Limitation of liability is a concept that allows a carrier to limit their liability for maritime claims up to a limited sum regardless of the actual monetary value of the claim.. In short, there is a limit on the maximum amount of compensation that a carrier may need to pay..
Despite the varying forms, the main characteristic of the limitation of liability is that, while in principal the carrier may be liable for damages, the extent of their liability is reduced by this limitation..
Limitation of liability is governed by a number of Conventions adopted by the International Maritime Organization (IMO) and is expressed in Special Drawing Rights (SDR)..
There are a few popularly used conventions and rules covering the Carriage of Goods by Sea and this article by Ali Shami compares the limitation of liability in the various contracts of carriage by sea..