Introduction

In the context of a salvage and towage operation performed by a Chilean tugboat close to the Strait of Magellan, the tugboat's owners constituted a limitation fund in Chile in order to respond to the damages suffered by the different parties in connection with the subsequent sinking of the towed vessel. The owners based their request on being the owners and proprietors of the tugboat.

The plaintiffs opposed the fund's constitution, arguing – among other things – that, under Chilean law, salvors are not entitled to limit their liability.

Tonnage limitation of liability

The Chilean tonnage limitation regulations (ie, Articles 889 to 904 of the Commercial Code) are inspired by the Brussels Convention 1957 and the Convention on the Limitation of Liability of Shipowners 1976.

With respect to tonnage limitation figures, the Commercial Code follows the 1976 convention.

Under Article 889 of the Commercial Code, the owner (ie, the "person or corporation, whether or not the proprietor of the vessel, who trades or dispatches it under his [or her] name"),(1) can limit its liability in the following cases:

  • death or personal injury and damage to property on board;
  • death or personal injury caused by any person for whom the owner is responsible, whether on board or ashore (in the latter case, the acts must relate to the ship's operation or the loading, discharging or carriage of relevant goods);
  • loss of or damage to other goods, including cargo, caused by the above person or people, grounds, places and circumstances; and
  • resulting liability concerning the damage caused by a vessel to harbour works, dry docks, basins and waterways.

Besides the shipowner, other people entitled to limit their liability under the Chilean tonnage regime include:

  • the shipowner's staff;
  • liability insurers;
  • the operator,(2) carrier, charterer and ship's proprietor, if different to the shipowner's staff; and
  • individual employees in the previous bullet point, including the master and crew members, if sued.

Procedure for establishing limitation

The procedure for establishing a limitation fund in connection to general civil liability is regulated by Article 1,210 et seq of the Commercial Code and is mainly based on Articles 11 to 13 of Chapter III of the 1976 convention.

Case study

Facts On January 16 2009, during a voyage from Punta Loyola, Argentina to Punta Arenas, Chile, the captain of a fishing vessel transporting approximately 9,506 gold bullions reported steering problems while navigating in adverse weather conditions and sought rescue assistance. The crew were evacuated successfully by an Argentine navy helicopter leaving the boat afloat and steaming ahead. Despite attempts by a Chilean tugboat to rescue the fishing vessel, the latter sank. The tugboat owners filed a request to constitute a limitation fund before the Valparaiso Second Civil Court for the potential liability associated with the sinking of the fishing vessel. The request was based on the company's capacity as shipowner of the tugboat.

Two opposition claims were filed against the constitution of the limitation fund. In this respect, one of the grounds argued by the plaintiffs was that the owners had acted as an assistant or salvor and that this capacity – in their view – did not warrant the benefit of being able to limit their liability.

Decision The Valparaiso Second Civil Court rejected the different opposition grounds alleged by the plaintiffs and upheld the limitation fund. As regards the specific allegation that in Chile salvors would not be entitled to limit liability, the court held that Article 889 of the Commercial Code expressly provides that a shipowner can limit its liability without excluding its faculty for being, simultaneously, salvor of another vessel.

According to the Valparaiso Second Civil Court, the correct manner of interpreting the laws applicable to this case involves affirming that the salvor or assistant, which is also the proprietor and shipowner of the rescuing vessel, can limit its liability. Further, the conclusion is even broader: if the salvor holds any of the capacities in respect of which the right to limit liability exists, said salvor can do so.

Subsequently, both the Valparaiso Court of Appeals and the Supreme Court upheld the Valparaiso Second Civil Court judgment.

Comment

The decision examined above is one of the most relevant substantive decisions confirmed by the Supreme Court and should provide future certainty in safeguarding salvors' rights to limit their liability.

For further information on this topic please contact Ricardo Rozas at JJR Abogados by telephone (+56 2 580 9300) or email (rrozas@jjr.cl). The JJR Abogados website can be accessed at www.jjr.cl.

Endnotes

(1) Article 882(1) of the Commercial Code.

(2) According to Article 882(3) of the Commercial Code, the 'operator' is "the person who is not the owner but who executes transport and other vessel exploitation contracts according to a power of attorney granted by the former, assuming liability therefrom".

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