What is the UK limit of liability for wreck?

Surprisingly, a shipowner’s rights to limit liability in respect of claims against a wreck are not clear under UK law. Although the ambiguities in question were pointed out at an early stage, the position remains unresolved. This article considers the applicable treaties, legislation and views of eminent authors to demonstrate that the position is unresolved.

The treaties

The position is ultimately defined by the treaties to which the UK is a party, namely the conventions on shipowners’ limitation of liability generally and the wreck convention.

The UK is currently a party to the 1996 Protocol to the International Convention on Limitation of Liability for Maritime Claims 1976. In becoming a party, the UK denounced the 1976 Convention to which it had previously been a party since 1 December 1986. The 1996 Protocol entered into force in the UK on 13 May 2004.

In connection with the ratification of both the 1976 Convention and the 1996 Protocol, the UK notified the depositary, the International Maritime Organization, that it reserved its right not to apply rights to limit liability to claims falling under article 2(1)(d) of the Convention. There has been no withdrawal of that notification. Article 2 is in identical form in both Conventions, and reads, with emphasis added:

“Claims subject to limitation

1. Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:

[(a) – (c)] …

(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;

(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship …”

Reservations are permitted against the Convention. Article 18 reads:

“Article 18. Reservations

1. Any State may, at the time of signature, ratification, acceptance, approval or accession, reserve the right to exclude the application of Article 2, paragraph 1(d) and (e). …”

The amending Protocol also permits this same reservation. The UK has availed itself of this option. As a result of this reservation, it is not bound by international law to ensure by domestic legislation that claims such as under article 2(1)(d) are subject to limitation. The reservation was made both under the original Convention and when ratifying the Protocol.

As for the Nairobi International Convention on the Removal of Wrecks 2007, it entered into force in the UK on 14 April 2015. This Convention does not contain any provisions on limitation of liability, except to recognise that states may wish to apply other Conventions on limitation of liability to claims in respect of wreck:

“Article 10. Liability of the owner

1. Subject to Article 11, the registered owner shall be liable for the costs of locating, marking and removing the wreck under Articles 7, 8 and 9, respectively, unless the registered owner proves that the maritime casualty that caused the wreck:

(a) resulted from an act of war, hostilities, civil war, insurrection, or a natural phenomenon of an exceptional, inevitable and irresistible character;

(b) was wholly caused by an act or omission done with intent to cause damage by a third party; or

(c) was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.

2. Nothing in this Convention shall affect the right of the registered owner to limit liability under any applicable national or international regime , such as the Convention on Limitation of Liability for Maritime Claims, 1976, as amended.” [Emphasis added.]

The right to limit liability for claims against wreck under UK law therefore depends on whether the enabling legislation giving force to the 1996 Protocol has given effect to the reservation against article 2(1)(d).

The legislation

The relevant provisions are contained in the Merchant Shipping Act 1995. Section 185(1) of that Act provides:

“The provisions of the Convention on Limitation of Liability for Maritime Claims 1976 as set out in Part I of Schedule 7 (in this section and Part II of that Schedule referred to as ‘the Convention’) shall have the force of law in the United Kingdom.”

Part I contains the text of the 1996 text of the Convention in full, without omission of article 2(1)(d). In principle, the full Convention therefore has the force of law. However, section 185(2) of the Merchant Shipping Act states that Part I of the Schedule is subject to Part II.

Part II, para 3, headed “Claims subject to limitation” reads as follows:

“(1) Paragraph 1(d) of article 2 shall not apply unless provision has been made by an order of the Secretary of State for the setting up and management of a fund to be used for the making to harbour or conservancy authorities of payments needed to compensate them for the reduction, in consequence of the said paragraph 1(d), of amounts recoverable by them in claims of the kind there mentioned, and to be maintained by contributions from such authorities raised and collected by them in respect of vessels in like manner as other sums so raised by them.

(2) Any order under sub-paragraph (1) above may contain such incidental and supplemental provisions as appear to the Secretary of State to be necessary or expedient.” [Emphasis added.]

There appears to be no such order at present. The conclusion must therefore be that the provision does not apply, and that wreck claims are not currently subject to limitation in the UK. This contradicts the Explanatory notes to the Wreck Removal Convention Bill as introduced in the House of Commons on 30 June 2010 [Bill 18], where para 24 reads:

“The right to limit liability under section 185 (limitation of liability for marine claims), which gives effect to the Convention on Liability for Marine Claims, is preserved.”

To confuse matters, the header “Claims subject to limitation” in Part II of Schedule 7 is followed by another header, “Claims excluded from limitation” above para 4, which deals with claims for damages related to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea 1996 (the HNS Convention). Considering the combination of headers (“Claims subject to limitation” and “Claims excluded from limitation”), it appears clear that the intention of the legislator was that HNS claims should be excluded from, but wreck claims should be subject to limitation.

Other sources: comments on the provisions

These observations are not new: the discrepancy has been pointed out by others. A letter from the British Maritime Law Association dated 24 July 2008 and signed by the association’s then Secretary/Treasurer Andrew Taylor is available online. ¹ In the letter, it is noted a propos para 3(1) of part II of Schedule 7 to the Merchant Shipping Act 1995:

“The effect of this provision is that the owner of a ship is not in English Law entitled to limit its liability under the Merchant Shipping Act for the cost of wreck removal.”

The BMLA letter goes on to offer a solution:

“However it is, in the view of the BMLA working group, arguable that the provisions relating to compulsory insurance and direct action for the recovery of such costs are equivalent to the setting up of a fund envisaged by the above paragraph.”

If additional support were needed, other authors have noted the same discrepancy. Aengus Fogarty, the author of Merchant Shipping Legislation, 3rd Edition, 2017, Informa Law, makes a similar observation at para 15.171:

“Article 2(1)(d) of the Convention is not yet applicable as no fund has yet been established under paragraph 3 of Part II of Schedule 7. Accordingly, statutory claims by harbour and conservancy authorities for wreck removal expenses are not yet subject to limitation of liability. It is arguable that non-statutory claims for wreck removal expenses in circumstances similar to those in The Putbus, ² supra, and The Arabet, ³ supra, are excluded from limitation by virtue of this paragraph: see Limitation of Liability for Maritime Claims …” (Footnotes with references added.)

The work referenced at the end of the quote is Griggs et al, Limitation of Liability for Maritime Claims, 4th Edition, 2005, Informa Law. This work, best known as Griggs, contains a commentary to the Limitation Convention. The Commentary to article 2(1)(d) of the Convention posits – undoubtedly correctly – that the government’s policy behind the reservation to the Convention was that harbours and other facilities should not shoulder the costs for wreck removal. That concern pertains particularly to wreck removal undertaken pursuant to statutory powers. The authors of Griggs go on to say:

“it appears that as a result of the wording in the introductory paragraph to Article 2, to the effect that the listed claims are to be the subject of limitation ‘whatever the basis of liability’, the reservation exercised by the United Kingdom may have inadvertently taken out of limitation in the United Kingdom any claims (whether statutory or otherwise) relating to wreck removal, including claims for recourse, provided that the liability does not relate to remuneration under a contract with the person liable).” ⁴

The apparent effect that claims for wreck removal expenses against other parties are not subject to limitation as a result of the legislation is confirmed by these eminent authors, and described as “inadvertent”.

Comment

The effects for insurers are important: they are said in the Wreck Removal Convention Act 2011, section 255P, sub-section (5) to have the same rights to limit liability as their insured:

“The insurer may limit liability in respect of claims made under this section to the same extent as the registered owner may limit liability by virtue of section 185 (or would be able to limit liability by virtue of that section if it were not for paragraph 3 of Part 2 of Schedule 7).” (Emphasis added.)

But what does “to the same extent” mean? The position appears to be a door to litigation, waiting to be knocked down.

Dr Johanna Hjalmarsson

Informa Associate Professor in Maritime and Commercial Law

This article was first published in Shipping & Trade Law 2017 (17) 10 pp 3-5 and is reproduced here by kind permission of the publisher.

Available at: https://www.shippingandtradelaw.com/shipping/liability/what-is-the-uk-limit-of-liability-for-wreck-127949.htm (registration required) and https://www.i-law.com/ilaw/doc/view.htm?id=385574 (paywall)

Footnotes

1 The letter is available at www.bmla.org.uk/documents/2011/ltr_DfT_re_Nairobi_Convention_Wreck_Removal.doc (accessed on 20 December 2017).