MSC Mediterranean Shipping Company SA v Conti 11 Container Schiffahrts-GmbH & Company KG MS “MSC Flaminia”

Heard on 5 and 6 February 2025

Lord Hamblen ( with whom Lord Hodge, Lord Briggs, Lord Leggatt and Lord Burrows agree):

The principle of limited liability for maritime claims is an established feature of international maritime law. It entitles the shipowner and certain others involved in ship operation to limit their liability for claims arising out of a maritime casualty or incident to a particular sum. Its roots lie in a recognition of the importance of maritime trade and the need to encourage investment in it.

In the United Kingdom limitation is governed by the 1976 Convention on Limitation of Liability for Maritime Claims as amended by the amending Protocol of 1996 (“the 1976 Convention”), which is given the force of law by section 185 of the Merchant Shipping Act 1995. Under the 1976 Convention shipowners and salvors are entitled to limit their liability (article 1.1) and the “shipowner” means “the owner, charterer, manager and operator of a seagoing ship” (article 1.2). The right to limit is given in respect of specified types of claim (article 2) and, in particular, claims for damage to property occurring on board or in direct connexion with the operation of the ship (article 2.1(a)).

This appeal concerns the circumstances in which a charterer may limit its liability in respect of claims made by the shipowner. As a matter of English law it is well established (and common ground on the appeal) that there is no right to limit its liability in respect of claims by a shipowner for loss of or damage to the vessel – see CMA CGM SA v Classica Shipping Co Ltd (The CMA Djakarta) [2004] EWCA Civ 114, [2004] 1 All ER (Comm) 865, approved (obiter) by the Supreme Court in Gard Marine and Energy Ltd v China National Chartering Co Ltd (The Ocean Victory) [2017] UKSC 35, [2017] 1 WLR 1793.

The principal issues on this appeal are (i) whether there is a further and wider principle that there is no right for a charterer to limit its liability in respect of claims by a shipowner for losses originally suffered by it (as opposed to recourse claims) and (ii) whether the claims made by the shipowner fall within article 2.1 of the 1976 Convention and, if so, whether the fact that they result from damage to the vessel means that there is no right to limit.

The appellant (“MSC”) is a container line operator, which runs liner services carrying containerised cargo around the world. The respondent (“Conti”) is the owner of a container ship, the “MSC Flaminia” (“the Vessel”).

The Vessel was chartered by MSC under a time charter on the New York Produce Exchange form (“the Charter”), initially made in November 2000 and extended several times.

On 14 July 2012, while the Vessel was in mid-Atlantic en route from Charleston, South Carolina, to Antwerp, an explosion occurred in the no 4 cargo hold which led to an extensive fire on board. The explosion was caused by auto-polymerisation of the contents of one or more of three tank containers laden with 80% divinylbenzene (“DVB”) which had been shipped at New Orleans. Three of the Vessel's crew lost their lives, extensive damage was caused to the Vessel, and hundreds of containers were destroyed.

Conti engaged salvors, Smit Salvage BV (“Smit”), to bring the fire under control and to salve the Vessel and cargo. Seawater was sprayed into the Vessel which resulted in about 30,000 mt of firefighting water, contaminated with dangerous and toxic residues, remaining in the holds after the fire was brought under control. On 20 July 2012 Smit began towing the Vessel towards mainland Europe.

On 28 August 2012, an agreement was reached with the German authorities and the Vessel was allowed to proceed to Wilhelmshaven in Germany.

Significant costs and expenses were incurred by Conti in relation to the passage to Wilhelmshaven. In particular, payments were made to national authorities in Belgium, France, the UK, and Germany, most of which related to claims by the German and UK authorities under the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001. These claims related to preventative and precautionary measures taken in those jurisdictions in the event that bunker oil leaked from the Vessel and causing pollution in their territorial waters.

The Vessel arrived at Wilhelmshaven on 9 September 2012 for the discharge of sound and damaged containers that needed to be removed before the Vessel could be moved to a repair facility. This commenced on 28 September 2012. Discharge of the sound and damaged containers was ultimately completed on 18 December 2012. The process of decontaminating cargo, releasing sound cargo, and destroying unsound and sound but unclaimed cargo continued thereafter, into 2013 and beyond.

During this time, Conti incurred various costs and expenses, all of which had to be incurred in order, ultimately, to repair the Vessel. These included berth dues, quayside space rental and service charges (€18.3m); cargo handling and disposal costs (€9.2m); customs agents' fees (€210,000); disbursements and bunker supplies (€4.2m); fire experts' fees (€880,000), and additional services and miscellaneous expenses (all figures approximate).

A further issue that needed to be considered by Conti at this time was the disposal of the firefighting water on board the Vessel, which had to be removed before repairs could commence. Discharge of the firefighting water was arranged and was completed on 1 March 2013 at a cost of around €7.1m.

After the discharge of the majority of the firefighting water, there remained on board the Vessel about 30,500 mt of waste material, consisting of approximately 14,800 mt of fire-damaged solid cargo (ie the contents of the containers), 7,800 mt of contaminated water, and 5,400 mt of steel scrap. Most of this steel scrap consisted of damaged cargo containers, but there was also fire-damaged structural steel from the Vessel. All of this waste material was contaminated by dangerous and toxic residues which needed to be removed before repairs to the Vessel could be carried out. Conti arranged for this waste to be removed at facilities in Romania.

On 15 March 2013 the Vessel left Wilhelmshaven, arriving in Romania on 30 March but only berthing on 17 May. On 20 July discharge of the waste commenced but on 16 October it ceased, it being decided to have the remainder of the waste discharged in Denmark.

On 8 November 2013, the Vessel left Romania for Denmark and arrived on 22 November. Upon arrival in Denmark, discharge operations commenced and were completed by 2 February 2014. The following day the Vessel departed for Romania.

Conti incurred costs and expenses in the sum of about €24.8m removing the waste from the Vessel.

The Vessel arrived in Romania on 17 February 2014 and repair work was commenced. It was completed on 12 July 2014. Sea trials were completed on 14 July 2014 and the Vessel was ready to return to service on 15 July 2014.

Conti incurred costs and expenses in the sum of about US$21m repairing the Vessel plus various disbursements.

The Vessel was re-delivered to MSC under the Charter on 23 July 2014.

In 2012, cargo claimants issued proceedings against not just MSC (the bills of lading being charterers' bills) and Conti but also the DVB's shippers, Stolt-Nielsen USA Inc and Stolt Tank Containers BV (together “Stolt”), and its manufacturer, Deltech Corp (“Deltech”), in the United States District Court for the Southern District of New York.

In September 2018, the District Court found that Stolt and Deltech were liable to the cargo claimants, that the claims against MSC and Conti failed, and that MSC and Conti were entitled to a full indemnity in respect of their losses from Stolt and Deltech, with quantum to be determined later. An appeal by Stolt and Deltech was dismissed by the US Court of Appeals for the Second Circuit on 30 June 2023.

The Charter provided for London arbitration. An arbitration was started in 2012 but it was actively prosecuted only much later, after the US proceedings had been progressed. Conti sought to recover from MSC the extensive losses it had suffered by reason of the casualty. The tribunal held that Conti was entitled to an indemnity and/or damages in respect of MSC's breaches of clause 78 of the Charter and article IV rule 6 of the Hague Rules (which had been incorporated into the Charter) for shipment of a dangerous cargo and also to outstanding hire. It awarded Conti approximately US$200 million.

By a limitation claim form dated 21 July 2020, MSC claimed a limitation decree. Pursuant to an order dated 5 October 2021, the limitation fund was established by the provision of a letter of undertaking from the Standard Club UK Ltd.

In October 2022, there was a four-day trial before the Admiralty Judge, Andrew Baker J, of the issue whether any of Conti's claims against MSC were claims within article 2.1 of the 1976 Convention and so subject to limitation. The judge held that they were not: MSC Flaminia [2022] EWHC 2746 (Admlty), [2023] Bus LR 686.

MSC appealed. Following a two-day hearing in July 2023, the Court of Appeal (Males and Falk LJJ and Sir Launcelot Henderson) dismissed MSC's appeal on 1 September 2023: [2023] EWCA Civ 1007, [2024] 1 All ER (Comm) 364, [2024] Bus LR 311.

On 19 December 2023, the Supreme Court (Lord Hodge, Lord Hamblen and Lady Simler) granted...