This case arose from a collision between two fishing vessels, the Meireles Novo and the Paz da Vida, which took place off the Portuguese coast. The plaintiffs requested the establishment of a limitation of liability fund. This application was granted and the constitution of a limitation fund was declared. The defendants appealed against the decision establishing the fund, arguing that the LLMC 1957, incorporated into Portuguese law with an amendment to art 3, regarding the form of constitution of a fund for ships of less than 300 tons of tonnage, by Decree Law No 49/028 of 26 May 1969 shall not apply to coastal vessels in situations occurring within the Portuguese territorial sea, ie within twelve miles of the coast.

Held: Appeal upheld in part; contested judgment amended.

The so-called 'Brussels Convention' is the International Convention on the Limitation of Liability for Owners of Sea-going Vessels, done at Brussels on 10 October 1957, the text of which is set out in Decree Law 48/036, 14 November 1967. According to art 1.1.b of the Convention, the owner of a seagoing ship may limit its liability in respect of claims for compensation arising from any of the following causes: 'loss of or damage to any other property or infringement of any rights caused by the act, neglect or default of any person on board the ship for whose act, neglect or default the owner is responsible or any person not on board the ship for whose act, neglect or default the owner is responsible: Provided however that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers'.

Through this statute, the Convention was approved, for ratification, with the reservations provided for in paras 2 (a), (b) and (c) of the Signature Protocol. These reservations concern only the following questions:

(a) The right of the Portuguese State to exclude the application of art 1.1.c on removal of wreckage;
(b) the right to regulate by national law the system of limitation of liability applicable to ships of less than 300 t (tonnes) of tonnage;
(c) the right to enforce such Convention, whether by giving it force of law or by including in national law the provisions of this Convention in the form appropriate to that law.

In order to enforce the domestic law of the Brussels Convention, it had to be given the force of law. This was done by Decree Law No 49/028 of 26 May 1969, and then came into force as Portuguese domestic law. On the other hand, Decree 49/029, of the same date, approved the Regulations for the Execution of the Convention, establishing the procedure for the establishment of a limitation fund for the liability of the owners of the respective ships.

However, the following exception was established in art 4 of the Convention, as amended by Decree Law No 48/036 of 14 November 1967: 'the rules relating to the constitution and distribution of the limitation fund, if any, and all rules of procedure shall be governed by the national law of the State in which the fund is constituted'.

In the present case, the two ships are Portuguese ships; the 'accident' occurred 6 miles from the coast; the collision occurred when the boat Paz da Vida was immobilised; it was the vessel Meireles Novo that crashed into the Paz da Vida, having not deflected its course or managed to avoid collision; and both ships are inshore fishing vessels.

In this regard must be borne in mind, in addition to the reservations accepted in respect of the Convention, the provisions of art 12.2 of the Decree Law in the original version. It states, in express terms, that when all the interested parties, as well as the Court that has to judge the deed, belong to the same State, it will be the national law, not the Convention, that will have to be applied. This is well understood.

In the light of such a rule, the application of the Convention will only make sense when the dispute involves interested parties of different nationalities and, consequently, subject to different national laws. In that case, in order to avoid conflict of laws with possible divergent content, the application of the Convention itself is necessary. The same justification does not seem to apply when the parties concerned and the court which will be called upon to settle the dispute belong to the same State, as, for example, in the present case.

Notwithstanding this fact, the national legislature, when drafting national law, took into account the rules set out in the 1957 Brussels Convention, as stated in Decree Law No 202/98 of 10 July, as regards the constitution of liability limitation funds. Therefore, under such rules, the establishment of a limitation fund is admissible.