Limitation of liability

There have been several important decisions from the English and Australian courts concerning limitation of liability under the Limitation of Liability for Maritime Claims 1976 Convention.

Australia

Tasmanian Ports Corporation Pty Ltd v. CSL Australia Pty Ltd (The Goliath) [2025] FCAFC 53

The Full Court of the Federal Court held in Tasmanian Ports Corporation Pty Ltd v. CSL Australia Pty Ltd (The Goliath) [2025] FCAFC 53 that, as Australia has made a reservation under Art 18(1) of the 1976 Convention, Articles 2(1)(d) and (e) have no application in Australia. Thus, claims in respect of wreck removal, destruction, or the rendering harmless of a ship that is sunk, wrecked, stranded, or abandoned, including anything that is or has been on board such a ship, whatever the basis of liability for those claims, cannot be the subject of limitation in Australia. In holding that claims for wreck removal cannot be the subject of limitation in Australia, the Court followed the reasoning of the Hong Kong Court of Final Appeal in The Star Centurion and The Antea [2023] HKCFA 20.

In the circumstances, the Court held that CSL Australia is not entitled to limit its liability pursuant to the Limitation of Liability for Maritime Claims Act 1989 (Cth) (the Act) to Tasmanian Ports Corporation for claims in respect of the raising, removal, destruction, or rendering harmless of the tugs Campbell Cove and York Cove, which were sunk and wrecked, including anything that was on board the said tugs, being matters identified in the Act, Schedule 1, Article 2.1(d), which claims are not limitable by reason of section 6 of the Act.

England and Wales

Sea Consortium Pte Ltd (Trading as X-Press Feeders) and Others v. Bengal Tiger Line Pte Ltd and Others [2024] EWHC 3174 (Admlty)
 
In Sea Consortium Pte Ltd (Trading as X-Press Feeders) and Others v. Bengal Tiger Line Pte Ltd and Others [2024] EWHC 3174 (Admlty), the High Court held:

1. that for the purposes of the Limitation of Liability for Maritime Claims 1976 Convention, the particular contractual arrangements under which a putative Article 1(2) “charterer” enjoyed the services of the ship in question would always need to be examined before reaching a decision on whether they were within that definition;
2. it would normally be sufficient for a party to be considered an Article 1(2) “charterer” if its relevant contract obliged an owner or disponent owner to make part of the carrying capacity of a ship available to it for the carriage of goods that it would undertake as carrier; and
3. a party to whom space on a ship was contracted for the performance by it, delegated to the ship, of its contractual obligations as carrier, would generally be an Article 1(2) “charterer”, given the ordinary connotation of that word and the purpose of the Convention.

Following a review of the specific contractual slot charter arrangements the claimants Bengal Tiger Line, Maersk, and MSC had for the vessel X-Press Pearl, the court held that each was a “shipowner” within Article 1(2) of the Convention, because each was a “charterer” of the ship within the meaning of that term as it appeared in the Article 1(2) definition of “shipowner”.

The decision has provided some clarity for use in determining when the various industry practices, such as contracting for a slot (or similar) charter, may nonetheless result in the charterer being considered a shipowner for the purposes of the Limitation of Liability for Maritime Claims 1976 Convention.
 
MSC Mediterranean Shipping Company SA v. Conti 11 Container Schiffahrts-GmbH & Co KG MS “MSC Flaminia” [2025] UKSC 14 
 
In MSC Mediterranean Shipping Company SA v. Conti 11 Container Schiffahrts-GmbH & Co KG MS “MSC Flaminia” [2025] UKSC 14, the Supreme Court held that under the Convention on Limitation of Liability for Maritime Claims 1976 Article 2(1), a charterer could limit its liability for claims by an owner, including in respect of losses originally suffered by the owner itself.

The Court reaffirmed the long-standing position that where an owner has a claim against the charterer for loss of or damage to the ship, such claims are not subject to limitation under Article 2.1(a): The CMA Djakarta [2003] EWHC 641 (Comm).

Cargo Claims

Sino East Transportation Ltd v. Grand Amazon Shipping Ltd (the Grand Amanda) [2025] EWHC 1990 (Comm)

The Commercial Court has given valuable guidance on the indemnity, regularly implied into time charterparties, against the consequences of complying with a charterers’ employment orders.

The owners of Grand Amanda were sued in the Chinese courts after a cargo of soybeans was found to be mildewed, discoloured, caked, and blackened upon discharge. The owners were found liable and sought to recover an indemnity from their charterers. It was common ground that the damage was caused by the inherent vice of the cargo.

The Commercial Court held that:

• The implied indemnity will apply even to lawful contractual orders to carry a permitted cargo: there is no presumption that the owners will accept all foreseeable risks.
• The owners did not agree to bear the risk of deterioration of the cargo from inherent vice.
• The Inter-Club Agreement is not a complete code for apportioning cargo claims: if it does not apply, then the claim is to be dealt with under the terms of the charter.

The Maersk Katalin [2025] SGCA 42

A Payment Letter of Indemnity (LOI) is typically used in the liquid cargo trade for trade financing. It is issued by the beneficiary of a letter of credit (i.e., the seller) and tendered in lieu of bills of lading (B/Ls) to draw on the letter of credit (L/C). This case illustrates a scenario in which a financing bank, as L/C issuer, makes payment against a Payment LOI and takes enforcement action against a vessel for misdelivery of cargo. In this case, the seller was ultimately on the hook as it provided a Discharge LOI to the shipowner.

A key defence raised by the defendants (i.e., the shipowner and seller) was that the claimant bank never looked to the B/Ls as security. On the facts of this case, the Court decided as follows:

1. The claimant bank acquired the B/Ls in good faith and as an indorsee of the B/Ls. It therefore acquired all rights of suit under the contract of carriage and had the right to demand delivery of the cargo.
2. It was difficult to argue that the claimant bank did not view the B/Ls as security when the L/C expressly requires endorsement and tender of the B/Ls to the claimant bank.
3. There was inadequate evidence tending to suggest that the claimant bank would decide that discharge of the cargo should proceed without the B/Ls (this being the defendants’ evidential burden to prove).

There is no special significance in an argument that the financier “never looked to the B/Ls as security”. Subject to established legal principles and analysis of the facts, a party’s mental state and conduct may or may not give rise to a defence.

Collisions

Kiveli and Afina I [2025] EWHC 1185 (Admlty)

This case provides guidance on the operation of Rule 14 (Head-on Situation) of the Colregs and its interplay with Rule 15 (Crossing Situation). The Court decided as follows:

1. The structure of Rules 14 and 15 is such that Rule 14 takes precedence. This reduces the number of collisions caused by any uncertainty on the part of watch officers as to whether they are in a head-on or fine-crossing situation.
2. Rule 14(a) is the principal provision and is not qualified in any way. It defines a particular situation (i.e., two power-driven vessels meeting on reciprocal or nearly reciprocal courses so as to involve risk of collision) and what action to take in that situation (i.e., each shall alter her course to starboard so that each shall pass on the port side of the other).
3. Rule 14(b) is a deeming provision and applies (i) when a vessel sees the other vessel ahead or nearly ahead and (ii) by night she would see the masthead lights of the other vessel in a line or nearly in a line, or both side lights. Rule 14(b) is not exhaustive and is intended to support Rule 14(a), not to constrain it. Rule 14(b) is satisfied by reference to what a vessel can see of the other, not by reference to what both vessels can see of the other.

The Court’s construction of Rule 14 is consistent with a requirement that the Colregs should be easily understood by seafarers. A test for a head-on situation requiring what both vessels can see of the other would not be of practical assistance to seafarers because a vessel will never know (as a fact) what the other vessel could see of her.

Insurance

OCBC v. ArgoGlobal Underwriting Asia Pacific Pte Ltd and Ors [2025] SGHC 82

In this case, the Court considered several issues of English insurance law, including a term defining “risk as a whole” under section 11 of the UK Insurance Act 2015 (UK IA 2015). The Court decided as follows:

1. Terms defining risk as a whole are those that were so fundamental and extensive that they delimit the risk that the insurer is underwriting. On the facts of this case, in relation to the tow voyage, “risk as a whole” would be a geographical or usage restriction.
2. On the assumption that express warranties were breached by the insured, the Court opined that under English law, a duty to act in utmost good faith is a condition precedent when exercising a Held Covered Clause “with or without notice”.
3. Pursuant to section 4 of the UK Marine Insurance Act 1906, the Increased Value section of the marine insurance policy was void as a gaming or wagering contract even if the assureds did in fact have an insurable interest. This was because that section contained “Policy Proof of Interest” and “Full Interest Admitted” provisions.

This case is a useful authority because the phrase “risk as a whole” in the context of section 11 of the UK IA 1025 has yet to be interpreted in English case law. As regards the Court’s decision that the Increased Value section of the marine insurance policy was void as a gaming or wagering contract, it is difficult to see most insurers raising this technical defence to solely resist a claim given that it would be contrary to the terms of the commercial bargain set out in the policy (and could well have an impact on the commercial reputation of insurers).

Recent cases in Hong Kong

Linde GmbH and Linde PLC v. RusChemAlliance LLC [2023] HKCFI 2409

An English-law EPC contract for a Russian gas-processing complex included an HKIAC arbitration clause seated in Hong Kong. Following EU sanctions, the contractor suspended performance; the owner terminated, pursued Russian court proceedings invoking Article 248.1 of the Russian procedural code, and obtained a Russian freezing order. The contractor commenced HKIAC arbitration and obtained an interim anti-suit injunction in Hong Kong to restrain the Russian proceedings.

Key rulings:

• The court rejected assertions that Hong Kong was biased or fettered by EU sanctions, confirming that EU sanctions have no legal effect in Hong Kong and HKIAC arbitrations are governed by independence and impartiality.
• The court maintained the injunction and emphasized that arbitration is not futile merely because recovery might be uncertain; an award may still be enforceable in Russia or elsewhere.

Practical takeaways:

• Hong Kong remains a reliable, neutral seat for disputes with PRC-linked projects, even where sanctions and foreign “exclusive jurisdiction” statutes are invoked.
• Anti-suit protection is robust where parties agreed to arbitrate in Hong Kong.

CI v. IU [2025] HKCFI 4397

A voyage charterparty dispute under Hong Kong-seated arbitration (HKMAG Terms 2021) involved a back-to-back charter chain. The charterers failed to supply cargo, leading to a repudiatory breach and losses cascading up and down the chain. In a related reference, an award established liabilities up the line. The owners then sought to recover not only their own loss of profits but also damages reflecting upstream liabilities, including amounts determined in the related award.

Appeal and issues. Charterers sought leave to appeal under section 6 of Schedule 2 to the Arbitration Ordinance, arguing the tribunal erred by awarding the owners amounts reflecting a third-party’s losses where no direct claim had been made against the owners.

Key rulings:

• Leave to appeal refused. The court held the issue was context-specific and not of general importance, and that the tribunal’s decision was not “obviously wrong.”
• No rigid requirement for a separate award or demand between related entities in a back-to-back chain where the liability pathway is plain and the defaulting party had a full opportunity to be heard.
• Scope of “question of law.” Appeals on questions of law under Schedule 2 are not confined to Hong Kong law; an error in applying English law can still be an error of law for these purposes, particularly in maritime disputes where the court can ascertain foreign legal principles directly.

Practical takeaways:

• In chain charterparty structures, Hong Kong tribunals may award flow-through damages without a formal upstream/downstream demand, provided fairness and due process are respected.
• Parties cannot rely on technicalities to avoid chain liabilities when terms are materially back-to-back and the causal chain is established.
• For PRC market participants using Hong Kong seats and English law, the decision underscores predictability in how chain liabilities are treated and clarifies the appeal threshold.

PRC Maritime Code: Time-bar reform (Effective 1 May 2026)

Current regime (selected):

• Article 257. One-year limitation for claims against the carrier, counted from the date the goods were delivered or should have been delivered.
• Article 267. Limitation is discontinued by filing a lawsuit, submitting to arbitration, or the respondent’s admission. Arrest applications also discontinue the limitation; a new period runs from the discontinuance..

New regime (selected) under the Maritime Code (effective 1 May 2026):

• Article 284. Maintains a one-year limitation for claims related to carriage of goods by sea.
  • For claims against the carrier or actual carrier, time runs from the date the goods were delivered or ought to have been delivered.
  • For claims against the shipper, consignee, or holder of the transport document, time runs from when the claimant knew or ought to have known of the infringement.This is sample sub-bullet text.
• Article 294. The limitation is interrupted (not merely discontinued) by a request for performance, legal proceedings, arbitration, respondent’s agreement to perform, or ship arrest applications. The period recommences upon interruption or when the relevant procedure ends.

What has changed and why it matters:

• Broader triggering acts and clearer restart rules. The express inclusion of a request for performance and the interruption concept provide more predictable clock management for claimants and respondents.
• Divergent start dates by party type. The shift to a knowledge-based accrual for claims against shippers, consignees, or document holders could extend practical exposure windows and requires tighter evidence and notice controls.
• Operational impact. Carriers, NVOCCs, and cargo interests trading into and out of the PRC should recalibrate time-bar workflows, align contract notice provisions, and adjust litigation and arrest strategies ahead of 1 May 2026.

Action points for PRC market participants:

• Seat/arbitration clauses. Continue to select Hong Kong-seated arbitration for neutrality and enforceability, with clear anti-suit language where appropriate.
• Chain risk mapping. In back-to-back charterparty chains, document liability flows and ensure opportunities to be heard are preserved to facilitate recovery of flow-through losses.
• Time-bar readiness (PRC). Update limitation trackers, contract templates, issuance of requests for performance, and ship arrest playbooks to reflect the interruption and recommencement mechanics and party-specific accrual rules taking effect on 1 May 2026.