The Carriage of Goods by Sea Act (Cogsa) statutorily applies to every bill of lading for the common carriage of goods by sea to or from the United States in foreign trade.

Congress enacted Cogsa in 1936 as America’s ratification of the Brussels Convention (Hague Rules). The enactment was part of an international effort to achieve uniformity in ocean bills of lading.

Cogsa also was intended to reduce uncertainties concerning the responsibilities, rights, and liabilities of ocean carriers and cargo interests. Congress recognized that only a uniform maritime law could provide the degree of predictability required for international shipping needs

Since Cogsa’s enactment, American courts have attempted to comply with this congressional mandate by interpreting the act uniformly. Unfortunately, achieving uniformity throughout the country has not always been possible.

In the federal judicial system, appellate circuit courts oversee numerous lower district trial courts. Conflicts among circuits in interpreting Cogsa do occur. Clear conflicts, to name a few, exist on such topics as the meaning of the terms “package,” “peril of the sea,” “deviation,” and the burden of proof in fire cases

The U.S. Supreme Court is not bound to hear every circuit conflict. Principles of judicial restraint usually result in its withholding review until lower courts have an opportunity to resolve their differences.

Test case to be decided
The Sky Reefer case (1994 AMC 2513) recently decided by the 1st Circuit Court of Appeals appears to be an exception to the judicial restraint rule. the Supreme Court has now agreed to hear this case in order to resolve conflicting views from two circuits regarding the validity of foreign arbitration clauses in bills of lading subject to Cogsa.

In the Sky Reefer case, oranges shipped from Morocco to the United Stats spoiled. The bill of lading provided that any dispute arising from the voyage would be arbitrated in Japan. The cargo consignee sued in Boston federal district court, seeking to recover $1 million in damages from the vessel. The district court held that the foreign arbitration clause was enforceable, stayed the legal action, and certified the matter for appeal to the 1st Circuit

The consignee, relying on the 2nd Circuit Indussa opinion (1967 AMC 589), “To require an American plaintiff to assert his claim only in a distant court lessens the liability of the carrier, ” argued on appeal that the Japanese arbitration clause was invalid under Section 3(8) of Cogsa which prohibits the lessening of the ocean carrier’s obligation.

Arbitration Act, Cogsa at odds
The 1st Circuit rejected the argument and found the controlling law to be the Federal Arbitration Act. This statute, based upon a strong federal policy favoring arbitration, requires a stay of litigation when a maritime contract contains an arbitration clause.

The 1st Circuit acknowledged that in the similar Wesermunde case (1988 AMC 2328), the 11th Circuit declined to enforce a foreign arbitration clause in a bill of lading subject to Cogsa. Nevertheless, the 1st Circuit upheld arbitration clause based upon its believe that the Federal Arbitration Act, (not Cogsa) governed. The holding was based in part upon a canon of statutory interpretation that a later enacted statute (Federal Arbitration Act of 1947), generally limits the scope of an earlier statute (Cogsa of 1936), if the two laws conflict.

The Sky Reefer will be argued before the Supreme Court in early spring. The court’s decision should further uniformity in American maritime law by clarifying the patchwork of conflicting lower court decisions that concern the validity of foreign arbitration clauses in bills of lading. The decision should thus eliminate a major uncertainty now associated with common ocean carriage involving the United States.