18/04/2019

Damages reduced to less than 1% on M/V Norstar Case

On 10 April 2019 the International Tribunal for the Law of the Sea rendered its judgment in the Norstar Case (Panama v Italy). Paolo Busco from 20 Essex Street acted for Italy. The Tribunal found that Italy did not breach Articles 87(2) and 300 of the UNCLOS. It found (by 15 votes to 7) that Italy breached Article 87(1), but reduced damages to less than 1% of the amount sought by Panama.

The case originates from the arrest and detention in 1999 of the M/V Norstar, a vessel flying the flag of Panama involved in bunkering activities off the coasts of various European countries. The vessel was arrested in the internal waters of Spain by Spanish authorities acting upon request of Italian authorities, on suspicion of having committed crimes such as smuggling and tax evasion.

The majority of the Tribunal found that the principle of freedom of navigation enshrined in Article 87 prohibits not only the exercise of enforcement jurisdiction on the high seas by States other than the flag State, but also the extension of their prescriptive jurisdiction to lawful activities conducted by foreign ships on the high seas. It went on to explain that a State applying its criminal and customs laws to the high seas and criminalizing activities carried out by foreign ships thereon, acts in breach of article 87 of the Convention, unless such conduct is justified by the Convention or other international treaties. This would be so even if the State refrained from enforcing those laws on the high seas. In the view of the majority, even when enforcement is carried out in internal waters, article 87 may still be applicable and be breached.

In terms of damages, the Tribunal recognized Italy’s arguments on the interruption of the causal link between the arrest of the ship and the damages in 2003, and recognized in principle that failure by Panama to resort to domestic proceedings in Italy to secure the release of the vessel could be relevant from the perspective of the duty of mitigation of damages incumbent upon a claimant.

The case is very significant because it is the first occasion in which the ITLOS engaged at quite some length with the interpretation of Article 87(1) of the Convention. Given the high number of dissenting opinions, it is expected that this judgment will generate debate among scholars and practitioners alike.