First of all, I have to confess that it is embarrassing for me to deal with this argument, as it relates to not so much as to how the limitation of liability is regulated under Italian law but why Italian shipowners do not actually have the right to limit their liability under Italian law. Having said this, it is even more embarrassing to propose whatsoever comparison with Maltese law.
If I am not wrong, in Malta, the limitation is regulated by the Merchant Shipping Regulations of 2004, governing the limitation of liability for maritime claims, which makes the LLMC Convention 1976 as amended by the Protocol 1996 applicable in Malta.
In Italy, our Parliament in the last decades, as alternative to the ratification of the LLMC Convention, has chosen to maintain the traditional limitation system regulated by the 1942 Code of Navigation.
This system, among other things, grants the benefit of limitation only to the operator of the vessel and provides that the operator could limit his liability to an amount equal to the aggregate of the value of the vessel and the amount of the freight of the last voyage. The value of the ship cannot be lower than 1/5 nor exceed 2/5 of the insured value, depending on the actual value of the vessel at the end of the voyage.
Furthermore, Article 7 of the Italian Navigation Code provides that the liability of the operator is ruled by the law of the vessel’s flag. That means that the Italian courts only apply the Italian limitation system to cases involving the Italian flag. Where the ship involved is of a different flag, the Italian courts should apply the limitation system provided by the national law of the ship’s flag or by the LLMC Convention if ratified by the State of the ship’s flag. In this case, the Italian Navigation Code will be applied only in respect of the procedural rules of the limitation.
Where is the legal gap
Pursuant to the law No. 201 of 2009, the Italian government was authorised to ratify the LLMC Convention but the same law also provided that the government was delegated to adopt one or more legislative decrees aimed at the implementation of the Convention within 6 months of its coming into force. Amongst other things, the decrees should have provided the procedural rules applicable to limitation proceedings, mainly: modality of the constitution of the limitation fund, indication of the competent judge, formation of claims, oppositions and distribution of the fund. But,the decrees have not been enacted within the 6 month period and not even as I speak. Accordingly, the ratification has not been completed, the LLMC Convention is not applicable and the limitation of liability should remain regulated by the Italian Code of the Navigation.
The plot thickens. In April 2009, the European Union issues a Directive requiring the owners of ships of 300 GT or more to maintain insurance to cover maritime claims subject to limitation under the 1996 LLMC Protocol. Later on, a Law of 2012 incorporates the Directive and enters into force on 10 August 2012.
At this stage, we have a Kafkaesque situation. The law ignored that the LLMC Convention has not been ratified. Therefore, on the wrong assumption that the LLMC Convention should be applicable to Italian vessels with 300 GT or more, the above law has amended the Article 275 of the Navigation Code, rendering the limitation system applicable only to vessels with a gross tonnage below 300 tons.
The obvious consequence has been that the shipowners of Italian flagged vessels having a gross tonnage exceeding the 300 limit are now deprived of the right of limitation since the new regime does not provide the limitation for these vessels and LLMC Convention is not applicable.
It does not however end here. If the limitation is requested, for obligations arising in Italy, by an operator of a non Italian flagged ship, the Italian court, in accordance with Article 7 of the Italian Navigation Code, should apply the limitation system provided by the national law of the ship’s flag or by the LLMC Convention if ratified by the State of the ship’s flag. As a consequence there should be an illegal discrepancy between the Italian shipowner /flag and the non-Italian shipowner / flag, since the Italian Court should now apply the limitation only to the operator of a vessel with non-italian flag. In consideration of this illegal discrepancy, there is a reason for an application before the Italian Constitutional Court. But when the issue of the possible unconstitutionality of the current legislative system was raised, the Italian court rejected this possibility on the basis that the operator of a non-italian flagged ship does not have the right of limitation of liability under Italian law and, in any case, the court does not have jurisdiction on the application for the limitation of liability made by an operator of a non-Italian flagged ship. For these reasons the application was evaded notwithstanding the provision of Article 9 of Regulation (EU) no. 1215/2012, which states that: Where by virtue of this Regulation a court of a Member State has jurisdiction in actions relating to liability from the use or operation of a ship that court shall also have jurisdiction over claims for limitation of such liability.
Many years have elapsed since the abortive ratification of the LLMC Convention and the Italian legislature continue to ignore that, despite the fact that the Italian fleet is ranked fourth or fifth in the world, shipowners and insurers of Italian vessels with a gross tonnage exceeding 300 tons cannot limit their liability.
The emigration of the Italian fleet to the Malta flag can be justified due to the well known advantages offered by the Malta flag. And now we should add another one: Malta flag offers to the Italian shipowners the limitation of liability refused by the Italian law. And this is not little!
Bruno Castaldo
Propeller Club – Port of Naples
La Valletta-Malta, 26 April 2018
