Law School Case Brief
Vimar Seguros Y Reaseguros v. M/V Sky Reefer - 515 U.S. 528, 115 S. Ct. 2322 (1995)
Because foreign arbitration clauses in bills of lading are not invalid under the Carriage of Goods by Sea Act (COGSA) in all circumstances, both the Federal Arbitration Act and COGSA may be given full effect.
A U.S.-based buyer contracted with a Moroccan fruit supplier for shipload of oranges to be sent to Massachusetts. The ship carrying the oranges was defendant M/V Sky Reefer ("Ship"), which was owned by defendant M. H. Maritima, S. A., and time-chartered to a Japanese company, which loaded and stowed the cargo. The bill of lading contained an arbitration provision setting Tokyo as the place for arbitration and a choice of law provision providing that Japanese law governed any dispute. Once at Massachusetts, the buyer discovered over $1 million in damages to the oranges. The buyer received $ 733,442.90 compensation from plaintiff Vimar Seguros y Reaseguros ("Vimar"), which was the buyer's marine cargo insurer. Vimar and the buyer filed a lawsuit in federal district court in Massachusetts against Maritima and the Ship under the bill of lading. Defendants filed a motion to stay the action and compel arbitration under both the bill of lading and § 3 of the Federal Arbitration Act ("FAA") requiring courts to enforce arbitration agreements covered by the FAA. Vimar argued that the arbitration clause was unenforceable under the FAA because it violated § 3(8) of the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C.S. App. § 1300 et seq. The district court granted the motion to stay and to compel arbitration, retained jurisdiction pending arbitration, and certified for interlocutory appeal its ruling on the motion to compel arbitration. The court of appeals affirmed. Vimar was granted a writ of certiorari.
Did the COGSA nullify the foreign arbitration clause contained in parties' maritime bill of lading?
The Supreme Court of the United States affirmed the appellate court's judgment that affirmed the order compelling arbitration; the case was remanded for further proceedings. The Court ruled, inter alia, that because the increased cost of litigating in a distant forum did not "lessen liability" as those terms were used in § 3(8), COGSA did not forbid selection of a foreign forum. The relevant provisions of the COGSA and the FAA were in accord, not in conflict, and both could be given full effect, the Court ruled.
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