On 9th April 2025 the Supreme Court handed down it’s decision in the MSC Flaminia. The full judgment can be found here.
We last reported on this case in 2023 following the Court of Appeal’s decision to reject MSC’s attempts to limit their liability to claims being advanced against them by. Those interested in that blog and the circumstances in which the fire occurred can read it again by clicking here.
In terms of the law, in the High Court Andrew Baker J denied MSC’s right to limit on the basis that claims for damage to the vessel itself could not be limited by reference to her own tonnage. That decision followed the Court of Appeal decision in the CMA Djakarta [2004] 1 All ER (Comm) 865, a case handled by our senior partner Bob Deering during his time at Ince & Co.
The Court of Appeal upheld this decision and said that it was right to judge each claim on its merits by reference to the wording of the Limitation of Liability for Maritime Claims 1976 as amended (LLMC). However, they also said that there was a “magic circle” of persons entitled to limit and that the LLMC prevented anyone within that circle from limiting against another person also within the circle. Conti’s claims against MSC as the charterers of the vessel all fell within the category of damage to the vessel and/or claims consequential on damage to the vessel and, since those claims fell within the circle, they were outside the limitation regime and MSC could not limit.
The long delay between Court of Appeal and Supreme Court decisions was apparently caused by the fact that MSC and Conti reached an amicable settlement. However, somewhat unusually, in view of the importance of the case it was decided that the appeal should proceed to hear what the Supreme Court had to say on the issue of limitation.
Well known shipping judge Lord Hamblen delivered the unanimous judgment in the Supreme Court. He upheld the primary position as advanced in the CMA Djakarta. However, the “magic circle” argument was held not to be definitive. The correct approach was to read the LLMC and apply it “as read” by reference to the facts. So, the list of limitable claims in Art. 2(1) meant what it said. There was no reference there to the identity of the party who had suffered the loss so that should not be read into the meaning.
It follows that one should exercise caution with the “magic circle” theory and it seems possible that someone inside this circle could find themselves claiming against a limitation fund covering their own liability to others inside that circle.
In terms of the claims in question, the Supreme Court agreed with the Court of Appeal that none of Conti’s claims came within Article 2(1)(a). On the facts, they were not claims arising out of the damage to the cargo on this ship even though they would not have arisen but for damage to the cargo. They were held not to be claims within Article 2(1)(f) i.e. payments on account of bunker liability and for removal of fire fighting water nor to avert such claims. They did however hold that the costs of unloading and decontaminating burned cargo would fall within Article 2(1) (e) as that would fall under rendering cargo harmless and/or dealing with a wrecked ship.
So, the key it seems is to read the relevant Articles of the LLMC and apply the facts to the claims in question. If the claims fall under any of the limbs of Article 2(1) then they are prima facie limitable even if this results from damage to the vessel itself.
Some might say that the Supreme Court’s decision in MSC Flaminia makes limitation easier to understand. In layman’s terms it is simply a case of applying the facts to the relevant limbs of Article 2(1) of the LLMC and not reading more into it than that. In practice, ship fires are messy and expensive affairs. Container ship fires are perhaps the worst examples due to the complexity of the cargoes on board, the number of interests involved (owners, operators, charterers, slot charterers, shippers, receivers etc) and the costs of dealing with burned containers and detritus from the salvage operation, not to mention damage the GA and salvage issues which also concern sound cargo interests. The process of dealing with the claims remains a cumbersome one but at least now it should be readily apparently which of those claims are limitable or not based on the helpful guidance given by the Supreme Court.
Nick Burgess
Partner
