US MARITIME LAW CAN HAVE BROAD INTERPRETATION IN ARBITRATION PACT

It is not often that maritime arbitrators are called upon to interpret the meaning of “General Maritime Law” (also known as “Federal Maritime Law”). This is ironic in that maritime arbitrators often decide charter party disputes governed by the General Maritime Law. the recent New York arbitration award of the Astra Lift (SMA 3270), illustrates how important the interpretation of the term can be when resolving choice-of-law issues in international shipping disputes.

By way of background, most American maritime contracts are subject to the General Maritime Law of the United States. This body of substantive law is international in scope and often described as the common law of the seas adopted at the time of the U.S. Constitution and later modified by Congress and court decisions.

The General Maritime Law furnishes the legal precedent for maritime cases in the absence of pre-emptive legislation. It is a body of concepts, principles and rules, customary and international in origin, that has been adopted by federal courts and is intended to be uniform countrywide.

Dispute arises over damaged steel coils
In the Astra Lift arbitration, a dispute arose between cargo interests and a vessel owner regarding seawater damage to 130 steel coils carried under a bill-of-lading contract from Mexico to Chile.

Subsequent to the voyage, the parties agreed to submit the dispute to arbitration in New York. They drafted an arbitration agreement stipulating that the dispute would be governed by the Federal Maritime Law of the United States, and conducted under the rules of the Society of Maritime Arbitrators (SMA).

The arbitrators initially were asked to decide the law to be applied to the bill-of-lading contract. The bill of lading provided that on a voyage from Mexico to Chile, the Hague-Visby Rules would apply. Parties to maritime contracts may stipulate to the applicable law by utilizing a choice-of-law clause in the contract.

In the arbitration, the vessel owner argued that the arbitration agreement replaced the choice-of-law provision in the bill of lading, and the contract of carriage would be subject to every provision of the Federal Maritime Law of the United States, including the U.S. Carriage of Goods by Sea Act (Cogsa) with its $500 package limitation.

Cargo interests argued that the bill-of-lading provisions were not affected by the arbitration agreement. Furthermore, the Hague-Visby Rules applied under the terms of the bill, since Mexico had enacted these rules domestically.

The arbitrators ruled that the agreement to arbitrate under the SMA rules, which included adherence to U.S. Federal Maritime Law, was insufficient to establish that the parties intended to negate the terms of the bill of lading.

US maritime law has global application
“The Federal Maritime Law does not only recognize the statutory law of the United States, but it is broad enough to include the general maritime law of other countries. The law is not automatically inclusive or limited to Cogsa, but it recognizes the Hague-Visby Rules in appropriate cases and in fact coexists with foreign maritime laws.”

The arbitrators also held, based on the arbitration clause, that Federal Maritime Law would continue to apply in this ongoing arbitration for purposes of procedure, interpretation of the bill of lading and burdens of proof.

After analyzing the Astra Lift award, one can conclude that the words “Federal Maritime Law” in an arbitration agreement will be broadly interpreted. However, the term will not negate a specific choice of law provision in a bill of lading.


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