Forum selection, choice of law

and mandatory rules

Martin Davies*

Many countries have legislation striking down foreign forum selection clauses in
bills of lading and other contracts for carriage by sea. The oldest such legislation
in the common law world is that of Australia, which first legislated in 1904. By
contrast, the United States has never passed legislation guaranteeing a plaintiff
access to its home forum. Forum-protecting provisions were not included in the
Harter Act or the Carriage of Goods by Sea Act because they were not thought
necessary, as foreign forum selection clauses were regarded as contrary to public
policy. That changed in 1995, with the Supreme Court’s Sky Reefer decision.
Since then, foreign forum selection clauses have routinely been upheld, with the
result that few cargo claims are tried in US courts. This article compares the
Australian and American experience.

1. Introduction
Choice of law and choice of forum clauses are ubiquitous in contracts for the carriage of
goods by sea. In the liner trade, such clauses usually provide that the contract is governed
by the law of the carrier’s country and require any claim to be brought in the carrier’s
principal place of business.1 Obviously, this may not always be convenient for the cargo
owner or its insurer. The debate about whether to override such clauses by mandatory
rules of law for the protection of cargo claimants mirrors the debate about overriding pro-
carrier exclusion clauses, and it has gone on almost as long. In keeping with their
generally minimalist nature, neither the Hague Rules nor the Hague-Visby Rules contain
any provisions about jurisdiction or arbitration. It was never seriously contemplated that
they should, the prevailing view being that these were questions for national law to
decide.2 The Hamburg Rules3 did contain provisions about jurisdiction (Art 21) and

* Admiralty Law Institute Professor of Maritime Law, Tulane University Law School; Director, Tulane
Maritime Law Center.
1. This is true even in the generic liner bills of lading and waybills drafted by BIMCO: see, eg, Conlinebill
cl 3; Linewaybill, cl 3.
©Informa null - 27/03/2015 04:46

2. The International Law Association’s ‘‘Draft of a Suggested International Code’’, made in The Hague in
1921 (the original Hague Rules), contained a provision, Art 9, which made that intention clear by stating that
‘‘Nothing in this Code shall be deemed to affect in any way the competence of tribunals, mode of procedure, or
methods of execution authorised by national laws’’: see Michael Sturley, Legislative History of the Carriage of
Goods by Sea Act (Littleton, CO, 1990), Vol 1, 105. The Argentinean Maritime Law Association passed a
resolution asking the International Law Association to include a provision that all disputes should be settled in
the courts of the country of destination: ibid, Vol 2, 416. This met with opposition in the Comité Maritime
International (CMI) (ibid) and there was no debate about forum selection in the Brussels Convention.
3. UN Convention on the Carriage of Goods by Sea 1978.

237
 238 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

arbitration (Art 22), as will the Rotterdam Rules4 (in Chapters 14 and 15) when (and if)
they come into force.
Many countries have enacted national laws overriding the effect of foreign forum
selection clauses and, in some cases, mandating the application of their domestic law to
contracts for the carriage of goods by sea. The first such statute, at least in the common
law world, was Australia’s Sea-Carriage of Goods Act 1904 (Cth). In the United States,
on the other hand, there is no such legislation. When the Harter Act was passed in 1893,5
and when the Carriage of Goods by Sea Act (‘‘COGSA’’) was passed in 1936,6 it was not
thought necessary to include any legislative provisions striking down foreign choice-
of-court clauses,7 because they were regarded as invalid in any event. The position has
changed dramatically since then and foreign forum selection clauses are now routinely
enforced in the United States. The contrast between the protectionism of Australia and the
transition from protectionism to liberalism in the United States makes for an interesting
case study about the battle between mandatory domestic laws and forum selection
clauses.

2. Australia
Australia passed legislation modelled on the Harter Act in 1904,8 just three years after the
six previously British colonies were united into a single country by federation.9 The goal
of the legislation was simple, and similar to that of the Harter Act itself: to prevent
shipowners from contracting out of liability for their own negligence.10 The legislation
was introduced in response to a plea made to the Prime Minister, George Reid, by fruit
exporters complaining that ‘‘the shipping companies took no responsibility whatever
regarding the safe carriage of the products’’.11 When debating their Bill in 1904, the
Australian senators spent a considerable amount of time debating choice of law and choice
of forum. The pro-carrier state of English law and the attitude of English courts were of
central importance to Australia because, in 1904, 42 per cent of ships entering Australian

4. UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2009.
5. The Harter Act is still in force. It applies outside the ‘‘tackle to tackle’’ period covered by the Carriage of
Goods by Sea Act (COGSA). The Harter Act is now codified at 46 USC §§ 30701–30707. It was formerly
codified at 46 app USC §§ 190–196.
6. COGSA is now in a Statutory Note appended to the recodified Harter Act, 46 USC § 30701. It was
formerly codified at 46 app USC §§ 1300–1312.
7. Although the phrase ‘‘choice-of-court clauses’’ is ugly, it is precise and will be used where relevant
throughout this paper. A forum selection clause defines the forum in which a claim must be brought. Thus, an
arbitration clause is a form of forum selection clause. Because arbitration clauses were for a long time treated
differently from choice-of-court clauses in the United States, it is necessary to use the phrase ‘‘choice-of-court
clause’’ rather than ‘‘forum selection clause’’. When the latter phrase is used in this paper, it refers generically
to choice-of-court clauses and arbitration clauses.
©Informa null - 27/03/2015 04:46

8. Sea-Carriage of Goods Act 1904 (Cth).

9. The Commonwealth of Australia Constitution Act 1900 (UK), s 3 empowered Queen Victoria to unite the
colonies of New South Wales, Queensland, South Australia, Tasmania, Victoria and Western Australia into a
federal Commonwealth called the Commonwealth of Australia. The Royal Proclamation federating Australia
came into effect on 1 January 1901.
10. ‘‘In one sentence, the object of the measure is to prevent ship-owners from escaping liability for their own
negligence’’: Commonwealth of Australia, Parliamentary Debates, Senate, 23 November 1904, Vol XXIII, 7286
(Senator Sir Josiah Symon).
11. Ibid, 7286–7287 (Senator Sir Josiah Symon).
 FORUM SELECTION, CHOICE OF LAW AND MANDATORY RULES 239

ports were registered in the UK; only 19 per cent were registered in Australia.12 Australian
legislation based on the Harter Act would be sound and fury signifying nothing if it could
be circumvented by the simple device of an English choice of law clause in the bill of
lading. Opinions were divided about the effect that Australian legislation would have on
English judicial attitudes. The Attorney-General, Senator Sir Josiah Symon, was confident
that it would be sufficient to create a ‘‘positive law’’ striking down protective clauses in
bills of lading.13 The youthful Senator John Keating, born in Australia and just eight years
out of law school,14 was much warier about the attitude of English courts than the
Scottish-born (and not law school trained)15 Sir Josiah. Senator Keating argued that
English courts would apply English law notwithstanding the existence of an Australian
‘‘positive law’’.16 To his credit, the Attorney-General was not stubborn. He accepted the
need to make the Bill ‘‘absolutely without a loophole’’,17 and he himself introduced an
amendment in Committee providing that, in any bill of lading for carriage from a place in
Australia to a place outside Australia, the parties were deemed to have contracted
‘‘according to the laws in force at the place of shipment’’ and any agreement to the
contrary was ‘‘illegal, null and void, and of no effect’’,18 a wonderfully tautological
phrase19 that eventually found its way into the Hague Rules.20
That was only half a solution, though. Making choice of Australian law mandatory
would be a Pyrrhic victory if all disputes were to be heard in foreign courts. In 1904, it
took about 45 days to sail from Australia to London by passenger liner.21 The return fare
from Australia to London in saloon class ranged between £65 and £115 in 1904,22 which

12. Trade Since 1900, in Australian Bureau of Statistics, Year Book Australia 2001 (2001), available at
www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/1301.0Feature%20Article532001?opendocument&tab
name=Summary&prodno=1301.0&issue=2001&num=&view= (last visited 3 September 2010).
13. Commonwealth of Australia, Parliamentary Debates, Senate, 23 November 1904, Vol XXIII, 7297
(Senators Sir Josiah Symon and Thomas Givens).
14. Quentin Beresford, Keating, John Henry (1872–1940) in Australian Dictionary of Biography (1983), Vol
9, 541–542, available online at: www.adb.online.anu.edu.au/biogs/A090540b.htm (last visited 3 September
2010). Keating was born in Hobart and received an LLB degree from the University of Tasmania in 1896. He
was elected Senator in 1901, becoming the youngest member of the first Commonwealth Parliament.
15. Don Wright, Symon, Sir Josiah Henry (1846–1934) in Australian Dictionary of Biography (1983), Vol 12,
156–158, available online at: www.adb.online.anu.edu.au/biogs/A120174b.htm (last visited 3 September 2010).
Symon was born in Wick, Caithness. He emigrated to South Australia at the age of 20. He did not obtain a law
degree but was called to the South Australian Bar in 1871. He became Attorney-General of South Australia in
1881. He declined the offer of a safe Conservative seat in the House of Commons while on a visit to England
in 1886. He was elected to the first Commonwealth Parliament in 1901 and became Attorney-General in
1904.
16. Commonwealth of Australia, Parliamentary Debates, Senate, 23 November 1904, Vol XXIII, 7306
(Senator Keating).
17. Ibid, 7297 (Senator Sir Josiah Symon).
18. Sea-Carriage of Goods Act 1904 (Cth), s 6.
19. Inspired, perhaps, by the Bellman in Lewis Carroll’s The Hunting of the Snark (London 1876): ‘‘What I
tell you three times is true’’.
©Informa null - 27/03/2015 04:46

20. Hague Rules, Art III, r 8.

21. Passenger ships to Australia: a comparison of vessels and journey times to Australia between 1788 and
1900, Australian National Maritime Museum, www.anmm.gov.au/site/page.cfm?u=1486#1909 (last visited 20
August 2010). In 1909, the SS Osterley took 45 days to carry almost 1,100 passengers (270 first class, 120
second, 700 third) from London to Melbourne via the Suez Canal.
22. The Advertiser (an Adelaide newspaper) for 9 March 1904 can be read at the National Library of Australia
website at: newspapers.nla.gov.au/ndp/del/page/920082?zoomLevel=1 (last visited 3 September 2010). Much of
the front page is taken up with advertisements for shipping lines. The Orient-Pacific Line advertised a return fare
from Adelaide to London in saloon class at £65 to £115.
 240 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

is the equivalent of between £33,300 and £58,90023 today.24 Only the most determined of
cargo claimants with the largest of claims would be prepared to spend so much to sail so
far to try to persuade an English court to apply the Australian Act to the detriment of an
English carrier. Accordingly, the Sea-Carriage of Goods Act 1904 (Cth), s 6 provided that
‘‘any stipulation or agreement . . . purporting to oust or lessen the jurisdiction of the
Courts of the Commonwealth or of a State in respect of the bill of lading or document’’
should also be ‘‘illegal, null and void and of no effect’’.
Australia enacted the Hague Rules in 1924, long before it ratified the Brussels
Convention in which they were contained.25 The Sea-Carriage of Goods Act 1924 (Cth)
continued and expanded the protectionist policy enshrined in its predecessor, s 6 of the
1904 Act. The Sea-Carriage of Goods Act 1924 (Cth), s 9(1) made choice of Australian
law mandatory for outward-bound international carriage from Australia. Section 9 also
expanded the jurisdictional protection afforded by its predecessor, striking down any
clause that ousted or lessened the jurisdiction of Australian courts for either outward-
bound international carriage from Australia (in s 9(1)) or for inward-bound international
carriage to Australia (in s 9(2)).
The 1924 Act was completely effective in its goal of guaranteeing Australian cargo
claimants access to Australian courts. It used ‘‘the strongest words’’26 in ‘‘an ambit widely
cast’’.27 In Compagnie des Messageries Maritimes v. Wilson,28 the High Court of Australia
held that s 9(2) struck down a choice-of-French-courts clause in a bill of lading for
carriage of goods from Dunkirk to Sydney. In Kim Meller Imports Pty Ltd v. Eurolevant
SpA,29 the New South Wales Court of Appeal applied s 9(2) to strike down a London
arbitration clause in a bill of lading for carriage of goods from La Spezia to Sydney. In
Sonmez Denizcilik ve Ticaret Anonim Sirketi v. MV Blooming Orchard,30 the Supreme
Court of New South Wales applied s 9(1) to strike down a London arbitration clause in a
voyage charter for carriage of coal from Port Kembla in New South Wales to Iskenderun
in Turkey. Carruthers J held that a voyage charter was a ‘‘document relating to the carriage
of goods’’ for purposes of s 9.
When Australia adopted the Visby amendments to the Hague Rules, it passed a new
Act, the Carriage of Goods by Sea Act 1991 (Cth). Section 11 of that Act continued the
protectionist policies of its two predecessors, making choice of Australian law mandatory
for outward-bound international carriage from Australia.31 In 1998, Australia amended the

23. At the exchange rates prevailing on 3 September 2010, the equivalent ranges are US$51,410 to
US$90,934 and A$56,125 to A$99,272.
24. Five Ways to Compute the Relative Value of a UK Pound Amount, 1830 to Present at the MeasuringWorth
website, www.measuringworth.com/ukcompare/# (last accessed 3 September 2010). The website uses five
different indicators of relative worth and explains that different indicators are useful for different purposes.
Choosing the Best Indicator to Measure Relative Worth (www.measuringworth.com/indicator.html) suggests that
to compare how affordable something would be for the average person, the GDP per capita indicator should be
used. That indicator produced the figures shown above.
©Informa null - 27/03/2015 04:46

25. Australia did not ratify the Hague Rules until 4 July 1955. See Nagendra Singh, International Maritime
Conventions (London, 1983), Vol 4, 3044.
26. Compagnie des Messageries Maritimes v. Wilson (1954) 94 CLR 577, 583, per Dixon CJ.
27. Bulk Chartering and Consultants Australia Pty Ltd v. T & T Metal Trading Pty Ltd (The Krasnogorsk)
(1993) 31 NSWLR 18, 23, per Kirby P.
28. (1954) 94 CLR 577.
29. (1986) 7 NSWLR 269.
30. (1990) 22 NSWLR 273.
31. Carriage of Goods by Sea Act 1991 (Cth) ss 11(1)(a), 11(2)(a).
 FORUM SELECTION, CHOICE OF LAW AND MANDATORY RULES 241

Act of 1991 to create a hybrid version of the Hague-Visby Rules, adopting some, but not
all, of the innovations in the Hamburg Rules.32 As amended, s 11 uses the broadly
encompassing phrase ‘‘a sea carriage document’’, which seems broad enough to include all
kinds of documents used for the carriage of goods by sea, including bills of lading,
seawaybills, voyage charterparties and contracts of affreightment.
Of course, the Australian Parliament can only directly affect what happens within the
area of its territorial sovereignty. Akai Pty Ltd v. People’s Insurance Co Ltd33 illustrates
that English courts, at least, can be expected to apply English law when faced with a
contract containing a choice of English law clause, even if that clause is rendered invalid
by operation of an Australian statute. Similarly, OT Africa Line Ltd v. Magic Sportswear
Corp34 shows that English courts would be prepared to issue an anti-suit injunction to
restrain an Australian cargo claimant from proceeding in Australia under a bill of lading
containing an English exclusive jurisdiction clause, even though that clause would be
invalid under Australian law. As these cases emphatically illustrate, Australia cannot
effectively dictate to foreign courts or arbitrators what law should be applied to contracts,
nor whether forum selection clauses should be regarded as valid or void. Nevertheless, the
Australian legislation is not entirely without teeth. In BHPB Freight Pty Ltd v. Cosco
Oceania Chartering Pty Ltd,35 Finkelstein J of the Federal Court of Australia granted an
anti-arbitration injunction restraining continuation of London arbitration proceedings.
When copies of those orders were sent to the arbitrator in London, he replied that
arbitration in London is subject to the Arbitration Act 1996 (UK) and not the orders of a
foreign court. In response, Finkelstein J observed that the London arbitrator might have to
reconsider his view that he was not amenable to the jurisdiction of the Federal Court of
Australia.36 It is settled law that a non-party may nevertheless be guilty of contempt if he
or she deliberately undermines a court order. The fact that a foreign national commits an
act of contempt outside the territorial jurisdiction of the court does not necessarily relieve
that person of liability for contempt. Finkelstein J observed that, if the London arbitrator
did in fact take any step to further the arbitration after becoming aware of the anti-
arbitration injunction, ‘‘he may be in for a rude shock were he to find himself subject to
the personal jurisdiction of the Federal Court’’.37 The same might be said of any arbitrator,
whether in London or anywhere else outside Australia,38 who persisted in conducting an
arbitration after being ordered not to do so by an Australian court on the ground that the
arbitration agreement is rendered ‘‘illegal, null and void and of no effect’’ by the Carriage
of Goods by Sea Act 1991 (Cth), s 11. It should also be observed that, if the arbitrator

32. The peculiarly hybrid, non-uniform, Australian version of the Hague-Visby Rules can be seen in the
‘‘Schedule of Modifications’’: Carriage of Goods by Sea Act 1991 (Cth), Sch 1A. The amendments were made
by delegated legislation, the Carriage of Goods by Sea Regulations 1998 (Cth) and the Carriage of Goods by Sea
Regulations (No 2) 1998 (Cth). Such provisions are known as ‘‘Henry VIII clauses’’, a reference to the
delegation of power by the English Parliament to Henry VIII to amend legislation with which he did not
©Informa null - 27/03/2015 04:46

agree.
33. [1998] 1 Lloyd’s Rep 90.
34. [2005] 2 Lloyd’s Rep 170 (CA). See also Whitesea Shipping and Trading Corp v. El Paso Rio Clara Ltda
(The Marielle Bolton) [2010] 1 Lloyd’s Rep 648.
35. (2008) 168 FCR 169; 247 ALR 369.
36. (2008) 168 FCR 169, 174; 247 ALR 369, 372.
37. Ibid.
38. The Carriage of Goods by Sea Act 1991 (Cth), s 11(3) provides that agreements to arbitrate are valid if
they are for arbitration in Australia.
 242 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

were to proceed with the arbitration in such a situation and were to make an award in the
absence of the protesting party, that award would not be enforceable in Australia under the
New York Convention,39 because Art V, r 2(a) of that Convention provides that
recognition and enforcement of a foreign arbitral award may be refused in a country if the
subject matter of the difference is not capable of settlement by arbitration under the law
of that country.

3. The United States

The Harter Act contained no provision striking down forum selection clauses because
none was needed. Such clauses were already regarded as being unenforceable because
they were contrary to public policy. In 1889, four years before the Harter Act was passed,
Judge Benedict40 held in Prince Steam-Shipping Co v. Lehman41 that a forum selection
clause in a charterparty was ‘‘against public policy, and void’’.42 The fact that the clause
chose the nearby forum of Philadelphia made no difference: it was ‘‘in legal effect an
agreement ousting the jurisdiction of all courts, except those in the port of Philadelphia’’.43
Not surprisingly, the doctrine applied with equal or greater force to clauses choosing
foreign fora.44
This continued to be the position taken in US courts until the middle of the twentieth
century. Indeed, the principle that choice-of-court clauses were unenforceable was so well
established that carriers often gave up trying to rely on them. For example, in Wood &
Selick Inc v. Cie Générale Transatlantique,45 the plaintiff sued for damage to cargo carried
from France to the United States under bills of lading governed by French law and
containing a clause providing that all disputes must be brought before the Commerce
Court of the Seine. In the US Court of Appeals for the Second Circuit, another great
American judge, Judge Learned Hand,46 wrote:47
39. The UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is Sch 1 to
the International Arbitration Act 1974 (Cth).
40. Judge Charles Linnaeus Benedict is often believed to be the author of the book that became Benedict on
Admiralty, now a multi-volume encyclopaedia of American maritime law. That is incorrect, although Judge
Benedict was a distinguished admiralty judge. He was in fact the nephew and one-time law partner of the author,
Erastus C Benedict, who wrote The American Admiralty, Its Jurisdiction and Practice, 1st edn (New York,
1850).
41. (1889) 39 F 704 (SDNY).
42. Ibid, 704. The fact that the argument for the shipowner invoking the forum selection clause was made by
Judge Benedict’s brother, Robert D Benedict, did not sway the judge’s opinion, which was brusquely stated. The
case was reported by Judge Benedict’s nephew (Robert D Benedict’s son), Edward G Benedict. Robert D
Benedict later became the editor of the third edition of The American Admiralty, Its Jurisdiction and Practice,
published in 1894, the first edition to be published after his uncle Erastus C Benedict’s death. The book is
dedicated to Judge Charles L Benedict ‘‘with fraternal affection’’: see p iv. Edward G Benedict became the editor
of the fourth edition of The American Admiralty, Its Jurisdiction and Practice, published in 1910.
43. (1889) 39 F 704, 704.
44. See, eg, Slocum v. Western Assurance Co (1890) 42 F 235 (SDNY) (refusing to enforce choice-of-Toronto
©Informa null - 27/03/2015 04:46

courts clause in marine insurance contract).

45. (1930) 43 F 2d 941; 1930 AMC 1545 (2d Cir).
46. Judge Billings Learned Hand is often said to be the greatest judge never to be appointed to the Supreme
Court. He served on the US District Court for the Southern District of New York from 1909 to 1924 and on the
US Court of Appeals for the Second Circuit from 1924 to 1961. See Gerald Gunther, Learned Hand: The Man
and the Judge (Cambridge, MA, 1994). Hand’s cousin, Augustus Noble Hand, also served on both the US
District Court for the Southern District of New York and the US Court of Appeals for the Second Circuit. Wood
& Selick is one of the many Second Circuit cases decided by both Hands.
47. (1930) 43 F 2d 941, 942; 1930 AMC 1545, 1547.
 FORUM SELECTION, CHOICE OF LAW AND MANDATORY RULES 243

‘‘We may at the start lay aside the clauses in the bills of lading, which apparently were intended to
confine any litigation over the contracts to a French court. The respondent [the carrier] does not
pretend that, so construed, these would be valid, and it is of course well settled that they would
not’’.

Throughout the extensive debates in the US Congress about adoption of the Hague Rules,
no mention was made of the need to include in the Carriage of Goods by Sea Act
(COGSA) a provision striking down foreign choice-of-court clauses. The reason was the
same in 1936 as it had been in 1893, when the Harter Act was passed: such a provision
was simply not necessary, given the prevailing judicial doctrine. Courts continued to hold
choice-of-court clauses to be unenforceable after COGSA was passed, just as they had
done before.48
Contract clauses providing for arbitration of disputes were in a different category, at
least after 1925, when Congress passed the Federal Arbitration Act (‘‘FAA’’). Before
1925, the attitude of admiralty courts to executory arbitration agreements49 was the same
as to choice-of-court clauses: they were simply not enforceable.50 Section 3 of the FAA,
9 USC § 3, now requires a mandatory stay of court proceedings on any issue referable to
arbitration under an agreement in writing requiring arbitration. This Congressional
recognition of the enforceability of arbitration clauses placed them in a different category
from choice-of-court clauses. The former were enforceable, the latter were not.
In Kulukundis Shipping Co SA v. Amtorg Trading Corp,51 the US Court of Appeals for
the Second Circuit held that, although it is for the court to decide whether there is an
agreement to arbitrate, the judge must send all other matters to arbitration if there is a valid
arbitration agreement in a charterparty.52 The court’s opinion was written by Jerome
Frank, one of the leaders of the American Legal Realist movement and author of the
seminal Realist text Law and the Modern Mind.53 Judge Frank examined the history of
judicial hostility, both English and American, to arbitration agreements before concluding,
with his usual combination of acuity and acerbity:54
‘‘Perhaps the true explanation is the hypnotic power of the phrase, ‘oust the jurisdiction’. Give a bad
dogma a good name and its bite may become as bad as its bark’’.

Frank was right, of course. The parties cannot by their contract divest the court of the
jurisdiction conferred upon it by Congress. They can, however, agree that they will not
invoke the court’s jurisdiction but will instead go to some other forum to resolve their
dispute. Tellingly, this characterisation of the effect of forum selection clauses applies just
as much to choice-of-court clauses as it does to arbitration clauses. Not long after
Kulukundis, the Second Circuit began to adopt a similar view of choice-of-court clauses,

48. See, eg, The Edam (1938) 27 F Supp 8; 1939 AMC 48 (SDNY).
©Informa null - 27/03/2015 04:46

49. Ie, agreements to arbitrate future disputes, rather than ad hoc agreements to arbitrate existing disputes.
50. See, eg, US Asphalt Refining Co v. Trinidad Lake Petroleum Co (1915) 222 F 1006 (2d Cir) (holding
London arbitration clause in a charterparty to be void).
51. (1942) 126 F 2d 978; 1942 AMC 364 (2d Cir).
52. This is still the position under US law, which therefore has a weak version of the kompetenz-kompetenz
principle. See First Options of Chicago Inc v. Kaplan (1995) 514 US 938; 115 S Ct 1920.
53. Jerome Frank, Law and the Modern Mind (New York, 1930). A new edition with an introduction by Brian
Bix was published by Transaction Publishers in 2009.
54. (1942) 126 F 2d 978, 984; 1942 AMC 364, 372.
 244 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

treating them as a reason for the court to decline its unquestioned jurisdiction rather than
an attempt to oust the court’s jurisdiction.
The break from the historic prohibition on choice-of-court clauses came in Wm H
Muller & Co v. Swedish American Line Ltd.55 In that case, a Swedish carrier moved
successfully for the libel (the complaint) against it to be set aside because the bill of lading
contained a choice-of-Swedish-courts clause. The US Court of Appeals for the Second
Circuit held that a forum selection clause of this kind was enforceable if it was ‘‘not
unreasonable in the setting of the particular case’’.56
Not all circuit courts of appeal were convinced. The US Court of Appeals for the Fifth
Circuit firmly restated the general rule, and the historic characterisation of choice-of-court
clauses, in Carbon Black Export Inc v. SS Monrosa.57 The Supreme Court granted
certiorari (ie, special leave to appeal) in Carbon Black, with the intention of resolving the
conflict between the Second Circuit’s Muller decision and the Fifth Circuit’s decision in
Carbon Black itself.58 However, the Supreme Court later dismissed the writ as improvi-
dently granted, a bare majority holding that the particular choice-of-court clause in the
case before it did not extend to in rem actions, and so the case did not actually require the
lower court to adopt a position that conflicted with Muller.59
The rather confused and ambiguous position created by this divergence of opinion
between the two main maritime courts of appeal continued until 1967, when the US Court
of Appeals for the Second Circuit, sitting en banc,60 overruled Muller in Indussa Corp v.
SS Ranborg,61 thereby restoring uniformity with the Fifth Circuit’s position. The Indussa
court did not disagree with the new characterisation of choice-of-court clauses as being a
reason for the court to decline jurisdiction, rather than an attempted ouster of jurisdiction.
Instead, the Indussa court pointed out that Muller had paid insufficient attention to the
effect of COGSA.62 The Indussa court said that, if proper effect were to be given to
COGSA, the impact of s 3(8) (equivalent to Hague Rules, Art 3, r 8) must be considered.
In an opinion written by Judge Friendly, the en banc Indussa court held that s 3(8) struck
down any provision that might have the result that a foreign court would afford the cargo
owner lesser protection than would be given by an American court applying
COGSA:63
‘‘From a practical standpoint, to require an American plaintiff to assert his claim only in a distant
court lessens the liability of the carrier quite substantially, particularly when the claim is small. Such
a clause puts ‘a high hurdle’ in the way of enforcing liability . . . and thus is an effective means for
carriers to secure settlements lower than if cargo could sue in a convenient forum . . . A clause
making a claim triable only in a foreign court would almost certainly lessen liability if the law which
the court would apply was neither the Carriage of Goods by Sea Act nor the Hague Rules. Even

55. (1955) 224 F 2d 806; 1955 AMC 1687 (2d Cir).

56. (1955) 224 F 2d 806, 808; 1955 AMC 1687, 1689–1690.
57. (1958) 254 F 2d 297; 1958 AMC 1335 (5th Cir).
©Informa null - 27/03/2015 04:46

58. The Monrosa v. Carbon Black Export Inc (1958) 358 US 809; 79 S Ct 43.
59. The Monrosa v. Carbon Black Export Inc (1959) 359 US 180; 79 S Ct 710; 1959 AMC 1327.
60. An en banc court consists of all active judges in the federal circuit in question. Only an en banc court can
overrule an earlier decision made by a three-judge panel. A later three-judge panel must follow an earlier
decision of a three-judge panel, even if it disagrees with the decision. If the later panel rebels, its decision has
no precedential value.
61. (1967) 377 F 2d 200; 1967 AMC 589 (2d Cir).
62. (1967) 377 F 2d 200, 202–203; 1967 AMC 589, 593–594.
63. (1967) 377 F 2d 200, 203–2043; 1967 AMC 589, 595 (emphasis in the original).
 FORUM SELECTION, CHOICE OF LAW AND MANDATORY RULES 245

when the foreign court would apply one or the other of these regimes, requiring trial abroad might
lessen the carrier’s liability since there could be no assurance that it would apply them in the same
way as would an American tribunal subject to the uniform control of the Supreme Court, and s 3(8)
can well be read as covering a potential and not simply a demonstrable lessening of liability.’’

After Indussa, American courts returned to their former practice of routinely striking
down foreign choice-of-court clauses in bills of lading, albeit this time for the new reason
that they violated COGSA, s 3(8).64 They continued to do so even after the Supreme
Court’s landmark decision in M/S Bremen v. Zapata Off-Shore Co,65 which held that a
choice-of-court clause in ‘‘a freely negotiated private international agreement, unaffected
by fraud, undue influence, or overweening bargaining power, such as that involved here,
should be given full effect’’.66 Among other things, Bremen finally put paid to the old idea
that choice-of-court clauses oust the jurisdiction of the courts. Nevertheless, lower courts,
including circuit courts of appeal, said that, although Bremen had reversed the traditional
view and had held that choice-of-court clauses are presumptively valid, it had done so in
the absence of any congressional policy on the subject, much less a contrary congressional
policy such as the Indussa court had discerned in COGSA, s 3(8).67 Thus, Bremen was
held to have no impact on Indussa.
Indussa’s interpretation of COGSA, s 3(8) prevailed until the Supreme Court’s famous
(or infamous) decision in Vimar Seguros y Reaseguros SA v. M/V Sky Reefer,68 where the
court held that enforcing an arbitration clause in a bill of lading by ordering a stay under
the FAA, 9 USC s 3, did not conflict with COGSA, s 3(8). The arbitration clause affected
the manner in which liability was to be determined, but it had no effect on the extent of
the carrier’s liability, so it did not offend against COGSA. Although Sky Reefer was
concerned with an arbitration clause, which had long been treated differently from a
choice-of-court clause, the majority specifically said that: ‘‘[W]e cannot endorse the
reasoning or the conclusion of the Indussa rule itself’’.69 The plaintiff’s Indussa-like
argument that the Japanese arbitrators might not apply COGSA was dismissed as
‘‘premature’’.70 The possibility that the foreign forum might not apply COGSA had been
enough for the Indussa court to find a violation of s 3(8).71 The Sky Reefer court was
unconvinced:72
‘‘At this interlocutory stage it is not established what law the arbitrators will apply to petitioner’s
claims or that petitioner will receive diminished protection as a result. The arbitrators may conclude
that COGSA applies of its own force or that Japanese law does not apply so that, under another
clause of the bill of lading, COGSA controls. Respondents seek only to enforce the arbitration
agreement. The District Court has retained jurisdiction over the case and will have the opportunity

64. Courts in the Fifth Circuit continued to apply the Carbon Black rationale that choice-of-court clauses were
unenforceable because contrary to public policy: see, eg, Insurance Co of North America v. NV Stoomvaart-
Maatschappij ‘‘Oostzee’’ (1961) 201 F Supp 76; 1964 AMC 1060 (ED La).
©Informa null - 27/03/2015 04:46

65. (1972) 407 US 1; 92 S Ct 1907.

66. (1972) 407 US 1, 12–13; 92 S Ct 1907, 1914–1915.
67. See, eg, Union Insurance Society of Canton Ltd v. SS Elikon (1981) 642 F 2d 721, 724 (4th Cir); Conklin
& Garrett Ltd v. M/V Finnrose (1987) 826 F 2d 1441, 1443–1444 (5th Cir).
68. (1995) 515 US 528; 115 S Ct 2322; 1995 AMC 1817.
69. (1995) 515 US 528, 534; 115 S Ct 2322, 2326.
70. (1995) 515 US 528, 540; 115 S Ct 2322, 2329.
71. See supra, n 63.
72. (1995) 515 US 528, 540; 115 S Ct 2322, 2329–2320 (internal quotations and references omitted).
 246 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the . . .
laws has been addressed.’’

This ‘‘second look’’ doctrine is a familiar feature of cases involving arbitration

agreements.73 A court is asked to rule at a preliminary stage that a certain issue should not
be arbitrated because it involves some question of mandatory US law involving the public
interest, such as the Securities Exchange Act of 1934 or the Sherman Act, the principal
American antitrust legislation. The court declines to hold that such questions are
inarbitrable and sends the parties off to private international arbitration, with the rather
complacent observation that any errors on the part of the arbitrators or any failure
appropriately to consider the public interest can be remedied when the time comes for the
award to be enforced.74 Even in the context of arbitration, the ‘‘second look’’ doctrine is
questionable because it supposes that there will be enforcement proceedings in the United
States, when the courts can take their ‘‘second look’’, rather than elsewhere in the world.75
The same approach is entirely out of place in the context of choice-of-court clauses, at
least in the United States.
In the passage just quoted, the Sky Reefer court observed that the US District Court for
the District of Massachusetts had retained jurisdiction over the case and thus could (at
least in theory) take its ‘‘second look’’ at award enforcement stage. That is true under the
FAA, because the order made by the court is a stay of proceedings under 9 USC § 3. It
is not true in the context of choice-of-court clauses because American courts dismiss
claims brought in breach of a choice-of-court clause.76 There can be no ‘‘second look’’ to
verify whether the foreign court applied COGSA in the same way that an American court
would have done because the claim has been expunged from the American court’s
docket.
It follows that the Sky Reefer doctrine should have been applied with great caution in
choice-of-court cases because a crucial element in the court’s reasoning—the possibility
of a ‘‘second look’’—does not apply to them. O’Connor J expressed that very caution in
Sky Reefer itself. She concurred in the result but said that it was not necessary to reject
Indussa nor to disturb the unbroken line of authority invalidating foreign choice-of-court
clauses in order to arrive at the result preferred by the majority.77 Nevertheless, caution
was there none after Sky Reefer. Lower courts immediately began to apply the decision to

73. The name ‘‘second look doctrine’’ seems to have been coined by William Park, ‘‘Private Adjudicators and
the Public Interest: The Expanding Scope of International Arbitration’’ (1986) 12 Brook J Int’l L 629, 630.
74. See Scherk v. Alberto-Culver Co (1974) 417 US 506; 94 S Ct 2449 (Securities Exchange Act); Mitsubishi
Motors Corp v. Soler Chrysler-Plymouth Inc (1985) 473 US 614; 105 S Ct 3346 (Sherman Act).
75. Philip McConnaughay, ‘‘The Risks and Virtues of Lawlessness: A ‘Second Look’ at International
Commercial Arbitration’’ (1999) 93 Northwestern UL Rev 453.
©Informa null - 27/03/2015 04:46

76. Many different bases are given for the order of dismissal, some of which are illogical, but the order is
always dismissal: see Martin Davies, ‘‘Forum Selection Clauses in Maritime Cases’’ (2003) 27 Tul Mar LJ 367.
One court has said: ‘‘[T]here is no existing mechanism with which forum selection enforcement is a perfect fit’’:
New Moon Shipping Co v. MAN B&W Diesel AG (1997) 121 F 3d 24, 29 (2d Cir). The best conceptual
explanation for dismissal, albeit one very rarely used, is dismissal by exercise of the court’s inherent power to
decline to exercise its jurisdiction, an order made to give the moving party specific performance of the plaintiff’s
promise to litigate elsewhere. See Staring, ‘‘Forgotten Equity: The Enforcement of Forum Clauses’’ (1999) 30
JMLC 405; Davies (2003) 27 Tul Mar LJ 367, 376.
77. Sky Reefer (1995) 515 US 528, 541–542; 115 S Ct 2322, 2330–2331.
 FORUM SELECTION, CHOICE OF LAW AND MANDATORY RULES 247

uphold foreign choice-of-court clauses in bills of lading, dismissing claims that would
previously have been retained.78
The effect of Sky Reefer has been exactly as predicted by Judge Friendly in Indussa.
Requiring American plaintiffs to assert their claims in distant courts has been an effective
means for carriers to secure settlements lower than if the cargo claimant could sue in an
American forum. In 2004, a survey of all cases dismissed or stayed on Sky Reefer grounds
was conducted, in an attempt to determine what happened to each case after dismissal or
stay.79 Information was received about 34 cases.80 Only three of them (or 8.8%) proceeded
to trial or arbitration in the chosen foreign forum. Of those three, one was found to be
time-barred in the foreign forum, so only two (or 5.9%) proceeded to resolution in the
forum designated in the forum selection clause. Fifteen cases (or 44.1%) were settled.
Nine cases (or 26.5%, a strikingly large number) were completely abandoned after
dismissal, with no further action being taken to bring the case before the chosen foreign
forum and no settlement.81
Of course, many of the cases that were settled would have settled even if they had not
been dismissed. The key to the survey was not merely the number of claims settled, but
the impact that dismissal from (or stay in) the American forum had on settlement. A large
majority (81.8% of those answering the relevant question) indicated that the case would
have settled for ‘‘more’’ or ‘‘much more’’ if it had not been dismissed.82 A similarly large
majority (80% of those answering the relevant question) indicated that the case settled
without any steps being taken to bring the case before the foreign forum; a further 10%
indicated that the case settled soon after proceedings were instituted in the foreign
forum.
Overall, the responses to the survey show overwhelmingly that is unrealistic to assume
that the plaintiff’s claim will be pursued in the foreign forum if it is dismissed or stayed
from the American court. A large majority of cases (24 out of the 34, or 70.6%) settled
or were discontinued after dismissal in the United States and, when there was a settlement,
it was almost always settlement at a discount. In half of the cases (17 of the 34 cases, or
50%), no steps were taken to bring the case before the chosen foreign forum.83 Judge
Friendly was right. Forum selection clauses lessen the carrier’s liability.
American cargo claimants have been without reliable access to American courts for
fifteen years, largely because the US Congress has paid little or no attention to the law of

78. See, eg, Mitsui & Co (USA) Inc v. Mira M/V (1997) 111 F 3d 33, 36 (5th Cir); Fireman’s Fund Insurance
Co v. MV DSR Atlantic (1997) 131 F 3d 1336, 1338 (9th Cir).
79. The results of the survey are described in detail in Robert Force and Martin Davies, ‘‘Forum Selection
Clauses in International Maritime Contracts’’, ch 1 of Martin Davies (ed), Jurisdiction and Forum Selection in
International Maritime Law: Essays in Honor of Robert Force (The Hague, 2005), 8–11.
80. For 13 of the 34 cases, counsel on both sides responded; for 12, only counsel for the plaintiff responded;
for nine, only counsel for the defendant responded: ibid, 8–9. In the 13 cases where both sides responded, the
responses were almost identical, which gave considerable cause for confidence that the 21 single-response
©Informa null - 27/03/2015 04:46

outcomes nevertheless gave an accurate picture of the outcome of the litigation in those cases, even though not
corroborated by responses from counsel on the other side: ibid, 9.
81. In six cases (or 17.6%), the respondent did not know how the case was subsequently resolved, because
his or her involvement ceased after dismissal in the United States. It is probable that those cases were also settled
or discontinued, because it is very unlikely that a case could have proceeded to trial or arbitration in the foreign
forum without the American lawyers being aware of that fact, even if they were not directly involved.
Nevertheless, the six remaining cases were left in the ‘‘don’t know’’ category: ibid, 9.
82. Ibid, 10.
83. Ibid, 11.
 248 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

carriage of goods by sea since 1936, when it passed COGSA. There was a radical change
in judicial attitude to choice-of-court clauses between 1936 and 1995 but Congress has
done nothing to restore the position that was taken for granted at the time when COGSA
was passed. Adoption of the Rotterdam Rules by the United States would remedy the
situation (except in the case of volume contracts and charterparties) and would largely
restore the Indussa position.84 Of course, that may be a long time coming, not least
because the US Senate must have its attention attracted for long enough to consider
adoption of the Convention containing the Rules, and two-thirds of the senators present
must then vote for adoption.85

4. Conclusion
Australia is far from being alone in seeking to ensure that cargo claimants have guaranteed
access to the forum of their choice. There is legislation similar to the Carriage of Goods
by Sea Act 1991 (Cth), s 11, in New Zealand,86 South Africa87 and Canada.88 The country
commentaries in Professor Tetley’s Marine Cargo Claims suggest that at least some form
of action against foreign forum selection clauses is taken in Argentina, Belgium, Chile,
China, Denmark, Finland, Greece, Japan, Liberia, Morocco, Norway, Peru, Sweden and
Venezuela.89 The experience of cargo claimants in the United States since Sky Reefer
shows that this is a sensible course of action for a country to take when its ports are served
by ocean carriers from other countries, with forum selection clauses drawn to favour their
own convenience. In many cases, a foreign forum selection clause has the effect of
completely insulating the carrier from liability.

84. Chester Hooper, ‘‘Forum Selection and Arbitration in the Draft Convention on Contracts for the
International Carriage of Goods Wholly or Partly by Sea, or the Definition of Fora Conveniens Set Forth in the
Rotterdam Rules’’ (2009) 44 Tex Int’l LJ 417.
85. Under the US Constitution, Art 2, § 2, the President has the power to make treaties ‘‘by and with the
Advice and Consent of the Senate . . . provided two thirds of the Senators present concur’’. Although advice and
consent by the Senate is a necessary stage in the process of treaty ratification, the United States only becomes
party to a treaty once the President makes a proclamation ratifying the treaty. Staff of Senate Committee on
©Informa null - 27/03/2015 04:46

Foreign Relations, 95th Congress, 1st Session, The Role of the Senate in Treaty Ratification (Committee Print,
1977), 2–3.
86. Marine Transport Act 1994 (NZ), s 210. See Deborah Laurent, ‘‘Foreign Jurisdiction and Arbitration
Clauses in the New Zealand Maritime Context’’ [2007] ANZMLJ 12.
87. Carriage of Goods by Sea Act 1986 (SA), s 3.
88. Marine Liability Act 2001 (Can), s 46.
89. William Tetley, Marine Cargo Claims, 4th edn (Quebec, 2007), Vol 2, 2419 (Argentina), 2425–2426
(Belgium), 2440–2441 (Chile), 2448 (Denmark), 2456 (Finland), 2471 (Greece), 2497 (Japan), 2500 (Liberia),
2521 (Morocco), 2536 (Norway), 2539 (Peru), 2572 (Sweden), 2608 (Venezuela).
 The position in the United States on foreign
forum selection and arbitration clauses

Robert Force*

To offset several extremely broad grants of jurisdiction to US federal courts, with

jurisdiction in Admiralty cases being a prime example, US courts have devised
rules and approaches to limit the scope of federal jurisdiction. As one example,
US courts have adopted a very pro-enforcement approach to foreign forum
selection and arbitration clauses. A review of the case law reveals that only in the
most extreme situations will US courts refuse to enforce these clauses. This
article also demonstrates, at least in cargo loss or damage cases, that sending
the cargo claimant off to another country effectively ends the case or results in
a discounted settlement. Despite the fact that in arbitration cases the district
court in which suit has been filed merely stays the action pending arbitration,
as a practical matter there is nothing that the court can do after the arbitrators
have issued their award.

I. INTRODUCTION

Maritime jurisdiction in the United States of America is very open ended. Consequently,
any maritime tort or contract case in which a US court can obtain jurisdiction over the
defendant or the defendant’s property, theoretically, may be brought in that court. Various
rules have been devised to prevent the exercise of extravagant jurisdiction and overtaxing
the US judiciary.
Of course a federal court may, if the court in which a case has been filed is an improper
venue, ‘‘transfer’’ a case to another federal court in which venue is proper and may
likewise do so for the convenience of the parties.1 These situations rarely involve
dismissal. If a defendant has been properly served with process even in an improper venue
within the limitation period, transfer presents no problem of prescription. A federal court
may not transfer a case to a state court, and a state court may not transfer a case to a
federal court. Similarly, neither a federal nor a state court may transfer a case to a foreign
court or arbitral tribunal. When a court is confronted with a valid foreign forum selection
clause or where a court is asked to yield its jurisdiction to a more convenient forum, the
©Informa null - 27/03/2015 04:46

court has no option but to dismiss the case. There is no international mechanism to which

* Niels F Johnsen Professor of Maritime Law and Director Emeritus, Maritime Law Center, Tulane
University. This article was presented at Colloquium on Maritime Conflicts of Law held in Southampton, UK
and co-sponsored by the Southampton University Institute of Maritime Law, the Nordisk Institute of Maritime
Law and the Tulane University Maritime Law Center. A longer version of this article is published in (2011) 35
Tul Mar LJ 401.
1. 28 USC § 1404.

249
 250 LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY

the US is a party that authorises a US court to transfer a case to a foreign court or arbitral
tribunal. Where a defendant is entitled to relief, it comes in the form of a dismissal. This
means that the case has been concluded in the court where it had originally been filed and
will not proceed in the court that ordered dismissal. Thus, the plaintiff or claimant must
start anew in the foreign jurisdiction.

II. FOREIGN FORUM SELECTION AND ARBITRATION CLAUSES

What really happens when the plaintiff chooses to file suit in a forum other than the one
previously agreed to by the parties and the case has been dismissed for that reason? I raise
this question because, as academicians, we may not give much thought to what happens
to a dispute after reading a decision in which the court has dismissed a case and relegated
the plaintiff to a foreign forum. Are the consequences of such dismissals more dire than
a mere change of forum and decision maker?
I am not aware of any US study, except for the one I am about to describe, that tracks
what happens to dismissed cases. Do plaintiffs in fact pursue defendants in foreign fora?
US lawyers believe, based on experience and anecdotal evidence, that plaintiffs in carriage
of goods cases do not. This belief was shared by many judges. Prior to the decision of the
United States Supreme Court in The M/S Bremen v. Zapata Off-Shore Co,2 which will be
discussed shortly, Judge Friendly, writing for the Court of Appeals for the Second Circuit
en banc, in Indussa Corp v. SS Ranborg,3 stated:
‘‘From a practical standpoint, to require an American plaintiff to assert his claim only in a distant
court lessens the liability of the carrier quite substantially, particularly when the claim is small. Such
a clause puts ‘‘a high hurdle’’ in the way of enforcing liability, and thus is an effective means for
carriers to secure settlements lower than if cargo could sue in a convenient forum. A clause making
a claim triable only in a foreign court could almost certainly lessen liability if the law which the
court would apply was neither the Carriage of Goods by Sea Act nor the Hague Rules. Even when
the foreign court would apply one or the other of these regimes, requiring trial abroad might lessen
the carrier’s liability since there could be no assurance that it would apply them in the same way as
would an American tribunal subject to the uniform control of the Supreme Court, and § 3(8) can
well be read as covering a potential and not simply a demonstrable lessening of liability.’’

As we shall see, because the Supreme Court rejected Judge Friendly’s analysis and
conclusion and held that foreign forum selection and arbitration clauses were enforceable,
Professor Davies and I set out to find out, if we could, what actually happens to cases after
dismissal. We conducted a study,4 which does not purport to be statistically accurate, to
find out what happens when a court grants a motion to dismiss on grounds of a foreign
forum selection or arbitration clause in carriage of goods cases.
We contacted counsel for both the cargo interest and the carrier in every reported case
©Informa null - 27/03/2015 04:46

where a motion to dismiss was granted as a result of a foreign forum selection or

2. (1972) 407 US 1.
3. (1967) 377 F 2d 200 (2d Cir). It should be noted that in a footnote he distinguished foreign arbitration
clauses.
4. The study is described in R Force and M Davies, ‘‘Forum Selection Clauses in International Maritime
Contracts’’, in M Davies (ed), Jurisdiction and Forum Selection in International Maritime Law: Essays in Honor
of Robert Force 1 (2005).