Knowledge Series: Maritime Law (Volume II – Limitation of Liability)
Our Associate, Budoor Al Halwachi elaborates on the limitation rights of ship owners & the protection provided under Maritime Law.
Budoor Al Halwachi – Associate ([email protected])
The Kingdom of Bahrain issued Decree-Law No. 10 of 2022 Promulgating the Maritime Law (the “Maritime Law” or the “Law”), where a distinctive feature of the Law is to afford protection – or to limit the liability – of Ship Owners and other connected to the shipping industry. This has recently been considered as cargo interests in the region pursued recoveries following the capsizing of the car carrier Golden Ray and the blockage of the Suez Canal by the Ever Given. While Volume I of the Maritime Knowledge Series covers Key Concepts, in this Volume – we discuss the application of the limitation rights of Ship Owners and the protection provided under the Maritime Law with the new generation of megaships navigating the waters of the region.
Scope of the Provisions of the Limitation of Liability
Every Bahraini or foreign Ships (except for Ships with air cushions, and floating platforms for the purpose of exploring natural resources) present in the waters of the Kingdom of Bahrain fall within the scope of the provisions of the Maritime Law. The Ship Owner, charterer, Operator, Master, Seafarers, salvor, and other servants of the Owner or the charterer in connection with the performance of their duties may avail themselves of the limitation of liability set out under this Law, where the Ship Owner will be liable for the actions of his Master, sailor, pilot or any other Person in the service of the ship during or as a result of the performance of their functions. The Ship Owner is also liable for the obligations of the Master arising from contracts concluded within the limits of his legal powers.
However, where a claim for damages arises against either the Master or Seafarers for Personal Fault – and the damage was committed purely in their capacity as Master or Seafarers – the limits of liability provided under the Law applies and affords protection from onerous damages that arise in situations of contractual or tortious liability. Accordingly, the Maritime Law provides that where the Owner or the Master or other Persons may not uphold the limitation of their liability if the damage is due to fraud or serious error on the Person liable thereof.
Cases in which Liability may be Limited and the Exceptions
Claims in respect of the following fall within the scope of the limitation of liability under the Maritime Law: (i) loss or life or personal injury; (ii) damage to property (including damage to harbour works, docks and waterways); (iii) loss resulting from delay in the carriage of cargo, Passengers or their luggage; and (iv) the raising, removal, destruction or the rendering harmless of a Ship which is sunk or wrecked and its cargo. This also includes claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the Ship or Salvage Operations.
Additionally, claims of a Person other than the Person liable in respect of measures taken to mitigate the losses may limit his liability under the provisions of the Convention on Limits of Liability for Maritime Claims 1976, and its 1996 Protocol amending it, and further loss caused by such measurers.
However, claims in respect of the following are exceptions to the limits of liability under the Maritime Law: (i) salvage; (ii) oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage of 1969 and its two protocols of 1976 and 1992 (to which the Kingdom of Bahrain is a party pursuant to Decree-Law No. 13 of 1995); (iii) nuclear damage; and (iv) and any other claims subject to any international convention to which the Kingdom is a party or national legislation governing or prohibiting limitation of liability for nuclear damage. As such, Ship Owners should tread with caution in such cases in order to avoid onerous claims.
In contractual relationships between the Ship Owner or salvor and such servants of the Ship Owner, the liability may not be limited in claims relating to the duties which relate to the Ship or the salvage operations, including claims of their heirs, dependents or other Persons entitled to compensation. The contract may include any term agreed upon by both parties, where such terms are not prohibited by Law or contrary to public order. As such, in this circumstance it is permissible to limit liability to an amount greater than that provided in the Maritime Law.
Limits of Liability
Any agreement made prior to the occurrence of an accident, that resulted in debt or whose object is to limit the liability less than the requirement set out under Article 194 of the Law, shall be deemed null and void. Ship Owners cannot discharge any liability arising from a wrongful act or exclude their liability in tort, as liability may materialize between parties who are not involved in a contractual relationship and individuals who has suffered injuries or other damages may seek to remedy the injury. As the Maritime Law provides the limits of liability of Ship Owners – where the Gross Tonnage of the Ship is calculated in accordance with relevant laws and decisions – shall be calculated as follows in respect of:
Claims for Loss of Life or Personal Injury
| Tonnage of Ship | Units of Accounts for a Ship |
| Not exceeding 2,000 | 3.02 Millions |
| 2,001-30,001 | 1,208 |
| 30,001-70,000 | 609 |
| Each Ton in excess of 70,000 | 604 |
Claims for Damages other than Personal Injury
| Tonnage of Ship | Units of Accounts for a Ship |
| Not exceeding 2,000 | 1.51 Millions |
| 2,001-30,000 | 604 |
| 30,001-70,000 | 453 |
| Each Ton in excess of 70,000 | 302 |
Claims for Distinct Bodily Injury or Death of Passengers of a Ship
The limit of liability of the Ship Owner thereof shall be an amount of 175,000 Units of Accounts multiplied by the number of Passengers which the ship is authorized to carry.
Compensation
Compensation shall cover damages incurred by the Creditors, including loss or profit, provided that such damages or loss of profit are natural consequences of the debtor’s failure to perform the obligation or delay in the performance thereof. However, a creditor may not take any legal action against the property of the Ship Owner in the circumstances that the amount designated for compensation is placed at the Creditor’s disposal or if the Owner provides a guarantee (acceptable by the Courts).
Any claim which does not fall within the scope of the limitation of liability of the Maritime Law – i.e. mainly salvage, oil pollution and nuclear damage – shall have priority over tortious claims. Nevertheless, claims in relation to bodily injuries are allocated compensation in full, where the remainder of the damages is allocated to the debts of other non-bodily damages. Whereas compensation for single accidents which result in bodily injuries and material damage are independently assessed on a case-by-case basis.
Statute of Limitation of the Liability Action
The Ship Owner shall be liable for their actions for two years after the date of the act giving rise to the liability. This period – subject to the limitation periods set out under the Bahraini Civil Law –shall be interrupted by either: (i) registered letter with acknowledgment of receipt; (ii) delivery of documents related to the claim; or (iii) the assignment of an expert to assess damages.
Concluding Remarks
By exercising the right to limit their liability up to the maximum sum, irrespective of the actual amount of damages, not only are Ship Owners able to preserve their financial position, but claimants are also granted certain payments for liability established by Persons involved in the functioning of the Ship. Accordingly, the cargo interests, insurance companies and similar parties in the industry should be cautious when settling claims as not all contractual terms are applied as read. The Kingdom is also a signatory to maritime international agreements and treaties which will have further implications on all parties involved, notwithstanding the importance of this recent enactment, as the Law brings the Kingdom in line with international standards and practices of the shipping industry.
For more information, please contact us on [email protected].