The English Admiralty Court has recently considered the status of slot-charterers in limitation proceedings as part of the ongoing litigation arising out of the trouble encountered by the unfortunate “MSC Napoli” in January of 2007: Metvale Limited v Monsanto International SARL [2008] EWHC 3002 (Admlty). Readers may recall that the container vessel suffered heavy weather damage in the English Channel, including cracking to the hull and ingress of water. She was intentionally beached and eventually removed as a wreck. Many containers were lost.
There are very numerous claims arising out of the various contracts of carriage in place. The total value of the claims is well in excess of £100 million. However, applying tonnage limitation under the Convention on Limitation of Liability for Maritime Claims 1976, as in force in England under the Merchant Shipping Act 1995, liability is reduced to a little less than £15 million. The owners of the vessel have commenced limitation proceedings and obtained a decree from the English Admiralty Court that they are entitled to limit. They have also established a fund in that amount out of which successful claims will be paid in due course.
Hapag-Lloyd AG and Stinnes Linien GmbH were both slot-charterers of the vessel with containers on board at the time of the incident and had issued bills of lading in their own names under which they face possible liability to cargo claimants. The questions that arose for determination by the court on this occasion were whether they, as slot charterers were entitled to limitation of liability and, if so, whether they were entitled to share in the protection against claims provided by the fund constituted by the owners.
The relevant provisions of the convention for determining the first question appear in Article 1, which provides,
- Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.
- The term “shipowner” shall mean owner, charterer, manager or operator of a seagoing ship.
Thus the court had to consider whether a slot-charterer counts as a “charterer” for the purposes of this provision.
The “MSC Napoli” was one of several vessels engaged on a regular service from North West Europe to South Africa. The slot-charters were between MSC, who had the vessel on long term time charter from the owners, and the slot-charterers. They were typical of such agreements, with MSC allocating a number of slots per vessel voyage leg for a fixed price. The fixed price was referred to in the agreements as “slot charter hire”
The judge considered that a slot-charter had some features in common with a time charter in that the agreement lasted for a period of time and involved the payment of hire for use of (some of) the cargo carrying capacity of the vessel. On the other hand, it was different from a time charter in that the charterers did not have the right to direct the vessel where to go and it could in this respect be regarded as similar to a voyage charter. In any event he was of the view that the ordinary meaning of the word “charterer” was apt to include any type of charterer whether a bareboat, time or voyage charterer and he could see no reason why it was not also apt to include a slot- charterer.
One argument against this interpretation was that the phrase used in the Convention was “charterer of a … ship”, which might not include someone who chartered only part of a ship. There was also the question whether it was the intention of the Convention that the limit of a charterer who had access only to part of the vessel should be assessed by the tonnage of the entire vessel. The judge did not find either of these arguments convincing.
Teare J took account of the purpose of the Convention, which he described as being the encouragement of international trade by way of sea carriage. If charterers were not entitled to limit their liability then, in cases where the charterers had issued bills of lading in their own name, cargo claimants would pursue the charterers for the full amount of any claims. When the charterers looked in turn to the owners of the vessel, they would be met with the undoubted right of the owners to limit. This would leave the charterers liable without recourse for any excess over and above the limit. It was in order to prevent this eventuality that charterers were given the same right to limit as the owners. The judge considered that the same reasoning would apply equally to slot charterers as to time or voyage charterers.
The court was on this occasion only considering the position of slot-charterers. Another class of carrier routinely involved in the container business are freight forwarders or NVOCCs. Such companies ship containers under bills of lading issued by owners or time or slot charterers but then themselves issue bills of lading in their own names to the cargo interests. The same commercial reasoning would surely apply to them. However it might not seem so obvious that an NVOCC would come within the ordinary usage of the word “charterer”. This question may be determined at some future date. It was not an issue for consideration on this occasion.
The second question that arose for determination in this matter was whether the slot- charterers are entitled to share in the protection afforded by the fund that had been constituted by the owners. The judge regarded this as a very straightforward question that was resolved by the express words of the Convention. Article 9 stipulates that the limit applies to all claims that may arise on any distinct occasion and Article 11 states that a fund constituted by any one of the persons entitled to limit shall be deemed to have been constituted by all. Accordingly, the judge held that the slot charterers were entitled to rely on the fund constituted by the owner.
An interesting question, which was not debated on this occasion, is how claims between the parties who are entitled to limit should be managed. In the case of the “MSC Napol”i for example, assuming cargo interests establish a right to recover from the slot-charterers, the slot-charterers will now be entitled to direct the cargo interests to recover from the fund. The fund however has been established by the owners who are not in any direct contractual relationship with the slot-charterers. The slot-charters were between the slot charterers and MSC. Do the slot-charterers thus avoid any liability? Is the owner entitled to a contribution from the slot charterers to the extent that its fund is used to discharge liability of the slot-charterers? If so, on what basis? This question may well be determined at a later stage in this litigation. Watch this space!
With thanks to Dominic McAleer of MFB Solicitors for preparing this article.
