A Mexican-flagged supply vessel, the Isla Azteca, allided with a Mexican-flagged MODU, the Totonaca, in the Bay of Campeche, in the Mexican EEZ. Marítimas Mexicanas SA de CV (MarMex), the owner of the Isla Azteca, filed limitation proceedings in the Mexican courts under the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC 76), as domestically enacted in Mexico pursuant to the Mexican Navigation Act of 1994 (the Act). Perforaciones Marítimas Mexicanas SA de CV, the owner of the Totonaca (together with its underwriters), filed a parallel suit against the defendant owner/operator of the Isla Azteca (Grupo TMM SA de CV, the 60% owner of MarMex, and MarMex) in the US federal court, alleging negligence and unseaworthiness. Defendants filed a motion to apply Mexican law (pursuant to Federal Rule of Civil Procedure 44.1), and a motion for summary judgment and transfer to the pending Mexican limitation proceeding.

Held: The defendants' motion and notice to apply Mexican substantive law is granted. The motion for summary judgment and transfer of venue is denied.

The Court granted the motion to apply Mexican substantive law on the basis of the eight-factor maritime choice of law test set forth by the US Supreme Court in Lauritzen v Larsen, which considers: (1) the allegiance or domicile of the plaintiff; (2) the place of the contract; (3) the allegiance of the defendant shipowner; (4) the law of the flag; (5) the accessibility of the foreign forum; (6) the place of the wrongful act; (7) the law of the forum; and (8) the defendant shipowner's base of operations, with (4) the law of the flag and (8) the defendant shipowner's base of operations weighing most heavily in the determination: see Lauritzen v Larsen 345 US 571, 73 S Ct 921, 97 L Ed 1254 (1953). The Court found that all these factors - other than the law of the forum, which the Court noted is 'given little weight in determining choice of law' - weighed in favor of applying Mexican substantive law.

The Court then turned to the defendant's motion for summary judgment, seeking dismissal of the plaintiff's claims on the ground that the Act/the LLMC 1976 formed the substantively applicable law of the case, such that the case should be: (1) dismissed, with the plaintiffs ordered to bring their claims in the Mexican limitation proceeding; or (2) stayed pending a decision of the Mexican court regarding limitation; or alternatively (3) that the US Court should apply the Act/the LLMC 1976 to the claims before it. The plaintiffs countered that the Act/the LLMC 1976 is procedural only, such that the US Court was not bound by the allegedly procedural strictures of Mexican law, and could otherwise adjudicate the substance of the claims (negligence, gross negligence, unseaworthiness).

As the Court summarised the issue: 'Here, if the 1994 Mexican Navigation Act, which incorporates the London Convention [ie the LLMC 1976], creates a substantive right, then the Court must honor it. If the Act merely provides a way to quantify rights that parties obtain from other sources, then the Court is not required to observe the Mexican Limitation.'

The defendants' expert in Mexican law testified that that the Act only adopted the first eight articles of the LLMC 76, all of which are substantive, but omitted the ninth article, which contains the procedural mechanisms for the enforcement of the substantive rights contained in the first eight articles. Thus, the defendants' position was that the Act contains no procedural mechanisms and is entirely substantive.

The plaintiffs' expert in Mexican law, contrarily, testified that that all Mexican substantive rights arise in the Mexican Civil Code, and that, even if Mexico had not adopted the LLMC 76, the right to recover, which is bestowed in the Civil Code, would still be available, such that the Act/the LLMC 76 merely provides the procedural mechanism for limiting the amount available if a party should exercise its right of recovery under the Mexican Civil Code. The plaintiffs' expert likewise noted that English law, which has also incorporated the LLMC 76, considers the Convention to be merely procedural, not substantive.

Ultimately, the Court agreed with the plaintiffs and held that the Act/the LLMC 76 was merely procedural, relying primarily on the US Supreme Court's decision in The Norwalk Victory, 336 US 386, 395, 69 S Ct 622, 627, 93 L Ed 754 (1949), and that it merely created a right to limit the remedy, not a substantive right to recovery. Accordingly, the Court refused to dismiss the case, and held that while the plaintiffs' substantive rights would be determined under Mexican law (ie the Mexican Civil Code), any liability ultimately allocated to the defendants under Mexican law would not be limited under the purely procedural Act/the LLMC 76.