Web alert: Court of Appeal holds a Club LOU sufficient security under the Limitation Convention

The Standard Club has won their appeal in the UK Court of Appeal in the case of Kairos Shipping Ltd and The Standard Club Europe Ltd v Enka & Co LLC.   The Court's holding sets an important precedent by which shipowners and their clubs may choose to establish a limitation fund in Court by way of a Club Letter of Undertaking (LOU) or cash.

The case follows the loss of the cargo ship MV Atlantik Confidence, which sank off Oman with a cargo of steel products following a catastrophic engine room fire in April 2013.  The Standard Club and Kairos Shipping requested that the Commercial High Court of London allow them to establish a limitation fund pursuant to the 1976 Limitation Convention to secure potential P&I claims by way of an LOU instead of by cash deposit. The request was denied by the Commercial High Court, but the Standard Club and Kairos Shipping appealed to the UK Court of Appeal, who reversed the High Court’s decision.

The appeal was heard on 4 December, and the decision was published on 6 March 2014.  Clyde and Co LLP represented The Standard Club (Europe) Ltd and Kairos Shipping in the action.  The appeal was largely unopposed by the known claimants.  The International Group supported the Standard Club’s action and submitted a letter to the Court, endorsing the position of the Standard Club and Kairos Shipping.