Vessel SA v CP Ships (UK) Ltd

The High Court has jurisdiction to entertain limitation proceedings even where no substantive claim has yet been brought against the claimant in England. Article 11 of the 1976 Convention governs when a limitation fund may be constituted; it does not restrict the court’s jurisdiction to grant a limitation decree. Article 10 expressly permits limitation to be invoked without a fund having been constituted and leaves procedural questions to the law of the state where the action is brought. A fund may be constituted before or after the decree. There is no automatic obligation to constitute one, although the court may order it where appropriate.

The claimant owners of two vessels commenced limitation proceedings after a casualty in the River Plate. Cargo interests had brought or threatened claims in Argentina, while shipping lines, including the defendant, had obtained security for possible English proceedings.

The defendant applied to set aside the limitation proceedings, arguing that the court lacked subject-matter jurisdiction because no claim had yet been brought in England and Article 11 of the 1976 Convention required existing proceedings before a limitation fund could be constituted. The central issue was whether the absence of an existing English claim prevented the claimant from seeking a limitation decree.

1. Application dismissed. The court had jurisdiction to entertain the limitation proceedings. Section 20 of the Supreme Court Act 1981 includes an action by shipowners or other persons under the Merchant Shipping Act 1995 for limitation of liability. It contains no requirement that a claim must already exist against the shipowners in the same jurisdiction.
2. Articles 10 and 11 of the 1976 Convention did not impose such a restriction. Article 11 limits the entitlement to constitute a fund to a state party in which legal proceedings have been instituted. Article 10 makes clear that limitation may be invoked even though no fund has been constituted, and that procedural questions are governed by the national law of the state in which the action is brought.
3. Part 61.11, rule 13 of the English rules of court gives the court discretionary powers after a limitation decree, including staying proceedings and ordering establishment of a fund. The rule does not make constitution of a fund an automatic consequence of the decree.
4. The court rejected the submission that a fund must be constituted immediately after a decree. A fund may be constituted at any stage after legal proceedings have been instituted, whether before or after the decree. The court may impose an obligation to constitute one if appropriate, but there was no such automatic obligation.
5. The decision in ICL Vikraman [2004] 1 Lloyd's Rep. 21 concerned a different issue and did not determine whether limitation proceedings could initially be issued without existing proceedings. It was nevertheless consistent with the possibility that no defendants might yet have commenced proceedings in England.
6. The claimants were awarded costs on the standard basis, assessed at £9,711, payable within 14 days.