The Norstar, an oil tanker flying the flag of Panama, was owned by the Norwegian-registered company Inter Marine & Co AS (Inter Marine). In May 1998, the Norstar was chartered to Nor Maritime Bunker, a Maltese-registered company. From 1994 to 1998, the vessel was engaged in supplying gasoil to mega yachts on the high seas off France, Italy and Spain. The Italian registered company Rossmare International SAS (Rossmare) acted as bunkering brokers for the vessel.

In 1997, the Italian fiscal police initiated an investigation into Rossmare and the activities of the vessel. According to Italy, the vessel was involved in evasion of Italian customs duties and tax. In this connection, criminal proceedings were instituted against 8 individuals, including the president and the managing director of Inter Marine, the captain of the Norstar and the owner of Rossmare. On 11 August 1998, the Public Prosecutor at the Court of Savona, Italy, issued a decree of seizure against the Norstar on the basis that it was the 'corpus delicti'.

The vessel was seized in Palma de Mallorca, Spain, on 25 September 1998. In a judgment issued on 14 March 2003, the Court of Savona acquitted all persons accused by the Public Prosecutor on the basis that the oil was supplied offshore beyond territorial waters. On 18 March 2003, the Court of Savona transmitted to the Court of Palma de Mallorca a certified copy of its judgment ordering the release of the vessel and its return to Inter Marine. The Court of Savona also informed Inter Marine that it had ordered the vessel's release and restitution. However, the shipowner did not take possession of the vessel.

On 25 March 2015, the Port Authority of the Balearic Islands announced the public auction of the vessel in the official State bulletin. The base bid price for the auction was set at EUR 3,000. According to a press article provided by Panama, the vessel was bought by 'a company dedicated to waste management … to convert it into scrap' and removed from port in August 2015.

Panama requested the Tribunal to adjudge and declare that Italy had violated arts 33, 73.3, 73.4, 87.1 and 87.2, 111, 226 and 300 of the United Nations Convention on the Law of the Sea 1982 (UNCLOS); and that Panama was entitled to damages of USD 10,000,000 plus attorneys’ fees, costs and incidental expenses.

Held: The Tribunal (1) by 15 votes to 7, finds that Italy violated art 87.1 of UNCLOS;
(2) unanimously finds that art 87.2 of UNCLOS is not applicable in the present case;
(3) by 20 votes to 2, finds that Italy did not violate art 300 of UNCLOS;
(4) by 15 votes to 7, decides to award Panama compensation for the loss of the vessel in the amount of USD 285,000 with interest at the rate of 2.7182 per cent, compounded annually and payable from 25 September 1998 until the date of the present judgment;
(5) by 19 votes to 3, decides not to award Panama compensation with respect to its other claims; and
(6) unanimously decides that each party shall bear its own costs.

On jurisdiction and the scope of the dispute, the Tribunal affirmed its earlier judgment on Preliminary Objections, and held that the dispute between the parties included not only the Italian court's decree of seizure and the request for its execution, but also the subsequent arrest and detention of the vessel in Spain. The Tribunal’s jurisdiction over the dispute, therefore, covers all these issues.

In the present proceedings on the merits the Tribunal is called upon to interpret and apply art 87 of UNCLOS regarding Panama’s freedom of navigation on the high seas. In order to assess what that freedom entails under UNCLOS, the Tribunal may have recourse to other provisions of UNCLOS pursuant to art 293. One such provision is contained in art 92 of UNCLOS regarding the principle of exclusive jurisdiction of the flag State over its vessels on the high seas. Therefore, without prejudice to its decision to rely on arts 87 and 300 in establishing its jurisdiction in the present case, the Tribunal may have recourse to art 92 as applicable law. This is not the same as enlarging the scope of the dispute, the limits of which have been set by the judgment on Preliminary Objections.

The Tribunal finds that art 87.1 of UNCLOS is applicable in the present case and that Italy, by extending its criminal and customs laws to the high seas, by issuing the decree of seizure, and by requesting the Spanish authorities to execute it - which they subsequently did - breached the freedom of navigation which Panama, as the flag State of the Norstar, enjoyed under that provision. However, a breach of art 87 does not necessarily entail a breach of article 300 of UNCLOS. For a breach of art 300, Panama not only has to prove that art 87 has been violated but that it has been violated in breach of good faith, as bad faith cannot be presumed and has to be established. This Panama has failed to do. The Tribunal therefore concludes that Italy did not violate art 300.

Panama further contended that Italy breached the obligation of due regard under art 87.2 of UNCLOS. This provision imposes an obligation of due regard upon a State in its exercise of the freedom of the high seas. The present dispute concerns Panama’s exercise of the freedom of navigation with respect to its vessel, the Norstar. There is no dispute related to Italy’s exercise of the freedom of navigation. Accordingly, there can be no question of Italy’s breach of the obligation of due regard. The Tribunal, therefore, finds that art 87.2 of UNCLOS is not applicable in the present case.