Vimar Seguros Y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1994)

Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer

No. 94-623

Argued March 20, 1995
Decided June 19, 1995
515 U.S. 528

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

Syllabus

After a New York fruit distributor’s produce was damaged in transit from Morocco to Massachusetts aboard respondent vessel, which was owned by respondent Panamanian company and chartered to a Japanese carrier, petitioner insurer paid the distributor’s claim, and they both sued respondents under the standard form bill of lading tendered to the distributor by its Moroccan supplier. Respondents moved to stay the action and compel arbitration in Tokyo under the bill of lading’s foreign arbitration clause and the Federal Arbitration Act (FAA). The District Court granted the motion, rejecting the argument of petitioner and the distributor that the arbitration clause was unenforceable under the FAA because, inter alia, it violated § 3(8) of the Carriage of Goods by Sea Act (COGSA) in that the inconvenience and costs of proceeding in Japan would "lesse[n] . . . liability" in the sense that COGSA prohibits. However, the court certified for interlocutory appeal its ruling to compel arbitration, stating that the controlling question of law was "whether [§ 3(8)] nullifies an arbitration clause contained in a bill of lading governed by COGSA." In affirming the order to arbitrate, the First Circuit expressed grave doubt whether a foreign arbitration clause lessened liability under § 3(8), but assumed the clause was invalid under COGSA and resolved the conflict between the statutes in the FAA’s favor.

Held: COGSA does not nullify foreign arbitration clauses contained in maritime bills of lading. Pp. 533-541.

(a) Examined with care, § 3(8) does not support petitioner’s argument that a foreign arbitration clause lessens COGSA liability by increasing the transaction costs of obtaining relief. Because it requires that the "liability" that may not be "lessen[ed]" "aris[e] from . . . failure in the duties or obligations provided in this section," § 3(8) is concerned with the liability imposed elsewhere in § 3, which defines that liability by explicit obligations and procedures designed to correct certain abuses by carriers, but does not address the separate question of the particular forum or other procedural enforcement mechanisms. Petitioner’s contrary reading of § 3(8) is undermined by Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595-596, whereas the Court’s reading finds support in the goals of the so-called Hague Rules, the international convention on which COGSA is modeled, and in the pertinent decisions and statutes of other nations. It would be out of keeping with such goals and with contemporary principles of international comity and commercial practice to interpret COGSA to disparage the authority or competence of international forums for dispute resolution. The irony of petitioner’s argument in favor of such an interpretation is heightened by the fact that the forum here is arbitration, for the FAA is also based in part on an international convention. For the United States to be able to gain the benefits of international accords, its courts must not construe COGSA to nullify foreign arbitration clauses because of inconvenience to the plaintiff or insular distrust of the ability of foreign arbitrators to apply the law. Pp. 533-539.

(b) Also rejected is petitioner’s argument that the arbitration clause should not be enforced because there is no guarantee foreign arbitrators will apply COGSA. According to petitioner, the arbitrators will follow the Japanese Hague Rules, which significantly lessen respondents’ liability by providing carriers with a defense based on the acts or omissions of the stevedores hired by the shipper, rather than COGSA, which makes nondelegable the carrier’s obligation to properly and carefully stow the goods carried. Whatever the merits of this comparative reading, petitioner’s claim is premature because, at this interlocutory stage, it is not established what law the arbitrators will apply or that petitioner will receive diminished protection as a result. The District Court has retained jurisdiction over the case, and will have the opportunity at the award enforcement stage to ensure that the legitimate interest in the enforcement of the laws has been addressed. Pp. 539-541.

(c) In light of the foregoing, the relevant provisions of COGSA and the FAA are in accord, and both Acts may be given full effect. It is therefore unnecessary to resolve the further question whether the FAA would override COGSA were COGSA interpreted otherwise. P. 541.

29 F.3d 727, affirmed and remanded.

KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and SCALIA, SOUTER, THOMAS, and GINSBURG, JJ., joined. O’CONNOR, J., filed an opinion concurring in the judgment, post, p. 541. STEVENS, J., filed a dissenting opinion, post, p. 542. BREYER, J., took no part in the consideration or decision of the case.