Does a court seised of limitation proceedings under the Limitation Convention have jurisdiction to discharge a P&I Club Letter of Undertaking?

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Does a court seised of limitation proceedings under the Limitation Convention have jurisdiction to discharge a P&I Club Letter of Undertaking?

Published 24 mayo 2021

Enemalta Plc v The Standard Club Asia Ltd1

On 23 December 2019 the island of Malta suffered a nationwide power outage, following damage to an underwater connector cable operated by Enemalta, Malta’s national power distributor.

Enemalta concluded that the damage had been caused by the vessel DI MATTEO, whose owners were domiciled in Singapore.  Accordingly, negotiations ensued with the Owners’ P&I Club (the Club), who provided a Letter of Undertaking (LoU) in the usual terms, in consideration for Enemalta refraining from arresting the vessel with respect to the claim. The maximum value stated in the LoU was calculated by reference to the limits of liability applicable under the 1996 Protocol to the Convention on Limitation of Liability for Marine Claims 1976 (the 1996 Protocol). The LoU was expressly subject to English law and to the exclusive jurisdiction of the English High Court of Justice.

Subsequently, Owners commenced limitation proceedings in Singapore, where (at the time) substantially lower limits of liability were applicable, pursuant to the Convention on Limitation of Liability for Marine Claims 1976 (the 1976 Convention). In the meantime, Enemalta commenced proceedings against the owners in the Maltese courts in respect of their substantive claim. Malta, like the United Kingdom, is a signatory state to the 1996 Protocol. Both have renounced the 1976 Convention.

In their Singapore proceedings, Owners brought an application to discharge the LoU, relying on Article 13.2 of the 1976 Convention. This provides as follows (emphases added):

After a limitation fund has been constituted in accordance with Article 11, any ship or other property, belonging to a person on behalf of whom the fund has been constituted, which has been arrested or attached within the jurisdiction of a State Party for a claim which may be raised against the fund, or any security given, may be released by order of the Court or other competent authority of such State

It was Owners’ case that this conferred on the Singapore court the jurisdiction to discharge the LoU, upon constitution of the limitation fund, notwithstanding the choice of English law and exclusive English jurisdiction agreed upon in the LoU. 

Enemalta’s position was that article 13.2 conferred no such jurisdiction because, amongst other reasons, the security must be one within the jurisdiction of the courts of the state party in which the limitation fund was constituted. The present LoU was not within the Singapore jurisdiction, either because it was not physically present in Singapore or by virtue of the choice of English law and exclusive jurisdiction. These factors pointed either to Malta or to England, neither of which are (now) state parties to the 1976 Convention.

Consistent with the above position, Enemalta commenced English proceedings against the Club, seeking a declaration that only the English courts could adjudge on matters concerning the validity of the LoU, and that any contrary order that might be issued by the courts of Singapore would have no effect on the status of the LoU under its governing law.

The Club sought to challenge the jurisdiction of the English court to hear the matter, a dispute on which judgment was given by HH Judge Pelling QC on 26 April 2021.

The Club’s challenge to English jurisdiction failed. The judge concluded that it was ‘better than seriously arguable’ that the LoU was not security within the jurisdiction of the Singapore Court. It was not a vessel or other property attached within Singapore or indeed the jurisdiction of any other state party to the 1976 Convention, nor was the security given to obtain the release of a vessel or other property attached within the jurisdiction of any state party. 

As to where the LoU was in fact located, the judge noted that it was physically to be found in Malta, being not a state party to the 1976 Convention. More probably, however, English law would treat the LoU as being located in England, being the state which, by agreement, had been given exclusive jurisdiction in relation to it2. England too was not a state party to the 1976 Convention.

On the question of construction of Article 13.2, the judge referred to the previous decision of Colman J in The ICL VIKRAMAN [2003]3 in which he held that the words ‘such State’ at the end of the first sentence of Article 13.2 did not mean the state where the limitation fund has been constituted, regardless of the jurisdiction in which the vessel has been arrested or within which the security had been put up. Furthermore, he held the 1976 Convention could not be construed so as to create a power in the courts of one state party (in the present case Singapore) to interfere by order with the disposition of property or other security within the jurisdiction of a state that is not a party (in this case, either Malta or England). 

On this basis, it was unlikely that English law would regard the Singapore court as having jurisdiction to discharge the LoU, and hence it was quite proper for Enemalta to apply for the protective relief sought in its English proceedings.

DAC Beachcroft’s London office (Anthony Menzies and Franc Gozálvez) acted for the successful Claimant, Enemalta.


[1] [2021] EWHC 1215 (Comm)

[2] SAS Institute Inc v World Programming Limited [2020] EWCA Civ 599; Hardy Exploration v the Government of India [2018] EWHC 1916 Comm, [2019] QB 544

[3] [2003] EWHC 2320 Comm, [2004] 1 Lloyd’s Rep 2

Authors

Anthony Menzies

Anthony Menzies

London - Walbrook

+44 (0)20 7894 6948

Franc Gozalvez

Franc Gozalvez

London - Walbrook

+44 (0) 20 7894 6139

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