The M/V Transmichigan (a German-flagged vessel owned by Poseidon Schiffahrt GmbH) collided with the M/S Netuno (a Brazilian-flagged vessel) in the channel of the St Clair River at the southern end of Lake Huron, close to the international boundary between Michigan and Toronto, Canada (with the exact location vis-à-vis the actual border undetermined). An initial suit was filed in federal court in Michigan in personam and in rem by the Netuno’s owner against the Transmichigan/Poseidon, but was dismissed, prior to perfection of in rem jurisdiction, after initial crew discovery. Thereafter, Poseidon filed a nominal in rem action against the Netuno in the Federal Court of Canada at Montreal (while the Netuno was under repair at Toronto), and the Netuno’s owner counterclaimed for damages. However, the Netuno apparently sailed from its repair berth in Toronto without posting any bail in the in rem proceeding, such that the proceeding was deemed not to be a true in rem action. Poseidon commenced a third proceeding in Savannah, Georgia, (the Netuno's next port of call) against the Netuno in rem. The Netuno was not arrested in the Georgia action, but the owner filed a stipulated waiver of arrest to have the same effect as if an arrest warrant had been served. Poseidon acknowledged that the purpose of the Georgia action was to have access to a larger limitation of liability fund under US law than would be available under Canadian law. The lower Court acknowledged the potentially difficult issue of whether the Collision Convention 1910 and/or the Collision (Civil Jurisdiction) Convention 1952 (to which Canada, Germany and Brazil are all parties, but to which the US is not a party) might mandate that the Court retain in rem jurisdiction, but dismissed the case on forum non conveniens grounds (see CMI1049).

The United States Fifth Circuit Court of Appeals reversed the lower court's forum non conveniens dismissal and remanded (see CMI1047), holding that because the district court undisputedly held in rem jurisdiction over the Netuno, its decision to defer to the Canadian proceedings was improper unless doing so would 'work an injustice' to the Netuno or its owner.

The Fifth Circuit relied primarily on the US Supreme Court's decision in The Belgenland, 114 US 355, 5 S Ct 860, 29 L Ed 152 (1885), which held that in a collision on the high seas between vessels of foreign nations, a US federal court must take jurisdiction in a properly commenced in rem proceeding:

[A]lthough the courts will use a discretion about assuming jurisdiction of controversies between foreigners in cases arising beyond the territorial jurisdiction of the country to which the courts belong, yet where such controversies are communis juris, – that is, where they arise under the common law of nations, – special grounds should appear to induce the court to deny its aid to a foreign suitor when it has jurisdiction of the ship or party charged. The existence of jurisdiction in all such cases is beyond dispute; the only question will be whether it is expedient to exercise it.

The Fifth Circuit specifically noted that the lower Court considered whether refusing in rem jurisdiction would work an injustice, which is precisely the opposite framing of the issue required under The Belgenland. Instead, the Fifth Circuit explained, 'the question is not whether an injustice will result if the court does not exercise jurisdiction, but whether exercising jurisdiction will result in an injustice'. And this 'distinction is more than one of semantics [because] [u]nder the proper standard, the court must begin with the assumption it will exercise jurisdiction unless it is established, by the defendant, that an injustice would follow'.