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Limitation fund - where to constitute it?

Ship owners and certain other parties are entitled to limit their liability for maritime claims basis the vessel’s tonnage. In which state would one want to constitute a limitation fund would depend primarily on whether lower or higher limits apply and kind of claims limitable. Two recent limitation cases in Hong Kong make this point.

In The Milano Bridge, it was S.Korea or HK. Former has lower limits making it an attractive option for owners of the vessel that caused extensive damage to Pusan port. Limits in HK were $58.6m higher and hence Pusan port was targeting it. The court decided that S.Korea was more suited to deal with this for reasons such as the place of allision, location of parties, and language of document & witnesses. What irked the court was that higher limitation in HK was the main driver for Pusan port to choose HK.


In the other case, one of the vessels capsized after a collision. Wreck removal costs alone were > $17m and would nearly exhaust the limitation fund of $22m. Question was whether the wreck removal costs were subject to limitation. Under LLMC’76 wreck removal claims are limitable. However, the convention also gives each state the right to exclude certain types of claims & HK had exercised this option for wreck removal claims.



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