The construction of two offshore construction vessels, Caballo Maya and Caballo Marango, was financed by loans secured by mortgages over the respective vessels, which were recorded on the Panamanian ship registry, that being the country of registration of both vessels. The owner/borrowers chartered both vessels to Oceanografia SA de CV for use in Mexico. The Mexican government then seized both Caballo Maya and Caballo Marango in conjunction with its criminal investigation of Oceanografia, and both vessels were kept in the custody of the Mexican government. Because the owner/borrowers could not generate any revenue from the use of their vessels, they fell behind on their loan repayments to the mortgagees. The plaintiff, a Mexican conglomerate in the oil, gas and energy sector, agreed to buy the two vessels, but their original owners were unable to obtain release of the vessels from the Mexican government, which meant that they failed to abide by the deadlines in the purchase agreements. The plaintiff successfully brought arbitration proceedings against the original owners in London, winning awards of US$5m in relation to each vessel. The plaintiff then filed suit in the US District Court for the Southern District of Texas, seeking to attach Caballo Maya and Caballo Marango under Texas state law,2 and requesting sale of the vessels at judicial auction to satisfy the London arbitration awards. The mortgage lenders moved to intervene, arresting the vessels under Rule C of the Supplemental Admiralty Rules of the Federal Rules of Civil Procedure.

By order of the federal district court, the two vessels were sold at judicial auction. Caballo Marango was sold to one of the original lenders for a credit bid of $5m.

The district court formally ordered recognition and enforcement of the London arbitration awards under the New York Convention,3 and then proceeded to determine the enforceability of the interveners’ Panamanian ship mortgages and the priority between them and the plaintiff’s state-law liens to enforce the London arbitration awards. The