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Limitation of Liability: Jurisdiction

Seismic Shipping Inc and Westerngeco Ltd -v- Total E&P UK Plc

The "Western Regent"

March 2005

The claimants in this action ("the Owners") were, respectively, the owners and bareboat charterers of the seismic survey vessel Western Regent. In the early hours of 2nd October 2004 the vessel was operating in the North Sea towing six streamers, each 3,600 metres long with 100 metres separation. Two of the streamers contacted the Ellon Grant marker buoy, which was positioned at a well head in the Total Dunbar oilfield some 70 miles east of the Shetlands. The well head installation, which was owned by Total E&P UK plc ("Total"), was damaged and the losses suffered by Total as a result of the collision, including lost production, amounted to almost US$10 million. The Owners admitted responsibility for the accident. However, in November 2004 they commenced proceedings in the Admiralty Court seeking a declaration that they were entitled to limit their liability in respect of Total's claim to a sum of 2,590,000 Special Drawing Rights (equivalent to about US$3.9 million) in accordance with the Convention for Limitation of Liability for Maritime Claims 1976 ("the 1976 Convention").

Total, for its part, issued proceedings against the Owners in Texas in January 2005 - anticipating that its losses would be recoverable in full in that jurisdiction. Total reasoned that, because the United States is not a signatory to the 1976 Convention, Texan law would apply to the question of limitation and that the amount to which the Owners would be entitled to limit their liability would be the Western Regent's post-collision value (which was expected to exceed Total's entire claim). Total further applied to the Admiralty Court for the dismissal of the Owners. limitation claim, on the ground that the court lacked jurisdiction to deal with it.

Total's challenge to the court's jurisdiction was based on Article 11.1 of the 1976 Convention. This states:

"Any person alleged to be liable may constitute a fund with the Court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation...".

Total submitted that the 1976 Convention only confers jurisdiction to commence a limitation claim in circumstances where the claimant can constitute a limitation fund under Article 11.1 - and that this provision only contemplates the setting up of a fund in a State in which legal proceedings had been instituted in respect of the underlying claim. Since no proceedings had been instituted in the English courts in connection with the accident on 2nd October 2004, Total submitted that the Owners would not be able to constitute a limitation fund there and so could not therefore bring a limitation action in that jurisdiction.

However, Mr Julian Flaux Q.C., sitting as a deputy judge, concluded that a shipowner or charterer was not precluded from seeking a limitation decree by reason of the fact that there were no proceedings in the jurisdiction relating to the underlying claim. In his view, there was nothing in the Convention to suggest that the entitlement to limit only arises where the claimant can constitute a fund within the meaning of Article 11.1. On the contrary, it seemed to the judge that Article 10 provided a free-standing entitlement to limit irrespective of whether a fund was ever constituted. The judge was satisfied that the Admiralty Court had jurisdiction over the claim, including jurisdiction to grant a limitation decree. Total's application was therefore dismissed.

As Total had not sought to advance any substantive defence to the limitation claim, the judge further concluded that the Owners were entitled to judgment limiting their liability under the 1976 Convention in the form of a restricted limitation decree.

However, the judge was not prepared to grant an injunction restraining Total from continuing with the proceedings in Texas. He concluded that it would not be appropriate to grant an anti-suit injunction at a stage when the court in Texas had yet to consider what effect, if any, his judgment on the limitation claim had on those proceedings.

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