Limitation actions and the return of security

In Enemalta Plc v The Standard Club Asia Ltd, the High Court had to address its jurisdiction in respect of security (the LoU) which had been provided.

The Convention on Limitation of Liability for Maritime Claims 1976 (the 1976 Convention) entitles a shipowner to limit its liability for claims asserted against them. When a shipowner does so, the 1976 Convention operates pursuant to Article 13 to bar any other actions against the shipowners and, in respect of security, states:

Background

Shipowners’ vessel, the DI MATTEO, was alleged to have caused damage to a cable in international waters which caused a nationwide power outage in Malta.

The LoU was provided by the shipowners’ P&I club, securing the claimant’s claim for a value equivalent to the maximum figure provided for by the 1996 Protocol to the Convention of Limitation for Marine Claims 1976 (the 1996 Protocol).

The LoU was expressly subject to English law and to the exclusive jurisdiction of the High Court (the UK being a signatory to the 1996 Protocol). However the shipowners commenced the limitation proceedings in Singapore, which is not a signatory to the 1996 Protocol, and so questions were raised as to the validity of the LoU if the Singapore court should make any order in respect of it pursuant to Article 13(2).

High Court decision

The High Court had to consider an application challenging its jurisdiction. The defendant P&I club’s application had a fairly inauspicious start – Judge Pelling noting that Singapore being the proper and more appropriate forum with respect to Article 13(2) “rather misses the point”. The question was whether any order made by the Singapore court (which it would be entitled to do as a matter of Singapore law) would affect the validity of the LoU which was subject to an exclusive English court jurisdiction clause.

The High Court first considered whether the security was a security within the jurisdiction of the Singapore court, finding that it was “better than seriously arguable” that it was not. Relevant to this is that Singapore is signatory to the 1976 Convention. The High Court noted that the security was physically located in Malta which had renounced the 1976 Convention.

In addition, it was found that English law would probably treat the LoU as being located in England due to the LoU’s exclusive jurisdiction clause. On that basis, and as England has also renounced the 1976 Convention in favour of the 1996 Protocol, as a matter of English law, the court said that it was at least strongly arguable that an English court would find that the Singapore court would have no jurisdiction to order its release. The LoU, for the purposes of the 1976 Convention, was not “within the jurisdiction of a State Party” because neither Malta nor England are state parties to the 1976 Convention.

Judge Pelling recognised that he was not determining how the Singapore court, applying Singapore law, should determine any question before it. But if the Singapore court did make such a finding pursuant to Article 13(2), the English court would have jurisdiction to determine whether the order from Singapore would have the effect of releasing the defendant from the LoU. The High Court therefore found that:

The defendant P&I club’s application therefore failed.

Comment

In light of this judgment, in circumstances where limitation would be put up in Singapore according to the 1976 Convention and the Singapore court may then make an order affecting the validity of the security (for a sum based on the 1996 Protocol), the English High Court would retain jurisdiction over the validity of the LoU. Accordingly, where security is put up subject to English law, a party cannot escape the extent of the limits agreed in that security by pursuing proceedings in another jurisdiction where the limits might be less.

Related items:

• Admiralty Court provides helpful clarification as to who is the ‘operator’ of a vessel
• MIRACLE HOPE: guidance on parties’ obligations under a chain of letters of indemnity