Anton Durbeck GmbH v Den Norske Bank Asa

Where a tort involves the arrest and detention of a vessel, the applicable law is ordinarily the law of the country most closely connected with the arrest and resulting loss. The place where the vessel is arrested and the cargo is lost will generally have greater significance than the parties’ connections with other countries or the law governing related contracts.

Under Panamanian law, a bill of lading holder cannot recover for cargo loss caused by a valid arrest merely because the arrest created a foreseeable risk of damage. Liability requires bad faith or a deliberate intention to harm. A mortgagee exercising security rights owes no general duty of care to an affected cargo owner. The claim failed under both Panamanian law and, obiter, English law.

The claimant was consignee of bananas carried from Ecuador to Europe aboard the Tropical Reefer. The defendant bank held mortgages over the vessel and arrested it in Panama after defaults under the secured loans and the withdrawal of P&I cover.

The vessel remained under arrest. The bananas deteriorated and were ultimately discharged overboard, causing an agreed loss of €2,396,213.88. The claimant alleged that the bank had wrongfully interfered with the bills of lading contracts.

The issues were whether Panamanian or English law governed the alleged tort; whether the arrest was wrongful under Panamanian law; and, if English law applied, whether the principle stated in The “Myrto” remained applicable.

1. Applicable law. Section 11 of the Private International Law (Miscellaneous Provisions) Act 1995, subject to section 12, directed attention to the country with the most significant connection with the events constituting the tort. The critical events were the arrest and detention of the vessel and the resulting loss of the cargo, all occurring in Panama. The law of Panama therefore applied.
2. Panamanian law. The bank was entitled under Articles 1507 and 1527 of the Commercial Code to arrest the vessel as mortgagee, and the arrest complied with Articles 164(3) and 525 of the Maritime Procedural Code. Article 217 of the Judicial Code governed the claim by a third party injured by procedural acts. Its reference to temerity or bad faith required a rigorous standard. A valid arrest could give rise to liability only if carried out in bad faith or with the deliberate intention of harming the bill of lading holder. The foreseeable risk that arrest would damage cargo was insufficient.
3. The Panamanian Supreme Court decisions, including Rivera v Jimenez and the Castillero family case, established a probable doctrine requiring proof of serious abuse, malice or clear bad faith. Cintia Cristina Corro Batista v Prudencia Ramos Peralta did not support liability based merely on light negligence.
4. The evidence did not establish bad faith, an intention to harm, or reckless indifference. The bank was entitled to protect its security and was not required to release the vessel without acceptable security and reinstated P&I cover. The claim therefore failed under Panamanian law.
5. English law. The discussion was obiter. The rule in The “Myrto”, derived from Collins v Lamport, remained good law. A ship mortgagee could not interfere with a contract for the employment of the vessel where the contract did not impair the mortgage security. Here, however, permitting the uninsured vessel to sail would have impaired the bank’s security. The claim would therefore also have failed under English law.

Judgment for the defendant.