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UAE ratifies the 1996 Protocol to LLMC 1976

Insights / 16-02-2021 / Dubai

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 non-ratification of the 1996 Protocol by the UAE for over 23 years had led to interesting practical implications in litigation before the UAE courts with regard to the LLMC. This article aims to consider the practical implications of both non-ratification and ratification of the 1996 Protocol.

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:

Limitation regime

Limitation Amount for Personal Injury Claims/Loss of life

Limitation Amount for Other Claims/Physical Damages[1]

The UAE Maritime Code

USD 2,722,940.77

USD 1,361,470.38

The LLMC

USD 10,448,745.60

USD 4,938,056.40

The 1996 Protocol (Ratified by the UAE in 2020)

USD 23,655,360.00

USD 11,827,680.00

The 2012 Amended Limits (Not ratified yet by the UAE)

USD 35,719,593.60

USD 17,859,796.80

 
 

The UAE Maritime Code was enacted in 1981 after the LLMC was issued in 1976, but prior to its ratification by the UAE in 1997. It seems that UAE legislators had borne in mind the LLMC when the UAE Maritime Code was issued as the scope of application of the limitation regime under the UAE Maritime Code is relatively similar to that of the LLMC, however the monetary limits are different.

In practice, 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. The difficulty for defaulting parties was that declaratory judgments are not common under UAE procedural laws and UAE judges are reluctant to issue them. UAE judges are more familiar with a situation where the injured party sues and the defaulting party defends and raises a limitation defence. However, the defaulting parties could not rely on the injured parties suing in the UAE courts, for example because the incident happened in the UAE, especially if the ship owner/operator at fault was based in a country where higher limits applied or if there was an opportunity to attract another jurisdiction where higher limits applied.

We have experienced limitation cases before UAE onshore courts and a Dubai (DIFC-based) 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. The purpose of seeking to establish liability before the Fujairah courts was to obtain a judgment that the claimant’s liability was discharged beyond the limitation amount. Both the Fujairah First Instance Court and Appeal Court dismissed[2] the case on the basis that this type of claim was not subject to limitation of liability, but ignored the other issues raised before them such as jurisdiction and the entitlement to a declaratory judgment. 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 a declaratory judgment that the owners were entitled to limit their liability.

Despite the UAE’s ratification of the 1996 Protocol, jurisdictional battles are likely to continue because the 1996 limits were increased on 12 April 2012 (and came into force on 8 June 2015) and the UAE is yet to ratify the 2012 increases. Certain jurisdictions such as England and Hong Kong have, however, adopted the increases to the 1996 limits. Therefore, an injured party should continue favouring those jurisdictions over UAE jurisdiction where possible so that a higher limit in monetary terms is applicable.

[1] If the claim involves both personal injury and physical damage, the limitation amount under the UAE Maritime Code is AED 750 per ton.

[2] The case was discontinued after the appeal stage and did not reach the Federal High Court.

Rania Tadros

Rania Tadros Managing Partner

Mazin El Amin

Mazin El Amin Associate

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