Vimar Seguros y Reaseguros, S. A. v. M/V Sky Reefer, 515 U.S. 528 (1995)

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certiorari to the united states court of appeals for the first circuit

No. 94-623. Argued March 20, 1995—Decided June 19, 1995

After a New York fruit distributor's produce was damaged in transit from

Morocco to Massachusetts aboard respondent vessel, which was owned by respondent Panamanian company and chartered to a Japanese carrier, petitioner insurer paid the distributor's claim, and they both sued respondents under the standard form bill of lading tendered to the distributor by its Moroccan supplier. Respondents moved to stay the action and compel arbitration in Tokyo under the bill of lading's foreign arbitration clause and the Federal Arbitration Act (FAA). The District Court granted the motion, rejecting the argument of petitioner and the distributor that the arbitration clause was unenforceable under the FAA because, inter alia, it violated 3(8) of the Carriage of Goods by Sea Act (COGSA) in that the inconvenience and costs of proceeding in Japan would "lesse[n] . . . liability" in the sense that COGSA prohibits. However, the court certified for interlocutory appeal its ruling to compel arbitration, stating that the controlling question of law was "whether [ 3(8)] nullifies an arbitration clause contained in a bill of lading governed by COGSA." In affirming the order to arbitrate, the First Circuit expressed grave doubt whether a foreign arbitration clause lessened liability under 3(8), but assumed the clause was invalid under COGSA and resolved the conflict between the statutes in the FAA's favor.

Held: COGSA does not nullify foreign arbitration clauses contained in maritime bills of lading. Pp. 533-541. (a) Examined with care, 3(8) does not support petitioner's argument that a foreign arbitration clause lessens COGSA liability by increasing the transaction costs of obtaining relief. Because it requires that the "liability" that may not be "lessen[ed]" "aris[e] from . . . failure in the duties or obligations provided in this section," 3(8) is concerned with the liability imposed elsewhere in 3, which defines that liability by explicit obligations and procedures designed to correct certain abuses by carriers, but does not address the separate question of the particular forum or other procedural enforcement mechanisms. Petitioner's contrary reading of 3(8) is undermined by Carnival Cruise Lines, Inc. v. Shute, 499 U. S. 585, 595-596, whereas the Court's reading finds support

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