Limitation Conventions and Forum Non Conveniens – Strategically Navigating Different Regimes for Maritime Claims
Frazer Hunt, Partner, Maurice Lynch, Special Counsel and Diana Lee, Law Graduate, Mills Oakley, Australia
When a shipowner is sued for personal injury or damage to property in connection with the operation of their ship, the maximum amount that a claimant can be compensated is limited in many jurisdictions around the world by either international conventions or domestic laws. Significantly, depending on which regime applies, and a nation’s own domestic laws, the maximum compensation amount that the shipowner can pay to the claimant can significantly differ.
The different regimes for maritime claims across jurisdictions raise a number of intertwining legal and commercial implications. Firstly, a shipowner has an obvious commercial interest in having any maritime claims decided in a jurisdiction where an international convention or domestic laws with a low limit on liability applies. Conversely, a claimant would seek to maximise their compensable amount by having the matter decided in a jurisdiction where a high limit or no limits on compensation amounts applies. Secondly, and relatedly, due to the competing interests of a shipowner and a claimant, a forum non conveniens dispute can often arise as each party attempts to have the matter decided in a jurisdiction commercially favourable to them.
In this article, we will explore the substantial differences in compensable amounts between the Convention on Limitation of Liability for Maritime Claims 1976 (1976 Convention) and the Protocol of 1996 to Amend the Convention on Limitation of Liability for Maritime Claims 1976 (1996 Protocol) and the legal principles underpinning forum non conveniens and how they apply in the context of maritime claims. We will also discuss the MV Milano Bridge litigation where the claimant is represented by Mills Oakley, which involves the South Korean, Japanese and Hong Kong jurisdictions.
Overview of different maritime regimes and comparison of the 1976 Convention and 1996 Protocol
Countries have either adopted international conventions or apply their own domestic laws regarding maritime claims. Currently, 63 states have ratified the 1996 Protocol, including Australia, which comprise approximately 70% of the world’s shipping tonnage, meaning that the limitations in the 1996 Protocol will likely apply to a majority of maritime claims. However, some countries, such as Egypt, Bahamas, Iran and Mexico have only ratified the 1976 Convention and not the 1996 Protocol, meaning that the limitations in the 1976 Convention apply. Additionally, some countries, such as the USA, China, Korea, Panama and Brazil have not adopted either conventions, and apply earlier conventions or implement domestic laws regarding maritime claims.
The maximum amount that a claimant can be compensated for by shipowners vary substantially between conventions and domestic laws, and this is highlighted by a comparison between the 1996 Protocol and the 1976 Convention. For example, the minimum limitation amount in the 1976 Convention for personal injury claims, which is 333,000 Special Drawing Rights, was increased substantially through the 1996 Protocol and its subsequent amendments and is now 3.02 million Special Drawing Rights. This means that in US dollars, the minimum limitation amount has increased from approximately USD 466,200 to USD 4,228,000.00. For ships of higher tonnage levels, the compensation amounts differ by approximately 360% between the 1976 Convention and the 1996 Protocol. Accordingly, depending on whether a state has ratified the 1996 Protocol or not, the differences in the amounts that a claimant can be compensated for by a shipowner will be significant. Accordingly, parties involved in a maritime claim need to strategically assess which jurisdiction associated with the maritime claim applies a limitation regime that is favourable to them and determine how proceedings can be instituted in that jurisdiction. In this, the law of forum non conveniens is likely to be crucial.
What is forum non conveniens?
Forum non conveniens is a common law principle meaning “inconvenient forum”, where a Court acknowledges that it is an inappropriate forum for the determination of a proceeding and declines to exercise its jurisdiction.
The test for determining whether a Court is forum non conveniens differs between jurisdictions. In the United Kingdom, the Court decides whether it is the appropriate forum to determine the proceedings. In Australia, the threshold for a forum non conveniens order is higher, requiring that the Court be a “clearly inappropriate forum” pursuant to Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 239. To determine whether it is a clearly inappropriate forum, the Court considers factors such as the parties’ place of residence, where the incident occurred and the governing law of relevant contracts.
In the context of the globalised shipping industry, these factors could be associated with multiple jurisdictions. Indeed, it is common for the place of residence of the shipowner and crew members, registration of the vessel, the governing law in relevant documents and the subject incident to be associated with different jurisdictions. Accordingly, depending on the circumstances, a party seeking a forum non conveniens order can have ample legal and factual bases for claiming that the jurisdiction in which proceedings are commenced is inappropriate, and another jurisdiction is more appropriate.
MV Milano Bridge case study
The need to strategically navigate multi-jurisdictional maritime claims is illustrated in a large claim against a shipowner involving the Japanese, Hong Kong and South Korean jurisdiction where Mills Oakley is currently representing the claimant. The shipowner’s vessel, MV Milano Bridge, crashed into into four cranes owned by the claimant while attempting to berth at Busan port in South Korea, resulting in total destruction of one of the cranes and millions of dollars’ in other losses. The shipowner was incorporated in Japan while the claimant was incorporated in South Korea where the loss occurred.
While South Korea has not ratified the 1976 Convention, its domestic maritime regime largely mirrors the 1976 Convention, including its limitations on compensable amounts. Japan and Hong Kong on the other hand, has ratified the 1996 Protocol, meaning that its high limitations on compensable amounts apply in those jurisdictions. The limitation applicable in Korea is approximately USD 23,000,000 and the limitation applicable in Hong Kong and Japan is approximately USD 83,000,000. The loss exceeds USD 83,000,000.
Prior to the vessel owner commencing limitation proceedings in Korea, the claimant did the following:
- arrested a sister ship of the vessel which damaged the cranes when it called into Hong Kong to commence in rem proceedings and to obtain jurisdiction as of right in Hong Kong; and
- commenced in personam proceedings in Japan against the vessel owner who is domiciled in Japan.
In response, in order to strengthen the connection of the dispute to Korea, in addition to commencing limitation proceedings in Korea, the vessel owner commenced proceedings against the owner of the cranes alleging it was responsible for the allision in an attempt to reinforce the application of the lower limits of liability in Korea.
Regarding the proceedings in Hong Kong and Japan, the vessel owner asserts that these should be stayed on the basis of forum non conveniens. At a first instance decision in Hong Kong the Court found Hong Kong was a forum non conveniens but that decision is the subject of an appeal which will be heard in November 2021. The Japanese Courts apply a different concept to forum non conveniens have not yet decided on the issue.
The differences in maritime regimes across jurisdictions raise complex legal and commercial considerations that need to be strategically navigated by both shipowners and claimants. What is clear is that the limitation provisions in the 1976 Limitation Convention are outdated and have not kept up with inflation and so a harmonised approach is needed. Having a universal maritime regime which is more reflective of the nature of global shipping today and the size of assets involved will require more States to ratify international conventions such as the 1996 Protocol. This will reduce forum non conveniens disputes, make maritime claims simpler, faster and cheaper to run, and will provide certainty in relation to limitation and recovery actions. In the meantime, the principle of forum non conveniens will be crucial for achieving a commercially favourable outcome for clients involved in multi-jurisdictional maritime claim.