Scope of limitation
Due to the volatile and cost-intensive nature of the shipping industry, shipowners are given the right to limit the extent of their liability. In Nigerian law, this right is governed by the Merchant Shipping Act 2007. Section 353(1) allows carriers, protection and indemnity clubs, insurers and salvors to limit their liability with respect to:
“(a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbor works, basins and waterways and aids to navigation), occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefore;
(b) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
(c) 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;
(d) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;
(e) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Part, and further loss caused by such measures;
(f) claims in respect of floating platforms constructed for the purpose of exploring the natural resources of the sea-bed or the subsoil thereof;
(g) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship.”
Section 353(2) states that:
“Claims set out in subsection (1) of this section shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise. However, claims set out under subsections (1) (d), (e) and (g) of this subsection shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable i.e. crew members.”
These claims are in line with those subject to limitation under the Convention on the Limitation of Liability for Maritime Claims 1976, as amended by the 1996 protocol. The convention regulates the limitation of liability of shipowners, charterers, managers and salvors. It has been ratified by many countries, including Nigeria, which has incorporated its provisions into the Merchant Shipping Act. However, Section 12 of the Constitution states that all treaties and conventions must be enacted into law by the National Assembly. Thus, the act itself is unclear on whether its incorporation of the convention serves as enactment of the protocol into law by the National Assembly for this purpose.
The act also excludes application in some instances. Section 354 of the act states that:
“The rules of this Part shall not apply to:
- claims for salvage or contribution in general average;
- claims for oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage or of any amendment thereto which is in force;
- claims subject to any International Convention or national legislation governing or prohibiting limitation of liability for nuclear damage;
- claims against the shipowner of a nuclear ship for nuclear damage;
- claims by servants of the shipowner or salvor whose duties are connected with the ship or the salvage operations, including claims of their heirs, dependants or other persons entitled to make such claims, if the under the law governing the contract of service between the shipowner or salvor and such servant the shipowner or salvor is entitled to limit his liability in respect of such claims, or if he is by such law only permitted to limit his liability to an amount greater than that provided for in section 357 of this Act.“
In addition, Section 355 of the act does not apply if it can be shown that a loss was the result of the personal acts or omissions of the shipowner or those under its duty of care, committed either with the intention of causing loss or recklessly and in the knowledge that such loss would occur.
The limit of the shipowner’s liability is calculated based on the ship’s tonnage and the type of claim being made before the court. When calculating limitation, the special drawing rights (SDR) of the International Monetary Fund are used as the unit of account, and in the absence of an agreement between contracting parties, the applicable currency is the naira rate at the date on which payment is due to be made or security is due to be provided.(1) Each claim gives rise to a different unit of account and is calculated as indicated in the act. Section 357 of the act sets out this system as follows:
“(1) (a) in respect of claims for loss of life or personal injury
(i) two million Units of Account for a ship with a tonnage not exceeding 2,000 tons;
(ii) for a ship with a tonnage in excess thereof, the following amount in addition to that mentioned in (i)above; for each ton from 2,001 to 30,000 tons, 800 Units of Account for each ton from 30,001 to 70,000 tons, 600 Units of Account; and for each ton in excess of 70,000 tons, 400 Units of Account;
(b) in respect of any other claims:
(i) one million Units of Account for a ship with a tonnage not exceeding 2,000 tons,
(ii) for a ship with a tonnage in excess thereof, the following amount n addition to that mentioned in (i) above; for each ton from 2,001 to 30,000 tons, 400 Units of Account,
(iii) for each ton from 30,001 to 70,000 tons, 300 Units of Account; and
(iv) for each ton in excess of 70,000 tons, 200 Units of Account.
(2) Where the amount calculated in accordance with subsection (1)(a) of this section is insufficient to pay the claims mentioned in full, the amount calculated in accordance with subsection (1)(b) shall be available for payment of the unpaid balance of claims under subsection (1)(a) and such unpaid balance shall rank rateably with claims mentioned under subsection(1)(b)
(3) The limits of liability for any salvor not operating from any ship or for any salvor operating solely on the ship to or in respect of which he is rendering salvage services, shall be calculated according to a tonnage of 1,500 tons.
(4) For the purpose of this Part the ship’s tonnage shall be the gross registered tonnage.”
For example, in the event of loss or damage, where the SDR value is N239 ($1.50) and the ship’s tonnage is 1,320 tons, the act provides that the ship owner’s liability may not exceed N239 million (approximately $1.475 million) – N239 multiplied by one million.(2)
Limitation in cases of death or personal injury is twice that for damage and loss of property. Limitation for cases involving passengers is calculated at 175,000 units of account, multiplied by the number of passengers that the ship is authorised to carry under its certificate.
Procedure for limiting liability
Section 9 of the Admiralty Jurisdiction Act 1991 and Order 15 of the Admiralty Jurisdiction (Procedure) Rules 2011 deal with the procedural aspects of bringing a limitation action before the Nigerian courts. Once it is proved that the shipowner is liable with respect to damage or loss of a ship or persons carried on the ship, it may bring an action by way of summons at the Federal High Court, asking the court to determine whether its liability can be limited.(3) The application must be supported by an affidavit bearing the names and addresses of everyone who may have been affected by the incident.(4) If the court finds that limitation is applicable,(5) the shipowner may be asked to advertise the fact that proceedings were held and the nature of determination of the liability, giving notice to anyone that may have a maritime claim to prosecute it. If the determination is not advertised, only those persons with identified claims are bound by the court’s determination.
On April 19 2012 the 1996 Protocol was amended, increasing the limits of liability for maritime claims. These amendments will come into effect 36 months after the date of adoption (ie, on June 8 2015). The limits are shown in the table below.
Limitation category |
Old limit |
New limit |
Loss of life or personal injury | ||
Less than 2,000 tons |
2 million |
3.2 million |
2,001 to 30,000 tons |
800 per ton |
1,208 per ton |
30,001 to 70,000 tons |
600 per ton |
906 per ton |
More than 70,000 tons |
400 per ton |
604 per ton |
Damage and loss of property | ||
Less than 2,000 tons |
1 million |
1.51 million |
2,001 to 30,000 tons |
400 per ton |
604 per ton |
30,001 to 70,000 tons |
300 per ton |
453 per ton |
More than 70,000 tons |
200 per ton |
302 per ton |
For further information on this topic please contact Mojisola Agunbiade at Bloomfield by telephone (+234 1 791 0702), fax (+234 1 4960 4666) or email (moji.agunbiade@bloomfield-law.com).
Endnotes
(1) Section 359 of the Merchant Shipping Act.