Limitation of Liability - 1957 and 1976 Conventions - Jurisdictional Issues

(Sea Venture Volume 18)

In 1996 the "Herceg Novi" sank in Singapore territorial waters after a collision with the "Ming Galaxy". Each party made allegations of fault against the other. The owners of the "Ming Galaxy" began an action in rem in Singapore and eight days later the owners of the "Herceg Novi" issued a writ in rem in England.

The different choice of jurisdiction can be understood for the following reason: Under the 1957 Convention¹  regime, which would be applied by the Singapore Court, the Ming Galaxy’s limit of liability would be $2,900,000 (unless the owner’s fault or privity could be established). Under the 1976 Convention² regime, which would be applied by the English Court, the limitation of liability would be $5, 800, 000 (in the absence of any circumstances which would deprive the owners of the right to limit - it is more difficult to deny owners the right to limit under the 1976 Convention than under the 1957 Convention).

Thus, the party whose claim exceeded $2,900,000 and was likely to establish liability against the other party in excess of that sum would naturally prefer the higher limit available under English law. Equally, the party who faced greater liability if the lower limit under Singapore law did not govern the proceedings would prefer the jurisdiction of the Singapore Court.

In this case, the owners of the Ming Galaxy wished to avail themselves of the lower Singapore limit. They were the defendants in the English proceedings brought by the owners of the Herceg Novi and applied for a stay of those proceedings on the ground that England was not the natural or appropriate forum for the trial and that Singapore was clearly more appropriate. The plaintiffs’ argument was that a stay would deprive them of the provisions of the 1976 Convention and justice required that the trial take place in England.

The judge at first instance determined that the alleged injustice of depriving the plaintiffs of the provisions of the 1976 Convention was a relevant factor. On the basis of this, he decided that the Singapore Court should determine the issues of responsibility and quantum, that the English proceedings should be stayed pending that decision, but that the plaintiffs have liberty to apply to the English Court thereafter. The defendants appealed.

The Court of Appeal³ allowed the appeal and granted an unconditional stay of the English proceedings. The decision was based on three reasons:

1. The 1976 Convention reflects the view of some 30 states. It has not received universal acceptance.
2. The International Maritime Organisation may commend the 1976 Convention to the international community. However, if, in doing so, it were found to have enacted an international consensus, that would deprive sovereign states to a large extent of their right to adhere to some other regime.
3. The preference for the 1976 convention has no greater justification than for the 1957 regime in terms of abstract justice and neither Convention is objectively more just than the other. It was the Court’s view that substantial justice would be done in Singapore.

In this case, the 1976 Convention was not applicable to the collision by force of English law. The plaintiff was asking the English Court to accept jurisdiction (which the Court was not obliged to do) and to apply English law (which was not automatically applicable).

This is a final decision. (The plaintiffs’ petition for an appeal to the House of Lords was denied.). The importance of the decision lies in the fact that if, under English law, no convention is compulsorily applicable to a case, the English Court will not give preference to one over another merely because it may be more favourable to a claimant. The English Court will stay its own proceedings in circumstances where proceedings have been commenced in a more appropriate forum, even though the foreign jurisdiction will apply a less favourable, but nonetheless legitimate, regime.

¹ The International Convention Relating to the Limitation of the Liability of Owners of Sea-going Ships, 1957
² The Convention on Limitation of Liability for Maritime Claims, 1976
³ Lloyd's Rep1998 Vol. 2 454