Triton Pacific Maritime Corp (the defendant) owned the MV Mexico I. The vessel was chartered by Pacific Caribbean Shipping (USA) Inc (the charterer). The charterer ordered fuel from Perez & Compania (Cataluna) SA (the plaintiff). The plaintiff in turn contracted with a fuel dealer, Entrepol, which supplied the fuel in Pasajes, Spain. When the charterer failed to pay for the fuel, the plaintiff paid for it under its guarantee. The plaintiff was not reimbursed.

The plaintiff claimed in rem against the vessel for breach of a contract furnishing bunker fuel oil to the vessel, seeking USD 25,000. The plaintiff sought to seize the vessel under Supplemental Admiralty Rule C, which governs in rem actions. A letter of undertaking (LOU) was filed. The LOU stated in relevant part: 'In the event [that a] final decree (after appeal, if any) be entered in favour of the plaintiff against the M/V 'Mexico l' in rem, then the undersigned Association agrees to pay …'. The vessel was not arrested. The parties stipulated that Spanish law controlled the action. On 30 October 1985, the District Court for the Southern District of Texas determined that no in rem action existed under Spanish law, but granted the plaintiff leave to amend its complaint to assert an in personam action against the defendant.

The defendant moved to cancel security and dismiss the in personam claim under the doctrine of forum non conveniens. The District Court for the Southern District of Texas dismissed the action, without prejudice, under the doctrine of forum non conveniens on the condition that the defendant submit itself to the jurisdiction of the Spanish courts and waive any applicable statute of limitations (or laches) defences. The balance of all factors favoured dismissal of the case: (1) the parties were foreign; (2) the charterer, though a US corporation, was neither a plaintiff nor a defendant in the action; (3) the contract was negotiated and executed in Spain; (4) the witnesses and evidence were in Spain or Europe and beyond the Court's power of compulsory process; (5) Spain had more interest in this dispute then the congested courts of Houston in the US; (6) an adequate remedy existed in Spain; (7) the defendant's delay in bringing the motion to dismiss did not outweigh the other factors. Separately, the defendant’s motion to cancel security was denied. The LOU was to be retained as security for the case filed with the Spanish courts. The District Court read the LOU as security for the 'eventuality' that Spanish law might permit attachment of a vessel even though the vessel is not subject to an in rem proceeding: see Perez y Compania (Cataluna) SA v Triton Pacific Maritime Corp 647 F Supp 556 (SD Tex 1996), 1986 US Dist LEXIS 21019, 1987 AMC 1745, Civ A No H-84-2198.

Both parties appealed. The defendant asserted that the LOU could not stand as security for the in personam action. The plaintiff asserted that the District Court erred in determining that Spanish law does not recognise an in rem action, and that the District Court abused its discretion in dismissing the suit on the basis of forum non conveniens.

Held: The decision not to cancel LOU is reversed. The dismissal of the in rem complaint is affirmed. The case is remanded to the District Court.

The decision by the District Court not to cancel the LOU is reversed. The express terms of the LOU limit its applicability to proceedings in rem. The LOU by its terms precludes its application as security for the in personam claim. Spanish law does not allow an in rem claim. The case is remanded to the District Court for reconsideration of its dismissal on the basis of forum non conveniens, to decide whether dismissal should be conditioned upon the defendant formally agreeing to satisfy any final Spanish court judgment.

The issue is not whether the plaintiff is entitled to seize the vessel as security for a claim against the vessel owner, but whether the plaintiff is entitled to sue the vessel, in rem, as a separate entity. As explained in Belcher Co of AlabamaInc v M/V Maratha Mariner 724 F 2d 1161, 1165 (5th Cir 1984) (Belcher), while attachment resembles arrest, the issues in the two actions differ; the basic theory on which each is brought is different. In rem rights are based on a substantive theory that the vessel itself can be held liable for a debt that creates a maritime lien:

In the in rem proceeding the owner bears no personal liability. The vessel is sold solely to satisfy the lien. If the proceeds of the sale are inadequate, there is no liability on the owner's part for the residue. Indeed the admiralty court will not render a personal judgment against the owner in excess of the amount of the release bond. Only a personal action against the owner can establish such liability. In the attachment action, the object of the action is a personal judgment for the full sum due ... . If the proceeds of sale of the vessel do not satisfy the judgment, the owner remains liable for the balance of the debt.

Spanish law does not recognise a right to proceed directly against a vessel. A creditor must file a personal action against the vessel owner or charterer, but may seize the vessel as security. Spain is a signatory to the Arrest Convention 1952, which provides that if the plaintiff has a 'maritime claim' against a ship owner or time charterer (including claims arising out of fuel supplied to a ship) then the plaintiff may arrest either the particular ship in respect of which the claim arose or any other ship belonging to the same owner or charterer. As in Belcher, attachment of a vessel in a nation signatory to the Arrest Convention 1952 cannot be equated to an in rem Rule C seizure in the US. The dismissal of the in rem complaint by the District Court is affirmed.

The District Court did not abuse its discretion in determining that the balance of public and private interests warrant dismissal of the suit. However, because the Court based its decision to dismiss partly on the premise that the LOU would continue to serve as a security for the plaintiff's claim in the Spanish courts, it did not consider whether to impose a condition that the defendant agree to satisfy any final judgment. The case is therefore remanded to the District Court to consider whether such a condition should be added.