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29 October 2008
Supreme Court Judgment
The Norwegian government decided to implement the 1996 Protocol to the Convention on Limitation of Liability for Maritime Claims prior to it entering into force internationally, while not simultaneously denouncing the 1976 convention. The Supreme Court’s decision in Rocknes demonstrates that the government was too eager in giving effect to the protocol's higher limitation amounts in Norwegian law.
On January 19 2004 the 17,357-ton bulk carrier Rocknes capsized in Vatlestraumen off Bergen, Norway, after hitting a shallow. The vessel capsized within a few minutes of the incident, leading to the death of 18 seamen and causing a serious oil spill.
Following the government’s decision to seek recovery of oil clean-up costs from the shipowner, on May 12 2004 the shipowner commenced proceedings against the government claiming principally that the government’s decision to seek recovery from the shipowner was invalid. Alternatively, they claimed that the shipowner was entitled to limit liability pursuant to the Norwegian rules implementing the 1976 convention. Subsequently, compensation claims were filed against the shipowner and on April 28 2005 the shipowner filed a petition with the district court for the constitution of a limitation fund pursuant to the 1976 convention.
The claimants argued that the fund should be constituted pursuant to the rules implementing the 1996 protocol, which provide for significantly higher limitation amounts. Established pursuant to the 1976 convention, the limitation fund would have amounted to about Nkr38 million but established pursuant to the 1996 protocol, the fund would have amounted to about Nkr 90 million. On February 7 2006, the district court granted the shipowner permission to constitute a limitation fund, but accepted the claimants’ view that the fund should be established pursuant to the 1996 protocol.
The shipowner filed an appeal, but the Court of Appeal upheld the district court’s decision in a ruling issued on July 3 2006. The shipowner then filed an appeal with the Supreme Court. At that time the government was the only creditor still engaged in the limitation proceedings.
The Supreme Court rendered its decision on February 15 2007(1), overturning the Court of Appeal decision and granting the shipowner permission to constitute a limitation fund pursuant to the 1976 convention in the amount of Nkr38 million.
At the time of the Rocknes incident, a dual system was in force. Norway ratified the 1976 convention in 1983 and implemented the rules in the Norwegian Maritime Code in force at the time. The 1976 convention was also implemented in the new Norwegian Maritime Code 1994, which came into force in October 1994.
Norway ratified the 1996 protocol in 2000 and at the same time decided to implement it into law prior to it entering into force internationally. The government expected the protocol to take another couple of years before entering into force internationally and wanted to give the higher limitation amounts in the 1996 protocol effect as soon as possible. The 1996 protocol was implemented into law on January 7 2000. However, Norway did not denounce the 1976 convention at the time.
Due to Norway’s existing obligations under the 1976 convention, a parallel system was established whereby the rules corresponding to the 1996 protocol would generally apply whenever limitation of liability was invoked before Norwegian courts. An exception was made for the situation where the party filing for limitation at the time of filing was domiciled in a state party to the 1976 convention, but not the 1996 protocol, in which case rules corresponding to the 1976 convention would apply.(2) The purpose of this dual system was to ensure the 1996 protocol was given as wide application as possible under Norwegian law without violating international public law obligations under the 1976 convention. The legislature clearly recognized that existing obligations under the 1976 convention imposed restrictions on the application of the 1996 protocol until the protocol entered into force internationally and Norway denounced the 1976 convention.
The wording of the second paragraph of Section 170 of the previous Norwegian Maritime Code referred to the situation where the party filing for limitation “at the time of filing for limitation” was domiciled in a 1976 convention state as decisive to whether the 1976 convention or the 1996 protocol should apply.
The Rocknes incident occurred on January 19 2004. At that time Germany, the shipowner’s domicile, had ratified the 1996 protocol but the protocol had yet not entered into force. Germany was thus still bound by the 1976 convention. The protocol entered into force in Germany on May 13 2004, the same day it entered into force internationally.
The main question before the Supreme Court was whether the 1996 protocol was applicable where the shipowner was domiciled in a state bound by the 1976 convention at the time of the incident, but bound by the 1996 protocol at the time of filing for limitation.
The government, represented by the Norwegian solicitor general, argued that the wording of the second paragraph of the code’s Section 170 - “at the time of filing for limitation is domiciled in a state bound by the 1976 convention, but not the 1996 protocol” - was clear and left no doubt that the time of filing for limitation was the decisive point and that the situation at the time of the incident was immaterial. The government also referred to the Norwegian preparatory work emphasizing that the main purpose of giving the 1996 protocol effect in Norwegian law prior to it entering into force internationally was to afford possible claimants the benefit of higher limitation amounts. Against this background,according to the claimants, there was no basis for setting aside the wording in the Section 170.
The shipowner argued that the wording in Section 170 must be set aside and that “the time of the incident” must be decisive. The shipowner also referred to the Norwegian preparatory work, which clearly emphasized the importance of Norway not violating its existing obligations under the 1976 convention by giving the 1996 protocol effect towards shipowners domiciled in the 1976 convention states. Applying the 1996 protocol towards the owner of the Rocknes would violate Norway’s international public law obligations towards Germany under the 1976 convention. The shipowner further referred to Article 9.3 of the 1996 protocol: “The convention as amended by this protocol shall apply only to claims arising out of occurrences which take place after the entry into force for each state of this protocol.” This clearly states that, towards the 1976 convention states, the 1996 protocol can be invoked only for occurrences taking place after the protocol entered into force internationally. Finally, the shipowner argued that using the time of filing for limitation and not the time of the incident as the decisive point in time would conflict with Section 97 of the Norwegian Constitution which prohibits laws from having retroactive effect.
The Supreme Court followed the shipowner’s reasoning and held that, despite the clear wording, the situation at the time of the incident must be the relevant parameter under the previous Section 170. Following the Supreme Court’s decision, a limitation fund in the amount of Nkr38 million was established.
In Rocknes the Supreme Court rapped the government’s knuckles for being a little too creative in trying to give the higher limitation amounts in the 1996 protocol effect in Norwegian law. Although the previous Section 170 was repealed in connection with Norway’s denunciation of the 1976 convention and this particular legal question is most likely no longer relevant, the decision demonstrates the increasing tendency of interpreting domestic Norwegian law in light of international public law obligations. At the outset, the Rocknes decision may seem to go one step further than the Finanger I decision.(3) However, given the clear emphasis in the preparatory work on honouring such obligations, the two Supreme Court decisions do not conflict and reflect two different legal situations consistently.
The Rocknes Case is set to continue in the Norwegian courts, with a combined hearing scheduled for February 2009 on the government’s claim for recovery of oil clean-up costs and the shipowner’s claim for recovery of vessel repair costs and other losses.
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