With management and operation of ships gradually divided from ownership, “manager” and “operator” have become two widely used terms in shipping. The meaning of these words has never been determined in any legal precedent until the most recent case of The STEMA BARGE II [2020] EWHC 1294 where the English court was called upon to consider this issue for the first time. With an interpretation on articles of the 1976 Limitation Convention, the judgement produced a conclusion for the industry to be concerned.

I.     The Background

STEMA BARGE II was contracted to transport rock armour and severed an undersea cable between England and France when she anchored off Dover on 20 November 2016. The damage led to substantial financial loss including repair costs and other consequential damages. Company A, the allegedly “operator” in charge of crew deployment, claimed to be entitled to limit its liabilities in accordance with the convention, and owners of the cable did not agree.

II.    The Judgement

1.      The interpretation of the convention

The Limitation Convention specified persons entitled to limit liability in Article 1 (1) and (2):

“Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.

The term ‘shipowner’ shall mean the owner, charterer, manager or operator of a seagoing ship.”

In terms of how to interpret words of a convention, the Judge referred to The “CMA Djakarta” (2004) 1 Lloyd’s Rep 460 which made clear an approach to interpret international conventions through rules specified in the 1969 Vienna Convention on the Law of Treaties. The approach was endorsed by the Supreme Court in the “Ocean Victory” (2017) 1 Lloyd’s Rep 521.

The Vienna Convention provided in Article 31 General rule of interpretation that:

“1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.”

And in Article 32 Supplementary means of interpretation that:

“Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or unreasonable.”

2.      The meaning of “manager”

The judge noted that it was first necessary to consider the meaning of “manager” as the two words are interrelated.

There hasn’t been any definition to look up to in relevant publication, and some only included a list of obligations of ship managers, like the Scrutton on Charterparties (17th edition, 1964). The master of a ship used to play also the role of a manager, but owners are now left with greater responsibilities of ship management with the development of modern shipping and for the benefits of relevant parties, especially after the ISM Code came into force. The tremendous work may be assigned to professionals, an affiliated company of the owners, or an independent third-party.

The Judge concluded that the ordinary meaning of “manager” is:

“the person entrusted by the Owner with sufficient of the tasks involved in ensuring that a vessel is safely operated, properly manned, properly maintained and profitably employed to justify describing that person as the Manager of the ship. I put it that way because if a person is entrusted with just one limited task it may be inappropriate to describe that person as the Manager of the ship. A person who is entrusted with just one limited task of management may be described as assisting in the management of the ship rather than being the Manager of the ship.”

3.      The meaning of “operator”

In the court’s view, the meaning of “operator” would include the manager and in many cases, there may be little scope for the definition to go further than that. However, this case involves an unmanned dumb barge which was towed to the discharge location and later attended by Company A which places men on board with instructions to drop anchor or transfer cargo. The question here is whether the ordinary meaning of “the operator of a ship” can include these men on board and company A who sent them in the first place.

Although it seems that the ordinary meaning of a “operator” would include those who physically operate the machinery of the ship, relevant articles of the convention embrace the entity which with the permission of the owner, directs its employees to board the ship and operate her in the ordinary course of the ship’s business.

The Judge also noted that in the light of the object and purpose of the Limitation Convention, the limitation of liability was set to encourage international trade by sea and therefore the entity placed men on ship should be protected as much as the owners. In addition, from the perspective of systematic interpretation, since claims in respect of loss of or damage to property in direct connection with the operation of the ship shall be subject to limitation of liability, the entity places crew on the ship to operate her shall be deemed entitled to limit liability.

4.      The decision

Accordingly, Company A was entitled to limit its alleged liabilities as “operator” of the dumb barge.

III.      Comments on the Case

In the light of recent precedents, the determination of entities entitled to limitation of liability has been relaxed. The UK Supreme Court in the “Ocean Victory” agreed with the approach taken by the Court of Appeal in The “CMA Djakarta” which held that charterers are entitled to limit their liabilities under the convention with no restrictions attached.

In the case of STEMA BARGE II, although the judgement defined a “manager” as the person entrusted by the owner with the duty of devising and maintaining a safety management system to ensure the safe operation of the vessel and the prevention of pollution, crewing the vessel with appropriately qualified and trained personnel, maintaining the vessel, finding employment for her and preparing her for trading, the person that fulfills one of the above duties also qualifies as the “operator” of the ship and is therefore entitled to limitation of liability.

Whilst the relax in restrictions is of common good for Members and the Association, it also conforms to the purposes of the system of limitation of liability. Like Professor Yuzhuo Si once said, the system as a whole is a firewall that cannot be left with any gap, or those who claims to be entitled would crack open the gap to corrupt and overturn the system.

For more information, please contact your manager at the Club.