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United States: Supreme Court Decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer et al. (Enforceability under Federal Arbitration Act; and Foreign Arbitration Clauses in Maritime Bills of Lading)

  • Georges R. Delaume

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[Reproduced from Slip Opinion No. 94-623 provided by the U.S. Supreme Court. The Introductory Note was prepared for International Legal Materials by Georges R. Delaume, Curtis, Mallet-Prevost, Colt & Mosle, and ILM Corresponding Editor for International Arbitration.

[M/S Bremen and Unterweser Reederi GmbH v. Zapata Offshore Company appears at 11 I.L.M. 599 (1972); Scherk v. Alberto-Culver Co., appears at 13 I.L.M. 974 (1974); Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., can be found at 24 I.L.M. 1064 (1985).]

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1 International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, August 25, 1924, 120 LNTS 155; 2 Bevans 430.

1 49 Stat. 1207, 46 U. S. C. App. §§1300-1315.

2 27 Stat. 445, 46 U. S. C. App. §§190-196.

3 In support of its holding in Liverpool Steam, the Court observed: 4The carrier and his customer do not stand upon a footing of equality. The individual customer has no real freedom of choice. He cannot afford to higgle or stand out, and seek redress in the courts. He prefers rather to accept any bill of lading, or to sign any paper, that the carrier presents; and in most cases he has no alternative but to do this, or to abandon his business.“ 129 U. S., at 441.

4 The first section of the Harter Act provides: “Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it shall not be lawful for the manger, agent, master, or owner of any vessel transporting merchandise or property from or between ports of the United States and foreign ports to insert in any bill of lading or shipping document any clause, covenant, or agreement whereby it, he, or they shall be relieved from liability for loss or damage arising from negligence, fault, or failure in proper loading, stowage, custody, care, or proper delivery of any and all lawful merchandise or property committed to its or their charge. Any and all words or clauses of such import inserted in bills of lading or shipping receipts shall be null and void and of no effect.” 27 Stat. 445, 46 U. S. C. App. §190. This section was rendered obsolete by §3(8) of COGSA, a broader prohibition that invalidates clauses either “relieving” or “lessening” a carrier's liability. 46 U. S. C. App. §1303(8), quoted supra, at 1.

5 G. Gilmore & C. Black, Law of Admiralty 125, n. 23 (1st ed. (1957).

6 The bill of lading contained the following provision: “ ‘Any dispute arising under this Bill of Lading shall be decided in the country where the Carrier has his principal place of business, and the law of such country shall apply except as provided elsewhere herein.'” Indussa Corp. v. S. S. Ranborg, 377 F. 2d 200, 201 (CA2 1967).

7 Of course, the objectionable feature in the instant bill of lading is a foreign arbitration clause, not a foreign forum selection clause. But this distinction is of little importance; in relevant respects, there is no difference between the two. Both impose substantial costs on shippers, and both should be held to lessen liability under COGSA. The majority's reasoning to the contrary thus presumably covers forum selection as well as arbitration. See ante, at 5; ante, at 1-2 (O'CONNOR, J., concurring in judgment). The only ground on which one might distinguish the two types of clauses is that another federal statute, the Federal Arbitration Act, makes arbitration clauses enforceable, whereas no analogous federal statute exists for forum selection clauses. For the reasons expressed infra, at 14-16, this distinction is unpersuasive.

8 I am assuming that the majority would not actually uphold the application of disadvantageous legal standards—these, even under the narrowest reading of COGSA, surely lessen liability. See ante, at 11-13. Nonetheless, the majority is apparently willing to allow arbitration to proceed under foreign law, and to determine afterwards whether application of that law has actually lessened the carrier's formal liability. As I have discussed above, this regime creates serious problems of delay and uncertainty. Because the majority's holding in this case is limited to the enforceability of the foreign arbitration clause—it does not actually pass upon the validity of the foreign law clause—I will not discuss the foreign law cluuse further except to say that it is an unenforceable lessening of liability to the extent it gives an advantage to the carrier at the expense of the shipper.

9 The Court of Appeals enforced the arbitration clause, despite its concession that the clause might violate COGSA, because of its perception that COGSA must give way to the conflicting dictate of the Federal Arbitration Act. 29 F. 3d, at 731-733. I consider, and reject, this argument infra, at 14-16.

10 See Eskridge, & Frickey, , The Supreme Court 1993 Term-Foreword: Law as Equilibrium, 108 Harv. L. Rev. 26, 81 (1994).

11 See United States v. Farr Sugar Corp., 191 F. 2d 370, 374 (CA2 1951), aff'd, 343 U. S. 236 (1952): “One other fact requires special note. The shipowners stress the consensual nature of the (“Both-to-Blame“] clause, arguing that a bill of lading is but a contract. But that is so at most in name only; the clause, as we are told, is now in practically all bills of lading issued by steamship companies doing business to and from the United States. Obviously the individual shipper has no opportunity to repudiate the document agreed upon by the trade, even if he has actually examined it and all its twenty-eight lengthy paragraphs, of which this clause is No. 9. This lack of equality of bargaining power has long been recognized in our law; and stipula¬tions for unreasonable exemption of the carrier have not been allowed to stand. Hence so definite a relinquishment of what the law gives the cargo as is found here can hardly be found reasonable without direct authorization of law.“

12 The majority's reasoning is not, of course, limited to foreign fora as accessible as Tokyo. A carrier who truly wished to relieve itself of liability might select an outpost in Antarctica as the setting for arbitration of all claims. Under the Court's reasoning, such a clause presumably would be enforceable.

13 Nor is it compelled by logic. It is true that some domestic fora are more distant than some foreign fora—a citizen of Maine may have less trouble arbitrating in Canada than in Arizona. But that is no reason to eschew any distinction between foreign and domestic fora. If it is to adhere to Carnival Cruise and yet avoid an outrageous result, the Court must draw a line somewhere. The most sensible line, it seems to me, is at the United States border. Transaction costs generally, though not aiways, increase when that line is crossed. Passports usually must be obtained, language barriers often present themselves, and distances are usually greater when litigants are forced to cross that boundary. I think Carnival Cruise was wrongly decided, but adherence to the holding in that case does not require the result the majority reaches today.

14 The majority's puzzhng reference to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ante, at 10, strikes me as irrelevant. Nothing in that treaty even remotely suggests an intent to enforce arbitration clauses that constitute a “lessening”.of liability under COGSA or the Hague Rules.

* [Reproduced from Slip Opinion No. 94-623 provided by the U.S. Supreme Court. The Introductory Note was prepared for International Legal Materials by Georges R. Delaume, Curtis, Mallet-Prevost, Colt & Mosle, and ILM Corresponding Editor for International Arbitration.

[M/S Bremen and Unterweser Reederi GmbH v. Zapata Offshore Company appears at 11 I.L.M. 599 (1972); Scherk v. Alberto-Culver Co., appears at 13 I.L.M. 974 (1974); Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc., can be found at 24 I.L.M. 1064 (1985).]

United States: Supreme Court Decision in Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer et al. (Enforceability under Federal Arbitration Act; and Foreign Arbitration Clauses in Maritime Bills of Lading)

  • Georges R. Delaume

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