(Comment Upon the Judgment of the Commercial Court of the Far Eastern District in Case A51–383/2024 dd. 20 April 2026)

Russia is a party to the 1976 LLMC Convention and the 1996 Protocol. The Convention provides for general limits of liability for particular types of maritime claims, including the claims for damage done by a ship (art. 2 (1) (a) of the Convention). Under the Convention, the shipowner’s liability cannot be limited if “it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result” (art. 4 of the Convention). ¹

These provisions are reflected in the Russian Merchant Shipping Code (the MSC, ch. XXI). Article 355 of the MSC corresponds to art. 2 of the Convention, and art. 357 of the MSC corresponds to art. 4 of the Convention. However, the relevant MSC provisions do not repeat the Convention verbatim. The MSC provides that a person is barred from limiting their liability if the loss was caused intentionally or with “gross negligence.”

Thus, there is a difference between the Convention and the MSC. This difference is reflected in the use of the phrases “recklessly and with knowledge that such loss would probably result” and “with gross negligence.” The comment on the Judgment of the Commercial Court of the Far Eastern District in Case No. A51–383 / 2024, dated 20 April 2026, deals with the interpretation of the relevant provisions.

Facts

JSC SOGAZ (the claimant) brought a claim in the Commercial Court of the Primorskiy Region against LLC Femko-Management (the defendant) for damage to the floating crane during its towage from Quindao, China, to the berth owned by LLC SSK Zvezda (the charterer) in the Primorskiy Region. Under the contract between the defendant and the charterer, the charterer undertook to prepare the crane for towage. During the voyage, the crane became detached and was damaged. The defendant applied to limit its liability and to establish the limitation fund by providing a bank guarantee.

Courts’ Decisions

The Courts of first and appellate instance dismissed the application. The Court of the Far Eastern District upheld the judgments. The Court found that, despite the contract stipulating that the charterer bears the obligation to prepare the crane for the voyage, the defendant, as a professional carrier, was obliged to supervise the preparation process and the crane attachment.

The lack of proper supervision constituted gross negligence on the part of the defendant. In this regard, the defendant is barred from limiting its liability (art. 357 of the MSC, art. 4 of the 1976 LLMC Convention).

Purpose of the Limitation of Liability Fund

Both the Convention (art. 11) and the MSC (art. 363) provide for the right to establish the fund. This is a debtor’s defensive right designed to ensure that the ship is not arrested and that the claims are consolidated within a single jurisdiction.²The debtor chooses the jurisdiction in which to establish the fund. ³

This is the peculiarity of establishing the fund at the debtor’s discretion. The debtor acquires the right to determine which liability regime will apply to claims against it. Limiting liability does not often depend on the limits provided by the Convention, but on other circumstances. One of these is the difficulty of breaking the limitation.⁴

Breaking the Limitation Under the 1976 LLMC Convention

The 1976 Convention was adopted to renew the limitation regime under the 1957 Convention. The purpose of the 1976 Convention was to make it more difficult to break the limitation. ⁵ The content of art. 4 of the 1976 Convention actually comes down to the English term “wilful misconduct” which is a ground for excluding the insurer’s liability (MIA 1906, s 55 (2)).

The link between the limitation of liability and insurance is not a mere coincidence. ⁶

In practice, the limitation of liability corresponds to the limitation of insured liability. The reasoning is that if the shipowner’s liability were not limited, insurers would have refused to provide insurance, or premiums would have been unreasonably high. ⁷

Under the 1957 Convention, the shipowner is barred from limiting its liability if the damage is caused by its actual fault or privity (art. 1 (1)). ⁸

During the discussion of the 1976 Convention, delegates stated that negligence is sufficient to break the liability under the relevant 1957 Convention”s provision. ⁹ In the context of the 1976 Convention, it is not essential to determine whether the shipowner”s negligence was enough to break the liability under the 1957 Convention; what is crucial is that art. 4 of the 1976 Convention was formulated to exclude negligence from the grounds for breaking the liability, favouring wilful misconduct in the form of actual fault or recklessness. ¹⁰ This made the 1976 Convention limitation almost unbreakable. ¹¹ The claimant must prove that the shipowner (not the master of the ship, not the crew or any other persons) wilfully and with knowledge that the damage could occur made the decisions that caused the damage. In insurance, insurers do not often even try to prove the insured”s wilful misconduct but search for other options to avoid liability. ¹²

Meaning of Gross Negligence

During the 1976 Convention discussions, delegates proposed adding “gross negligence” to the provisions on breaking the liability. ¹³ However, this suggestion was rejected. ¹⁴ One reason was that the term “gross negligence” was difficult to define and interpret uniformly. ¹⁵ The delegates’ reasoning was that the limits should have been almost unbreakable, but the limits themselves must have become higher than those in the 1957 Convention. ¹⁶ Despite that, the MSC refers to gross negligence rather than recklessness (art. 357).

In the decision commented upon, the Court sought to determine what constitutes “gross negligence” under Russian law. For that, the Court referred to several decisions of the Supreme Commercial Court, the Supreme Court, and the Constitutional Court. ¹⁷The main conclusion was that Russian law does not define gross negligence, and the courts should determine whether a person”s conduct was grossly negligent on a case-by-case basis.

It is possible to define gross negligence as the lack of care that would be expected from any reasonable person in the given circumstances. ¹⁸

Based on this broad definition, in the context of the Convention, it is difficult to say whether the gross negligence standard is higher or lower than the recklessness standard. They are distinct and based on different criteria, so they cannot be compared.

Gross Negligence in the MSC

One reason for the emergence of wilful misconduct in the Convention was the attempt to link the grounds for breaking the limitation to the conduct that bars a person from receiving insurance compensation. In the MSC, a ground for barring a person from receiving insurance compensation is gross negligence, not recklessness (art. 265).¹⁹ For instance, the courts found the shipowner grossly negligent when the ship was outside the insurance area (this was also a separate ground for excluding the insurer’s liability); ²⁰ when the shipowner was informed of adverse weather conditions but nevertheless sent the ship on a voyage; ²¹ when the ship was in an area restricted to ships by the Ministry of Emergency of Russia; ²²and for the lack of professionalism of a crew member in charge during the mooring operations.²³

As seen, gross negligence in insurance does not correspond to wilful misconduct, at least because the relevant provision of the MSC does not contain a wilful element, and therefore the shipowner’s gross negligence can be found in the acts of crew members.

In the context of the case commented upon, the Court found that the MSC provisions on gross negligence do not contradict the 1976 Convention. Depending on the interpretation of gross negligence, this may be true. Recklessness, as understood by the Convention’s authors, can encompass gross negligence as a standard of care significantly lower than minimally reasonable. However, these standards differ, and their use in place of one another may cause difficulties. It is essential to emphasise the aspect of wilfulness. It is crucial that both the recklessness under the Convention and gross negligence under the MSC should be found in the shipowner”s conduct, not in the conduct of the master of the ship, crew members or third parties. ²⁴ It is wilfulness that might be disregarded by the Russian courts, although it is emphasised in the MSC, as in the Convention.

Although the MSC contradicts the Convention and the Convention has priority over the MSC (art. 15 (4) of the Russian Constitution), the MSC authors’ decision to set gross negligence as the standard for breaking the limitation is reasonable in the context of the MSC’s provisions on marine insurance. However, this conclusion does not change the fact that the Russian court, by referring to gross negligence and excluding the wilfulness requirement, interprets the Convention in contradiction to international practice and the Convention’s underlying principles.

Gross negligence and recklessness of the defendant in the commented case

The damage to the floating crane during towage was due to its poor preparation for the voyage, in particular, its unsatisfactory attachment. The obligation to prepare the crane was upon the charterer. The defendant was grossly negligent because it, “being a professional in the business of shipping,” did not ensure the “maximum level of safety” of carriage, which means

“active and responsible participation not only by the tug master during the towage, but also by all responsible parties of [the defendant], at all stages of preparation for the towage, including the stages of conversion, inspection, and ensuring the towed crane is in good condition, including the risks associated with the deleted inspection.”

The gross negligence standard, as determined by the court, was the conduct of the professional party that should have been so careful as to act beyond its contractual obligations. Simultaneously, the breach of this standard was due to the lack of supervision by the master of the ship and other responsible parties. This standard is much lower than the one required to break the limitation under Russian law.

The court can apply more determined criteria when finding recklessness. The shipowner must know that its actions or omission may cause damage and nevertheless proceed. This mental state is almost unprovable. The claimant must prove that the defendant knew the consequences and ordered the actions despite all risks. This standard makes it almost impossible to break liability. However, this was the purpose of the Convention, to which Russia is a party. ■