2 B R I TA N N I A N E W S CO N V E N T I O N S

CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS (LLMC), 1976

The Convention on Limitation of Liability for Maritime Claims (LLMC), 1976 was designed to
replace the International Convention relating to the Limitation of the Liability of Owners of
Sea-Going Ships, and Protocol of Signature (Brussels, 10 October 1957). The 1976 Limitation
Convention was adopted on 19 November 1976 and came into force on 1 December 1986.

The Convention sets a global limitation that
deals with limitation of liability for the sum of
various different types of claims, arising out
of one incident, for which liability is capped
at a certain amount.
The Protocol of 1996 to amend the LLMC
1976 was adopted on 3 May 1996. It provides
for enhanced compensation and establishes
a simplified procedure for updating the
limitation amounts. The 1996 Protocol came
into force on 13 May 2004. The increased
limits specified by the Protocol are set out at
the end of this work.
Application of the Convention
The LLMC 1976 is applicable if certain
conditions regarding the personal, objective
and geographical scope of application are
fulfilled.
Article 15 (1) defines the scope of application.
Accordingly, it applies to cases where a person
referred to in Article 1 of the Convention
seeks to limit liability or to procure for the
release of a ship or other property or for the
discharge of any other financial security
before a court of a State Party.
Ships
The Convention applies to seagoing ships
(Article 1(2)). The States may make a
reservation extending the application to ships
used for inland navigation (Article 15(2)(a)).
Persons entitled to limitation
According to Article 1, shipowners, salvors and
insurers can limit their liability. Additionally,
persons for whose act, negligence or default
the shipowner or salvor is responsible are
entitled to limit liability under the 1976
Limitation Convention – including servants
and independent agents such as pilots or
stevedores.
Persons entitled to limitation: Shipowner
and charterer
The definition of shipowner includes the
owner, charterer, manager and operator of
the ship (Article 1(2)).
The charterer can limit his liability in respect
of claims brought by third parties when
acting in the capacity of shipowner. However,
the question has arisen whether a charterer
can limit in respect of a claim for indemnity
pursued by the owners. For example, if the
ship is lost as a result of being ordered to an
unsafe port, does the charterer have a right
to limit his liability to the owner? The issue
has come before the English Courts: The
Aegean Sea [1998] 2 Lloyd’s Rep. 39. and CMA
CGM SA v Classica Shipping Co Ltd
(The CMA Djakarta) [2004] 1 Lloyd’s Rep. 460.
In The Aegean Sea, the vessel grounded whilst
proceeding to berth, broke in two and
exploded. The vessel and most of her cargo
were lost and there was significant pollution
and property damage. Claims were brought
against shipowners and they sought to
recover from the charterers these sums
together with the value of the vessel, the
bunkers on board and freight. The
shipowners argued that they were entitled to
make such claims against the charterer
because either:
1) the charterer had nominated an unsafe
port; or
2) the loss was sustained as a consequence of
complying with the order of the charterers
and therefore shipowners were entitled to an
implied indemnity.
The preliminary issues before the Court were
whether the charterers were entitled to limit
their liability and whether shipowners’
claims were within the scope of Article 2 of
the 1976 Convention.
Thomas J held that the 1976 Convention
does not provide (and is not intended to
provide) an entitlement to charterers to limit
for these types of claims brought against
them by shipowners. To conclude otherwise
would mean that the limitation amount or
fund could potentially be depleted by claims
by the shipowners against charterers when
the intent had been for it to be available for
cargo and other third party claimants
external to the operation of the ship.
The CMA Djakarta concerned an explosion
and fire on board the vessel caused by
containers of bleaching powder. The
arbitrators found that the charterers were
liable to the owners for breach of a time
charterparty because the vessel was to be
employed in carrying lawful merchandise
excluding any goods of a dangerous,
injurious, flammable or corrosive nature
and refused the charterers’ claim to limit
their liability.
Upon the charterers’ appeal as to the
limitation of liability point, the Court of
Appeal held that the ordinary meaning of the
word ‘charterer’ connoted a charterer acting
in his capacity as such – not a charterer

acting in some other capacity. It was
conceded that a charterer could limit his
liability when sued by a cargo owner for loss
of or damage to cargo. It was still necessary,
however, to ascertain whether a claim for
damage to the ship by reference to which a
charterer sought to limit his liability was a
claim which fell within Art. 2 and whether the
charterers could limit their liability for any of
the other claims brought by the shipowners.
The Court of Appeal agreed with David Steel J
that the ordinary meaning of Article 2(1)(a)
did not extend the right to limit to a claim for
damage to the vessel. Moreover, the Court of
Appeal held that if a claim for loss of or
damage to the ship was not itself a claim
within Article 2(1)(a), a claim for amounts paid
to salve the ship could not be within Article
2(1)(a) either. The same principle applied to
the shipowners’ claim to be indemnified
against their liability to contribute in general
average. Any contribution made by the
shipowners would be made as a result of the
damage to the vessel and did not, therefore,
fall within Article 2(1)(a).
Slot charterers
A slot charterer is a party who has the right
to use a specified part of the cargo carrying
capacity of a vessel on a particular voyage –
but not the whole. Article 1(2) of the 1976
Limitation Convention does not specify if
the definition of charterer includes slot
charterers.
In English law, in Metvale Ltd v Monsanto
International Sarl (The MSC Napoli) [2009]
1 Lloyd's Rep. 246, Teare J held that there is
no reason why ‘charterer’ in Article 1(2) of the
Convention should not include a slot
charterer as well as time and voyage
charterers. The judge emphasised that a slot
charterer’s inability to limit liability would not
encourage international trade by way of sea
carriage, which was the object and purpose
of the Convention. A further question related
to the method of calculation of the slot
charterer’s limitation of liability. The
Convention does not provide for calculation
on the basis of use of part of the vessel. The
possibilities are therefore that:
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1) he may limit his liability according to the
full tonnage of the vessel, even though his
contract allows him to use merely part of it;
or
2) he may not limit his liability at all on the
basis that he is not a charterer or an operator
of a ship.
It may be argued that, because he is only
paying for use of a part of the vessel, he
should not be able to limit his liability
according to the full tonnage of the vessel.
However, under English law, it was held in
The MSC Napoli that there is nothing absurd
in a slot charterer being able to limit by
reference to a limit calculated by reference to
the whole tonnage of the vessel.
Persons entitled to limitation: Salvors
The 1976 Limitation Convention allows
salvors and any person for whose act, neglect
or default a salvor is responsible to benefit of
limitation of liability (Article 1(1), 1(3), 1(4),
Article 6(4))
Article 1 confers the benefit of limitation on
salvors engaged in direct connection with
salvage services. Article 1(3) defines salvage
services as including, in addition to salvage,
wreck or cargo removal or other services
described in Article 2(1)(d) (e) and (f ).
Persons entitled to limitation: Insurer
Article 1(6) of the Convention provides that
‘An insurer of liability for claims subject to
limitation in accordance with the rules of this
Convention shall be entitled to the benefits
of this Convention to the same extent as the
assured himself’. The wording of the
Convention does not seem to grant the
insurer a right to limit its liability in cases
where the shipowner has lost his right of
limitation. It follows that the liability insurer
should not be able to limit his liability if the
assured cannot. This is significant because
the Bunkers Convention and the Civil Liability
Conventions allow an insurer to limit its
liability even though the shipowner lost his
right of limit for the reasons set out by the
relevant conventions in question.
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For example, Article VII(8) of the 1992 Civil
Liability Convention provides that ‘Any claim
for compensation for pollution damage may
be brought directly against the insurer or
other person providing financial security for
the owner’s liability for pollution damage. In
such case, the defendant may, even if the
owner is not entitled to limit his liability
according to Article V, paragraph 2, avail
himself of the limits of liability prescribed in
Article V, paragraph 1’. In other words, in the
case where, if the claim was made against the
shipowner, he would not be entitled to limit
his liability because the pollution damage
had resulted from his personal act or
omission, committed with the intent to cause
such damage, or recklessly and with
knowledge that such damage would
probably result. In an action against the
insurer, the insurer would still be able to limit
its liability.
In summary, the persons entitled to limit their
liability are:
1) Shipowners
2) Charterers (but not against shipowners
according to the English courts)
3) Managers
4) Operators
5) Any persons for whose act, neglect or
default the parties identified in 1 to 4
inclusive is responsible
6) Salvors
7) Any person for whose act, neglect or
default the salvor is responsible
8) Insurers of liability of the parties identified
in 1 to 7 inclusive
Excluded persons/vessels
1) In accordance with Article 1(2), non-
seagoing ships (that is, ships intended for
navigation on inland waterways) are excluded
from the scope of the Convention. Article
15(2), however, provides that a State Party
may make specific provisions in its national
law, so that the Convention does apply.
4 B R I TA N N I A N E W S CO N V E N T I O N S
2) Article 15(5) provides that the Convention
shall not apply to:
a) aircushion vehicles;
b) floating platforms constructed for the
purpose of exploring or exploiting the natural
resources of the seabed or the subsoil thereof.
Claims entitled to limitation
Under the 1976 Convention limits are
specified for two types of claims:
1) claims for loss of life or personal injury; and
2) property claims (such as damage to other
ships, property or harbour works).
Article 2(1) lists the claims that could be
limited under the Convention. The list
indicates claims regardless of the basis of
liability and limitation is still granted even if
a claim is brought by way of recourse.
Article 2(1)(a)
a) Claims in respect of loss of life, personal
injury and/or loss of and/or damage to
property. Such claims are covered whatever
the basis of liability (e.g. breach of the
contract of carriage or absolute liability
irrespective of fault).
Any claim, however, must be one which
occurs on board or in direct connection with
the operation of the ship (or with salvage
operations). The words ‘on board’ are clear.
On the other hand, the phrase ‘in direct
connection with the operation of the ship’ is
not defined and needs to be clarified.
The term operation is a wide one. If a tanker
owner sends his tanker to an oil terminal and
the ship negligently damages the jetty, the
shipowner will be able to limit his liability.
However, if in breach of contract with the
terminal owner, the shipowner omits to send
the tanker at all, can the shipowner limit his
liability for losses claimed by the terminal
owner? The English case The Caspian Basin
[1998] CLC 1526 supports the view that there
must be a physical linkage between
the loss of or damage to property and the
ship in respect of which the claim is made
on the other.
The claims in respect of which liability may
be limited include consequential losses. For
example, if a ship is damaged in collision the
shipowner may recover for the cost of repairs
and for loss of use of the vessel and it is the
totality of these claims that the party causing
the damage may limit his liability for.
We saw above that the charterers of a ship
cannot limit their liability for a claim brought
by the shipowners for loss of the very ship
itself. Likewise, a claim for amounts paid to
salve the ship does not lie within Art. 2(1)(a),
because it is not a claim in respect of loss or
damage to property within the article. A
claim to recover the cost incurred in salving a
vessel might best be understood as a claim
for consequential loss resulting from the
damage to the ship – which means that it
cannot be brought within Article 2(1)(a) or
2(1)(f ). The same principle applies to the
shipowners’ claim to be indemnified against
their liability to contribute in general average.
Any contribution made by the shipowners
would be made as a result of the damage to
the vessel and does not, therefore, fall within
Article 2(1)(a) (CMA CGM S.A. v. Classica
Shipping Co Ltd and The Aegean Sea). Loss of
unearned freight is not within Article 2(1)(a)
since that was consequent on the loss of the
ship which was not itself a claim capable of
limitation (The Aegean Sea).
The phrase ‘operation of the ship’
encompasses all that relates to the operation
of the ship, including the selection of a port
and the ascertainment of its safety and
suitability for the vessel and the provision of
what might be necessary for the vessel to use
it safely such as chart and tugs (The Aegean
Sea). As a result, Article 2(1)(a) includes claims
in respect of loss of bunkers where they are
lost as a result of, for example, being ordered
to an unsafe port because this would arise in
direct connection with the operation of the
ship. Likewise, the payment of pollution
claims for property damage, property clean
up and loss of profit claims by fishing boat
owners would also be considered to have
arisen in direct connection with the
operation of the ship and would fall within
Article 2(1)(a).
b) claims in respect of loss resulting from
delay in the carriage by sea of cargo,
passengers or their luggage;
Article 2(1)(b) covers circumstances such as
the carriage of perishable cargo. If there is
delay in reaching the port of discharge and if
the cargo is damaged as a result as well as
consequential loss due to market
fluctuations, the shipowner can limit his
liability in respect of both types of loss as
there is no restriction on the word ‘loss’ in
subparagraph (b). Furthermore, the right to
limit is given ‘whatever the basis of liability
may be’ so it would include a liability in
contract as well as in tort.
c) claims in respect of other loss resulting
from infringement of rights other than
contractual rights, occurring in direct
connection with the operation of the ship or
salvage operations;
It is not easy to see what is being referred to
in subparagraph (c) as the ‘other loss’ refers to
loss other than those referred to in
subparagraphs (a) and (b). One example may
be that of a ship blocking a passage, thereby
causing loss to others – say, a ship running
aground at the entrance to a harbour. Parties
suffering economic losses as a result of the
blockage may bring claims against the
wrongdoing ship. In such circumstances, the
wrongdoing ship should be able to limit his
liability under subparagraph (c).
Claims for loss of use and loss of profits made
by fishing boat owners, yacht owners, fish
and shellfish farm owners, shellfish
harvesters, fishing net and fishing pot
owners, shop owners, local municipalities,
local government and the state itself
consequent upon pollution may fall under
Article 2(1)(c).
The shipowner’s right to earn freight under
the charterparty is not a claim for
infringement of contractual rights, and
therefore not within the scope of Article
2(1)(c) (The Aegean Sea).
NUMBER 3 JUNE 2011
d) claims in respect of the 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;
Liability for the cost of wreck removal may
arise as damages in an action for negligence
or it may arise out of a statutory obligation to
pay the cost following an order for removal
(from, say, a Harbour Authority). It should be
noted that this subsection confers the right
to limit in the case of claims for the cost of
removal or destruction of wrecks except
where the claims relate to remuneration
under a contract with the person liable
(Article 2(2)). If the shipowner therefore
contracts with a party to remove a wreck, the
shipowner risks becoming a claimant on his
own fund.
If, after sinking, a part of the ship or her cargo
escapes or breaks loose and steps are taken
to recover it or render it harmless, the
wording of Article 2(1)(d) indicates that the
shipowner can limit his liability for such costs.
Claims for pollution caused by bunkers and
by cargo fall within Article 2(1)(d) in so far as
they related to clean up or pollution
prevention (The Aegean Sea).
e) claims in respect of the removal,
destruction or the rendering harmless of the
cargo of the ship;
This subparagraph covers claims by a
governmental agency or authority having
powers as to the removal, destruction or
rendering harmless of cargo except where
such claims relate to remuneration under a
contract with the person liable (Article (2)(2)).
f ) claims of a person other than the person
liable in respect of measures taken in order
to avert or minimise loss for which the
person liable may limit his liability in
accordance with this Convention, and further
loss caused by such measures.
An example of a claim arising under Article
2(1)(f ) would be expenses incurred by an
owner taking protective measures to avoid
damage by a ship dragging its anchor.
Another example would be the cost of
measures are taken by third parties to
minimise the potential damage caused by
pollution following a stranding. Subsequent
claims against the shipowner (the person
liable) to recover the cost of taking such
measures will be subject to limitation. If in
the course of taking those measures further
loss is caused, claims arising will also be
subject to limitation.
A claim by a cargo owner against the
shipowner for breach of contract of carriage
claiming compensation including sums paid
to salvors for services rendered in the saving
of the cargo would fall within the scope of
Article 2(1)(f ) because it is a claim presented
by a ‘person other than the person liable’ (the
shipowners) and is ‘in respect of measures
taken to minimise loss [damage to cargo] for
which [the shipowners] may limit their
liability’ (The Breydon Merchant).
Claims excepted from limitation
Article 3 lists the circumstances under which
the Convention will not be applicable.
Accordingly, the Convention shall not apply to:
a) claims for salvage or contribution in
general average;
Article 3(a) refers to the absence of a right to
limit in respect of salvage as against a salvor.
The owner of a wrongdoing ship cannot,
therefore, limit his liability in respect of direct
claims against him by salvors or by parties who
have incurred a general loss or sacrifice.
However, as described above, if in a collision
action the salvage reward was included as
part of the damages of the shipowner
claiming damages, the owner of the
wrongdoing ship could limit in respect of the
total claim for damages, even though this
claim included a sum for salvage payable by
the other party.
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b) claims for oil pollution damage within the
meaning of the International Convention on
Civil Liability for Oil Pollution Damage, dated
29 November 1969, or of any amendment or
Protocol thereto which is in force;
Pollution caused by oil spills either as cargo
or bunkers in a tanker is covered by the Civil
Liability Conventions 1969/1992. Pollution
caused by bunker spilled from ships other
than tankers is covered by the Bunker
Pollution Convention.
Since CLC does not cover liability for
pollution caused by bunker spills from non-
tankers, the CLC exclusion under Article 3(b)
does not embrace that type of bunker spill.
The Bunker Convention which, in principle,
provides for strict liability for a shipowner for
pollution damage caused by any bunker oil
on board or originating from non-tankers,
came into force on 21 November 2008. The
Bunker Convention, however, does not
contain a standalone limitation in itself but
refers to an applicable national or
international regime such as LLMC 1976 or
1996. Some commentators have submitted
that Article 2(1) would enable a shipowner to
limit in relation to property damage caused
by such bunker spills (e.g. fishing boats and
gear), and for associated consequential
economic loss (e.g. loss of fishing) as well as
for the actual cost of reasonable measures for
reinstatement of the environment.
Furthermore, the same authors have
maintained that Article 2(1)(c) could afford
rights of limitation in respect of claims for
pure economic loss (e.g. loss of fishing
without damage to gear, loss of hotel trade).
c) claims subject to any international
convention or national legislation governing
or prohibiting limitation of liability for
nuclear damage;
If there is no relevant convention or other
legislation as to limitation, limitation should,
prima facie, be available.
d) claims against the shipowner of a nuclear
ship for nuclear damage;
This is self-explanatory.
6 B R I TA N N I A N E W S CO N V E N T I O N S
e) claims by servants of the shipowner or
salvor whose duties are connected with the
ship or the salvage operations, including
claims of their heirs, dependants or other
persons entitled to make such claims, if
under the law governing the contract of
service between the shipowner or salvor and
such servants the shipowner or salvor is not
entitled to limit his liability in respect of such
claims, or if he is by such law only permitted
to limit his liability to an amount greater than
that provided for in Article 6.
Subparagraph (e) refers to those persons
having contracts of service with the shipowner
or salvor and excludes crew claims from the
1976 Limitation Convention in respect of both
personal injury and property claims. The
subparagraph is applicable if the proper law of
the relevant contract of service excludes the
right to limit in respect of such claim or if the
right to limit is to a sum greater than that
provided by the 1976 Limitation Convention.
It is also noteworthy that the exclusion
applies only if the law governing the contract
of service imposes a higher limit; the
exclusion does not necessarily apply merely
because the contract itself provides for a
higher limit.
Article 3(e) of the 1976 Limitation Convention
expressly extends the exclusion of the right to
limit to claims by or on behalf of the servants
of salvors under a contract of service between
them and the salvors. This express exclusion is
necessary as a result of the inclusion of
salvors as ‘persons entitled to limit liability’ in
Article 1 of the 1976 Convention.
Limitation amount
General limits of liability – Article 6
The 1976 Limitation Convention provides for
a minimum fixed level of limitation for all
ships up to 500 tons.
The Convention uses a tonnage-based
system to calculate the limit of the
shipowner’s liability. Accordingly, the value of
the vessel is irrelevant. Article 6(5) states that
tonnage in this respect refers to the gross
tonnage as defined in Article 2(4) and
Regulation 3 of Annex 1 of the 1969
International Convention on Tonnage
Measurement of Ships.
Under the 1976 Limitation Convention, the
limitation amounts are expressed in terms of
units of account. Each unit of account is
equivalent in value to the Special Drawing
Right (SDR) as defined by the International
Monetary Fund (IMF), although States which
are not members of the IMF and whose law
does not allow the use of SDR may continue
to use the old gold franc (referred to as
‘monetary unit’ in the Convention).
The limits under the 1976 Convention were
set at 333,000 SDR for personal claims for
ships not exceeding 500 tons plus an
additional amount based on tonnage:
• For each ton from 501 to 3,000 tons,
500 SDR
• For each ton from 3,001 to 30,000 tons,
333 SDR
• For each ton from 30,001 to 70,000 tons,
250 SDR
• For each ton in excess of 70,000 tons,
167 SDR
For other claims, the limit of liability was fixed
under the 1976 Convention at 167,000 SDR
for ships not exceeding 500 tons. For larger
ships the additional amounts were:
• For each ton from 501 to 30,000 tons,
167 SDR
• For each ton from 30,001 to 70,000 tons,
125 SDR
• For each ton in excess of 70,000 tons,
83 SDR
Loss of life or personal injury of passengers –
Article 7
Article 7 of the 1976 Limitation Convention
introduces a separate limit of liability where
there is loss of life or personal injury to a
passenger carried in a ship. This limit applies
to claims made by passengers against the
carrying ship. The limit is 46,666 SDR
multiplied by the number of passengers that
the ship is authorised to carry, up to a
maximum of 25 million SDR. This separate
treatment of passengers will ensure that they
will not have to share in the general
limitation fund. Claims for loss of or damage
to property of passenger e.g. for loss of
luggage, will be subject to the general
property limit in Article 6(1)(b).
The limit under the 1976 Limitation
Convention is not applied in relation to each
passenger claim but is multiplied by the
theoretical number of passengers that the
ship is authorised to carry according to her
certificate. This means that the fewer
passengers actually carried, the greater will
be the proportionate limit available to them.
Under Article 7(2) a passenger is any person
carried in that ship:
a) under a contract of passenger carriage, or
b) who, with the consent of the carrier, is
accompanying a vehicle or live animals
which are covered by a contract for the
carriage of goods.
This would exclude stowaways, visitors,
guests of the owners or crew and those
working on the ship under a contract of
employment with somebody else (e.g.
dockers). Article 7(2)(b) is intended to cover
persons such as truck drivers using RoRo
ferries and veterinary surgeons. In both
cases, the consent of the carrier is required.
This could include a charterer as well as the
shipowner.
It should be borne in mind that the 1976
Limitation Convention does not create any
liability for passenger carriage. That would be
decided according to the Athens Convention
Relating to the Carriage of Passengers and
Their Luggage 1974. The Athens Convention
also provides a limit of liability for death or
personal injury per passenger. Like the Hague
and Hague Visby Rules, this operates as a first
stage of limitation in relation to each
contract of carriage before any question of
global limitation is considered.
NUMBER 3 JUNE 2011
Salvors’ limitation of liability
The 1976 Convention provides by Article 1(1)
that salvors may limit their liability, and
Article 6(4) provides that a salvor who is ‘not
operating from any ship’ or who is ‘operating
solely on the ship to or in respect of which,
he is rendering salvage services’ shall be
entitled to calculate the limit of his liability by
reference to a deemed tonnage of 1,500 tons.
Many salvage vessels would have a lower
tonnage than this and that deemed tonnage
has not been increased by the 1996 Protocol
to the Limitation Convention. The 1,500 gt
limit would apply, say, where a salvage team
is helicoptered direct onto the ship from land
and an accident occurs (Article 9(1)(c). Where
the negligence is committed by the salvage
crew ‘operating from’ the salvage vessel, the
limit should be calculated according to the
actual tonnage of the vessel (Article 9(1)(b)).
If the salvage vessel was very small, e.g. a
launch, the minimum tonnage provisions of
Article 6 would apply. However, where a
salvage team is helicoptered onto the
casualty direct from land, the 1,500 gt
deemed limit would apply.
Limitation fund
Article 11(1) states that any person alleged to
be liable may set up a limitation fund:
1) in the amounts of the limits specified in
Article 6 and 7;
2) with the court or other competent
authority in any State Party in which legal
proceedings including arbitration are
brought;
3) with respect to claims subject to limitation.
In constituting the fund, the calculation must
anticipate liability for all types of claims in
Articles 6 and 7, plus interest from the date of
the incident up to the date of the constitution
of the fund. The rate of interest is not specified
and therefore left to the national law of the
country where the fund is constituted.
The fund is constituted by depositing the
sum in cash or by producing a guarantee
acceptable under the legislation of the State
Party in which the fund is set up, given that
the court or other competent authority finds
it to be adequate. The most common way is
to provide a guarantee or a letter of
undertaking.
According to Article 12(1), the fund shall be
distributed among the claimants in
proportion to their established claims. A
claim is established when it is recognised by
the court. The claims rank equally and if the
fund cannot satisfy all of them in full, it will
be distributed in proportion. Liens or other
privileges do not entitle to claim priority over
other claims.
In the case of England and Wales the fund is
to be constituted with the Admiralty Court.
Where there is only one claimant, the
defendant may decide to rely upon Article
10(1) and invoke limitation without
constituting the fund.
The fund may be constituted by ‘any person
alleged to be liable’ who is entitled to the
benefit of limitation (Article 11(1)). Where the
fund is constituted by any one of the several
persons mentioned in Article 9 or by an
insurer of one of those persons, the fund will
be regarded as having been constituted ‘by
all persons mentioned’ in Article 9.
Effects of the constitution of a fund
Article 13 states that where a limitation fund
has been established in accordance with
Article 11, a person who has made a claim
against the fund may not exercise any rights
with regard to this claim against other assets
of any person by whom or on whose behalf
the fund has been established. The intention
of Article 13 is to ensure that when a
limitation fund has been constituted under
the 1976 Convention the other assets of a
‘person liable’ should not be exposed to
separate actions in respect of the same
‘limitation’ claims.
Additionally, Article 13(2) states that every
ship or other property arrested or attached,
and any security given within the jurisdiction
of a State Party, may be released by order of a
competent authority. Such a release is
7
obligatory if the limitation fund has been
constituted in the port where the occurrence
took place or, if the incident occurred outside
a port, in the first port of call thereafter. In the
case of claims for loss of life or personal
injury, this will be the port of disembarkation,
or, for cargo claims, in the port of discharge or
in the State where the arrest has been made.
Article 13(2) is designed to ensure that when
a limitation fund has been constituted under
the 1976 Limitation Convention, the vessels
or other property of the person on whose
behalf the fund has been constituted should
be protected from arrest or detention.
Distinct occasion
A distinct occasion may occur where a ship
causes several incidents, each of which
results in loss. For example, where one
collision occurs at the start of the voyage and
another at the end, each is a distinct occasion
and there will be two funds. However,
problems arise where a ship is successively
involved in a number of incidents. The crucial
issue seems to be that of causation: whether
two or more incidents were the result of the
same act of negligence. If it is possible to
draw a clear line between the two acts of
negligence, there will be two distinct
occasions. But the court might find that an
earlier act of negligence has combined with a
later negligent act to be a partial cause of any
resulting damage.
Assume that vessel A and vessel B collide as a
result of the fault of A; B grounds suffering
the first grounding damage. The grounding
occurs in a river and because of the size of B
in relation to the river, the state of the tide
and the weather, it is decided that she must
return upriver to await the ebb, which
necessarily involves a difficult turning
manoeuvre and, despite towage assistance,
she grounds for a second time, suffering new
‘second grounding damage’. The case will
concern the apportionment of responsibility
for the second grounding damage.
It may be said that B is negligent during the
turning manoeuvre and the owner of A may
argue that this was a novus actus interveniens
and that he is not responsible for the second
8
grounding damage. In such a case the court
may find that the second damage is partly
caused by B’s negligence in making the turn,
but also by those responsible for damage 1
and as a result the liability may be sub-
apportioned. The crucial finding here is that
the effects of the first acts of negligence are
still continuing when the turn is made1. It
may be said that there are two occasions but
the question is, are they distinct? The passage
of time alone is not decisive, because the
wording requires an examination of the
causation issue.
It may be argued that, as a general principle,
a second incident may not be wholly distinct
from the first incident and as a result there is
only one distinct occasion for which A will be
liable. If a third party is involved (as in the
case where a bridge was damaged during
the turning operation) it might seem hard to
require A to put up two funds. Moreover, as B
is negligent in turn, it might be equally hard
for B to argue that the third party should
proceed against the single limitation fund set
up to satisfy claims resulting from the
original collision. If it is proved that there has
been continuing negligence from the first
incident, a third party, making claim against B
because of the second incident, may have to
share the fund with the collision claimants.
The burden of proof that the damage did not
arise on distinct occasions rests on the
ship that is seeking to limit its liability to a
single occasion.
Aggregation
An injured party cannot, by suing the owner,
charterer and master, claim to have three
limitation funds. Article 9(1) states that the
limits apply to the aggregate of all claims
that arise on any distinct occasion against:
1) shipowners as defined in Article 1(2) and
those for whom they are responsible;
2) shipowners and salvors (as defined in
Article 1(3)) and those for whom they are
responsible providing salvage services from
a ship; and
3) salvors and those for whom they are
responsible not operating from a ship.
1
This is the illustration of the case The Calliope, [1970] 1 All ER 624
Article 9(2) provides a separate aggregation
for the passenger claims subject to the limits
of Article 7. Thus, a passenger cannot seek to
share in the ship’s Article 6 funds to the
extent that he has claims unsatisfied because
of the limits in Article 7. The passenger,
however, would be entitled to sue a non-
carrying ship, which collides with the
passenger ship, to the extent of that ship’s
Article 6 limits (Article 9(2)). Naturally, the
passenger would have to share with any
other claimants against the Article 6 fund.
Counterclaims
Where there are counterclaims as a result of a
collision, the procedure is to set them off so
that the shipowner who is a net debtor is
entitled to limit his liability on the balance
(Article 5).
Conduct barring limitation
Article 4 of the 1976 Convention provides that:
’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.’
The wording of Article 4 itself makes it plain
that the right to limit exists unless the person
challenging the right to limit proves conduct
barring limitation. Thus, the burden of proof
is placed upon the person challenging the
right to limit.
The formula that is set by Article 4 of the
LLMC 1976 is in fact said to be virtually
unbreakable because of the three elements
that the article looks for for their proof:
1) Personal act or omission.
2) Intentionally or recklessly and with
knowledge of such loss.
3) Probability of such a loss.
Personal act or omission
According to Article 1 ‘the person liable’ is the
shipowner, charterer, manager, operator,
salvor, liability insurer or any person for
whose act, neglect or default the shipowner
or salvor is responsible. Personal act of any of
these persons enumerated by Article 1 will
deprive him from limiting his own liability in
a claim against him.
The insurer’s position is different, because the
insurer steps into the assured’s shoes and,
therefore, the assured’s personal act will
deprive the insurer of the right to limit. In the
case of P&I Insurance an owner, demise
charterer and manager may all be insured in
respect of the same ship. In such
circumstances, it may be that one assured
will be able to limit liability whereas another
is not. Then the right of the P&I insurer to
limit may depend on which member is sued.
Article 4 of the Convention does not refer to
agents of servants but only to personal acts
or omissions of the person liable.
Where the shipowner is a company the
question is how to prove ‘personal act’ of the
company and proof of personal act or
omission of the alter ego of the company will
be necessary. Under English law The Marion
[1984] A.C. 563 set out the criteria to
determine who the alter ego of the company
is. Accordingly:
1) Members of the board of the directors.
2) The person dealing with actual
management and control over the relevant
branch of the company’s business. In other
words, the shipowner will be held personally
responsible for act or omission of the person
to whom some or all functions of the
company in relation to its management and
operation has been delegated.
3) If the delegation of responsibility to
another person was improper, or not
sufficiently supervised, the act of delegation
itself would constitute the faulty act.
Under English law, acts of the master of the
ship cannot be attributed to the shipowner
in terms of proving the shipowner’s personal
act or omission under Article 4 of the LLMC
1976 (See The Lady Gwendolen [1965]
1 Lloyd's Rep. 335, The Marion).
NUMBER 3 JUNE 2011
Intentionally or recklessly and with
knowledge of such loss
Article 4 requires proof of a personal act or
omission which has been done intentionally
or recklessly and with knowledge that such
loss would probably result.
The word ‘intentionally’ does not require
much interpretation, it means that the
person trying to limit acted with mens rea
(a guilty state of mind) and wanted to cause
such loss.
Recklessness in this sense means a conduct
which indicates a decision to run the risk or a
mental attitude of indifference of its
existence. As a result, a person who acts
without considering the risks of his actions
might be called reckless.
The words ‘such loss’ in Article 4 refer back to
the loss that has actually resulted and which
is the subject matter of the claim in which
the right to limit is asserted.
Both reckless conduct and knowledge that
the relevant loss would probably result must
be proved.
Probability of such a loss
Article 4 refers not to possibility, but to the
probability of resulting damage. Thus
something more than a possibility is
required. Probability may be defined as
‘something that is likely to happen’. In other
words, knowledge of the consequences of
the personal act or omission done is required.
The consequences of the personal act of
omission refers to the specific consequences
that have actually occurred; in terms of
breaking limitation, it would not be sufficient
to prove that some other loss, not intended,
had occurred.
Protocol of 1996
The Protocol was adopted on 3 May 1996
and entered into force on 13 May 2004.
The limit of liability for claims for loss of life
or personal injury for ships not exceeding
2,000 gross tonnage was increased to
2 million SDR.
9
For larger ships, the following additional
amounts are used in calculating the
limitation amount:
• For each ton from 2,001 to 30,000 tons,
800 SDR
• For each ton from 30,001 to 70,000 tons,
600 SDR
• For each ton in excess of 70,000, 400 SDR
Under the 1996 LLMC Protocol, the limit of
liability for property claims for ships not
exceeding 2,000 gross tonnage is 1 million
SDR. For larger ships, the following additional
amounts are used in calculating the
limitation amount:
• For each ton from 2,001 to 30,000 tons,
400 SDR
• For each ton from 30,001 to 70,000 tons,
300 SDR
• For each ton in excess of 70,000, 200 SDR
Article 4 of the 1996 Protocol replaces
paragraph 1 of Article 7 of the 1976 Limitation
Convention with the following text:
‘1. In respect of claims arising on any
distinct occasion for loss of life or personal
injury to passengers of a ship, the limit of
liability of the shipowner thereof shall be an
amount of 175,000 Units of Account
multiplied by the number of passengers
which the ship is authorized to carry
according to the ship’s certificate.’
10 B R I TA N N I A N E W S CO N V E N T I O N S

1976 Limitation Convention

‘Personal’ claims alone Bibliography

Assume 80,000 (limitation) ton ship. Patrick Griggs, Richard Williams and Jeremy Farr, Limitation of
Tonnage slices Tons SDR Rate SDR Total Liability for Maritime Claims, 4th Edition, 2005.
0-500 Fixed rate 333,000
501-3,000 2,500 x 500 1,250,000 Verena Lahmer, ‘Limitation of Liability and Denial of Limitation
3,001-30,000 27,000 x 333 8,991,000 in Maritime Conventions – Past, Present and Future of Limitation
30,001-70,000 40,000 x 250 10,000,000 of Liability’, Peter Ehlers, Rainer Lagoni (Eds.) ‘Responsibility and
70,001-80,000 10,000 x 167 1,670,000 Liability in the Maritime Context’ LIT Verlag, Hamburg, 2009,
22,244,000 45-107.

‘Others’ claims alone Erling Selvig, ‘An Introduction to the 1976 Convention’, The
Assume 80,000 (limitation) ton ship. Limitation of Shipowners’ Liability: The New Law, London,
Tonnage slices Tons SDR Rate SDR Total Sweet and Maxwell, Institute of Maritime Law, 1986, pp2-32
0-500 Fixed rate 167,000
501-30,000 29,500 x 167 4,926,500
Nick Gaskell, ‘The Amount of Limitation’, The Limitation of
30,001-70,000 40,000 x 125 5,000,000
Shipowners’ Liability: The New Law, London, Sweet and Maxwell,
70,001-80,000 10,000 x 83 830,000
Institute of Maritime Law, 1986, pp33-101.
10,923,500

Total fund available

Assume 80,000 (limitation) ton ship.
Tonnage slices Tons SDR Rate SDR Total
0-500 Fixed rate 500,000
501-3,000 2,500 x 667 1,667,500
3,001-30,000 27,000 x 500 13,500,000
30,001-70,000 40,000 x 375 15,000,000
70,001-80,000 10,000 x 250 2,500,000
33,167,500

1996 PROTOCOL
Assume 80,000 (limitation) ton ship.
in respect of claims for loss of life or personal injury
Tonnage slices Tons SDR Rate SDR Total
Up to 2,000 Fixed rate 2,000,000
2,001-30,000 28,000 x 800 22,400,000
30,001-70,000 40,000 x 600 24,000,000
70,001-80,000 10,000 x 400 4,000,000
52,400,000

in respect of any other claims

Tonnage slices Tons SDR Rate SDR Total
Up to 2,000 Fixed rate 1,000,000
2,001-30,000 28,000 x 400 11,200,000
30,001-70,000 40,000 x 300 12,000,000
70,001-80,000 10,000 x 200 2,000,000
26,200,000

Total fund available

Tonnage slices Tons SDR Rate SDR Total
Up to 2,000 Fixed rate 3,000,000
2,001-30,000 28,000 x 1200 33,600,000
30,001-70,000 40,000 x 900 36,000,000
70,001-80,000 10,000 x 600 6,000,000
78,600,000