UNIT IV

LAW OF MARITIME DISPUTE RESOLUTION

 Contents
Law of Maritime Dispute resolution
Unit D

Collision Claims, Limitation Claims

D1

Ship Mortgage
D2

Maritime Arbitration
D3

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Collision Claim
A collision is said to exist when there is contact between two ships regardless of whether they
are moving or at anchor. Therefore, it is necessary to draw a distinction amongst contracts
between:

a ship and another ship whether moving or stationary (i.e. a 'collision')

a ship and a floating object which is not a ship (such as a floating oil rig, loading/discharge tank
or mooring buoy); OR
a ship and an object that is not afloat, (such as a bridge, wharf, crane or offshore structure
sitting on the seabed) (i.e. an allusion).

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Collision Claim
The contracts in relation to collision between ships is governed by different rule of law as against
the contracts between a ship and a 'fixed or floating object' ("FFO") that is not a ship.

Claims for losses and damages to goods and property arising as a result of collisions between
ships are very complex.
They usually occur without much warning and require quick decisions to be taken, which can
have a major impact on the future handling of the incident and on the merits of the consequent
claims and liabilities.
The issues commonly involve damage to each of the vessels, general average, salvage, damage
to cargo, security and limitation of liability.

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Contd/-
When vessels collide, there is usually a degree of fault or responsibility on each of the vessels
involved.
When such an incident occurs, investigation needs to take place and evidence be obtained in
order to try to determine the circumstances surrounding the collision as well as the resulting
losses to the vessels and any cargo involved.
An apportionment of responsibility for the collision is then agreed or determined on a
percentage basis between each of the vessels depending upon the circumstances surrounding
the incident.
Where a collision involves two vessels both at sea, responsibility is usually apportioned around
50-50 or 60-40 between the vessels, unless one of the vessels involved is more exceptionally at
fault.

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Contd/-.
When two vessels collide the following claims are likely to arise:

Collision damage to the hulls of the colliding vessels;

Damage to the cargo carried on one or both vessels;
Personal injury claims;
Salvage claims;
Pollution claims;
General average claims;
Delay claims.

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Indian Law
In an event of collision between two or more ships, the ships which are responsible for the
cause are held liable to make up for any damage of goods, cargo or ship’s property.
The liability is to be allocated among the responsible ships based upon the degree of their fault.
This liability will include salvage or any further expenses caused as a consequence of the fault of
a ship. In circumstances where it is impossible to determine different degrees of fault the loss
shall be equally divided.
A party or person who is a non contributor to the fault has been relieved totally from any
liabilities arising out of claims under these rules. Thus making the non guilty immune from
contributing to losses or damages as far as it is established in his favor

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Contd/-
If loss of lives or personal injuries occurs to any person onboard ship due to fault of his own ship
or any other ships, the owners of the ships concerned are jointly accountable for it.
However, the owners have full authority for their defense and to lawfully restrict their liability
against a claim by an injured or deceased person or by any other body representing the victims.

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Contd/-
If several owners are involved in a contribution and if one of the owners contributes excess
amount than his share, he shall have same rights and powers as if a victim claiming money from
rest of the ship owners.

The right to sue the ship owners involved is transferred here to an individual ship owner if he
has contributed in excess of his share as contribution towards damages for the victim. While
they offer a fault based approach for apportioning of losses, a part of it also deals with
obligations upon master in case of collision.

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 DUTIES OF MASTER FOR ASSISTING IN CASE OF
COLLISION

In every case of collision between two ships, the master is to duly comply as far as possible with
following, without endangering his own ship, crew and passengers:
He should assist the master, crew and passengers of the other ship in every possible way to save
them from any danger caused by the collision. Before leaving the site they also have to ascertain that
the other ship needs no further assistance
He has to provide the master or person in charge of the other ship with the name of his own ship,
her port of registry, last port of call and next port of call
In every case of collision if practicable the master of the ship concerned shall make a full statement
detailing the location, circumstances and causes of the incident into the official log book. The entry
should be signed by the Master and also by mate or any of the crew members

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Contd/-
The owners or the Master shall immediately transmit a report to the Central Government or the
nearest principal officer in following cases
If ship has sustained any damage due to collision. E.g. If transverse bulkheads or shipside
frames are damaged due to collision
 If above cause has resulted in loss of life or severe personal injury. E.g. If any crew member
has died or needs to be hospitalized urgently.
 If the material damages caused have affected the vessel’s seaworthiness .E.g. if water has
flooded compartments thereby causing vessel to list heavily.
 If any machinery cannot work up to specified parameters in certificates issued under MS ACT.
E.g. Seawater or fire fighting pump has been damaged and cannot be used up to their rated
capacity.

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Contd/-
The above said report should contain name of the ship, her official number, Port of registry, her
present location and details of the incident.
A written notice should be sent to the Central Government stating details of the vessel, her
official number and port of registry as soon as possible by the ship owner or agent of any Indian
ship when a ship has disappeared or in any other circumstance when they suspect the vessel to
be totally lost.

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Contd/-
The maritime claims in respect of which the power of arrest is recognised in law includes claims
relating to damage caused by any ship either in collision or otherwise.

The claimant must establish that the ship has, done the damage (whether by collision or
otherwise) to invoke admiralty jurisdiction over any claim for damage done and some authority
must be shown that the damage as caused in the present case entitled the parties to proceed in
rem.

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Case 1
Church of Tonga v Pacific Trading Ltd [2002] TOSC 26; C 0259 1999 (12 September 2002)

Collision- It is incumbent upon the defendant to show that the cause of the injury was
unavoidable by the exercise of reasonable care. “Preliminary act” procedure not necessary
when the plaintiff’s vessel is moored at the wharf.

The plaintiffs claim damages in negligence for damage to their vessel which occurred when the
defendant’s vessel collided with a neighboring vessel while the vessels were moored at the
wharf.
DECISION: Damages awarded to plaintiff

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Case 2
River Countess BV and Others v MSC Cruise Management (UK) Ltd (The “MSC Opera”) – QBD
(Comm Ct) (Andrew Baker J) [2021] EWHC 2652 (Admlty) – 4 October 2021
Admiralty – Collision action – Cruise liner colliding with smaller vessel in Venice – Cruise liner
wholly liable for collision – Claimants bringing proceedings against cruise line operator claiming
damages under various heads – Italian law applying to claims – Preliminary issue determined as
to whether claims for non-physical loss recoverable from defendant

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Limitation of Liability
Limitation of liability is a long-standing concept in shipping law. That is because it allows
shipowners and their representatives to limit their liability for damages which occur in maritime
adventures in respect of claims that can be brought against them.
By exercising the right to limit their liability up to maximum sum, regardless of actual amount of
damages, not only shipowners preserve their financial existence, but also claimants are granted
certain payments from liability of funds established by persons liable.

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Contd/-
In absence of the right of the shipowner to limit liability, the overall amount of damages from
the loss or injury to persons or goods caused by or on the board of the ship could often exceed
value of the ship and other assets of the shipowner.
Furthermore, unlimited liability could have led to the bankruptcy of even those merchants
whose assets extended well beyond the carrying vessel

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Convention on Limitation of Liability for
Maritime Claims (LLMC)
The Convention replaced the International Convention Relating to the Limitation of the Liability
of Owners of Seagoing Ships, which was signed in Brussels in 1957, and came into force in 1968.
Whenever any person seeks to limit his liability before the Court of a State Party or seeks to
procure the release of a ship or other property or the discharge of any security given within the
jurisdiction of any such State.
Courts of a State party will not apply the Convention to ships constructed for, or adapted to, and
engaged in, drilling, (a) air-cushion vehicles and (b) floating platforms constructed for the
purpose of exploring or exploiting the natural resources of the seabed or the subsoil thereof

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Contd/-
According to Article 1 of the 1996 LLMC Convention, the persons entitled to limit liability are:
- shipowners (which term can be interpreted as including the owner, charterer, manager and
operator of a seagoing ship),
- salvors (which include any person rendering services in direct connection with salvage
operations, also including operations referred to in Article 2, paragraph 1(d),(e),(f)),
- any person for whose act, neglect or default the shipowner or salvor is responsible, and -
insurers of liability (to the extent as the assured himself).

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Conduct barring limitation
Article 4 of the Convention provides a case when person liable shall not be entitled to limit his
liability - if it is proved that the loss resulted from his personal act or omission, committed with
the intent to cause such loss, or recklessly and with knowledge that such loss would probably
result.

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Counterclaim
Where a person entitled to limitation of liability under the rules of the Convention has a claim
against the claimant arising out of the same occurrence, their respective claims shall be set off
against each other and the provisions of the Convention shall only apply to the balance, if any

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Limitation of claim
The limits of liability for claims on distinct occasion, shall be calculated as follows:
(a) in respect of claims for loss of life or personal injury,
◦ (i) 3,02 million Units of Account for a ship with a tonnage not exceeding 2,000 tons
◦ for a ship with a tonnage in excess thereof, the following amount in addition to that
◦ mentioned in (i):
◦ for each ton from 2,001 to 30,000 tons, 1,208 Units of Account;
◦ for each ton from 30,001 to 70,000 tons, 906 Units of Account; and
◦ for each ton in excess of 70,000 tons, 604 Units of Account,

◦ (Unit of account means the Special Drawing Right as defined by the International Monetary Fund. The SDR is an international
reserve asset. The SDR is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese
renminbi, the Japanese yen, and the British pound sterling.., the amounts mentioned shall be converted into national currency of
the State in which limitation is sought, according to the value of that currency at the date the limitation fund shall have been
constituted, payment is made, or security is given which under the law of that State is equivalent to such payment)

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Contd/-
(b) in respect of any other claims,
(i) 1,51 million Units of Account for a ship with a tonnage not exceeding 2,000 tons,
(ii) for a ship with a tonnage in excess thereof, the following amount in addition to that
mentioned in (i):
◦ for each ton from 2,001 to 30,000 tons, 604 Units of Account;
◦ for each ton from 30,001 to 70,000 tons, 453 Units of Account; and
◦ for each ton in excess of 70,000 tons, 302 Units of Account.

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Ship mortgage
Ship mortgage is a form of security wherein the ship-owner (“Mortgagor”) gives a lender
(“Mortgagee”) an interest in a ship as security for a loan via a Deed and same is discharged upon
repayment of the loan.
Mortgages may either be equitable or statutory.
The essential feature of a mortgage is that it is only a security transaction, where the property is
redeemable by the mortgagor upon satisfaction of the debt.

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Ship Mortgage
It is imperative to note that a shipowner transfers a security interest in a ship to a lender as
collateral for a mortgage loan in a ship mortgage.
A ship mortgage is legally composed of three components, similar to other forms of mortgages:
the mortgage loan, the mortgage document, and the rights arising from the mortgage deed
granted to the money lender.
A registered ship or a share in any such ship may be made security for the repayment of a loan
or the discharge of any other obligation, according to paragraph 21 of Schedule 1 to the
Merchant Shipping Act of 1988. Upon production of the document establishing any such
security (referred to in this Act as a mortgage), the registrar of the ship’s port of registry shall
record it in the register.

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Contd/-
Ship mortgages are distinct from other mortgage kinds in three respects.
◦ Some privileged claims rank higher than mortgagee claims against the ship.
◦ ships inevitably cross international borders
◦ when at sea, a ship is always susceptible to partial or complete destruction.

In the case of a ship mortgage, the choice of applicable law should be incorporated into the
security documents of the ship mortgage. Although the flag of registry determines the
legislation that applies to a ship mortgage, the underlying security documentation is frequently
subject to a separate law.
Despite the fact that each of these nations has a completely distinct process for enforcing ship
mortgages, both Norwegian and English law has been frequently chosen.

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Maritime Arbitration
Maritime commerce is a cornerstone of the global economy, driving international trade and
connecting nations.
Parties involved will have different contracts between transnational parties and these contracts
will have dispute resolution clauses.
Maritime arbitration has emerged as a preferred choice for parties engaged in international
maritime contracts due to its neutrality, expertise, and enforceability of awards.
The arbitration process is marked by a number of characteristics that have evolved from the
requirements of dispute settlement between commercial enterprises. Their paramount
consideration is usually money. The parties arbitrate because it is the most cost-efficient means
of settling their dispute, or at least they believe this to be the case.

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Maritime Arbitration
Arbitration is a procedure whereby parties bound together in a contractual agreement appoint a
third party to settle their disputes.
The rise of arbitration in the field of maritime commerce has resulted from the ability of its
adherents to promote cost-efficient, timely, and, most important, just and equitable decisions
for the many disputes that arise as a result of maritime trade.

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Arbitration Clause
Arbitration clauses are commonly found in maritime contracts.
The standard form contracts are often used with parties' adaptation of terms to fit their
contracts including the arbitration clauses by way of deletion, addition and rider clauses.
These terms are sometimes incorporated by reference to another contract containing the
arbitration clause e.g., where bills of lading are issued pursuant to charterparties, and the terms
of the latter are specifically referred and incorporated.

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Maritime Disputes
Maritime disputes that are typically resolved by arbitration include:
Ship building;
Sale and Purchase Disputes
Charterparty Disputes
Marine Hull Insurance
Salvage and General Average and
International Sales

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essential elements for an arbitration
(a) that there exist a dispute between the parties;
(b) that the dispute be justiciable under the governing laws
(c) that the parties volunteer to submit to arbitration
(d) that the agreement to arbitrate be a binding contractual obligation on the parties
(e) that the settlement must be by a third party
(f) that there be a formal reference of the dispute to arbitration
(g) that the arbitration must be decided according to law; and
(h) that the award be final and binding on the parties.

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