Charterers cannot limit an owner’s claim for its own losses…ever

4 September, 2023

On 1st September 2023, the Court of Appeal handed-down judgment in The MSC Flaminia (No. 2) [2023] EWCA Civ 1007, upholding the decision of Mr Justice Andrew Baker ([2022] EWHC 2746 (Admlty)) albeit on different grounds.

The case arises from a casualty on board the MSC Flaminia on 14th July 2012 while the ship was in mid-Atlantic en route from Charleston, South Carolina, to Antwerp. An explosion occurred in the no. 4 cargo hold which led to a large fire on board. Hundreds of containers were destroyed and extensive damage was caused to the ship. Three crew members lost their lives. The explosion was caused by the auto-polymerisation of the contents of one or more of three tank containers laden with a chemical known as DVB which had been shipped at New Orleans on 1st July 2012.

The ship was eventually salved and repaired at enormous cost to her owners, Conti. Conti brought claims in arbitration against the charterers of the vessel, MSC, to recover hire throughout the period while the ship was out of service under the charter and to recover its losses as a result of the casualty. The arbitrators determined that the ship remained on hire throughout and that MSC was liable to Conti in respect of the casualty. By an award dated 30th July 2021, they awarded damages of approximately US $200 million.

MSC then sought to limit its liability for claims arising from the casualty pursuant to the 1976 Convention on Limitation of Liability for Maritime Claims, as amended by the Amending Protocol of 1996 and now given the force of law in the United Kingdom by section 185 of the Merchant Shipping Act 1995.

The trial of the limitation action came before Andrew Baker J, who had previously held that MSC was not entitled to an anti-suit injunction to prevent Conti from seeking to enforce its arbitration award elsewhere (see The MSC Flaminia (No. 1) [2022] 2 Lloyd’s Rep 341). The judge held that MSC was not entitled to limit its liability because Conti’s claims were not within the scope of any of the paragraphs of Article 2 of the Convention. However, in so-holding, the judge rejected Conti’s submission that that tonnage limitation under Article 2(1) only applies to claims in respect of losses suffered in the first instance by someone who is not within the extended definition of “shipowner” in Article 1(2) of the 1976 Convention, referred to by the judge as an “outsider” (“insiders” being those within the extended definition of “shipowner” in Article 1(2)).

MSC appealed and Conti filed a respondent’s notice advancing a narrower submission than the one made to the judge; on appeal Conti contended that the claims referred to in Article 2 must be interpreted to exclude claims by an owner against a charterer to recover losses suffered by the owner itself.

This narrower submission was accepted by the Court of Appeal, with the appeal dismissed by reference to the respondent’s notice.

The decision is likely to be of interest to all engaged in shipping litigation and their insurers.

A link to the full judgment can be found here.

Christopher Smith KC and David Walsh acted for Conti, instructed by Chris Garley and Vivienne Pitroff of HFW LLP.