An interesting case displaying the potential financial disparity between jurisdictions where more recent protocols – or even conventions – are not adopted or implemented, echoing a recent International Group call to increase certainty and consistency of outcome. 

The facts

‘Milano Bridge’ collided with gantry cranes at Pusan, South Korea and the terminal operator subsequently claimed repair and business interruption costs. The ship owner constituted a limitation fund in South Korea. 

Ship’s limitation under Korean law was determined by the flag of the ship which was, in this instance, Panama. The latter has ratified the original 1976 Convention on Limitation on Liability for Maritime Claims (LLMC) 1976, producing a figure of approximately US$24 million.  

The terminal operator issued parallel civil proceedings in South Korea and Japan, the latter being the place where the ship was managed. Subsequently, the terminal arrested a sister ship of ‘Milano Bridge’ in Hong Kong and obtained security for approximately US$83 million. This latter figure was calculated under Hong Kong law, which had enacted the 1996 Protocol and the 2015 revisions to the LLMC (a similar limitation figure would have applied under Japanese law).  

The ship owner sought a stay of the Hong Kong proceedings before the First Instance Court on grounds of forum non conveniens. 

The judgment

The Hong Kong court applied the two stage test set out in the 1986 English House of Lords case Spiliada Maritime Corp v Cansulex, and endorsed by the Hong Kong Court of Final Appeal. The first stage requires the defendant to discharge the burden that the court where the application is made is not the natural or appropriate forum, and that there is another available forum which is more appropriate. If this condition is met, the court will ordinarily grant a stay, unless the plaintiff can show why it should not. The second stage requires the plaintiff to show that it will suffer a juridical or personal disadvantage if the stay application is allowed.

The court distinguished Hong Kong precedents, also basically driven by disparities in limitation amounts, when proceedings had not been stayed. In one case a more natural forum might have been Indonesia, but limitation there would have been uncertain and possibly derisory. In another, there was a natural forum, but neither of the parties had chosen it. In a third case, the defendant was a Hong Kong company, thereby failing the first stage of the Spiliada test.

In this case, it was common ground that Hong Kong was not the natural or appropriate forum. However, the South Korean claimant contended that South Korea was not clearly or distinctly the more appropriate forum. The claimant further contended that it would be deprived of a legitimate juridical advantage if compelled to proceed in South Korea because of the lower limitation amount, and that this latter point was decisive.

The court found that South Korea was clearly and distinctly the more appropriate forum. The incident had happened in Korea, the witnesses were based there, much of the relevant documentation was in Korean and the law applicable to the incident was Korean. 

The court rejected the claimant’s argument that the question of juridical advantage was decisive and held that it could by itself justify the refusal of a stay where the connection with Hong Kong was otherwise weak, depending entirely on the location of the arrest. The claimant’s case was further weakened by the fact that none of the parties were resident in Hong Kong. 

The court had little sympathy for forum shopping motivated purely by economic factors and stated that the claimant, as a South Korean company, should accept the ethos of the jurisdiction where it operated. The court also speculated that the claimant may in the past have benefited as defendant from the lower Korean limit, and from consequent lower insurance premiums. 

Comment

If this application had succeeded, the practical effect would have been that arresting a ship in Hong Kong would entitle the claimant to Hong Kong jurisdiction solely because higher limitation was available there, regardless of any other factors. This would have been a surprising and unwelcome conclusion. The result might have been different if the facts had been less clear, for example if there had been a collision on the high seas. 

The claimant has sought leave to appeal.

Although this is a Hong Kong case, the decision depends, at least partly, on an English House of Lords judgment.  Moreover, it clearly indicates worldwide that Hong Kong is not a soft touch with regard to jurisdiction. 

PUSAN NEWPORT CO LTD v OWNERS OF MILANO BRIDGE & CMACGM MUSCA+HYDRA 
[2021] HKCFI 1283

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We look forward to hearing from you.

Peregrine Storrs-Fox

Risk Management Director, TT Club