Australia: Lloyds List Australia - Ernest van Buuren - Limitation of liability, wreck removal and forum

This article was originally published by Lloyd's List Australia and is reproduced with permission.

Limitation of liability, wreck removal and forum shopping
Ernest van Buuren, Partner and Australian Head of Transport and Shipping, Norton Rose Fulbright

Wreck removal operations have become more costly in the past decade and in certain cases, costs have risen dramatically.

According to the Large Casualty Working Group of The International Group of P&I Clubs, the total cost of the top 20 most expensive wreck removals in the past decade is some $2.1 billion.

Increasing vessel sizes and growing cargo volumes are largely behind the increase. Another reason is that some national authorities require ship wrecks to be removed even if they pose no danger to navigation or the environment.

Therefore, it is not surprising that many states do not include the cost of wreck removal as a claim that can be subject to limitation of liability or that some countries have a different liability regime dealing with wreck removal costs.

This article examines a case that involved a shipowner seeking to recover wreck removal costs in Australia for a collision off Malaysia, that had no connection with Australia. The contest between the parties was whether Australia or China should have jurisdiction to hear the matter, with Australia potentially providing a higher recovery.

Why are limitations imposed on liability in the case of ship wrecks? The rationale for allowing shipowners to limit their liability in respect of ship-sourced damage is historic and was said to encourage shipping and trade. This involves balancing the competing objectives of compensating anybody who suffers loss or damage caused by ship owners or their representatives, while ensuring that shipping remains a profitable venture.

The provisions limiting a ship owner's liability are found in two Conventions, one of which is the Convention on the Limitation of Liability for Maritime Claims 1976. Article 2 of the 1976 Convention provides a list of claims that may be subject to limitation.

Interestingly, the cost of wreck removal is included in Article 2(1)(d) as a cost that is subject to limitation of liability. However, many countries, including Australia, have exercised the option to exclude the cost of wreck removal from the list of limitable claims in Article 2. Australia has also adopted the 1996 Protocol which increased limits of liability, thus allowing for greater recovery against ship owners than under the limits provided for in the 1976 Limitation Convention.

China has not ratified any of the Limitation Conventions, but it has modelled its maritime domestic law upon the 1976 Convention, which is found primarily in Chapter XI of the Chinese Maritime Code.

Under Article 207 of the Code, in the situation where two ships collide and one ship owner claims against the other, the other ship owner is entitled to raise limitation of liability as a defence, including against claims for wreck removal. Having not adopted the 1996 Protocol, the limits of liability are also lower in China when compared to Australia.

The difference between Australia and China on limitation of liability, Australia having higher limits and excluding wreck removal from the list of limitable claims, means that there is an advantage to claimants in the Australian jurisdiction. The Federal Court of Australia has considered this in the B Oceania case.

The collision and the proceedings
In July 2011, B Oceania sank after colliding with Xin Tai Hai in the Straits of Malacca. The owner of B Oceania was Atlasnavios Navegaзгo LDA (Atlas), and the owner of Xin Tai Hai was China Earth Shipping Inc (China Earth). Although China Earth sounded like a Chinese company, it was Panamanian.

That same year, China Earth commenced limitation proceedings in China in August and Atlas against the Xin Tai Hai in Australia in November. In May 2012, Atlas arrested the Xin Tai Hai at Port Hedland. The service of the in rem writ on the Xin Tai Hai in Australia meant there were parallel proceedings in both China and Australia and at issue was which country should hear the claims.

China Earth applied to stay the Australian proceedings in favour of those in China. One of the arguments raised by China Earth was that Australia was a clearly inappropriate forum and that these proceedings should be dismissed or stayed in favour of the matter being heard in China.

Clearly inappropriate forum
The controversial issue was that the collision had no connection with Australia and therefore it was alleged that Atlas was simply using a jurisdiction that would provide the most advantageous outcome of its damages claim.
The limitation of liability, including wreck removal, was about US$18 million if decided in China. But if payable in Australia, it was about US$35 million and possibly also the wreck removal costs incurred by Atlas of about US$65 million - a potential total recovery of US$100 million.

The court held that the existence of the proceedings in China did not necessarily mean that Australia was a 'clearly inappropriate forum'. China Earth's application was not granted and the liability proceedings against Xin Tai Hai in Australia were allowed to continue, although ultimately it was settled.

Applying the test from Voth's case, decided in 1990, the court noted that the question on a stay application focuses on the appropriateness of the local court, not the appropriateness or comparative appropriateness of a foreign forum.

The Australian court will be a clearly inappropriate forum if continuation of the proceedings in Australia would be "oppressive" or "vexatious" to the defendant. China Earth was unable to establish that this was the case. Interestingly, in the B Oceania case the court noted that neither China nor Australia was a "natural" forum for the litigation to resolve liabilities arising from the collision. His Honour Justice Rares stated:
"I am not satisfied that this court is a clearly inappropriate forum, even if the Maritime Court were not to permit Atlas to withdraw its claim against China Earth. Atlas regularly invoked this court's jurisdiction and seeks the benefit of the legitimate advantages of the greater amount of security for its claim, a larger limitation fund and exclusion from limitation of liability of wreck removal expenses to which it seems, prima facie, entitled."

B Oceania considered
The B Oceania case was considered in the CMA CGM Florida case, which was appealed to the Full Court of the Federal Court.

The appeal considered whether the case had applied the "natural and obvious forum" test (an English test) rather than the "clearly inappropriate forum test" (the Australian test) and whether the primary judge adequately considered juridicial advantage in assessing whether Australia was a clearly inappropriate forum.
This arose after the capesize bulk carrier Chou Shan collided with the container ship CMA CGM Florida in the East China Sea on 19 March 2013 approximately 100 nautical miles from the Chinese coastline and within the Exclusive Economic Zone Liability for the collision, which was disputed.

CMA CGM Florida interests commenced proceedings in Australia. Shortly after this, Chou Shan interests applied in the Ningbo Maritime Court to establish a limitation fund under Chinese Law.

Interests for Chou Shan then arrested CMA CGM Florida in China and interests for Chou Shan made an application to stay the proceedings in Australia. As with the B Oceania case, the stay application was made on the basis that both parties were subject to Chinese jurisdiction before they were subject to Australian jurisdiction and therefore Australia was a clearly inappropriate forum.

Justice McKerracher agreed and distinguished this case from the B Oceania case by saying "the natural and obvious forum for all disputes relating to the collision is China".

The collision occurred in ChinaТs Exclusive Economic Zone (EEZ), rather than the Straits of Malacca near Malaysia ,and afterwards both ships went to Chinese ports for repair, he said.

"Neither ship sank but there was considerable oil spillage in China's EEZ which was expressly governed by Chinese jurisdiction. That jurisdiction is well and truly in train and was immediately in train following the collision", he said. "Generally speaking, the amount of activity in China in the present case, appears to me have been significantly greater and certainly involving a greater number of interests than the proceeding in Australia."
His Honour held that there was simply no connection with Australia other than the commencement of the in rem proceeding and the arrest of the ship. Accordingly, an action could have occurred in any country having comparable legislation and therefore there was no sufficient connection to substantiate the claim.

The Full Court of the Federal Court dismissed the appeal in July this year. Their Honours were satisfied the primary judge had applied the 'clearly inappropriate test' from Voth appropriately and that "the mere fact that the primary judge used expressions such as 'natural and obvious forum' or examined factors such as to the suitability of China as a forum does not necessarily betray any misapplication of Australian principle".

Justice McKerracher did not discount the appellant's juridicial advantage of a higher limitation amount in considering whether Australia was a clearly inappropriate forum, they said. The assessment of juridical advantage focuses on the factors that make a local forum inappropriate, as opposed to why the other forum is appropriate. "In a legal environment governed by Voth where a plaintiff had a legitimate advantage in an Australian limitation of liability regime in the enforcement of a maritime lien claim, in circumstances where the risk of inconsistent findings in parallel proceedings could be eliminated, or at least significantly ameliorated, it might be difficult to conclude that the Federal Court was a clearly inappropriate forum", they said.

The B Oceania case illustrates that the differences between countries in limitation of liability, whether it be higher limits of liability or the exclusion of wreck removal from limitation, together with the right forum selection laws such as the Уclearly inappropriateФ forum test, can lead to a juridical advantage in the recovery of loss and damage. A victory for ship owners in these disputes can mean millions in terms of the eventual damages bill.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.