By: Lawson Barkley
Maritime law has deep roots in our society, tying itself back to the inference of at least rudimentary maritime laws of the ancient Egyptians and Phoenicians who were commercial leaders in international shipping throughout the Mediterranean. There is no doubt that international shipping and trade require comprehensive rules regarding the liability of the vessels that transport cargo and those who operate them. In an attempt to create an international comity in the maritime field, the United Nations created a specialized agency now known as the International Maritime Organization “IMO.” Coming into force in 1958, after being ratified by 21 countries, its presence is felt across many different maritime issues such as “the environment, legal issues, the transport of dangerous goods, radio communications, fire protection, ship design and equipment, lifesaving appliances, and cargoes and containers.” The United States and Singapore are both members of the IMO.
While international law governs many of the substantive guidelines that cargo ships must follow when conducting international trade, limitation of liability laws are not given international recognition. This opens up shipowners to potential limitation proceedings in several countries from even a single incident. If those countries have different limitations of liability laws then they could be forced to set up “limitation funds” in each of the separate jurisdictions that will assert claims. In the United States, limitation laws are governed by the Limitation of Liability Act. Under this Act, the shipowner only has to put up the value of the vessel and cargo essentially as a bond paid to the court registry, and into the limitation fund. Importantly, limitation proceedings are only successful under the Limitation of Liability Act if the shipowner is found to be negligent-free, and the crash was the fault of some fault outside of their own.
The recent tragedy involving the cargo ship “Dali” that crashed into the Francis Scott Key Bridge on March 26, 2024, raises significant questions regarding the liability of those involved in the crash. The incident resulted in the tragic loss of life of six individuals, and damage to the ship and its cargo of an estimated $43.7 million. In addition to the loss of life and damage to the cargo, the ongoing financial burden the bridge collapse will bring is likely to be the largest loss in the maritime industry’s long-standing history with an estimated $1 billion or more in insurance claims expected to be brought.
The owner of the 984-foot cargo ship is Singapore-based group Grace Ocean Private Ltd. Another key actor is Synergy Marine Pte Ltd., a Singapore-based entity responsible for managing the cargo ship. Grace Ocean filed a claim under the Limitation of Liability Act to limit its liability to all of the potential claims resulting from the incident. So, what does this mean for the $1 billion-plus damages?
First and foremost, the outcome of this case will be the result of lengthy litigation on both sides, who will aim to minimize their respective liability. President Joe Biden announced that the federal government should take on the burden of rebuilding the Francis Scott Key Bridge, which would reduce liability for the shipowners off the top, even if they were to be found negligent in the handling of its vessel.
Over a billion dollars is at stake in determining the cause of the crash, and whether or not Grace Ocean or Synergy Marine were negligent in operating the vessel, however, the exact cause is yet to be known. In June 2023, Dali was docked in Chile, and during a routine inspection of the vessel, a third-party Tokyo MoU discovered that Dali had deficiencies in its “propulsion and auxiliary machinery.” This would seem to put the owners of the Dali on notice that their vessel was not sea-worthy, and any subsequent trips could mean that they are liable for the negligent operation of a deficient vessel. If found to be true, their limitation proceedings would fail, and their liability for the damages would increase exponentially. However, later that year, in September, the United States Coast Guard conducted a standard examination of Dali directly contradicting this determination by Tokyo MoU. The Coast Guard’s examination report had no mention of those deficiencies noted previously when the vessel was docked in Chile. It is unclear whether or not subsequent remedial measures were taken, and if none were, then which examination would hold more weight, if any.
Jin Wang, a professor of Marine technology at Liverpool John Moores University reacted to the ambiguity among the ship’s deficiencies and stated that considering the surrounding circumstances, it is likely that the loss of propulsion of the vessel was the cause of the accident. While the exact cause remains unclear, conspiracies surrounding the incident have surfaced across the internet. Some asserted that it was the result of a terrorist cyberattack by a foreign country, and others claimed that it was a deliberate attack on U.S. soil. These conspiracies are unfounded and cite many facts which have since been debunked. Whether the loss was caused by some sort of human error, or failure of equipment is still under investigation. Professor Wang emphasized the importance of an independent accident investigation to prevent similar accidents from occurring in the future.
Maritime law, specifically the laws regulating the shipping industry, is typically a reactive regime. This means that many of the rules and regulations in place today came as a result of identifying the cause of accidents. Congruent to the accident in Baltimore, depending on the outcome of the investigation, the IMO is likely to implement new international standards for the safety and security of all vessels. Whether this will mean the IMO will implement enhanced measures taken at an examination of vessels transporting goods internationally, or clear jurisdictional boundaries regarding which examinations will hold more weight in the event of an accident is entirely up to the IMO. Meanwhile, those affected by the incident will have to wait for any payouts while the limitation proceedings take place. A finding of negligence will allow their claims an opportunity to be paid out in full, depending on how judgment-proof the owners and operators are. On the other end, all of these claims stand to be only paid out a pro-rata share of the $43.7 million put in the limitation fund given a finding of no negligence.
