DESPITE COGSA, CARGO CLAIMS CAN WIND UP IN FOREIGN COURTS

American shippers and their cargo underwriters have relied upon the Carriage of Goods by Sea Act, known as Cogsa, for protection against foreign forum selection clauses in ocean bills of lading. Such clauses, if enforced could force American cargo interests to litigate their cargo claims in foreign courts under foreign laws.

The recent case of the SS Alca, 710 F. Supp. 497, suggests that a party cannot necessarily rely on Cogsa to guarantee that a cargo claim will be litigated in the United States under American law. In the SS Alca case, a New York court dismissed an American plaintiff’s Cogsa cargo action where the bill of lading contained a forum selection clause requiring disputes to be decided in Turkish courts under Turkish law. The dismissal was based upon the doctrine of “forum non conveniens.”

Forum non conveniens is defined by Black’s Law Dictionary as “a doctrine pattered upon the right of the court in the exercise of its equitable powers to refuse . . . trial of cases . . . if it appears that for the convenience of litigants and witnesses and the interest of justice, the action should be instituted in another forum.”

In determining whether the discretionary doctrine should be applied, courts perform a balancing test and consider the relative ease of access to sources of proof, the availability and expense of producing witnesses and all other practical problems that facilitate a trial.

In the SS Alca case, a Connecticut insurance company sued in New York on behalf of its Tennessee insured for damages sustained to the insured’s cargo while on a voyage from New Orleans to Turkey. The consignment was carried aboard a Spanish vessel, timechartered to a Turkish company. The bill of lading contained a Turkish forum selection clause. The vessel, its owners and the charterer were named as defendants. A Swiss corporation and its New York affiliate also were sued for alleged negligence in repackaging the damaged cargo in Turkey. All defendants moved to dismiss on the ground of forum non -conveniens.

Plaintiff argued that transfer of the case to Turkey was barred by the 1967 Indussa decision 377 F. 2d 200, which held that Cogsa invalidates “any contractual provision in a bill of lading for a shipment to or from the United States that would prevent cargo (interests) able to obtain jurisdiction over a carrier in an American court from having that court entertain the suit and apply (American Law)”.

The court in SS Alca held that Cogsa and Indussa were not applicable because defendants did not move to dismiss, as in Indussa, based upon a forum selection clause. Instead, defendants moved solely on the grounds of forum non conveniens. The court noted that there was no authority for creating a general exception to the forum non conveniens doctrine in admiralty cases. The court held that Cogsa did not present a bar to the application of forum non conveniens and then proceeded to examine defendants’ arguments that the New York action should be dismissed.

The court performed a balancing test and weighed private and public interests affecting the convenience of the parties and the forum. The private factors favored Turkey because the overwhelming number of documents, witness fees and access to sources of proof were located in Turkey. Public factors also favored dismissal because New York had little interest in the controversy as none of the critical events took place in New York.

Turkey had a far greater interest in deciding the controversy as the action involved goods being shipped through Turkey, and Turkish companies were accused of damaging the goods. furthermore, Turkish law would govern since the bill of lading instructed the court to apply Turkish law, and the courts in Turkey were in the best position to apply their own laws.

It is interesting to note that the defendants did not raise the Turkish forum selection clause in their motion to dismiss, yet the court took the clause into consideration while performing its balancing test.

The SS Alca ruling is now on appeal. However, at the present time, the doctrine of forum non conveniens remains applicable to actions on bills of lading subject to Cogsa. American shippers should be aware that forum selection clauses may play a significant role when American courts perform their forum non conveniens balancing tests.


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