The Dutch Supreme Court ("DSC") has ruled on how to qualify for recourse claims relating to wreck removal costs and the raising of cargo under the Convention on Limitation of Liability for Maritime Claims ("LLMC”).
The case concerns the collision of the seagoing vessel Wisdom with the inland waterway vessel Riad nearby Rotterdam, which caused the Riad and its cargo to sink. Dutch authorities removed the vessel, which was a total loss, but recovered its cargo. The owner of the Riad’s cargo reimbursed the Dutch authorities for the wreck removal and for raising the cargo. After the owner of the Wisdom was held liable for the collision, it petitioned the court of Rotterdam to limit its liability. The court granted this request and the Wisdom’s owner and insurers reserved funds and invoked limitation.
The LLMC Convention allows the owner of a seagoing vessel to limit its liability for certain claims, including claims relating to the loss of cargo and wreck-removal costs. A ship owner wishing to limit its liability should provide a limitation fund containing a deposit determined by the LLMC, which is usually lower than the actual damages after a collision.
The LLMC (article 2, paragraph 1) describes the claims subject to limitation. Claims regarding the removal of a shipwreck and its ancillary cargo are also subject to limitation (article 2, paragraph 1 d-e), but these claims have a special position under the LLMC. Article 18, paragraph 1 provides that contracting states may exclude these claims from the LLMC.
The Netherlands chose to implement the LLMC, but decided to make an exclusion per article 18, which states that – under Dutch law – the last category of claims are excluded from limitation under the general limitation fund. This exclusion does not mean that ship owners are not able to limit their liability for claims for the removal of a shipwreck and the raising of its cargo. Under Dutch law, ship owners can limit their liability with a separate domestic wreck fund, in addition to the general limitation fund.
Since Dutch law was applicable, the hull insurer of the Wisdom provided a deposit to the general limitation fund, and the P&I insurer provided one to the domestic wreck fund. The Wisdom’sownerargued that the recourse claim for the removal of a shipwreck and the raising of its cargo does not qualify as a claim for the removal of a shipwreck. If the recourse claim doesn’t qualify as such, the claim would be subject to the general limitation fund, and the recourse claim would not be subject to the domestic wreck fund. The reason for this argument is financial gain for the ship owner and its P&I insurer: if the claim does not qualify, the money deposited in the domestic wreck fund would be returned. Another consequence might be that the total claim in the general limitation fund would increase significantly, weakening the position of the different claimants intending to invoke the general limitation fund.
In a decision that impacts recourse claims for shipping in Dutch waters, the DSC ruled that a recourse claim relating to wreck removal and the raising of cargo qualifies as a claim per article 2 paragraphs d-e LLMC. In practice, this means that recourse claims for wreck removal and cargo recovery are subject to the domestic wreck fund.
According to the wording of article 2 LLMC, the basis of a claim has no bearing on the qualification of a claim: "… whatever the basis of liability may be … even if brought by way of recourse or for indemnity under a contract or otherwise…"
In other words, it is not relevant what the legal ground of the claim is, nor is it relevant if a claim is invoked by way of recourse.
Furthermore, the DSC ruled that paragraphs d-e LLMC of article 2 refer to wreck removal and cargo recovery, which follows from the travaux préparatoires and the convention’s wording. Therefore, recourse claims arising out of the removal of a wreck and its cargo are qualified as claims in article 2 paragraphs d-e LLMC.
Based on this decision, the cargo owner is allowed to make a claim under the domestic wreck fund.
Source: DSC 2 February 2018, ECLI:NL:HR:2018:140 (Wisdom/Riad)
On Law-Now: Dutch Supreme Court decision on recourse claims under LLMC 1976