Recreational Crafts, relevant judgment of the Spanish Supreme Court

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Following a request from Clients, we hereby summarize the issues that we consider most relevant of the judgment issued by the Spanish Supreme Court num. 241/2015 dated 6th May and that affect recreational crafts.

Background

The Supreme Court judgment dated 6th May 2015 resolves a series of claims that arose from the damages caused to various yachts as a result of fire originated in another recreational yacht while the latter was berthed in the Port of Botafoch on 19th December 2005.

The owners of the damaged yachts and their insurance companies filed claims against the owner and insurance company of the yacht in which the fire originated, and against the Marina in which such yacht was berthed.

Issues analyzed by the Supreme Court

  1. Which are the competent courts to resolve this type of claims.
  2. The constitution of the limitation fund.
  3. The limitation of liability for maritime claims.
  4. Possible liability of the Port.

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  1. Which are the competent courts to resolve this type of claims? The First Instance or the Mercantile Courts?
    The respondents had alleged lack of competence of the First Instance Courts and the competence of the Mercantile Courts. This lack of competence had been raised not in the specific motion to challenge jurisdiction but as an allegation in the points of defense.
    The Supreme Court ruled that matters of competence must be raised though a motion to challenge jurisdiction. When competence is analyzed “ex officio” as a result of allegations made in the points of defense, the Court does not need to extend in the reasoning that supports it competence over the matter. On the merits of the argument, the Supreme Court ruled that the issue of competence had already been decided in a previous judgment num. 890/2011 dated 16th December, in a similar matter, in favour of the First Instance Courts. The Court found relevant for this decision the fact that the boat that had caused the damages was a recreational craft, and that the mandatory civil liability insurance for such type of crafts, regulated by the Royal Decree 607/1999, was regulated in a subsidiary way by the Spanish Insurance Act (Law 50/1980, of 8th October). To this effect, the Supreme Court considered that article 406 of the Spanish Shipping Act (not directly applicable to the matter) did not introduce any modifications that could be interpreted in a different way. Therefore, the competence corresponded to the First Instance Courts.
    In this way, the Supreme Court confirmed the Court of Appeals decision which established that the main action exercised by the plaintiffs was a general tort action (of article 1.902 of the Civil Law) and an action based on Article 43 of the Spanish Insurance Act, based on a contract of insurance that did not qualify as a maritime insurance.
  2. The constitution of the limitation fund.
    According to the facts of the matter, the respondents had constituted a limitation fund by virtue of a Decision of the Supreme Court of Gibraltar dated 31st March 2008.
    The Spanish Supreme Court declared that, without prejudice to the fact that this motive had been incorrectly stated, the appellate court had been correct in not recognizing the decision of the courts of Gibraltar as the respondents had not been able to prove that such decision had been issued in a contradictory proceeding. To support this contention, the Spanish Supreme Court quoted the judgment issued by the Court of Justice of the European Union dated 14th October 2004, in the matter C-39/02, case Maersk Olie, in which the European Court had held the need for a contradictory procedure in the constitution of a limitation fund that allows the parties affected by the fund to challenge or question the constitution of such fund. The Spanish Supreme Court held that, in the case at hand, there was no evidence that the procedure in which the limitation fund was constituted before the Courts of Gibraltar had been a contradictory one. The lack of such evidence, thus, allowed the Courts of other member States, such as Spain, to reject the recognition of the decision, following article 34.2 of Regulation num. 44/2001.
  3. Limitation of liability for maritime claims.
    With respect to the right to limit liability for the damages arising from the fire, the Supreme Court considered that the Court of Appeals had been right in considering that the 1976 London Convention on Limitation of Liability was not applicable. The Supreme Court reasoned that the claims filed were not those contemplated by article 2.a) of the Convention. This article, according to the Supreme Court, had been reproduced by article 396.1.a of the 2014 Spanish Shipping Act which has kept the expression “operation of the vessel” as used in the Spanish version of the London Convention, which requires that the vessel is operated in the course of a business activity and this is incompatible with the use of the craft in which the fire originated as a recreational craft.
    The limitation of liability is only justified, according to the Supreme Court, in the case of a business activity as it implies an exception and a privilege with respect to the general rule in damages which requires that the damages are fully and totally compensated. Such exception to the general rule is not justified when the damages are caused by a craft that is being used for recreational purposes.
    This judgment finally decides between the different opinions existing over the matter. On one hand, those that consider that the term “operation”, as used in the English version of the Convention, does not necessarily mean a business activity and that argue that in the preparation of the Convention the States members were given the right to exclude the application of the Convention of recreational and other small crafts. However, such exclusion was limited to “vessels of less than 300 tons” in the Convention’s final version, thereby clearly stating that it is the size of the craft that can give rise to the exclusion of the right to limit liability and not the purpose of the navigation. On the other hand, those consider that the only justification to limit liability is that the vessel is used for a business activity, which is the position finally adopted by the Spanish Supreme Court.
  4. Lack of liability of the Marina.
    The Supreme Court considered that the Marina had no liability for the damages caused as a result of the fire as the contract between the owner of the yacht and the Port does not constitute a bailment contract that gives rise to the duty to custody the yacht.
    According to the Supreme Court, the duty of the Marina is to allow the yacht owner the peaceful use of the yacht and this does not imply liability for damages to or loss of the boat when there is no negligence of the Port.