OBLIGATORY FORUM COURT STATUTES (SHIPOWNERS’ LIMITATIONS)

OBLIGATORY FORUM COURT STATUTES (SHIPOWNERS’ LIMITATIONS)

1. Limitations in the Common and Civil Law

1. Conflict Problems & Solutions

• 
  Originally the law of a ship collision and all surrounding matters such as limitation were subject to the lex loci, including the right to limit and the size of the fund.
  
• 
  Two main problems: (1) to determine which law would provide the right to invoke the limitation; and (2) which law would govern the size of the limitation fund itself.
  
• 
  Solutions have normally been: (a) the right to limit was seen as substantive and to be governed by the same law which determined the responsibility for the collision; (b) the actual size of the fund was characterized as a matter of procedure, to be decided by the lex fori.
  
• 
  This modern division between the right to limit and the procedural fund has problems. There are not merely two choice of law problems, but often many, including law of responsibility, law of presumptions, law of divisions of damages, laws applicable to contracts or claimants, law applicable in tort for persons against non-carrying ship, PEL, law of right to limit and calculation of fund, law of marshalling and distribution of fund. Must also consider if there is a better forum – each issue may have its own applicable law.
  

1. Conflict Directives in International Limitation Conventions

1. 
   per ton and abandonment;
   
2. 
   only ship-owner may limit – to value of ship and freight after event or to a sum equal to 8 sterling per ton plus an additional 8 sterling in cases of personal injury or wrongful death
   
3. 
   "actual fault or privity of the ship-owner" loses the right to limit.
   

1. 
   per ton;
   
2. 
   ship-owner, charterer, manager and operator, master and crew may limit;
   
3. 
   “actual fault or privity" of any of the above, loses their right to limit – lex fori determines who has BoP
   

(This is an obligatory forum court statute. This act applies in any federal court, doesn't matter where event occurs)

1. 
   per ton (sliding scale)
   
2. 
   ship-owner, charterer, operator, manager, insurer and salvor and preposes may limit;
   
3. 
   The right to limit is only lost by a personal act or omission, done with intent to cause damage or recklessly with knowledge that damage would probably result. (This is a major change. Comes from Warsaw Convention, and Tetley feels it is unacceptable.)
   

• 
  Also included these ideas in this act – gave force of law to the 1976 Limitation Convention as amend by 1996 Protocol.
  
• 
  It repealed and replaced the Canada Shipping Act provisions enacted by the Act to amend the Canada Shipping Act (maritime liability), 1998.
  

1. 
   retains the use of maximum liability derived from tonnage
   
2. 
   the persons who may limit include shipowners, salvors, charterers, managers, operators, preposes, the vessel and insures of sea-going trips
   
3. 
   Convention is applicable whenever limitation proceedings are taken before the court of a state party.
   

2. National Laws

• 
  Article 1 – sets out the general possibility to limit liability according to this convention for ship-owners, charterers and managers
  
• 
  Article 11 – You can only have a fund in a state party and the fund must be created according to the rules of the limitation convention.
  
• 
  Article 14 - Governing law: Subject to the provisions of this Chapter the rules relating to the constitution and distribution of a limitation fund, and all rules of procedure in connection therewith, shall be governed by the law of the State Party in which the fund is constituted.
  
• 
  Article 15 - 1. This Convention shall apply whenever any person referred to in Article 1 seeks to limit his liability before the Court of a State party or seeks to procure the release of a ship or other property or the discharge of any security given within the jurisdiction of any such State. Obligatory forum court statute, applies in countries which have adopted the statute.
  

1. 
   abandonment, only the value of the vessel (and earned freight) after the event – pay whatever its worth after the event…this eliminates fund where there is total loss
   
2. 
   plus $420 per ton for death and personal injury;
   
3. 
   only shipowner or demise charterer (where you take the ship but owner can name crew – still pays for everything) may limit – no difference in 1851 between demise and bareboat charterer (bareboat vs. demise charterer – bareboat means you name the crew and demise you don’t name the crew)
   
4. 
   6 months after written notice of complaint to file a limitation (strictly construed)
   
5. 
   "privity or knowledge" rarely applied by American courts and appear stricter than “actual fault or privity rules of ’24 and ’57 Limitation Conventions
   
6. 
   insurance proceeds do not fall into the limitation fund (very archaic – widows orphans don’t get access to insurance proceeds of owners)
   

A summary of U.S. conflicts law on limitation of shipowners' liability indicates an inconsistent practice, based on divergent theories. There is a preoccupation with the differences between substance and procedure which is in need of modernization. The First Restatement called for the lex fori, the Restatement Second called for the proper law of "each issue" in tort, which would include the proper law of the limitation. The Restatement Second, unfortunately, was not followed. Both the Titanic and the Norwalk Victory are inconsistent conundrums giving varying rules, which have been followed and rejected in subsequent decisions.

• 
  Convention does not restrict application of obligatory forum court statutes – application of mandatory rules irrespective of the proper law of contract
  
• 
  CCQ – 3129 isn’t a general application of this rule because it only applies to raw materials – can it be extended?
  
• 
  3076 CCQ also could be considered another option – but isn’t a very good one
  

Nothing in this Regulation shall restrict the application of the rules of the law of the forum in a situation where they are mandatory irrespective if the law otherwise applicable to the non-contractual obligation.

3. Conflict Limitation Cases

1) As a defense - as per Arctic Explorer -

2) By petition
“Concursus”

After the limitation fund has been constituted, the district court issues an injunction to stay all proceedings against the owner or his property with respect to the casualty concerned. This "concursus" requires all claims resulting from the incident to be filed and disposed of in a single proceeding, although the concursus has effect only within the U.S. and does not preclude claimants from suing in other countries. This is formally in maritime law but also found in US District Courts in some matters.

1. Bethlehem Steel, 1978

a) First Decision of US District Court – Canadian law was applied to the right to limit liability because the right of a shipowner to limit under the Canada Shipping Act was deemed substantive, connected with heads of damage. Size of the fund calculated by American law because were deemed procedural.

b) Decision of the Federal Court of Canada – the law to determine liability in tort cases was deemed to be the lex loci delicti commissi (i.e. the law of Canada), no claims for pure economic loss were allowed under Canadian law which applied to this allision case in Canada; it was properly assumed that Canadian law applies to the right to limit liability, a Canadian limitation fund was created under Canadian law – shipowner could recover from CAN fund any funds it had paid out of US fund for claims that would have been valid in Canada (assume CAN governs fund).

c) Second Decision of US District Court – Canadian law of damages was applied to an allision in Canadian waters, held that there was no claim for economic loss, also held that there was no “overriding domestic policy” to apply US law.

• 
  Tetley – “a better solution” – The court correctly found that the proper law of the claims for damages and for economic loss was Canadian. The proper law of the right to limit was also Canadian. The proper law of the fund was Canadian as well, there being a closer and more real connection to Canada. Thus the US court applying forum non conveniens should have stayed the American action and had the claim tried in Canada with a Canadian fund and Canadian distribution under Canadian law.
  

2. Arctic Explorer, 1984 AMC 2413.

• 
  Issue: Was right to limit liability (of time charterer) under Canadian law or no right under US law.
  
• 
  Held: Canadian law applies, at least with regards to right to limit.
  
• 
  Concursus – permitted to force all 13 suits into federal court. Arctic Explorer had not entered US – if it had, would have been considered doing business in US.
  
• 
  Right to limit is substantive, closest and most real connection, and interest analysis – law of CAN held to be applicable to rights and liabilities in the sinking, based on Lauritzen/Rhoditis factors and because there were no substantial contacts with US.
  
• 
  Right of a time charterer to limit was held to be substantive and subject to Canadian law.
  
• 
  Size of the fund is procedural? Fund probably of the forum (so Canada too) once sent back.
  
• 
  Forum non conveniens - held should go back to Canada on basis of forum non conveniens, no interest to have it in US (analysis), even though in Canada right to compensation limited, no substantial contact with base of operations so dismissed on basis of forum non conveniens.
  
• 
  Tetley: "The result in the Arctic Explorer is very satisfying, although a more rational and more consistent reasoning could have been made by the use of a methodology, such as the one suggested in Chapter II".
  

Discuss Canada Shipping Act, s.649, which provides for limitation to apply to the charterer of the ship and any person having interest in or possession of a ship from and including the launch thereof. U.S. does not permit a time charterer to limit liability but Canada does, therefore apply Canadian law…also because of above cases (Lauritzen, etc.). The court then discusses the contacts to be looked at – not a contact counting test. Private and public interest factors are considered here – the private factors are the contacts, while the public interest aspect is looked at through governmental interest analysis.

3. The M/V Swiborn, 1984

• 
  US District Court conceived of a two tier test – ceiling on liability would be fixed by US law and no foreign limit would be applied if higher.
  
• 
  If the foreign limit was lower than the US one then the court would proceed to consider whether the foreign limitation fund was attached to the ship-owners’ right to limit.
  
• 
  Court found that the calculation of the Korean fund was a right of the shipowner under Korean law and therefore substantive and should be recognized as the proper law being attached to the right to limit.
  

This is an example of the attempt to reconcile Titanic and Norwalk Victory. It arrives at a two-tier test that attempts to satisfy both decisions and then uses additional more logical reasoning to find the proper law and this arriving at the same conclusion. Tetley thinks it would have been better had the court determined the proper law of the right to limit and the proper law of the fund – the court did in fact apply Lauritzen and governmental interest analysis to find the proper law. Also, forum shopping was reason for suit in US, which should be discouraged.

4. "The Lady Gwendolen" [1965] 1 Lloyd's Rep. 335 CA

• 
  Although plaintiffs' main business was that of brewers, in their capacity as shipowners they were to be judged by the standard of conduct of the ordinary reasonable shipowner in the management and control of vessels; that the primary concern of a shipowner was safety of life at sea, and that involved a seaworthy ship, properly manned and safely navigated.
  
• 
  Pt. had failed to prove that collision occurred without their actual fault or privity; and that, therefore, plaintiffs' appeal should be dismissed.
  

5. Rhone (The) v. Peter A.B. Widener (The) [1993] 1 S.C.R. 497  

• 
  The collision between the Rhône and the Widener did not occur with the actual fault or privity of Great Lakes. While Captain Kelch was the master of the Ohio at the time of the collision, navigational errors committed by a ship's master, in the course of his duties, do not in themselves give rise to actual fault or privity on the part of the shipowner in the absence of a breach of its duty to supervise the management and navigation of its vessel which is causally linked to the resulting damage.
  
• 
  Further, there was no actual fault or privity on the part of Great Lakes on the basis that Captain Kelch was a directing mind of the corporation.
  
• 
  While Captain Kelch no doubt had certain decision-making authority on navigational matters as an incident of his role as master of the tug Ohio and was given important operational duties, he did not have governing authority over the management and operation of Great Lakes' tugs. This authority remained with his superior. The fact that his superior may have been lax in his supervision of Captain Kelch does not alter the fact that Kelch was essentially a servant of Great Lakes.
  
• 
  Great Lakes, as owner of the Ohio, may thus limit its liability since the cause of the collision consisted of acts or omissions of Captain Kelch on board the Ohio.
  

6. N.V. Bureau Wijsmuller v. "Tojo Maru" [1971] 1 Lloyd's Rep. 341 HL

• 
  There is no rule of maritime law that a successful salvor cannot be liable in damages to the owner for the result of any negligence on his part.
  
• 
  Damage done by a salvor in the course of a salvage operation was taken into account (i) by basing the salvage reward on a salved value reduced by the damage; and (ii) by deducting part or whole of the damage from the salvage reward; save to that extent, a salvor was not liable for damage done; but that principle applied only when the salvor did more good than harm; that, accordingly, if the salvor succeeded in effecting a cure then the operation must be regarded as a whole and the salvor was entitled to a reward calculated on the above principle; that, therefore, applying that principle to this case, the owners were not entitled to counterclaim damages for negligence
  
• 
  If the contractors were liable in damages to the owners, they could not limit their liability under setc. 503, in that the act of V. was neither done in the "management" of the tug nor was it an act or omission of a person "on board" the tug
  
• 
  Further, that if the contractors were liable in damages and were entitled to limit liability, then the owners were not entitled to a set-off before limitation of liability was applied
  
• 
  Further, that if the contractors were liable in damages without any limitation of liability, the reward should first be calculated as if no damage had been done by their negligence; then the counterclaim should be calculated on the cost of repairs, delay and loss of profit, and then a balance should be struck;
  

7. Caltex Singapore v. BP Shipping Ltd. [1996] 1 Lloyd's Rep. 286 QBD (Adm Ct)

• 
  The limit of liability in Singapore was likely to be less than the limit of liability in England and the defendants (BP) applied for a stay of the action on the ground that the plaintiffs' claims should be heard and determined in Singapore.
  
• 
  Under s. 272 of the Singapore Merchant Shipping Act, 1970 a shipowner was entitled to limit his liability for damages to an aggregate amount not exceeding in the currency of Singapore the equivalent of 1000 gold francs per ton provided that he proved that the relevant damage was caused without his actual fault or privity. Section 272 was in material respects the same as s. 503 of the Merchant Shipping Act, 1894 and thus gave effect to the International Convention relating to the Limitation of Liability of Owners of Sea-going Ships, 1957 (the 1957 Convention).
  
• 
  In England s. 503 was replaced by s. 17 of the Merchant Shipping Act, 1979 which provided that parts of the Convention on Limitation of Liability for Maritime Claims,1976 (the 1976 Convention) should have the force of law in the United Kingdom. Under the 1976 Convention the limit of liability was significantly greater than the 1957 Convention but it was much more difficult for a claimant to break the limit. The plaintiffs contended that if they had to claim in Singapore they would be unable to recover the difference between their claim of U.S.$10.5 m. and the Singapore limit of about U.S.$5.8 m. They argued that in that event they would be deprived of a substantial legitimate juridical advantage.
  
• 
  For the defendants it was submitted that there was no relevant advantage to the plaintiffs proceeding in England because the Singapore limit would be applied as part of the lex loci delicti.
  
• 
  The plaintiffs argued that the English Court would not apply the Singapore limit because English law characterized the limitation provisions of Singapore law as procedural; (b) it was sufficient for the plaintiffs to establish that the act or omission complained of was actionable or tortious by the lex loci delicti; and (c) the Court must apply the English limit and not the Singapore limit because the relevant part of the Convention had the force of law in England.
  
• 
  On the evidence BP had established that Singapore was the natural forum for the determination of the issues and distinctly more appropriate for the trial of the issues of fact between the parties and especially the issue of quantum.
  
• 
  the ends of justice would best be served if the plaintiffs were permitted to proceed in England; it was true that many countries had not ratified the 1976 Convention but it was desirable that as many countries as possible should apply the same standards; it was proper to regard the 1976 Convention as representing a widely accepted development from the regime which existed under the 1957 Convention.
  

8. The 'Happy Fellow' [1997] 1 Lloyd's Rep. 130 QBD (Adm Ct)

• 
  Limitation action was a special proceeding to which all potential claimants were made parties and included a power to stay proceedings to enforce any judgments which might be obtained in other actions; in a multi-party situation a shipowners' right to limit was not an incident or attribute of a claimant's claim but an altogether different right to have all claims scaled down to their proportionate share of a limited fund
  
• 
  Shipowner's right to limit did not qualify or attach to the substantive right of the claimant but operated to limit the extent to which an unqualified right could be enforced against the limitation fund; the right to limit was procedural and did not affect the substantive rights of the French claimants; the English proceedings purported to invoke a right which was good against all possible claimants while the French proceedings sought only to invoke rights between the parties to those proceedings; the proceedings did not have the same 'object or cause', didn’t involve the same cause of action and art. 21 Convention had no application.
  

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