Admiralty Law

Aderonke. O. Elesho*

LIMITATION OF LIABILITY IN THE CURRENT CONTEXT OF ADMIRALTY LAW
INTRODUCTION
Maritime adventures of the 16th and 17th centuries were an extremely volatile investment, vessels were regularly lost and in the absence of limitation of liability a shipowner could stand to lose not only the vessel but also incur the further liability of reimbursing the cargo interests for their losses. All this factors gave rise to the rare protection that shipowners’ enjoy by being able to limit their liability and in particular to encourage trade. Some authors and academicians have argued that the concept is no longer relevant due to the continuous trends of developments whilst some other authors and academicians have argued for the continual relevance and necessity of Limitation of Liability in the shipping industry. This work in analysing whether limitation of liability is justifiable in maritime claims will consider the concept of limitation of liability; limitation of liability under the various international conventions; regulation of Oil Pollution in the US with particular reference to the Clean Water Act and the Oil Pollution Act. This work would also analyse the reasonability, applicability and efficiency or otherwise of limitation of liability.

LIMITATION OF LIABILITY
In the 18th and 19th century, insurance was yet to develop into a coherent industry and therefore the risks fell squarely upon the shipowner, investors were consequently hesitant to risk their wealth in shipowning1. Limitation of liability was introduced into shipping to encourage shipowners to carry on their business, capitalists to invest in the maritime sector despite the horrendous perils of the sea, thereby increasing the wealth and influence of

* Legal Practitioner and LL.M Student, University of Hull (2011). 1 Van der Eb, C.J. (2005) Limited Liability In Marine Adventures: An Analysis Of “The Shifting Seas” Of Legislative Intent [Internet] 2010 Available from: http://panamax.co.uk/limitationvanderebjc.pdf Accessed on th [December 16 , 2010]

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maritime nations2. It is the rule that allows a ship-owner to limit its liability when adjudged responsible in full or part for the acts that led to the loss of life, cargo or pollution of the environment. The concept of limitation of liability is one of a controversial nature as scholars, academicians, professional and the judiciary has criticised it. According to Lord Denning in The Bramley Moore, ―I agree there is not much room for justice in this rule; but limitation of liability is not a matter of justice. It is a rule of public policy that has its origins in history and its justifications in convenience3. It is clear that the concept of limitation of liability goes against the basic legal concept of restitutiou in integrum4. Under common law, liability for marine pollution is dealt with by the torts of nuisance and negligence5. However, practice has shown that negligence is not easily established in claims for oil pollution damage and to recover compensation becomes difficult6. Where there has been a collision between two vessels or more, the liability of the ship-owners arise from the fact the shipmaster who was navigating the ship at the time of the collision was in their employment and that they expected to reap the benefits of that employment. A collision incident could lead to various claims such as loss of cargo, loss of life, personal injury, oil pollution damage e.t.c.

REGIMES OF LIMITATION OF LIABILITY
There are various regimes of statutes that deal with liability of shipowners with respect to claims which may arise from the conduct of their business. The Limitation of Liability for Maritime Claims Convention of 1976 (LLMC) deals with compensation payable by a shipowner for some form of maritime claims and changes the basis of liability under the Merchant Shipping Act (MSA) 1894 that was according to the value of the ship. Under the Convention, a shipowner and a salvor were entitled to limit their liability7. Article 2 LLMC8 provides for claims in which a shipowner will be entitled to limit his liability while Article 3 LLMC9 provides for claims that are excluded from limitation. A shipowner’s liability could only be broken if it is proved that the loss resulted from his personal act or omission,
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Ozcayir, Z. (1998) Liability for Oil Pollution and Collisions, London, LLP. [1964] 1 All ER at 109 4 Hare, J Limitation of Lliability – a Nigerian Perspective. Available from http://web.uct.ac.za/depts/shiplaw/fulltext/harepapers/limliab-nigeria.pdf [Accessed on December 16th, 2010] 5 nd Baughen, S. (2003) Shipping Law (2 ed), London, Cavendish. 6 Esso Petroleum Co Ltd v. Southport Corporation (The Inverpool) (1955) 2 Lloyd’s Rep. 655 7 LLMC Art..1 8 Claims for loss of life, personal injury or loss or damage to property; (b) claims for loss resulting from delay in the carriage by sae of cargo, passengers or their luggage; (c) claims in respect of other loss;... 9 claims for salvage, contribution in general average; (b) oil pollution damage claims; (c) claims in respect of nuclear damage; (d) crew claims against shipowner or salvor if their contract of employment excludes such.

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committed with the intent to cause such damage, or recklessly and with knowledge that such loss would probably result10. When a claim is brought, the responsible party may constitute a fund with the court or other competent party in which legal proceedings are instituted11. Limitation of liability limits are: in respect of claims for loss of life or personal injury, (i) 2 million Units of Account for a ship with a tonnage not exceeding 2,000 tons; (ii) for each ton of 2,001 to 30,000 tons, 800 Units of Account; for each ton of 30,001 to 70,000 tons, 600 Units of Account; and for each ton in excess of 70,000 tons, 400 Units of Account. In respect of any other claims, (i) 1 million Units of Account for a ship with a tonnage not exceeding 2,000 tons, (ii) for each ton from 2,001 to 30,000 tons, 400 Units of Account; for each ton from 30,001 to 70,000 tons, 300 Units of Account; and for each ton in excess of 70,000 tons, 200 Units of Account12. There are two funds established under the Convention, the personal claims and other claims. Where there are unsatisfied personal claims, the fund from other claims is used to satisfy the balance of the personal claims. The ship must fall under the definition of a ship under the relevant convention13. The concept of strict liability as enshrined in the CLC, is subject to a couple of exceptions which exempts the shipowner from liability; if it can be shown that the pollution damage occurred as a result of war, a natural phenomenon of an exceptional, inevitable, irresistible character, malicious act of another, default in maintenance of navigational aids14. The shipowner will not be able to limit his liability where it is proved that the incident occurred with his actual fault or privy. Under the CLC, only the ship-owner and his insurer are liable for oil pollution damage and they alone have the ability to limit their liabilities in accordance with CLC. Claims for pure economic loss are admissible only if they are for loss or damage caused by contamination15. It is noteworthy, that claims for loss of earnings may arise from an oil spill by persons who have fishing rights in those waters16. The ship-owners right to limit their liability is important both as a quid pro quo for strict liability imposed on them and for the role it plays in the apportionment of the cost of oil spills between the shipping industries and oil industries17.

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LLMC Art..4 LLMCArt. 11 12 As amended by Art. 6.1 of the 1996 Protocol 13 Civil Liability Convention (CLC) 1969 and Civil Liability Convention (CLC) 1992 Art.1.1 14 CLC 1969, Art III. 2 and CLC 1992, Art. III.2. 15 IOPC Fund 1971 Claims Manual June 1998 16 Gauci, G. (2000) Ship-source oil pollution damage and recovery for relational economic loss, Journal of Business law, 356-361. 17 De La Rue, C. and Anderson, C. B. (1998) Compensation from the Shipowner under the Civil Liability Conventions , Shipping and the Environment: law and practice, London, Lloyds Shipping Law Library.

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It is noteworthy that certain oil spill fall outside the CLC therefore, any damage caused will fall under the applicable national laws. There has also been established in most CLC states The International Oil Pollution Compensation Fund of 1971 and 1992 respectively. The rationale for this funds is to provide additional compensation when where the amounts recoverable from the sip-owner cannot adequately meet claims. Under the CLC, a shipowner,s liability is determined by the size of the vessel. Art.V.1. CLC 1969, provides that a shipowner whose vessel is involved in an oil pollution incident is entitled to limit his liability to an aggregate amount of 2,000 gold francs for each ton of the ship’s tonnage, subject to an overall maximum of 210 million francs. However, the 1976 CLC Protocol changed the units of account from gold franc to Special Drawing Rights (SDRs) and the liability limits was changed to 133 SDRs per ton and the overall maximum limit as 14 million SDRs18. The CLC 1992 sets a minimum limit of liability for vessels of 5,000 tons and above at 3 million SDRs and to a maximum limit of 59.7 SDRs for vessels of 140,000 tons which is being calculated at 420 SDRs for every other ton. Art. VII.1 of CLC 1969 and CLC 1992 requires ships to maintain insurance or some other form of financial security. This compulsory insurance cover is only applicable to ships of more than 2,000 tons of oil in bulk as cargo. A claim for compensation must be brought within three (3) years of the oil pollution damage incident however, if the oil pollution damage consists of a series of oil pollution incidents, the time limit within which the action must be instituted is six (6) years19. For a shipowner to claim the right to limit his liability, he must constitute a sum for the total sum representing his limit of liability and this may be done by either depositing the sum or producing a bank guarantee or other form of guarantee that is acceptable by the court or other competent authority20. Where the incident has caused oil pollution damage in more than one state, the shipowner is at liberty to constitute the fund in either of the two states and whichever state he chooses will have exclusive jurisdiction to determine the apportionment and distribution of the funds21. Where the liability claims is in excess of the limitation fund, the fund is distributed in proportion to the amounts of the established claims22. The shipowner also has a right to recover all expenses reasonably incurred while voluntarily

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CLC Protocol 1976, Art. II. CLC 1969 Art. VIII and CLC 1992 Art. VIII 20 CLC 1969 Art V. 3 and CLC 1992, Art.V.3 21 CLC 1969 Art. IX.3 and CLC 1992 Art. IX.3 22 CLC 1969 Art. V.4 and CLC 1992 Art. V.4

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trying to prevent or minimise pollution damage and such claim will rank equally amongst all other claims to the limitation fund23. In claims for oil pollution damage, the two forms of compensation are usually recoverable which is compensation paid by the ship-owner under the CLC and compensation from the Fund conventions in contracting state. The Fund Convention 1971 established the International Oil Pollution Compensation Fund, an inter-governmental body that is financed by oil receivers in member states. Just like the CLC, the Fund Convention also has two regimes of Fund convention which is described as 1971 Fund Convention and 1992 Fund Convention. Only states that are parties to the relevant CLC Convention can be party to the Fund Convention. In addition, the purpose of establishing the Funds is to pay claimants further compensation where the entirety of their established claim has not been satisfied because of the shipowners’ right to limit his liability. Persons who receive contributing oil exceeding a total quantity of 150,000 tonnes contribute on behalf of a contracting state to the Fund24. Within the scope of the Fund Conventions, movement of oil by sea in an oil producing state may qualify as oil receivers who are then required to contribute to the Fund25. The Assembly is empowered to determine how much is paid by the contributing parties which is based on the expenditure and income of the current year26. A claimant will be entitled to compensation under the Fund Convention;    Where no liability for the pollution arises under CLC; Where the ship-owner is incapable of meeting his financial obligations; Where the oil pollution damage caused is in excess of the ship-owners liability as allowed by the applicable CLC regime27. A ship-owner may be entitled to an indemnification under the 1971 Fund of a portion of his liability incurred under the CLC 196928. The Fund may be exempted from paying the indemnification where it can prove that the ship with actual fault or privity of the owner

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CLC 1969 Art. V.8 and CLC 1992 Art. V.8 IOPC Fund 1072 Art.10.1 and IOPC Fund Art. 10.1 25 See note 4 above pg. 130 26 IOPC Fund 1971 Art 12.4 and IOPC Fund 1992 Art. 12.4 27 IOPC Fund 1971 Art 4.1. and IOPC Fund 1992 Art. 4.1. 28 IOPC Fund 1971 Art. 6.1 and 6.2 A portion of his liability which is in excess of 100 SDRs per ton of the ship’s tonnage or an amount of 8.33 million SDRs, whichever is less not exceeding the ship’s liability limit calculated 28 in accordance with CLC 1969 . The shipowner must make a claim for indemnification by the shipowner within six months after the date on which he or his guarantor first knew of proceedings brought against him under CLC 1969.

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failed to comply with International Conventions on safety or the prevention of pollution, and that the oil pollution incident arose wholly or partially from the non-compliance29. As provided in the CLC, the Fund is under no obligation to pay compensation where it can prove that pollution damage arose from war risks, caused by state-owned ships, from sources other than ships and where the person suffering the damage caused the pollution damage30. Under the 1971 Fund, compensation is limited to 900 million gold francs31. The 1976 Protocol to the 1971 IOPC Fund altered the unit of account from gold franc to the Special Drawing Right (SDR) and therein provided for a conversion rate of 15 francs per SDR and the limit of the Fund’s liability would be 60 million SDRs, which represent the maximum compensation available under CLC 1969 and 1971 Fund jointly. The compensation payable under the 1992 Fund is limited to 135 million SDRs32. Where the amount recoverable in established claims exceeds the limit of the Fund convention, the amount available shall be distributed pro rata amongst the claimants. However, in May 2003 a Protocol to the 1992 Fund Convention was adopted. This Supplementary Fund Protocol (SFP) 2003 provides for supplementary compensation in addition to that available under the 1992 CLC and the 1992 Fund up to a level of 750 SDRs. This has successfully created a third tier level of compensation for claimants. It is noteworthy that the CLC does not deal with all claims for oil pollution damage however, claims for bunker spills are covered under Merchant Shipping Act (MSA) where such claims too are subject to Limitation of shipowner’s liability under the said Act. Also, dock and canal owners as well as harbour authorities are entitled to limit their liability under the MSA33. There has been established a Hazardous and Noxious Substance Convention (HNSC ) of 1996 which holds the shipowner liable for damage caused by Hazardous and Noxious Substances in their connection with carriage by sea on board the ship. The exceptions of the shipowner’s liability is similar to that under the CLC 34 however HNSC provides for a further exception which is the failure of the shipper to disclose information about the Hazardous and noxious nature of the substances shipped35. A shipowner in any one incident may limit his

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IOPC Fund 1971 Art. 5.3 and IOPC Fund 1992 Art. 5.3 IOPC Fund 1971 Art. 4.2(a)(b),3 and IOPC Fund 1992 Art. 4.2(a)(b), 3 31 IOPC Fund 1971 Art. 4.4(a) 32 IOPC Fund 1992 Art. 4.4(a) 33 Section 191 MSA 1995 34 See note 7 and 18 above 35 HNSC Art. 7. 2(d)

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liability to an aggregate amount of 10 million SDR for ships up to 2,000 tons; for each vessel from 2,001 to 50,000 tons an additional 1,500 SDR for each ton; for each ton in excess of 50,00 ton a further 360 SDR up to an overall maximum of 100 million SDR. The HNSC establishes the International Hazardous and Noxious Substances Fund (HNS Fund) which is the second-tier of compensation available under the HNSC scheme and funding is available: (a) for compensation for damage resulting from the carriage of hazardous and noxious substances by sea and (b) giving effect to other related tasks36. Compensation is obtainable from the fund where: (a) liability does not arise under Chapter II of HNSC where the shipowner is unidentifiable or where the Shipowner is exonerated from liability; (b) the shipowner is incapable of meeting his liabilities; (c) the damage exceeds the shipowner’s liability. There exist circumstances that the HNS fund incurs no liability for damages incurred37. The maximum limit of compensation available under HNS is 250 million SDRs. Established claims become subject to pro rata abatement and priority is to given to claims in respect of death, personal injury up to two-thirds of the compensation limit where the aggregate amount of established claims is exceeds the funds limit. The legal framework in the United States with regard to oil pollution is different, even though the US participated in the diplomatic conferences that berthed the formation and adoption of the CLC and the Fund conventions and signed both conventions, the US senate has refused to ratify it. In the US, reference will be made to both Federal and State law and the principal federal legislation is the Oil Pollution Act (OPA) 1990. The Act aims both to reduce the incidence of oil spills and to provide for remediation and compensation for spills that do occur38. However, the OPA did not repeal other existing enactments neither did it preclude coastal states from making laws regulating oil pollution within their territory with the resulting effect of creating unlimited liability for the ship owner. US Clean Water Act (CWA) – Section 311 of the Act deals extensively with federal water pollution with references to solid waste disposal, agricultural pollution, water pollution by hazardous substances as well as oil, sewage treatment, however, the OPA has reproduced the key provisions of section 311. The CWA provides both mandatory and discretionary civil and
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HNSC Art. 13. 1 See note 7 and 18 above 38 Goldberg, J.C.P. (2010) Liability for Economic Loss in Connection with the Deepwater Horizon Spill [Internet] Available from: http://lawprofessors.typepad.com/files/goldberg-report-on-economic-loss-liability-11-22th 10.pdf [Accessed on December, 17 , 2010]

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criminal penalties against the owner, operator, or the person in charge of the onshore or offshore facility or vessel that discharges a prohibited amount of oil or a hazardous substance. The CWA recognises four exceptions to the strict liability rule which are: (1) act of God; (2) act of war; (3) negligence on the part of the United States government; and an act or omission of a third-party. The CWA requires any vessel or barge with 300 gross registered tons using any port or place in the US to establish and maintain evidence of financial responsibility to meet the statutory potential liability. The Oil Pollution Act 1990 – section 100239 provides that each responsible party for a vessel or facility, which oil is discharged, or which poses threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the cost of removal and damages. However, the shipowner is still obligated to pay the cleanup costs and damages and the shipowner would have a right of recourse to the third party. The OPA extended the forms of damages that was recoverable such as the cost of restoring or replacing damaged natural resources, the loss of use of those resources pending restoration, and the reasonable cost of assessing such damage. Section 1004(a) provides that the responsible party in an oil spill incidence is liable for the full cost of clean-up and removal of spilled oil plus any damages incurred up to the following limit: 1. The greater of $1,200 per gross ton or $10 million for tank vessels of more than 3,000 tons; 2. The greater of $1,200 per gross or $2 million for tank vessels of less than 3,000 tons;
3. The greater of $600 per gross ton or $500,000 for any other vessels; 4. $75 million plus the total of all removal costs, for offshore facilities (except

deepwater ports); and
5. $350 million for onshore facilities and deepwater ports.

However, the OPA increased the threshold for breaking the limitation limits by changing the previous standard of CWA from wilful negligence to gross negligence or wilful misconduct. As it is easier to establish gross negligence as opposed to wilful misconduct where intent must be proved. Limitation of liability limits may also be broken if it is shown that the

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Sub-section (b) provides for the culpability of other persons who are not employees of the shipowner, if the shipowner can prove that the discharge or the threat of discharge arose from an act or omission of a party.

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incident was proximately caused by the violation of a federal safety, construction or operating regulation40. OPA established the Oil Spill Liability Trust Fund (OSLTF), which consolidates the existing Fund. The OSLTF is principally funded by a 5 per cent barrel tax on imported and domestically produced. The Fund is used for the funding of the following exercises:   Payment of removal costs incurred by the federal, state or Indian tribe trustees which is consistent with the National Contingency Plan (NCP) Payment of costs incurred by the federal, state or Indian tribe trustees for assessing natural resource damages and developing and implementing restoration plans consistent with the NCP;  Payment of removal costs consistent with NCP as a result of damages resulting from a discharge or substantial threat or substantial threat of discharge from a foreign offshore unit (a facility located in the territorial sea or on the continental shelf of a foreign country used for exploitation of oil resources produced from the seabed);   Payment of claims for uncompensated removal costs consistent with the NCP or uncompensated damages Payment of federal administrative, operational and personnel costs and expenses incurred in connection with the implementation, administration and enforcement of OPA and the CWA as amended by the OPA with respect to prevention, removal and enforcement. Expenditures under the Fund for removal costs and damages for any one incident is limited to one billion dollars while expenditures for natural resource damage for any one incident is limited to $500 million. The OSLTF consists of two funds, the emergency fund and a parent fund. The emergency fund is available to a maximum limit of $50 million annually for: (1) payment of federal costs; (2) funding for state requests to access the Fund directly for immediate removal action; and (3) initiation of natural resource damage assessments.

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Failure or refusal of the responsible party to report the incident where he knows or has reason to know of the incident; failure or refusal to provide all reasonable cooperation and assistance required by a responsible official in connection with removal activities; and failure or refusal without sufficient cause, to comply with an order issued under section 311(c) or (e) of the CWA as amended by OPA, or the Intervention of the High Seas Act all constitute grounds upon which the responsible party may lose the right to limit his liability .

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AN ANALYSIS OF THE CONCEPT OF LIMITATION OF LIABILITY
It’s been argued that limitation of liability is an unjustly discriminatory attempt to subsidize the shipping industry at the expense of other interests41 as the concept was conceived to meet commercial needs, and its utility is found in the apportionment of maritime disaster42. However, it is noteworthy that limitation of liability is a concept which is widespread in the law relating to the transportation of goods, limitation of liability is a practise common to transport by air, rail as well as transport by sea and therefore shipowners are just as justified as their other counterparts43. It is known fact that incidence of oil pollution damage involve enormous loss which would make it difficult for a shipowner to find insurance cover or to find same at a reasonable fair price. Limitation of liability of a shipowner is intended to promote their solvency and allow them stay in business even after an oil pollution damage incidence44. If this is not done, it would be only shipowners who have the wherewithal to deal with their liability if such ever arises that will be in the only shipping business thereby creating an opportunity for exploitation. Limitation of liability in the shipping industry is likened to the business type of a Limited Liability Company. Shareholders under a Limited Liability Company are only required to contribute the amount remaining unpaid on their shareholding during winding up therefore the shareholders are shielded under this concept and where they knowingly engage in a risky business which its likelihood of yielding success is minimal, they are still protected likewise. It is therefore my opinion that the sought of protection granted to shareholders and directors of a limited liability company is the same applicable to limitation of liability in that shipowners are not allowed to be overburdened by an oil pollution damage which himself, his agents and or servants never even had a hand in the occurrence of same. In an oil pollution incident, it is possible for the shipowner to establish 3 or more funds, to meet its liability from that one incident: a fund under the 1957 Convention, LLMC or whichever regime is applicable for collision claims, loss of life, personal injury, loss of cargo claims; a CLC fund
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Gauci, G. (Dr), (1995) Limitation of liability in maritime law: an anachronism. 19(1) Marine Policy 65, pp 6574 42 Donovan, J. (1979) Admiralty Law Institute: Symposium on Limitation of Liability – The Origins and Development of Limitation of Shipowners’ Liability, Tulane Law Review Vol 53, 999-1045 43 Seward, R.C. (1986) The Insurance viewpoint: In The Limitation of Shipowners' Liability: The New Law, Institute of Maritime Law, University of Southampton. London: Sweet and Maxwell, pp 165-166. 44 Lord Mustill. (1993) Ships are different- or are they? Lloyds Maritime Commercial Law Quarterly (LMCLQ) 490

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to meet oil pollution damage claims and an HNSC fund for fire explosion damages. If a shipowner’s liabilities under this various conventions are not limited, then it is possible to run the shipowner bankrupt and the law would have worked sufficient injustice on the shipowner. Removal of limits to liability may encourage shipowners to pursue practices that would be to the detriment of the industry and potential claimants such as self-insurance. Exorbitant premiums or insurance companies may not be willing to insure certain classes of risk. Fleets are likely to be reduced to a number of one ship companies to avoid claims against an owner's other assets. Increased freight rates due to increased insurances. Increased use of flags of convenience, which allows for the registration of unsafe and unseaworthy vessels45. The foundation of a shipowner being strictly liable for oil pollution damage as mandated by the CLC is enshrined in the limitation of liability. Under the CLC strict liability is imposed on the shipowner but this is tempered by the right to limit liability according to the tonnage of the vessel. It therefore necessitates that if limitation of liability is considered unnecessary due to the world’s present economy then the strict liability rule goes with the limitation of liability rule. Thereby taking us back to the pre-CLC regime where it was extremely difficult to establish a claim for oil pollution damage as evidenced in the Inverpool46. Another persuasive factor in the determination of whether limitation of liability should be retained or not, lies in a comparison of the quantum of damages being recovered by claimants under the pre-CLC regime and under the CLC regime and the Fund conventions thereto. Oil pollution damages have been easily accessed by claimants under the CLC thereby making the regime more useful for combating oil pollution damage even with the entrenchment of the limitation of liability rule in the CLC. The removal of limits to liability will encourage shipowners to pursue practices that are detrimental to the industry, proliferation of activities such as self-insurance because insurance companies will want exorbitant premiums or may not be willing to insure certain classes of risk at all. Shipping companies would reduce to one ship companies to avoid claims against an owner's other assets. Increased freight rates and even increased use of flags of convenience47. Mandraka-Sheppard argued that had it not been for limitation of liability,

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Hawke, N. and Hargreaves, P. (2003) Environmental Compensation Schemes: Experience and Prospects, Environmental Law Review 5 (1) 9-22 46 See note 17 above 47 Steel, D. (1995) Ships are Different – The case for Limitation of Liability. Lloyds Maritime Commercial Law Quarterly 77

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goods, freight and fuel would not be competitive and insurance would be scarce 48. However, Professor Wetterstein has argued that the role played by insurance costs in competition seems to have been exaggerated and that the introduction of unlimited liability would mean only a marginal - if even that - increase in costs49. It has also been stated that if shipowners were deprived the cover of limitation, Insurance cost will go up by 25 to 30 percent50. Pollution incidents has taken its toll on shipowners, as the effect of an incident in some circumstances may not manifest for several years leading to the insurance company paying more cost than it ever budgeted for, leading to insurers withdrawing their pollution cover51. Limitation of liability has the effect of passing on to the general public a substantial part of environmental liability52, the concept is contrary to the polluter pay principle and the delimitation of liability would not cause hardship to the oil industry as the costs of CLC/Fund compensation are already widely distributed53. It would be preposterous to reach this conclusion hastily as it should not be forgotten that the liability of shipowners’s may well be unlimited and unascertainable as was shown in the Exxon valdez oil spill of 1989. To therefore conclude that the oil industry would be capable of bearing all the liability, which may arise in one pollution incident, may amount to spelling doom for the oil industry. It is not in contention that the application of limitation of liability may sometimes work injustice as was seen in the Torrey Canyon54 disaster where the amount recoverable was US $50.00 which in itself amounted to a ridicule of the entire legal system. However, with the steady review and increase of liability limits, shipowners liability will be more satisfactorily met.

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Mandraka-Sheppard, A. (2009) Limitation of liability in maritime claims in Modern Maritime Law and Risk Management. London, Informa. 49 Wetterstein, (1990) 'Damage from international disasters in the light of tort and insurance law', of AIDA 8th World Congress Copenhagen General report at pp 102—103 taken from Gauci, G. (Dr), (1995) Limitation of liability in maritime law: an anachronism. 19(1) Marine Policy 65, pp 65-74 50 Sadler, J.k. Affidavit of marine underwriter in Re Independent Towing Co., 242 F. Supp 950 (E.D. La 1965) in Buglass, L. J. (1978-1979) Limitation of Liability from a Marine Insurance Viewpoint, 53 Tulane Law Review, 1364. 51 Wilde, M. (2002) Civil Liability for Environmental Damage: A Comparative Analysis of Law and Policy in European and the United States, The Hague, Kluwer Law International. 52 Sadeleer, N. (2009), Analysis: Liability for oil pollution Damage versus Liability for Waste Management:The Polluter Pays Principle at the Rescue of the Victims, Journal on Environmental Law 21(2): 299-307. 53 Wilkinson, D. (1993) Moving The Boundaries Of Compensable Environmental Damage Caused By Marine Oil Spills: The Effect Of Two New International Protocols. Journal on Environmental Law (1993) 5 (1):71-90. 54 See note 17 above

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Where there has been a pollution, restoration of the environment should take place in an effective manner55. In analysing limitation of liability, Wetterstein recommends that liability should be linked to state’s undertaking to prevent pollution and he also suggest that liability limits should not be linked to the tonnage of the vessel but that there should be a maximum limit to liability for all vessels56. It has also been argued that shipmasters and owners should be made to pay fines out of pocket which should not be subject to any form of indemnification and also that avoidable acts which leads to oil pollution exercise should be criminally culpable acts under a system of international criminal system57. In as much as limitation of liability may be necessary, the threshold for breaking the limits under the CLC is rather overprotective of the shipowner as it is extremely difficult to prove actual fault or privity of the shipowner. The ground for breaking limitation limits under the OPA that is gross negligence and wilful misconduct is sufficient. If same level is incorporated in the CLC regimes, then there would be a balance between the competing rights of the shipowner, who should not be allowed to go bankrupt for an act that he had no control over and potential claimants, who should be able to recover their losses. If this is done, then the purpose of the law would have been achieved as justice would not only have been done but would have been seen to be done58. Moreover, the position of Mr Justice Staughton (as he then was) in The Garden City59 where he stated that ―...limitation should not be tolerated in the case of outrageous conduct, such as deliberately or recklessly causing loss‖ must serve as a guiding principle to limitation of liability. The Donaldson report60 criticises shipping standards and it suggested that the issue of substandard vessel should be dealt with as against seeking unrealistic compensation coverage for remote catastrophic accidents61. Also, the various international treaties dealing with oil pollution, can take a cue from the California state law62 which imposes unlimited liability on tanker-owners for both clean-up costs and for damage to natural resources and to

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Legislative Text, (2004) EC Directive on Environmental Liability Journal of Environmental Law 16(3) 419-438 Wetterstein, P. (1994) Current Trends in International Civil Liability For Environmental Damage, Annual Survey of International & Comparative Law, Vol. 1, Iss. 1, Art.8 PP 181-202. 57 Owen, L. (1989) The Prosecution Of Marine Oil Pollution Offences and The Practice Of Insuring Against Fines 1 Journal on Environmental Law 44 58 R v Sussex Justices, Ex parte McCarthy [1924] 1 KB 256 59 (1982) 2 Lloyd’s Rep 382, p 398. 60 Donaldson Report, (1994) Safer ships, cleaner sea (Cmnd 2560) 61 Gold, E. (n.d) Liability and Compensation for Ship-Source Marine Pollution: The International System th [Internet] Available from http://www.fni.no/YBICED/99_02_gold.pdf [ Accessed on December 17 , 2010] 62 § 8670.56.5 and §8670.37.53 (b). (1992) West's Annotated California Codes, Government, Vol. 32B., Chapter 7.4,

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third parties. There is no rationale for the position that limitation of liability is more suitable for other forms of maritime accidents to the exclusion of marine pollution as in every cases there are grievous losses.

CONCLUSION
If the shipping industry undergoes a change in priorities and approach63, then limitation of liability has a place, and should remain as law but governments must resolve to demand, not ask, business, including shipping, to be more accountable for the way they conduct their business. Also, let us not forget the words of David Steel when he stated that ―it is better for the victim to have a limited claim which is certain can be paid than to have an unlimited claim against an insolvent party‖64.

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Killingbeck, S. (1999) Limitation of Liability for Maritime Claims and Its Place In the Past Present and Future- How Can It Survive? 3 SCU Law Review 1 Vol 3 at 2 [Internet] Available th from:http://www.scu.edu.au/schools/law/law_rehtmview/V3_full_text..htm [Accessed on December 15 ,2010] 64 See note 47 above

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BIBLIOGRAPHY
STATUTES  Merchant Shipping Act, 1995  West's Annotated California Codes, Government, (1992)Vol. 32B., Chapter 7.4  US Clean Water Act  Oil Pollution Act (OPA) 1990 INTERNATIONAL CONVENTIONS
 Limitation of Liability for Maritime Claims 1976  Merchant shipping (Oil Pollution Bunkers Convention Regulations), 2006 SI No.1244  International Convention on Civil Liability for Oil Pollution Damage (CLC)1969  International Convention on Civil Liability for Oil Pollution Damage (CLC)1992  Merchant Shipping (Oil Pollution) Act 1971  International Convention on Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND), 1971  International Convention on Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND), 1992  International Convention on Liability and Compensation for Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea (HNS), 1996  International Convention on Civil Liability for Bunker Oil Pollution Damage, 1991  1968 Brussels Convention

CASES
 Esso Petroleum Co Ltd v. Southport Corporation (The Inverpool) (1955) 2 Lloyd’s Rep. 655  R v Sussex Justices, Ex parte McCarthy [1924] 1 KB 256  The Bramley Moore [1964] 1 All ER at 109
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 The Garden City (1982) 2 Lloyd’s Rep 382, p 398.

BOOKS  Baughen, S. (2003) Shipping Law (2nd ed), London, Cavendish.  De La Rue, C. and Anderson, C. B. (1998) Compensation from the Shipowner under
the Civil Liability Conventions, Shipping and the Environment: law and practice, London, Lloyds Shipping Law Library.

 Mandraka-Sheppard, A. (2009) Limitation of liability in maritime claims in Modern
Maritime Law and Risk Management. London, Informa

 Ozcayir, Z. (1998) Liability for Oil Pollution and Collisions, London, LLP.
 Seward, R.C. (1986) The Insurance viewpoint: In The Limitation of Shipowners' Liability: The New Law, Institute of Maritime Law, University of Southampton. London: Sweet and Maxwell, pp 165-166.  Wilde, M. (2002) Civil Liability for Environmental Damage: A Comparative Analysis of Law and Policy in European and the United States, The Hague, Kluwer Law International.

ARTICLES
 Donaldson Report, (1994) Safer ships, cleaner sea (Cmnd 2560)  Donovan, J. (1979) Admiralty Law Institute: Symposium on Limitation of Liability – The Origins and Development of Limitation of Shipowners’ Liability, Tulane Law Review Vol 53, 999-1045  Gauci, G. (2000) Ship-source oil pollution damage and recovery for relational economic loss, Journal of Business law, 356-361.  Goldberg, J.C.P. (2010) Liability for Economic Loss in Connection with the Deepwater Horizon Spill [Internet] Available from:

http://lawprofessors.typepad.com/files/goldberg-report-on-economic-loss-liability-1122-10.pdf [Accessed on December 17th, 2010]  Gauci, G. (Dr), (1995) Limitation of liability in maritime law: an anachronism. 19(1) Marine Policy 65, pp 65-74
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 Gold, E. (n.d) Liability and Compensation for Ship-Source Marine Pollution: The International System [Internet] Available from http://www.fni.no/YBICED/99_02_gold.pdf [ Accessed on December 17th, 2010]  Hare, J Limitation of Lliability – a Nigerian Perspective. Available from http://web.uct.ac.za/depts/shiplaw/fulltext/harepapers/limliab-nigeria.pdf on December 16th, 2010]  Hawke, N. and Hargreaves, P. (2003) Environmental Compensation Schemes: Experience and Prospects, Environmental Law Review 5 (1) 9-22  IOPC Fund 1971 Claims Manual June 1998  Killingbeck, S. (1999) Limitation of Liability for Maritime Claims and Its Place In the Past, Present and Future- How Can It Survive? 3 SCU Law Review 1 Vol 3 at 2 [Internet]Availablefrom:http://www.scu.edu.au/schools/law/law_rehtmview/V3_full_t ext.htm [Accessed on December 15th ,2010]  Legislative Text, (2004) EC Directive on Environmental Liability Journal of Environmental Law 16(3) 419-438  Lord Mustill. (1993) Ships are different- or are they? Lloyds Maritime Commercial Law Quarterly (LMCLQ) 490  Owen, L. (1989) The Prosecution Of Marine Oil Pollution Offences and The Practice Of Insuring Against Fines 1 Journal on Environmental Law  Sadler, J.k. Affidavit of marine underwriter in Re Independent Towing Co., 242 F. Supp 950 (E.D. La 1965) in Buglass, L. J. (1978-1979) Limitation of Liability from a Marine Insurance Viewpoint, 53 Tulane Law Review, 1364.  Sadeleer, N. (2009), Analysis: Liability for oil pollution Damage versus Liability for Waste Management:The Polluter Pays Principle at the Rescue of the Victims, Journal on Environmental Law 21(2): 299-307.  Steel, D. (1995) Ships are Different – The case for Limitation of Liability. Lloyds Maritime Commercial Law Quarterly 77.  Van der Eb, C.J. (2005) Limited Liability In Marine Adventures: An Analysis Of ―The Shifting Seas‖ Of Legislative Intent [Internet] 2010 Available from: http://panamax.co.uk/limitationvanderebjc.pdf Accessed on [December 16th, 2010]  Wetterstein, (1990) 'Damage from international disasters in the light of tort and insurance law', of AIDA 8th World Congress Copenhagen General report at pp [Accessed

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102—103 taken from Gauci, G. (Dr), (1995) Limitation of liability in maritime law: an anachronism. 19(1) Marine Policy 65, pp 65-74.  Wetterstein, P. (1994) Current Trends in International Civil Liability For Environmental Damage, Annual Survey of International & Comparative Law, Vol. 1, Iss. 1, Art.8 PP 181-202.  Wilkinson, D. (1993) Moving The Boundaries Of Compensable Environmental Damage Caused By Marine Oil Spills: The Effect Of Two New International Protocols. Journal on Environmental Law (1993) 5 (1):71-90.

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