Duhaime's Law Dictionary


Limitation Fund Definition:

A guarantee or deposit made by a ship owner to meet any damage claim, and calculated on the negligent ship's tonnage.

A statutory tool to facilitate the statutory limit of liability of ship owners for the negigence of their captains, officer or such other operators.

Many states, in keeping with international treaties such as the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage 1971, allow a ship owner facing an applicable negligence claim, to deposit with the court, on a without prejudice basis until judgment has been rendered, in either money or acceptable guarantee, a monetary value limited and calculated with reference to the weight (tonnage) of the ship, and which constitutes the sole source of available compensation or, in other words, the monetary limit of the ship owner's liability.

From §12 and §13 of the 1971 Convention:

"... the fund shall be distributed among the claimants in proportion to their established claims against the fund.

"Where a limitation fund has been constituted..., any person having made a claim against the fund shall be barred from exercising any right in respect of such claim against any other assets of a person by or on behalf of whom the fund has been constituted."

REFERENCES:

  • Convention for Liability for Maritime Claims 1976
  • International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1971
  • Jackson, D., Enforcement of Maritime Claims (London: Informa Professional, 2005)

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