Bahamas Oil Refining Company International Limited v The Owners of the Cape Bari Tankschiffahrts GMBH & Co KG

A statutory right to limit maritime liability under the Convention on Limitation of Liability for Maritime Claims 1976, given force of law by section 3(1) of the Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989, may be waived or excluded by contract. The Convention does not prohibit contracting out. Clear and unequivocal language is required to abandon the right, whether expressly or by necessary implication. A general indemnity for loss and damage does not suffice where it can operate consistently with the Convention’s limit. The contract is construed against the known statutory background.

A vessel collided with a terminal berth in The Bahamas. The owners relied on statutory limitation, while BORCO relied on the Conditions of Use as an indemnity and as an exclusion of that limitation.

At first instance, Senior Justice Hartman Longley held that the owners had contracted out of their right to limit. The Court of Appeal reversed on the unargued basis that the Convention on Limitation of Liability for Maritime Claims 1976 made contracting out impermissible. The Privy Council considered whether waiver was legally possible, whether the Conditions of Use effected a waiver, and whether the Court of Appeal had acted unfairly.

The Board gave a single judgment and dismissed BORCO’s appeal in practical effect, while reaching a different conclusion from the Court of Appeal on the first issue.

1. Procedural fairness. The Court of Appeal ought not to have decided the contracting-out issue without giving the parties an opportunity to address it. The Board nevertheless decided the issue because both parties had made full submissions before it and the interests of justice favoured resolving an issue of general importance.
2. Construction of the Convention. International conventions must be construed by broad and generally acceptable principles, without domestic-law preconceptions. Ordinary meaning is considered in context and in light of the treaty’s object and purpose; preparatory materials are supplementary. The Board applied the approach adopted in CMA CGM SA v Classica Shipping Co Ltd [2014] EWCA Civ 114.
3. The Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989 added no distinct rule, since section 3(1) merely gave the Convention force of law. Articles 1.1, 2.1 and 2.2 conferred a right to limit liability and extended that right to claims based on contract or indemnity. The Convention contained no prohibition on a shipowner waiving the right. Article 4 addressed conduct barring limitation, not consensual waiver. Issue 1 was therefore answered affirmatively.
4. Construction of the Conditions of Use. A valuable statutory right is presumed to remain available unless the contract clearly and unequivocally excludes it, expressly or by necessary implication. The statutory regime formed part of the known background. Clause 4 imposed strict liability and an indemnity, but contained no reference to the Convention or the right to limit. It could operate coherently with article 2.2 as an indemnity subject to the Convention’s limit. The owners had not waived their right. Issue 2 was therefore answered negatively.
5. The reasoning in Clarke v Earl of Dunraven and Mount-Earl (The Satanita) [1897] AC 59 was not a general rule for merchant-vessel contracts. It was distinguished as concerning a reciprocal yacht-racing agreement and was not controlling in this case. The Board endorsed the closely analogous analysis in Sun Wai Wah Transportation Ltd v Cheung Kee Marine Services Co Ltd [2010] 1 HKLRD 833.
6. The Board advised that the owners were entitled to rely on limitation. Consequential issues concerning the limitation fund and costs were left for written submissions.

1. Privy Council. The Board answered that contracting out was legally permissible but had not occurred under the Conditions of Use. The owners therefore remained entitled to limitation under [2016] UKPC 20.
2. Court of Appeal of the Commonwealth of the Bahamas. Reversed the first-instance decision, holding on an issue not argued by the parties that articles 2.1 and 2.2 of the 1976 Convention prevented contracting out.
3. First instance. Senior Justice Hartman Longley held that the owners had contracted out of their statutory right to limit liability.