Law of the Sea | Italy to compensate USD 285,000 to Panama for causing loss of its M/V Norstar in breach of Art. 87 of UN Convention on Law of the Sea

International Tribunal for the Law of the Sea: In the battle between Panama and Italy concerning Panama’s claim for compensation regarding loss of it’s Marine Vessel “Norstar”, Italy was found to have committed a wrongful act in breach of Article 87 Para 1 of the United Nations Convention on the Law of the Sea. The Judgment was given by a bench of Jin-Hyun Paik, President; and Ndiaye, Jesus, Cot, Lucky, Pawlak, Yanai, Kateka, Hoffman, Gao, Bouguetaia, Kelly, Kulyk, Gomez-Robledo, Heidar, Cabello, Chadha, Kittichaisaree, Kolodkin, Lijnzaad, JJ., and Treves and Eiriksson, Ad-hoc JJ.

Factual background

Marine Vessel “Norstar”, an oil tanker flying the flag of Panama, wasowned by Inter Marine & Co. AS, a Norwegian-registered company. From 1994 to 1998, M/V Norstar was engaged in supplying gasoil to mega yachts in an area described by Panama as — “international waters beyond the Territorial Sea of Italy. France and Spain”. The same area was described by Italy as — “off the coasts of the France, Italy and Spain”. The Italian-registered company. Rossmare International SAS, acted as “bunkering brokers” therefor.

In 1997, the Italian fiscal police initiated an investigation into Rossmare International and the activities of Norstar, which revealed that Norstar was involved in the business of selling the fuel purchased in Italy in the exemption of tax duties to a clientele of Italian and other EU leisure boats in international waters off the coasts of the Italian city of Sanremo. On 11-08-1998, the Public Prosecutor of the Coast of Savona, Italy issued a Decree of Seizure against Norstar. Following the request for assistance, Spanish authorities in Palma de Mallorca seized Norstar on 25-9-1998. Criminal proceedings were also instituted against eight individuals including the President and Managing Director of Inter Marine & Co., the captain of Norstar and the owner of Rossmare International.

By a Judgment dated 14-3-2003, the Court of Savona acquitted all the persons and also ordered the revocation of Norstar’s seizure and it’s release. The ship-owners were called upon to take possession of Norstar by that was not done. A document withdrawing seizure and custody of Norstar was issued by the authorities, which Panama states, was never informed to the ship-owners. Ultimately, in 2015, Norstar was publicly auctioned and was purchased by a company dedicated to waste management, to convert Norstar into scrap.

Upshot of submissions on behalf of Panama

(i) By acting in the matter as aforesaid, Italy prevented Panama’s ability to navigate the high seas and conduct legitimate commercial activity. By filing charges against persons having interest in the Panamanian vessel, Italy violated Article 87 of the United Nations Convention on the Law of the Sea.

(ii)Italy acted in a manner which constitutes an abuse of right under Article 300.

(iii) Claim of compensation amounting to over USD 27 millions plus interest and the legal costs derived from the case.

Upshot of submissions on behalf of Italy

(i)All of Panama’s claims should be dismissed, either because of lack of Tribunal’s jurisdiction or because of non-admissibility, or on merits.

(ii)Claim of legal costs derived from the case.

Judgment of the Tribunal

(a) Whether the Decree of Seizure and arrest of M/V Norstar constitute a violation of Article 87 (freedom of the high seas) of the Convention?

Considered: If the Decree and its execution concern only alleged crimes committed in the territory of Italy. Article 87 is not applicable. However, if they concern activities conducted by Norstar on the high seas, as maintained by Panama, Article 87 may be applicable.

Held: Decree of Seizure indicate that it concerns not only alleged crimes committed in the territory of Italy but also bunkering activities conducted by Norstar on the high seas. Article 87 of the Convention proclaims that the high seas are open to all States. It also proclaims the freedom of the high seas and provides for the obligation of due regard in its exercise. Bunkering of leisure boats carried out by Norstar on the high sea falls within the freedom of navigation under Article 87. Italy, through the decree of Seizure Norstar, the request for its execution, and the arrest and detention of the vessel, breached Article 87 Para 1 of the Convention.

(b) Panama’s claims concerning Article 300 (good faith and abuse of rights) of the Convention.

Considered: For a breach of Article 300, Panama not only has to prove that Article 87 has been violated but that it has been violated in breach of good of faith, as bad faith cannot be presumed and has to be established.

Held: After discussing the timing of the arrest of Norstar, the location of arrest, execution of the Decree of Seizure and contradictory reasons to justify it, lack of communication, withholding of information, duration of detention and maintenance of Norstar, the Tribunal found that Panama could not establish the link between its claim concerning Article 300 and the breach of Article 87. Hence, concluded, Italy did not violate Article 300.

(c) Repatriation

Considered: Italy, as the State responsible for an internationally wrongful act, is under an obligation to compensate for damage caused by its breach of Article 87 Para 1 of the Convention.

Held: Owing to the loss of Norstar, restitution in kind was materially impossible in the present case. Panama was entitled to compensation for damage suffered by it as well as for damage or other loss suffered by Norstar, including all persons involved or interested in its operation. After discussing the causal link between the damage and the wrongful act of Italy, interruption of the causal link, duty to mitigate damage, it was concluded that the amount of USD 285,000 shall be compensated to Panama for the loss of M/V Norstar, along with the interest at the rate of 2.7182% compounded annually and payable from 25-9-1998 until the date of the present Judgment. [Panama v. Italy (M/V Norstar Case), 2019 SCC OnLine ITLOS 1, decided on 10-04-2019]

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