On 31 July 1929, a collision occurred in Brazilian waters between the Brazilian steamer Mandu and the German steamer Denderah. The Denderah sank, and most of its cargo was lost. In June 1930, the Great American Insurance Co (Great American), acting under an assignment of rights granted by owners of the cargo on the Denderah, filed an action in rem against the Mandu. The owners of the Mandu filed a bond, and the ship was released from arrest. Great American then filed a second lawsuit for other claims resulting from the same collision.
The owners of the Mandu brought proceedings for limitation of liability. They alleged that the collision was wholly due to the fault of the German steamer, and requested exoneration from or, at least, limitation of liability. A second bond for the value of the Mandu was posted, the security of the first lawsuit was released, and the proceedings in the two lawsuits were stayed. The owners of the Mandu invoked the application of the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910 (Collision Convention 1910), as the collision occurred in Brazilian water, and Brazil and Germany had ratified the Convention. The Convention provides that if both vessels in a collision are at fault, the liability of each should be in proportion to the degree of fault committed, and the damage to vessels and cargoes should be borne by the vessels at fault in such proportion (art 4). The owners of the Mandu contended that the fault of the Denderah was greater; the fault of the Mandu, if any, was very slight; and damages against the Mandu should in any event be proportioned according to its degree of fault. The District Court overruled the exceptions proposed by Great American against this allegation. Great American appealed.
Held: The Collision Convention 1910 applies to the determination and apportionment of liability, while local statutes apply to the right to limit liability.
The United States has not adopted the Collision Convention 1910, and under local maritime law, it is the rule that where both vessels are at fault in a collision, the innocent cargo owner may recover all damages against either: The Atlas 93 US 302, 23 L Ed 863. The liability for tort caused by a collision in the territorial waters of a foreign country is governed by the law of that country: Smith v Condry 1 How 28, 11 L Ed 35. That law determines the existence of liability and its measure: Northern Pacific R Co v Babcock 154 US 190, 14 S Ct 978, 38 L Ed 958; Slater v Mexican National R Co 194 US 120, 126, 24 S Ct 581, 48 L Ed 900. 'The injustice of imposing a greater liability than that created by the law governing the conduct of the parties at the time of the act or omission complained of is obvious': Western Union Telegraph Co v Brown 234 US 542, 547, 34 S Ct 955, 956, 58 L Ed 1457.
However, the statutes permitting limitation of liability in maritime cases are regarded as relating to remedies, and the law of the forum applies: The Titanic 233 US 718, 34 S Ct 754, 58 L Ed 1171; Western Union Telegraph Co v Brown 547. The Collision Convention 1910 recognises this, and leaves each nation to enforce its own law of limitation of shipowners' liability (art 10). Therefore, the liability of the Mandu is determined by Brazilian law, and the extent of such liability will in no event exceed what is proper under the Collision Convention 1910. The rules embodied in this Convention, as part of the law of Brazil, and particularly art 4, clearly relate to a right rather than a remedy: The Eagle Point 142 F 453 (3rd Cir), certiorari denied 201 US 644, 26 S Ct 760, 50 L Ed 902. The right of the Mandu to limit liability, if any, will be decided according to local statutes governing the shipowners' right to limit liability.
Great American has no fair grievance against the Collision Convention 1910. Its rights are only those of the cargo owners who were content to ship their goods on the German vessel, and Germany, as well as Brazil, has ratified this Convention. If the collision had occurred on the high seas, the law common to both vessels would determine their liabilities to one another and to the cargo interests. The petitioner had the right to interpose the Collision Convention 1910 against the claims of the cargo on the Denderah. The articles of the Convention are not against US public policy. Although the local law lays down different rules, 'we are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home': Loucks v Standard Oil Co 224 NY 99, 111, 120 NE 198, 201.