The Federal Parliament has passed legislation strengthening the compensation regime that applies when oil spills occur within Australian waters – quadrupling the maximum amount of compensation from $350 million to $1.3 billion.

The legislation brings into effect an international agreement that levies oil importers to fund an insurance scheme for the victims of oil spills.

The levies are paid by oil importers in 21 countries currently party to the protocol including Denmark, France, Germany, Italy, Japan and the United Kingdom.

In Australia, companies that are liable to make contributions to the fund include refiners of petroleum products and some of the major resource companies.

In the event of a major oil spill, monies from the fund may be used to cover the clean-up costs as well as help with the recovery of affected marine environments and coastal communities.

In recent years, major oil spills overseas have proven that the maximum amount of compensation afforded under the old scheme was insufficient.