MSC Flaminia: Supreme Court Clarifies 1976 Liability Limits

Introduction

In a landmark ruling delivered on 9 April 2025, the UK Supreme Court handed down judgment in the long-running dispute between MSC Mediterranean Shipping Company SA (MSC) and Conti 11 Container Schiffahrts-GmbH & Co KG, concerning the aftermath of the catastrophic explosion on the vessel MSC Flaminia in July 2012. This decision provides significant clarification on the scope of the 1976 Convention on Limitation of Liability for Maritime Claims and the ability of charterers to limit liability for certain types of claims brought by shipowners.

Factual Background

On 14 July 2012, the MSC Flaminia suffered a catastrophic explosion while en route from the United States to Europe. The explosion was caused by the auto-polymerisation of divinylbenzene (DVB), a chemical substance stored in three tank containers loaded in New Orleans. The resulting fire and explosion destroyed hundreds of containers and caused extensive damage to the vessel.

At the time, the vessel was subject to a time charter between MSC (as charterer) and Conti (as registered owner). The charterparty provided for arbitration in London, which ultimately led to a series of arbitration awards in favour of Conti. The arbitral tribunal found that MSC had breached the charterparty by failing to inform the owner about the hazardous nature of the cargo, awarding Conti approximately US$200 million in damages. However, the tribunal did not find MSC negligent in the actual carriage of the goods.

In an effort to contain its liability, MSC established a limitation fund under the 1976 Convention. This triggered a series of legal disputes, first regarding whether MSC could limit liability at all, and second, over whether specific claims MSC sought to limit fell within the scope of the Convention.

Procedural History

At first instance ([2022] EWHC 2746 (Admlty)), the Admiralty Court held that MSC could not rely on the Convention to limit its liability for the claims in question. The Court of Appeal upheld that decision in [2023] EWCA Civ 1007, ruling that Article 2 of the Convention did not extend to cover claims by a shipowner against a charterer for losses the shipowner had originally suffered.

MSC appealed to the Supreme Court.

Key Issues Before the Supreme Court

The Supreme Court was asked to resolve two central questions:

Is there a general rule that a charterer cannot limit liability under the 1976 Convention in respect of claims brought by a shipowner for losses originally suffered by the shipowner?
Do the specific claims advanced by MSC fall within the types of claims listed in Article 2.1 of the 1976 Convention, and if so, are any of them excluded due to being consequential upon damage to the ship?

The Court considered the decision in the Ocean Victory. That case established, obiter, that where it is the vessel itself that is lost or damaged, the charterers have no right to limit liability for claims by the shipowner. The Ocean Victory affirmed the Court of Appeal’s decision in the CMA Djakarta, which held that loss of or damage to the vessel itself is not interpreted as “loss of property (…) occurring in direct connection with the operation of the vessel” but is limited to loss of or damage to property on board the vessel or property external to the vessel.

In the MSC Flaminia, the Supreme Court affirmed this rule. The charterers in principle had a right to limit liability as against the shipowner, except for claims for the loss of the ship itself and consequential losses.

The Supreme Court’s Judgment

1. Charterers Can Limit Liability Under the Convention

The Court unanimously rejected the notion that there was a broad principle precluding charterers from limiting liability in relation to claims brought by shipowners.

The Court clarified that:

The definition of “shipowner” in Article 1.2 of the Convention includes charterers, and there is no textual basis in the Convention to distinguish between claims brought by insiders (e.g., owners or charterers) and outsiders (e.g., cargo owners or third parties).
Although claims for damage to the vessel itself or consequential losses flowing from such damage are excluded from the scope of limitable claims under Article 2.1(a), other types of claims may still fall within the Convention and be limitable.
The historic 1924 and 1957 conventions do not assist in interpreting the 1976 Convention, and there was no evidence that the drafters intended to exclude charterers’ liability to shipowners per se.

Thus, the Supreme Court held that MSC was, in principle, entitled to limit liability, subject to the nature of the specific claims involved.

2. Which of MSC’s Claims Are Limitable?

MSC sought to limit liability for four categories of costs it had incurred following the casualty:

Payments to national authorities to allow the vessel to proceed to Wilhelmshaven.
Costs of discharging both sound and damaged cargo, and decontaminating the cargo, at Wilhelmshaven.
Costs of removing firefighting water from the cargo holds.
Costs of removing waste from the vessel.

The Court held as follows:

Limitable Claims:
- The costs of discharging and decontaminating cargo were limitable under Article 2.1(e), which covers “claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship.”
- The Court emphasised that these were not simply consequences of damage to the vessel but independent cargo-related operations that fell squarely within the scope of the Convention.
Non-limitable Claims:
- Payments to national authorities were not incurred to prevent further damage but rather to address losses that had already occurred. Thus, they did not qualify as mitigation costs under Article 2.1(f).
- The removal of firefighting water was seen as part of the repair process, not as a mitigation of environmental or cargo-related damage. Therefore, it was not limitable.
- Similarly, the costs of waste removal were not considered to fall within the Convention’s scope.

The Court was careful to state that Article 2 should be interpreted neutrally — not broadly or narrowly — and that the nature of the claim (not its causation or context) determines its limitability under the Convention.

Conclusion and Implications

The Supreme Court’s decision marks an important clarification in maritime law regarding the application of the 1976 Limitation Convention. It affirms that charterers, like shipowners, can invoke limitation rights under the Convention, even in cases involving claims by shipowners themselves — provided that the claims fall within the categories specified in Article 2.1.

Crucially, the judgment reinforces that not all claims arising from a casualty are limitable, especially where they relate to damage to the ship or repair costs, which remain excluded.

For maritime operators, this decision provides greater clarity and predictability in assessing liability exposures and confirms that the right to limit liability is not automatically lost simply because the claimant is another party to the shipping contract.