Luis Sanz Calvo SA (the plaintiff) claimed for damage to a cargo carried from Venezuela on board the MV Pacific Empress, flagged in Cyprus, against the carrier, Pacific Empress Ltd (the defendant). The defendant rejected liability for the damage and alleged lack of jurisdiction of the Court based on an arbitration clause and the fact that the plaintiff did not submit a protest in due time, resulting in the action having elapsed (caducada). It also claimed the right to limit liability according to the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976). The defendant filed a counterclaim requesting payment for demurrage.

The first instance Court rejected the defences of lack of jurisdiction and that the action had elapsed (caducada), and admitted the claim partially, ordering the defendant to pay compensation. The Court also admitted partially the counterclaim and ordered the plaintiff to pay the demurrage claimed by the defendant. Both parties appealed, and the Court of Appeal modified the decision increasing the amount of the compensation to the plaintiff and varying the amount of the payment for the demurrage. The defendant recurred this decision in cassation before the Tribunal Supremo/Supreme Court (SC). It alleged an infraction of arts 3 and 7 of the International Convention Relating to the Arrest of Sea-Going Ships 1952 (the Arrest Convention 1952), arguing that the presentation of security to release an arrested ship did not imply acceptance of the jurisdiction of the arresting court and the existence of an arbitration clause that prevented the jurisdiction of the court to decide the merits of the case. The second argument related to an infraction of art 2 of the LLMC 1976 because it was not applied to the claim.

Held: The SC affirmed the decision. The SC held that as the alleged arbitration clause was not in writing, it is considered non-existent according to the requirement established the local law and in art 2 of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Hence, the application of art 7.3 of the Arrest Convention 1952 is irrelevant as there is no valid arbitration clause.

Regarding the LLMC 1976, the SC explained that art 2.1.c includes among the claims that admit limitation of liability, 'claims in respect of other loss resulting from infringement of rights other than contractual rights'. In this case, it has been proven that it was the defective performance of a contract that produced the right for compensation. When art 2.2 refers to contractual or non-contractual actions, that does not exclude the application of the previous paragraph. This action, whether contractual or not, may comprise claims listed or not listed in art 2.1. The most common of those claims is that of the creditor who has a right to the benefit of the correct performance of the service contracted for by the debtor. Furthermore, the SC stated that there was no evidence that Venezuela, where the carriage started, or Cyprus, where the ship was registered, were members of the LLMC 1976. Therefore, this Convention did not apply to this claim.