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The doctrine of limitation of liability for maritime claims, which entitles shipowners and certain others to limit their liability for claims arising out of their ships’ operation to a particular sum, has been entrenched in the shipping industry for years. However, recent marine disasters have generated widespread discussion on abolishing or reforming the doctrine. This article seeks to explore how the modern business environment of insurance, incorporation and technological advancement impact upon the doctrine. It argues that it has not outlived its usefulness and that a system of unlimited liability would be detrimental to the shipping industry and to society at large.
The shipping industry is a fundamental pillar of international trade: 90 per cent of global trade is carried by sea.1 One of the industry’s long-standing peculiarities is the principle of limitation of shipowners’ liability,2 which entitles shipowners and certain others3 to limit their liability for claims arising out of their ships’ operation (eg, loss of life/personal injury and property damage claims) to a particular sum. Contrary to other limitation of liability mechanisms, such as contractual exclusion clauses and limited liability corporations, which form part of the general law of contract and company law, maritime limitation which acts as a cap on damages is, apart from rare exceptions,4 unique to the shipping industry and is—for the most part—regulated by international Conventions,5