Salvage Law: Limitation of Shipowner’s Liability

Jim Shirley - 

In the wake of the Deepwater Horizon casualty there have been a number of proposals put before Congress for new legislation or amendments to existing legislation affecting vessel owners and operators. Many of these relate to liability for damages sustained as a result of the casualty or the oil spill that followed.

Perhaps the oldest legislation to which amendment and / or appeal is being sought is a statute passed in 1851 to provide vessel owners with limited liability in respect claims brought against them in certain circumstances involving, amongst other things, marine casualties.

This statute is unique to the United States, but the concept of allowing shipowners the right to limit their liability in casualty matters is not. Many countries, but not the U.S., are parties to an international convention that allows for such limitation, though on terms quite different from those in the U.S. statute. Indeed, according to its legislative history, the U.S. limitation act was enacted to encourage investment in U.S. shipping by putting the United States on a par with other countries that already had such legislation.

U.S. courts have held that limitation of a shipowner’s liability is a procedural issue, and therefore the law of the forum governs. That is, if the matter is brought before a U.S. court, that court will apply U.S. law, i.e. the 1851 statute, to the issue of limitation.

There may at the same time be legal issues in the case that the courts have held to be substantive rather than procedural, and to those the court hearing the case may apply the law of some other nation, e.g. the law of the nation where the casualty occurred or that of the flag(s) of the vessel(s) involved in the casualty.

Therefore, for the purposes of this article, only the U.S. statute and the applicable civil procedural rules will be discussed. Even so, limitation of shipowners’ liability is a complex and heavily nuanced subject. Space constraints allow no more than a brief overview of the subject in this column.

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