These proceedings arose from a collision between the Vera D, a container ship owned by the plaintiff, and the Arctic Rose, a whale-watching passenger vessel owned by the defendant.

The plaintiff and its insurer relied on the fact that they had a maritime lien over the Arctic Rose for their damage claims: see art 197.1.3 of the Shipping Act/Siglingalög No 34/1985 (the Act) [although Iceland is not a State Party to any of the MLM Conventions, art 197 of the Act broadly tracks the substance of art 2 of the MLM Convention 1926 and art 4 of the MLM Convention 1967], as these were claims for damage that occurred in direct connection with the operation of the vessel and fell outside the scope of a contract.

The defendant relied on the fact that it was acknowledged in the summons that the crew of the Vera D saw when the Arctic Rose sailed from Reykjavík. In this regard, attention should be paid to art 159, and cp art 162 of the Act, which states that when assessing fault in a collision between ships according to art 158 [which gives domestic effect to arts 2-4 of the Collision Convention 1910]:

... the judge shall pay particular attention to the length of time the ship's captain had to become aware of the circumstances.

The defendant emphasised that the cause of the damage was attributable to the late and incorrect manoeuvring of the helmsman of the Vera D, as the container ship was sailing too fast considering the conditions and location within the port navigation area. The defendant should therefore be acquitted of the plaintiffs' claims: see arts 158.1 [cp art 3 of the Collision Convention 1910] and 162 [cp art 13 of the Collision Convention 1910] of the Act, and the plaintiffs' claims for maritime liens over the Arctic Rose should be rejected.

Alternatively, if it is not accepted that all blame lies with the management of Vera D, it was an accident: see arts 160 [cp art 2 of the Collision Convention 1910] and 162 of the Maritime Act, and therefore the plaintiffs are not entitled to damages from the defendant.

Even if the Court were to find that the defendant was at fault for the plaintiffs' damage, compensation should be significantly reduced. The plaintiffs agreed to a reduction of the claims on the basis of the liability limitation rule of art 177.3 [cp art 6 of the LLMC 1996] of the Act. In addition, the defendant relied on the limitation rule of art 174.1.1 [cp art 2.1.a of the LLMC 1996] of the Act. Furthermore, the defendant denied that it was liable for consequential and/or indirect damage to the plaintiffs. This should be assessed as a reduction of the plaintiffs' claims. Finally, the defendant relied on the fact that if the fault of the captain of the Arctic Rose were proven, it should be considered a major factor. Accordingly, blame should be apportioned: art 158.2 [cp art 4.1 of the Collision Convention 1910] of the Act, and only a very small portion of the damages should be imposed on the defendant.

Held: The fault for the collision is apportioned at 4/5 to the plaintiff and 1/5 to the defendant.

In view of arts 158.2, 159, and 162 of the Act, the Court is of the view that fault should be apportioned in the ratio of one to five, so that 1/5 of the claimed damage falls on the defendant.

The plaintiff claims ISK 124,477,645 in damages from the defendant for losses that the plaintiff did not receive compensation from its insurer. The insurance company makes a claim of ISK 143,154,755 against the defendant. The plaintiffs' claims are thoroughly substantiated in the lawsuit and are based on the submitted documents. They have not been numerically contested by the defendant, and it is considered appropriate to base the judgment on the above-mentioned amounts. There is no basis for limiting the defendant's liability for damages on the basis of art 174 of the Act.

The plaintiffs' respective financial claims are based on the defendant being equally liable (50/50) for direct and consequential damages. Taking into account the division of liability that the defendant is to bear 1/5 of the damages, it should be ordered to pay the plaintiff ISK 49,791,058 and the insurer ISK 57,261,902.

According to the analysed results and with reference to art 197.1.3 of the Act, the plaintiffs' respective maritime liens on the defendant's passenger vessel, the Arctic Rose, are recognised as security for payment of the adjudicated claims.