Two recent cases illustrate the different perceptions that clients have when it comes to potential rights to limit liability under UK and US laws.
Take first the recent decision of Mr Justice Andrew Baker in The Solong (1) . This case tells us that, as a matter of English law, the right to limit liability under Article 4 of the LLMC 1976 is virtually unbreakable. Indeed, the only recent case where the right to limit was broken was a case where it was held that the ship was deliberately scuttled (2) .
The Solong smashed into the Stena Immaculate in March 2025 causing a serious fire and one death. The Russian Master was subsequently convicted of gross negligence manslaughter.
Given that, on any basis, it seems that Solong is likely to be substantially (if not100%) liable for the collision and given the substantial damage to the Stena Immaculate and its cargo which was effectively a total loss, it is perhaps not surprising that Solong interests decided to commence a limitation action in the Admiralty Court. The right to limit was challenged by Stena interests such that Mr Justice Andrew Baker was asked to decide on the evidence whether limitation could be broken on the basis that Stena interests were able to prove that the loss resulted from the “personal act or omission” of those who controlled Solong committed with “the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.” That is the legal test for breaking limit under the 1976 Limitation Convention (LLMC) (as amended by the 1996 Protocol)
Stena interests argued that Solong’s designated person ashore (DPA), whom it was alleged was the directing mind, was aware of deficient onboard practices related to the navigation and management of the vessel that would make a collision likely and that it was realistic to envisage that evidence might be obtained from the criminal action (which Stena Interests were hoping to inspect) or from disclosure in the underlying collision claims to prove that point. Unfortunately, the judge did not agree that the DPA was the directing mind. The Solong was in fact majority owned by Ernst Russ AG of Hamburg who managed a fleet of vessels. The CEO and CCO of Ernst Russ AG were Robert Gärtner and Joseph Schuchmann. It was held that there was no basis to plead that there was any personal act or omission on the part of either.
Even if Stena got beyond this point, it was held that they would also need to prove that the directing mind knew that the defective practices on board Solong amounted to unseaworthiness such that a collision was inevitable at some stage and that they did nothing about those practices. Again, there was no evidence to substantiate any such argument simply a proposition that such matters ought to have made their way up the chain to the directing mind.
More importantly, the judge shut down the challenge to limitation before allowing disclosure as requested by Stena interests.
Contrast this to the case of the Dali which infamously destroyed the Francis Scott Key Bridge in Baltimore Harbour in March 2024. That case is also well known and we refer to our previous blog post here reporting on the possibility that the US Courts would seek to find a way around limitation so as to enable the State of Maryland to recover damages from the ship owner to enable them to rebuild the bridge, the costs of which are estimated to be north of US$4 billion. Consider also the numerous other claims arising from that incident including from the relatives of the deceased construction workers who tragically lost their lives on that March evening.
Despite the fact that, as a matter of US law, the ship owners were in principle entitled to limit their liability to approximately US$44 million (being the value of the vessel and unpaid freight) under the US Limitation Act of 1851, it has been reported that the owners of Dali and their liability insurers Britannia P&I and the International Group have agreed to pay the State of Maryland some US$2.25 billion to cover bridge reconstruction, emergency response expenses and broader economic losses. The death and personal injury claims are excluded from this settlement as are claims against the builders of the vessel.
The obvious question is why did owners and their insurers agree to pay such a large sum when the right to limit liability at around U$44 million was open to them?
We may never know the full story as to why the decision was taken to settle. However, protection under the US Limitation Act is only available to a shipowner if the accident occurred without privity or knowledge of the fault. One assumes that the State of Maryland felt they had a pretty good chance of unearthing evidence that might show that the shipowners and their agents knew about the prior electrical blackouts and how they were addressed. If evidence emerged that showed similar prior incidents, decisions taken to defer repairs and/or knowledge of electrical vulnerabilities, then it is possible that a convincing argument might have been made out that limitation should be denied. Once limitation has been denied, the owners and their insurers would be exposed to unlimited liability which would be of concern to all those insurers in the P&I reinsurance layers!
Of course, the Dali case is also highly political. Some have lobbied for the repeal or amendment of the US Limitation Act 1851 backdated to the date before the Dali incident. With that sort of pressure on owners and their insurers, it is perhaps understandable that they might view settlement as an opportunity to cap payments out rather than leaving these open ended. One might therefore see the settlement as saving circa US$1.75 billion as opposed to overpaying by US$2.2 billion.
There are still criminal proceedings pending against Synergy Marine (the vessel manager) in which it alleged that they were criminally culpable for the incident. Synergy’s defence is that it had no knowledge of what was, ultimately, a latent defect in the electrical wiring. It is possible therefore that the criminal trial (assuming it proceeds) could shed light on whether the record settlement agreed by the owners of Dali and their insurers was reasonable i.e. whether limitation might have succeeded had the matter gone to trial. Only time will tell.
For now, what we can say is that had the Dali incident occurred in the UK or for that matter any of the jurisdictions that have enacted the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC) (as amended by the 1996 Protocol) then it seems likely that limitation could not have been challenged in the way it was in the United States. Under Article 4 of the LLMC, a shipowner loses the right to limit liability only where the loss results from “a personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.” This is a significantly higher threshold for those seeking to challenge limitation as the Owners of Stena Immaculate discovered. Their attempt to persuade Mr Justice Baker to defer his decision on limitation pending disclosure did not even get off the ground!
Nick Burgess
Partner
