UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
with the court. This is detailed in Article 85(1) of the ML. The court’s role The court with jurisdiction over the incident is responsible for establishing the compensation fund. This is specified in Article 85(2) of the ML. Compensation calculation Compensation from the fund is calculated based on the conditions set out in Article 83(1) of the ML, though the exact methodology is detailed further in the executive regulations. For instance, to calculate the limitation fund for a ship with a tonnage of 20,000 GT based on Article 83(1) of the ML, the formula provided can be used, with an exchange rate of 1 SDR = AED4.84 (as of 10 December 2024), following the rules step- by-step. • Step 1: identify the compensation limit based on tonnage – concerning the initial compen - sation for loss of life and physical damage, the basic amount is 1,000,000 Special Draw - ing Rights (SDR) for vessels with a tonnage not exceeding 2,000 tons. Concerning ves - sels with a tonnage exceeding 2,000 tons, the ship in question has a tonnage of 20,000 tons, so it falls into the second category. For this category, the compensation increases by 400 SDR for each additional ton above 2,000 tons (up to 30,000 tons). • Step 2: calculate the additional SDR for the vessel – since the vessel has a tonnage of 20,000 tons, the additional compensation based on the additional tonnage above 2,000 tons must be calculated: (i) tonnage above 2,000 tons, 20,000 − 2,000 = 18,000 tons; (ii) compensation for additional tonnage (18,000 tons), 18,000 × 400 = 7,200,000 SDR. • Step 3: calculate the total compensation in SDR – the total compensation is the sum of
the base compensation (1 million SDR) and the additional compensation for the 18,000 tons above 2,000 tons: 1,000,000 SDR + 7,200,000 SDR = 8,200,000 SDR. • Step 4: convert SDR to United Arab Emirates dirham – given that the exchange rate is 1 SDR = AED4.84, the total compensation in United Arab Emirates dirham can now be cal - culated as 8,200,000 SDR × 4.84 AED/SDR = AED39,688,000. The maximum compen - sation for a vessel with a tonnage of 20,000 GT is 8,200,000 SDR, which is equivalent to AED39,688,000. Deposit and guarantees The requirement for a deposit depends on the court’s determination, as clarified in Article 85(4) of the ML. The competent court may require a deposit as security for the fund, but this is at its discretion and based on the guarantees deemed necessary. Who can establish the fund? The responsibility for establishing the limitation fund rests with the court in the jurisdiction where the incident occurred. This ensures that the fund is tied to the legal proceedings and jurisdictional context of the maritime incident. In summary, the procedure for establishing a limitation fund is initiated by the ship-owner or their representative, with the court overseeing its creation. Compensation is calculated accord - ing to specified guidelines, and the requirement for a deposit is subject to the court’s decision. However, since the ML was recently implement - ed, there is currently uncertainty regarding the establishment of the limitation fund within the UAE judicial system. The concept of creating a limitation fund in the UAE has yet to be tested by its legal and litigation systems.
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