An overview of the statutory limitation of liability regime in Nigeria
Oluseyi Adejuyigbe
Chaniel Legal Practitioners, Lagos
Background information
The Nigerian legal system is fundamentally rooted in the English Common Law tradition, a legacy of the country's colonial history. Consequently, Nigerian maritime law has evolved under the substantial influence of English Admiralty Law, supplemented by international maritime conventions. These international instruments, in accordance with section 12 of the 1999 Constitution of the Federal Republic of Nigeria (as amended), acquire the force of law in Nigeria only upon their domestication through an act of the National Assembly.
Jurisdictionally, the Federal High Court is conferred with exclusive authority over admiralty and maritime matters by virtue of section 251 of the 1999 Constitution and further reinforced by section 7 of the Federal High Court Act. The scope and operational framework of this admiralty jurisdiction are elaborately defined in section 1 of the Admiralty Jurisdiction Act of 1991(AJA). This legislative framework delineates the extent to which the Federal High Court may exercise jurisdiction over maritime claims, disputes and related proceedings.
Limitation of liability in Nigeria
The Merchant Shipping Act 2007 (the 'MSA') stands as one of Nigeria's most comprehensive legislative instruments governing maritime law. Among its significant contributions, the MSA gives domestic effect to the Convention on Limitation of Liability for Maritime Claims ('LLMC') 1976, as well as its 1996 Protocol, pursuant to section 351.
A foundational inquiry is: what constitutes limitation of liability, and who is entitled to invoke it?
Limitation of liability refers to a statutory mechanism by which certain maritime actors, primarily shipowners, may restrict their financial liability for loss, damage or personal injury arising from maritime incidents to a predetermined monetary threshold, irrespective of the actual magnitude of the claims. The underlying rationale is to strike a balance between safeguarding the interests of claimants and promoting commercial maritime activity by mitigating the potentially devastating financial consequences associated with unlimited liability.
Under the MSA, specifically section 351, the right to limit liability is conferred upon shipowners and salvors. Notably, the MSA adopts a broad and functional definition of a 'shipowner', encompassing not only the registered owner but also the charterer, manager and operator of a vessel. Furthermore, the MSA extends the right to limit liability to insurers of claims that fall within the scope of limitation. An insurer is entitled to avail itself of the same limitation benefits as the assured, thereby reinforcing the indemnity principle in maritime insurance law and ensuring coherence within the liability regime.
Claims subject to limitation (S352)
The following claims shall be subject to limitation of liability, regardless of the basis of liability:
- claims in respect of loss of life or personal injury, or loss of or damage to property (including damage to harbour works, basins and waterways, and aids to navigation) occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;
- claims in respect of loss occasioned by delay in carriage by sea of cargo, passengers or their luggage;
- claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connection with the operation of the ship or salvage operations;
- claims for removal, destruction or rendering harmless of the ship's cargo;
- claims by a person other than the person liable in respect of measures taken to avert or minimise loss for which the person liable may limit his liability under the MSA, and further loss caused by such measures;
- claims in respect of floating platforms constructed for the purpose of exploration or exploiting the seabed or subsoil; and
- claims in respect of raising, removal, destruction or rendering harmless a ship sunk, wrecked, stranded or abandoned, including anything that is or has been on board such a ship.
Note that all the above claims shall be subject to limitation of liability, even if brought by way of recourse or for indemnity, whether under a contract or otherwise.
The claims in italics, however, shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.
Claims excluded from limitation of liability
The following claims are excluded from limitation of liability:
- claims for salvage or general average contribution;
- claims for oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage;
- claims subject to any international convention or national legislation governing or prohibiting limitation of liability for nuclear damage;
- claims against the shipowner of a nuclear ship for nuclear damage; and
- claims by servants of the shipowner or salvor whose duties are connected with the ship or the salvage operations, including claims by their heirs, dependents or other persons entitled to make such claims, if under the law governing the contract of service between the shipowner or salvor and such servant the shipowner or salvor is entitled to limit his/her liability in respect of such claims, or if, under such law, he/she is only permitted to limit his/her liability to an amount greater than that provided for in section 357 of the MSA 2007.
Exceptions to limitation of liability
A party seeking to invoke the right to limit liability will be precluded from doing so where it is established that the loss or damage resulted from a personal act or omission or that of his/her servants or agents acting within the scope of their employment, committed with intent to cause such loss or damage or recklessly and with knowledge that such loss would probably result. This exception reflects a well-established principle in international maritime law that limitation of liability is not available to those whose conduct amounts to wilful misconduct or gross recklessness.
Importantly, the burden of proof rests not on the person seeking to limit liability, but on the party opposing the limitation. The evidentiary threshold is high, requiring proof of intentional or recklessly indifferent conduct that demonstrates a conscious disregard for the likely consequences.
Limitation amounts in maritime liability
The quantification of liability under the limitation regime is not arbitrary but follows a structured and formulaic approach, primarily based on the gross tonnage of the vessel involved. This tonnage-based calculation reflects the principle of proportionality, recognising that larger vessels, by their nature, carry greater risk and therefore attract higher limitation thresholds. The limitation amounts are graduated, increasing incrementally with the tonnage of the vessel.
Claims relating to loss of life and personal injury
For claims arising out of loss of life or personal injury, the limitation amount for ships not exceeding 2,000 gross tons is set at two million units of account. For vessels exceeding this threshold, the limitation amount increases progressively in accordance with a formula prescribed by the applicable international convention, typically LLMC 1976, as amended by the 1996 Protocol and domesticated under Nigerian law.
Other claims (eg, property damage)
For non-personal injury claims, such as those involving property damage, cargo loss or pollution, the limitation amount for ships not exceeding 2,000 gross tons is one million units of account, with similar graduated increases for vessels of greater tonnage.
Unit of account
The term 'unit of account' refers to the special drawing right (SDR) as defined by the International Monetary Fund (IMF). SDRs serve as an international reserve asset and provide a standardised reference value, thereby promoting consistency and stability in international financial and legal transactions. In practical terms, the conversion of SDRs into national currency (eg, Nigerian naira) is determined by the prevailing exchange rate published by the IMF.
The tonnage-based limitation system reflects the broader policy objective of balancing equitable compensation for claimants with the commercial realities and economic sustainability of maritime operations.
Limitation periods
Under Nigerian maritime law, various categories of maritime claims are subject to specific limitation periods, within which legal action must be commenced. These limitation periods serve to promote legal certainty, prevent stale claims and encourage prompt dispute resolution in the highly time-sensitive maritime sector. The applicable time limits are as follows:
Collision claims
Actions arising from ship collisions must be brought within two years from the date the cause of action arose. However, the court may exercise discretion to extend this period in exceptional circumstances. Such an extension may be granted where the claimant can demonstrate that it was not reasonably possible to arrest the offending vessel, either within Nigerian territorial jurisdiction or in any jurisdiction where the defendant shipowner resides or carries on business.
Maritime liens
Claims based on maritime liens such as those for crew wages, salvage, or damages arising from torts committed on navigable waters must generally be commenced within one year of the accrual of the cause of action.
Salvage claims
Claims for salvage remuneration are subject to a two-year limitation period from the date the salvage operations were completed. This period may be judicially extended where the claimant can establish that it was impossible to arrest the vessel assisted or salvaged at a Nigerian port within the limitation period.
Cargo claims
The limitation period for cargo-related claims depends on the applicable international carriage regime:
- Hague Rules: one year from the date of delivery or the date on which delivery should have been made; and
- Hamburg Rules: two years from the date of delivery of the goods or the date when delivery should have occurred.
General admiralty claims
In the absence of a specific statutory or contractual limitation period, the Admiralty Jurisdiction Act provides a residual or omnibus limitation period of three years for general admiralty actions. This provision functions as a default timeframe in cases where no other specific limitation period applies.
Institution of a limitation action by a shipowner
A shipowner who anticipates that a claim for compensation may be brought against him, typically arising from incidents such as collisions, cargo loss or personal injury, may proactively initiate a limitation action before the Federal High Court, which is vested with exclusive jurisdiction over admiralty matters under section 251 of the 1999 Constitution and section 7 of the Federal High Court Act.
Such an action is commenced in personam, by way of originating summons, in accordance with the Federal High Court (Civil Procedure) Rules and Order 15(2) of the Admiralty Jurisdiction Procedure Rules (AJPR) 2023. The purpose of the action is twofold: first, to seek a judicial determination on whether the shipowner is entitled to limit his/her liability, and second, to ascertain the quantum of that limitation based on the applicable statutory framework most notably, the MSA and LLMC 1976, as modified by the 1996 Protocol.
Upon a finding that the shipowner is entitled to limit his/her liability, the court may order the constitution of a limitation fund, a monetary deposit into court, representing the maximum aggregate amount the shipowner may be required to pay in satisfaction of all claims arising from the incident in question. This fund is calculated based on the vessel's gross tonnage and the prescribed units of account (SDRs) as stipulated under the relevant legislation.
Importantly, the shipowner is not compelled to initiate a separate limitation action. As an alternative procedural strategy, he/she may choose to assert the right to limit liability as a defence within the context of proceedings brought against him/her by a claimant. In either scenario, invoking the right to limit liability does not amount to an admission of liability. The legal doctrine treats the limitation application as a procedural safeguard rather than a concession on the merits of the underlying claim.