Conventions & Liability Law

Definition

P&I (Protection and Indemnity) insurance is the shipowner's mutual liability cover for third-party risks arising from ship operation. It is provided by mutual clubs — not commercial insurers — where shipowners are both insurer and insured.

What P&I Covers

• Cargo claims — loss, damage, short delivery
• Oil pollution liability — MARPOL, CLC, US OPA 90
• Collision liability — the ¼ not covered by H&M; P&I covers the remaining quarter and any excess above the ¾ ITC collision clause
• Personal injury, illness, death — crew and third parties
• Wreck removal costs
• Fines and penalties — legally insurable (e.g. MARPOL violations where insurable under applicable law)
• Repatriation of crew; sick seafarer costs
• MLC 2006 financial security obligations — crew wage claims and repatriation costs under MLC Amendments 2014 (Standard A2.1 / A4.2 — financial security for abandonment and crew claims)

What P&I Does Not Cover

• Physical damage to the ship itself — that is Hull & Machinery (H&M)
• War risks — separate war risk insurer or club
• Wilful misconduct by the owner

Key Distinction — P&I vs H&M

• H&M: damage TO the insured vessel — commercial policy, fixed premium
• P&I: liability ARISING FROM the vessel's operation — mutual club, called premium + supplementary calls if claims exceed estimates

The 12 principal P&I clubs form the International Group of P&I Clubs (IG), which operates a pooling arrangement for large claims and a reinsurance programme above the pool retention. The IG shrank from 13 to 12 following the merger of North of England P&I and The Standard Club into NorthStandard (effective 20 Feb 2023).

Indian Context

Most international operators use IG clubs (Gard, North P&I, UK Club, Britannia, West of England, etc.). DG Shipping and the Maritime Development Fund have been developing plans for an indigenous India P&I Club to reduce dependence on the IG — a Class 1 examiner may test awareness of this initiative in relation to Indian maritime policy.

Purpose

The IOPC Fund Convention (1992) supplements CLC by providing additional compensation where the shipowner's CLC liability is insufficient or where no liability attaches under CLC. Victims of oil pollution have two tiers of compensation — CLC first, Fund second.

Three-Tier Structure

• Tier 1 — CLC 1992: Shipowner strictly liable (compulsory P&I insurance). Limit: 4.51m SDR (small ships) up to 89.77m SDR (large tankers)
• Tier 2 — 1992 Fund: Combined CLC + Fund maximum = 203 million SDR for incidents on/after 1 Nov 2003 (135 million SDR applied only to incidents before that date). This rises further to 300,740,000 SDR (~300.74 million) for any incident occurring while the top three Fund-contributing States, by combined contributing-oil receipts in the preceding calendar year, together received 600 million tonnes or more. Funded by levies on entities receiving >150,000 tonnes crude/heavy fuel oil per year in member states (cargo receivers — NOT shipowners). Annual receipts reported via Form A submitted to the IOPC Fund Secretariat, London
• Tier 3 — Supplementary Fund (2003 Protocol): Combined total raised to ~750 million SDR. Not all states have ratified

Who Pays Into the Fund

Cargo interests (oil importers/receivers) pay annual levies based on volume received — the fundamental structural difference from CLC: CLC = shipowner pays; Fund = cargo interests pay.

When the Fund Pays

• CLC limit exhausted
• Shipowner exempt from CLC liability (act of war, natural disaster)
• Financially incapable shipowner (insolvent, uninsured)

Purpose

The LLMC (Convention on Limitation of Liability for Maritime Claims) 1976, amended by the 1996 Protocol and the 2012 Amendments (Resolution LEG.5(99), in force 2015), allows shipowners, charterers, managers, operators, and salvors to limit their liability for specified claims arising from a single incident. The 2012 amendments raised limits by 51% over the 1996 Protocol values.

Limits — 2012 Amendments (LEG.5(99), in force 2015)

Personal Injury Claims:

• Baseline (ships ≤ 2,000 GT): 3.02 million SDR
• 2,001–30,000 GT: + 1,208 SDR per GT above 2,000
• 30,001–70,000 GT: + 906 SDR per GT above 30,000
• Over 70,000 GT: + 604 SDR per GT above 70,000

Property Claims:

• Baseline (ships ≤ 2,000 GT): 1.51 million SDR
• Scaling applies proportionally above 2,000 GT

Who Pays Within the Limit

The shipowner (through P&I insurer) pays all valid claims up to the limitation amount. If multiple claimants, a Limitation Fund is constituted in court and claims paid proportionally.

Who Pays Above the Limit

Nobody — once the fund is constituted and the limit is not broken, claimants cannot recover further from the shipowner. Exception: if proved the loss resulted from the owner's personal act or omission, committed with intent or recklessly with knowledge that such loss would probably result — the right to limit is lost entirely.

Claims Not Subject to LLMC

• Salvage remuneration and General Average contributions
• Oil pollution under CLC (CLC has its own limits — LLMC does not apply)
• Nuclear damage claims

Indian Context

India gave effect to LLMC through the Merchant Shipping Act, 1958 (Part XB); with effect from 15 March 2026 this has been re-enacted as Chapter II (Limitation of Liability for Maritime Claims), Part IX of the Merchant Shipping Act, 2025 (Sections 162–174). The 2012 LEG.5(99) higher limits carry forward under the new provisions. India's reservation under LLMC continues — wreck removal claims may fall outside LLMC limitation in Indian jurisdiction; the Nairobi Convention's compulsory insurance regime applies separately.

Why CLC Was Insufficient

CLC 1992 applies only to persistent oil carried as cargo on tankers. Non-tankers (container ships, bulk carriers, ro-ro vessels) carry large quantities of bunker fuel — HFO, MDO — which if spilled can cause severe pollution. The Erika and Prestige disasters highlighted this gap. The Bunker Convention 2001 (in force 21 November 2008) filled it.

Scope

• Applies to all seagoing vessels NOT covered by CLC (non-tankers) and tankers for bunker spills when no persistent oil cargo is involved
• Geographic scope: territorial sea + EEZ of contracting states

Liability

• Registered shipowner is strictly liable for bunker pollution damage
• Multiple parties may be liable: shipowner, bareboat charterer, manager, operator — each can limit under LLMC
• Direct Action: An affected coastal state or claimant can sue the P&I club (insurer) directly — bypassing an insolvent or non-responsive shipowner. Critical protection for coastal states

Compulsory Insurance

Ships over 1,000 GT must carry compulsory insurance or financial security. A Bunker Certificate (issued by flag state/RO) must be carried on board. Limitation governed by LLMC 1996 (no separate Bunker Convention limits).

CLC vs Bunker Convention

History and Scope

CLC 1969 was adopted after the Torrey Canyon disaster (1967). The CLC 1992 Protocol (superseding 1969 for contracting states) applies to tankers carrying persistent oil as cargo — crude oil, heavy fuel oil, lubricating oil. CLC's definition is limited to persistent hydrocarbon mineral oil; it does NOT cover gasoline or light diesel (non-persistent), nor non-mineral oils such as whale oil or other animal/vegetable oils — these are classed as hazardous and noxious substances and fall under the HNS Convention 1996, as revised by the 2010 HNS Protocol, instead. Note the 2010 HNS Protocol is not yet in force (confirmed entry into force 29 November 2027 — see Q6); until then such incidents are handled under national law, LLMC limitation, and P&I cover, not a CLC/Fund-style regime. Geographic scope: territorial sea + EEZ.

Strict Liability and Defences

The registered shipowner is strictly liable — no need to prove negligence. Defences under Art. 3 CLC 1992: act of war, natural phenomenon of exceptional character, third party's deliberate act, negligence of authorities (e.g. incorrect navigational light).

Compulsory Insurance (Art. 7)

All tankers carrying more than 2,000 tonnes persistent oil as cargo must carry a CLC insurance certificate. The "blue card" from the P&I club confirms cover and must be on board at all times.

Limitation Amounts (2000 SDR Amendments — LEG.1(82), in force 2003)

• Up to 5,000 GT: 4.51 million SDR
• 5,001–140,000 GT: + 631 SDR per additional GT
• Over 140,000 GT: 89.77 million SDR (cap)

These limits remain current — no further revision since 2003 for CLC (unlike LLMC which was revised by LEG.5(99) in 2015).

Relationship with Fund Convention

CLC pays first (up to limit). If limit exhausted → 1992 Fund pays balance (combined ceiling 135m SDR). If exceeded → Supplementary Fund up to ~750m SDR (if state is party).

Purpose and Scope

The HNS Convention (1996), revised by the 2010 HNS Protocol, establishes a CLC/Fund-style two-tier liability and compensation regime for damage caused by hazardous and noxious substances carried by sea — chemicals, gases, certain liquid substances, packaged goods (IMDG Code, IBC Code, IGC Code, MARPOL Annex II substances).

Two-Tier Structure

• Tier 1 — Shipowner liability: Strict, compulsory insurance; limits based on tonnage
• Tier 2 — HNS Fund: Financed by entities receiving HNS above threshold tonnage in member states. Covers claims exceeding Tier 1 limit

Is it in Force?

The 1996 HNS Convention never entered into force. The 2010 HNS Protocol revised it — but as of 2026 it has still not entered into force. Entry into force requires: 12 states ratifying, including 4 states with not less than 2 million GT each.

The primary bottleneck has been the difficulty states face in establishing reporting systems to track "packaged HNS" — containerised chemicals and IMDG-classified goods. Bulk HNS is straightforward to report; packaged HNS moves through ports in containers and is extremely difficult to quantify for fund contribution purposes.

Practical Gap

HNS pollution claims currently rely on national law, LLMC, and P&I cover. Examiners test whether you know why the convention has not entered into force — the packaged HNS reporting problem is the answer.

Definition

Admiralty law (maritime law) is the specialised body of law governing navigational rights and duties, marine commerce, salvage, seamen's rights, and liability for maritime wrongs — distinct from common law. In India, governed by the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017.

Actions In Rem vs In Personam

• In rem: Action against the ship itself — the vessel can be arrested in port to secure a maritime claim. Unique power of admiralty courts
• In personam: Action against the owner or responsible person

Maritime Claims Under Indian Admiralty Act 2017

Claims that give rise to admiralty jurisdiction include: damage caused by a ship, loss of life/personal injury, loss/damage to cargo, towage, pilotage, salvage, General Average, collision, mortgage/hypothecation, wages of master/officers/crew, disbursements incurred by master.

CE Relationship to the Admiralty Act

• Unpaid Wages: CE's wages are a maritime lien — the CE can bring an admiralty claim against the ship if wages are unpaid; the vessel can be arrested in any port where Indian admiralty jurisdiction applies
• CE's Disbursements: Legitimate expenses on behalf of the ship (emergency spare parts, port charges) constitute a maritime claim if the owner does not reimburse
• Personal Liability: If the CE's negligence causes damage, they may be named in admiralty proceedings in personam
• Vessel Arrest: CE must understand that if the ship is arrested in port, operations stop; CE has responsibilities for maintaining the vessel safely during arrest

Indian Admiralty Jurisdiction

High Courts of Bombay, Calcutta, Madras, Karnataka, Gujarat, Orissa, Telangana, and Kerala hold admiralty jurisdiction under the 2017 Act.

Definition

A maritime lien is a privileged claim upon a ship, her cargo or freight, which arises by operation of law — without any agreement or registration — and travels with the ship regardless of change of ownership.

Key Characteristics

• Arises by law — not by contract; no registration needed
• Travels with the ship — a purchaser takes subject to all existing liens, even if undisclosed
• Secret lien — not recorded in the ship's registry
• Priority — maritime liens rank above registered mortgages

Priority Ranking Under Indian Admiralty Act 2017 (Section 9)

1. Wages and other sums due to master, officers, and crew — this is where the CE stands; highest priority, ranking above salvage and all mortgages
2. Loss of life / personal injury in connection with ship's operation
3. Salvage costs
4. Port dues, canal dues, pilotage dues
5. Damage caused by the ship (tort — collision, cargo damage)

Registered mortgages rank BELOW all five maritime liens.

International Convention — Article 4 (Maritime Liens)

The International Convention on Maritime Liens and Mortgages, 1993 (MLM Convention) sets out, in Article 4, the five categories of claim that are secured by a maritime lien against the owner, demise charterer, manager or operator of the vessel:

1. (a) Wages and other sums due to the master, officers and crew for their employment on the vessel — including repatriation costs and social insurance contributions
2. (b) Loss of life or personal injury — whether occurring on land or water, in direct connection with the operation of the vessel
3. (c) Salvage reward — claims for reward for the salvage of the vessel
4. (d) Port, canal and other waterway dues, and pilotage dues
5. (e) Tort claims for physical loss or damage caused by the operation of the vessel — excluding damage to cargo, containers or passengers' effects

Article 4(2) carve-out: no lien attaches under (b) or (e) where the claim already has compensation available through a compulsory-insurance regime — e.g. oil pollution damage under CLC, or nuclear/radioactive damage — since those are covered by their own strict-liability conventions.

Article 5 — Priority of Maritime Liens

Article 5 governs how the five Article 4 liens rank against each other and against registered mortgages:

• Art. 5(1): the Article 4 liens take priority over registered mortgages/hypothèques/charges — no other claim outranks them
• Art. 5(2): the liens generally rank in the order listed in Article 4, except that salvage liens (c) take priority over all liens that had already attached to the vessel before the salvage operation was performed — salvage is rewarded for preserving the very fund the other lienholders are claiming against
• Art. 5(3): liens (a), (b), (d) and (e) rank pari passu (equally) among themselves where they fall in the same category
• Art. 5(4): where there are multiple salvage liens, they rank in inverse chronological order — the most recent salvage operation is paid first, since it is the one that preserved the value the earlier salvors' claims depend on

Limitation: under Article 9, Article 4 liens extinguish after 1 year unless the vessel is arrested/seized leading to a forced sale before expiry; the clock runs from discharge (for wages) or from when the claim arises (for the others), and does not suspend or interrupt except where arrest is legally barred.

Maritime Lien vs Maritime Claim

All maritime liens are maritime claims — but not all maritime claims are liens. Supply of stores = a maritime claim but not a maritime lien. Wages = both a claim and a lien.

Definition and Formula

General Average (GA) is the principle that when a voluntary sacrifice or extraordinary expenditure is made for the common safety of the ship, cargo, and freight — the loss is shared proportionally among all parties whose property was saved.

COMMON DANGER + INTENTIONAL/VOLUNTARY SACRIFICE + REALISED SAFETY = SHARED LOSS

Legal Basis

York-Antwerp Rules (YAR) 2016 — internationally accepted rules governing GA adjustments; incorporated by reference in most bills of lading and charterparties. India: the old Merchant Shipping Act, 1958, Section 159 provision has no direct restated equivalent in the Merchant Shipping Act, 2025 (in force 15 March 2026) — GA in India is governed primarily by contract/B/L incorporation of YAR; verify against current B/L terms rather than statute.

Three Conditions (YAR Rule A)

• Voluntary — intentional act by master or CE; not accidental
• Extraordinary — not an ordinary operating cost
• Common Safety — for the safety of all interests at risk (ship, cargo, freight)

Classic Examples

• Jettisoning cargo to lighten ship in danger of grounding
• Flooding a hold to extinguish fire (sacrifices cargo/equipment)
• Hiring salvage tugs when ship is in peril
• Port of refuge for necessary emergency repairs

Procedure

1. Master declares General Average
2. Average Bond signed by cargo interests before cargo release
3. Average Guarantee issued by insurer in lieu of cash deposit
4. Average Adjuster appointed (Lloyd's Average Adjuster or equivalent)
5. All interests valued at time/place of termination of adventure
6. GA Statement prepared — loss allocated proportionally

CE Role — Evidence Preservation (Critical)

• Immediately after GA event: secure VDR data, freeze Engine Data Logger printouts
• Make an explicit, timed entry in the Engine Room Logbook detailing exact quantities of fuel, water, ballast, or machinery power sacrificed
• Do not clean up or restore any sacrificed equipment before it is surveyed and recorded
• Engine room records (fuel consumed, pumping power, tug connection logs) directly affect GA calculations

Definition

The Sue and Labour clause is a provision in marine insurance policies (hull and cargo) that requires the insured to take reasonable steps to avert, minimise, or recover from a loss — and entitles the insured to recover the reasonable costs of those steps from the insurer, even if the attempt ultimately fails.

Legal Basis

Marine Insurance Act 1906 (UK) Section 78. Clause 13 of the Institute Cargo Clauses (A, B, C) and Clause 13 of the Institute Time Clauses (Hulls).

What It Covers

• Cost of emergency repairs to prevent total loss
• Cost of salvage services engaged by the insured (contractual salvage hired by the insured)
• Port of refuge expenses for necessary emergency repairs
• Cost of preserving cargo from further damage after incident
• Surveys, inspections taken to limit further loss

Critical Distinction — Sue and Labour vs Salvage

• Sue and Labour = pre-emptive/mitigative expense by the assured themselves (or their servants/agents) under a contractual duty to minimise the insured loss
• Salvage = voluntary act by an independent third party facing a "No Cure No Pay" risk — no contractual obligation; they act at their own financial risk

If the CE directs crew to fight a fire and prevent flooding — Sue and Labour. If the CE engages a salvage company under LOF — Salvage.

Important Nuance

Sue and Labour expenses are recoverable in addition to any partial loss claim. If the insured does nothing and could have prevented further loss, the insurer may reduce or refuse the claim.

Definition

Salvage is a service rendered to a ship, cargo, or maritime property in peril, by a person under no prior contractual obligation — entitling the salvor to a reward from the saved values. Governed by the International Convention on Salvage 1989 and Lloyd's Open Form (LOF 2020).

Types of Salvage

• Contract Salvage (LOF): Lloyd's Open Form — "No Cure No Pay" basis; reward assessed by Lloyd's Salvage Arbitration Branch based on salved values, danger, skill, success, environmental protection
• Pure / Merit Salvage: No prior contract — salvor acts voluntarily; claim made under the Salvage Convention in court or arbitration
• Article 14 — Special Compensation: Salvage Convention Art. 14 allows a salvor to recover expenses (not a reward) when the vessel threatened environmental damage but the operation failed to save property. Provides only expense recovery — not profit. This inadequacy led to SCOPIC
• Wreck Removal Services: Contractual, not salvage per se — governed by Nairobi Convention

SCOPIC — Special Compensation P&I Clause

SCOPIC replaces Art. 14 with an industry-agreed mechanism:

• Salvor must invoke SCOPIC explicitly in writing at any time — does not apply automatically
• Once invoked: salvor guaranteed payment at agreed SCOPIC tariff rates plus 25% uplift — regardless of whether property is saved
• Funded by P&I club (not hull underwriter) — SCOPIC protects the environment (P&I interest)
• Hull underwriter gets a SCOPIC credit against the conventional LOF award if SCOPIC amount exceeds the LOF award
• Effect: removes the salvor's financial risk when dealing with pollution threat — encouraging early, aggressive environmental protection

Definition

The Institute Time Clauses (Hulls) — ITC(H) are the standard clauses for hull and machinery (H&M) insurance in the London market. Most used: ITC(H) 1983 and ITC(H) 1995. ITC defines what perils are insured, exclusions, conditions, and claims procedure for a time-based hull policy.

Key Clauses — ITC(H) 1983

• Clause 1 — Navigation: Ship may navigate worldwide; laid-up provisions
• Clause 4 — Classification: Ship must maintain class with IACS member. Loss of class = suspension of cover
• Clause 6 — Perils (the core clause): Perils insured include: perils of the sea, fire, explosion, violent theft, jettison, piracy, contact with aircraft/dock, earthquake, lightning, accidents in loading/discharging cargo, bursting of boilers, breakage of shafts (Inchmaree Clause perils) — provided the loss did not result from want of due diligence by the Assured, Owners, or Managers; negligence of master, officers, crew; negligence of repairers; barratry
• Inchmaree Clause: Named after the Inchmaree case (1887) — covers machinery perils (boiler bursting, shaft breakage, latent defects). A CE's failure to maintain causes the loss = NOT covered. A sudden unforeseen mechanical failure = IS covered
• Clause 8 — ¾ Collision Liability: H&M covers ¾ of insured's liability to the other vessel in a collision. The ¼ balance + any excess covered by P&I
• Clause 11 — CTL: Constructive Total Loss when cost of recovery and repair exceeds insured value
• Clause 16 — Sue and Labour: Duty of assured to take reasonable measures to avoid/minimise loss

Key Exclusions

• Wilful misconduct of the assured
• Delay (even if caused by an insured peril)
• Ordinary wear and tear, gradual deterioration
• War, strikes (separate war risk clauses available)

Definition and Purpose

The London Convention 1972 (Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter) and its 1996 Protocol govern the deliberate disposal of wastes at sea from ships, aircraft, and platforms.

Critical Distinction — MARPOL vs London Convention

• MARPOL = regulates operational discharges inherent to running a ship (bilge water, sewage, garbage, exhaust gas, ballast water) — these arise from the ship's normal operation at sea
• London Convention/Protocol = regulates the deliberate placement of waste (generated on land or elsewhere) onto a ship for the purpose of disposal at sea — this is "dumping", not ship operation

1996 Protocol — Reverse List Approach (Precautionary Principle)

Everything is prohibited unless it appears on the permitted list (Annex 1 to the 1996 Protocol). Permitted materials include: dredged material, sewage sludge, fish waste, vessels and platforms, inert inorganic geological material, organic material of natural origin, CO2 streams (for sub-seabed geological storage — 2006 amendment).

CE Relevance

CE must not authorise dumping of any waste at sea unless it is on the permitted list and documented. The Garbage Record Book (MARPOL Annex V) and the London Protocol are complementary but separate regimes — MARPOL Annex V governs day-to-day garbage; London Protocol governs deliberate loading and dumping of external waste.

Full Form and Purpose

OPRC = International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990 (in force 1995). Adopted after the Exxon Valdez disaster (1989). Establishes a global framework for international co-operation and mutual assistance in preparing for and responding to oil pollution incidents.

Key Requirements on Ships

Ships must carry a SOPEP (Shipboard Oil Pollution Emergency Plan) — required by MARPOL Annex I Reg. 37 for ships ≥400 GT.

SOPEP Contents: Reporting procedures (who to call, GMDSS forms); contacts (DPA, flag state, coastal state, port authority, salvage companies); ship's pollution response equipment and location; crew roles and responsibilities; procedures to contain the source.

OPRC-HNS Protocol 2000

Extends OPRC to HNS (hazardous and noxious substances) — mirrors OPRC but for chemical pollution events. Requires SMPEP (Shipboard Marine Pollution Emergency Plan for HNS) on ships carrying HNS cargoes (MARPOL Annex II Reg. 17).

CE Responsibilities

• Report oil spill immediately to master → master reports to ICG / DGS / port authority
• Activate SOPEP immediately
• Provide all operational data (position, quantity, weather, response measures)
• Polluter Pays Principle: ICG mobilises response but holds the registered shipowner (through P&I club) strictly liable for ALL costs of containment, clean-up, and environmental restoration. CE must document every response action, time, and resource — this record forms the basis of cost recovery claims

Full Form and Authority

NOSDCP = National Oil Spill Disaster Contingency Plan. Authority: Ministry of Earth Sciences, Government of India. Nodal implementing agency: Indian Coast Guard (ICG). India's national framework under OPRC 1990 for preparing for, responding to, and recovering from oil spill incidents in Indian waters.

Geographic Coverage

Territorial Sea (12 nm), Contiguous Zone (24 nm), EEZ (200 nm), Continental Shelf, Ports, harbours, anchorages.

Three-Tier Response Structure

• Tier 1 — Local: Ship's SOPEP, Port Trust, facility response; ICG informed immediately
• Tier 2 — Regional: ICG Regional Oil Spill Response Centres activated; mutual aid between ports/facilities
• Tier 3 — National: Large-scale incident beyond regional capacity; national resources mobilised; international assistance requested under OPRC bilateral arrangements

Polluter Pays Principle Under NOSDCP

The ICG mobilises clean-up operations but holds the registered shipowner's P&I club strictly liable for all dynamic costs of containment and restoration. CE must document every response action, time, and resource — this record forms the evidence trail for cost recovery from the insurer.

Reporting Chain

CE → Master → DPA → ICG (via VHF/GMDSS) → DGS → Port Authority

Use these trees to instantly identify which legal/insurance regime applies to a spill scenario.

When revising, work through one cluster at a time rather than jumping between isolated questions. Each cluster reflects a likely Nair follow-up chain.