OWNERS LIABILITY

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OWNERS LIABILITY

• SECOND LECTURE
• LIMITATION OF LIABILITY

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Chapter 9 Limitation of Shipowners Liability

• Overview
• Background
• The legal application of the global limitation
  rules (MC chapter 9)
• a) persons who may invoke the rules
• b) categories of claims and corresponding
  limitation fund and
• c) conduct barring a claim
• The practical application of the global
  limitation rules
• Procedural rules

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1. Background

• Overview of the limitation of liability regime
• International instruments concerning global
  limitation

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1. Background (cont.)

• Global limitation instruments
• Grotious unlimited liability is inequitable and
  injurious to the interests of trade
• International unifying attempts
• a) The 1924 Brussels Convention on Limitation
  of Liability
• b) The 1957 Brussels Convention and the 1979
  Protocol and
• c) The 1976 London Convention and the 1996
  Protocol
• 3. Norway 1996 Protocol (in terms of the
  Maritime Code Amendment Act of 17 June 2005 no 88
  which entered into force 1 November 2006)

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2. The legal application of the global limitation
rulesa) persons who may invoke the limitation

• MC section 171
• Identified persons
• May limit claims against each other (however cf
  the English position)
• Catch all group in relation to salvage and wreck
  removal
• Also if vicariously liable
• Cannot evade limitation by pursuing the insurer
  directly

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund

• MC section 172 (subject to the limitations in
  section 173)
• A right to limit liability in terms of section
  175 applies, whatever the basis of liability may
  be, to claims raised in respect of
• loss of life or personal injuries or loss of or
  damage to property if the damage occurred on
  board or in direct connection with the operation
  of the ship or salvage (subject to section 173
  no. 5)
• loss resulting from delay in carriage of goods by
  sea of cargo, passengers or their luggage
• other loss resulting from infringement of rights
  other than contractual rights, occurring in
  direct connection with the operation of the ship
  or salvage
• measures taken in order to avert or minimize loss
  for which the person liable may limit his
  liability in terms of the Act, and further loss
  caused by such measures. (subject to section
  173 no. 1)

by a person other than the person liable
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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• MC s 172a.
• The right to limit liability in terms of section
  175a will apply to ships above 300 tons, whatever
  the basis of liability, in respect of claims
  arising from
• raising, removal, destruction or the rendering
  harmless of a ship which is sunk, wrecked,
  stranded or abandoned, including anything that is
  or has been on board such ship (subject to
  section 173 no. 1)
• removal, destruction or the rendering harmless of
  the cargo of the ship
• measures taken in order to avert or minimize loss
  for which the person liable may limit his
  liability in terms of the Act, and further loss
  caused by such measures.

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• MC section 173
• Claims for which limitation of liability is not
  available
• claims for salvage, general average contribution,
  or any contractual claim for payment in respect
  of measures referred to in section 172 no 4 or
  172a no 1
• claims for oil pollution damage which may be
  limited according to the special rules regarding
  oil pollution liability (sections 191 and 207)
• claims subject to any international convention or
  national legislation governing or prohibiting
  limitation of liability for nuclear damage
• claims for nuclear damage caused by nuclear
  powered vessel
• claims for damage or injury caused to any
  employee of the persons entitled to limit their
  liability and whose duties are connected with the
  vessel or the salvage operation
• claims for interest and litigation costs.

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• MC section 175
• The liability for claims based on section 172
  are limited as follows
• For claims relating to personal injury of the
  ships own passengers the limit of liability is
  175.000 SDR multiplied by the number of
  passengers that the ship in terms of its
  certificate is authorised to carry.
• For other claims relating to personal injury the
  limit of liability is 2.000.000 SDR. For ships
  with tonnage exceeding 2.000 tons the limits of
  liability will increase as follows
• for each ton from 2.001 to 30.000 tons, with 800
  SDR,
• for each ton from 30.001 to 70.000 tons, with
  600 SDR, and
• for each ton from 70.001, with 400 SDR.

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• MC section 175 (cont.)
• 3. The limits of liability in respect of all
  other claims, as well as uncovered claims as
  mentioned in no. 2, is 1.000.000 SDR. For ships
  with tonnage exceeding 2000 tons the limits of
  liability will increase as follows
• for each ton from 2.001 to 30.000 tons, with 400
  SDR,
• for each ton from 30.001 to 70.000 tons, with
  300 SDR, and
• for each ton from 70.001, with 200 SDR.

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• MC section 175a.
• The limit of liability for claims raised in
  terms of section 172a, is 2.000.000 SDR. For
  ships with tonnage of more than 1.000 tons the
  limit of liability is increased as follows
• for each ton from 1.001 to 10.000 tons with
  2.000 SDR, and
• for each ton over 10.001 tons, with 500 SDR.
• Special tonnage calculation rule in relation to
  salvage
• MC section 175 no. 5 (also applies to section
  175a.)
• If salvors do not operate from a ship or only
  operate out of the salvaged ship, then the
  limitation limit will be estimated from a tonnage
  of 1.500 tons.

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2. The legal application of the global limitation
rulesb) categories of claims and corresponding
limitation fund (cont.)

• Additional points
• Single liability principle
• Section 172 (also applies to section 172a and
  section 175 no. 5, salvors)
• If the liable party is subject to a
  counter-claim, and claim and counter-claim arises
  out of the same occurrence, then the limitation
  will only apply to that part of the claim which
  exceeds the counter-claim.
• (Compare 1976 convention art 5)
• 2. Occurrence
• Section 175 no. 4 (also applies to section 175a)
• The limits to liability in no. 1 to 3. of
  section 175 and 175a applies to the aggregate of
  all claims which arise out of one distinct
  occasion against the reder, the shipowner, the
  charterer or the operator, as well as any other
  person that the above answers for.

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2. The legal application of the global limitation
rulesc) conduct barring a claim

• MC section 174 and 1976 Convention art 4
• A person liable shall not be entitled to limit
  his liability if it is proved that the loss
  resulted from his personal act or omission,
  committed with the intent to cause such loss, or
  recklessly and with knowledge that such loss
  would probably result

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3. The practical application of the global
limitation rulesThe Green Ålesund
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The Green Ålesund (cont.)

• Owner, Green Como of Bergen, did not want to
  remove wreck or cargo.
• SFT spent NOK 86.550.000 on the operation.
• Gross tonnage 2280 tons.
• Global limitation
• Who may limit?
• Is this a claim for which liability may be
  limited?
• What limitation applies?

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• Global limitation ceiling in terms of section
  175a (with todays SDR value)
• Liability first 1000 tons 2.000.000 SDR
• Liability following 1280 tons (2.000 SDR x 1280
  tons) 2.560.000 SDR
• Global limitation on claims 4.560.000 SDR
• NOK conversion rate (8.88 on 31 August 2007)
  40.264.800 NOK
• If 1976 Convention with 1996 Protocol applied
• Liablity first 2.000 tons 1.000.000 SDR
• Liability following 280 tons (400 SDR x 280
  tons) 112.000 SDR
• Global limitation on claims 1.112.000 SDR
• NOK conversion rate 8,88
  9.874.560 NOK
• If 1976 Convention applied
• Liability first 500 GT 167.000 SDR
• Liability following 1780 tons (167 SDR x 1780
  tons) 297.260 SDR
• Global limitation on claims 464.260 SDR
• NOK conversion rate 8,88
  4.122.629 NOK

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Suggested further reading

• For an English summary of the latest amendments
  to the MC in relation to limitation of liability
• Griggs, Williams and Farr Limitation of Liability
  for Maritime Claims (LLP, 2005, 4ed), library
  reference 25 GRI, in particular Chapter 32 Lund
  and Gjelsten Norway at 343