Study On The System Of Limitation Of Liability For Maritime Claims

The system of limitation of liability for maritime claims is a special compensationsystem in the maritime law, which has been widely accepted as a powerful means toencourage shipping investment. However, its fairness and rationality had being fronted withcontinuously heckling and questioning, the objector held that the social and economicbackground for establishing the system back into the middle ages had gone for a long time,thus there can be no necessity for the system any more. As a matter of fact, although thedevelopment in navigation and shipbuilding skills had decreased the risk to some extent, andthe effective marine insurance had distracted risks in related industries, these are not enoughto deny the importance the system has been in shipping industry. The existence of the systemcan balance the interests sharing between all parties, and maintain the stable operation ofshipping industry and others related, subject to some amendment and improvement accordingto the social development. This dissertation firstly analyses and discusses the systeminternationally, and then came to the considerations for improvement of the related system inChina. Except for the introduction and conclusion, the dissertation is divided into six chaptersto discuss:The first chapter is about the basic theory of the system. The definition, nature, form andcharacter of the system are firstly introduced. Limitation of liability for maritime claims has along history, which can be traced back into Tablets of Amalfi in the11thcentury. The purposeof this system is to encourage the shipping industry and incarnate justice, which is theinheritance and developing of the principles of peculium and noxae deditio in the Roman law.The system had gone through three stages in the history, that is, the era of customary law, theera of statute law, and the era of modern law. The international organizations havesuccessively developed three relevant international conventions during the last stage, andcoordination and harmonization of national legislation is the future direction of developmentin a long term. The limitation of liability system allows the risk assumed by the practitionersto be limited in order to limit the responsibility as well, which is the fairness of maritime law.The increase of economic efficiency and the best risk-sharing system should be the latestobjectives of the limitation of liability legislation.The second chapter deals with the persons entitled to limit liability. The ship is the basis and center of limitation system, and the limitation conventions and national laws all regulateships related respectively. The persons entitled to limitation of liability for maritime claimswas initially confined to shipowner, and later with the development of shipping industry, thesubjects with titles had gradually developed to include shipowner, operators, charterers,salvors and the persons being responsible for the occurrence of a maritime damage, such asthe captain, crew and other employee, which were all included in the1976Convention. TheUK’s legislation is basically complied with the Convention, with some more contents inspecial law. The1985Limitation Act of United States has expanded the persons entitled tolimitation to managers, operators, time charterers, voyage charterers, salvors and insurers,which was also complied with the1976Convention. The persons entitled to limitation inMaritime Code of China is almost the same as the1976Convention, whereas it does notinclude the ship manager, and the NVOCC (non vessel operation, common carrier) cannotenjoy the titles of limitation in China.The third chapter talks about the conducts barring limitation. The title to limit liabilityonly comes into existence while certain conditions are required, international conventions andnational legislation on limitation of liability all specify the conducts barring limitation. Thefirst task of conditions of limitation of liability is to define the shipowner by law, many statesparties of the limitation convention have adopted the methods of “alter ego” which hadestablished by UK presently. In the limitation conventions, the conditions of losing right tolimit had changed from “actual fault or privity” to “intent or recklessly and with knowledge”,which had becoming to protect the shipowners more obviously. The onus of proof had alsochanged from the person who sought to limit his liability to the party claiming limitation, orelse the right to limit applies automatically. The UK had been the advocator of the1924Convention, the1957Convention, the1974Athens Convention and the1976Convention,which were all enacted in the UK’s national law, therefore, in respect of conduct barringlimitation, the UK holds the same attitude as the Conventions. The US1851Limitation Actallowed the shipowners to limit liability without privity or knowledge, however, limitation ofliability is a policy-related issue, thus so many criticisms had finally brought the1985Act,which was complied with the1976Convention on conduct barring limitation. Maritime Codeof China is also complied with the Convention except for some deviation in understanding ofthe law in maritime practice.The fourth chapter is about the scope of maritime claims. Not all maritime claims are subject to limitation of liability, the persons entitled to limitation can only limit their liabilitytowards those claims subject to limitation by law. International conventions and nationallegislation on limitation of liability all clearly defined claims subject to limitation of liabilityand claims exempt from limitation. The limitation conventions had embraced more claimssubject to limitation gradually, until the1976Convention, the shipowners are allowed tolimitation despite of the basis of liability. The national legislations in most states parties arecomplied with the1976Convention, with two lists of claims that are subject to limitation andexempt from limitation respectively, despite of some differences in conservation of someclaims subject to limitation. The US legislation is unique, which does not choose to list, butspecifies each claim through various laws accordingly. Maritime Code of China has adoptedthe methods of the1976Convention, but without determining the two maritime claims subjectto limitation being conserved from the Convention, which has caused some conflicts in boththeory and practice. The judicial interpretation by the Supreme People’s Court has expresslyexcluded these two claims out of claims subject to limitation.The fifth chapter is mainly on the limitation amount. The limitation amount is themaximum amount of compensation for the persons entitled to limit liability for all claimssubject to limitation of liability in a single occurrence subject to the law, and it is based on thetonnage of the ship according to the generally accepted monetary system. Besides, thecalculation of limitation amount follows the principle of “one accident, one limit”, and thecross claim shall be set off against each other and the limitation shall only apply to thebalance, and the loss of life and person injury shall be the priority. The conventionscontinuously increased the limits, which had intensified the protection towards the victims.The limit amount in the UK is complied with the1976Convention and the1996Protocolexcept for some arrangement of conservations. Limitation Act of the US adopted the mixsystem of the value and monetary systems, the limit amount had to satisfy both the ship valueplus pending freight and the limits being calculated based on420dollars per tonnage. TheMaritime Code of China was also based on the1976Convention, which only applies to theoceangoing ships. For the ships with a gross tonnage not exceeding300tons and thoseengaging in coastal transport services and operations, and for the costal carriage of passengers,the two separated Provisions by Ministry of Communications apply. The sixth chapter dealswith the procedure of the system. The limitation procedure is the exercise of substantivedefensive right of by the responsible person. There are two different ways to invoke the right of limit, being as a defense to maritime claims and as right in order to obtain a decree oflimitation. In marine practice, claimants and the person being responsible will both go withforum shopping in order to get the most beneficial judgments for themselves, as the limitationof liability subject to the lex fori. Common law and civil law systems had separatelydeveloped forum non conveniens and Lis Pendens. Establishment of the limitation fund isrelatively independent, neither a prerequisite nor necessity for the limitation procedure, andthere are not inevitable causation between them. Once the fund has been constituted, anyperson who had claimed against the limitation fund shall not exercise any right against anyother property of the liable person on this claim. The Maritime Procedure Law and thejudicial interpretation on maritime procedure law by the Supreme People’s Court have notconstituted an integrated system of limitation of liability for maritime claims, which onlydealt with the procedure for constitution of the limitation fund and registration andsatisfaction of claims. Therefore, the modifications should be arranged through the requisitionfor limitation of liability, the censoring and accepting of the application, the affirmation of theright to limit, the constitution and announcement of the limitation fund, the registration ofclaims and satisfaction of claims.