Limitation of liability for maritime claims is a legal concept which allows the
shipowner to limit his financial exposure for maritime claims up to a maximum
sum regardless of the actual amount of the claims being brought against him. The
concept has a long history and, although there is controversy as to the specific
time when it first appeared, it seems that the first real recognition of a shipowner’s
right of limitation of liability is found in the Tavole Amalfitane, wherefrom it
later spread to continental Europe. Originally in continental Europe, limitation of
liability was by ‘abandonment’, i.e. the shipowner was considered to be ‘personally’
liable for the claims, but he was allowed to limit his liability by abandoning his ship
(or what was left of it), together with any pending freight, to the claimants.
On the other hand, the statutory recognition of the shipowner’s right of limitation
of liability in the United Kingdom dates back only to 1734. This has made multiple
jurists assert that this enactment actually ‘gave birth’ to the concept of limitation
of liability in the United Kingdom. Nonetheless, it seems possible to recognize an
earlier form of limitation of liability in the United Kingdom by studying a possible
link between the right to limit liability and the action in rem. In this respect, it
must be recalled that, even before 1734, where a plaintiff brought an action in rem
before the court, his remedy was restricted to the res itself. Hence, the defendant
shipowner was actually able to limit his liability since he was not ‘personally’ liable
for the claims after the vessel had been sold. Accordingly, as Lord Steyn explained,
in these cases ‘[t] he ship was regarded as both the source and limit of liability’.
It would therefore seem that, in relation to actions in rem, if the right to limit
was recognized, it was one by abandonment similar to the continental approach.
However, when the right to limit liability was specifically recognized under statute,
the liability of the shipowner was established in accordance to the size of the
ship, i.e. limitation of liability was determined by reference to the ship’s tonnage.
The concept of global limitation of liability for maritime claims then slowly spread
throughout the world where it was frequently adopted by national enactments
until there was a need to adopt this concept under an international convention. It
may be said that the wake-up call for international regulation was the sinking of
the RMS Titanic in 1912. This tragedy gave rise to many claims for loss of life and
personal injuries, as well as claims for loss of property, which were tried in different
countries. Accordingly, this led to a myriad of judgments, all different from one
another as they were determined according to the prevailing law in each jurisdiction.
In fact, as Justice Holmes of the US Supreme Court stated in the case of
Ocean Steam Navigation Co. v Mellor (The Titanic), the Court saw ‘no absurdity
in supposing that if the owner of the Titanic were sued in different countries, each
having a different rule affecting the remedy there, the local rule should be applied
in each case’.
In 1913, a year after the sinking of the RMS Titanic, a committee established by the
Comité Maritime International (CMI) to review the law on limitation of liability
came up with a draft convention aimed at bringing about harmonization of the
law in the field of limitation of liability. The draft convention was adopted by a
Diplomatic Conference in Brussels in 1924 as the International Convention for
the Unification of Certain Rules Relating to the Limitation of Liability of Owners
of Sea-Going Vessels. Perhaps the most interesting feature of the 1924 Convention
was that it sought to achieve a compromise between the different systems of limitation
of liability—it took into account both ‘limitation by abandonment’ and
‘limitation based on tonnage’.
The 1924 Convention, however, received very little support from the international
community. Therefore the CMI revisited the issue in the 1950s. The CMI work
led to the adoption of the International Convention Relating to the Limitation of
Liability of Owners of Sea-Going Ships, 1957.
The 1957 Convention completely abandoned the system of the calculation of
limitation by reference to the residual value of the ship and exclusively adopted the
system of calculation of limitation by reference to its tonnage. The Convention
used the Poincare gold franc to calculate the limits of liability (which were
increased in relation to those under the 1924 Convention), and established separate
funds for personal and property claims.
The 1957 Convention received wider acceptance by the international community
than its predecessor. However, international developments in the shipping world
during the 1960s, together with the recognition of the need to extend the right
to limit to persons other than those covered by the 1957 Convention, made the
Inter-Governmental Maritime Consultative Organization (IMCO) realize that
there was an urgent need to revise the 1957 Convention. IMCO worked closely
with the CMI in this revision project which eventually led to the adoption of
a completely new convention—the Convention on Limitation of Liability for
Maritime Claims, 1976 (LLMC Convention).
The LLMC Convention is currently the most widely accepted treaty on global limitation
of liability having, as at 22 September 2015, been ratified or acceded to by
fifty-four States with 54.80 per cent of the total world tonnage. Nevertheless, the
Protocol of 1996 to Amend the Convention on Limitation of Liability for Maritime
Claims, 1976 (1996 LLMC Protocol) is constantly gaining ground on the LLMC
Convention and, as at 22 September 2015, it has been ratified or acceded to by fifty-two
States which constitute 53.58 per cent of the total world tonnage. This Protocol was
adopted, inter alia, to increase the LLMC Convention’s limits of liability which had
been eroded by inflation and were no longer adequate to satisfy possible claims. The
Protocol also provided for a simplified revision and amendment procedure modelled
on previous particular liability regimes, and pursuant to this amendment procedure
the IMO Legal Committee increased the 1996 LLMC Protocol’s limits of
liability through Resolution LEG.5(99) adopted on 19 April 2012.
