Compensation for Rena Incident: Maritime Claims Convention

Compensation for the Rena Incident: What is And is Not Covered by the Limitation of Liability for Maritime Claims Convention

There has been considerable speculation recently about whether the New Zealand Government can claim compensation from the owners of the Rena in excess of the NZ$12 million cap imposed by the Limitation of Liability for Maritime Claims Convention 1976 (or LLMC).

Section 86 of the Maritime Transport Act, which implements Articles 2 and 3 of the LLMC in New Zealand law, states that the ship owner is not liable “for an amount greater than the relevant limit … in respect of claims for loss or injury or damage arising on any distinct occasion”. The list of claims is very broadly drafted, and includes claims for loss of or damage to property, wreck removal, rendering the cargo harmless, and claims of third parties who tried to avert or minimize the loss or damage (in other words, the clean-up operation).

There are also claims that are expressly EXCLUDED from limitation of liability. The salvors will be paid in full for their efforts, and their claims will not be subject to the principle of limitation of liability. This is entirely appropriate, given the risky and crucial nature of the salvage operation.

Section 86 of the Maritime Transport Act also states that claims for pollution damage caused by Civil Liability Convention ships are not subject to limitation of liability. This looks promising, but it is a red herring. The Civil Liability Convention only applies to oil tankers ie ships that carry oil as cargo. The Rena is a container ship, so this exclusion from limitation of liability does NOT apply to the Rena.

Section 86(3)(d) also makes it clear that the limitation issue will apply regardless of whether the claim is based on the common law or any other statute. This includes the Resource Management Act. The civil liability provisions of the Resource Management Act cannot, in my view, be used to circumvent the limitation of liability principle set out in the LLMC and given domestic legal effect in the Maritime Transport Act.

There are also a few statutory exceptions in section 86(4) of the Maritime Transport Act, however. The most interesting are the wreck removal provisions in the Local Government Act and the hazard removal provisions in the Maritime Transport Act. Costs of wreck removal or hazard removal are not subject to limitation of liability, and the Rena clearly poses a hazard. However, these provisions can only be invoked if the owner refuses to remove a wreck or hazard after being instructed to do so by Maritime New Zealand or the relevant council, and fails to do so, or proceeds in an inappropriate manner. There is no indication here that the shipowners are not co-operating with the New Zealand authorities, and they have appointed a highly experienced and reputable salvor to attempt to salvage the vessel and minimize pollution and property damage.

It is virtually impossible to “break” limitation under the LLMC. In order to do this, section 85(2) of the Maritime Transport Act, which implements Art 4 of the LLMC, states that the claimant must show that the loss or injury or damage resulted “from that person’s personal act or omission where the act or omission was committed, or omitted, with intent to cause such loss or injury or damage, or recklessly and with knowledge that such loss or injury or damage would probably result”. This is incredibly difficult for claimants to prove. Most collisions and groundings are caused by negligence (“human error”), rather than intentionally or by deliberate recklessness. Also, it would need to be proved that the shipowning COMPANY has PERSONALLY intentionally or recklessly caused the loss or damage, rather than someone right at the bottom of the management ladder, like the master or crew. That adds another layer of difficulty.

That leaves criminal liability. The LLMC only limits common law or statutory “claims” against the shipowner. In other words, it only covers civil legal liability. It does not apply to criminal liability in the form of fines that may be imposed on the owner for maritime offences. There are a number of criminal offence provisions in the Maritime Transport Act that may be relevant to the Rena incident. We have seen significant criminal fines being imposed against shipowners in previous pollution incidents, for example the Erika incident off the coast of France. It remains to be seen, however, whether any fines imposed for potential criminal offences will be able to be recovered from the overseas owners or whatever is left of the ship after the salvage operation has been completed.

Associate Professor Paul Myburgh
Faculty of Law
The University of Auckland

ENDS

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