4.2 The limitation fund procedures
4.2.1 Establishment of limitation funds
Accordingly, the legal framework for limitation funds contained in the Maritime Code is set out in provisions generally applicable as an important part of each of the limitations regimes, even if the specific provisions on limitable claims and limits of liability thereof are different, cf. in particular MC §§ 176-179 and §§ 231-245. These provisions first define:
when and how the shipowner may request that a limitation fund according to MC §§ 175, 175a or 195 be established,
the requirements as to the amount of each of the limitation funds (MC §§ 177 and 232-234).
According to the Convention Article 11 and MC § 177, any person alleged to be liable for a claim subject to limitation may request that a limitation fund be established with a court where an action is brought or an arrest of the ship requested. Ordinarily, the shipowner submits his request for establishment of the fund immediately or fairly soon after the casualty, in order to clarify the likely extent of total liability for the casualty and to prevent any of the claimants from initiating independent actions for claims subject to limitation (MC §§ 178 and 178a). Nevertheless, the establishment of the limitation fund at such an early stage is hardly possible unless the questions related to the establishment of the limitation fund as requested generally are detached from possible disputes related to questions of liability, amounts and other matters when determining the particular claims.
The approach of the Convention Article 11 and MC §§ 232-234 is that, at the establishment of a limitation fund, the court will primarily have to determine the amount of the specific limitation fund to be established. This presupposes a calculation of the amount mainly based on the relevant statutory limit and the tonnage of the ship and on certain other facts readily available at the time of the request by the shipowner. Accordingly, when converting the limit expressed in Special Drawing Rights to national currency, the court applies the rate of exchange at the date of the establishment of the fund (Convention Article 8, paragraph 1, MC § 501). Likewise, the Convention Article 11 and MC § 232 provides a standardized basis and period for the calculation of the particular amount added to the fund as required by the Convention Article 11, paragraph 1, and MC § 232 paragraph 1, expressed in terms of interest for the period from the casualty to the date of the establishment of the fund. The court may at its discretion determine that the shipowner shall provide additional security for costs related to the limitation fund procedure and any subsequent liability for delay-interest not subject to limitation (MC § 234, paragraph 2.
4.2.2 Limitation actions and procedures
After the establishment of the limitation fund, only the shipowner or his insurer or a claimant in the fund may bring a “limitation action” against all known and unknown claimants of limitable claims (MC §§ 177, paragraph 3 and 240). The purpose of the limitation action is to have all questions relating to liability for the particular claims, the right to limitation of liability for the claims, and the distribution of the limitation fund, decided ultimately by judgment. Consequently, the limitation action is the initial stage of an – ordinarily – comprehensive and most time-consuming limitation fund procedure. The objective is to ensure that all the – known and unknown – claims subject to the same limit of liability arising out of any one casualty, be limited to the extent required, in order that the total liability of the shipowner/actual operator shall not exceed the amount of the limitation fund. This requires statutory provisions on:
submission of claims against the fund,
the settlements of or decisions on disputes relating to liabilities and the extent of particular claims required to ascertain the key to proportionate distribution of the amount of the limitation fund among the claimants (MC § 235-243, cf. §§ 176-177),
the judgment of the court deciding the proportionate distribution of the limitation fund with binding effects for all established claims and relieving the shipowner of any further liability towards known or unknown claimants (MC §§ 244-245), and finally
payment by the limitation fund of the amount of dividends allocated to each of the established claims.
The model for this comprehensive legal framework of the Maritime Code is the key principles set out in Articles 11 to 13 of the 1996 Convention, but is, without prejudice to the provisions of these Articles, also supplemented as contemplated by Article 14 by certain national procedural rules appropriate to general rules on civil litigation in the particular state party. According to both the 1996 Convention and the Maritime Code, consequently, the limitation fund ordinarily holds the key role as the vehicle to ensure efficient “global limitation” of the shipowners’ liability according to each of the several limitation regimes (supra 1.5).
The “global” limitation model of the limitation regimes would hardly function unless the shipowner/operator in particular cases is able to invoke limitation, by requesting the establishment of a limitation fund as the basis for a coherent and coordinated final settlement of all limitable claims arising out of a particular casualty. The result thereof is a proportionate distribution of the limitation fund (Convention Article 12 and MC § 244), in order that the total liabilities shall not exceed the amount of the limitation fund. However, the quite time-consuming limitation procedure also means that the shipowner/operator, by requesting a limitation fund, also derives benefits of resulting postponement and delay of payment of compensation to injured parties. Accordingly, additional disputes frequently arise on questions relating to interest on claims and other loss during the period from the casualty to the establishment of the limitation fund and subsequently to the final payment of dividends to claimants (supra 1.5.2). (59)