The English High Court has reaffirmed that parties securing space on vessels under contractual arrangements for the carriage of goods may qualify as "shipowners" under Article 1(2) of the Convention on Limitation of Liability for Maritime Claims 1976 (as amended).

The English High Court has reaffirmed that parties securing space on vessels under contractual arrangements for the carriage of goods may qualify as "shipowners" under Article 1(2) of the Convention on Limitation of Liability for Maritime Claims 1976 (as amended). The ruling aligns with previous case law, particularly The MSC Napoli, and provides clarification regarding the application of limitation rights to entities engaged in commercial shipping arrangements that do not conform strictly to traditional charterparty models.

Campbell Johnston Clark acts for the Owners, represented by Simon Rainey KC, Natalie Moore, Andrew Leung and Joseph Gourgey of Quadrant Chambers, and Sean O’Sullivan KC of 4 Pump Court, in the Limitation Action.

Alistair Johnston, Maria Borg Barthet, Debo Fletcher and Konstantina Zariou summarise the judgment in Sea Consortium & Ors v Bengal Tiger Line & Ors [2024] EWHC 3174 (Admlty) below.

A full copy of the judgment can be found here: Link

1. Background

The case arose from the loss of the X-Press Pearl, a container ship that suffered from a catastrophic incident off the coast of Sri Lanka on 20 May 2021 and ultimately sank on 2 June 2021 (the “Casualty”).

Following the Casualty, the Owners constituted a Limitation Fund in England under the Merchant Shipping Act 1995, seeking to cap their liability under the 1996 Protocol to the 1976 Limitation Convention, as amended (the “Convention”). Three parties that had contracted to transport cargo aboard the vessel - Bengal Tiger Line Pte. Ltd. (“BTL”), MSC Mediterranean Shipping Company S.A. (“MSC”) and Maersk A/S (“Maersk”) (together the “Applicants”) - sought declarations before the court that they were also entitled to limit liability on the basis that they were “shipowners” under Article 1(2) of the Convention (the “Article 1 Applications”).

2. Arguments

The central issue for decision was whether the Applicants, on the basis of their respective contracts, could be classified as charterers, and therefore “shipowners” within the meaning of the Convention. There was no active opposition to the Article 1 Applications, with the Owners adopting a neutral position. The Judge noted that in circumstances where declaratory relief binding on all parties was being sought, each applicant needed to satisfy the court that it fell within the Article 1(2) definition of “shipowner”.

The applicants argued that their respective contracts for space aboard the X-Press Pearl should be considered charterparty arrangements, making them charterers and thus shipowners under Article 1(2). They relied on the reasoning in The MSC Napoli, in which Teare J had ruled that slot charterers (entities leasing specific container slots on a vessel) so qualified. 

3. Judgment

Interpretation of "Charterer" under Article 1(2)

Mr Justice Andrew Baker ruled that the Applicants qualified as charterers, thus “shipowners”, under Article 1(2), and were therefore entitled to limit their liability under the Convention.

In reaching this conclusion, the judge relied on the principles established in The MSC Napoli, where it was held that a charterer need not have an exclusive right to direct the use of an entire vessel in order to qualify under the Convention. Instead, key questions included whether each party:

1. Secured a dedicated allocation of space on board a vessel for the carriage of goods as carrier;
2. Bore contractual risk in relation to the cargo carried in that space; or
3. Functioned as a carrier by issuing its own bills of lading.

The Judge also emphasised that the particular contractual arrangement in respect of the potential Article 1(2) charterers’ use of the ship will always need to be scrutinised before judgment can be given in favour of their being deemed as an Article 1(2) “charterer”.

Here, the Applicants had each contracted for space on the X-Press Pearl under pre-arranged commercial agreements, entitling them to use an agreed number of cargo slots. These agreements obliged the vessel’s operators to make cargo space available, while the applicants undertook financial commitments and assumed obligations towards cargo interests.

Application to the Individual Applicants

1. BTL and MSC

For BTL and MSC, the judge found that their agreements were closely aligned with the slot charters considered in The MSC Napoli. Both parties had secured a fixed allocation of container slots for an agreed period and were obliged to pay for these slots, and in the case of MSC, regardless of whether the slots were used or not used. Both applicants’ position was that it was sufficient that their contract with Owners obliged Owners to make part of the ship’s carrying capacity available to them for the carriage of goods as contracting carriers.

A key feature of these arrangements was the requirement to issue bills of lading in their own names or handle cargo claims as contracting carrier, thus assuming direct contractual liability to cargo interests. By assuming the commercial risk associated with cargo carriage, BTL and MSC were not merely contracting for isolated shipments but were instead engaging in charterparty-type arrangements for the use of vessel space.

Andrew Baker J concluded that BTL and MSC’s commercial position was indistinguishable from that of the MSC Napoli slot charterparty, meaning they were entitled to limit their liability as Article 1(2) “charterers”.

2. Maersk – The Agreement for Transport Services (ATS)

Maersk’s contractual arrangements differed in one significant respect: its Agreement for Transport Services (ATS) did not require Maersk to have a fixed minimum number of slots. Instead with no volume commitments, it was only charged for the space it actually utilised, with some of the contractual terms more akin to Maersk being treated as “cargo” than as “carrier”. This raised the question of whether Maersk’s obligations were sufficiently similar to a charterer’s obligations, rather than a shipper’s obligations, to bring it within the scope of Article 1(2).

However, the court took a pragmatic approach considering the totality of the ATS in concluding that Maersk still functioned as a carrier. Maersk had argued that although the ATS contained no minimum volume commitments, Owners were obliged to ensure there was sufficient capacity to allow Maersk to ship the containers it wanted to ship, and the price paid by Maersk was reflective of that undertaking by the Owners to provide sufficient capacity. The containers Maersk carried on board the X-Press Pearl at the time of the incident were also the subject of Maersk bills, as required by the ATS, with Maersk also assuming contractual responsibility towards cargo owners.

While the lack of a fixed slot commitment was relevant, it was not in itself determinative. The broader question was whether Maersk had secured cargo space under a commercial arrangement that imposed responsibilities similar to those of a charterer.

4. Conclusion

The ruling affirms that parties securing cargo space under commercial shipping agreements, even where their contracts differ from traditional charterparties or MSC Napoli-style charterparties, can qualify as charterers under Article 1(2) and benefit from the limitation of liability regime. The judgment adopts a purposive approach, focusing on the commercial realities of slot allocation agreements rather than applying a rigid definition of “charterer”. It provides important clarification for the shipping industry, ensuring that charterers of vessel space can be recognised under the limitation regime, depending on the particular characteristics of their contracts, with the absence of a one-size-fits-all approach to the definition of slot charterer.

For further information on this topic, please contact: Alistair Johnston, Maria Borg Barthet, Debo Fletcher or Konstantina Zariou at CJC’s London office.