MSC Mediterranean Shipping Company SA v Stolt Tank Containers BV & Ors

A charterer cannot limit its liability under the 1976 Convention on Limitation of Liability for Maritime Claims against a shipowner for loss suffered by that owner itself. Limitation may apply where the owner passes on liability arising from a third-party claim.

The distinction turns on the type and origin of the claim, not the capacity in which the charterer acted. This construction reflects the Convention’s single-limit and single-fund machinery and the common interest of those included within the definition of shipowner.

If such owner-to-charterer claims had been limitable, separate heads of loss would have required individual analysis under article 2 rather than characterisation as one indivisible damage claim.

An explosion and fire aboard the container ship “MSC Flaminia” caused extensive damage to the ship and cargo. The owner, Conti, incurred substantial expenditure on cargo handling, contaminated firefighting water, payments to public authorities and removal of burnt waste. Arbitrators held the time charterer, MSC, liable under the charterparty and awarded Conti approximately US$200 million.

Andrew Baker J held in [2022] EWHC 2746 (Admlty) that the disputed losses were outside article 2 of the 1976 Convention on Limitation of Liability for Maritime Claims. MSC appealed concerning four categories of expenditure. Conti’s respondent’s notice raised the anterior question whether a charterer could ever limit its liability for loss suffered by the actual owner itself, rather than liability passed on from a third party.

1. Appeal dismissed. A charterer falling within the extended definition of “shipowner” in article 1(2) of the 1976 Convention cannot limit its liability for a claim by the actual owner to recover loss suffered by that owner itself. It may limit where the owner passes on liability arising from a third-party claim. The distinction depends on the type and origin of the claim, not the capacity in which the charterer acted: paras 66–80.

2. Articles 9 to 11 establish a single liability limit and a single fund for the owner, charterer and other persons within the Convention’s definition of shipowner. Permitting the owner’s direct claim against the charterer to rank against a fund deemed to have been constituted by the owner would diminish the fund available to third-party claimants and undermine that common-interest structure. The previous conventions, the Convention’s object and purpose and its preparatory materials confirmed this construction: paras 61–79.

3. Alternatively, the judge’s characterisation of the disputed expenditure as one claim for damage to the ship was not a complete answer. A claim for a single breach of charter may comprise distinct heads of loss. Each head must be tested against the individual paragraphs of article 2(1): paras 81–83.

4. On the assumed basis that direct owner-to-charterer claims were limitable, the costs of removing, handling and decontaminating casualty-affected cargo fell within article 2(1)(e). The provision concerns the nature of the claim. It imposes no additional requirement that the expenditure must not also relate to ship damage or that it must have been incurred for a particular purpose: paras 84–89.

5. Article 2(1)(f) requires attention to the purpose of the relevant measures. Avoidance of limitable loss need not be their sole purpose; it must be their main or dominant purpose. That test was not satisfied because protecting the ship was at least an equal purpose of the salvage and refuge measures: paras 90–92.

6. Article 2(1)(a) requires consequential loss to result from property damage giving rise to a limitable claim. Although cargo damage was a factual precondition, the disputed expenditure was primarily caused by damage to the ship, which is not limitable by reference to that ship’s tonnage: paras 93–94.

Falk LJ and Sir Launcelot Henderson agreed with Males LJ: paras 95–97.

1. Court of Appeal (Civil Division): The court dismissed MSC’s appeal and upheld the conclusion that MSC could not limit its liability, principally on the ground advanced by Conti’s respondent’s notice: [2023] EWCA Civ 1007.
2. High Court, Admiralty Court: Andrew Baker J held that Conti’s disputed claims fell outside article 2 of the 1976 Convention and that MSC was not entitled to limit its liability: [2022] EWHC 2746 (Admlty).
3. Arbitration: Arbitrators held the vessel remained on hire, found MSC liable under the time charter and awarded Conti approximately US$200 million.