Background
National Implementation
Proposed Amendments
Because shipping is such a high-risk industry, participants have always sought to spread, allocate and limit their risk exposure. Ship owners have long had a legal right to limit their liability, and the prevailing international convention regarding the limitation of liability in connection with maritime claims is the London Convention of 1976.
The convention has subsequently been amended, most recently by a protocol in 1996 which has not yet come into force. However, Norway has adopted both the convention and the protocol. The provisions in the protocol have been implemented in the Norwegian Maritime Code of 1994. The main difference between the two is that the limit of liability under the protocol is significantly higher than under the convention.
Under Norwegian law, the main rule is that the 1996 protocol applies whenever limitation of liability is pleaded before a Norwegian court. However, where the ship owner is a resident of a state that has adopted the London Convention, but not the protocol, the convention limitation regime applies.
Once a petition is filed for arrest or other enforcement proceedings, or a suit is filed against a ship owner who is entitled to limit liability, a limitation fund can be established. The owner must not pre-empt the creditors by establishing a fund himself. He must wait until arrest or other conservatory proceedings have been commenced.
The right to limitation only includes claims against the ship owner. The ship owner's own costs for limiting the damages are not subject to limitation, and therefore the ship owner cannot demand that these costs be taken into consideration upon disbursement of the limitation fund.
The costs of cleaning up after a shipping accident often exceed the total in the limitation fund, and in some cases the National State Pollution Control Authority has tried to make the ship owner cover the remaining costs.
Both the London Convention and the 1996 protocol allow contracting states to reserve the right not to apply the limitation to claims for raising, removing, destroying or rendering harmless a vessel that has sunk, run aground, been abandoned or become a wreck. This includes includes all equipment on board the vessel, in addition to claims for the removal, destruction or rendering harmless of the cargo carried by the vessel as mentioned in Article 2(1)(d) and (e). However, so far Norway has not reserved its rights.
Additionally, provisions in the Norwegian Pollution Act cover the responsibility for costs incurred in cleaning up pollution. There are no provisions regarding limitation of liability in the act, although the prevailing view is that the Maritime Code has priority.
This problem has been recognized by the Maritime Code Committee. In the committee's White Paper (NOU 2002:15) it suggested that the Maritime Code be amended, in order to exempt claims in connection with cleaning up after shipping accidents (including wreck removal) from the general limitation rules, and instead subject them to a separate limitation regime (for vessels above 300 gross tons).
According to the committee, the separate limitation regime must be sufficient to cover the costs of the clean-up operation, independently of other claims arising from the same incident. The committee suggests setting the new limitation at Nkr3 million for vessels up to 1,000 gross tons. For every increase in gross tonnage between 1,001 and 10,000 the limitation would be increased by Nkr1,000, and for every increase from 10,001 the limitation would increase by Nkr500. These limits are to be reviewed and adjusted after five years.
The Maritime Code Committee has also suggested that ship owners' own costs in connection with the clean-up operation, should compete equally with other claims upon the disbursement of the limitation fund. The committee has recognized that the existing rules do not give the ship owner an incentive to take action to prevent or limit damage.
For further information please contact Trond Eilertsen at Wikborg, Rein & Co by telephone (+47 22 82 75 00) or by fax (+47 22 82 75 01) or by email ([email protected]).
aspxl">disclaimer.