United Arab Emirates: Maritime Claims And Limitation Funds

Last Updated: 25 July 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, September 2018

Limitation Funds in UAE

As with most of the world's trading countries, the United Arab Emirates (UAE) has embraced international conventions in its national laws which, in certain conditions, allow carriers such as shipowners to confine their liability for claims made against them. Archaeologically, the reason for letting shipowners limit their liability was for policy purposes, to be specific, to encourage the international trade by sea. The value of claims emerging from maritime occurrences, for instance, the loss of freight, could exceed the cost of the vessel and ruin a shipowner. International conventions obliging the limitation of liability, therefore, aims at looking for a balance between sufficiently paying a claimant for its loss and allowing owners to limit their potential liability to a sum that can safeguard the interest at a reasonable cost.

In the UAE, Articles 138-142 of the Federal Law Number 26 of 1981 of UAE Maritime Code entitles an owner, charterer or worker to restrain the liability given the size of the vessel.

This article is meticulously in light of the 1957 International Convention relating to the Limitation of Liability of the Owners of Seagoing Ships (the 1957 convention). This agreement, be that as it may, was superseded in 1976 by the Convention on Limitation of Liability for Marine Claims (the 1976 Convention).

It was, by and large, acknowledged that the 1957 convention required updating and the 1976 conference was acquainted with widening the types of cases subject to limitation, increment the points of confinement of liability and reexamine the test for conduct barring a litigant from its prerogative to restriction. Under the 1976 convention, the privilege to limit liability expires only when an applicant can demonstrate willful intent or recklessness concerning the individual looking to constrain (Article 4 of the 1976 convention).

The privilege to restrict liability under the 1976 convention, as far as anyone is concerned, was under efficient inspection in England just once since 1976. In this case, the master (who was likewise the proprietor) of an angling vessel purposely and frequently crossed caught up with transportation paths before different ships in the English Channel. In explicit contravention of the movement division scheme keeping in mind the end goal to be the first to touch base at lucrative angling grounds. Amid one of those intersections, there was a collision. The master knew the hazards he was taking that is, the danger of an impact, however, all things considered purposely took them. It is evident that the expectation of the 1976 tradition, to be specific that it will break the privilege of limiting extraordinary conditions.

Ships, by nature of their exchange, are involved in events that lead to claims. These claims may be for personal injury, damage to property such as other ships or fixed and floating objects such as drifting items, or cargo damage, to name a few. A shipowner may be exposed to extensive loss, even to the extent of insolvency, as a result of claims. In acknowledgment of the essential and necessary role played by ships in endorsing world trade, shipowners are permitted to restrict their risk for applications in individual countries, subject to certain conditions. Such constraint is allowed by international conventions such as the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC 76).

Since 1957, as the values of consignments, containers, docks installations and the like vastly augmented, and claims arising from marine deaths similarly escalated, many claimants felt that the limits enforce by 1957 Convention were irrationally low. So, in cases where the limitation of liability was likely to be intricate, expensive and time-consuming lawsuits often resulted to "break the fund." Also, since 1957 as some of other Conventions have come into effect which has dealt with liability in specific fields, for instance, the Civil Liability Convention on oil pollution. Conventions such as these introduced monetary limits for their particular category of responsibility much superior to the overall limits administer in the 1957 Convention. To avoid, either in general or under specific circumstances, the Convention limits annul by the much lower worldwide limits of the 1957 Convention, modifications are always necessary. In addition to mollifying the desire of probable claimants for higher limits, the change was needed to make more confident prerogative to limit liability. The product of this need for modification is the 1976 Convention on the Limitation of Liability for Maritime Claims (the 1976 Convention).

Would vicarious liability apply in case of ship employees' responsibility?

There can be numerous parties as defendants in a suit for negligent behavior. The palpable defendant is the party that committed the act leading to the damage – usually an employee of a group or company. The superintendent or administrator who serves as the superior of the employee is also often named. And generally, the employer of the employee (usually the "deep pocket") is often designated based on the legal maxim of Respondeat superior (also called vicarious liability.)

In the case Kadylak v. Royal Caribbean, the claimant got several wounds while motorcycling with a passenger on the seashore with an employee of the ship, during the spare time and for the personal pleasure of the employee. The court noticed that the employee was not on duty and was not wearing a ship uniform or name tag; it granted immediate judgment ruling that the employee was not acting within the extent of employment and that Royal Caribbean was not vicariously liable.

What is Limitation of Funds?

The term Limitation of Funds indicates a guarantee or deposit made by a shipowner to meet any damage claim and the shipowner has to calculate it on the irresponsible ship's weight or some tons. Limitation of Funds is a legislative amount to fix the constitutional limit of liability of shipowners for the negligence of their captains, officers or the operators. World nations have entered into an international agreement between the countries concerning the limitation fund. Many states permit a shipowner facing a pertinent negligence claim to deposit an amount with the court, on a non-bias basis until a decision has been affected, an economic value limited and calculated concerning the density of the ship. Archeologically, the purpose of allowing shipowners to limit their liability was for policy purposes, specifically, to boost international trade by sea. The deposit constitutes sole source of the monetary limit of the shipowner's liability. In what follows will be a comprehension of how it is possible for a shipowner to set up a limitation fund in the UAE.

What is meant by collision as per UAE courts?

The Maritime Code of UAE defines "collision" as contact amongst vessels and ships, however notably exempts floating objects moored to a fixed anchor. As such, communication of boats with objects such as oil platforms has been held by the UAE courts not to be collisions.

What is the Dubai World Tribunal (DWT)?

The Dubai World Tribunal (DWT) was at first instituted in 2009 as a specialist court as an outcome of the international economic crisis to discharge the local judge's caseload. Also, in a situation where the Government of Dubai was under extreme monetary pressure and concerned that this might affect the solidarity of the government-owned Dubai World group of companies.

Naturally, therefore, Decree (57) of 2009 ("the decree"), which offered life to the DWT, concentrated principally on building up and arrangement of bankruptcy guidelines and systems in light of those effectively pertinent in the Dubai International Financial Centre ("the DIFC"). These thus depended on US and UK law and hence quite different from those who would otherwise have applied in the UAE. Unlike the DIFC, be that as it may, the DWT was instructed to apply UAE law to the disputes beforehand. The decree (as subsequently modified) also provided that the DWT was to have legal authority over "all claims and demands by and against the Dubai World or any of its subsidiaries companies" to the segregation of the local "onshore" courts.

As the Government of Dubai sought to reform its business interests, the DWT saw a noteworthy assignment in its early years, most remarkably resolving disputes relating to the real estate company, Nakheel, a former Dubai World subsidiary. In any case, as the world financial outlook improved and the restructuring advanced, the tribunal's workload diminished to such a degree that in 2017 there were only two cases began before the DWT and the decision was that there had been deliberations about disbanding it.

The Court's decision in one of those two 2017 cases may be that as it may, lead to renewed interest in the DWT, mainly from the maritime sector. In a verdict, Claim No DWT 0001-2017, the DWT acknowledged the shipowner's quarrel that it had power to and should make an order permitting the constitution of a limitation fund by the 1976 Convention which the UAE had executed by Federal Decree Number (118) of 1997.

The judgment would seem to prepare the DWT's exclusive jurisdiction to be invoked in maritime disputes that left UAE. For instance, if a shipping container (the largest of which may now carry not far short of 20,000 vessels) involves itself in an event in the Singapore seas. The very fact that there was a separate shipment of cargo on board belonging to a Dubai World company would legitimize the commencement of a limitation action before the DWT, regardless of whether that entity brought no case. It is because as a significant aspect of this decision, DWT found the meaning of Article 11 of the 1976 Convention. Further, UAE law follows the English Court of Appeal decision in The Western Regent and does not require any substantive case to be against the shipowner in the jurisdiction before the commencement of limitation proceedings.

There is clear, unreliable evidence that the "onshore" courts in the UAE have been unwilling to allow limitation legal order or allow limitation funds to be constituted even in prominent cases. The DWT referred to this issue in its judgment but dismissed it as insignificant on the basis that no proof to support the proposition was in reference before it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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