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Can a claimant always pick the jurisdiction with the highest limitation of liability?

Insights / / Hong Kong

Pusan Newport Co Ltd v. The Owners and/or Demise Charterers of the ships or vessels “Milano Bridge” and “CMA CGM Musca” and “CMA CGM Hydra” [2021] HKCFI 1283

The Hong Kong Court has stayed proceedings before it that arose out of an allision in South Korea on the ground that South Korea was the more appropriate forum. As a result, the vessel’s Owners could rely on the lower limitation amount applied in South Korea.

The background facts

On 6 April 2020, the containership Milano Bridge allided with a berth and multiple gantry cranes at Busan, South Korea. The terminal at which the incident occurred was operated by Pusan Newport Co Ltd (the “Terminal”).

Shortly after the incident, the Owners of the Milano Bridge constituted a limitation fund in South Korea. As a matter of Korean law, the limitation amount was to be determined by reference to the law of the flag of the vessel, which in this case meant Panamanian law.  Under Panamanian law, the limit was as prescribed by the LLMC 1976 in its original form, without any subsequent increase or amendment. The relevant limitation figure was thus approximately US$ 24m. There were also a number of other actions commenced before the Korean courts arising out of the same incident.

A short time later, on 24 June 2020, the Terminal arrested a sister ship of the Milano Bridge, the CMA CGM Musca, in Hong Kong. In order to obtain the release of the CMA CGM Musca, security in a sum of approximately US$ 83m was provided. That figure was calculated by reference to the limitation amount under Hong Kong law, Hong Kong having enacted both the 1996 Protocol to the LLMC 1976 and the 2015 revisions thereto.

In July 2020, the Terminal also commenced proceedings in Japan, where the Owners of the Milano Bridge are incorporated. The limitation amount under Japanese law would be essentially the same as that under Hong Kong law.

The Terminal served its Statement of Claim in the Hong Kong proceedings commenced by the arrest of the CMA CGM Musca. The Owners then sought a stay of the Hong Kong proceedings, on grounds of forum non conveniens. The application for a stay was heard by the Admiralty Judge.

The test to be applied

In deciding matters of this kind, the Hong Kong courts apply the test as set out by the House of Lords in The Spiliada, as endorsed by the Hong Kong Court of Final Appeal in SPH v. SA.

In order to obtain a stay, the applicant will have to establish, first, that Hong Kong is not the natural or appropriate forum and, second, that there is another available forum which is clearly or distinctly more appropriate than Hong Kong. If the applicant can establish both of those things, then the plaintiff must show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong. If that is established, the Court will balance the advantages of the alternative forum with the disadvantages which the plaintiff may suffer.

In this case, it was common ground that Hong Kong was not the natural or appropriate forum. That was evidently South Korea, given that all the relevant events happened there.  However, the Terminal contended both that South Korea was not clearly or distinctly the more appropriate forum and that it would be deprived of a legitimate juridical advantage if compelled to proceed in Korea, owing to the lower limitation amount that would apply.  Indeed, the Terminal sought to argue that this latter point was decisive and that the Court was in fact obliged to dismiss the application for a stay.

The Court decision

The Owners were successful on all issues in dispute and a stay of the Hong Kong action was accordingly granted.

The Court found that most connecting factors pointed to South Korea. The most that could be said for Hong Kong was that the Court was available and that jurisdiction had been established by the arrest of the CMA CGM Musca.  Several important witnesses were based in South Korea and much of the relevant documentation would inevitably be in Korean. It was also not disputed that the law applicable to the incident was Korean law. It followed that South Korea was clearly and distinctly the more appropriate forum.

Whilst it was accepted that the availability of a higher limitation amount in Hong Kong was a juridical advantage for the Terminal, the Court rejected the submission that this was decisive. The loss of this advantage would not, by itself, justify the refusal of a stay in circumstances where the connection with Hong Kong was otherwise weak. This was particularly the case where, as here, the plaintiff came from the alternative forum.

Comment

The decision will be welcomed by shipowners seeking to limit their liability under the various limitation regimes. Had a stay not been granted in this case, in which the only connection to Hong Kong was the arrest of a sister ship, then it would have become difficult to think of any case in which a stay would be granted in the face of a lower limitation amount elsewhere. The practical effect would have been that arresting in Hong Kong would entitle the arresting party to proceed there in any case where the limitation amount in Hong Kong was higher than that available elsewhere. In other words, the availability of a higher limitation amount would have been decisive, to the exclusion of all else. That would have been a surprising and unwelcome conclusion.

Nevertheless, on the facts in this case, South Korea was clearly the natural forum and the various connecting factors largely pointed to that forum as well. In other, less clear-cut, cases (for example, collisions occurring on the high seas), the Hong Kong Court is less likely to grant a stay. This was demonstrated in the series of decisions arising from the collision between the vessels CF Crystal and Sanchi, which were referred to extensively in this case.

The Terminal has sought leave to appeal.

The authors of this article acted for the successful Owners in this matter.

Ruaridh Guy

Ruaridh Guy Partner

Richard Oakley

Richard Oakley Partner

Alex Ngai

Alex Ngai Associate

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