A container ship caught fire and sank near Colombo in Sri Lanka resulting in a total loss. The owner and bareboat charterer successfully claimed limitation of liability in the English Admiralty Court. The three slot charterers also argued for limitation on the basis they could be considered as shipowners too.

SEA CONSORTIUM Pte Ltd & Ors v BENGAL TIGER LINE Pte & Ors (The X-Press Pearl): [2024] EWHC 3174 (Admlty)

The facts

The X-Press Pearl, a newly built 2756 TEU container ship, sunk following a fire in May 2021 off Colombo, Sri Lanka together with its cargo. Slot charterers Bengal Tiger Line (BTL), MSC and Maersk sought orders and declaratory relief under the Convention on Limitation for Maritime Liability Claims (LLMC) from the English Admiralty Court. They argued they were “shipowners” for the purposes of the Convention and were therefore entitled to limit liability for the cargo loss under the Convention.

The judgment

The inclusion under the Convention of “charterer” within the definition of “shipowner” is intended to prevent cargo claimants from avoiding limitation by claiming against charterers. Otherwise, shipowners could limit indemnity claims from charterers, leaving charterers to bear the excess of cargo claims over the limit.

Relying on the MSC Napoli ([2008] EWHC 3002 (Admlty)), the court found no reason to find that “charterer” as contemplated by the Convention excluded a slot charterer. A contrary decision would discourage the use of slot chartering, which has become a well-established and efficient way to organise the carriage of goods. It would therefore normally be sufficient for the applicable contract to oblige an owner to make part of the carrying capacity of a ship available. This could in principle extend to a party characterising itself as a non-ship-owning common carrier (NVOCC), rather than a charterer.

The court then compared the contracts between the owner and BTL, MSC and Maersk against the contract considered in the MSC Napoli.

• BTL’s “fixed slots contract” was materially identical.
• MSC’s “connecting carrier agreement” differed only in the lack of obligation to pay for unused slots, and this was not sufficient to take the agreement outside the scope of the Convention.
• Maersk’s “agreement for transport services” differed because Maersk did not undertake to pay for used and unused slots, but only for containers actually carried. Again, this was not sufficient to take the agreement outside the scope of the Convention.

The court therefore granted the owner permission to constitute a limitation fund, at an amount calculated to be about US$20 million.

Comment

This judgment provides useful confirmation of the MSC Napoli case and applies the earlier judgment to agreements with different names but with basically the same substance. The result is that parties should not be discouraged from part-chartering a ship by the risk that they might be unable to limit under the Convention.

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