On 12 January 2007, the MV Server ran aground and sank at Hellisøy lighthouse in Fedje municipality. The Oslo District Court established a global limitation fund on 23 May 2012 based on s 177 of the Maritime Code. The liability amount (approximately NOK 226.4 million) was paid on 29 June 2012. In addition, security was provided for a further NOK 115 million to cover interest and costs. The fund was considered to be constituted on the day of payment: s 234 of the Maritime Code.

The State, through the Ministry of Trade and Fisheries, and Gard notified claims to the limitation fund. The State's claim of approximately NOK 182.2 million mainly included costs for cleaning up pollution damage.

Gard's claims were linked to various costs covered on behalf of the shipowner (subrogated claims). In addition, Gard applied to recover costs for the subsequent removal of the stern of the ship. This wreck removal only took place in 2018-2019, because of protracted disagreements about wreck removal obligations. Gard settled significant parts of the wreck removal costs in foreign currencies – EUR and GBP. Gard's claim was reported to the fund in USD and amounted to approximately NOK 53 million if the currency conversion was made when Gard met the outlays that were required to be covered by the limitation fund (the time of redemption). If the currency conversion was done at the time of the constitution of the limitation fund in 2012, Gard's claim amounted to approximately NOK 41.3 million.

The Oslo District Court held that Gard's wreck removal claim should be calculated on the basis of the NOK exchange rate at the time the individual claims in foreign currency that were included in the wreck removal claim were paid. The State appealed. The Borgarting Court of Appeal dismissed the State's appeal on 30 September 2022 (CMI2084). The State appealed to the Supreme Court.

Held: Appeal dismissed.

Section 177 of the Maritime Code gives the shipowner the right to constitute a limitation fund under certain conditions. The background is that maritime law gives shipowner the right to limit its liability for compensation after maritime accidents. The Maritime Code sets liability limits that constitute the shipowner's maximum liability for damages for various categories of loss caused by the accident. The limitation of liability may result in all claims not being fully settled. The liability amount must then be distributed between the claimants.

The purpose of the rules on limitation funds is to ensure effective limitation of liability and an orderly, proportionate distribution of the amount of liability between the claimants. The shipowner who chooses not to constitute a limitation fund can also invoke limitation of liability: see s 180 of the Maritime Code. But then the shipowner exposes itself to successive claims from individual creditors, with the risk that limitation of liability will not be effective in practice.

It follows from s 505 of the Maritime Code, read with ss 232-234, that when a limitation fund is constituted, the liability amount in NOK is determined - ie locked - at the time of establishment. This means that payments from the fund must in practice also be made in NOK, which crystallises the issue in this dispute: some claimants – in this case Gard – have outlays and losses in currencies other than NOK. At what point should the conversion to NOK take place?

This issue is not resolved in the LLMC 1996, which Norway has ratified and implemented in Ch 9 of the Maritime Code. Article 14 of the Convention states that the regulation of the constitution and distribution of limitation funds, and all rules of procedure in connection with such cases, is left to national law.

This issue is also not resolved in national maritime law. Section 176(1) of the Maritime Code states that the liability amount 'shall be distributed among the claims that are subject to limitation, in relation to the reimbursed amounts'. This wording implements art 12.1 of the Convention, where the wording after the comma is 'in proportion to their established claims against the fund'. But the Maritime Code does not regulate in more detail when claims against the limitation fund are considered settled - nor when claims in foreign currency are considered settled.

Because the Maritime Code's rules on limitation funds are relatively sparse, the draft legislation provides some guidance on applying the bankruptcy legislation's rules by analogy. From NOU 1980:55 pp 26-27 it appears that the draft of what is now s 176(1) 'determines the main principle for the distribution'. In particular:

Proportional distribution means a dividend payment, in the same manner as in bankruptcy. Certain principles of bankruptcy law must also be able to be applied by analogy. The single liability principle in U. § 235, subsection 2, is a clear parallel to the rule on set-off in bankruptcy. It may also be relevant to withdraw the rules on full dividend rights in case of solidarity ...

The NOU contains several similar references to bankruptcy legislation. For example, at p 50:

When a limitation fund has been established which is to be distributed proportionately between the creditors, the subsequent proceedings and the distribution of the fund will have to be characterised by a bankruptcy-like settlement. ... As mentioned, the committee expects that the chapter on limitation funds and limitation actions will only be significant in relatively few cases. The committee has therefore come to the conclusion that there is hardly any need for extensive and detailed regulation. It must be sufficient that the law lays down the main features of the limitation procedure. Individual issues that the draft does not resolve are therefore expected to be decided by the courts, eg based on general rules of procedural law and the rules that apply to bankruptcy proceedings.

The Ministry agreed with this: see Ot prp nr 32 (1982-1983) pp 34 and 52. The Storting committee must be understood in the same way: see Innst O nr 58 (1982-1983).

It cannot be inferred from these statements that the courts are required to apply the rules of the bankruptcy legislation by analogy in all cases where the Maritime Code itself does not have rules. What the preparatory work does - with good reason - is to point to legal rules from which it is obvious to draw analogies.

Another rule which is analogously relevant here is s 6-5 of the Insurance Act:

When the claimant does not have a claim that the exchange rate on an earlier day is used as a basis, claims in foreign currency must be converted into Norwegian currency according to the exchange rate on the deadline day. § 6-4 second sentence applies accordingly.

The reference to s 6-4 second sentence means that claims in foreign currency that have arisen after the deadline must be converted at the time of the establishment of the estate administration. This has its parallel in the time of the constitution of the limitation fund. An analogy from s 6-5 of the Insurance Act can therefore lead to the conversion to take place at the time of fund creation, as the State has claimed.

These legal sources ultimately do not point unequivocally towards a specific solution. The Maritime Code keeps the question open and in practice leaves it to the courts to determine the time at which currency conversion is to take place. This means that the courts are given a not insignificant amount of discretion. In this connection, it must be assessed whether there is reason to draw an analogy from rules in bankruptcy legislation.

The rule in the Insurance Act is justified in the preparatory work in that it 'will immediately be clear what parties have to adhere to during the estate administration' if the conversion time is linked to the opening of the estate administration or earlier: NOU 1972:20 p 307. It is also pointed out that the rule should be unambiguous and relatively simple.

These considerations do not apply without further ado to limitation funds under the Maritime Code. The constitution of a limitation fund does not depend on how big the claims are. The size of the fund is calculated based on the ship's tonnage: see s 175a of the Maritime Code. There is therefore not the same need as in bankruptcy already to know the size of the claims at the time of constitution of the fund.

A more important difference is that the claims for which dividends are calculated in bankruptcy have generally arisen before the bankruptcy. This case illustrates that this is not always the case in limitation funds: the wreck removal costs Gard submitted were ordered and carried out many years after the limitation fund was constituted. The magnitude of the claims could therefore not be clarified at the point when the fund was constituted.

There are strong reasons against applying s 6-5 of the Insurance Act analogously for claims arising after the limitation fund was constituted. Considerations of equal treatment of the claimants do not indicate that the time of fund creation should nevertheless be used, as the State has argued. Regardless of the timing, it is the claimants' individual claims that entitle them to a dividend in the limitation fund.

On the other hand, there is also a need in limitation funds to be able to clarify the size of the claims as soon as possible after they have been submitted. Among other things, it is in the interest of all parties to make arrangements so that preliminary payments to claimants according to s 243 of the Maritime Code can be made to the greatest extent possible and as quickly as possible. This means that the currency conversion should not be delayed until the final distribution of the limitation fund.

Collectively, this leads to the decision that the currency conversion should take place at the time of payment of the outlays that are required to be reimbursed, where the outlay has been paid after the creation of the fund. That timing must be used here, because Gard paid the outlays in foreign currency after the fund was created.

It may be different in those cases where the claimant has paid the outlay before the constitution of a limitation fund. That situation is significantly more similar to that regulated in s 6-5 of the Insurance Act. In that case, the constitution of the fund should not lead to the conversion time being moved to a time before constitution of the fund.