By Mazin El Amin, Senior Associate, Ince
On 10 October 1957, the International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships was signed in Brussels (the “Brussels Convention”). On 19 November 1976, the Limitation of Liability for Maritime Claims Convention 1976 (the “LLMC”) was signed in London, addressing some of the pitfalls in the Brussels Convention. The LLMC continues to be the “base” Convention regulating shipowners’ ability to limit liability in certain circumstances.
It is important for shipowners/operators to be able to limit liability to a known amount in response to certain risks so that they can: (a) undertake an informed risk assessment and; (b) procure appropriate insurance. In order to encourage international trade and movement of vessels through numerous jurisdictions with different laws, a unified universal regime for limitation of liability was necessary. This led to the Conventions being signed. With the passage of time and as a result of additional experience on how they were being applied, the Conventions have been updated with protocols.
On 4 August 1997, the UAE ratified the LLMC. Despite the fact that the LLMC had been amended by a Protocol in 1996 (the “1996 Protocol”), the 1996 Protocol remained unratified by the UAE until recently. On 10 November 2020, the UAE ratified the 1996 Protocol by virtue of the Federal Decree No. 167 of 2020. The 1996 Protocol will come into force in the UAE on 23 May 2021 pursuant to the Circular No. 03 of 2021 issued by the Federal Transport Authority (the “FTA”).
Limitations and Liabilities
The limitation of liability under the LLMC overlaps with a local limitation regime under the UAE Commercial Maritime Law No. 26 of 1981 (the “UAE Maritime Code”). The local limitation regime sets out much lower limits than those stipulated under the LLMC and the 1996 Protocol. The table below illustrates an example of the differences between the limitation amounts under the UAE Maritime Code, the LLMC and the 1996 Protocol on a vessel with a gross tonnage of 20,000 tons:
The UAE Courts are yet to rule on which limitation figures are applicable. In the judgment no. 24/2008, the Dubai Cassation Court ruled that a vessel owner is entitled to limit its liability and referred to the provisions of both regimes. However, the limitation figure was not disputed and no decision was made on this issue.
Article 8(1) of the UAE Maritime Code states that the provisions of the UAE Maritime Code shall not prejudice the international treaties ratified by the UAE. Therefore, in our view, the limitation amounts under the LLMC are likely to be applicable. This is supported by the fact that, in November 2020, the UAE authorities ratified the 1996 Protocol, which suggests a decision by the UAE not to allow owners to limit their liability at lower levels.
Prior to ratification of the 1996 Protocol, the UAE courts witnessed jurisdictional battles over the application of the LLMC. The injured parties used to seek to avoid UAE jurisdiction where lower limitation amounts applied, preferring to sue in countries where the 1996 Protocol had been ratified. On the other hand, defaulting parties would seek to establish UAE jurisdiction in order to benefit from the lower limitation amounts.
We have experienced limitation cases before UAE onshore courts and a Dubai judicial tribunal in which such jurisdictional battles took place. In Fujairah, we acted for owners of a vessel who attempted to establish their right to limit liability under the LLMC whilst the injured party had brought proceedings before the English High Court to avoid the application of the lower limitation amount in the UAE. Both the Fujairah First Instance Court and Appeal Court dismissed the case on the basis that this type of claim was not subject to limitation of liability. In another dispute, the Dubai World Tribunal, whose procedural rules are derived from the English Civil Procedure Rules, ruled that it had jurisdiction over the claim brought by the vessel owners for whom we acted and then found no difficulty in issuing judgment that the owners were entitled to limit their liability.
Tacit Acceptance Procedure
The 1996 Protocol contains a concept of “tacit acceptance”. This concept entails that further amendments to the 1996 limits could be introduced following a particular procedure. If the procedure is completed and the new limits become effective, the amendments to the limits shall be deemed to have been accepted by all members of the 1996 Protocol and a state becomes bound by such amendments when those amendments enter into force, or when the 1996 Protocol enters into force for that state, if later.
On 12 April 2012, the 1996 limits were increased as illustrated in the above table, and such increases came into force on 8 June 2015 in most countries under the tacit acceptance procedure. However, in certain jurisdictions such as England and Hong Kong, the local laws required further steps to ratify the 2012 increases and the further local steps were taken to ratify the 2012 increases.
It is not entirely clear whether the UAE law requires a local step (a Federal Decree) in order for the 2012 increases to become effective. As the Federal Decree No. 118 of 1997 ratifying the LLMC and the Federal Decree No. 167 of 2020 ratifying the 1996 Protocol do not stipulate on a particular condition for implementing further amendments to the limits, we are of the view that the 2012 limits are implemented in the UAE under the tactic acceptance procedure. These Federal Decrees include the texts of the LLMC and the 1996 Protocol respectively, and that the FTA shall implement them. It is advisable that the FTA issues circulars clarifying the position on implementation of the 2012 limits.