Ashfords Solicitors - MSC "NAPOLI"

However, behind the scenes there has been a considerable commercial activity on the London insurance market. The vessel's insurers, the London Steamship Owners Mutual Insurance Association Limited, managed by A Bilborough & Co Limited of London E1, together with hull and machinery insurers, have been faced with a number of major issues.

First and foremost they will have had to negotiate with the salvors, the internationally renowned Dutch company SMIT. This would have involved serious negotiations about the terms under which they were prepared to operate, (probably concluded under the terms of a Lloyds open form) and the need to obtain adequate security for their salvage claim – which given the amount of work and resources deployed on the task, will be very considerable indeed. Accordingly there will undoubtedly be a letter of guarantee in place for a very substantial sum.

Second, the P & I Club will also be faced with a number of claims particularly those from cargo interests. By all accounts these could amount to as much as £60 million. There are, and will continue to be, other claims from third party sources such as fishermen, cruise operators who operate off this Jurassic coastline, together with local County Councils, the police and environmental groups who have spent a great deal of time and potential money in assisting the salvors in the clean up operation on Branscombe Beach.

Third, there will also be claims from organisations such as the National Trust (who own the beach) and other organisations (e.g. RSPB) who have been involved in the incident.

In circumstances such as these, the owners and charterers of the MSC "Napoli" are, however, entitled to limit their liability dependent upon the gross tonnage of the vessel. This right is given by virtue of the Merchant Shipping Act 1995, Section 185, and subsequent international protocols, ship owners are able to limit their liability to a value of approximately £20 million special drawing rates. This calculation is based upon a gross tonnage of 53409. Applying special drawing rates to pounds sterling this equates to approximately £15 million".

Clearly there will be claims substantially in excess of this amount and say for example they amount to a total of £70 million, given the fact that it is under English law extremely difficult to break limit, i.e. exceed the cap imposed by the limitation fund, such claims would be limited to a little over 20% of their proven value. This means that if for example the police put in a claim for £100,000 for all the work carried out by the force over the last 3-4 weeks, the total payment may be limited to as little as £20,000.

This of course is of very serious concern to those that have assisted throughout this difficult operation, in good faith and with a high degree of goodwill.

The answer in future is to demand security from the vessel's owners, charterers and/or their insurers promptly, i.e. immediately the accident happens, and at the same time ensure that no work is carried out until adequate security by way of a letter of credit, bank bond or P & I Club guarantee is actually in place.

Hard-nosed financial lessons will be learnt from this case and they should be implemented in the number of contingencies/risk assessment plans that are already being put into force in the event such an incident happens again.

Ironically such a position would not have occurred had the "Napoli" been a tanker – this is because tanker owners contribute to what is known as an International Oil Pollution Fund and in the event of any casualty involving the leakage of oil from tankers, the International Oil Pollution Compensation Fund has adequate security (up to about £45 million) to fund all relevant claims.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.

23rd February 2007

Key Contacts

MSC "NAPOLI"

Introduction