Following the sinking of the container ship Elsa 3 in May 2025, the Indian state of Kerala requested around one billion euros in damages from Msc, the company managing the vessel, for the environmental harm caused by the ship and its cargo. However, the Swiss company firmly rejected the claim during the initial hearing at the High Court, describing it as “highly exaggerated” and lacking sufficient evidence. The dispute has raised questions about the limits of maritime liability, the governance of shipping companies, and the effectiveness of environmental compensation mechanisms under international maritime law.
The Msc Elsa 3, a Liberian-flagged container ship with a capacity of 1,730 teu built in 1997, capsized and sank about 13 nautical miles off the coast of Alappuzha, in Kerala, while en route from Vizhinjam to Kochi. The ship was carrying 643 containers, including 13 that contained hazardous materials, such as 12 containers of calcium carbide and 72 containers of plastic pellets (nurdles). The accident was reportedly caused by severe cargo imbalance that led to a 26-degree list to starboard during adverse monsoon conditions. The ship was also transporting 84.44 metric tonnes of marine diesel oil, 367.1 metric tonnes of fuel oil and other substances that contributed to marine pollution once released into the ocean.
Ninety point three per cent of the amount claimed by Kerala is attributed to marine and coastal pollution damage, with a further four per cent for environmental restoration and preventive measures, and five point five per cent for economic losses incurred by local fishermen. The government has also requested interest at a rate of six per cent per year from the date of the summons until judgment, and twelve per cent annually thereafter until full payment is made. This marks the first time in Kerala’s history that a compensation claim of this scale has been submitted.
Msc has launched a multi-pronged defence strategy, which it presented during the first hearing held at the Kerala High Court on 11 July 2025. In addition to calling the sum excessive, the company argued that the vessel did not lose a significant amount of fuel and that the oil slick observed around the wreck was confined to within one nautical mile. Divers reportedly sealed the leaking tanks, preventing further spillage.
Msc told the Kerala High Court that it was unable to deposit the amount requested as security and requested the release of the container ship Msc Akiteta II, which has been held under arrest in the port of Vizhinjam since 7 July 2025, refusing to post bail. An Indian court had previously seized three Msc vessels under the Admiralty Act of 2017. In addition to the Akiteta II, the Msc Polo II has been held in India since 18 June 2025, while the Msc Manasa F, detained on 12 June 2025, was released after a security deposit was made.
During the High Court hearing, Kerala’s legal representatives argued that Msc uses a complex corporate structure precisely to avoid liability claims. Some container ships are registered under independent companies controlled by Msc, while still sharing operational control and management. According to the lawyers, even if Msc is treated as a bareboat charterer, the High Court has the authority to arrest the vessel in question.
Another aspect of the dispute concerns the liability limits set by international conventions. Under the 1976 Convention on Limitation of Liability for Maritime Claims, the total liability of the shipowner for the Msc Elsa 3 is far below Kerala’s claim. Regarding the sunken vessel, Hull and Machinery Insurance covers physical damage or total loss of the ship, while Protection and Indemnity Insurance covers environmental damage and third-party liabilities.
India shows some shortcomings in terms of international conventions. The country has not ratified three key conventions: the Bunker Convention for fuel spills from ships, the Wreck Removal Convention for the clearance of sunken vessels, and the Hazardous and Noxious Substances Convention for dangerous goods.
The Kerala High Court has scheduled the next hearing for 6 August 2025. The court has granted the state government two weeks to submit additional information to support its claims, while Msc has requested more time to respond to the allegations. According to some analysts, the case could set significant precedents in India regarding the use of the sister ship doctrine, the interpretation of maritime liability limits, the assessment of environmental damage in maritime contexts, and the effectiveness of complex corporate structures in global shipping.
