Once an incident has been dealt with by the master and crew of a
yacht, matters immediately turn to the recovery of any losses. When
dealing with such losses it has long been a unique feature of
shipping law that shipowners (and also charterers, managers and
operators of a sea-going ship) are entitled, subject to certain
conditions, to limit the extent of their liability in the event of
a claim being made against them.
The limit of their liability is based on the tonnage (size) of
the ship involved in the incident giving rise to the claim and the
type of claim being made. The limit is much higher for personal
injury or loss of life.
Examples of limiting liability can be found in many charter
agreements. However, where third parties are affected such as in
collisions, fires etc the owner will rely on the 1976 Convention on
Limitation of Liability for Maritime Claims and the 1996 Protocol
to the 1976 Convention (the LLMC) to limit their liability.
The LLMC is a strict regime which provides for a virtually
unbreakable system of limiting liability. The only situation where
a shipowner will not be able to limit their liability is when:
"It is proved that the loss resulted from his personal
act or omission, committed with the intent to cause such a loss or
recklessly and with knowledge that such loss would probably
result." (Article 4 of the LLMC).
Although such limitation appears quite harsh the rationale
behind the concept is that most ships and yachts are (usually)
insured against losses and so insurers are able to cap the
provisions they have to make in the event of an accident.
An example of how the LLMC works in practice can be seen in case
that went before the High Court of the Isle of Man Dominator
(Yacht XTC of London) v Others CLA 2008/12 (available at
The Yacht XTC of London caught fire in the Marina Port
Vell, Barcelona, Spain in February 2008. The fire destroyed the
XTC, three other vessels were damaged and sank and at
least five other yachts were badly damaged in the incident. The
value of the losses amounted to more than €6 million and
wreck recovery costs were estimated at approx
The owner of the XTC, a company with registered offices
in the Isle of Man, was able to limit its liability to a sum in the
region of Ł500,000 (around €564,000) for the whole
incident by bringing a pre-emptive limitation action under Article
10 of the LLMC, before the High Court in the Isle Man.
This figure is lower than one, which might have been decided
upon by the Courts in England or Spain because of how the Isle of
Man has enacted the LLMC into the national law. Whilst the Isle of
Man is not a signatory to the convention, the UK is and the Isle of
Man has enacted the relevant UK law giving effect to the LLMC into
Manx Law by virtue of the Merchant Shipping Act 1995 application
order and the Merchant Shipping (Convention on the Limitation of
Liability for Maritime Claims) (Application) Order 2000.
The unique advantage the Isle of Man offered in respect of the
XTC claim was:
Firstly, that whilst other countries have reserved the right to
exclude wreck from the limitation of liability the Isle of Man has
Secondly the Isle of Man has taken advantage of the measures
allowed under the LLMC and made its own provisions for less than
300 tons. This has set a limited of 500,000SDR1 in
respect of a claim not involving personal injury or loss of life;
considerable less than the LLMC standard limit of
Although actions under the LLMC are commonplace in other larger
jurisdictions the XTC case is the first such reported
action in the Isle of Man. The judgment clearly shows that the Isle
of Man is a suitable jurisdiction to bring such claims and adds to
the Isle of Man's growing reputation as a "Shipping Centre
of Excellence" being home to international companies offering
specialist maritime services in both ship and yacht management,
finance, maritime insurance, maritime law and company
1. Special Drawing Rights – A figure produced by
the International Monetary Fund which converts the SDR to the
currency of the Court or Country where the limitation is
established that is 1SDR = $US1.5.
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It is a criminal offence to leave the scene of an accident,
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