International Law of the Shipmaster

Dr John A; C; Cartner; Richard P; Fiske and Tara L; Leiter

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CHAPTER 14 LIMITATION OF THE SHIPMASTER’S LIABILITY

“All men are liable to error; and most men are, in many points, by passion or interest, under temptation to it.” John Locke (1632-1704), Essay Concerning Human Understanding [1690]. § 14.0 The Limitation of Liability1 of the Master in Context. Limitation of liability, whereby a shipowner or operator may limit his liability for compensation for damage, loss or injury caused through his acts, is a longstanding principle in maritime law. In addition to the specific limitations given by the legislation and conventions on carriage of goods by sea, a global limitation of shipowner’s liability has emerged for all claims arising from one incident or occurrence. It has traditionally been justified by the policy purpose to encourage the perpetuation of the merchant marine activity2 The more recent policy rationale of the shipowner’s liability is to protect the viability of the merchant marine by making its activity insurable by allowing the insurers to calculate their maximum exposure with reasonable certainty3 Additional schemes of limitations of liability have been created to cover risks of incommensurable magnitude, such as oil pollution or nuclear damage.4 However, the emphasis on all these limitation of liability schemes is the shipowner and not the shipmaster. § 14.1 Global Shipowner’s Limitation Regimes. Three main regimes can be identified: abandonment, the International Convention Relating to the Limitation of Liability of Owners of Sea-Going Ships 1957, and the Convention on Limitation of Liability for Maritime Claims 1976. § 14.1.1 Abandonment. Traditionally, limitation of liability was based upon the concept of abandonment, whereby the owner would abandon the vessel, sometimes at the bottom of the sea, to the claimants whose claim was therefore limited to the ship and the freight. This concept dominates in a very few jurisdictions, including the United States and the very few states still party to the Limitation of the Liability of Owners of Sea-Going Vessels 1924.5 § 14.1.2 International Convention Relating to the Limitation of Liability of Owners of Sea-going Ships 1957. The 1957 Convention was intended to replace the 1924 Convention. Under this Convention, the shipowner could not claim the benefice of the limitation if he was unable to show that the incident giving rise to the claim took place without his “actual fault or privity”.6 It was not an easy burden to discharge for the shipowner and it generated an abundant litigation.7 As a result, the framework of the Convention was soon perceived as defective, allowing claimants to escape the limits too easily while the compensation amounts provided in Article 3 were found too low.8 A compromise was found and a new convention was therefore enacted, but a significant number of states remain ruled by the 1957 Convention.9 § 14.1.3 Limitation of Liability Convention 1976 (the London Convention). The London Convention was intended to replace the 1957 Convention. It considerably raised the levels of limitation and introduced tonnage bands with different SDR rates per ton.10 The Convention also made it considerably more difficult to break the limitation, by eliminating the “actual fault or privity” of the owner test and instituting a regime of exclusion of the limitation whereby “a person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his actual act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.11 As the burden of persuasion of the deliberate or extremely reckless characteristic of the act or omission of the person liable rests on the claimant, the condition has been labelled as the “unbreakable Limit”.12 § 14.2 The Global Shipowners’ Liability and the Master. Different options have been retained regarding the possibility for the master to avail himself of the shipowners’ liability. While some systems, such as the United States, have adopted a moral purity approach which precludes the master from escaping the consequences of his personal liability, most legal systems, have adopted either the 1957 or the 1976 Convention, which extended the availability of the limitation to the master as a realization that the exclusion of the servants from the benefice of the limitation defeated the whole purpose of the limitation by providing claimants with a powerful means of by passing it. However, a very substantial difference of regime exists between the 1957 Convention, where scope of application is circumscribed to situations where the shipowner is vicariously liable, and the 1976 Convention which always allows the shipowner to avail himself of the limitation of liability, unless the claimant can prove that the shipowner or his servants and agents deliberately or recklessly caused the damage.13 § 14.2.1 Evolution of the Shipowners’Liability Regarding the Master. Prior to the Limitation of Liability of Owners of Sea-Going Ships 1957, it was controversial as to whether or not the master could invoke the shipowner’s limitation of liability because the master could not abandon a property which he did not own,14 and because the limitation was not designed to protect seamen putatively in order to encourage people to go to sea, and perhaps, for the more speculative reason that it was unlikely that litigants would choose to sue the master rather than the shipowners15 from the motivation of the shallowness of his pocket as a natural person. From a moral point of view, it was also considered that the master should not be insulated from being fully liable for damages that he caused by his negligence or intentional action.16 However, these objections were largely outweighed by the many inconveniences of excluding the master and the crew from the protection of the limitation of liability. One of these inconveniences is illustrated by the so-called “Himalaya problem”, whereby shipowners inserted clauses into the bills of lading and cruise contracts excluding or limiting all liability of the shipping company or the master.17 This proved rather unsuccessful, since employees such as the master were not in privity with the shippers or consignees or passengers.18 In the meantime, in the United States, the labour organisations successfully negotiated with shipowners to insert indemnification clauses in the engagement contracts or to provide the shipowners’ servants with insurance coverage, which in turn, perversely, provided an incentive to claimants to sue the master in order to obtain full compensation indirectly through an indemnification action or against an insurer.19 Ultimately, excluding the master and the crew from the benefice of the limitation defeated the whole purpose of the limitation. To avoid such problems, the Limitation of Liability of Owners of Sea-Going Ships 1957 included the following provision:

When actions are brought against the master or against members of the crew, such persons may limit their liability even if the occurrence which gives rise to the claims resulted from the actual fault or privity of one or more of such persons. If, however, the master or member of the crew is at the same time the owner, co-owner, charterer, manager or operator of the ship the provisions of this paragraph shall only apply where the act, neglect or default in question is an act, neglect or default committed by the person in question in his capacity as master or as member of the crew of the ship.20

It is obvious from the “actual fault or privity test” that the limitation’s scope was limited to situations of purely vicarious liability of the shipowner, while the limitation was unavailable in situations where the shipowner was independently liable.21The drafters of the London Convention took a broader perspective as to which occurrences and persons would be protected by the limitation, while making it more difficult to escape the limitation. Hence, the London Convention provides: “If any claim set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention”.22 Although the new Convention does not specifically mention the master, it no doubt grants an independent right of limitation to those people for whose action, neglect or default the shipowner will be vicariously liable. While the 1976 Convention considerably extends the scope of the situations and the persons covered by the limitation and sets the limitation much higher than the 1957 Convention, it considerably limits the possibility for claimants to break the limitations. Hence, the 1976 Convention provides: “A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.23 The language used imposes a standard intended to make it very burdensome to bar the limitation, which encompasses more or less all conducts that would preclude insurance coverage.24 § 14.2.2 Master’s Ability to Limit Liability under UK Law and International Law. The 1976 Limitation of Liability Convention25 has been incorporated, virtually in whole part, into the law of the United Kingdom by section 17 of the Merchant Shipping Act 1979. The Convention has also been adopted by other states in much the same way. The United States is not a party to the Limitation Convention. The right to limit, under Article 1 (4) of the Limitation Convention, extends to masters by extending the right to “any person for whose act, neglect or default the shipowner or salvor is responsible”. The right to limit under the 1957 Limitation Convention extended the right to limit to the master,26 therefore, Article 1(4) of the 1976 Limitation Convention, providing that claims made against any person for whose act, neglect, or default of the shipowner is responsible, clearly embraces the master acting in the course of his employment as an agent of the owner, entitling him to limit under the 1976 Limitation Convention. Article 1(4) of the 1976 Limitation Convention includes the master, so long as the broadly defined shipowner is responsible for the acts or negligence resulting in the claim against him.27 The Limitation Convention also has a tougher standard for denying the right to limit, which runs in favour of the shipowner and others so entitled. The shipowner, or other person liable, is precluded from limiting its liability only “if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.28 In order for the master to be able to limit under the 1976 Limitation Convention, the master, if liable for the loss, must have acted “recklessly and with knowledge that such would probably result”.29 Therefore, upon proving that the master acted so recklessly, he would probably not be able to limit, while the vessel owner, who was not privy to the act, may not be restricted in the same way. However, the close relationship that often exists between an owner and a master may mean that the alter ego of the two entities is the same, so that the recklessness of one may, for the purposes of Article 4 of the Limitation Convention, may be imputed to the other.30 Article 13 of the Limitation Convention ensures that once a limitation fund has been constituted, the other assets of a person liable should not be exposed to separate actions in respect to claims arising out of the same occurrence.31 Article 1 covers claims against the master or crew and bars separate actions filed against those individuals. The UK Merchant Shipping Act provides exclusions of liability in section 186(2) of the Act to “the Master, member of the crew or servant where the loss or damage arises from anything done or omitted by any person in his capacity of Master or member of the crew or (otherwise than in that capacity) in the course of his employment as a servant of the owner of the ship”. § 14.2.3 The Situation in the United States. The shipowner’s right to limit its liability in the United States remains governed by the archaic and internationally awkward but still binding Limitation of Vessel Owner’s Liability Act of 1851.32 The Limitation Act permits a shipowner to limit its liability following maritime casualties to the value of the owner’s interest in its vessel and pending freight, provided that the accident occurred without privity or knowledge of the owner.33 However, the owner of a seagoing vessel involved in a maritime casualty that results in the loss of life or personal injuries may be required to set up an additional fund if the value of the vessel and pending freight is insufficient to pay such losses in full.34 The United States adopted neither the 1957 nor the 1976 Convention. Oddly, the master, members of the crew and other servants are not among those who may invoke limitation. Indeed, by statute, the master is fully liable without limitation if sued. As a result, labour unions have fought to obtain the insertion of indemnification clauses by the owner in the engagement contracts and insurance coverage for actions against the master and the crew. As a result, US shipowners are exposed to full liability for situations giving rise to vicarious liability for the personal faults of their servants by means of claims of indemnification of the said servants.35 The US District Court for the Northern District of Florida, in one of the early cases dealing with claims brought directly against a master of the vessel, held that such claims were entirely outside the limitation proceeding.36 In contrast, eight years later, the United States District Court for the Eastern District of Louisiana held that a stay of state court proceedings against the vessel master was appropriate.37 The court upheld the claimant’s right to proceed against the master, but merely restrained further proceedings against the master until resolution of the limitation proceeding.38 The court recognised three principal grounds for this holding: (1) proceeding against the master could effectively deprive the shipowner of its insurance and possibly defeat the limitation proceeding; (2) even if insurance were not the issue, the state court proceeding would interfere with the district court’s task in judging whether the actions of the master were sufficient to charge the owner with privity and knowledge; and (3) the possible problems of res judicata and collateral estoppel if the state court proceeding was allowed to continue.39 The court reasoned from a direct action statute that “many of the same concerns are present in this case such that a stay order is necessary ‘to make certain that such actions do not interfere with the Federal Limitation proceeding’”.40 In determining whether non-statutory maritime law, as to both liabilities and remedies, survives enactment of a statute, any terms of a statute explicitly preserving or preempting judge-made law are controlling, as is clear evidence of Congressional intent to achieve such results, legislative history may provide useful guidance in absence of clearly expressed legislative intent, the “scope of legislation” must be assessed, and judgment must be made whether applying judge-made law would entail filling a gap left by Congress’ silence or rewriting rules that Congress has affirmatively and specifically enacted.41 § 14.3 Carrier’s Limitation and the Master. Whereas the Hague Rules42 are only concerned with the carrier or the ship, the Visby Protocol43 has added a provision whereby,

“if such an action [in respect of loss or damage to goods covered by a contract of carriage] is brought against a servant or agent of the carrier (such servant or agent not being an independent contractor), such servant or agent shall be entitled to avail himself of the defences and limits of liability which the carrier is entitled to invoke under this convention … . The aggregate of the amounts recoverable from the carrier, and such servants and agents, shall in no case exceed the limit provided for in this convention.”44

These two provisions considerably limit the cargo interests’ incentives to sue the master, since doing so does not provide them with any further advantages. The Visby Protocol therefore put an end to a common practice of shippers under the Hague Rules, who attempted to escape the carrier’s limitation of liability by suing the master, with the expectation that the shipowner, the charterer or the operator would feel morally compelled to pay the whole amount of damages its servant was condemned to pay.45 Shipowners under the Visby Protocol need have no such feelings. However, as in the 1976 Convention, the master and therefore the shipowner “shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.46 This makes sense in the generally accepted legal theories of tort/delict. Similarly, the UN Convention on the Carriage of Goods by Sea 1978 (Hamburg Rules) provides that a carrier’s servant against whom an action in respect of loss, damage to the goods or delay in delivery covered by the contract of carriage by sea is brought against him, if he proves that he acted within the scope of his employment, can avail himself of the defences and limits of liability which the carrier is entitled to invoke under the Convention.47 The benefice shall however be excluded if it is proved that the loss, damage or delay resulted from an act or omission of such servant or agent, done with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result.48 § 14.4 The Oil Pollution, Nuclear Damages Regimes and the Master. Considering the magnitude of the damage caused by oil pollution and nuclear damage, the global shipowners’ limitation of liability regimes was far too insufficient to adequately cover such damages. As a consequence, special regimes have been set up, which also contain limitation schemes. The International Convention on Civil Liability for Oil Pollution Damage 1969 simply bars any action against the servants or agents of the owner.49 Its 1984 and 1992 amendments went further, since they also bar any action against the servants or agents of pilots, charterers and salvors, “unless the damage resulted from their personal act or omission, committed with the intent to cause such damage, or recklessly and with knowledge that such damage would probably result”.50 The Hazardous and Noxious Substances Liability Convention contains the same provision as the International Convention on Civil Liability for Oil Pollution Damage 1992.51 The Vienna and Paris Conventions on nuclear damage are even more radical since they provide that liability is channeled exclusively against the operator of the relevant nuclear installation whose liability is limited without any possibility to break the limitation.52 § 14.5 Contractual Waivers Of Liability for the Master’s Negligence. A number of charter provisions, such as the Exxon master clause, provide the master with an immunity against suit from the charterers for personal injury, illness or death of any representative or contractor or charterer, unless the damage resulted from the master’s negligent act or omission.53

1 The principal conventions on limitation of the shipowner’s liability are Limitation Shipowners Liability 1924; International Convention for the Unification of Certain Rules Relating to the Limitation of Liability of Owners of Sea-Going Vessels 1924; Limitation Shipowners Liability 1957; International Convention Relating to the Limitation of the Liability of Owners of Sea-Going Ships 1957; Limitation Shipowners Liability 1979; Protocol Amending the International Convention Relating to the Limitation of the Liability of Owners of Sea-Going Ships 1979; Convention on Limitations of Liability for Maritime Claims 1976; and Protocol of 1996 to Amend the Convention on Limitation of Liability for Maritime Claims 1976.

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