Charterers cannot limit an owner’s claim for its own losses…ever

The Court of Appeal has upheld a judgement that charterers cannot limit an owner’s claim for its own losses. The decision is part of the long-running legal saga generally known as MSC Flaminia, on which there was an explosion on the containership of that name on July 14th 2012.

On September 1st 2023 the Court of Appeal, comprising Lord Justice Males, Lady Justice Falk and Sir Launcelot Henderson handed down judgment in The MSC Flaminia (No. 2) [2023] EWCA Civ 1007, upholding the decision of Mr Justice Andrew Baker ([2022] EWHC 2746 (Admlty)), but on different grounds from those cited by Justice Baker.

The MSC Flaminia was in mid-Atlantic, en route from Charleston South Carolina to Antwerp Belgium, when an explosion occurred in the number 4 cargo hold. This led to a large fire on board. Hundreds of containers were destroyed and extensive damage was caused to the ship. Three crew members lost their lives.

The fire-crippled MSC Flaminia was denied access to a number of ports in Europe for 11 weeks, before eventually berthing in Wilhelmshaven, Germany. A further 20-plus weeks elapsed before the remaining containers were discharged in Romania.

The explosion was caused by the auto-polymerization of the contents of one or more of three tank containers laden with a chemical known as DVB. These had been loaded at New Orleans on July 1st 2012.

The ship was eventually salved and repaired at great cost to its owners, Conti. That company brought claims in arbitration against MSC – the charterers of the vessel – to recover hire throughout the period while the ship was out of service under the charter, and also to recover its losses as a result of the casualty.

The arbitrators determined that the ship remained on hire throughout and that MSC was liable to Conti in respect of the casualty. In an award dated July 30th 2021 they awarded damages of approximately $200m.

MSC then sought to limit its liability for claims arising from the casualty, pursuant to the 1976 Convention on Limitation of Liability for Maritime Claims, as amended by the Amending Protocol of 1996 and now given the force of law in the UK by section 185 of the Merchant Shipping Act 1995.

The trial of the limitation action came before Andrew Baker J, who had previously held that MSC was not entitled to an anti-suit injunction to prevent Conti from seeking to enforce its arbitration award elsewhere (see The MSC Flaminia (No. 1) [2022] 2 Lloyd’s Rep 341).

Judge Baker held that MSC was not entitled to limit its liability because Conti’s claims were not within the scope of any of the paragraphs of Article 2 of the Convention. However, in so doing, the judge rejected Conti’s submission that that tonnage limitation under Article 2(1) only applied to claims in respect of losses suffered in the first instance by someone who is not within the extended definition of “shipowner” in Article 1(2) of the 1976 Convention, referred to by the judge as an “outsider” (“insiders” being those within the extended definition of “shipowner” in Article 1(2)).

MSC appealed. Conti in turn filed a respondent’s notice. This advanced a narrower submission than the one made to the judge in the first instance. Conti contended on appeal that the claims referred to in Article 2 must be interpreted to exclude claims by an owner against a charterer to recover losses suffered by the owner itself.

This narrower submission was accepted by the Court of Appeal, with the appeal dismissed by reference to the respondent’s notice.

The full judgment can be found at

Christopher Smith KC and David Walsh acted for Conti, instructed by Chris Garley and Vivienne Pitroff of HFW LLP. Julian Kenny KC & Michal Hain (instructed by Mills & Co Solicitors Ltd) acted for the Appellant

“The decision is likely to be of interest to all engaged in shipping litigation and their insurers,” an update from Essex Court Chambers stated.