By Frazer Hunt, Partner, Maurice Lynch, Special Counsel and Diana Lee, Law Graduate

Regimes for limiting a shipowner’s liability for maritime claims significantly differ around the world, meaning that the amount of compensation that a claimant can receive vary vastly from jurisdiction to jurisdiction. This can often result in forum non conveniens disputes as shipowners attempt to commence proceedings in a jurisdiction with low limits on liability, while claimants seek to institute proceedings in a jurisdiction with high, or no limits on compensable amounts. This article will explore important strategic commercial and legal considerations that parties in a multi-jurisdictional maritime claim should make to achieve a favourable result.

When a shipowner is sued for personal injury or damage to property in connection with the operation of their ship, their liability for the loss or damage is limited in many jurisdictions around the world by either international instruments or domestic laws. Notably, many States are currently signatories to either the Convention on Limitation of Liability for Maritime Claims 1976 (1976 Convention) or the Protocol of 1996 to Amend the Convention on Limitation of Liability for Maritime Claims 1976 (1996 Protocol). Significantly, depending on which regime applies, and a nation’s own domestic laws the maximum compensation amount that the shipowner can pay to the claimant can significantly differ.

The different regimes for maritime claims across jurisdictions raise a number of intertwining legal and commercial implications. Firstly, a shipowner has an obvious commercial interest in having any maritime claims decided in a jurisdiction where an international convention or domestic laws with a low limit on liability applies. Conversely, a claimant would seek to maximise their compensable amount by having the matter decided in a jurisdiction where a high limit or no limits on compensation amounts applies. Secondly, and relatedly, due to the competing interests of a shipowner and a claimant, a forum non conveniens dispute can often arise as each party attempts to have the matter decided in a jurisdiction commercially favourable to them. This is facilitated by the fact that in the contemporary globalised shipping industry, the shipowner can be registered in one jurisdiction, relevant contracts executed in a different jurisdiction, with an accident occurring in yet another jurisdiction, providing shipowners and claimants legal bases for having the matter decided in various jurisdictions.

This paper will begin by highlighting the substantial difference in compensable amounts between the 1976 Convention and the 1996 Protocol then discuss the legal principles underpinning forum non conveniens and how they apply in the context of maritime claims. It will conclude with a case study of a case study of MV Milano Bridge where the claimant is represented by Mills Oakley, which involves the South Korean, Japanese and Hong Kong jurisdictions.

Overview of different maritime regimes and comparison of the 1976 Convention and 1996 Protocol

Countries have either adopted international conventions or apply their own domestic laws regarding maritime claims.  Currently, 63 states have ratified the 1996 Protocol, including Australia. The states that have ratified and apply the 1996 Protocol comprise 69.13% of the world’s shipping tonnage,[1] meaning that the limitations in the 1996 Protocol will likely apply to a majority of maritime claims. However, some countries, such as Egypt, Bahamas, Iran and Mexico have only ratified the 1976 Convention and not the 1996 Protocol.[2] Accordingly, the limitations in the 1976 Convention apply in those jurisdictions. Additionally, some countries, such as the USA, China, Korea, Panama and Brazil have not adopted either conventions, and apply earlier conventions or implement their own domestic laws regarding maritime claims.

The maximum amount that a claimant can be compensated for by shipowners vary substantially between conventions and domestic laws, and this is highlighted by a comparison between the 1996 Protocol and the 1976 Convention. For example, the minimum limitation amount in the 1976 Convention for personal injury claims, which is 333,000 Special Drawing Rights, was increased substantially through the 1996 Protocol and its subsequent amendments and is now 3.02 million Special Drawing Rights. This means that in US dollars, the minimum limitation amount has increased from approximately USD 466,200 to USD 4,228,000.00. For ships of higher tonnage levels, the compensation amounts differ by approximately 360% between the 1976 Convention and the 1996 Protocol. Accordingly, depending on whether a state has ratified the 1996 Protocol or not, the amount that a claimant can be compensated for by a shipowner can dramatically, and rather arbitrarily, differ.

As a result of these differences in maritime regimes across jurisdictions, shipowners and claimants are strongly motivated to have a maritime claim heard in a jurisdiction which applies the limits commercially favourable to them. Accordingly, parties involved in a maritime claim need to strategically assess which jurisdiction associated with the maritime claim is favourable to them and to determine how proceedings can be instituted in that jurisdiction. In this, the law of forum non conveniens is likely to be crucial.

Legal principles of forum non conveniens

Forum non conveniens is a common law principle meaning “inconvenient forum”, whereby a Court acknowledges that it is an inappropriate forum for the determination of a proceeding and declines to exercise its jurisdiction. The party seeking the forum non conveniens order will also usually need to identify another foreign tribunal which it considers is more appropriate.

The test for determining whether a Court is forum non conveniens differs between jurisdictions. In the United Kingdom, the Courts apply the test in Spiliada Maritime Corp v Consulex Ltd [1987] AC 460 at 476, where the House of Lords expressed the “basic principle” of forum non conveniens as follows:

“…a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e., in which the case may be tried more suitably for the interests of all the parties and the ends of justice…”.

In Australia, the threshold for a forum non conveniens order is higher, requiring that the Court be a “clearly inappropriate forum” pursuant to Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 239. This was further explicated in Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55 and later stated more succinctly in Henry v Henry (1996) 185 CLR 571 at 587 as follows:

“In Voth, this Court adopted for Australia the test propounded by Deane J in Oceanic Sun, namely, that a stay should be granted if the local court is a clearly inappropriate forum, which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of “seriously and unfairly burdensome, prejudicial or damaging”, or, vexatious, in the sense of “productive of serious and unjustified trouble and harassment” [Oceanic Sun, above at 247].”

Halsbury’s Laws of Australia have identified the following as factors that the Court usually considers in determining whether it is a clearly inappropriate forum:[3]

1. “factors affecting convenience and expense, including the location of evidence;
2. the governing law;
3. the parties’ places of residence or business;
4. the existence of legitimate personal and juridical advantages to the plaintiff of litigating in the Australian forum, including the availability of a statutory cause of action which may be unavailable in other jurisdictions and the availability of procedural advantages;
5. where the acts and omissions giving rise to the dispute occurred; and
6. the existence of multiple defendants and multiple proceedings.”

In the context of the globalised shipping industry, the above factors could be associated with multiple jurisdictions. Indeed, it is common for the place of residence of the shipowner and crew members, registration of the vessel, the governing law in relevant documents and the incident giving rise to the claimant’s damage to be associated with different jurisdictions. Accordingly, depending on the circumstances, parties can have ample legal bases for claiming that the jurisdiction in which proceedings are commenced is inappropriate, and another jurisdiction is more appropriate. A key factor for deciding which jurisdiction advances a client’s interests is of course, determining which jurisdiction has regimes for maritime claims that are commercially favourable to the client. For shipowners, this would be regimes that have low limitations on compensable amounts. For claimants, regimes with high limits on compensable amounts or low legal thresholds for breaking the limitation on shipowners’ liability would be preferable.

Indeed, applications by a party to assert that a particular jurisdiction is a forum non conveniens will almost certainly always be made where one party is seeking to obtain the benefit of a higher limitation in one particular jurisdiction which has a connection to a dispute but the defendant wants to take advantage of a lower limitation in another jurisdiction which has a connection to the dispute. Accordingly, legal advisers would need to marshal legal and factual arguments to institute proceedings in a jurisdiction favourable to their client.

MV Milano Bridge case study

The legal and commercial analysis needed to strategically navigate multi-jurisdictional maritime claims is illustrated in a large claim against a shipowner involving the Japanese, Hong Kong and South Korean jurisdiction where Mills Oakley represents the claimant. The shipowner’s vessel, MV Milano Bridge allided into four cranes  owned by the claimant situated at Busan port in South Korea, resulting total destruction of the crane and millions of dollars’ worth of loss. Subsequently, the vessel journeyed onto Hong Kong, where it was arrested by the claimant and in rem proceedings commenced against the vessel which provides jurisdiction for the claim in Hong Kong as of right. The shipowner was incorporated in Japan while the claimant was incorporated in South Korea where the loss occurred.

While South Korea has not ratified the 1976 Convention, its domestic maritime regime largely mirrors the 1976 Convention, including its limitations on compensable amounts. Japan and Hong Kong on the other hand, has ratified the 1996 Protocol, meaning that its high limitations on compensable amounts apply in those jurisdictions. The limitation applicable in Korea is approximately USD 23,000,000 and the limitation applicable in Hong Kong and Japan is approximately USD 83,000,000. The loss exceeds USD 83,000,000.

Prior to the vessel owner commencing limitation proceedings in Korea, the claimant did the following:

• arrested a sister ship of the vessel which damaged the cranes when it called into Hong Kong to commence in rem proceedings and obtain jurisdiction as of right in Hong Kong where a higher limitation for the claim applies; and
• commenced in personam proceedings in Japan against the vessel owner who is domiciled in Japan.

In response to these proceedings in order to strengthen the connection of the dispute to Korea, in addition to commencing limitation proceedings in Korea, the vessel owner commenced proceedings against the owner of the cranes alleging it was responsible for the allision. A somewhat curios position and an attempt to reinforce the application of the lower limits of liability in Korea.

In response to the proceedings in Hong Kong and Japan the vessel owner has sought to assert that these jurisdictions are a forum non conveniens. At a first instance decision in Hong Kong the Court found Hong Kong was a forum non conveniens but that decision is the subject of an appeal being hearing in November 2021. The Japanese Courts who apply a different concept to forum non conveniens have not yet decided on the issue.

Conclusion

The differences in maritime regimes across jurisdictions raise complex legal and commercial considerations that need to be strategically navigated by legal advisers. Significantly, this also raises the need for a harmonised approach to limitation of liability laws for maritime claims across jurisdictions around the world. What is clear is that the limitation provisions in the 1976 Limitation Convention are outdated and have not kept up with inflation. Having a harmonised, universal maritime regime which is more reflective of the nature of global shipping today and the size of assets involved will require more states to ratify international conventions such as the 1996 Protocol. Having uniformity in the limitation levels through the 1996 Protocol will reduce forum non conveniens disputes, make maritime claims more simple and cheaper to run, will provide certainty for the insurance market on limitation and recovery actions and result in dispute being finalised sooner. In the meantime, as illustrated in this paper, the principle of forum non conveniens will be crucial to achieving a commercially favourable outcome for clients involved in multi-jurisdictional maritime claim.

[1] International Maritime Organisation, ‘Status of Conventions’ (4 April 2021) <https://wwwcdn.imo.org/localresources/en/About/Conventions/StatusOfConventions/StatusOfTreaties%20(1).pdf>.

[2] International Maritime Organisation, ‘Ratification by State’ (2021) < <https://www.imo.org/en/About/Conventions/Pages/StatusOfConventions.aspx>.

[3] Halsbury’s Laws of Australia [85-475].