Seismic Shipping v. Total E&P UK (CofA)
The Court of Appeal has confirmed that setting up a limitation fund under the 1976 Limitation Convention is not a pre-condition of the right to limit liability, nor of the court's jurisdiction to hear and determine a limitation claim. That jurisdiction exists even if there is no action in the jurisdiction in respect of a claim subject to limitation. But it found no grounds to grant an anti-suit injunction restraining parallel limitation proceedings in Texas. It was for the Texas court to decide whether or not to recognise the English limitation decree
DMC Category Rating: Confirmed
This case note is based on an Article in the August 2005 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website
The claimants admitted liability and, in November 2004, issued proceedings in England seeking to limit their liability under the Merchant Shipping Act 1995, which implements the 1976 Limitation of Liability for Maritime Claims Convention into English law. The tonnage of the vessel was 5,975 tons, so under the Convention, liability would be capped at 2.59 million Special Drawing Rights (about US$3.8 million).
On 24 January 2005, the defendant filed an original complaint in the United States District Court for the Southern District of Texas, claiming damage to property and lost production and business interruption losses of US$9.9 million. The United States is not a signatory to the 1976 Convention. The limitation provisions that apply in Texas far exceeded the value of the defendant's total claim.
The defendant then applied to the English court for a declaration that it had no jurisdiction and for an order dismissing the claim. The claimants responded by applying for summary judgment and for an anti-suit injunction restraining the defendant from pursuing the proceedings in Texas.
At first instance, the judge held that the claimants were entitled to judgment in the form of a restricted limitation decree which limited their liability to 2.59m Special Drawing Rights. The liability in pounds sterling was £2,089,383.67 with simple interest of £43,118.58, making a total of £2,132,502.25.
But the judge was not prepared to grant an anti-suit injunction to prevent the defendant from continuing with the action in Texas, as the Texas court had not yet considered what effect, if any, the limitation decree in the English court would have upon its proceedings. Both parties appealed.
Article 10 of the Convention, however, provides that "Limitation of liability may be invoked notwithstanding that a limitation fund as mentioned in Article 11 has not been constituted … If limitation of liability is invoked without the constitution of the limitation fund, the provisions of Article 12 shall apply correspondingly…"
The defendant relied on Article 11 to argue that the claimants were precluded from limiting their liability. The only circumstances in which a party in the position of a shipowner or demise charterer can launch limitation proceedings is when underlying legal proceedings or arbitration proceedings have been instituted in the same jurisdiction. Neither the 1976 Convention nor the 1995 Act contemplates the possibility of a pre-emptive strike brought by a shipowner before any such proceedings have been brought by a person with a claim arising out of a particular incident.
There is no general jurisdiction provision in the Convention that sets out where rights of limitation can, or cannot, be invoked. In principle, therefore, it allows a party to limit its liability in any contracting state which has personal jurisdiction over the defendant. Neither Article 10 nor Article 11 contains any restriction that states, expressly or impliedly, that a party cannot begin limitation proceedings without first setting up a fund. This is unsurprising because, in some cases (such as in this one) there might be only one claim arising out of a particular casualty.
The Civil Procedure Rules also recognise that the constitution
of a fund is not mandatory. Rule 61.11 provides that, when a limitation decree
is granted, the court may order the claimant to establish a fund if one has not
been established or make other arrangements for payment of claims against which
liability is limited. This allows the court in some, albeit fairly rare,
circumstances, to require the claimant to make payment rather than set up a
fund. Where, as here, there is only one claim against the shipowner, a fund
would serve no useful purpose.
But the Court of Appeal also agreed with the judge that there were no grounds for granting the claimants an anti-suit injunction restraining the proceedings in Texas.
Where concurrent proceedings have been issued in England and in a foreign jurisdiction, the English court will only grant an anti-suit injunction when justice requires it. The court is always careful to emphasise that the injunction is not an order directed against the foreign court, but against the parties who issued or threaten to issue those proceedings (Donohue v Armco Inc and others  1 UKHL 64). If, however, the foreign court is in a European state that is party to the Brussels or Lugano Conventions or the Jurisdiction Regulation 44/2001, the English court has no power to grant an anti-suit injunction, even if the foreign proceedings are an abuse (Turner v Grovit (Case C - 159/02,  2 Lloyd's Rep 169).
In deciding whether to grant the remedy, the court will look at all the circumstances of the case. It must be persuaded that England is the more appropriate forum and that the foreign proceedings are "vexatious and oppressive or unconscionable" (General Star International Indemnity v Stirling Cooke Brown Reinsurance Brokers Ltd  EWHC 3). An example might be where the foreign proceedings have been brought in breach of an exclusive English jurisdiction clause.
No jurisdiction clause, however, was involved in this case so the claimants had to persuade the court that the proceedings in Texas were unconscionable in some other way.
But the Court of Appeal found it was not possible to say that the proceedings in the US were unconscionable simply because they were brought in accordance with US limitation provisions rather than the Convention. The mere fact that there were concurrent proceedings in two jurisdictions was not enough. For the present, the Texas court had stayed its proceedings pending this appeal. It was now a matter for it to decide whether or not to recognise and enforce the English limitation decree.
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