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08 April 2009
In a landmark ruling the Supreme Court has extended the protection for shipowners that establish a limitation fund with a European court against enforcement proceedings in Norway, irrespective of whether Norway and the European country in which the fund has been established are parties to the same maritime limitation of liability conventions.
Two vessels, the General Grot-Rowecki (GGR) and the ECE, collided in the English Channel on January 31 2006. While the GGR suffered no extensive damage, the ECE sank and was lost with all its cargo on board.
On March 2 2007 the ECE's owners filed an application with Ålesund District Court in Norway to arrest the GGR. The court rendered an ex parte decision on the same day, granting the ECE interests arrest in GGR as security for a claim of $14 million. The GGR's owners filed a motion for oral hearings on March 5 2007, which were conducted on March 13 2007. In the meantime, on March 7 2007 the GGR interests established a limitation fund of €4,590,735 with the Commercial Court of Paris, pursuant to the French rules incorporating the 1976 London Convention on the Limitation of Liability for Maritime Claims.
Following the oral hearings, the Ålesund District Court reversed its decision and lifted the arrest. The ECE interests appealed to the Frostating Court of Appeal, where the district court's decision was upheld. The matter was appealed to the Supreme Court.
When the matter came before the Supreme Court, the parties agreed that the rules in force at the time of the collision were applicable.(1) At that time, Norway had ratified and incorporated the Limitation of Liability for Maritime Claims 1996 Protocol into the Norwegian Maritime Code, but had not yet denounced the 1976 convention. Due to Norway's existing obligations under the convention, a parallel system had been established whereby the protocol should apply whenever limitation of liability was invoked before the Norwegian courts. An exception was made where the party filing for limitation was domiciled in a state party to the convention, but not to the protocol, in which case the convention applied. Pursuant to the wording of the Norwegian Maritime Code at the time of the collision, a limitation fund constituted in France pursuant to the convention need not be recognized in Norway (unless the exception relating to the party's domicile was applicable, which was not the case).
The GGR interests argued that the limitation fund constituted in France should be recognized in Norway, meaning that, pursuant to Article 13 of the convention, the ECE interests were barred from pursuing actions in Norway against the GGR interests, including arrest of the vessel. The GGR interests referred to the rules on recognition and enforcement of judgments in the Lugano Convention 1988 and Norway's public international law obligations towards France as a party to the convention. The ECE interests argued that the Lugano Convention was not applicable and that the Norwegian Maritime Code clearly provided that only limitation funds constituted pursuant to the 1996 Protocol could be recognized in Norway.
The Supreme Court found that the wording of the Norwegian Maritime Code required the Norwegian courts to recognize only limitation funds constituted pursuant to the 1996 protocol, and not the limitation fund constituted in France pursuant to the French rules incorporating the convention.
However, the court held that the Norwegian Maritime Code was overridden by the Lugano Convention, and that the limitation fund established in France was a judgment within the meaning of Article 25 of the Lugano Convention, which must be recognized by Norwegian courts, pursuant to Article 26 of the Lugano Convention. The court referred to the Mærsk I decision rendered by the European Court of Justice on October 14 2004 (C-39/02) and the Mærsk II decision rendered by the Danish Supreme Court on October 17 2005 (Case 233/1998).
A key point is the scope of the obligation in Article 26 of the Lugano Convention to recognize a judgment. With reference to previous judgments of the European Court of Justice,(2) the Danish Supreme Court (Mærsk II) and the Dutch Supreme Court,(3) the GGR interests argued that to 'recognize' means giving the judgment in question the same effect in the receiving state as in the state of origin. In France, it was clear that establishing a limitation fund pursuant to Article 13 of the convention would prevent claimants from commencing or continuing other enforcement proceedings against the parties on whose behalf the fund was constituted. In order to satisfy the recognition requirement in Article 26 of the Lugano Convention, the French court's decision to constitute a limitation fund must be given the same effect in Norway as in France, including the bar to other actions provided for in Article 13 of the convention. The Supreme Court agreed without further discussion.
The court discussed the applicability of Article 57 of the Lugano Convention, which excludes from the scope of the convention questions related to limitation funds governed by other conventions. With reference to Mærsk II and Assi Eurolink, the court held that Article 57 was not applicable.
The GGR interests argued alternatively that non-recognition of the limitation fund constituted in France would contravene Norway's public international law obligations towards France under the convention, but this was not discussed by the court.
The Supreme Court's decision in General Grot-Rowecki emphasizes the importance of the Lugano Convention (which has recently been amended and renamed the Lugano Convention 2007) and the corresponding EU Regulation on Maritime Limitation of Liability Matters within the European Union and European Free Trade Association (44/2001). It will ensure to a greater extent that shipowners are afforded the protection intended by a specific limitation convention, irrespective of whether other European countries are parties to the same convention.
Norway has denounced the convention and is party only to the 1996 convention. However, a limitation fund constituted by a European court pursuant to the convention, or even the 1957 convention, should be recognized in Norway pursuant to the Lugano Convention. Norway's special regulations on separate limitation amounts for clean-up costs related to maritime accidents may not be enforceable if a limitation fund has been constituted in another European country which does not have the same special regulations.
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