The Sea Empress grounded off Milford Haven and 72,000 mt of crude oil spilled into the sea. As a result of this there followed a six-month fishing ban in a maritime area around Wales. Alegrete Shipping Co Inc (the respondent), the owner of the Sea Empress, commenced limitation proceedings to limit its liability. The totality of the claims arising out of the incident was substantially in excess of the respondent's liability as limited by s 175 of the Merchant Shipping Act 1995 (UK) (the Act). The International Oil Pollution Compensation Fund 1971 (the Fund) was responsible for all claims above the respondent's limit subject to the Fund's own limit and the Fund intervened in the limitation proceedings.

R J Tilbury & Sons (Devon) Ltd (the appellant) was engaged in the business of fish processing. As a result of the fishing ban, the appellant claimed to have lost the profit that it would have made from processing whelks supplied to it by fishers. The lost profit claimed for amounted to around GBP 643,557, by virtue of s153(1)(a) of the Act. The appellant submitted that the economic loss caused by contamination resulting from the escape of oil was recoverable in principle. The loss was foreseeable and not too remote. The Fund argued that the appellant's economic loss flowed from the interruption of a business relationship with primary victims of the contamination, namely the fishers, and that this secondary or relational claim was not recoverable.

The first instance Court held that the appellant's claim failed. The appellant appealed. The issue before the Court was whether the economic loss suffered by the appellant was caused by contamination resulting from the escape of oil.

Held: Appeal dismissed.

Article 4 of the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971 (the Fund Convention 1971) provided that the purpose of the Fund was to provide full compensation to victims, and the liability of the Fund was limited. This suggested that the Fund was set up to compensate proximate claimants and not remote claimants. The relevant test in claims for economic loss was that the loss had to be a sufficiently 'direct' result of the contamination. The appellant was not engaged in any local activity within the physical area of the contamination. The contamination prevented local fishers, whose physical activities were closely affected by the contamination of the waters and of whelks, from supplying the appellant with the landed whelks for which it contracted. However, the appellant's resulting loss arose from its inability to carry out processing and packing and deliveries of processed and packed whelks. This was a form of secondary economic loss, which was outside the intended scope of s153(1)(a) of the Act.