On 26 October 1977, the M/T Tsesis, owned by Latvian Shipping Co (LSC), a Soviet shipping company, ran aground near the island of Fifong. The ship's hull was seriously damaged, and leaked approximately 600 mt of oil. The Swedish State (the State), through the Swedish Maritime Administration (the SMA), brought an action against LSC. LSC counter-claimed damages from the SMA.

The Stockholm District Court found by a majority that the grounding was caused both by the State and by LSC. LSC was obligated to pay the State SEK 5,589,990.58 for the oil damage and SEK 1,900,000 for salvage wages. The State was obligated to pay LSC SEK 3,150,000.

Both parties appealed to the Svea Court of Appeal. The Court of Appeal varied the amounts decided by the District Court. Both parties then appealed to the Supreme Court.

Held (by a majority): Appeal partially upheld. The Supreme Court dismisses the State's action for compensation for oil damage; upholds the State's claim against LSC for salvage compensation (SEK 1,900,000 plus interest), and declares that LSC's claim against the State for damages to the corresponding amount shall be set off against each other; and determines the amount that the State has to pay LSC at SEK 6,300,000 plus interest.

Against the SMA's claim for damages for the oil damages incurred, LSC objected that the grounding and the damages in their entirety were caused by the error or negligence of the State in the performance of its obligation to maintain navigational aids under s 3(2)(3) of the Oil Liability Act 1973 (the Act), which gives domestic effect to the exemption in art 3.2.c of the CLC 1969. A precondition for this exception to apply is that the grounding was not LSC's fault, and that error or negligence had occurred on the part of the State, and was the cause of the grounding.

Taking account of all of the evidence, it is not established that the master of the vessel, or anyone else for whom LSC is responsible, was liable for the grounding. In support of its claim that the State, through its negligence with regard to the maintenance of navigational aids referred to in the exemption, caused the grounding, LSC alleged that the State was negligent, in that the Swedish Maritime Administration's Chart Department failed to transfer correct information to Chart 721. There can be no doubt that the failings on the part of SMA in preparing Chart 721 constituted serious negligence, and were the cause of the accident. The State was responsible for the grounding of the Tsesis.

The next question that arises is whether charts are included in 'navigational aids'. It must be borne in mind in this context that the Act is based in its entirety on an international Convention acceded to by Sweden, the CLC 1969. The preparatory work for the Swedish legislation shows that serious consideration was given to transposing the Convention into Swedish law without, as in the past, 'transforming' the provisions of the Convention into an independent Swedish law, prepared using customary Swedish legislative technique. The alternative that was discussed was instead to directly elevate the Convention to Swedish law through direct incorporation in a promulgation statute with certain supplementary provisions, to which the Convention in its English and French text and a Swedish translation would be attached as an appendix.

The fact that the established transformation technique was finally chosen was essentially due to the fact that during the legislative process it was shown that extensive and somewhat complicated supplementary national rules would be required, and that difficult technical problems would arise when applied to the co-ordination between these rules and the Convention provisions, whereby the legislation would be difficult to understand and possibly difficult to access (Bill 1973:140 p 37). In this context, it was nonetheless emphasised that if the rules of the Convention were transformed into national law, the underlying text of the Convention and the case law, both national and international, related to it, should of course be given great importance in interpreting the law.

In these circumstances, it is natural to seek to ascertain the meaning of the provision in the Convention that corresponds to the exception in s 3(2)(3) of Swedish law, based on the text of the Convention and its available preparatory work.

The exception has its equivalent in art 3.2.c of the CLC 1969, which in the English text stipulates:

2. No liability for pollution damage shall attach to the owner if he proves that the damage: ...

c) was wholly caused by the negligence or other wrongful act of any Government or other authority responsible for the maintenance of lights or other navigational aids in the exercise of that function.

The English and French texts of the Convention are equally authentic. However, as the present provision of the Convention goes back to a proposal presented during the diplomatic conference by the British delegation, which had no equivalent in the basic text drawn up before the conference, an interpretation of the provision should be based primarily on the English text. It should be mentioned, however, for the sake of completeness that the French text does not seem to make an independent contribution to the answer to the question at issue.

The UK proposal was part of a more comprehensive proposal, aimed at reaching a compromise between, on the one hand, the group of States, including the United Kingdom, who were in favour of a system based on liability with a reverse burden of proof for shipowners and who were opposed to the idea of strict liability, and on the other hand those States, including Sweden, who wanted a system based on strict liability for shipowners. The compromise proposal gave rise to a lively debate, which, however, almost exclusively concerned fundamental issues of principle. The preparatory work for the Convention thus provides little direct guidance for the interpretation of the exemption provision.

As the State has pointed out, the fact that the provision of the Convention originated in a British proposal gives reason to assume that it was drafted in accordance with English legal language and with observance of the legislative technique and rules of interpretation applied in English law. An analysis of the English text - which, apart from a mere editorial adjustment without significance in this context, is entirely in line with the wording of the original British proposal - in the light of prevailing English legal language and English interpretation principles can therefore provide some guidance on the question of interpretation.

The State has relied on the systematic structure of the Convention. In this connection, the State has pointed out that the exception provision is found in immediate connection with two other exceptions - arts 3.2.a and 3.2.b - which refer to situations of a distinctly extraordinary, almost force majeure nature. In connection with this, the State has argued that the systematic connection with these exemption rules suggests that the current provision should also be interpreted restrictively as applying only to extraordinary cases. For that reason, in the State's opinion, charts should not be considered covered by the provision. However, the importance of the systematic link between the relevant exemption rules must be assessed in the light of the fact that the provision in art 3.2.c was added during the course of the conference due to the UK compromise proposal, while the other two provisions were already included in the draft text. It was therefore important to insert the new exception into an already given system of rules. The fact that the drafters chose to place it in connection with the two exceptions already prescribed probably seemed natural, regardless of whether the rules, by their nature and scope, showed certain mutual differences.

It is clear that charts, according to plain language, are to be regarded as navigational aids. It may further be assumed that the use of the term 'maintenance' cannot - if one regards the term in the light of the English term used in the text of the Convention - be considered to include any restriction which in itself excludes charts from the scope of the provision. In view of the fact that charts thus fall under the wording, the statute should be applicable to them, unless the purpose of the statute must be considered to indicate that an application to charts would not contribute to the realisation of its purpose.

The Court finds in accordance with the above that the direct cause of the grounding of the Tsesis includes the negligence of the SMA's fulfilment of its obligation to maintain navigational aids referred to in the exemption provision in s 3(2) of the Act. As the oil damage was caused in its entirety by this negligence, LSC is accordingly free from liability under the Act for oil damage. In accordance with the foregoing, the State was responsible for the grounding, and as a result incurred an obligation to compensate LSC for the damages caused to it by the grounding.

After the grounding, there was a salvage situation, as referred to in s 224(1) of the Maritime Code. In these circumstances, the salvage of the Tsesis carried out by Röda Bolaget in accordance with the relevant legal provisions in the Maritime Code has afforded the company the right to receive salvage compensation from LSC. This right of claim has been transferred to the State. The State is consequently entitled to receive compensation from LSC in an amount corresponding to reasonable salvage compensation.