensation; such items were not treated as compensable pollution damage.

## Legal Principles

- The IOPC Fund’s liability is conditional and supplementary; it depends on prior determination and quantification of the shipowner’s liability and the statutory triggers for Fund involvement.
- Statutory “pollution damage” may include some economic loss, but it does not extend to relational or secondary market losses suffered only because third parties in the contaminated area altered their purchasing decisions.
- “But for” causation does not define the outer boundary of statutory recoverability for oil pollution compensation; the scheme preserves limiting concepts analogous to remoteness and protected interests.
- Informal claims-handling conduct cannot displace statutory prerequisites for Fund liability absent a clear and unequivocal basis for waiver or personal bar.
- Expenses of pursuing compensation are not ordinarily part of substantive “pollution damage” within the statutory compensation scheme.

## Conclusion

The court held that the IOPC Fund could not be sued as a primary obligor before establishing the shipowner’s liability and that a mainland smolt producer’s customer-driven losses after the *Braer* spill were non-compensable relational economic losses outside the statutory concept of pollution damage.


Landcatch Ltd. v. Int’l Oil Pollution Comp. Fund, [1999] 2 Lloyd’s Rep. 316 (Scot.)