In re Otal Investments - m/v "Kariba"
The United States District Court for the Southern District of New York denied a motion to dismiss the in rem claim of a U.S. Limitation of Liability Act ("Limitation Act") plaintiff against another vessel involved in a collision on the grounds that a similar limitation proceeding brought by the other vessel owner pursuant to the 1976 Limitation of Liability Convention (the "Convention") in the Netherlands, to which the United States is not a signatory, only recognized in personam and not in rem liability. The District Court refused to extend international comity and give extraterritorial effect to the Dutch proceedings as they were prejudicial and contrary to U.S. policy permitting enforcement of maritime liens against vessels through in rem actions.
DMC Category: Confirmed
This case note has been prepared by Matthew H. James of Healy & Baillie, LLP in New York. Healy & Baillie are the International Contributors to this website for the United States.
Soon thereafter, Otal filed a complaint for exoneration from or limitation of liability in the Southern District of New York pursuant to the U S Limitation Act and sought contribution and indemnity from the other two vessels for any amounts for which Otal might be found liable. Otal then filed an action against the M/V Clary in the Southern District of Georgia for hull and machinery damages and lost income. In order to avoid the impending arrest of the M/V Clary upon her arrival in Georgia, her P&I club issued a Letter of Undertaking to Otal. Otal thereupon dismissed the action in the Southern District of Georgia and amended its claim in the Southern District of New York to include the hull and machinery damages and lost income claims. The owners of the M/V Clary then filed a motion in New York to dismiss the in rem claim against the vessel, arguing that it was duplicative of Otal’s claim in the Dutch proceedings.
The owners of the M/V Clary argued that permitting the in rem claim to proceed would be inequitable as it would effectively require security in two different jurisdictions. The District Court rejected this argument as (1) there would be no recovery under either fund if the M/V Clary prevailed, (2) the P&I Club’s Letter of Undertaking in the United States did not result in any additional premiums paid by her owners, and (3) Otal agreed to withdraw its claim in the Netherlands if it prevailed in its Limitation Action in the United States, thus preventing a double recovery.
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