This extraordinary appeal arose from a fire which broke out on a pleasure boat moored in the Botafoch marina in Ibiza on 19 December 2005. Several pleasure boats moored in the surroundings were damaged. Their owners or insurers filed lawsuits claiming compensation for the damages suffered by the vessels against Mr Esteban, the owner of the vessel from where the fire originated; Underwriting Risk Services Ltd (URS), the insurer of the boat; and Puerto Deportivo Botafoch SL (PDB), which was the concessionaire of the operation of the marina.

Both the Court of first instance and the Provincial Court considered it proven that the fire originated on the relevant vessel, and that URS was the insurance company which covered that vessel up to a limit of EUR 3 million for civil liability by virtue of the compulsory civil liability insurance for pleasure or sports boats. Judgment was entered against the shipowner and URS jointly and severally to compensate the plaintiffs for the damage caused to the adjacent vessels. PDB was held not liable.

Mr Esteban and URS appealed. Among other things, they argued that the Commercial Courts did not have jurisdiction over the matter, as this was a maritime matter; and that the Courts below had ignored the modern conception of maritime law, and the legal concept of a ship, and had failed to apply the LLMC 1996. The Courts had breached art 8 of Law 27/1992, and art 146 of the Mercantile Registry Regulations of 14 December 1956, of Royal Decree 1027/1989, of 28 July, on registration and flagging of ships and the jurisprudence and doctrine that interprets them by not treating the pleasure boat as a 'ship', and by not allowing the shipowner to limit its liability. The Court's had failed to apply art 2.1.a of the LLMC 1976, ratified by Spain through an Instrument of 22 October 1981 (see BOE No 310, of 27 December 1986), and modified by the Protocol of 1996 to which Spain has adhered - BOE of 28 February 2005.

Held: Appeal dismissed.

The Court considers that the alleged object of the appeal does not fall within the scope of application of the LLMC, since the claims formulated in the application are none of those provided for in art 2 of the Convention, specifically in art 2.1.a (currently reproduced in art 396.1.a of the Maritime Navigation Law (LNM), which maintains the expression 'operation of the ship' ('explotación del buque') used in the Spanish version of the text of the LLMC), in so far as the operating element of the ship, ie, the existence of a business activity articulated around the ship, is incompatible with the nature and use of a pleasure boat, in this case the boat whose fire caused the damage for which compensation is claimed.

Being aware of the problematic nature of the matter, the Court confirms that the limitation of liability regulated in this Convention is only justified in the case of the development of a business activity, since the Convention constitutes a privileged regime with respect to the integral compensation of damages that constitutes the general rule in the law of damages. This privileged regime is not justified when the vessel, the use or possession of which has caused the damage, is a pleasure vessel.