Vernon Sewell Partner
Court finds ship operator can limit liability
(1) Splitt Chartering APS (2) Stema Shipping A/S (3) Maibau Baustoffhandel GmbH (4) Stema Shipping (UK) Limited (Claimant) v. (1) Saga Shipholding Norway AS (2) RTE Reseau De Transport D’Electricitie SA and others (Stema Barge II)  EWHC 1294 (Admlty)
The Admiralty Court has for the first time considered what might constitute the meaning of “operator” or “manager” under the 1976 Limitation Convention (“the Convention”). The Court concluded that a manager must be “entrusted by the owner with sufficient of the tasks involved in ensuring that a vessel is safely operated, properly manned, properly maintained and profitably employed” to justify the description. The Court also concluded that the ordinary meaning of "the operator of a ship" in article 1(2) of the Convention embraces not only the manager of the ship but also the entity which, with the owner’s permission, directs its employees to board the ship and operate her in the ordinary course of the ship's business.
1976 Limitation Convention
Article 1 of the Convention states that:
- "Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.
- The term "shipowner" shall mean the owner, charterer, manager or operator of a seagoing ship."
The background facts
Stema Shipping (UK) Limited ("Stema UK") was contracted by a UK civil engineering consortium to provide rock armour to repair a railway line between Dover and Folkestone recently weakened by storms. Stema UK purchased the rock armour from its associated company, Stema Shipping A/S, ("Stema A/S"), a Danish limited liability company. The rock armour was transported from a quarry in Norway on the barge STEMA BARGE II, owned by Danish Company Splitt Chartering APS and chartered to Stema A/S (together “STEMA BARGE II interests”).
On 7 November 2016, the barge arrived off Dover under towage where it then anchored. Stema UK personnel thereafter were involved in removing the rock armour to the beach. On 20 November 2016, the barge began to drag her anchor in poor weather caused by Storm Angus and during the early hours of that morning an undersea cable (cable 12) supplying electricity from France to England registered a tripping. The owners of the undersea cable, RTE Reseau de Transport d'Électricitié SA ("RTE"), contended that the cable was damaged by the barge’s anchor.
In Danish court proceedings, RTE claimed Euros 55 million for damage to cable 12 against Splitt Chartering APS and Stema A/S. Stema UK sought a declaration of non-liability in the English Admiralty Court, which action is currently stayed.
STEMA BARGE II interests also instituted a limitation claim in the English Admiralty Court, seeking to limit their liability to RTE to 5,309,200 SDRs (currently about £5.5m) under the Convention (as enacted in England pursuant to the Merchant Shipping Act 1995, Section 185).
The defendants to the limitation claim (including RTE) accepted that Splitt Chartering APS (as the barge owners) and Stema Shipping AS (as charterers) were persons entitled to limit their liability under the Convention, pursuant to article 1(2). However, Stema UK sought to argue that it was also entitled to limit its liability to RTE because, at the time of the incident, it was the operator/manager of the barge.
RTE challenged Stema UK’s right to limit its liability on the ground that it had no direct responsibility for the management and control of the commercial, technical or crewing operations of the ship and was not, therefore, an entitled person for the purposes of article 1(2).
The Admiralty Court decision
The Court was asked to consider who is entitled to the right to limit under the Convention, and, in particular, the meaning of the phrase "the operator of the ship" in article 1(2).
The Court considered both the activities of management and operating and concluded that the "operator of a ship" and the "manager of a ship” were very closely related and connected functions. The "manager of the ship" was a person entrusted by the owner with a sufficient number of tasks related to ensuring that a vessel was safely operated, properly manned, properly maintained and profitably employed. However, it might not include someone who was entrusted with just one limited task as that might be described as assisting in the management of the ship, rather than as being the manager of the ship.
When analysing the meaning of the "operator of a ship" the Court considered whether (as Stema UK argued) it might include those on board the vessel physically operating the vessel's machinery. The Court concluded that such individuals were covered by article 1(4) of the Convention (which allows any person for whose act, neglect or default the shipowner or salvor is responsible to avail themselves of the limitation of liability provided for by the Convention), and were not, therefore, to be included under article 1(2). Instead, the Court suggested that the role of "operator" was “one which has a notion of management and control over the operation of the ship”.
On the facts, the Court found that Stema UK was involved in choosing and surveying the anchorage area off Dover and sending their barge master and crew on board to anchor the barge and thereafter setting up the barge to be left unmanned. During the discharge operations, those same crew operated the barge's machinery to ensure that it remained safely ballasted. Stema UK also monitored the position of the barge and, when the weather forecasts worsened, helped the owner and charterer in deciding whether to leave the barge where it was or to tow it to a place of shelter.
On that factual basis, the Court found that it was appropriate to describe Stema UK as the operator of the barge off Dover. It was, therefore, entitled to limit its alleged liability for the damage to cable 12.
This is the first time that the Admiralty Court has considered the meaning of the phrase “manager or operator of a seagoing ship” in article 1(2) of the Convention. The Court has provided some helpful observations and guidance on who might be covered by these words, particularly where marine units (including units which are not self-propelled) are assisting in off shore or on shore activities.
Related news & insights
News / Ince celebrates one year since Scotland office opening
23-11-2022 / Insurance, Maritime, Real Estate
We are pleased to be celebrating one year since opening our first Scottish office in the city of Glasgow. Stefanie Johnston, dual-qualified Partner and Head of Scotland, has worked tirelessly over the last year to develop our offering through the opening of an Ince office in what is arguably an established Scottish market. Starting from the ground up, Stefanie and her team have successfully gained an admirable reputation in the region and further afield in the maritime, insurance, real estate and regulatory sectors.
News / Shipping E-brief November 2022
17-11-2022 / Maritime
The Shipping E-Brief is a publication providing you with key information on legal decisions and developments in shipping and related business areas.
News / Appeals from arbitration: is reform required?
15-11-2022 / Maritime
In September 2022, the UK Law Commission published a consultation paper with provisional recommendations for updating the Arbitration Act 1996 (the Act 1996). Amongst other things, the Law Commission considered whether any changes need to be made to: (i) s.67 of the Act 1996, which deals with jurisdictional challenges to arbitral awards; and (ii) s.69 of the Act 1996, which deals with appeals on points of law.
News / Owners not in breach of charter and entitled to claim demurrage
09-11-2022 / Maritime
CM P-MAX III Limited v. Petroleos Del Norte SA (MT Stena Primorsk)  EWHC 2147 (Comm) This recent laytime and demurrage dispute demonstrates that an owner can legitimately refuse orders where such orders may jeopardise the safety of a vessel.
News / Court of Appeal finds owner should have accepted non-contractual performance
09-11-2022 / Maritime
Mur Shipping BV v. RTI Ltd  EWCA Civ 1406 A majority of the Court of Appeal has held that the Owner under a contract of affreightment (COA) should have accepted payment of freight in Euros, rather than the US dollars provided for in the COA. Its refusal to do so meant that the Owner could not rely on the force majeure clause in the COA, in circumstances where US sanctions might have restricted US dollar transfers from or on behalf of the Charterer.
News / “Due” means due!
03-11-2022 / Maritime
Ceto Shipping Corporation v. Savory Inc (Victor 1)  EWHC 2636 (Comm) The Court in this case had to construe a purchase option clause in a bareboat charter. Specifically, it considered whether the fact that the charterer had not fulfilled certain payment obligations under the charter because it was disputing them in good faith meant that the owner was not obliged to transfer title to the vessel at the end of the charter period.