SUPREME COURT DECISION MAY CHART NEW ADMIRALTY JURISDICTION COURSE

Ships’ agents play a vital role in international shipping and maritime commerce. They collect and distribute cargo related documents, coordinate vessel supplies, collect and remit freight payments to vessel owners, solicit cargoes, respond to vessel information inquiries, assist in clearing vessels and attend to crew members’ needs. Most important, they often pay for necessary ship services nad supplies which permit vessels to freely depart from ports and keep their sailing schedules.

Until recently, the laws of the United States failed to provide adequate protection to shps’ agents. The failure stemmed from the one-page 1854 Supreme Court Minturn decision case (58 US 477).

This often-criticized case held that a ship’s agent who advances funds for repairs and supplies necessary for a vessel was barred from commencing an admiralty suit against the vessel to recover its advance. The Minturn case also has prevented other ships’ agents over the past century from obtaining maritime contract liens against vessel for monies advanced.

Under American Law, a prerequisite for establishing the existence of a maritime contract lien is the requirement that the contract must be subject to admiralty jurisdiction. A maritime lien is a security device that is unique to admiralty law. and gives vessel creditors a special non-possessory interest in the ship.

The purpose of the contract maritime lien is to encourage suppliers to advance credit to the vessel for goods and services to enable the vessel to complete her voyage. The non-recorded lien arises the instant the services are performed. The lien can be judicially discharged only by an admiralty proceeding in any country where the ship may be found, arrested and judicially sold to satisfy the debt.

On June 3, the Supreme Court in an action titled Exxon Corp. v. Central Gulf Lines (111 S. Ct. 2071) brushed aside 136 years of questionable jurisprudence by overruling the Minturn case. Exxon had commenced an admiralty suit in a federal district court against a vessel by claiming that it had a maritime lien against the vessel for monies it had advanced to bunker the ship.

At the time of the fuel sale, Exxon was acting as an agent on behalf of the vessel’s interest. The district court quickly dismissed the suit based upon the Minturn decision. The matter was eventually reviewed by the Supreme Court.

IN overruling the Minturn case, the Supreme Court held that ship agency agreements are not necessarily excluded from admiratly jurisdiction:

In determining the boundaries of admiralty jurisdiction we look at the purpose of the (Constitutional) grant. . . The fundamental interest giving rise to maritime jurisdiction is the protection of maritime commence …. The nature of the subject matter of the contract at lease should be the critical consideration in assessing admiralty jurisdiction…

The Supreme Court has now remanded the case to the federal district court to determine if Exxon is entitled to a maritime lien.

It remains to be seen if the overruling of Minturn will open admiralty jurisdiction and maritime liens to ofther contracts that are intricately related to shipping, but have been considered for years to be jurisdictionally non-maritime.

For example, a contract to repair a vessel supports admiralty jurisdiction, while a contract to build a ship does not. Other non-admiralty subject matter contracts that may now have to be reevaluated are agreements of charter brokers. marine insurance brokers, shipbrokers include services that directly concern the business of maritime commerce. As the Supreme Court stated in the Exxon case: “It is inappropriate . . . to focuse a claimant to determine whether admiralty jurisdiction exists.”


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