The law of limitation in England is primarily governed by the Convention on Limitation of Liability for Maritime Claims 1976 (“LLMC 1976”) as amended. This allows Shipowners (and their insurers) to limit their liability for certain types of claims up to a certain amount of Special Drawing Rights calculated by reference to the gross tonnage of the ship.
Two recent decisions of the English courts – The X-Press Pearl and The MSC Flaminia – demonstrate the continued relevance of the LLMC 1976. The decisions relate to the questions of who can limit liability and for which claims.
Who can limit liability?
Under the LLMC 1976, the “Shipowner” and salvors may limit their liability for the types of claims set out in Article 2.1.
“Shipowner” is defined as “the owner, charterer, manager or operator of a seagoing ship.”
“Charterer” includes any type of charterer, whether a demise, time, voyage or slot charterer.
In The X-Press Pearl, the Court had to consider whether three lines (Maersk, BTL and MSC) were “charterers” for the purposes of the Convention. Applying the test in The MSC Napoli in respect of slot charterers, the Court said they would be entitled to limit their liability if the relevant contract obliges an owner to make part of the carrying capacity of a ship available to them for the carriage of goods which they will have contracted, or will contract, to undertake as carrier.
Applying that test to the contractual arrangements between each line and the owner of The X-Press Pearl, the Court held that all three lines were entitled to limit liability.
There is still a question of whether a non-vessel operating common carrier (NVOCC) qualifies as a “charterer”. If the point ever comes up in a future case, it is likely that the Court will likewise look at the precise terms of the contractual arrangements.
The decision in The MSC Flaminia confirms that a “charterer” can limit its liability for claims by an owner, including in respect of losses originally suffered by the owner itself, subject to the exception that a charterer cannot limit liability for claims for loss/damage done to the ship itself and consequential loss thereon.
What claims can be limited?
The claims that are limitable are the six categories of claims described in Article 2.1(a) to (f) of the LLMC 1976.
The MSC Flaminia concerned a fire and explosion on a containership chartered and operated by MSC.
The dispute before the Supreme Court was whether MSC could limit liability for (1) payment to national authorities, (2) the costs of discharging cargo, (3) the costs of removing firefighting water, and (4) the costs of removing waste.
The Supreme Court held that MSC could limit their liability for the costs of discharging the sound and damaged cargo. The remaining costs were not limitable.
