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Limitation of liability for maritime claims and the Brussels I regulation

The European Court of Justice's decision in the Maersk Oil & Gas case (case C -39/02) is of significant importance to the possibility of global limitation of liability for maritime claims within the European Union. In this article, the judgment and its consequences for actions on global limitation of liability are considered.

The European Court of Justice's judgment in the Maersk Oil & Gas case

The ECJ judgment was a preliminary ruling to a question brought before it by the Danish Supreme Court for use in the legal proceedings between Maersk Oil & Gas and a Dutch shipowner of the fishing vessel "Cornelius Simon". The action concerned the issue of whether a limitation fund constituted in the Netherlands under the 1957 limitation of liability Convention, by which Denmark was not bound, was to have any legal effect in connection with legal proceedings in Denmark.

The facts of the case were as follows: In the period from June 10 to June 16 1985, the shipowner of the trawler "Cornelius Simon" was fishing in an area of the North Sea where Maersk Oil & Gas was submerging pipelines between the oilfields "Gorm" and "Rolf'. It was subsequently discovered that the pipelines had been damaged. According to Maersk, the damage was caused by the shipowner's trawling methods and Maersk filed a claim for damages. At the time in question, the Netherlands had not yet signed the 1976 Limitation of Liability Convention, which had entered into force in Denmark on February 1 1983. On April 23 1987, the shipowner constituted a liability limitation fund before a Dutch court under the rules of the 1957 Convention applicable at the time. Subsequently, on June 20 1987, Maersk Oil & Gas brought an action for damages against the shipowner before the Danish High Court (Western Division). As no claims were filed with the Dutch fund, it was dissolved by the court and repaid to the shipowner to the effect that under Dutch law there was a preclusion of the shipowner's potential liability in damages for the event motivating the constitution of the fund. The ECJ found that, pursuant to the 1957 Convention, a decision to constitute a liability limitation fund in the Netherlands is a judgment within the meaning of article 25 of the EC Convention on Recognition and enforcement of judgment (article 33 of the Brussels I Regulation). As Dutch law precluded liability for the damage occurred by virtue of the Dutch judgment on the dissolution of the Dutch liability limitation fund and Maersk Oil & Gas, according to the ECJ judgment, had to recognise the legal effect thereof, the shipowner could not be held liable towards Maersk. Consequently, the Danish Supreme Court found the shipowner free from any liability.

What is to be the effect of the recognition of the foreign liability limitation fund?

It is of significant importance that it is established whether a limitation fund constituted in a state signatory to either the 1957 or the 1976 Convention is to have any legal effect in a 1996 Protocol State. If the constitution of a fund in such a country is to be legally effective in a 1996 Protocol State, there is the risk that liability could be limited for maritime claims in such states contrary to the provisions of the 1996 Protocol. The issue was considered in a judgment of September 29 2006 by the Dutch Supreme Court).

On January 25 2003, the ships Assi Eurolink and Seawheel Rhine collided in the North Sea, and as a result of the collision, Assi Eurolink went down. The owners of Seawheel Rhine constituted a liability limitation fund in Sweden under the 1976 Convention. Under Swedish law, and contrary to Dutch law, the said fund entitled the shipowner to limit its liability for costs related to the ship wreck removal. Subsequently, the Assi Eurolink owners arrested Seawheel Rhine in the Netherlands claiming a refund of the said costs. The Dutch Supreme Court found that the Swedish decision to constitute a liability limitation fund should be recognized and be effective in the Netherlands, precisely as in Sweden, to the effect that the arrest was lifted.

The issue was further considered in a judgment of 7 December 2007 by the Norwegian Supreme Court.

The ships GGR and ECE collided in the English Channel, and the ECE sank with its cargo as a result of the collision. The owners of the GGR constituted a liability limitation fund in France under the 1976 Convention.

At that time, Norway was not signatory to the 1976 Convention and, consequently the fund was not legally effective in Norway pursuant to the Norwegian Merchant Shipping Act. Subsequently, the owners of the ECE had the GGR arrested in Norway. The Norwegian Supreme Court reached the conclusion that the French fund should be recognised in Norway precisely as in France to the effect that the arrest in Norway was lifted.

As can be seen both the Courts held that the recognition of the constitution of a foreign fund means that the fund must be granted identical legal effect in the country where the question of legal effect arises. Stipulated by the rules of law of the country where the fund is constituted. This implies that enforcement action cannot be carried out against the liable party in a 1996 Protocol State if a liability limitation fund has been constituted in a state having ratified the 1957 or the 1976 Convention.