This was an appeal by MSC Mediterranean Shipping Co SA (MSC) against Andrew Barker J's decision in MSC Mediterranean Shipping Co SA v Stolt Tank Containers BV [2022] EWHC 2746 (Admlty) (CMI2026) that MSC, the time charterer of the MSC Flaminia, was not entitled to limit its liability to the fourth respondent, Conti 11 Container Schiffahrts-GmbH & Co KG MS 'MSC Flaminia' (Conti), the owner of the ship, arising from an explosion on the ship in July 2012. This was because Conti's claims were not within the scope of art 2 of the LLMC 1996.

Held: Appeal dismissed.

The LLMC 1924 (which the United Kingdom signed, but did not enact) was the first international Convention dealing with tonnage limitation. It provided in art 1 that 'the owner of a seagoing vessel' could limit its liability in respect of the matters specified. Article 10 extended the right to limit as follows: 'Where a person who operates the vessel without owning it or the principal charterer is liable under one of the heads enumerated in Article 1, the provisions of this Convention are applicable to him.'

The LLMC 1924 was superseded by the LLMC 1957, which was the immediate predecessor of the LLMC 1976. Article 1.1 of the LLMC 1957 entitled the owner of a sea-going ship to limit its liability in respect of certain claims. The right to limit did not apply, however, if the occurrence giving rise to the claim 'resulted from the actual fault or privity of the owner'. Article 6.2 extended the provisions of the LLMC 1957 to (among others) the charterer of a ship.

The LLMC 1976 extended the right to limit to salvors as well as shipowners, and contained an extended definition of 'shipowner' for the purpose of the Convention in art 1. The claims which are subject to limitation are set out in art 2 of the LLMC 1976. Article 2.1.d does not have the force of law in the United Kingdom (see s 185 and Sch 7 to the Merchant Shipping Act 1995). However, for the purpose of interpreting art 2 of the Convention, the article (including 2.1.d) must be considered as a whole. Article 4 deals with conduct barring limitation. It is considerably more difficult to 'break' limitation under the LLMC 1976 than was the case under the LLMC 1957.

Article 6 sets out how the limit applicable to claims other than claims by passengers for loss of life or personal injury should be calculated. The calculation depends on the tonnage of the ship, and a higher limit applies to claims for loss of life or personal injury.

Article 9.1 of the LLMC 1976 provides for a single limit of liability to apply to all non-passenger claims arising on a single occasion. Articles 11 and 12 provide for the constitution and distribution of a limitation fund. Any person alleged to be liable may constitute a fund, and a fund constituted by any one of the persons mentioned in art 9 (which itself refers back to art 1.2) or its insurer is deemed to have been constituted by all such persons. Thus a fund constituted by the owner is deemed also to have been constituted by the charterer, and vice versa. The fund is then to be distributed among claimants in proportion to their established claims against the fund.

Conti submitted that a charterer like MSC can limit its liability in respect of, and only in respect of, liabilities that originate outside the group of entities defined as 'shipowners' for the purposes of limitation, identified in art 1.2 of the Convention. Article 1 adopts the drafting technique of including a charterer within the definition of 'shipowner', while art 2 lists the claims which are subject to limitation in terms which, at least primarily, refer to claims by 'outsiders'. Critically, however, art 9 provides for a single limit of liability applicable to the aggregate of all claims arising on any distinct occasion against the persons within the definition of 'shipowner', while art 11 provides for the constitution of a fund by any of those persons, which fund, once constituted, is deemed to have been constituted by all such 'insiders', and against which any claimant may claim. Article 10 provides that limitation may be invoked, where applicable, notwithstanding that a limitation fund has not been constituted; but provides the important qualification that national law may provide that the right to invoke limitation arises only if a fund is constituted.

If a charterer is entitled to limit its liability for a claim made by an owner to recover losses which the owner itself has suffered, as distinct from the owner passing on to the charterer a liability incurred to a third party, the consequences would be remarkable. It would mean that an owner's own claim may have to be paid out of a fund constituted by the owner itself. That would by itself be a surprising result, but it would also mean that the fund would be diminished to the prejudice of third-party claimants ('outsiders') for whose benefit the fund is primarily constituted. This cannot be what was intended by the parties to the Convention.

Accordingly, Conti submitted that the claims referred to in art 2 must be interpreted to exclude claims by an owner against a charterer to recover losses suffered by the owner itself. The Court accepts this submission. As Thomas J noted in The Aegean Sea [1998] 2 Lloyd's Rep 39, 49, it is difficult to see how a charterer can claim the benefit of limitation through a fund intended to cover both owner and charterer when a claim is brought against the charterer by the owner; and as David Steel J observed in The CMA Djakarta [2003] EWHC 641 (Comm), [2003] 2 Lloyd's Rep 50 (CMI732) [44]-[45], the 'requirement of a community of interest between those falling within the category 'shipowner' is underlined by the machinery of a single fund'. Articles 9-11 'are only consistent with all those identified as within the class of shipowner having a common potential exposure to the relevant claims and a common interest in funding the limit of liability, all the more so when no provision is made for allocation of the cost of putting up the fund among the members of the class.'

While it is true that this reasoning led Thomas and David Steel J to a conclusion which has been held to be mistaken, namely that a charterer's right to limit arises only when the charterer is acting in the capacity of an owner, that does not detract from the basic point that the Convention is not intended to apply to claims by an owner against a charterer to recover loss suffered by the owner itself. Indeed, Longmore LJ in The CMA Djakarta [2004] EWCA Civ 114 (CMI728) also recognised the force of this reasoning, as did Lord Clarke in The Ocean Victory [2017] UKSC 35, [2017] 1 WLR 1793 (CMI16).

The interpretation proposed by Conti does not involve any evaluation of the charterer's capacity. When a claim falling within art 2 is made by an owner against a charterer, the charterer's right to limit does not depend upon the capacity in which the charterer was acting so as to give rise to the claim, but simply on whether the owner is claiming for a loss which it has suffered itself (no right for charterer to limit) or to pass on liability for a claim made against the owner by a third party (charterer entitled to limit). This is consistent with art 2 of the LLMC 1976, according to which the right to limit depends upon the characterisation of the claim.

This view of the intended operation of the LLMC 1976, derived from the provisions of the Convention itself, is reinforced when the Convention is considered in the context of the previously existing law. It is entirely clear that under the LLMC 1957 a charterer had no right to limit in respect of claims by an owner to recover losses suffered by the owner itself. There is nothing in the LLMC 1976 to suggest that it was intended either to bring about a radical extension of the circumstances in which a charterer has a right to limit. Rather, the object and purpose of the LLMC 1976 was limited.

Reference to the travaux préparatoires leading to the LLMC 1976 confirms this interpretation reached from the terms of the Convention, considered in their context and in the light of the object and purpose of the Convention. The travaux explain what changes were intended to be introduced, ie to increase the limitation amount, to make it much harder to break the limit and to extend to salvors the right to limit, but there is nothing to suggest any intention to extend the claims in respect of which a charterer had the right to limit.