CONTRACT WORDING: 'including, without limitation...'

Ship owners benefit from a range of limitation conventions and contractual limitations and often their insurances (especially P&I Cover) will be prejudiced in the event that they optionally waive those rights to limitation, so careful attention to contract wording is essential.

A contract which seeks to have the ship owner waive his rights will normally include an express term to that effect, i.e. 'the owner hereby agrees to waive their right to limit under the LLMC Conventions, CLC Conventions or any other ...' or 'the Owner shall pay claims for damage to Charterers property arising under this contract in full and without limitation'.

This language is not to be confused with the phrase from american legalese which is now common in many commercial legal contracts worldwide - 'the Owner agrees to indemnify / settle ... including, without limitation, claims for x, y, z.'. Some have argued that this may be construed as an agreement to settle those specific listed claims without limitation, but this is not the case. This arrangement of words merely means 'included but not limited to'.

For example, if a ship owner agrees to pay the Charterers claims for losses resulting from the ship owner's crew's negligence including, without limitation, claims for pollution, property damage and third party injury, then those types of claims resulting from the ship owner's crew's negligence are definitely to be met by the shipowner, but this does not limit or prevent the Charterer from also claiming for other types of claims resulting from the ship owner's crew's negligence. Any application of limitation conventions is unaffected by the clause.

Another confusing phrase which is used in the same context is 'without limitation to the generality of the foregoing' or 'without prejudice to the generality of the foregoing', which merely means where you express a rule then give some examples, the examples cannot be said in any way to weaken or restrict the general rule which stands as if the examples had not been given.

The "Rena" Grounding in New Zealand - What Limit Applies?

The "Rena" ran aground on a reef off the North Island in New Zealand on 5 October 2011. It is predicted to be the worst maritime disasters in New Zealand's history. Questions quickly began as to what the total cost would be and whether the shipowner (MSC is reported to have had the container vessel on a 5 year hire agreement) would be able to limit. I have heard a lot of speculation about what the result will be but in my opinion the vessel will be able to limit its liability to around USD 9.5 Million (considering that no direct fault of owners or charterers is alleged and proven).

There are 4 main conventions which apply to limitations for release of oil. The difference is extremely confusing but hopefully the following provides a brief 'idiot's' guide.

1. The CLC Convention - This would normally be the first port of call for an oil pollution claim. However, it only covers persistant oil - i.e. heavy oil carried as cargo by oil tankers. It will not therefore apply.

2. The 1992 Fund Convention - In the same way as above this would not apply.

3. The Bunker Pollution Convention - This convention was brought in specifically to deal with the effect of large oil spillages from commercial vessels due to them spilling their own fuel (bunkers), rather than a cargo of fuel they were carrying. The New Zealand government has supported its implementation recognising that in the last ten years the worst oil pollution incidents in NZ waters have been bunker spills, however, to my knowledge they have not yet ratified or acceded to the convention. It therefore has no effect.

4. The LLMC 1976 - This is the convention that will probably therefore apply by default, as implemented into NZ law in the Maritime Transport Act 1994 . It is very broad brush and does not even specifically mention oil but the limit for claims which do not involve injuries to people or passengers are as follows:
(a) in the case of a ship of not more than 300 gross tons, 83 333 units of account:

• (b)     in the case of a ship of more than 300 gross tons, but not more than 500 gross tons, 167 000 units of account:

• (c) in the case of a ship of more than 500 gross tons, 167 000 units of account* plus a further number of units of account calculated as follows:
  • (i) for each gross ton of the ship from 501 to 30 000 tons, 167 units of account; and
  • (ii) for each gross ton of the ship from 30 001 to 70 000 tons, 125 units of account; and
  • (iii) for each gross ton of the ship in excess of 70 000 tons, 83 units of account.

Therefore the limit can be calculated as follows:
a. 167,000 SDR (for the first 500 GT)
b. 29,500 x 167 SDR = 4,926,500 SDR (for 501 to 30,000 GT)
c. 7,209 x 125 SDR = 901,125 SDR (for 30,001 to 37,209 GT - the GT of the "Rena")
Total = 5,994,625 SDR (or) approx. 9,500,000 US Dollars at today's rate of exchange.

* A 'Unit of Account' means a Special Drawing Right - see this article for an explanation of what this is.