The vessel M/V CMA CGM Centaurus collided with the quay wall and cranes at Container Terminal 1 in Jebel Ali Port, UAE.

On 11 May 2017, the terminal operator, its parent company, and their insurers issued an in rem claim form in the High Court in London against the owner and demise charterers of the vessel and other CMA CGM vessels. They claimed in respect of damage to the quay wall and the cranes at the terminal (and associated loss) arising out of the allision.

On 22 May 2017, the terminal operator, its parent company, and one of their insurers commenced proceedings in the Hong Kong courts.

On 29 May 2017, the claimants, the owner and bareboat charterers of the vessel, issued a claim form against the terminal operator, its parent company, and 'All other persons claiming or being entitled to claim damages for the Incident'. The claim form sought: (1) damages arising from the negligence and breach of duty of the named defendants in the berthing of the vessel at the terminal and a declaration that the claimants were entitled to an indemnity from the named defendants in respect of any liability which they may have to third parties arising out of the incident; and (2) declarations in respect of the claimant's entitlement to limit their liability for damage to property pursuant to the LLMC 1976. The claimant's case was that, at the time of the incident, the vessel was under the control of the pilot for whose actions (or failure to act) the defendants were responsible and that it was the pilot's actions (or failure to act) that caused the incident. In conjunction with the declarations, the claimants sought directions for the purposes of ascertaining the persons (if any) who may have claims for such damage and any consequent loss arising out of the incident, and the establishment of a limitation fund pursuant to the LLMC 1976.

The defendants sought an order: (1) setting aside the amended claim form on the ground that the Tribunal had no jurisdiction to entertain the claims made in these proceedings; or in the alternative, (2) staying those claims and declaring that the Tribunal would not exercise that jurisdiction. The named defendant argued that the claimant's claims were plainly no more than a jurisdictional hook used to secure the benefit of the UAE limitation provisions in circumstances where the claim had no real prospect of success, or (at best) was very weak on the merits. They also contended that, in accordance with UAE law and practice of the onshore courts, the fund must be established by cash or a local bank guarantee.

Held: The claimants are entitled to constitute a limitation fund by producing a letter of undertaking from a P&I club.

The LLMC 1976 had been ratified by the UAE and implemented by Federal Decree No (118) of 1997. Article 1 of the Convention provides that shipowners (which includes both owners and charterers) may limit their liability for claims set out in art 2 in accordance with the rules of the Convention. Those claims include (art 2.1.a) claims in respect of damage to property (including damage to harbour works) occurring in direct connection with the operation of the ship and consequential loss resulting therefrom. Such claims are subject to limitation of liability under the Convention, 'even if brought by way of recourse or for indemnity under a contract or otherwise': art 2.2. The limits of liability under the Convention are set out in Ch II: in particular, the general limits in respect of claims other than for loss of life or personal injury for a ship having a tonnage in excess of 500 tons are set out in art 6.1.b.ii. Given that the gross tonnage of the vessel was 131,332 tons, the claimants argued that the relevant limit of liability applicable in the present case was 15,184,056 SDRs; an amount equivalent to approximately USD 20.785 m.

Article 9, in Ch II of the Convention, provides that the limits of liability determined in accordance with art 6 shall apply to the aggregate of all claims which arise on any distinct occasion against a shipowner. The defendants argued that the total losses (including losses suffered by third parties in respect of containers and cargo) arising from the incident were estimated to be between USD 27.5 m and USD 30 m. If that were the case, there would be a shortfall: the aggregate of the claims against the claimants would exceed the (limited) amount available to meet those claims.

It is to meet a situation in which the aggregate of the claims exceeds (or may exceed) the limit on the shipowners' liability under the Convention that Ch III provides for the constitution of a limitation fund against which claims can be made.

Conflicting views have been expressed by judges and textbook writers on the question whether a party can invoke limitation of liability under the Convention in pre-emptive proceedings commenced in a jurisdiction of its own choice; or whether it can only do so responsively in proceedings which have been commenced against it by the party who claims to have suffered loss. The question turns on the wording of the 1976 Convention. The right to limit liability, conferred by arts 1 and 2, can be invoked under art 10, without first having constituted a limitation fund under art 11. There is no general jurisdiction provision in the Convention stating where the right of limitation must be invoked: on its face, the Convention permits a party to seek to limit its liability in any contracting State which has personal jurisdiction over the defendant. If there is a restriction as to the manner in which the right to limit may be invoked, it must be found by implication. But there is nothing in the Convention to warrant the implication of such a restriction. And there is no consideration of policy which requires that the manner in which the right to limit can be invoked should be restricted.

The reasoning of the EWCA in Seismic Shipping Inc v Total E&P UK Plc [2005] EWCA Civ 985 (CMI833) is compelling and should be followed. The claimants were entitled to commence proceedings seeking limitation under the Convention of their liability (if any) to the defendants in respect of loss suffered by reason of the incident, notwithstanding that no claim in respect of that loss had been made against them in this forum.

Further, the claimants were entitled, in these proceedings, to seek an order for the constitution of a limitation fund pursuant to art 11.1 of the Convention. The proceedings commenced by the issue of the claim form on 29 May 2017 are proceedings 'instituted in respect of claims subject to limitation' within the meaning of that article. Given that the claimants are entitled, pursuant to art 10.1 of the Convention, to invoke their right to limitation in proceedings commenced before the Tribunal for that purpose – and notwithstanding that the claims in respect of which they seek limitation of liability were not brought in this forum – it would be bizarre if the phrase 'proceedings ... instituted in respect of claims subject to limitation' was given a meaning which excluded proceedings in which limitation of liability had been invoked and so denied the party seeking (and obtaining) a decree of limitation the protection from other actions provided by art 13 of the Convention.

Generally - and, more particularly, having regard to the requirement in art 307(2) of the UAE Maritime Code - a shipowner who seeks to rely on pilot error in order to found a claim against a port operator has a difficult evidential hurdle to surmount. There was no material before the Tribunal upon which it could form a view as to the evidential force, or otherwise, of factors that would enable the claimants to establish that the pilot was guilty of gross error. The Tribunal could not hold that the claim was bound to fail.

The courts of England and Wales were not clearly and distinctly more appropriate for the trial of the action than the Tribunal itself. Therefore, it was unnecessary to decide whether or not it was open to the Tribunal to stay proceedings on the grounds of forum non conveniens. The submission that the claimants have commenced proceedings for damages in the Tribunal as 'a jurisdictional hook' on which to hang an application for a limitation decree based on the unrevised provisions of the Convention is rejected.

If there were a settled practice in the Dubai Courts as to the nature and form of the guarantee considered appropriate for the purpose of constituting a limitation fund under art 11.2 of the Convention, it would have been appropriate to follow that practice. However, the evidence did not indicate such a settled practice.