Limiting liability: LLMC, 1851 Act & the M.V. Dali

With the M.V Dali at the centre of global news, and the anniversary of the RMS Titanic sinking less than a week away, there’s been a lot of talk (and misinformation) about liability in the world of maritime.

In our last newsletter we spoke about general average, the speculation and misinformation that was being spread, and the sensationalist headlines that had appeared last week in news stories that sought to outrage audiences into clicking on them to read about the shocking turn of events in which the Dali’s owner “denies liability” and “denies all responsibility” for the bridge collapse that led to six workers presumably losing their lives.

If you read on further, you would have seen that we also discussed how general average has been part of shipping for a very long time and that it is worth remembering that we still don’t know what the outcome of investigations will be - and that in amongst those headlines and the wider conversations being had, it’s important to remember there are actual people involved in this too.

The same reminder applies as we take a deeper look into liability this week, specifically the Convention on Limitations of Liability for Maritime Claims (LLMC) and the Limitation of Liability Act of 1851 that gained infamy in 1912 when it was invoked by White Star Line to limit their liability and cap damages after the sinking of the RMS Titanic.

Why both?

When it comes to both the LLMC and the Limitation of Liability Act of 1851, it can feel a bit like we’re watching the maritime version of the iconic (Australian) Old El Paso advertisement turned meme with the “porque no los dos?”, but while both Convention and Act seek to limit liability there are some differences between them.

Without delving too deeply into it, LLMC was first adopted in 1976 by the United Nations International Maritime Organization (IMO), and the purpose of it was to replace the former International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships which was signed in 1957.

Under the LLMC the limit for the claims was raised and the types of claims were categorised into claims involving loss of life or personal injury, and claims involving property. It provides, in IMO’s own words, a “virtually unbreakable system of limiting liability” which allows salvors and shipowners the ability to limit liability with one exception:

“If it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such a loss, or recklessly and with knowledge that such loss would probably result”

You can read more about the limit for liability claims here.

Whilst LLMC has been ratified by 65 states, it actually has less state parties due a number of ratifying states later denouncing the convention.

Most importantly, the USA is not a signatory to this convention.

What about the Limitation of Liability Act of 1851?

This Act has definitely played the long game when it comes to US maritime law (173 years young). It was codified at the end of 2022 under Title 46 of the United States Code which outlines the US Federal laws that apply to the shipping industry.

To understand the Act, we need to briefly step back to the ‘why’.

Because back in 1851, shipowners had no protections and America itself ended up at a competitive disadvantage to other seafaring nations because of it. The Act was introduced to limit liability to the value of the vessel, when shipowners were previously subject to the loss in incidents that were genuinely beyond their control.

The Act is a bit more modern these days, after many amendments to keep it relevant, but these days shipowners are able to limit claims to “the value of the vessel at the end of the voyage plus pending freight” on the provision that the shipowner can establish proof that there was no knowledge of the issue beforehand.

Why do these matter to the M.V Dali?

Put simply, they matter because they are the relevant maritime law/convention in this situation.

Last week the news headlines were sprinkled with those words we mentioned in our second paragraph around “denies liability” and “denies all responsibility”, whereas we see a shift this week into “Titanic law”.

“Titanic law helps ship owner limit bridge liability”

“Titanic law could limit bridge collapse payout”

The Limitation of Liability Act of 1851 was nicknamed the Titanic Law not just because it was invoked by White Star Line after the sinking of the Titanic, but because it was key to a ruling on whether US law or British law applied to the incident and the Supreme Court went on to uphold that US law would apply.

What have the owners of the Dali done with respect to limiting liability ?

Under US maritime law, a federal court in Maryland will review the joint petition from the shipowner (Grace Ocean Private Ltd.) and the ship manager (Synergy Marine Pte Ltd.) to limit liability and decide where the responsibility lies and how much is owed in damages. The petition that was filed sought to cap the liability at approximately $USD43.6 million and splits the values between the M.V Dali vessel at $USD90 million and income from freight at $USD1.1 million. In terms of damages, these were split between repair and salvage costs and estimated at $USD28 million and $USD19.5 million respectively.

And whilst the name of the Act seems archaic and irrelevant, it’s important again to remember that the Act has undergone many amendments since it was first passed, and that it is codified less than two years ago under Title 46 in US Federal Law.

Should the US have signed up to the LLMC?

We’ll leave that to a vigorous discussion at the next maritime lawyers convention, both in and out of session. 

So what next?

With respect to General Average – the ship still has to “succeed” in its maritime adventure before general average can be properly declared in the first instance. Standby for continuing salvage efforts in respect to the bridge and vessel.

Limitation of liability – causation will play a large factor (as per the final investigation report) as that’ll determine whether liability can indeed be limited under the Limitation of Liability Act of 1851.

Worried about your home port and the outstanding costs?

Given the ability to limit liability, for all those port operators we’d be suggesting some back of the envelope calculations on the min / max limitations for the ships regularly calling at your port… and then some enquires to the infrastructure owners as to the excess liability insurance coverage. But that’s just us.

Remember in the world of shipping:

Ship owners and carriers limiting liability: Yes.

Cargo interests having uncapped liability*: Also (terrifyingly) yes.

- Alison

*yes subject to ultimate caps in certain circumstances. Still large enough to get proper insurance.

You can learn more about the status of Conventions here.

You can view Title 46 of the US Code 'Shipping' here.