4.2 Case law on the interpretation of the LLMC art. 2 no. 1 letters (a), (d)-(e)
As mentioned above in section 1.2, the interpretation argued for in this article runs counter to three final appeal court decisions on the construction of the LLMC art. 2 no. 1 letters (a), (d)-(e). In the Amasus(1)Scheepvaartbedrijf MS Amasus BV v ELG Haniel Trading GmbH (ECLI:NL:HR:2018:140). and Eitzen(2)Eitzen Chemical (Singapore) Ltd v VOF G Idzenga Scheepvaartbedrijf (ECLI:NL:HR:2018:142). decisions from the Supreme Court of the Netherlands and the Star Centurion-decision from the Court of Final Appeal of Hong Kong, the question of what would equal A´s claim for damages against B for wreck removal and clean-up costs in our scenario 2 is concluded to fall under the LLMC art. 2 no. 1 letter (d) (and (e)). Simply by being apex court decisions, they will obviously carry weight if the same issue arises in other member states. However, the courts of other member states will need to construct the convention text independently and will obviously have regard to particular national legislation on the issue.
Even though the careful analysis of the wording in the LLMC in the Star Centurion-decision is persuasive, the Court of Final Appeal, in my opinion, too easily concluded on the purpose behind the LLMC art. 18 no. 1 and with the facts being as they were in the case, it is difficult not to get an impression that the “innocence” of the claimant at least partly influenced the decision. Before moving to the Star Centurion decision, we should briefly look at the Amasus and Eitzen decisions.
In Amasus, the two vessels “Wisdom” (owned by Amasus) and “Riad” (owned by Riad) collided on the river Oude Maas, with Riad, together with its cargo, sinking. The Dutch State invoked the Wreck Act against “Riad” and instructed a salvor to remove the vessel and its cargo. Once removed, the state sold the wreck and the cargo was discharged to a site belonging to the state. To have its cargo released, a company named ELG issued an on-demand guarantee for the state’s costs related to wreck and cargo removal, and after having paid under the guarantee, ELG held both “Amasus” and “Riad” liable for the salvage costs and all other consequential losses caused by the collision. “Amasus” established a so-called wreck fund. Similarly to Norway, under Dutch law the limitation amount equalling the wreck fund was higher due to the Netherlands reservation against the LLMC art. 2 no. 1 letters (d) and (e).(3) In 2019 the liability for wreck removal was made unlimitable under Dutch law. “Amasus” argued that its liability against ELG should be limited under the lower limitation amount, sinceas the claim fell under the LLMC art. 2 no. 1 letter (a). The Supreme Court of the Netherlands did not agree with “Amasus”. ELG’s claim against “Amasus” was held to fall under the LLMC art. 2 no. 1 letters (d) and (e). Before making some comments on the summary of the reasoning,(4) Unfortunately, I have had to refer to English summaries of the decisions available through the Centre for Maritime Law, Faculty of Law, National University of Singapore: Amasus: https://cmlcmidatabase.org/scheepvaartbedrijf-ms-amasus-bv-v-elg-haniel-trading-gmbh (last visited 4 March 2024) and Eitzen: https://cmlcmidatabase.org/eitzen-chemical-singapore-ltd-v-vof-g-idzenga-scheepvaartbedrijf-0 (last visited 4 March 2024). Accordingly, in addition to not being qualified in Dutch law, there might be nuances in the decisions that I have overlooked. I set out the facts of the Eitzen decision. Both were decided on the same day.
In Eitzen, the chemical tanker “Sichem Anne” collided with the container vessel “Margreta”. “Sichem Anne” created a hole in the hull of “Margreta”, with the latter starting to sink. “Margreta” was put aground to avoid further sinking. The vessel and its cargo was salvaged. Both vessels declared their liability limited by establishing property damage funds. “Sichem Anne” declared its liability for “Margreta’s” salvage costs limited under this fund, whilst “Margreta” argued that the liability for these costs would have to be limited by establishing a wreck fund with higher limits. The Supreme Court held that the higher limits would apply for the salvage claims against “Sichem Anne” in the event that there was liability, i.e. the indemnity claim fell under the LLMC art. 2 no. 1 letters (d) and (e) and not letter (a).
The English summaries of the court’s reasoning are brief, but the rationale for the decisions seems to be much the same in both cases.(5) Cf. fn. 98 above. The summaries leave an impression that it had been argued by Amasus and Eitzen that the reservation against the LLMC art. 2 no. 1 letters (d) and (e) only applied to claims made by public authorities. In relation to this, much emphasis seems to have been put on what is referred to as being the purpose behind the reservation. The purpose motivating the reservation is said to be to ensure the safety of maritime traffic, and that this interest can be served by parties other than the public authorities carrying out wreck removal and clean-up operations.
If it is correct that this was the decisive factor for the decisions, it is hard to disagree with the obvious point that wreck removal and clean-up costs might be carried out by parties other than the public authorities, and that these parties’ interests were intended to be protected by the LLMC art. 18 no. 1. However, as we have seen in relation to Norwegian law, this aim is still achieved, provided these parties’ claims against the owner of the “polluting” vessel (vessel A in our scenario) fall under the LLMC art. 2 no. 1 letters (d) and (e). It does not of course matter whether the claim is made by public authorities or by other third parties. Once these parties have had their wreck removal and clean-up claims covered, the purpose is achieved, and this does therefore not support the argument that B’s liability should be higher for A’s claims against B. What we see is that the “type of claim”-approach does not limit the LLMC art. 18 no. 1 to applying only to claims made by public authorities, but instead clarifies which claims are made against whom. This point might be obscured by solely focusing on the “type of loss”.
Similar reasoning is apparent in the Star Centurion decision.(6)Perusahaan Perseroan (Persero) PT Pertamina v Trevaskis Limited and others [2023] HKCFA 20. The facts in this case perfectly illustrate how the construction argued for in this article might seem “unfair” and “unreasonable”. Here, the vessel “ANTEA” collided with the vessel “Star Centurion”, while the latter was anchored in Indonesian waters. “Star Centurion” became a total loss and the owners were ordered by Indonesian authorities to remove the wreck and render it harmless. The parties agreed that “ANTEA” was solely to blame for the collision. They also agreed that Hong Kong law applied. Hong Kong has made a reservation against the LLMC art. 2 no. 1 letter (d), with liability for wreck removal claims being unlimited. The owners of “ANTEA” declared their liability limited and argued that both these costs and the loss of “Star Centurion” fell under the LLMC art. 2 no. 1 letter (a). As the wreck removal and clean-up costs were significant, little would be left for the loss of “Star Centurion” if “ANTEA’s” liability towards “Star Centurion” solely fell under the LLMC art. 2 no. 1 letter (a). All instances in Hong Kong concluded that the wreck removal and clean-up costs had to be separated from the loss of the vessel, with the consequence that “ANTEA’s” liability was unlimited with respect to “Star Centurion’s” claim for damages for these heads of losses.
It falls outside the scope of this article to comment on every point in the very thorough decision from the Court of Final Appeal. A couple of comments should however be made on some problematic parts of the decision.
First, although the wording of the last passage of para. 30 could be argued to contradict the rest of the reasoning related to the wording of the LLMC art. 2 no. 1 letters (a) and (d), it is clear that the court is of the opinion that the list in LLMC art. 2 no. 1 refers to types of losses/costs, and not to types of claims. The court emphasises that “in respect of” is “used to indicate connection between a kind of loss or expense and a claim to recover that loss or expense suffered against a shipowner”,(7) Para 33 (my emphasis). and further emphasises that the “plane on which the relationship between the claim and the factual basis of occurrence of the loss or expense in respect of which the claim is made” is not altered by the basis of the claim for wreck removal.(8) Para 33 (my emphasis). Accordingly, the court is of the view that the LLMC art. 2 no. 1 letter (d) must be constructed as referring to matters of fact, and not to a particular class of claimant or legal rights of the claimant. As mentioned above in section 4.1, whilst this interpretation is supported by the wording of the “rest” of the LLMC art. 2, it does not, strictly speaking, follow from letter (d) when read in isolation. However, the wording of LLMC alone admittedly allows for both interpretations.
Secondly, similarly to the Supreme Court of the Netherlands, the court “extends” the purpose behind the member states’ right to make reservations against the LLMC art. 2 no. 1 letters (d) and (e) in paras. 35–40. In this part of the decision, the court rejects the argument that letter (d) should be read as only applying to wreck removal claims from harbour authorities. It is hard to disagree with this. Neither the language of the LLMC, nor the preparatory works, support such a narrow interpretation. However, this conclusion does not automatically lead to shipowner A’s claim against shipowner B for the collision falling under letter (d). As we have seen, as long as public authorities and other third parties have their claim covered when making a claim against the “polluting” shipowner, the clear aim behind the LLMC art. 18 no. 1 is achieved. In this case, if Indonesian authorities carried out the wreck removal and claimed the expenses from “Star Centurion”, the owners of “Star Centurion” would have to reimburse the Indonesian state in full.(9) In practice, the owners’ P&I club. When we do not know more from the travaux préparatoires about the extent of the reservation, but do know the core area and principal aim, and that an extensive interpretation of the LLMC art. 2 no. 1 letter (d) correspondingly minimises the shipowners’ fundamental right to limit their liability, courts should be careful in making broad and general statements as to the purpose supporting the “type of loss” approach.
Thirdly, the court emphasises the danger that an “innocent shipowner” will be discouraged from carrying out wreck removal, if his claim for these costs against the other shipowner is limited. To my mind, this is not a weighty argument for the following reasons: Firstly, deliberately not carrying out a wreck removal order will often be a criminal offence, and the emphasis on this danger contributes to hiding the fact that the “polluting” shipowner’s liability for wreck removal is covered by P&I insurance.(10) It would accordingly not matter if the owners of the Star Centurion were insolvent. In fact, it is often a requirement under the P&I conditions that the assured is insolvent for a claimant to make a direct action claim against the insurers (for instance the Indonesian state if the “Star Centurion” had not carried out the wreck removal). Secondly, the reference to the “polluting shipowner” being “innocent” is problematic, since this is neither here nor there when applying and construing the limitation rules. The substantive law on division of liability deals with “innocence” and “fault/blameworthiness”. The fact that “Star Centurion” was innocent seems to have influenced the decision,(11) See especially paras. 35, 40, 49 and 54. and even though it is easy to understand and sympathise with this, it is unfortunate that such considerations influence the interpretation of rules based on economic efficiency and predictability for insurers. In a new case where a vessel like “Star Centurion” is 99% to blame for the collision,(12) It is not practical for the division of fault in a collision to be divided 99/1, but I use the example to prove a point. the (almost) “innocence” on “ANTEA’s” side could tilt the scale in the other direction. That would be unfortunate. However, my point is that such considerations should not be on the scale in the first place.
Fourthly, it is not easy to follow the court’s distinction between damages for wreck removal costs and damages for “salvage costs” in paras. 54–58. The court here refers to the English cases in which it has been held that, although a salvage claim is unlimited under the LLMC art. 3 letter (a), when salvage expenses have been paid to the salvor in full but are later included in a claim for damages as consequential losses, these costs fall under the LLMC art. 2 no. 1 letter (a).(13) The “Breydon Merchant” (1992) 1 Lloyd’s Rep 373 and The “Aegean Sea” (1998) 2 Lloyd’s Rep 39. It is difficult to disagree with this latter claim not being a claim for salvage reward, but instead just an ordinary claim for damages for e.g. a collision, but then it is hard to see how a claim for wreck removal is any different from this. The wording in LLMC art. 3 letter (a) reads as follows: “Claims for salvage or contribution in general average”.(14) Revised by the 1996 Protocol art. 2 to read: “claims for salvage, including, if applicable, any claim for special compensation under article 14 of the International Convention on Salvage 19892, as amended, or contribution in general average”. When comparing this to “Claims in respect of raising, removal …” in the LLMC art. 2 no. 1 letter (d), it is not easy to see that this provision, at least from its wording, “refers to kinds of loss or expense incurred in fact”,(15) Cf. para. 57. more than the provision in the LLMC art. 3 letter (a). For me it is hard to see that “claims for” is any different from “claims in respect of”. The parallel to the LLMC art. 3 letter (a) is, in my opinion, important. The policy consideration explaining this exception from the right to limit liability, is that salvors would be discouraged from carrying out salvage if they knew that their reward would be limited. However, once this aim has been achieved, the purpose underpinning the exception should not be extended to minimise shipowners’ right to limit their liability. As we have seen, this is no different for wreck removal claims.
Even though the decision in Star Centurion is thorough, similarly as the two decisions from the Supreme Court of the Netherlands, it is illustrative of how the “type of loss” approach can obscure the different claims that arise as a consequence of a collision, and who is liable for what. As long as the wording refers to “claims in respect of”, and as long as the aim with the LLMC art. 18 no. 1 is achieved by the “type of claim” approach, and for the reasons set out above, it is submitted that the Star Centurion decision should not be followed if the same issue were to arise in another member state to the LLMC unless the convention is changed.(16) Cf. Gutiérrez 2011 p. 102 and pp. 217–218.