§ 7.4 p.m.
§ Lord Triesman rose to move, That the draft order laid before the House on 24 March be approved [14th Report from the Joint Committee].
§ The noble Lord said: My Lords, the aim of the order is to enable the United Kingdom to enact the 1996 protocol to amend the 1976 Convention on Limitation of Liability for Maritime Claims as intended in the Merchant Shipping (Convention on Limitation of Liability for Maritime Claims) (Amendment) (Order) 1998. There is a small, but important, error in the 1998 order, which must be corrected before the protocol enters into force internationally on 13 May of this 1563 year. The order aims to correct the error. The enabling power for the order is provided by the Merchant Shipping and Maritime Security Act 1997.
§ The 1996 protocol to the 1976 Convention on Limitation of Liability for Maritime Claims, which is commonly referred to as LLMC, was negotiated at the International Maritime Organization in 1996. The 1996 LLMC protocol increases the amount of any limitation fund, which is set up by a ship owner to meet liabilities for general maritime claims arising from a shipping incident. The limitation limits are a significant increase on those set by the 1976 convention. Such increases are necessary to reverse the effect of nearly 30 years of inflation.
§ The UK ratified the 1996 LLMC protocol in 1999, and became only the second state to do so. However, it has taken another five years for the entry into force requirements of the protocol to be met.
§ The 1996 LLMC protocol entitles ship owners to limit their liability for certain general maritime claims. The applicable limit depends on the type of claim and the gross tonnage of the ship.
§ Overall, the order will increase the limitation amount that a ship owner will be entitled to seek in respect of general maritime claims by about two and a half times. Higher increases will be made for small ships. These increases, like most of the provisions of the order, are determined by the terms of the 1996 LLMC protocol. There are three areas, however, where the 1976 convention and the 1996 LLMC protocol give states discretion. The 1998 order has enabled the United Kingdom to take advantage of these three freedoms. The most important relates to passenger claims. This is where the error exists that the order seeks to amend.
§ The 1976 convention sets a global limit on all passenger claims arising from any particular incident. A separate international convention—the 1974 Athens convention relating to the carriage of passengers and their luggage by sea—sets a per capita limit; that is, a separate limit for each passenger.
§ The 1996 LLMC protocol provides an opt-out from the limit set by the 1976 convention. The 1998 order gives effect to that opt-out for seagoing ships, ensuring that such claims will be subject to limitation of liability under the Athens convention. The 1998 order will continue to apply limitation of liability for passenger claims for other ships.
§ That ensures flexibility to make appropriate changes to the legislation implementing the Athens convention in future. These changes could result from the international work on the revision of the Athens convention. The International Maritime Organization (IMO) adopted a protocol to the Athens convention in 2002 that provides for increased financial protection for passengers through increased limitation of liability of the carrier for death or personal injury claims and a requirement on the carrier to maintain insurance cover, with a right of the claimant to take direct action against the insurer.1564
§ The Government are currently considering the options for the implementation of the Athens protocol. However, the 1998 order could have the unintended consequence of depriving a ship owner of the right to a limitation limit for death and personal injury claims in the event of a collision between a passenger vessel and a non-passenger carrying ship. This is contrary to the intention of the 1996 LLMC protocol of applying limitation of liability for such claims, and could result in unlimited liability of the ship owner in such instances. This order will correct that error, and ensure that limitation of liability continues to apply for such claims on all sea going ships, as originally intended.
§ Consultation with interested parties undertaken at the time for the 1998 order indicated that the implementation of the 1996 LLMC protocol should not, in itself, increase insurance premiums paid by owners whose ships were engaged in international trade. Ship owners' insurers set their premiums according to the quality and track record of the insured ship, and not by reference to the liability limits or limitation rules established under the national law of any one state. The consequence of the existing error in the 1998 order, if it is not corrected by the order that is in front of your Lordships this evening, may affect ship owners' insurance cover because of the difficulties in seeking insurance cover where unlimited liability would apply.
§ The Government believe that the long-standing principle of limited liability for general maritime claims remains valid, as it has been over a long period historically, as long as the limits are set at appropriate levels, and the right to limitation is covered by the ship owner maintaining effective insurance cover. Entry into force of the 1996 LLMC protocol is good news for both the maritime industry and for those who may have claims arising from shipping incidents. I beg to move.
§ Moved, That the order laid before the House on 24 March be approved [14th Report from the Joint Committee].—(Lord Triesman.)
§ On Question, Motion agreed to.