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OWNER’S LIABILITY
SECOND LECTURE
LIMITATION OF LIABILITY
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Chapter 9 ‘Limitation of Shipowners’ Liability’
Overview:
1. Background
2. 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
3. The practical application of the global limitation rules
4. Procedural rules
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1. Background
1. Overview of the limitation of liability regime
2. International instruments concerning global limitation
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1. Background (cont.)
Global limitation instruments:
1. Grotious: unlimited liability is “inequitable and injurious to the interests of trade”
2. 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 rules:
a) persons who may invoke the limitation
MC section 171
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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 rules:
b) 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
1) 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)
2) loss resulting from delay in carriage of goods by sea of cargo, passengers
or their luggage;
3) other loss resulting from infringement of rights other than contractual
rights, occurring in direct connection with the operation of the ship or
salvage;
4) 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 rules
b) 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:
1. 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)
2. removal, destruction or the rendering harmless of the cargo of the ship;
3. 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 rules
b) categories of claims and corresponding limitation fund (cont.)
MC section 173
‘Claims for which limitation of liability is not available:
1. 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;
2. claims for oil pollution damage which may be limited according to the
special rules regarding oil pollution liability (sections 191 and 207);
3. claims subject to any international convention or national legislation
governing or prohibiting limitation of liability for nuclear damage;
4. claims for nuclear damage caused by nuclear powered vessel;
5. 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;
6. claims for interest and litigation costs.
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2. The legal application of the global limitation rules
b) categories of claims and corresponding limitation fund (cont.)
MC section 175
‘The liability for claims based on section 172 are limited as follows:
1. For claims relating to personal injury of the ship’s 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.
2. 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 rules
b) 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 rules
b) 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 rules
b) categories of claims and corresponding limitation fund (cont.)
Additional points:
1. 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 rules
c) 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 rules:
The Green Ålesund
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The Green Ålesund (cont.)
1. Owner, Green Como of Bergen, did not want to remove wreck or cargo.
2. SFT spent NOK 86.550.000 on the operation.
3. 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:
Liability following 280 tons:
(400 SDR x 280 tons) =
Global limitation on claims:
NOK conversion rate 8,88
If 1976 Convention applied:
Liability first 500 GT:
Liability following 1780 tons:
Global limitation on claims:
NOK conversion rate 8,88
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(167 SDR x 1780 tons) =
1.000.000 SDR
112.000 SDR
1.112.000 SDR
= 9.874.560 NOK
167.000 SDR
297.260 SDR
464.260 SDR
= 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
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