On 8 June 2015, the limits of an owners’ liability for a maritime incident under the Convention on Limitation of Liability for Maritime Claims (LLMC) 1976 will rise by 51%1 under the “tacit acceptance” procedure pursuant to Articles 8.7 and 8.8 of the 1996 Protocol to the LLMC.

Member States voted to increase the limits at the 99th session of the IMO (16-20 April 2012), driven partly by the view that the existing limits are insufficient to cover likely claims, in particular the consequences of a bunker spill. The PACIFIC ADVENTURER spill in Queensland (2009) was specifically cited as justification, and the rise was deemed necessary to “keep pace with the real costs of compensating victims” and for“limits to be sufficient to meet demands”. Calls for a higher increase were rejected on the grounds any increase had to reasonable to ensure affordable insurance was available. Further the concept of limitation requires some claims to exceed limit to avoid the LLMC being rendered redundant.

No enabling domestic legislation is required to bring the Amended 1996 Protocol limits and for incidents after 8 June 2015, the higher limits shall automatically apply in any contracting State. The limits cannot, however, be reviewed again until 2020, meaning there should be no further increase until 2023.

Illustrated Examples

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US$1.41135:1SDR (20 February 2015)

Comment

Insurers should keep the increased limits in mind when managing a major maritime claim, in particular when setting an appropriate reserve for their maximum likely exposure on any file. It may also be that when assessing potential jurisdictions for limiting one’s liability, questions of “what” claims can be limited may become more important than simply to what level. Finally, in the context of cargo claims, one should not forget the package limitation defence available under Article IV 5(a) of the Hague-Visby Rules, in addition to the global tonnage limitation regime under the LLMC.