This case arose out of a collision between fishing vessels in Palmeira, Ilha do Sal, Republic of Cape Verde. The Baía rammed into another vessel, allegedly as a result of a failure of its clutch cable. The owner and the insurer of the ​Baía sought to constitute a limitation of liability fund under the LLMC 1957. The court of first instance rejected the application. The applicants appealed to the Lisbon Court of Appeal.

Held: Appeal upheld. Judgment under appeal revoked in order to proceed in particular to assess the other requirements for granting the application for the establishment of the requested limitation fund.

Pursuant to art 1.1.b of the LLMC 1957, the owner of a seagoing ship may limit its liability to the amount determined in art 3 in respect of claims for compensation arising from loss or damage to any property or infringement of any rights caused by the act, neglect or default of any person on board the ship for whom the owner is liable, unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner.

In addition, pursuant to art 6.2, subject to the provisions of art 6.3, 'the provisions of this Convention shall apply to the charterer, manager and operator of the ship, and to the master, members of the crew and other servants of the owner, charterer, manager or operator acting in the course of their employment, in the same way as they apply to an owner himself: Provided that the total limits of liability of the owner and all such other persons in respect of personal claims and property claims arising on a distinct occasion shall not exceed the amounts determined in accordance with Article 3 of this Convention'.

In accordance with the provisions of art 4 of the Convention, Decree 49.029 of 26 May 1969 lays down the procedure for the implementation of the Convention and the rules relating to the constitution and distribution of the limitation fund. Thus, as set out in art 1 of this Decree, the owner of the ship or any of the persons referred to in art 6 of the Convention, wishing to benefit from the limit of liability contained therein, may apply to the court responsible for the constitution of a limitation fund by any of the forms of constitution permitted by civil law. The constitution of the fund is required, and the application must contain the indications and be accompanied by the documents mentioned in art 2 of the Convention. Pursuant to art 3 of the Decree, the application must be rejected when it is verified that the amount of the limitation fund has not been calculated in accordance with the provisions of art 3 of the Convention. Otherwise the judge shall determine the constitution of the fund.

As explained in the Supreme Court of Justice judgment, Process 07B4055 of 27 November 2007 (CMI599), maritime law has long granted the shipowner the privilege of limiting its liability for damage resulting from the conduct of the ship. This rule, which is old and common in countries with a maritime tradition, has primarily been aimed at promoting the development of maritime transport, as it has long been held that a shipowner does not have to fully compensate those who suffer damage from collision, with the tonnage of the ship functioning as the criterion limiting liability. The appropriateness of maintaining such a privilege, which, incidentally, is not exclusive to the shipowner, is crucial for the insurance industry even in the context of great economic liberalism, where competition is intensified.

It has also been held that, although the aforementioned Convention does not state that insurers may request the establishment of a limitation fund, because the insurer's liability to third parties cannot exceed the insured's liability and the law allows the insurer to limit its exposure to the insured to the extent stipulated, there is no obstacle to the insurer of the shipowner claiming for the constitution of a liability limitation fund under the Convention.

In this case, the applicant owner of the Baía, having regard to the provisions of art 1.1 of the Convention, may require the constitution of the limitation fund. The applicant insurer can be considered as insuring the damages that are legally attributed to the applicant owner, thus guaranteeing the civil liability within the limit of its liability and up to the amount of the insured value for material damages caused to third parties by collisions with other ships or vessels, so there is no obstacle to the insurer's application for limitation of liability.