1.1 The article´s topic and purpose
Transport at sea is perilous. Accordingly, marine casualties and accidents are unfortunately facts of life for individuals and entities operating vessels. The perilous nature of transport at sea has not however held back shipowners from carrying on their business. Transport at sea enables global trade, with currently around 90% of all goods sold being transported, at least partly, by sea. When taking into account both the value of the vessels and value of the goods transported, we immediately understand that a serious marine casualty could be ruinous for a shipowner. Consequently, various forms of legal frameworks have existed for a long time to prevent the perils of the sea from discouraging shipowners from carrying out their trade. The legal instruments achieve this by entitling the shipowner(1) In the following, I refer only to shipowners for simplicity, but it is important to emphasise that other individuals/entities may be entitled to limit their liability, cf. the LLMC art. 1 and the Norwegian Maritime Code section 171. to limit his liability for claims that arise as a consequence of a marine casualty.
One important example of a legal instrument that affords the shipowner a right to limit his liability for so-called maritime claims is the Convention on Limitation of Liability for Maritime Claims of 1976 (the “LLMC”)(2) As the convention was signed in London, the LLMC is in practice sometimes referred to as the London Convention. with its protocol of 1996 (the “1996 Protocol”).(3) In the following, I will refer to the LLMC as amended by the 1996 Protocol and only refer to the latter separately if relevant. In essence, the purpose of the LLMC is to set out a maximum amount for the shipowner´s total liability per accident. The maximum amount is determined mathematically, based on the relevant vessel´s gross tonnage. Although the definitions of claims for which liability can be limited are admittedly wide, the LLMC only entitles a shipowner to limit his liability for claims that fall under one of the letters in the LLMC art. 2 no. 1 (a)-(f). However, the LLMC art. 2 no. 2 makes it clear that it does not matter whether the claim is a “direct” claim or a claim made by way of recourse.
Whether a claim falls under one of the letters is a matter of construction. The “definitions” in these letters are broadly drafted. The wording of the LLMC does not in itself make it clear that they are mutually exclusive. Accordingly, the LLMC arguably opens the door to a claim falling under more than one of the letters in art. 2 no. 1 (a)-(f). An overlap between the different letters would not have been a problem, had it not been for the LLMC art. 18. According to this provision, the member states are entitled to make reservations against art. 2 no. 1 letter (d) and (e). If a member state has made reservations against the LLMC art. 2 no. 1 letter (d) and (e), the state is free to decide either to preclude the shipowner from limiting his liability at all, i.e. unlimited liability, or instead to implement national rules under which the limitation amount for such claims is higher than it would be under the convention.(4) As I will get back to in section 3 below, Norway has adopted the latter approach. There we will also have a look at the rationale for member states to the LLMC to make reservations in accordance with art. 18 no. 1. Consequently, for claims that fall under either the LLMC art. 2 no. 1 letter (d) or (e), the economic consequences for the shipowner may be dramatic.
The LLMC art. 2 no. 1 letter (d) and (e) entitles a shipowner to limit liability for
“[c]laims 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”
and,
“[c]laims in respect of the removal, destruction or the rendering harmless of the cargo of the ship”.
Wreck removal might be a consequence of a vessel grounding and thereafter sinking, either completely or partly, due to a hole in the hull of the vessel. Similarly, the grounding might cause cargo to fall overboard and either that, or the hole in the hull, may lead to a bunker oil spill.(5) Oil spill from crude oil in transport is regulated by a separate limitation regime, see section 2 below. In such a case, the authorities of the state in whose territorial waters the wreck lies will usually order the shipowner to remove the wreck and carry out other necessary clean-up measures. In some instances, the authorities carry out these operations themselves and claim the costs from the shipowner. Depending on whether the state in which the grounding occurred imposes unlimited liability for such costs, or has implemented rules with higher limitation amounts, if the state has made a reservation in accordance with the LLMC art. 18, the shipowner´s liability will in any event be higher than under the LLMC regime.
The same vessel may also, however, have become a wreck, lost cargo or leaked bunker oil,(6) Cf. fn. 6 above. due to a collision with another vessel.(7) In the following, I will refer to the vessel becoming a wreck, losing cargo and/or spilling bunker oil as vessel A, and to the other vessel as vessel B. If vessel A is ordered to be removed by the public authorities after the collision, the owner of vessel A incurs costs either personally, or else has to cover the authorities’ costs for the removal and clean-up operation. In either case his liability for these costs would fall under the LLMC art. 2 no. 1 letter (d) and (e), in the same way as they would for a grounding incident. The apportionment of blame for the collision is determined by the applicable collision rules in the state where the collision occurs,(8) For collisions to which Norwegian law applies, the applicable rules are found in chapter 8 of the Norwegian Maritime Code 1994, which implements the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910. and has in principle nothing to do with the LLMC.(9) Since the LLMC sets out the rules for the maximum economic liability, there must therefore exist a liability for it to apply. If there is no liability, then there is nothing to limit. Accordingly, if vessel B cannot be blamed, vessel A will not have a claim and the issues discussed in the following would accordingly not arise. Other than precluding the shipowner from limiting his liability in instances where it is proved that “the loss resulted from [the shipowner’s] personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”, cf. the LLMC art. 4, the LLMC is not concerned with liability issues as such. However, if vessel B is either wholly or partly to blame for the collision, the owner of vessel A is in a position to make a claim for damages against B, both for the loss of the vessel but also for the costs related to the wreck removal and clean-up operation. As the latter heads of loss relates to wreck removal and clean-up operation and therefore falls under the LLMC art. 2 no 1 letter (d) and (e) for the owner of vessel A, the owner of vessel A will typically argue that it is only natural that the owner of vessel B´s liability towards A should be determined by the same letters as they are for A. B´s liability might then be unlimited, or at least limited to a higher amount. Such an understanding of the LLMC art. 2 no. 1 letter (d) and (e) is attractive for shipowners who find themselves in the same position as the owner of vessel A. Conversely, the owner of vessel B might argue that the wreck removal and clean-up operation is a consequence of the collision, and accordingly the claim being made by A against B is only a claim “in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom”, cf. the LLMC art. 2 no. 1 letter (a).
For B, the costs related to the wreck removal and clean-up operation are only a part of the total claim for damages from A. All heads of A´s loss can be traced back to the same causative event that makes B liable towards A: the collision.
The question of whether the owner of vessel B´s liability limit towards the owner of vessel A is solely determined by the LLMC art. 2 no. 1 letter (a), and then limited to the one amount that follows from art. 6, or should instead be divided into two, so that the liability for the loss of, or damage to, vessel A falls under the LLMC art. 2 no 1 letter (a), with the loss for wreck removal and clean-up operation falling under the LLMC art. 2 no. 1 letter (d) and (e), is a contentious issue.(10) See i.a. Patrick Griggs, Richard Williams and Jeremy Farr, Limitation of Liability for Maritime Claims, 4th ed., London 2005, pp. 23–24, Norman A. Martínez Gutiérrez, Limitation of Liabality in International Maritime Conventions, London and New York 2011, pp. 99–102, Richard Williams, “Problematic Areas in the Current Global Limitation Regime” in: D. Rhidian Thomas (ed.), Liability Regimes in Contemporary Maritime Law, London 2007, pp.279–299, pp. 294ff. And for the position under Norwegian law compare Trond Solvang, «Some reflections concerning the scope of the Maritime Code section 172a», MarIus 2016 nr. 482, pp. 31–41 and Erling Selvig, “The Limitation Regimes for Maritime Claims” SIMPLY 2021, nr. 565, 2022, pp. 69–135. In this article, it will be argued that the owner of vessel B´s liability limit in instances like the one above is solely decided by the LLMC art. 2 no. 1 letter (a). The consequence of this is that the owner of vessel B's total liability is limited to one limitation amount.