The Panama-registered bulk carrier MV Full City grounded off Langesund on 31 July 2009. As a result of hull damage, approximately 300 tonnes of oil escaped into the sea, polluting 75 kms of shoreline from Stavern to Lillesand. The ship was owned by ROC Maritime Inc at the time of the incident, while Cosco HK Shipping Co Ltd was its operator. The ship was insured with the London Steam-Ship Owners Mutual Insurance Association Ltd (the P&I club). These parties are hereinafter collectively referred to as the 'shipping company side'.

The Norwegian Coastal Administration initiated an oil spill response operation and cleaned up following the accident. The shipping company engaged professional salvors to assist. Cleaning work and environmental investigations were ongoing until the autumn of 2011. As a result of the incident, the State and the shipping company incurred significant costs. On 19 June 2012, the Norwegian Coastal Administration submitted a claim for reimbursement against the shipping company of approximately NOK 255 million in accordance with the rules of the Pollution Control Act. In addition, the State demanded just over NOK 27 million in interest from the accident in 2009 until the claim in 2012, calculated at an interest rate of 5 per cent. The shipping company appealed the Coastal Administration's decision to the Ministry of Fisheries and Coastal Affairs, which in an appeal decision in June 2013 essentially upheld the State's requirements.

Following an application from the shipping company, the Oslo District Court established a limitation fund pursuant to the Maritime Code § 177 on 2 November 2012. Attorney Jon Andersen was appointed fund manager: cf the Maritime Code § 236. The parties agreed that the liability amount was 22,936,500 Special Drawing Rights (SDRs), calculated in accordance with the Maritime Code § 175(a). On 20 November 2012, the fund manager received a payment from the shipping company of just over NOK 200 million, which corresponded to the SDR amount at the conversion rate that day. The parties also agreed that the shipping company should set aside NOK 62 million in interest. The shipping company provided security for this amount in accordance with the Maritime Code § 232(1)(b).

During the fund processing, the State reduced its claim against the fund to approximately NOK 240 million with the addition of interest. The shipping company filed a claim against the fund of just over NOK 32 million. As the amount in the limitation fund was just over NOK 200 million, the parties' claims could not be fully covered.

By agreement between the parties, in December 2012 and June 2017, the fund made preliminary payments to the State of NOK 170 million and NOK 6 million respectively. A question in the case before the Court of Appeal is whether these payments only went to cover the principal in the State's claims, or whether they also applied to accrued interest.

The parties disagreed on several issues related to the fund, including which of the State's costs were to be covered, whether the State was entitled to loss-of-use damages before its claim in 2012, and what interest rate should be used in that case. There was also disagreement about whether the amount of NOK 62 million that was provided as security for interest was included in the liability amount and could be used to cover other types of claims than default interest.

In March 2015, the State filed a lawsuit against the shipping company before the Oslo District Court regarding the dividend calculation and the question of whether the state was entitled to loss-of-use damages. In a Borgarting Court of Appeal judgment of 15 August 2017 (BORG-2015-174299) it was clarified that the State was entitled to loss-of-use damages at a rate of 2.5 per cent from the accident until 12 July 2012. In a judgment of 28 June 2018 (HR-2018-1260-A), the Supreme Court ruled that the amount pledged as interest for interest - NOK 62 million - could only be used to cover interest, and not the State's dividend in the limitation fund: see London Steam-Ship Owners Mutual Insurance Association Ltd v The State (CMI946).

Following the Supreme Court's ruling, the fund manager issued a fourth recommendation in January 2019 on the issues that had been disputed. Referring to the fact that an agreement had been reached, the fund manager sent his final report to the Oslo District Court, which on 15 May 2019 handed down a ruling on the distribution of the fund's assets. The State now appeals the ruling to the Borgarting Court of Appeal, arguing that the District Court had miscalculated the interest on the State's claims against the limitation fund.

Held: The appeal is rejected.

It is agreed that the State's total claim against the fund after limitation is NOK 187,921,4299.50. Of this, the principal amounts to NOK 176,839,897, while the remainder - NOK 11,081,532.50 - is interest accrued in the period from the accident in 2009 until July 2012. The dispute before the Court of Appeal concerns the interest calculation of the State's claims in the limitation fund. The State argued, first, that the interim payments from the fund in 2012 and 2017 totaling NOK 176 million went partly to cover accrued interest. If a proportionate share of the payments concerned interest, a larger balance of the principal will remain, so that the basis for calculating default interest will be higher. The State will then have a higher interest claim than that upon which the District Court based its judgment. Secondly, the State submitted that default interest should be calculated on a compounding basis until payment. This will also lead to the State having a higher interest claim than that which follows from the District Court's judgment, as the District Court has only calculated default interest on the principal, and not on accrued interest.

The shipping company stated that the State's interest claim has been submitted too late. The shipping company argued that in any case there was no material basis for the State's interest claim, either in agreement or ordinary bond law.

It is the State itself that made the interest calculation on which the District Court has based its distribution of the fund. The first interest calculation, which applied to loss-of-use interest until July 2012, was made by the Norwegian Coastal Administration in the decision in June 2012, where the State presented its claim against the shipping company for cost coverage. The Norwegian Coastal Administration did not demand interest rates at the time. It appears from the correspondence that this was deliberate.

The State later updated and specified its interest calculation several times at the request of the fund manager, no later than 11 April 2019, shortly before the manager on 10 May 2019 sent his final report to the District Court for termination of the limitation fund by judgment under § 244 of the Maritime Code.

Section 241 of the Maritime Code regulates fund meetings. These are meetings where the District Court takes the initiative to clarify issues related to the limitation fund, such as the size of the fund, the size of the claims and - finally - how the fund assets are to be distributed to the claimants. Section 241(3) and (4) provide:

If at the end of the fund meeting there are no objections to the recommendation with the changes that may have been made during the fund meeting, the court shall base the recommendation on the fund's distribution. If necessary, the court may postpone the consideration of the recommendation to a later fund meeting.

If there is an objection at the end of the fund meeting, the court shall set a specific deadline for the person who makes an objection, to demand that the issue be decided by the court. If the deadline is exceeded, the objection is deemed to have lapsed.

As is clear from the wording in the third paragraph, objections to the recommendation that were not put forward in the fund meeting will be lost by preclusion. Such an effect is necessary to fulfill the purpose of fund meetings, which is to find agreed solutions and clarify whether there is a disagreement that the District Court must decide on. In the event of a dispute, a preclusive time limit for legal action is set, as stated in the fourth paragraph.

Fund meetings were held in 2014 and 2015 where the parties met in the District Court to consider the first three recommendations from the fund manager. The parties did not meet physically at the District Court for fund meetings after this. The consideration of the fund manager's fourth recommendation from January 2019 and of the final report in the spring of the same year took place in writing. However, § 241 of the Maritime Code cannot be understood as requiring a physical meeting between the parties. A fund meeting can also be held as a telephone conference or by written exchange of comments, if the parties agree to it, and such a form of treatment appears to be justifiable. The preclusion effect pursuant to § 241(3) will be the same whether the process takes place orally, in writing or as a remote meeting.

The final report in this case was processed and approved in writing in a manner that fully takes into account the considerations behind the Maritime Code § 241. The parties agreed on this procedure. The parties' approval of the final report - in the usual way - had a preclusive effect pursuant to Maritime Code § 241(3).