On Friday 2 February 2018 the Dutch Supreme Court dealt with the issue of whether recourse claims for raising and removal of vessels and their cargo (i.e. salvage costs) can be limited by putting up a property fund in two separate cases. The Supreme Court answered this question negatively: a wreck removal fund must be formed according to the Dutch national regime in order to be able to limit liability for such claims.

Factual background

Both cases concern a collision. Chronologically, the first collision took place on 13 October 2008, when the inland barge ‘Riad’ was hit by the seagoing vessel ‘Wisdom’ on the river Oude Maas. Following the collision, the ‘Riad’ and her cargo of ferrochrome sank. The Dutch State removed ‘Riad’ and her cargo. The ‘Riad’ was considered a total-loss. The cargo, however, was relatively unharmed and quite valuable. In order to have their cargo released, cargo interests paid the Dutch State an amount just under € 600.000,- for the removal costs. Parties interested in the ‘Riad-cargo’ and parties interested in the ‘Riad’, held the owners of the ‘Wisdom’, Amasus, liable for the damage and costs. Amasus pursuantly applied for limitation of its liability at the Rotterdam District Court, which application was granted. Hull and machinery underwriters of the ‘Wisdom’ put up the property fund. Amasus’ P&I Club put up the wreck removal fund.

Amasus argued that a large part of ‘Riad-cargo’ claims should not be accepted in the wreck removal fund, but rather belonged in the property fund. If that line of reasoning would be followed, the total amount of claims submitted to the wreck removal fund would probably be so low that the majority of the fund would ultimately be returned to Amasus’ P&I Club. The total amount of claims in the property fund would however increase, resulting in the dilution of the claims of creditors in the property fund. As a consequence, a substantially lower total amount would be recoverable for parties interested in the 'Riad-cargo' and the owners of the ‘Riad’.

The second collision occurred between the m.v. ‘Sichem Anne’ and the inland container vessel ‘Margreta’ on 11 January 2009. Parties interested in both vessels held each other liable for damage and costs and both parties put up property funds. Parties interested in the ‘Margreta’ submitted claims to ‘Sichem Anne’ for compensation of the costs paid to third parties for the re-floating of the ‘Margreta’ and her cargo. This case also prompted the question whether recourse claims for salvage can be limited by putting up a property fund.

Legal framework

Limitation of liability of seagoing vessels is based on the Convention on Limitation of Liability for Maritime Claims 1976 (‘LLMC’).  Article 2 LLMC sets out the kind of claims for which limitation is possible, being, inter alia, claims for damage to and loss of property originating on board of or in direct connection with the operation of the vessel or with salvage operations, and consequential loss resulting therefrom. The Convention provides contracting states with the possibility of a reservation for claims for costs in respect of, briefly summarised, the raising and removal of the vessel and its cargo. The Netherlands have opted for this reservation and determined in national legislation that parties should put up an additional wreck removal fund in order to limit liability such claims. The main consideration of the Dutch legislators in creating this legislation was that waterways should be free from obstacles and parties incurring costs for such purpose should not be forced to divide the property fund with other parties involved. That means the property fund is meant for claims falling within the scope of art. 2a LLMC; and a wreck removal fund will need to be put up in respect of raising and removal of vessels and their cargo (art. 2d and e LLMC jo. art. 8:752d and 2 DCC).

In both cases the debtors argued that the costs for raising and removal of vessels and the respective cargoes as submitted by the parties filing for such claims, should not be claimed in the wreck removal fund, but that such recourse claims should be claimed in the property fund. Such claims would no longer qualify as claims falling within the scope of art. 2d and e LLMC (“claims in respect of the raising, removal, destruction or the rendering harmless of a ship/its cargo”), as it concerns recourse claims.  These claims should therefore not fall within the scope of the wreck removal fund.

The Dutch Supreme Court’s decision

The Dutch Supreme Court holds that costs in respect of the raising and removal are costs in respect of raising and removal and remain so, regardless of the foundation for the claim as made in the fund. More specifically, the claims of the ‘Riad’ and its cargo interests for costs that were paid to the Dutch State in order to release the cargo, still fall within the scope of “claims in respect of the raising, removal, etc.”, also when such claims are filed as recourse claims and also when such costs have been made by another party than the Waterway Authorities.

When claims fall under the regime of art. 2d and e LLMC, they stay within that scope. Recourse claims for costs in respect of raising and removal can also fall under the definition of claims for which property funds can generally be put up. However, that does not mean that putting up a property fund suffices for a party seeking to limit its liability. When a state has opted to make the reservation of article 18 LLMC and provides for the possibility of a wreck removal fund in national legislation, costs for raising and removal can only be limited by putting up such a wreck removal fund. This specific regime pursuant to the reservation then takes precedence over the general regime of the LLMC.

Furthermore, the Supreme Court confirms that art. 3 LLMC, which dictates that it is not possible to limit liability for salvage remuneration claims, does not apply to recourse claims. The exclusion of art. 3 LLMC only applies for claims made by the salvor directly, according to the Supreme Court.

Comment

The Supreme Court decisions appear to be a positive development for creditors. The total amount of claims in the property fund will not be increased with recourse claims regarding the raising and removal of ships and their cargo. Collision debtors can limit their liability for such costs by putting up a wreck removal fund in the Netherlands, at least for the time being. There are currently plans underway to remove the possibility to limit liability for wreck removal costs. The Dutch government has opened a consultation for an amendment of the law for wreck removal. If these plans develop into a law, limitation of liability for claims in respect of raising and removal of ships and cargo in principle will no longer be possible in the Netherlands, also in the instance when such costs have been made as recourse claims or for the release of cargo.