ICL Shipping Ltd. & Anor v Chin Tai Steel Enterprise Co Ltd. & Ors

Under Article 11.1 of the 1976 Convention, “legal proceedings” include arbitration proceedings. A shipowner may therefore constitute an English limitation fund where the underlying maritime claim is being arbitrated in England. CPR 61.11(5)(c) permits service out of the jurisdiction in limitation proceedings founded on the Convention once the fund has been constituted. Article 13.2 is territorially confined: it permits release only of ships, property or security within the jurisdiction of a State Party. Security given in a non-State Party, even if supported by an English-law undertaking and a London arbitration, is outside the provision. A limitation fund may be “actually available” under Article 13.3 before a limitation decree, provided it has been established in accordance with the applicable procedure and remains available subject to the claimant’s right to challenge limitation.

The claim arose from the loss of cargo following the sinking of the ICL VIKRAMAN. Cargo interests arrested a sister ship in Singapore, which is not a party to the 1976 Convention, and obtained a letter of undertaking as security for their claims. Their claims were later referred to London arbitration, where Chin Tai obtained an award.

ICL constituted a limitation fund in England and obtained an injunction restraining enforcement of the undertaking. Chin Tai applied to set aside service of the limitation claim form and the injunction. ICL sought release or return of the undertaking under Article 13.2. The central issues were whether arbitration constituted “legal proceedings” under Article 11.1, whether CPR 61.11(5)(c) permitted service out, whether Article 13.2 applied to Singapore security, and whether the fund was “actually available” before a limitation decree.

1. Limitation fund. ICL was entitled to constitute a limitation fund in England. Although “legal proceedings” ordinarily suggested court proceedings, Article 11.1 had to be construed consistently with the Convention’s purpose and the established use of arbitration in maritime claims. The commencement of arbitration therefore satisfied Article 11.1. The reasoning in The Merak [1965] p223 supported that construction, while the narrower approach in Son Shipping Co Inc v De Forse & Tanghe, Solel Bond Ltd (1952) AMC 1931 was not followed.

2. Service out. CPR 61.11(5)(c) was construed as referring to a claim to limit and as including the 1976 Convention as an applicable convention. Once the English fund had been constituted, the Admiralty Court had jurisdiction to permit service of the limitation claim form on Chin Tai. The Leerort [2001] 2 Lloyd’s Rep 291 supported construing the Rules consistently with the Convention.

3. Article 13.2. Article 13.2 operates only in relation to additional security within the jurisdiction of a State Party. The Singapore arrest and the LOU were part of the continuing Singapore proceedings, and the Singapore court retained immediate control over the security. Since Singapore was not a State Party, Article 13.2 could not provide a basis for restraining Chin Tai from enforcing the LOU.

4. Article 13.3. If Article 13.2 had applied, the absence of a limitation decree would not have prevented release. The court preferred the approach in The Bowbelle [1990] 1 WLR 1330 to the obiter observation in The BOS 400 [1998] 2 Lloyd’s Rep 461. A fund is actually available when established under the relevant procedure, unless and until the claimant proves that the shipowner is not entitled to limit.

5. The court held that ICL could constitute the English fund and obtain permission to serve out, but that security located in Singapore was outside Article 13.2. The issue whether the injunction should nevertheless be discharged, and how discretion should be exercised, was reserved for further argument.

First-instance decision. The judgment records an earlier order by Moore-Bick J permitting service out and granting an injunction, but does not provide a citation for that order.