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Limiting

Liability

26 February 2011

Last revised

minutes

5

Reading time

Some liabilities, such as those arising from collisions or the injury of a guest or crew member, are obvious. Other liabilities are less obvious: a large wash made by excessive speed can damage both fixed and floating objects some distance away. Occasionally, it may be possible to limit liability just by spelling this out in a well-drafted charter agreement or employment contract. Often, however, there will be no such contractual relationship with an aggrieved party.

minutes

5

Reading time

26 February 2011

Last revised

Some liabilities, such as those arising from collisions or the injury of a guest or crew member, are obvious. Other liabilities are less obvious: a large wash made by excessive speed can damage both fixed and floating objects some distance away. Occasionally, it may be possible to limit liability just by spelling this out in a well-drafted charter agreement or employment contract. Often, however, there will be no such contractual relationship with an aggrieved party.

  • Yacht owners who are considered the legal owners, rather than just beneficial owners, can be held personally liable for incidents involving their yacht, putting their other assets at risk.

  • Effective insurance, known as Protection & Indemnity (P&I) insurance, is crucial to protect owners against liabilities to third parties.

  • International conventions allow owners to limit their liability, which provides a maximum payout for insurers and encourages trade.

  • The limitation figure for liability does not differentiate between trading ships and yachts, even though yachts are often worth more.

  • International conventions have specific requirements and standards of behavior that must be met to qualify for limitation.

  • The limitation amount is determined based on the tonnage of the yacht in most countries, except for Italy, the United States, and parts of South America.

  • The 1957 and 1976 Limitation Conventions have subtle differences, such as the circumstances under which the right to limit can be lost.

  • Besides the owner, charterers, managers, captains, crew, employees, salvors, and insurers may also have the right to limit liability under the conventions.

  • Owners can set up a fund with a court or competent authority, depositing an amount up to the limitation, to prevent the yacht from being detained in the future and protect other assets.

  • Jurisdictional issues can arise, and different jurisdictions may apply different conventions and rules, making it crucial to seek legal advice promptly and establish jurisdiction in a favorable location with a lower limitation figure.

  • The limitation amount is determined based on the tonnage of the yacht in most countries, except for Italy, the United States, and parts of South America.

  • The 1957 and 1976 Limitation Conventions have subtle differences, such as the circumstances under which the right to limit can be lost.

  • Besides the owner, charterers, managers, captains, crew, employees, salvors, and insurers may also have the right to limit liability under the conventions.

  • Owners can set up a fund with a court or competent authority, depositing an amount up to the limitation, to prevent the yacht from being detained in the future and protect other assets.

  • Jurisdictional issues can arise, and different jurisdictions may apply different conventions and rules, making it crucial to seek legal advice promptly and establish jurisdiction in a favorable location with a lower limitation figure.