Article 13.2 LLMC. Effect on LOU of owners establishing limitation fund in a different jurisdiction.

A maritime claim is brought before the courts of a state which applies the 1996 Protocol to the 1976 LLMC, and the owners P&I Club provides security based on the limits of the 1996 Protocol. However, the owners commence proceedings in another jurisdiction to limit by reference to the lower level in the 1976 LLMC which is in force in that jurisdiction? Do those proceedings affect the security provided by the Club? This was the issue which came before HH Judge Pelling QC in the High Court in Enemalta Plc v The Standard Club Asia Ltd [2021] EWHC 1215 (Comm)

The claim was for damage to an underwater connector cable, which caused a nationwide power failure in Malta. This was allegedly caused by a vessel, whose registered owners were a company domiciled in Singapore , and which was entered with the defendant P&I Club. The claim was brought in Malta which applies the 1996 Protocol and security was provided by owner’s P&I Club up to the limitation figure in the 1996 Protocol, and the LOU was subject to English law and exclusive jurisdiction of English High Court.

Owners then commenced proceedings in Singapore and sought to limit by reference to the lower level in the 1976 LLMC which applied in Singapore. Owners invited the Singapore court to order that on establishment of this fund any existing security given by or on behalf of owners should be released immediately. The claimants then requested the English High Court to make various declarations as to the validity of the LOU, irrespective of what the Singapore Court might decide. The defendant to these proceedings was the P&I Club and not the owner and the sole basis for the challenge to the High Court’s jurisdiction to make the requested declaration was that the Singapore Court had sole and exclusive jurisdiction to make an order art 13.2 of 1976 Convention.

Article 13.2 provides: “After a limitation fund has been constituted in accordance with Article 11, any ship or other property, belonging to a person on behalf of whom the fund has been constituted, which has been arrested or attached within the jurisdiction of a State Party for a claim which may be raised against the fund, or any security given, may be released by order of the Court or other competent authority of such State…”

HH Judge Pelling QC saw the instant case as the mirror image of the ICL Vikraman [2003] EWHC 2320 Comm, where an English domiciled Club provided a LOU, with a non- exclusive English jurisdiction agreement, to Cargo in Singapore to secure release of vessel arrested there. The UK was then party to 1976 LLMC, and Singapore not. Owners established their Fund in England and applied to the High Court to order the release of the  LOU under art 13.2 of LLMC. Colman J  held that although the owner was entitled to establish the limitation fund in England, the effect of Article 13.2 was that security located in Singapore did not fall within that article because Singapore was not a state party to the 1976 Convention and so that security would not be, or could not be, released

In the instant case, it was at least strongly arguable that an English court applying English law would conclude that the letter of undertaking should be treated as located in England. Therefore, the Singapore Court would have no jurisdiction to order its release, if that is what ultimately happened. The LOU would not be a security within the jurisdiction of a state party to the 1976 Convention. If the claimant succeeded in recovering a judgment in the Maltese proceedings for a sum in excess of the security that would be provided under the 1976 Convention in Singapore, the claimant would then seek to enforce its claim in England against the defendant under the letter of undertaking. By the terms of the LOU those proceedings would have to be brought in England and would be subject to English law. There was no principled reason why the court would not have jurisdiction to determine by declaration what would be the effect on the LOU of any order made by the Singapore Court under Article 13.2.

Although the Singapore Court had exclusive jurisdiction to make an order under Article 13.2 of the 1976 Convention, the present proceedings were concerned with the dispute between the claimant and the defendant as to the effect of any order made in the Singapore proceedings, commenced by or in the name of the vessel’s owner, on the liability of the defendant under its autonomous contract with the claimant. That was an issue that the parties had agreed should be determined exclusively by the English Court. Accordingly, HH Judge Pelling QC rejected the Club’s challenge to the jurisdiction of the High Court to hear the claim seeking declarations as to the continuing validity of the security provided under the LOU.

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