Slotting into Limitation22 January 2025

Legal Issue

The Convention defines “shipowners” as “the owner, charterer, manager or operator of a sea-going ship.” Mr Justice Baker had to consider whether Maersk, Bengal Tiger Line and MSC were “charterers”, which would qualify them as “shipowners” within the meaning of Article 1(2) of the Convention.

Legal Analysis

The MSC Napoli

Maersk, Bengal Tiger Line and MSC all drew the court’s attention to the decision relating to limitation by slot charterers in the MSC Napoli case (The MSC Napoli [2008] EWHC 3002 (Admty)). In that case, Hapag-Lloyd AG and H Stinnes Linien, as slot charterers, had contracts with MSC as slot provider or vessel provider. MSC allocated a number of TEU container slots per voyage on a defined MSC container service route to the slot charterers. These slot charters provided for containers carried under them to be covered by bills of lading issued by the slot charterers. The consideration payable to MSC was described as “slot charter hire” and was payable for the slot allocation, whether it was used or unused.

Teare J held that the slot charterers were each a “charterer…of a seagoing ship”. He noted that to be considered a “charterer” for the purposes of Article 1(2), the party was not required to have a right to use or direct the use of the entire cargo carrying capacity of the vessel. He concluded that as a matter of ordinary language there was no reason to say that “charterer” in Article 1(2) did not include a slot charterer. The slot charterers in the MSC Napoli case were held to be “shipowners” within the definition of Article 1(2) and entitled to limit their liability under the Convention.

The X-Press Pearl – Admiralty Court Decision

The court decided that Maersk, Bengal Tiger Line and MSC could be considered “charterers” within the meaning of Article 1(2) and therefore fell within the Article 1(2) definition of “shipowners”.

Mr Justice Baker stressed in his judgment that the court will always need to examine the specific contractual arrangements under which the party enjoyed the services of the vessel in question before it can decide whether that party falls within the definition of “charterer” for the purposes of Article 1(2). In considering the MSC Napoli case, the court concluded that it was not an essential part of Teare J’s reasoning that the charter slot hire in that case was given that title or that it was payable for the allocated slots, used or not used.

The court noted that it will normally be sufficient for a party to be considered an Article 1(2) “charterer”, if the relevant contract obliges an owner or disponent owner to make part of the carrying capacity of a ship available for the carriage of goods which that party will have contracted, or will be obliged to contract, to undertake as carrier. Baker J held at paragraph [19] that:

“A party to whom space on a ship is contracted for the performance by it, delegated to the ship, of its contractual obligations as carrier will generally be an Article 1(2) “charterer”, given the ordinary connotation of that word and the purposes of the Convention.”

The court went on to consider the precise contractual arrangements entered into by Maersk, Bengal Tiger Line and MSC.

Bengal Tiger Line

Bengal Tiger Line had entered into a Fixed Slots Contract with the time charterers under which the time charterers agreed to provide 250 TEU slots per voyage on the SMX route. The fees for the allocated slots were payable by Bengal Tiger Line, used or not used.

The court found that the Fixed Slots Contract was materially identical to the slot charters considered in the MSC Napoli case and therefore concluded that Bengal Tiger Line was straightforwardly a “charterer” within the meaning of Article 1(2).

MSC

MSC were using the time charterers as a feeder service to connect one of its linear routes to more remote ports and had entered into a written Connecting Carrier Agreement (the “CCA”) with the time charterers to govern that feeder service. Under the CCA, the time charterers agreed to make 50 TEU slots available to MSC per week. MSC were obliged to pay USD 175 per TEU for each slot used.

The court noted that the only substantive point of difference between the CCA and the slot charters considered in the MSC Napoli case was the lack of any obligation upon MSC to pay for unused slots. The court’s view was that this alone did not take MSC outside the scope of Article 1(2) and MSC still fell within the definition of “charterer”.

Maersk

Maersk had entered into a written Agreement for Transport Services (“ATS”) with the Claimants under which the Claimants provided ‘Transport Services” to Maersk, and Maersk paid container freight rates for the services as ordered. Maersk did not undertake to tender any minimum number of goods or containers. Whilst these provisions appeared to treat Maersk as a regular shipper rather than a “charterer”, the court found that the provisions in the ATS concerning bills of lading and liabilities clearly treated any carriage pursuant to the ATS as a carriage that Maersk would undertake as carrier.

The court decided that, overall, the ATS was a contract to make cargo carrying space available to Maersk for its effective use to perform its contractual commitments as carrier. Although Maersk did not promise to pay for slots, used or not used, but only for container transport actually undertaken, Mr Justice Baker concluded on balance that the ATS could fairly be characterised as a contract to hire slots on the Vessel from time to time including on the casualty voyage. Accordingly, Maersk was a “charterer” for the purposes of Article 1(2).

The court ultimately granted declarations that Bengal Tiger Line, MSC and Maersk were each “shipowners” within Article 1(2) of the Convention and were therefore entitled to limit their liability in respect of the X-Press Pearl casualty. The court clarified that these declarations did not affect any potential claim by the Claimants for indemnity or contribution relating to the Limitation Fund, subject to the outcome of Sri Lanka’s pending Article 4 application.

Key Takeaways

• This decision builds on the Admiralty Court’s judgment in The MSC Napoli to further clarify the scope of Article 1(2) of the Convention and the approach that the court will adopt when determining whether a party falls within the definition of “shipowner” for the purposes of the Convention.
• Mr Justice Baker’s judgment makes it clear that in considering whether a party is a “charterer” within Article 1(2) of the Convention, the court will focus on reviewing the specific contractual arrangements between the parties, and the circumstances in which the alleged “charterer” enjoyed the services of the vessel in question. The labels a party has given itself will therefore carry little weight in determining whether they are a “charterer” for this purpose. The judgment went so far as to recognise that NVOCCs (non-vessel operating common carriers) could constitute “charterers” under Article 1(2) of the Convention, subject to the specific terms of their contractual arrangements with the vessels in question.
• It is apparent that one of the key factors that will be taken into consideration by the courts going forwards is whether the parties’ contractual arrangements with the vessel oblige the owner or disponent owner to make cargo carrying space available to the putative “charterer” for the carriage of goods as a carrier.