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Dubai Court of Cassation Confirms Application of 1976 Convention

SSM Roundel

Steamship Mutual

Published: September 01, 2008

Along with the courts of other countries in the Gulf, the UAE courts have traditionally been seen as hostile to the concept of carriers (such as ship owners) limiting their liability for claims made against them. It is seen as contrary to religious, moral and legal customs that require harm to be compensated in full.[1]  And yet, as with most of the world's trading nations, the UAE adopted domestic laws which, in certain circumstances, allowed carriers to limit their liability for claims made against them. 

For example, articles 138-142 of the UAE Maritime Code (Federal Law No. 26 of 1981) (“the UAE Maritime Code”) entitle a ship owner, charterer or operator to limit liability based on the tonnage of the vessel. 

Despite this, experienced practitioners in the region would struggle to recollect a case where the courts have upheld the carrier's right to limit under these provisions. 

The aversion to limiting liability referred to above may explain this. Certainly there is a history of the local courts trying to avoid or circumvent provisions where they conflict with established legal principles and customs[2] . 

In the case of some maritime claims for instance, to avoid the UAE Maritime Code the UAE courts may refer instead to the UAE Civil Code which requires harm from tortious acts to be made good. In this respect some novel arguments have been advanced to allow claimants to rely on the Civil Code rather than the UAE Maritime Code. For instance, it has been argued that a dredger – when involved in dredging activities – is not a "ship" for the purposes of limitation and therefore is not covered by the UAE Maritime Code. For courts that instinctively dislike limitation and have minimal experience of shipping matters or international conventions, such arguments can appeal.  

Where the UAE Maritime Code clearly does apply, for the reasons above, it is speculated that the UAE courts have adopted a broad approach to interpretation so as to avoid applying the limitation provisions.

For example, article 140 of the UAE Maritime Code bars limitation in circumstances of "personal fault" of the owner. This is similar to article 1 of the 1957 Convention Relating to the Limitation of Liability of Owners of Seagoing Ships ("the 1957 Convention") on which articles 138-142 of the UAE Maritime Code are based. The UAE courts may have interpreted "personal fault" in its widest context as a means of circumventing limitation under articles 138-142. 

The 1957 Convention, however, was superseded in 1976 by the Convention on the Limitation of Liability for Maritime Claims ("the 1976 Convention"). The intent of the 1976 Limitation Convention was to provide higher levels of compensation for claimants in return for giving a defendant (defined as a salvor, ship owner, charterer, operator or manager of a seagoing vessel) an almost unbreakable right to limit its liability; under the 1976 Convention, the right to limit liability is lost only when a claimant can prove wilful intent or recklessness and with knowledge of damage on the part of the person seeking to limit (Article 4 of the 1976 Convention). In the leading English case on a defendant's right to limit liability (The “Bowbelle" [1990] 1 Lloyd's Rep 532), Mr Justice Sheen observed that the 1976 Convention conferred on ship owners an "almost indisputable right to limit their liability". 

The UAE ratified the 1976 Convention in 1997 (Federal Decree No. 118 of 1997). Article 15(1) of the 1976 Convention states that the Convention shall be enforced whenever "a [ship owner or other defined person] applies for limitation of liability before the courts of a country which is party to the Convention". 

In theory, as a party to the 1976 Convention, the UAE's Courts should therefore enforce it.  

In the first case on liability under the 1976 Convention that we are aware of, the claimants argued that the 1976 Convention had not been implemented in the UAE at all, since it was not codified in the UAE's national laws.  

Further, as noted above, the courts in the UAE have traditionally been averse to the concept of limitation of liability because it is contrary to religious, moral and legal customs that require harm to be compensated in full. 

For these reasons it has been uncertain how the local courts would approach, interpret or, indeed, apply the 1976 Convention when faced with a defendant seeking to limit its liability under that Convention.

A recent decision of the Dubai Court of Cassation has provided welcome clarification.

The court not only confirmed that the 1976 Convention has force of law in the UAE and accordingly must be applied by the lower courts, but also acknowledged a defendant's right to limit liability, subject to a claimant advancing evidence to defeat that right.  

The clarification is welcome to avoid unnecessary arguments as to the applicability of the 1976 Convention in the UAE.  

However, other issues remain. In particular: 

  • There is no system of precedent in the UAE, which has a civil code system.  It should also be noted that the Dubai Courts are separate to courts of the other Emirates. The Court of Cassation in Abu Dhabi, for instance, is the highest court of appeal for that and several other Emirates, but not for Dubai. Therefore even though the Dubai Court of Cassation Judgment will be highly persuasive, it is not binding on courts in the other Emirates.  It remains to be seen whether those courts will apply and interpret the 1976 Convention in the manner in which it is intended, in particular the provisions of article 4.  
  • Although the UAE Maritime Code alludes to a limitation fund, there remains no statutory provision for the constitution of a limitation fund for the purposes of securing a claim and paying out settlement funds.  Previous attempts to constitute a fund in the UAE were unsuccessful. That said, this is not a stumbling block to a limitation defence because a defendant may nevertheless invoke limitation under the 1976 Convention without having to constitute a limitation fund (Article 10 of the 1976 Convention). The Court of Cassation Judgment implicitly confirms this will be the case in the UAE.  
  • The UAE has not repealed the provisions (Articles 138 – 142) of the UAE Maritime Code which currently deal with limitation. Article 8 of the UAE Maritime Code however recognises that international conventions which have been ratified by the UAE supersede domestic legislation and for this reason the 1976 Convention should override these provisions.
  •  Finally, there remains tension between the legal right to limit liability on the one hand and the principles behind Sharia law on the other, certainly in terms of limitation of liability where death or personal injury is concerned. It is perhaps in this area where further clarification by way of revision of the UAE Civil and Maritime Codes is most urgently needed. 

In summary, whilst the Court of Cassation Judgment is welcome confirmation that the 1976 Convention not only has force of law in the UAE but also recognises a defendant's right to limit its liability (subject to a claimant advancing evidence to defeat that right), there will no doubt be further litigation over its interpretation and application for the above reason. 

 

With thanks to Simon Cartwright and Ann Mazzucco of Holman Fenwick & Willan for preparing this article.

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[1]See for example, "Limitation of liability issues in the Arabian Gulf", Dr Aziz Kurtha, [1998] IJOSL p247 and Maritime Laws of the Arabian Gulf States, Richard Price and Andreas Haberbeck, Graham and Trotman, London, (1986)
[2] "Limitation of liability for maritime claims in the UAE", Dr Aziz Kurtha, [1999] Arab Law Quarterly, p57

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