The above suggestion is consistent with the comments of the Baltic and International Maritime Conference (BIMCO) which were made on the original draft of the
LLMC 1976 Convention. BIMCO commented that Article 1(6) of the draft LLMC
1976 did not make clear the position of an insurer in the event of a breach by the
assured of Article 4,
54 and a direct recourse action brought against the insurer. In this
situation, the insurer should still be entitled to limit his liability—a principle
recognized by Article VII (8) of the CLC 1969. It was deemed to be important
that the insurer should not be exposed to unlimited liability in the event of an assured
being in breach of Article 4 of the draft LLMC 1976.
55
It is further proposed that the international conventions on carriage of goods by
sea prescribing package limitation should also clarify that liability insurers of the
relevant parties concerned, namely, those of the carrier, the actual carrier or the
maritime performing party, and their servants or agents, etc., are entitled to independent rights of limitation of liability, because they are also likely to be sued
directly by third party claimants in certain circumstances under relevant insurance
legislation.
56 The provision could be drafted as follows:
An insurer of liability for claims subject to limitation in accordance with the rules of this
Convention shall be entitled to the limit of liability set out in Article ÂÂ of this Convention,
irrespective of the assured himself being denied the right to limit by Article ÂÂof this
Convention.
By amending Article 1 (6) of the LLMC 1976 and adding a clause to the
international conventions on carriage of goods by sea as suggested above, a uniform
and independent mode of entitlement to limitation would be established in
maritime law.
8 The Position in Chinese Law
As regards the modality utilized in Chinese legislation to characterize the right of a
liability insurer to invoke limitation, it is instructive to look at Article 206 of the
CMC which provides—“[W]here the assured may limit his liability in accordance
with the provisions of this chapter, the insurer liable for the maritime claims shall be
entitled to the limitation of liability under this Chapter to the same extent as the
assured”. This provision is indubitably reflective of Article 1(6) of LLMC 1976/
1996. The wording clearly indicates that the liability insurer’s right to limit liability
under the CMC is parasitical in nature. This is also the majority view of Chinese
54 It must be noted in this context that in the final version of Article 1(6) and Article 4, the wording
remained the same as it was in the original draft. In other words, the problem highlighted above has
remained unresolved.
55 See IMO (1983), p. 118.
56 See Section 1 of the Third Parties (Rights against Insurers) Act, 2010 of the United Kingdom, or
Article 65 Paragraphs 1 & 2 of the Insurance Law of the People’s Republic of China.
Liability Insurer’s Right to Limit Liability for Maritime Claims:. . .
671
LLMC 1976 Convention. BIMCO commented that Article 1(6) of the draft LLMC
1976 did not make clear the position of an insurer in the event of a breach by the
assured of Article 4,
54 and a direct recourse action brought against the insurer. In this
situation, the insurer should still be entitled to limit his liability—a principle
recognized by Article VII (8) of the CLC 1969. It was deemed to be important
that the insurer should not be exposed to unlimited liability in the event of an assured
being in breach of Article 4 of the draft LLMC 1976.
55
It is further proposed that the international conventions on carriage of goods by
sea prescribing package limitation should also clarify that liability insurers of the
relevant parties concerned, namely, those of the carrier, the actual carrier or the
maritime performing party, and their servants or agents, etc., are entitled to independent rights of limitation of liability, because they are also likely to be sued
directly by third party claimants in certain circumstances under relevant insurance
legislation.
56 The provision could be drafted as follows:
An insurer of liability for claims subject to limitation in accordance with the rules of this
Convention shall be entitled to the limit of liability set out in Article ÂÂ of this Convention,
irrespective of the assured himself being denied the right to limit by Article ÂÂof this
Convention.
By amending Article 1 (6) of the LLMC 1976 and adding a clause to the
international conventions on carriage of goods by sea as suggested above, a uniform
and independent mode of entitlement to limitation would be established in
maritime law.
8 The Position in Chinese Law
As regards the modality utilized in Chinese legislation to characterize the right of a
liability insurer to invoke limitation, it is instructive to look at Article 206 of the
CMC which provides—“[W]here the assured may limit his liability in accordance
with the provisions of this chapter, the insurer liable for the maritime claims shall be
entitled to the limitation of liability under this Chapter to the same extent as the
assured”. This provision is indubitably reflective of Article 1(6) of LLMC 1976/
1996. The wording clearly indicates that the liability insurer’s right to limit liability
under the CMC is parasitical in nature. This is also the majority view of Chinese
54 It must be noted in this context that in the final version of Article 1(6) and Article 4, the wording
remained the same as it was in the original draft. In other words, the problem highlighted above has
remained unresolved.
55 See IMO (1983), p. 118.
56 See Section 1 of the Third Parties (Rights against Insurers) Act, 2010 of the United Kingdom, or
Article 65 Paragraphs 1 & 2 of the Insurance Law of the People’s Republic of China.
Liability Insurer’s Right to Limit Liability for Maritime Claims:. . .
671