MAKE a big mistake in any other industry and you and your insurers are entirely on the hook for the consequences. Shipowners, however, enjoy the unique right to limit liability.

In 50 countries, our industry owes this happy situation to the 1976 Convention on Limitation of Liability for Maritime Claims. There is a similar mechanism in the US, under domestic legislation dating back to 1856.

The privilege is not quite unqualified. There are exceptions for intentional or reckless acts, or in the American case, “privity or knowledge” of unseaworthiness.

But broadly speaking, if a shipping casualty kills people, results in a massive oil spill or leads to huge loss or damage to property, the payout is capped according to strict formulas.

The principle has been around since the 18th century, in recognition of huge risks involved in getting cargoes from A to B. These obviously go well beyond taking a share stake in a limited company.

Expect to hear a lot more on this subject in the next few years, as litigation surrounding the Baltimore bridge collapse makes its way through the US legal system.

The owners and managers of boxship Dali (IMO: 9697428) have understandably filed for limitation, as is their right. Equally understandably, the state of Maryland and the families of the six workers who lost their lives in the incident are contesting their claim.

For marine insurers, especially those that make up the International Group of P&I clubs, there are literally billions of dollars at stake.

This side of the pond, the Supreme Court yesterday handed down a limitation decision that is bound to rank among the major shipping law decisions of 2025.

MSC v Conti revolves around a casualty 13 years ago, when a boxship caught fire in mid-Atlantic, killing three seafarers.

Conti, as shipowner, footed a huge bill to get the stricken MSC Flaminia into the safe port of Wilhelmshaven in Germany.

It launched a claim against time charterer Mediterranean Shipping Co, which is believed had carried dangerous chemicals in contravention of the charterparty and was awarded $200m at arbitration.

MSC sought limitation and the two sides fought it out in the High Court and Court of Appeal, both of which essentially found for Conti.

Lord Hamblen’s findings overturned the Court of Appeal on the main point at issue. Charterers do have an extensive, if not quite unqualified, right of limitation against registered owners, he held.

Lloyd’s List secured an exclusive interview with Twenty Essex barrister KC Julian Kenny, who acted for MSC.

The outcome won’t be welcomed by everybody, of course. But as Kenny explained, it’s good news for shipping, not least for the clarity it provides for the market.

We’ll be unpacking it further with more interviews and comment in the days ahead.

Meanwhile, my colleague Joshua Minchin and I are in the process of producing a podcast on the repercussions of what happened in Baltimore. It’s shaping up to be a good one.

But let’s just conclude that shipowners should thank their lucky stars for limitation, which wasn’t open to Big Tobacco in 1998 or Apple and Samsung in the “smartphone wars” of 2012.

David Osler
Law and marine insurance editor, Lloyd’s List

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