Shipowner’s Limitation of Liability Action When is the Owner’s action time barred? Michael E. Crowley

U.S. Limitation Act 46 U.S.C. Sec. 30504, et. Seq. - Brief history 1700’s - Most European maritime nations had statutes limiting shipowner’s liability to value of the vessel following the voyage. In 1851, following Lexington fire casualty, U.S. enacted Limitation Act (to make U.S. shipowners competitive).

Main Features Owner files petition in federal court Notice to potential claimants Court enjoins/stays other actions Venue In district vessel arrested If no arrest, in district owner sued If no suit, in district vessel is located If none of the above, any district Fund posted (post-incident value of vessel plus pending freight) Supplemental fund for injury/death claimants

Breaking the Limit If claimants prove negligence or unseaworthiness as cause Owner has burden of proving lack of privity or knowledge of cause If Owner fails, no limit With modern technology/communications – not hard to break

Time Limit for Filing Petition Within six months after Owner receives notice of claim Sec. 30511(a) In General.— “The owner of a vessel may bring a civil action in a district court of the United States for limitation of liability under this chapter. The action must be brought within 6 months after a claimant gives the owner written notice of a claim.” Result of 1936 amendment to Act to prevent Owners from using delay tactics to their advantage.

What law applies General rule – Limitation is considered remedial in nature and therefore procedural. Accordingly, U.S. court will apply U.S. Limitation Act even if Owner is a foreign national. (TITANTIC – US Sup Ct.) (TAI CHI – SDNY 1976)

Exceptions Collision on high seas – both flag states agree on law (i.e. 76 Convention) Collision in foreign territorial waters – Court may consider whether foreign law is procedural or substantive (NORWALK VICTORY – Sup Ct)(unlikely). Sole ship casualty – Court may consider whether flag state law is procedural or substantive (unlikely).

Limitation as a Defence May be asserted as an affirmative defence This does not waive Owner’s right to commence separate Limitation proceeding This does not toll the 6 month period Limitation plead as defence does not create federal jurisdiction (so State court may decide limitation issues)

Other Limitation Schemes In late 1800’s some European nations began raising limits, based on tonnage 1924 Brussels Convention 1957 Brussels Convention (gold francs per gross ton) 1976 London Convention (SDR per gross ton) 1996 Protocol, and amendments (increased limits)

1976 Limitation Convention Entered into force 1986 About 50 contracting States (76 Conv + 96 Prot) Other countries have adopted as national law (notably Canada and Chile) Limitation Fund based on tonnage (sliding scale – SDR per ton) Other actions barred

Breaking the Limit Difficult to break – Claimant must prove Owner acted with “intent to cause loss” or acted “recklessly and with knowledge such loss would probably result.”

Time Limit for Commencing Action There is none in the Convention Article 15 – “Scope of Application” “This Convention shall apply whenever any person … seeks to limit his liability before the Court of a State Party …”

Article 11 – “Constitution of the fund” “Any person alleged to be liable may constitute a fund with the Court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation.”

Article 14 “Governing Law” “Subject to the provisions of this Chapter, the rules relating to the constitution and distribution of a limitation fund, and all rules of procedure in connection therewith, shall be governed by the law of the State Party in which the fund is constituted.”

CMI Questionnaire In 2005, the CMI gathered information from State Parties in effort to unify national procedures. About 16 subjects discussed, including – Can limitation be invoked before law suits are filed? (most said yes) How and when is fund constituted? Is there a time limit to constitute the fund? Not asked – is there a time limit to invoke limitation?

So What Are the Time Limits for Invoking Limitation? This is not legal advice. Do not rely on it. Consult a lawyer. Convention States? Mexico - one year to commence limitation action Others? - may apply tort time bar, collision time bar or some other civil or maritime code time bar

Other Convention States Most have 2 year collision SOL Australia - tort 6 years Belgium - tort 5 years China - civil 2 years Denmark - Egypt - tort 3 years England - tort 6 years Finland - tort 3 years France - tort 5 years Germany - civil 3 years Greece - tort 5 years Ireland - maritime 2 years

Japan - tort 3 years Netherlands - tort 5 years New Zealand – Norway - Poland - tort 3 years Spain - tort 1 year Sweden - Turkey -

Non Convention States Argentina – (value of ship) – tort 2 years Brazil - (abandon vessel) – tort 3 years Canada – Adopts Conv – mar claims 3 years Chile - Adopts Conv – mar claims 2 years Colombia - tort 10 years Ecuador - tort 5 years India – civil claims 3 years Italy - tort 2 years

Kuwait - tort 3years Panama - tort 1 year Portugal - tort 3 years Russia - civil 3 years Singapore – tort 3 years South Africa – tort 3 years South Korea - maritime tort 3 years Venezuela – Adopts Conv – tort 10 years

76 Conv limits Property claims (non-injury/death) – 500 gross tons or less - 167,000 SDR 501 – 30,000 gross tons - 167 SDR per ton 30,001 – 70,000 gross tons - 125 SDR per ton More than 70,000 gross tons - 83 SDR per ton

96 Protocol limits Property claims (non-injury/death) – 2,000 gross tons or less - 1 million SDR 2,001 – 30,000 gross tons - 400 SDR per ton 30,001 – 70,000 gross tons - 300 SDR per ton More than 70,000 gross tons - 200 SDR per ton

96 Protocol Amendments Property claims (non-injury/death) – 2,000 gross tons or less - 1.51 million SDR 2,001 – 30,000 gross tons- 604 SDR per ton 30,001 – 70,000 gross tons- 453 SDR per ton More than 70,000 gross tons- 302 SDR per ton

Example Limitation fund for 50,000 gt bulker 57 Convention - USD 5.155 M 76 Convention - USD 11.743 M 96 Protocol - USD 28.144 M 96 Protocol Amendments- USD 42.5 M

Considerations Divergence in limitation laws and fund calculations results in forum shopping for both shipowners and claimants Be aware that in many jurisdictions the shipowner may be entitled to invoke limitation, even after judgment Time bar issues remain unclear