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Are forum selection clauses enforceable against in rem claims?
Recent court decisions in the US have refused to enforce forum selection clauses in bills of lading in circumstances where the foreign forum does not recognise the concept of an in rem claim against a vessel. This has resulted in the court retaining the in rem claim against the vessel while dismissing the in personam claim against the carrier.

Our thanks go to Kirk M H Lyons of Lyons, Skoufalos, Proios & Flood, LLP, of New York for this article.

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Forum selection clauses

The basic premise for this argument is that US maritime law provides for the independent legal liability of a vessel in re m ,s e p a rate and apart from the legal liability of a carrier in personam. If the foreign forum identified in the bill of lading does not provide for in rem liability of a vessel, then cargo interests’ rights under COGSA will be ‘lessened’ in the event that the forum selection clause is enforced. These decisions, where the claims against carriers in personam were dismissed, were in respect of cases where there were Korean forum selection clauses in the bills of lading, while the claims against the vessel in rem were not dismissed.6 As a result, the claims against the vessel in rem remained to be litigated in the US. This issue is, however, by no means settled. The only Court of Appeals that has addressed the issue has landed on the side of enforcement of a forum selection clause in respect of an in rem claim against the vessel. In Fireman’s Fund Ins. Co. v M/V DSR Atlantic,7 the Ninth Circuit found that the Korean forum selection clause in the bill of lading did not violate § 1303(8) of COGSA in the context of an in rem claim against the vessel. As a result, the entire lawsuit was dismissed, including the in rem claim. The Fireman’s Fund decision has been followed by a number of district courts in the US.8

United States maritime law recognises the presumptive validity of mandatory forum selection clauses in bills of lading governed by COGSA.1 The presumptive validity of mandatory forum selection clauses is rebuttable, however, and may be overcome in the following ways:

by ‘clearly demonstrating that it is unreasonable or

invalid’;2 or

• if the ‘ . . . substantive law to be applied [by the
chosen forum] would reduce the carrier’s obligations to the cargo below what COGSA guarantees’;3 or,

• if the forum selection clause has been waived by the
party seeking to enforce it.4 The burden of proving the invalidity of the mandatory forum selection clause is on the party seeking to block its enforcement.
In rem claims against vessels

Enforcement of forum selection clauses in bills of lading has come under scrutiny in the context of in rem claims against vessels. Cargo interests have argued, successfully in a growing number of cases, that forum selection clauses should not be enforced, as they violate § 1303(8) of COGSA, in circumstances where a foreign forum does not recognise an in rem claim against the vessel.5

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ARE FO RUM SELECTION C LAUSES EN FOR CE ABLE AG AIN ST IN REM C LAIMS?

K EY POINTS

Are forum selection clauses enforceable against in rem claims?

1 United States Carriage of Goods at Sea Act, 46 USC § 1300 et seq. (‘COGSA’); Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995). 2 M/S Bremen v. Zapata Off-Shore Co. ,4 0 7 U . S .1 , 15 (1972). 3 Sky Reefer, supra at 515 U.S. 539. 4 In re Rationis Enterprises, Inc. of Panama, 1999 WL 6364 (S.D.N.Y. 1999). 5 Section 1303(8) of COGSA provides that:‘[a]ny clause…in a contract of carriage relieving the carrier or ship from liability for loss or damage to …goods, …or lessening such liability …shall be null and void and of no effect.’ (Emphasis added). 6 Tokio Marine & Fire Ins. Co. v. M/V Turquoise, 2001 AMC 1692 (D. S . C .2 0 0 1 ) ; Allianz Ins. Co. of Canada v. Cho Yang Shipping Co., 131 F.Supp.2d 787 (E.D.Va. 2 0 0 0 ) ;I nternational Marine Underwriters v. M/V Kasif Kalkavan, 1998 AMC 765 (S.D.N.Y. 1998). Dismissal of the in personam claim would apply equally whether the carrier were the vessel owner, charterer, or NVOCC. 7 131 F.3d 1336 (9th Cir. 1997). 8 See, eg, Thyssen Inc. v. M/V Markos N, 2000 U.S. Dist. Lexis 9764 (S.D.N.Y. 2001); Kelso Enterprises, Inc. v. M/V Wisida Frost, 8 F. Supp 2d 1197 (C.D. Cal 1998); Ab ra r Surgery Ltd. v. M/V Lolly Oro, 1999 U.S. Dist. Lexis 6768 (S.D.N.Y. 1999); Tradebed, Inc. v. M/V Agia Sofia, 1997 U.S. Dist. Lexis 23001 (D.N.J.1997). 9 See Tokio Marine in endnote 6. 10 Polar Shipping Ltd. v. Oriental Shipping Corp., 680 F.2d 627 (9th Cir. 1982); Staronset Shipping Ltd. v. North Star Nav i g at i o n ,I n c. , 659 F.Supp 189 (S.D.N.Y. 1987). There is an important distinction between foreign litigation clauses and foreign arbitration clauses. Specific statutory authority allows a party to seek security in aid of arbitration, 9 USC § 4; whereas there is no such specific statutory authority for security in aid of foreign litigation.

Security issues

Does the existence of a foreign forum selection clause serve as a ground to vacate a Rule C arrest or Rule B attachment proceeding in the US under a theory that, by virtue of the forum selection clause in the bill of lading, the parties have agreed that all claims arising under the bill of lading should be litigated in a foreign forum? The brief answer is probably ‘no’ based on the few cases that have addressed this issue. For example, the District of South Carolina has refused to vacate a vessel’s Rule C arrest since it found that enforcement of the Korean forum selection clause would lessen the vessel’s in rem liability in violation of § 1303(8) of COGSA. Thus, the Letter of Undertaking given as a substitute for the vessel remained in place to secure the in rem claim.9 In the context of a Rule B attachment, the Ninth Circuit Court of Appeals and Southern District of New York have refused to vacate an attachment on this ground. These courts have found that the attachment was essentially for purposes of security and the existence of a foreign forum selection clause in the governing contract should not deprive the claimant of the ability to obtain security for the claim.1 0 In sum, the law governing enforcement of a forum selection clause in the context of an in rem claim against a vessel is in a state of flux. It remains to be seen how this issue will be addressed by other Courts of Appeal.

US maritime law provides for the independent liability of a vessel in rem, separate and apart from the legal liability of a carrier in personam; US maritime law recognises the presumptive validity of mandatory forum selection clauses in bills of lading governed by COGSA (eg Sky Reefer); The enforcement of forum selection clauses has been scrutinised by US courts in the context of in rem claims against vessels; Where the foreign forum (stipulated in the relevant forum selection clause) does not recognise an in rem claim against a vessel, the forum selection clause may not be enforced (in respect of the in rem claim); The existence of a forum selection clause probably does not serve as a ground to vacate the arrest or attachment of a vessel; but the law is not firmly established on this point.

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