On 10 July 1999, the CMA Djakarta, which was owned by Classica Shipping Co Ltd (the defendant) and time chartered to CMA CGM SA (the plaintiff), suffered an explosion and its voyage had to be abandoned. The explosion was attributable to the fact that two containers on board carried explosive chemicals. This was a breach of the dangerous cargo clause by the plaintiff. The case was first referred to arbitration. The arbitrators decided that there was a breach of the charter party by the plaintiff and that the plaintiff was not entitled to limit its liability under the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) which had been incorporated into English law by s 185 of the Merchant Shipping Act 1995 (UK).

The plaintiff appealed the arbitrator’s award and relied on art 1.2 of the LLMC 1976 which includes a charterer under the definition of shipowner, thereby arguing that the plaintiff as a charterer of the vessel was entitled to limit its liability.

Held: The appeal is dismissed and the award upheld.

The plaintiff as charterer was not entitled to limit its liability under the LLMC 1976.

First, limitation of liability is premised on the relevant claims having arisen either from damage to property on board or from damage to third party property caused by the operation of the ship. This is evident from arts 2.1.a-2.1.f of the LLMC 1976, which set out a list of claims to which liability could be limited. The plaintiff’s case to limit liability did not fall under any of the claims listed therein. The Court further clarified that although art 2 includes claims 'whatever the basis of liability may be', this did not give rise to an inference that a claim against a charterer is limitable in whatever capacity the charterer is sued.

Second, a time charterer is only entitled to limit its liability if it was acting as a shipowner. This is evident from arts 9.1, 11.1 and 11.3 of the LLMC 1976 which indicate the requirement for a community of interests in relation to the aggregation of claims and the constitution of the limitation fund. These provisions show that the party seeking limitation within the class of a shipowner must have some form of common potential exposure and must be acting in the capacity of a shipowner. The benefit to limit liability therefore does not extend to charterers who are defending a claim by owners for the loss of a ship.

[For the unsuccessful appeal to the EWCA, see CMA CGM SA v Classica Shipping Co Ltd [2004] EWCA Civ 114 (CMI728).]