La Unión Compañía Nacional de Seguros (the plaintiff), an insurance company acting under an assignment of rights, claimed for damage to cargo carried in a container from Miami, United States, to Guayaquil, Ecuador. Transmupan Panalpina Transportes Panalpina SA issued the bill of lading and Mediterranean Shipping Co carried the cargo on the MV Nedlloyd Inca. The cargo was discharged in the port of Guayaquil on 21 November 1996 and reported damage. The claim was served on the defendant on 20 May 1999.

The defendant alleged that the claim was time-barred. The first instance Court accepted the defendant's defence and dismissed the lawsuit. On appeal, the decision was affirmed on the same grounds. The plaintiff recurred the decision on cassation before the National Court of Justice/Corte Nacional de Justicia (NCJ), alleging the incorrect application of the law governing the contract of insurance that establishes a two-year time bar.

Held: The NCJ affirmed the decision but on other grounds. The NCJ stated that the law on the contract of insurance establishes in art 26 a time bar of two years counted from the date of the event that originated the claim. That provision governs the actions arising out the contract of insurance, against the insurer, the insured, or the beneficiary, but not against the third parties responsible for the damage. That required an analysis of the local legislation to find the applicable rule. The law on insurance states that, once the insurer has paid the claim, it subrogates the rights of the insurer against the third party responsible for the damage up to the amount paid. Nonetheless, the third party can also allege the same defences it has against the insured. As the claim arises from a contract of carriage of goods by sea, it is not governed by the general provisions of the Code of Commerce (CCom), but by the Hague-Visby Rules, ratified by Ecuador. Three reasons support this statement. First, by constitutional mandate, this Convention prevails over other local laws and regulations; second, based on art 18 of the Civil Code, this particular contract is specifically governed by the Hague-Visby Rules; and, third, the Rules were ratified after the CCom, dated 1906. Article 3.6 of the Hague-Visby Rules establish a one-year time bar counted from the date of the delivery of the cargo and or the date when the cargo should have been delivered. Regarding third-party liabilities, art 3.6 bis provides that this period can be extended according to the law of the Court. In the latter case, that period cannot be shorter than three months counted from the moment in which the person that brings suit has paid the claim. Under the insurance law, the time bar starts running from the moment of the damage. Under the Rules, the time bar starts running from the moment the claim was paid. As there is no specific reference in the local law, the general rule that actions against third parties for damage resulting from the carriage of goods are barred after one year from the date of the delivery of the cargo or the date on which it should have been delivered must be applied. Therefore, the claim is time-barred.