MSC Mediterranean Shipping Company SA (Appellant) v Conti 11 Container Schiffahrts-GmbH & Co KG MS “MSC Flaminia” (Respondent) (This Appeal was decided by the UK Supreme Court on 9.4.2025)
Articles 1.1, 1.2 & 2 of the Convention on Limitation of Liability for Maritime Claims 1976
Lord Hamblen (with whom Lord Hodge, Lord Briggs, Lord Leggatt and Lord Burrows agree) held : –
– Claim for the costs of discharging sound and damaged cargo, and of decontaminating the cargo, was limitable under Article 2.1(e) of the Convention on Limitation of Liability for Maritime Claims 1976. As such the Court of Appeal was correct in its conclusion on this point.
– Even if a claim could be consequential upon damage to the vessel, it does not preclude reliance on the right to limit in respect of claims which fall within the terms of any of the sub-paragraphs of Article 2 other than Article 2.1(a).
– If a claim can be characterised as a single claim for damage to the vessel, it does not preclude parts of that claim being subject to limitation because they fall victim within one or more paragraphs under Article 2 other than Article 2.1(a).
Factual Background
– The Appellant is a container line operator running liner services carrying containerised cargo around the world. The Respondent is the owner of a container ship, the MSC Flaminia.
– The vessel was chartered by the Appellant under a time charter on the New York Produce Exchange form made in November 2000 and extended several times.
– On 14.7.2012, while the Vessel was in mid-Atlantic en-route from Charlseton, South Carolina to Antwerp, an explosion occurred in hold No.4 which led to an extensive fire on board. The explosion caused by auto-polymerisation of the contents of one or more of three tank containers laden with 80% divinylbenzene which had been shipped at New Orleans. Three of the vessel’s crew lost their lives, extensive damage to the Vessel, and hundreds of containers were destroyed.
– The Respondent appointed salvors, Smit Salvage BV to bring the fire under control and to salve the Vessel and cargo. Seawater was sprayed into the vessel which resulted in about 30,000 mt of firefighting water, contaminated with dangerous and toxic residues, remaining in the holds after the fire was brought under control. Subsequently on 20.7.2012 Smit towed the Vessel towards mainland Europe.
– On 28.8.2012, an agreement was reached with the German authorities and the Vessel was taken to Wilhelmshaven in Germany.
– Significant costs were incurred by the Respondent in relation to the passage to Wilhelmshaven. In particular, payments made to several national authorities relating to claims the German and UK authorities under the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001.
– These claims related to preventive and precautionary measures taken in those jurisdictions in the event bunker oil leaked from the vessel and causing pollution in their territorial waters.
– The Vessel arrived at Wilhelmshaven on 9.9.2012 for the discharge of sound and damaged containers that needed to be removed before the vessel could be moved to a repair facility. This work commenced on 28.9.2012 and concluded on 18.12.2012. The process of decontaminating cargo, releasing sound cargo and destroying unsound and sound but unclaimed cargo continued into 2013 and beyond.
– The Respondent incurred various costs and expenses, all of which had to be incurred in order, ultimately, to repair the Vessel and discharging the firefighting water from on board the vessel. After the discharge of the majority of the firefighting water, the Respondent arranged to remove waste material which remained on board the Vessel at a facility in Romania.
– Eventually the vessel was repaired and redelivered to Appellant under the Charter on 23.7.2014.
– The Charter provided for London arbitration and arbitration proceedings were commenced in 2012 after a proceedings was brought by cargo interests in the US against the Appellants, Respondents and various other parties. In the said US proceedings, the Appellants and the Respondents were not found to be liable.
– Under the arbitration, the Respondent sought to recover from the Appellant the extensive losses it suffered by reason of the casualty. The tribunal held that the Respondent was entitled to an indemnity and / or damages in respect of MSC’s breaches of clause 78 of the Charter and Article IV rule 6 of the Hague Rules (which was incorporated into the Charter) for shipment of a dangerous cargo and also to outstanding hire. The Respondent was awarded USD 200 million.
– By a limitation claim form dated 21.7.2020, the Appellant claimed a limitation decree and obtained an order to constitute a limitation fund by the provision of a letter of undertaking from the Standard Club UK Ltd.
– In 2022, after a four-day trial the trial judge held that the Respondent’s claim against the Appellant were not claims within Article 2.1 Convention on Limitation of Liability for Maritime Claims 1976.
– In 2023, the Appellant appealed against the trial judge’s decision and the appeal was dismissed by the Court of Appeal.
– The Supreme Court granted permission to appeal and this present appeal was filed and heard.
Issues
– Whether a charterer can claim its liability for claims by an owner in respect of losses originally suffered by the owner himself?
– Whether any of Conti’s claims fall within Article 2.1 of the 1976 Convention and, if so, whether the fact that they result from damage to the Vessel means that there is no right to limit?
Discussion and Analysis
Issue 1 – Whether a charterer can limit its liability for claims by an owner in respect of losses originally suffered by the owner itself?
– The Supreme Court had to look into three important authorities on the 1976 Convention namely, The Aegean Sea Traders Corporation v Repsol Petroleo SA (The Sea Aegean) [1998] 2 Lloyd’s Rep 39, The CMA Djakarta [2003] 2 Lloyd’s Rep 50 and the Ocean Victory.
– The Court of Appeal in The CMA Djakarta did not agree with the first instance judge in CMA Djakarta and the first instance judge in The Aegean Sea. The Court of Appeal stated through Longmore LJ that he disagreed because the meaning of charterer in article 2.1 is to be given its ordinary meaning in accordance with Article 31 of the Vienna Convention, where it connotes that a charterer acting in his capacity as such, not as a charterer acting in some other capacity. And that to say that a charterer must be acting as qua owner or as if he were the owner is to impose a gloss upon the wording of the Convention and accord it a meaning other than its ordinary meaning.
– The Court of Appeal in The Ocean Victory agreed with Longmore LJ’s approach in The CMA Djakarta on the charterer’s role qua owner. The Court of appeal in The Ocean Victory also agreed with Thomas J in The Aegean Sea, David Steel J in The CMA Djakarta at first instance and Longmore LJ in the CMA Djakarta at the Court of Appeal in that the ordinary meaning of article 2.1(a) of the 1976 Convention does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated.
– As such the position in English law is that there is no right to limit under Article 2.1(a) of the 1976 Convention in respect to claim for loss of or damage to the vessel or for consequential loss, which was accepted in this present case.
– The Respondent’s case is that the word “claims” in articles 1.1 and 2.1 of the 1976 Convention means, in relation to claims made by an owner against another “insider”, claims other than in respect of losses originally suffered by the owner itself.
– The word “claims” is defined by Articles 1.1 and 2.1 are the claims set out in Article 2 of the 1976 Convention and none of those claims differentiate between the claims made by the owner against another “insider” or whether they are made against the owners or other “insiders”.
– This is the type of misconstruction which was decided upon in The CMA Djakarta where the word must be given its ordinary as opposed to something which cannot co-exist with the ordinary meaning of the word “claims” as seen in Articles 1.1 and 2.1 of the 1976 convention.
– The Supreme Court held that the charterer can limit its liability for claims by an owner, including in respect of losses originally suffered by the owner itself.
Issue 2 – Whether any of Conti’s claim fall within Article 2.1 of the 1976 Convention and, if so, whether the fact that they result from damage to the Vessel means that there is no right to limit?
– The court looking at the case of The Tojo Maru, The Aegean Sea, Just v Chambers and CSL Australia Pty Ltd v Tasmanian Ports Corporation Pty Ltd and decided that the provisions in article 2 should be given a wide application as there are no rules under English law that allows the provisions of the 1976 Convention generally or article 2 in particular to be construed broadly, liberally or widely.
– The Appellant’s contentions of limiting liability under article 2.1(a) is rejected as it brings about the need to apply the issue of causation which has no place under article 2.1 (a).
– Their contention of applying the limitation of liability under 2.1(f) is also rejected because the claims it tries to park within article 2.1(f) for limitation of liability is the wrong type of claims. The cost of removing the firefighting water in the vessel is not a mitigation cost but a repair cost.
– The Appellant’s contention to limit liability under Article 2.1(e) is allowed as the cost of discharging sound and damaged cargo and of decontaminating the cargo at Wilhelmshaven fell within the article and was so limitable.
Decision
Appeal allowed on Issue No.1 and dismissed on Issue No.2. In addition, the Supreme Court also rejects both the additional or alternative reasons relied on by the Respondent. As a result The Appellant is entitled to limit under Article 2.1(e) of the Convention on Limitation of Liability for Maritime Claims 1976 in respect of the claim for the costs of discharging sound and damaged cargo and of decontaminating the cargo at Wilhelmshaven, but not otherwise.
This case summary was prepared by Chakaravarthi Thillainathan, Principal Associate at Low & Partners, Malaysia. We thank Dr. Arun Kasi, Barrister at 4-5 Gray’s Inn Square, London, for his insightful input on the case.