The shipowner, the charterer, the master and their insurer can cap their liability at an amount calculated on the ship’s tonnage, unless the claimant proves a personal act committed with intent or recklessly. Constituting a limitation fund before the president of the commercial court stops enforcement measures, releases the arrested ship and closes the direct action against the insurer.
A 25,000 gross tonnage bulk carrier strikes a quay while manoeuvring in a French port. The berth is out of service for six months, a gantry crane has to be replaced, two waiting ships claim demurrage, and a docker is injured. The claims exceed forty million euros. The shipowner, its liability insurer and its P&I club know they will not pay that sum: maritime law has always allowed them to limit their liability to an amount calculated on the ship’s tonnage. That right must still be exercised in the proper form, at the right time and before the right judge, and defended against claimants who will try to break it.
Limitation does not only benefit large shipping companies. It has been successfully relied on by the skipper of a racing catamaran whose capsize cost four crew members their lives, and by the owner of a sailing boat whose anchor dragged onto another boat. The regime is the same; only the figures change. Here is how it works, what it costs and how it is implemented before the commercial court.
A right specific to the maritime world
The principle is set out in article L. 5121-3 of the Transport Code: the shipowner may limit its liability towards its contracting parties and third parties, even towards the State, if the damage occurred on board or is directly connected with the navigation or use of the ship. Article L. 5121-2 extends this right to the charterer, the operator, the managing owner, the master and the shore-based or seagoing employees acting in the course of their duties. The master and crew members may rely on it even where they committed a personal fault. The insurer covering the liability of these persons benefits from it to the same extent as the insured.
The amounts are not set by French law but by reference: article L. 5121-5 provides that the limits are those of the London Convention of 19 November 1976 on Limitation of Liability for Maritime Claims (LLMC), as amended by the Protocol of 2 May 1996 and then by the amendments adopted by the International Maritime Organization on 20 April 2012. That last increase came into force on 8 June 2015 and was published in France by Decree no. 2018-545 of 28 June 2018.
Invoking limitation, or constituting the fund, is not an admission of liability (article L. 5121-8). The shipowner can therefore dispute fault and, in the alternative, cap the award.
Which claims are capped, and which are not
Limitation applies to claims for loss of life, personal injury or damage to property occurring on board or in direct connection with the navigation or use of the ship, and to claims relating to measures taken to prevent or minimise such damage and to damage caused by those measures (article L. 5121-3, paragraphs 1 and 2). Article 2 of the Convention adds loss resulting from delay in the carriage of goods or passengers and infringement of non-contractual rights.
Article L. 5121-4 removes four categories: claims for salvage, assistance and contribution in general average; claims of the master and crew members arising from their service on board; claims of any other person employed on board under a contract of employment; and claims of the State or of a public body that has raised, removed, destroyed or rendered harmless a ship that is sunk, wrecked, stranded or abandoned, together with anything on board. The Convention further excludes oil pollution damage within the CLC Convention and nuclear damage, which have their own regimes.
In practice, wreck removal by the port authority and crew claims are the two items the shipowner can never cap in France. For everything else, damage to port structures, to the other ship, to cargo, to third parties, injury to passengers and to people ashore, the cap applies.
The amounts: tonnage arithmetic
The Convention distinguishes two funds, one for loss of life and personal injury claims, the other for all other claims, and calculates each by bands of gross tonnage. Since 8 June 2015 the figures are as follows, in Special Drawing Rights of the International Monetary Fund.
For personal claims: 3.02 million SDR for a ship not exceeding 2,000 tonnage; then 1,208 SDR per ton from 2,001 to 30,000; 906 SDR per ton from 30,001 to 70,000; 604 SDR per ton above 70,000.
For other claims: 1.51 million SDR up to 2,000 tons; then 604 SDR per ton from 2,001 to 30,000; 453 SDR from 30,001 to 70,000; 302 SDR above.
The 25,000-ton bulk carrier in our example therefore has, for property damage, a limit of 1.51 million plus 23,000 times 604 SDR, a little over 15.4 million SDR. The SDR rate is published daily by the IMF; for several years it has moved between 1.2 and 1.3 euros. The forty million claimed is thus reduced to less than twenty million euros, excluding crew claims and wreck removal.
Claims by a ship’s passengers follow a separate rule, that of article 7 of the Convention: 175,000 SDR multiplied by the number of passengers the ship is authorised to carry.
French law adds two special features. For ships of 300 tonnage or less, the limits are half those provided for ships of 2,000 tons (article L. 5121-5, paragraph 2): 1.51 million SDR for personal injury, 755,000 SDR for other claims. This is the regime of almost all yachts and all pleasure boats. Maritime drones benefit from the same reduced amounts (article L. 5121-5-1).
Where personal claims exceed their own limit, the excess ranks with the other claims on the second fund (article L. 5121-10). The Cour de cassation recalled this in the Accroch’cœur catamaran case: the heirs of the crew members who died could claim compensation within the overall limit of both funds, not the personal injury limit alone (Cass. com., 26 June 2019, nos. 18-12.249 and 18-12.450, published in the Bulletin).
The conduct that breaks the limit
Limitation is not an absolute right. Article L. 5121-3, paragraph 3, refuses it to a person if it is proved that the loss resulted from that person’s personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. The wording is that of article 4 of the Convention.
Three elements must be met, and the burden of proof is on the claimant. First, the fault must be personal to the person invoking limitation: the fault of the master or crew does not deprive the shipowner of its right, and article L. 5121-2 even allows seafarers to limit their liability despite their own fault. For a shipping company, personal fault is that of its directors or management bodies, for example a known maintenance defect deliberately ignored, or commercial pressure that led to sailing a ship whose condition was known. Second, the fault must be intentional or reckless. Third, there must be knowledge that the loss would probably occur, which requires showing what the person liable knew at the time.
The Cour de cassation applies this test strictly. The owner of a sailing boat who admitted having anchored with too little chain, and whose boat dragged onto a neighbouring catamaran in strong wind, kept the right to limit: nothing showed that he had deliberately chosen to anchor too close, or that the winds forecast made dragging more than probable (Cass. com., 19 September 2018, no. 17-16.679, published in the Bulletin). In the Accroch’cœur case, the Court held that the lower courts did not have to examine of their own motion whether the skipper had committed inexcusable fault: it is for the victims to raise and prove it.
For the shipowner, the lesson is twofold. It must keep evidence of its diligence, class certificates, survey reports, maintenance history, implementation of the ISM Code, because that file answers the allegation of recklessness. And it must raise limitation in its first submissions, without waiting for the outcome of the debate on liability.
Constituting the fund: the procedure before the commercial court
The limitation fund is the sum, or the security, that the shipowner makes available to all the claimants of the same event. Constituting it is optional: the Convention allows the limit to be invoked without a fund, and French law does not require one. But only constitution of the fund produces the protective effects described below. The procedure is set by articles R. 5121-1 to R. 5121-22 of the Transport Code, as amended by Decree no. 2016-1893 of 28 December 2016 and Decree no. 2024-461 of 22 May 2024.
The applicant, owner, charterer, operator or insurer, files an application with the president of the commercial court. For a French ship, this is the court of the port of registry. For a foreign ship, it is the court of the French port where the accident happened, or of the first French port reached after the accident, or failing that of the place of the first arrest or the first security provided (article R. 5121-1).
On pain of nullity, the application states the event in which the damage occurred, the maximum amount of the fund calculated under the limitation rules, and how it is to be constituted. It must attach a certified list of known claimants, with their address and the final or provisional amount of their claim, and all documents supporting the calculation of the fund, first among them the tonnage certificate (article R. 5121-2).
The president checks the calculation, opens the procedure, rules on how the fund is to be constituted, sets the provision for costs, and appoints a supervising judge and a liquidator chosen from the lists of court-appointed administrators and trustees (article R. 5121-3). The fund may be paid in cash, to the body designated by the supervising judge, or represented by a joint guarantee or other security in the name of the liquidator (articles R. 5121-4 and R. 5121-5). In practice, the P&I club’s letter of guarantee, or a bank guarantee, stands in for the fund; interest and income on the security are paid into the fund.
An order of the president then records the constitution of the fund on the report of the supervising judge (article R. 5121-6). It is this order that triggers the protection.
The effects of the fund: enforcement stops and arrests are lifted
From the order recording the constitution of the fund, no enforcement measure may be taken against the applicant for claims subject to limitation (article R. 5121-7). Article L. 5121-6 puts it more broadly: after the fund has been constituted, no right may be exercised, for the same claims, over the owner’s other assets, provided the fund is actually available to the claimant.
The arrested ship is released. Article L. 5121-9 allows a person entitled to limit liability to obtain release of the arrest of its ship or any other property, and release of any security given, once it proves that the fund has been constituted or that adequate security for it has been provided. The text takes into account a fund constituted not only in France but also in the port where the event occurred, at the first port of call after the event, or at the port of disembarkation for personal injury or cargo damage. A fund constituted in Rotterdam or London after a collision in the Channel therefore allows release of an arrest made at Le Havre.
The fund also closes the direct action against the insurer. Article L. 173-24 of the Insurance Code deprives the victim of the right to sue the liability insurer directly once a fund has been constituted, and the Cour de cassation has held that constitution, which is subject to no time limit, may take place after proceedings for payment have been issued and makes the direct action inadmissible (Cass. com., 19 September 2018, cited above). The Court also held that a cap on cover in the policy does not prevent the insured and its insurer from relying on statutory limitation (Cass. com., 26 June 2019, cited above).
These effects explain the usual strategy. Where potential claims exceed the limit, where an arrest is feared or has already been made, or where several claimants are acting before different courts, the shipowner has an interest in constituting the fund without delay, in the most favourable State among those where the fund will be recognised. The choice between France, the United Kingdom, the Netherlands or another State party is made in the light of the applicable amounts, since some States have not ratified the 1996 Protocol or its amendments, the regime of the conduct barring limitation, and the speed of the procedure.
Verification of claims and distribution
After the order, the liquidator informs by registered letter all the claimants named by the applicant, with a copy of the order, the name of the ship, the event and the amount the applicant attributes to their claim (articles R. 5121-11 and R. 5121-12). Each claimant has thirty days to lodge its documents and dispute the figure; after that time it is deemed to have accepted it. The period is extended by ten days for claimants domiciled in Europe outside metropolitan France and by twenty days for the others (article R. 5121-13). Publication in a legal notices journal, and where appropriate abroad, opens the same period to claimants whose address is unknown (article R. 5121-14).
The liquidator verifies the claims in the presence of the applicant and submits proposals to the supervising judge, who settles the schedule of claims (articles R. 5121-15 and R. 5121-16). Each claimant may, within thirty days of notification of that schedule, object to the other claims and dispute the amount of the fund itself (articles R. 5121-18 and R. 5121-20). These disputes are decided by the commercial court, and the judgment binds the applicant and all claimants party to the procedure (article R. 5121-22). Claims falling within the jurisdiction of another court are entered provisionally pending a final decision (article R. 5121-21).
The fund has three parts, allocated respectively to passenger claims for loss of life or personal injury, to personal claims of other persons, and to other claims; within each part, distribution is pro rata (article L. 5121-10). The applicant or its insurer who has already paid a claimant is subrogated to that claimant’s rights over the fund (article L. 5121-11), and the supervising judge may set aside a sum for that purpose (article R. 5121-10).
Pleasure craft: same rules, small amounts
The regime applies to every ship, and therefore to a yacht as much as to a cruising sailing boat. The two Cour de cassation decisions cited above concerned a racing catamaran and a sailing boat at anchor. For a boat of less than 300 tons, which includes most yachts under 45 metres, the limit is 1.51 million SDR for personal injury and 755,000 SDR for property damage.
These amounts are often lower than the limits of cover in yacht policies, which has an important consequence for the victim: the insurer can shelter behind statutory limitation even if its policy covers more, as the Cour de cassation held in 2019. For the owner, constituting a fund after a serious accident is a way to protect personal assets that must be put in place with the insurer as soon as the first claims arrive.
What the firm does
The firm acts for shipowners, charterers, yacht owners and their insurers, and for claimants seeking full compensation.
For the shipowner and its insurer, it calculates the applicable limit, chooses the State in which to constitute the fund, drafts the application and its annexes, obtains the opening order and then the order recording constitution, negotiates the form of security with the P&I club, obtains release from arrest and follows the verification of claims through to closure. In parallel it prepares the diligence file that will answer the allegation of inexcusable conduct.
For the claimant, it examines whether the claim escapes limitation, whether the shipowner’s personal fault can be established and whether the fund was correctly calculated, and it lodges and defends the claim before the liquidator, the supervising judge and the court.
Limitation of liability arises mostly in three types of dispute that the firm covers in dedicated pages: ship collision, wreck removal and the Nairobi Convention and the liability of passenger carriers, where the limits are governed by their own texts.
Frequently asked questions
Who can limit liability under French maritime law?
The shipowner, the charterer, the operator, the managing owner, the master and employees acting in the course of their duties, and the liability insurer of those persons (articles L. 5121-2 and L. 5121-3 of the Transport Code). The master and seafarers may rely on it even in case of personal fault.
What is the amount of the limit?
It depends on the ship’s gross tonnage and on the nature of the claims. For a ship of 2,000 tons or less, it is 3.02 million SDR for personal injury and 1.51 million SDR for other claims, with additional amounts per ton above that. For a ship of 300 tons or less, these amounts are halved (article L. 5121-5).
Must a fund be constituted to benefit from limitation?
No. The limit can be raised as a defence without constituting a fund. But only constitution of the fund stops enforcement measures, allows arrests to be lifted and makes the direct action against the insurer inadmissible (articles L. 5121-6, L. 5121-9 and R. 5121-7 of the Transport Code, L. 173-24 of the Insurance Code).
Before which court is the fund constituted in France?
Before the president of the commercial court of the port of registry for a French ship; for a foreign ship, the court of the port where the accident happened, of the first French port reached afterwards, or of the place of the first arrest (article R. 5121-1). The court is seized by an application stating the event, the amount of the fund and how it is constituted.
What conduct deprives the shipowner of limitation?
A personal act, committed with intent or recklessly and with knowledge that the loss would probably result (article L. 5121-3, paragraph 3). It must be proved by the claimant. Fault of the master or crew is not enough, and the courts do not have to look for it of their own motion.
Are crew claims capped?
No. Claims of the master and crew members arising from their service on board, like those of any person employed on board, are outside limitation (article L. 5121-4). The same applies to claims for salvage and contribution in general average and to wreck removal costs incurred by a public body.
Does a fund constituted abroad protect the ship in France?
Yes, under the conditions of article L. 5121-9: release from arrest can be obtained if the fund was constituted in the port where the event occurred, at the next port of call, or at the port of disembarkation for personal injury or cargo damage.
Does limitation apply to pleasure boats?
Yes. The Cour de cassation has applied it to a racing catamaran and to a sailing boat at anchor (Cass. com., 26 June 2019, no. 18-12.249; Cass. com., 19 September 2018, no. 17-16.679). For a boat of 300 tons or less, the limit is 1.51 million SDR for personal injury and 755,000 SDR for other claims.
Hervé Guyader, avocat at the Paris Bar, doctor of law.