OCTOBER TERM, 1994
Syllabus
VIMAR SEGUROS Y REASEGUROS, S. A.
v. M/V SKY REEFER ET
AL.
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 Crnise Lines, Inc. v.
Shute, 499 U.
S. 585, 595-596, whereas the Court's reading finds support
529
in the goals of the so-called Hague Rules, the international
convention on which COGSA is modeled, and in the pertinent
decisions and statutes of other nations. It would be out of keeping
with such goals and with contemporary principles of international
comity and commercial practice to interpret COGSA to disparage the
authority or competence of international forums for dispute
resolution. The irony of petitioner's argument in favor of such an
interpretation is heightened by the fact that the forum here is
arbitration, for the FAA is also based in part on an international
convention. For the United States to be able to gain the benefits
of international accords, its courts must not construe COGSA to
nullify foreign arbitration clauses because of inconvenience to the
plaintiff or insular distrust of the ability of foreign arbitrators
to apply the law. Pp. 533-539.
(b) Also rejected is petitioner's argument that the arbitration
clause should not be enforced because there is no guarantee foreign
arbitrators will apply COGSA. According to petitioner, the
arbitrators will follow the Japanese Hague Rules, which
significantly lessen respondents' liability by providing carriers
with a defense based on the acts or omissions of the stevedores
hired by the shipper, rather than COGSA, which makes nondelegable
the carrier's obligation to properly and carefully stow the goods
carried. Whatever the merits of this comparative reading,
petitioner's claim is premature because, at this interlocutory
stage, it is not established what law the arbitrators will apply or
that petitioner will receive diminished protection as a result. The
District Court has retained jurisdiction over the case and will
have the opportunity at the award-enforcement stage to ensure that
the legitimate interest in the enforcement of the laws has been
addressed. Pp. 539-541.
(c) In light of the foregoing, the relevant provisions of COGSA
and the FAA are in accord, and both Acts may be given full effect.
It is therefore unnecessary to resolve the further question whether
the FAA would override COGSA were COGSA interpreted otherwise.
P.541.
29 F.3d
727, affirmed and remanded.
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C. J., and SCALIA, SOUTER, THOMAS, and GINSBURG, JJ.,
joined. O'CONNOR, J., filed an opinion concurring in the judgment,
post, p. 541. STEVENS, J., filed a dissenting opinion,
post, p. 542. BREYER, J., took no part in the consideration
or decision of the case.
Stanley McDermott III argued the cause for
petitioner.
With him on the briefs was
Lawrence S.
Robbins.
530
Thomas H. Walsh, Jr., argued the cause for
respondents.
With him on the brief was John J. Finn. *
JUSTICE KENNEDY delivered the opinion of the Court. This case
requires us to interpret the Carriage of Goods by Sea Act (COGSA),
46 U. S. C. App. § 1300
et seq., as it relates to a contract
containing a clause requiring arbitration in a foreign country. The
question is whether a foreign arbitration clause in a bill of
lading is invalid under COGSA because it lessens liability in the
sense that COGSA prohibits. Our holding that COGSA does not forbid
selection of the foreign forum makes it unnecessary to resolve the
further question whether the Federal Arbitration Act (FAA), 9 U. S.
C. § 1
et seq. (1988 ed. and Supp. V), would override COGSA
were it interpreted otherwise. In our view, the relevant provisions
of COGSA and the FAA are in accord, not in conflict.
I
The contract at issue in this case is a standard form bill of
lading to evidence the purchase of a shipload of Moroccan oranges
and lemons. The purchaser was Bacchus Associates (Bacchus), a New
York partnership that distributes fruit at wholesale throughout the
Northeastern United States. Bacchus dealt with Galaxie Negoce, S.
A. (Galaxie), a Moroccan fruit supplier. Bacchus contracted with
Galaxie to purchase the shipload of fruit and chartered a ship to
transport it from Morocco to Massachusetts. The ship was the M/V
Sky Reefer, a refrigerated cargo ship owned by M. H. Maritima, S.
A., a Panamanian company, and time-chartered to Nichiro Gyogyo
Kaisha, Ltd., a Japanese company. Stevedores
*
Marilyn L. Lytle filed a brief for the American
Association of Exporters and Importers et al. as
amici
curiae urging reversal.
Michael F.
Sturley filed a brief for the American
Steamship Owners Mutual Protection and Indemnity Association, Inc.,
et al. as
amici curiae urging affirmance.
531
hired by Galaxie loaded and stowed the cargo. As is customary in
these types of transactions, when it received the cargo from
Galaxie, Nichiro as carrier issued a form bill of lading to Galaxie
as shipper and consignee. Once the ship set sail from Morocco,
Galaxie tendered the bill of lading to Bacchus according to the
terms of a letter of credit posted in Galaxie's favor.
Among the rights and responsibilities set out in the bill of
lading were arbitration and choice-of-Iaw clauses. Clause 3,
entitled "Governing Law and Arbitration," provided:
"(1) The contract evidenced by or contained in this Bill of
Lading shall be governed by the Japanese law.
"(2) Any dispute arising from this Bill of Lading shall be
referred to arbitration in Tokyo by the Tokyo Maritime Arbitration
Commission (TOMAC) of The Japan Shipping Exchange, Inc., in
accordance with the rules of TOMAC and any amendment thereto, and
the award given by the arbitrators shall be final and binding on
both parties." App. 49.
When the vessel's hatches were opened for discharge in
Massachusetts, Bacchus discovered that thousands of boxes of
oranges had shifted in the cargo holds, resulting in over $1
million damage. Bacchus received $733,442.90 compensation from
petitioner Vimar Seguros y Reaseguros (Vi mar Seguros), Bacchus'
marine cargo insurer that became subrogated
pro tanto to
Bacchus' rights. Petitioner and Bacchus then brought suit against
Maritima
in personam and M/V Sky Reefer
in rem in the
District Court for the District of Massachusetts under the bill of
lading. These defendants, respondents here, moved to stay the
action and compel arbitration in Tokyo under clause 3 of the bill
of lading and § 3 of the FAA, which requires courts to stay
proceedings and enforce arbitration agreements covered by the Act.
Petitioner and Bacchus opposed the motion, arguing the arbitra-
532
tion clause was unenforceable under the FAA both because it was
a contract of adhesion and because it violated COGSA § 3(8). The
premise of the latter argument was that the inconvenience and costs
of proceeding in Japan would "lesse[n] ... liability" as those
terms are used in COGSA.
The District Court rejected the adhesion argument, observing
that Congress defined the arbitration agreements enforceable under
the FAA to include maritime bills of lading, 9 U. S. C. § 1, and
that petitioner was a sophisticated party familiar with the
negotiation of maritime shipping transactions. It also rejected the
argument that requiring the parties to submit to arbitration would
lessen respondents' liability under COGSA § 3(8). The court granted
the motion to stay judicial proceedings and to compel arbitration;
it retained jurisdiction pending arbitration; and at petitioner's
request, it certified for interlocutory appeal under 28 U. S. C. §
1292(b) its ruling to compel arbitration, stating that the
controlling question of law was "whether [COGSA § 3(8)] nullifies
an arbitration clause contained in a bill of lading governed by
COGSA." Pet. for Cert. 30a.
The First Circuit affirmed the order to arbitrate.
29 F.3d
727 (1994). Although it expressed grave doubt whether a foreign
arbitration clause lessened liability under COGSA § 3(8), id., at
730, the Court of Appeals assumed the clause was invalid under
COGSA and resolved the conflict between the statutes in favor of
the FAA, which it considered to be the later enacted and more
specific statute, id., at 731-733. We granted certiorari, 513 U. S.
1013 (1995), to resolve a Circuit split on the enforceability of
foreign arbitration clauses in maritime bills of lading. Compare
the case below (enforcing foreign arbitration clause assuming
arguendo it violated COGSA), with
State Establishment for
Agricultural Product Trading v.
M/V Wesermunde,
838 F.2d
1576 (CAll) (declining to enforce foreign arbitration clause
because that would violate COGSA), cert. denied, 488 U. S. 916
(1988). We now affirm.
533
II
The parties devote much of their argument to the question
whether COGSA or the FAA has priority. "[W]hen two statutes are
capable of co-existence," however, "it is the duty of the courts,
absent a clearly expressed congressional intention to the contrary,
to regard each as effective."
Morton v.
Mancari,
417 U. S. 535,
551 (1974);
Pittsburgh &
Lake Erie R. Co. v.
Railway Labor Executives' Assn., 491 U. S. 490, 510
(1989). There is no conflict unless COGSA by its own terms
nullifies a foreign arbitration clause, and we choose to address
that issue rather than assume nullification
arguendo, as the
Court of Appeals did. We consider the two arguments made by
petitioner. The first is that a foreign arbitration clause lessens
COGSA liability by increasing the transaction costs of obtaining
relief. The second is that there is a risk foreign arbitrators will
not apply COGSA.
A
The leading case for invalidation of a foreign forum selection
clause is the opinion of the Court of Appeals for the Second
Circuit in
Indussa Corp. v. S. S.
Ranborg, 377 F.2d
200 (1967) (en bane). The court there found that COGSA
invalidated a clause designating a foreign judicial forum because
it "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 [owners] could sue in a convenient forum."
Id., at 203 (citation omitted). The court observed "there
could be no assurance that [the foreign court] would apply [COGSA]
in the same way as would an American tribunal subject to the
uniform control of the Supreme Court."
Id., at 203-204.
Following
Indussa, the Courts of Appeals without exception
have invalidated foreign forum selection clauses under § 3(8). See
Union Ins. Soc. of Canton, Ltd. v. S. S.
Elikon,
642 F.2d
721, 723-725 (CA4 1981);
Conklin &
Garrett,
Ltd v.
MN Finnrose, 826 F.2d
1441, 1442-1444 (CA51987); see also G. Gilmore & C. Black,
Law of Admiralty
534
145-146, n. 23 (2d ed. 1975) (approving
lndussa rule). As
foreign arbitration clauses are but a subset of foreign forum
selection clauses in general,
Scherk v.
Alberto-Culver
Co., 417 U. S.
506, 519 (1974), the
lndussa holding has been extended
to foreign arbitration clauses as well. See
State Establishment
for Agricultural Product Trading, supra, at 1580-1581; cf.
Vimar Seguros y Reaseguros, supra, at 730, (assuming,
arguendo, lndussa applies). The logic of that extension
would be quite defensible, but we cannot endorse the reasoning or
the conclusion of the
lndussa rule itself.
The determinative provision in COGSA, examined with care, does
not support the arguments advanced first in
Indussa and now
by petitioner. Section 3(8) of COGSA provides as follows:
"Any clause, covenant, or agreement in a contract of carriage
relieving the carrier or the ship from liability for loss or damage
to or in connection with the goods, arising from negligence, fault,
or failure in the duties and obligations provided in this section,
or lessening such liability otherwise than as provided in this
chapter, shall be null and void and of no effect." 46 U. S. C. App.
§ 1303(8).
The liability that may not be lessened is "liability for loss or
damage ... arising from negligence, fault, or failure in the duties
and obligations provided in this section." The statute thus
addresses the lessening of the specific liability imposed by the
Act, without addressing the separate question of the means and
costs of enforcing that liability. The difference is that between
explicit statutory guarantees and the procedure for enforcing them,
between applicable liability principles and the forum in which they
are to be vindicated.
The liability imposed on carriers under COGSA § 3 is defined by
explicit standards of conduct, and it is designed to correct
specific abuses by carriers. In the 19th century it was a prevalent
practice for common carriers to insert
535
clauses in bills of lading exempting themselves from liability
for damage or loss, limiting the period in which plaintiffs had to
present their notice of claim or bring suit, and capping any
damages awards per package. See 2A M. Sturley, Benedict on
Admiralty § 11, pp. 2-2 to 2-3 (1995); 2 T. Schoenbaum, Admiralty
and Maritime Law § 10-13 (2d ed. 1994); Yancey, The Carriage of
Goods: Hague, COGSA, Visby, and Hamburg, 57 Tulane L. Rev. 1238,
1239-1240 (1983). Thus, § 3, entitled "Responsibilities and
liabilities of carrier and ship," requires that the carrier
"exercise due diligence to ... [m]ake the ship seaworthy" and
"[p]roperly man, equip, and supply the ship" before and at the
beginning of the voyage, § 3(1), "properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods
carried," § 3(2), and issue a bill of lading with specified
contents, § 3(3). 46 U. S. C. App. §§ 1303(1), (2), and (3).
Section 3(6) allows the cargo owner to provide notice of loss or
damage within three days and to bring suit within one year. These
are the substantive obligations and particular procedures that §
3(8) prohibits a carrier from altering to its advantage in a bill
of lading. Nothing in this section, however, suggests that the
statute prevents the parties from agreeing to enforce these
obligations in a particular forum. By its terms, it establishes
certain duties and obligations, separate and apart from the
mechanisms for their enforcement.
Petitioner's contrary reading of § 3(8) is undermined by the
Court's construction of a similar statutory provision in
Carnival Cruise Lines, Inc. v.
Shute, 499 U. S. 585 (1991).
There a number of Washington residents argued that a Florida forum
selection clause contained in a cruise ticket should not be
enforced because the expense and inconvenience of litigation in
Florida would "caus[e] plaintiffs unreasonable hardship in
asserting their rights," id., at 596, and therefore " 'lessen,
weaken, or avoid the right of any claimant to a trial by court of
competent jurisdiction on the question of liability for ... loss or
injury, or the measure of damages therefor'"
536
in violation of the Limitation of Vessel Owner's Liability Act,
id., at 595-596 (quoting 46 U. S. C. App. § 183c). We observed that
the clause "does not purport to limit petitioner's liability for
negligence," 499 U. S., at 596-597, and enforced the agreement over
the dissent's argument, based in part on the
lndussa line of
cases, that the cost and inconvenience of traveling thousands of
miles "lessens or weakens [plaintiffs'] ability to recover," 499 U.
S., at 603 (STEVENS, J., dissenting).
If the question whether a provision lessens liability were
answered by reference to the costs and inconvenience to the cargo
owner, there would be no principled basis for distinguishing
national from foreign arbitration clauses. Even if it were
reasonable to read § 3(8) to make a distinction based on travel
time, airfare, and hotels bills, these factors are not susceptible
of a simple and enforceable distinction between domestic and
foreign forums. Requiring a Seattle cargo owner to arbitrate in New
York likely imposes more costs and burdens than a foreign
arbitration clause requiring it to arbitrate in Vancouver. It would
be unwieldy and unsupported by the terms or policy of the statute
to require courts to proceed case by case to tally the costs and
burdens to particular plaintiffs in light of their means, the size
of their claims, and the relative burden on the carrier.
Our reading of "lessening such liability" to exclude increases
in the transaction costs of litigation also finds support in the
goals of the Brussels Convention for the Unification of Certain
Rules Relating to Bills of Lading, 51 Stat. 233 (1924) (Hague
Rules), on which COGSA is modeled. Sixty-six countries, including
the United States and Japan, are now parties to the Convention, see
Department of State, Office of the Legal Adviser, Treaties in
Force: A List of Treaties and Other International Agreements of the
United States in Force on January 1, 1994, p. 367 (June 1994), and
it appears that none has interpreted its enactment of § 3(8) of the
Hague Rules to prohibit foreign forum selection clauses, see
Sturley, International Uniform Laws in National Courts:
537
The Influence of Domestic Law in Conflicts of Interpretation, 27
Va. J. Int'l L. 729, 776-796 (1987). The English courts long ago
rejected the reasoning later adopted by the
lndussa court.
See
Maharani Woollen Mills Co. v.
Anchor Line, [1927]
29 Lloyd's List L. Rep. 169 (C. A.) (Scrutton, L. J.) ("[T]he
liability of the carrier appears to me to remain exactly the same
under the clause. The only difference is a question of
procedure-where shall the law be enforced?and I do not read any
clause as to procedure as lessening liability"). And other
countries that do not recognize foreign forum selection clauses
rely on specific provisions to that effect in their domestic
versions of the Hague Rules, see,
e. g., Sea-Carriage of
Goods Act 1924, § 9(2) (Australia); Carriage of Goods by Sea Act,
No. 1 of 1986, § 3 (South Africa). In light of the fact that COGSA
is the culmination of a multilateral effort "to establish uniform
ocean bills of lading to govern the rights and liabilities of
carriers and shippers
inter se in international trade,"
Robert C.
Herd &
Co. v.
Krawill
Machinery Corp., 359 U. S. 297, 301
(1959), we decline to interpret our version of the Hague Rules in a
manner contrary to every other nation to have addressed this issue.
See Sturley,
supra, at 736 (conflicts in the interpretation
of the Hague Rules not only destroy esthetic symmetry in the
international legal order but impose real costs on the commercial
system the Rules govern).
It would also be out of keeping with the objects of the
Convention for the courts of this country to interpret COGSA to
disparage the authority or competence of international forums for
dispute resolution. Petitioner's skepticism over the ability of
foreign arbitrators to apply COGSA or the Hague Rules, and its
reliance on this aspect of
lndussa Corp. v. S. S.
Ranborg, 377 F.2d
200 (CA2 1967), must give way to contemporary principles of
international comity and commercial practice. As the Court observed
in
The Bremen v.
Zapata Off-Shore Co., 407 U. S. 1 (1972), when it
enforced a foreign forum selection clause, the historical judicial
resist-
538
ance to foreign forum selection clauses "has little place in an
era when ... businesses once essentially local now operate in world
markets."
Id., at 12. "The expansion of American business
and industry will hardly be encouraged," we explained, "if,
notwithstanding solemn contracts, we insist on a parochial concept
that all disputes must be resolved under our laws and in our
courts."
Id., at 9. See
Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 638 (1985)
(if international arbitral institutions "are to take a central
place in the international legal order, national courts will need
to 'shake off the old judicial hostility to arbitration,' and also
their customary and understandable unwillingness to cede
jurisdiction of a claim arising under domestic law to a foreign or
transnational tribunal") (citation omitted);
Scherk v.
Alberto-Culver Co., 417 U. S., at 516 ("A parochial refusal
by the courts of one country to enforce an international
arbitration agreement" would frustrate "the orderliness and
predictability essential to any international business
transaction"); see also Allison, Arbitration of Private Antitrust
Claims in International Trade: A Study in the Subordination of
National Interests to the Demands of a World Market, 18 N. Y. U. J.
Int'l Law & Pol. 361, 439 (1986).
That the forum here is arbitration only heightens the irony of
petitioner's argument, for the FAA is also based in part on an
international convention, 9 U. S. C. § 201
et seq.
(codifying the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, [1970] 21 U.
S. T. 2517, T. 1. A. S. No. 6997), intended "to encourage the
recognition and enforcement of commercial arbitration agreements in
international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards are
enforced in the signatory countries,"
Scherk, supra, at 520,
n. 15. The FAA requires enforcement of arbitration agreements in
contracts that involve interstate commerce, see
Allied-Bruce
Terminix Coso v.
Dobson, 513 U. S. 265 (1995), and in
maritime transactions, including bills
539
of lading, see 9 U. S. C. §§ 1, 2, 201, 202, where there is no
independent basis in law or equity for revocation, cf.
Carnival
Cruise Lines, 499 U. S., at 595 ("[F]orum-selection clauses
contained in form passage contracts are subject to judicial
scrutiny for fundamental fairness"). If the United States is to be
able to gain the benefits of international accords and have a role
as a trusted partner in multilateral endeavors, its courts should
be most cautious before interpreting its domestic legislation in
such manner as to violate international agreements. That concern
counsels against construing COGSA to nullify foreign arbitration
clauses because of inconvenience to the plaintiff or insular
distrust of the ability of foreign arbitrators to apply the
law.
B
Petitioner's second argument against enforcement of the Japanese
arbitration clause is that there is no guarantee foreign
arbitrators will apply COGSA. This objection raises a concern of
substance. The central guarantee of § 3(8) is that the terms of a
bill of lading may not relieve the carrier of the obligations or
diminish the legal duties specified by the Act. The relevant
question, therefore, is whether the substantive law to be applied
will reduce the carrier's obligations to the cargo owner below what
COGSA guarantees. See
Mitsubishi Motors, supra, at 637, n.
19.
Petitioner argues that the arbitrators will follow the J apanese
Hague Rules, which, petitioner contends, lessen respondents'
liability in at least one significant respect. The Japanese version
of the Hague Rules, it is said, provides the carrier with a defense
based on the acts or omissions of the stevedores hired by the
shipper, Galaxie, see App. 112, Article 3(1) (carrier liable "when
he or the persons employed by him" fail to take due care), while
COGSA, according to petitioner, makes nondelegable the carrier's
obligation to "properly and carefully ... stow ... the goods
carried," COGSA § 3(2), 46 U. S. C. App. § 1303(2); see
Associated Metals &
540
Minerals Corp. v.
M/V Arktis Sky, 978 F.2d
47, 50 (CA2 1992). But see COGSA § 4(2)(i), 46 U. S. C. App. §
1304(2)(i) ("Neither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from ... [a]ct or omission
of the shipper or owner of the goods, his agent or
representative"); COGSA § 3(8), 46 U. S. C. App. § 1303(8)
(agreement may not relieve or lessen liability "otherwise than as
provided in this chapter"); Hegarty, A COGSA Carrier's Duty to Load
and Stow Cargo is Nondelegable, or Is It?:
Associated Metals
&
Minerals Corp. v.
M/V Arktis Sky, 18 Tulane
Mar. L. J. 125 (1993).
Whatever the merits of petitioner's comparative reading of COGSA
and its Japanese counterpart, its claim is premature. 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 at the award-enforcement stage
to ensure that the legitimate interest in the enforcement of the
... laws has been addressed."
Mitsubishi Motors, supra, at
638; cf. 1 Restatement (Third) of Foreign Relations Law of the
United States §482(2)(d) (1986) ("A court in the United States need
not recognize a judgment of the court of a foreign state if ... the
judgment itself, is repugnant to the public policy of the United
States"). Were there no subsequent opportunity for review and were
we persuaded that "the choice-of-forum and choice-of-law clauses
operated in tandem as a prospective waiver of a party's right to
pursue statutory remedies ... , we would have little hesitation in
condemning the agreement as against public policy."
Mitsubishi
Motors, supra, at 637, n. 19. Cf.
Knott v.
Botany
Mills, 179 U. S.
69 (1900) (nullifying choice-of-law provision under the Harter
Act, the statutory precursor to COGSA,
541
where British law would give effect to provision in bill of
lading that purported to exempt carrier from liability for damage
to goods caused by carrier's negligence in loading and stowage of
cargo);
The Hollandia, [1983] A. C. 565, 574575 (H. L. 1982)
(noting choice-of-forum clause "does not ex facie offend against
article III, paragraph 8," but holding clause unenforceable where
"the foreign court chosen as the exclusive forum would apply a
domestic substantive law which would result in limiting the
carrier's liability to a sum lower than that to which he would be
entitled if [English COGSA] applied"). Under the circumstances of
this case, however, the First Circuit was correct to reserve
judgment on the choice-of-Iaw question, 29 F. 3d, at 729, n. 3, as
it must be decided in the first instance by the arbitrator, cf.
Mitsubishi Motors, 473 U. S., at 637, n. 19. As the District
Court has retained jurisdiction, mere speculation that the foreign
arbitrators might apply Japanese law which, depending on the proper
construction of COGSA, might reduce respondents' legal obligations,
does not in and of itself lessen liability under COGSA § 3(8).
Because we hold that foreign arbitration clauses in bills of
lading are not invalid under COGSA in all circumstances, both the
FAA and COGSA may be given full effect. The judgment of the Court
of Appeals is affirmed, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
JUSTICE BREYER took no part in the consideration or decision of
this case.
JUSTICE O'CONNOR, concurring in the judgment.
I agree with what I understand to be the two basic points made
in the Court's opinion. First, I agree that the language of the
Carriage of Goods by Sea Act (COGSA), 46 U. S. C. App. § 1300
et
seq., and our decision in
Carnival Cruise Lines, Inc. v.
Shute, 499 U.
S. 585 (1991), preclude a
542
STEVENS, J., dissenting
holding that the increased cost of litigating in a distant
forum, without more, can lessen liability within the meaning of
COGSA § 3(8).
Ante, at 534-536. Second, I agree that,
because the District Court has retained jurisdiction over this case
while the arbitration proceeds, any claim of lessening of liability
that might arise out of the arbitrators' interpretation of the bill
of lading's choice-of-Iaw clause, or out of their application of
COGSA, is premature.
Ante, at 539-541. Those two points
suffice to affirm the decision below.
Because the Court's opinion appears to do more, however, I
concur only in the judgment. Foreign arbitration clauses of the
kind presented here do not divest domestic courts of jurisdiction,
unlike true foreign forum selection clauses such as that considered
in
lndussa Corp. v. S. S.
Ranborg, 377 F. 2d 200 (CA2
1967) (en banc). That difference is an important one-it is, after
all, what leads the Court to dismiss much of petitioner's argument
as premature-and we need not decide today whether
lndussa,
insofar as it relied on considerations other than the increased
cost of litigating in a distant forum, retains any vitality in the
context of true foreign forum selection clauses. Accordingly, I
would not, without qualification, reject "the reasoning [and] the
conclusion of the
lndussa rule itself,"
ante, at 534,
nor would I wholeheartedly approve an English decision that "long
ago rejected the reasoning later adopted by the
lndussa
court,"
ante, at 537. As the Court notes, "[f]ollowing
lndussa, the Courts of Appeals without exception have
invalidated foreign forum selection clauses under § 3(8)."
Ante, at 533. I would prefer to disturb that unbroken line
of authority only to the extent necessary to decide this case.
JUSTICE STEVENS, dissenting.
The Carriage of Goods by Sea Act (COGSA),l enacted in 1936 as a
supplement to the 1893 Harter Act,2 regulates the
149 Stat. 1207,46 U. S. C. App. §§ 1300-1315. 227 Stat. 445, 46
U. S. C. App. §§ 190-196.
543
terms of bills of lading issued by ocean carriers transporting
cargo to or from ports of the United States. Section 3(8) of COGSA
provides:
"Any clause, covenant, or agreement in a contract of carriage
relieving the carrier or the ship from liability for loss or damage
to or in connection with the goods, arising from negligence, fault,
or failure in the duties and obligations provided in this section,
or lessening such liability otherwise than as provided in this
chapter, shall be null and void and of no effect." 46 U. S. C. App.
§ 1303(8).
Petitioners in this case challenge the enforceability of a
foreign arbitration clause, coupled with a choice-of-foreignlaw
clause, in a bill of lading covering a shipment of oranges from
Morocco to Boston, Massachusetts. The bill, issued by the Japanese
carrier, provides (1) that the transaction" 'shall be governed by
the Japanese law,'" and (2) that any dispute arising from the bill
shall be arbitrated in Tokyo. See
ante, at 531. Under the
construction of COGSA that has been uniformly followed by the
Courts of Appeals and endorsed by scholarly commentary for decades,
both of those clauses are unenforceable against the shipper because
they "relieve" or "lessen" the liability of the carrier.
Nevertheless, relying almost entirely on a recent case involving a
domestic forum selection clause that was not even covered by COGSA,
Carnival Cruise Lines, Inc. v.
Shute, 499 U. S. 585 (1991), the
Court today unwisely discards settled law and adopts a novel
construction of § 3(8).
I
In the 19th century it was common practice for shipowners to
issue bills of lading that included stipulations exempting
themselves from liability for losses occasioned by the negligence
of their employees. Because a bill of lading was (and is) a
contract of adhesion, which a shipper must accept or else find
another means to transport his goods, shippers
544
STEVENS, J., dissenting
were in no position to bargain around these no-liability
clauses. Although the English courts enforced the stipulations, see
Compania de Navigacion la Flecha v.
Brauer, 168 U. S.
104, 117-118 (1897), citing
Peck v.
North Staffordshire
Railway, 10 H. L. Cas. 473, 493, 494 (1863), this Court
concluded, even prior to the 1893 enactment of the Harter Act, that
they were "contrary to public policy, and consequently void,"
Liverpool &
Great Western Steam Co. v.
Phenix
Ins. Co., 129 U.
S. 397, 442 (1889).3 As we noted in
Brauer, several
District Courts had held that such a stipulation was invalid even
when the bill of lading also contained a choice-oflaw clause
providing that "the contract should be governed by the law of
England." 168 U. S., at 118. The question whether such a
choice-of-law clause was itself valid remained open in this Court
until the Harter Act was passed in 1893.
Section 1 of the Harter Act makes it unlawful for the master or
owner of any vessel transporting cargo between ports of the United
States and foreign ports to insert in any bill of lading any clause
whereby the carrier "shall be relieved from liability for loss or
damage arising from negligence."4 In
3 In support of its holding in
Liverpool Steam, the Court
observed:
"The carrier and his customer do not stand upon a footing of
equality.
The individual customer has no real freedom of choice. He cannot
afford to higgle or stand out, and seek redress in the courts. He
prefers rather to accept any bill of lading, or to sign any paper,
that the carrier presents; and in most cases he has no alternative
but to do this, or to abandon his business." 129 U. S., at 441.
4 The first section of the Harter Act provides:
"Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That it
shall not be lawful for the manager, agent, master, or owner of any
vessel transporting merchandise or property from or between ports
of the United States and foreign ports to insert in any bill of
lading or shipping document any clause, covenant, or agreement
whereby it, he, or they shall be relieved from liability for loss
or damage arising from negligence, fault, or failure in proper
loading, stowage, custody, care, or proper delivery of any and all
lawful merchandise or property committed to its or their charge.
Any and all words or clauses of such import inserted in bills of
lading or ship-
545
Knott v.
Botany Mills, 179 U. S. 69 (1900), we
were presented with the question whether that prohibition applied
to a bill of lading containing a choice-of-Iaw clause designating
British law as controlling. The Court held:
"Th[e] express provision of the act of Congress overrides and
nullifies the stipulations of the bill of lading that the carrier
shall be exempt from liability for such negligence, and that the
contract shall be governed by the law of the ship's flag."
Id., at 77.
The Court's holding that the choice-of-Iaw clause was invalid
rested entirely on the Harter Act's prohibition against relieving
the carrier from liability.
Id., at 72. Since
Knott,
courts have consistently understood the Harter Act to create a flat
ban on foreign choice-of-Iaw clauses in bills of lading. See,
e.
g., Conklin &
Garrett, Ltd. v.
M/V Finnrose,
826 F.2d
1441, 1442-1444 (CA5 1987);
Union Ins. Soc. of Canton,
Ltd. v. S. S.
Elikon, 642 F.2d
721, 723-725 (CA4 1981);
Indussa Corp. v. S. S.
Ranborg, 377 F.2d
200 (CA2 1967). Courts have also consistently found such
clauses invalid under COGSA, which embodies an even broader
prohibition against clauses "relieving"
or "lessening" a
carrier's liability. Indeed, when a panel of the Second Circuit in
1955 interpreted COGSA to permit a foreign choice-of-Iaw clause,
Muller v.
Swedish American Line Ltd., 224 F.2d
806, scholars noted that "the case seems impossible to
reconcile with the holding in
Knott."5 Eventually agreeing,
the en banc court unanimously overruled
Muller in 1967.
Indussa Corp., 377 F. 2d, at 200.
In the 1957 edition of their treatise on the Law of Admiralty,
Gilmore and Black had criticized not only the choice-
ping receipts shall be null and void and of no effect." 27 Stat.
445, 46
This section was rendered obsolete by § 3(8) of COGSA, a broader
prohibition that invalidates clauses either "relieving" or
"lessening" a carrier's liability. 46 U. S. C. App. § 1303(8),
quoted supra, at 543.
5 G. Gilmore & C. Black, Law of Admiralty 125, n. 23 (1st
ed. 1957).
546
STEVENS, J., dissenting
of-law holding in
Muller, but also its enforcement of a
foreign choice-of-forum clause. They wrote:
"The stipulation for suit abroad seems also to offend Cogsa,
most obviously because it destroys the shipper's certainty that
Cogsa will be applied. Further, it is entirely unrealistic to look
on an obligation to sue overseas as not 'lessening' the liability
of the carrier. It puts a high hurdle in the way of enforcing that
liability." G. Gilmore & C. Black, Law of Admiralty 125, n.
23.
Judge Friendly's opinion for the en banc court in
lndussa
endorsed this reasoning. In
lndussa, the bill of lading
contained a provision requiring disputes to be resolved in Norway
under Norwegian law.6 Judge Friendly first remarked on the harsh
consequence of "requiring an American consignee claiming damages in
the modest sum of $2,600 to journey some 4200 miles to a court
having a different legal system and employing another language."
377 F. 2d, at 20l. The decision, however, rested not only on the
impact of the provision on a relatively small claim, but also on a
fair reading of the broad language in COGSA. Judge Friendly
explained:
"[Section] 3(8) of COGSA says that 'any clause, covenant, or
agreement in a contract of carriage * * * lessening [the carrier's
liability for negligence, fault, or dereliction of statutory
duties] otherwise than as provided in this Act, shall be null and
void and of no effect.' 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
hur-
6 The bill of lading contained the following provision:
"'Any dispute arising under this Bill of Lading shall be decided
in the country where the Carrier has his principal place of
business, and the law of such country shall apply except as
provided elsewhere herein.''' lndussa Corp. v. S. S. Ranborg,
377 F.2d
200, 201 (CA2 1967).
547
dIe' in the way of enforcing liability, Gilmore & Black,
supra, 125 n. 23, 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 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." Id., at 203-204 (citations
omitted).
As the Court notes,
ante, at 533, the Courts of Appeals
without exception have followed
Indussa. In the 1975 edition
of their treatise, Gilmore and Black also endorsed its holding,
adding this comment:
"Cogsa allows a freedom of contracting out of its terms, but
only in the direction of increasing the shipowner's
liabilities, and never in the direction of diminishing them. This
apparent onesidedness is a commonsense recognition of the
inequality in bargaining power which both Harter and Cogsa were
designed to redress, and of the fact that one of the great
objectives of both Acts is to prevent the impairment of the value
and negotiability of the ocean bill of lading. Obviously, the
latter result can never ensue from the increase of the carrier's
duties." G. Gilmore & C. Black, Law of Admiralty 145147 (2d
ed.) (emphasis in original; footnote omitted).
Thus, our interpretation of maritime law prior to the enactment
of the Harter Act, our reading of that statute in
Knott, and
the federal courts' consistent interpretation of
548
STEVENS, J., dissenting
COGSA, buttressed by scholarly recognition of the commercial
interest in uniformity, demonstrate that the clauses in the
Japanese carrier's bill of lading purporting to require arbitration
in Tokyo pursuant to Japanese law both would have been held invalid
under COGSA prior to today.7
The foreign-arbitration clause imposes potentially prohibitive
costs on the shipper, who must travel-and bring his lawyers,
witnesses, and exhibits-to a distant country in order to seek
redress. The shipper will therefore be inclined either to settle
the claim at a discount or to forgo bringing the claim at all. The
foreign-law clause leaves the shipper who does pursue his claim
open to the application of unfamiliar and potentially
disadvantageous legal standards, until he can obtain review
(perhaps years later) in a domestic forum under the high standard
applicable to vacation of arbitration awards.8 See
Wilko v.
Swan, 346 U.
S. 427, 436-437
7 Of course, the objectionable feature in the instant bill of
lading is a foreign arbitration clause, not a foreign forum
selection clause. But this distinction is of little importance; in
relevant respects, there is no difference between the two. Both
impose substantial costs on shippers, and both should be held to
lessen liability under COGSA. The majority's reasoning to the
contrary thus presumably covers forum selection as well as
arbitration. See
ante, at 533-534;
ante, at 542
(O'CONNOR, J., concurring in judgment). The only ground on which
one might distinguish the two types of clauses is that another
federal statute, the Federal Arbitration Act, makes arbitration
clauses enforceable, whereas no analogous federal statute exists
for forum selection clauses. For the reasons expressed
infra, at 554-556, this distinction is unpersuasive.
8 I am assuming that the majority would not actually uphold the
application of disadvantageous legal standards-these, even under
the narrowest reading of COGSA, surely lessen liability. See
ante, at 539-541. Nonetheless, the majority is apparently
willing to allow arbitration to proceed under foreign law, and to
determine afterwards whether application of that law has actually
lessened the carrier's formal liability. As I have discussed above,
this regime creates serious problems of delay and uncertainty.
Because the majority's holding in this case is limited to the
enforceability of the foreign arbitration clause-it does not
actually pass upon the validity of the foreign-law clause-I will
not discuss the foreignlaw clause further except to say that it is
an unenforceable lessening of
549
(1953). Accordingly, courts have always held that such clauses
"lessen" or "relieve" the carrier's liability, see,
e. g.,
State Establishment for Agricultural Product Trading v.
M/V Wesermunde, 838 F.2d
1576, 1580-1582 (CAll), cert. denied, 488 U. S. 916 (1988), and
even the Court of Appeals in this case assumed as much,
29 F.3d
727, 730, 732, n. 5 (CA1 1994).9 Yet this Court today holds
that carriers may insert foreign-arbitration clauses into bills of
lading, and it leaves in doubt the validity of choice-of-Iaw
clauses.
Although the policy undergirding the doctrine of
stare
decisis has its greatest value in preserving rules governing
commercial transactions, particularly when their meaning is well
understood and has been accepted for long periods of time,lO the
Court nevertheless has concluded that a change must be made. Its
law-changing decision is supported by three arguments: (1) the
statutory reference to "lessening such liability" has been
misconstrued; (2) the prior understanding of the meaning of the
statute has been "undermined" by the
Carnival Cruise case;
and (3) the new rule is supported by our obligation to honor the
1924 "Hague Rules." None of these arguments is persuasive.
II
The Court assumes that the words "lessening such liability" must
be narrowly construed to refer only to the substantive rules that
define the carrier's legal obligations.
Ante, at 534-535.
Under this view, contractual provisions that lessen the amount of
the consignee's net recovery, or that
liability to the extent it gives an advantage to the carrier at
the expense of the shipper.
9 The Court of Appeals enforced the arbitration clause, despite
its concession that the clause might violate COGSA, because of its
perception that COGSA must give way to the conflicting dictate of
the Federal Arbitration Act. 29 F. 3d, at 731-733. I consider, and
reject, this argument
infra, at 554-556.
10 See Eskridge & Frickey, The Supreme Court 1993
Term-Foreword:
Law as Equilibrium, 108 Harv. L. Rev. 26, 81 (1994).
550
STEVENS, J., dissenting
lessen the likelihood that it will make any recovery at all, are
beyond the scope of the statute.
In my opinion, this view is flatly inconsistent with the purpose
of COGSA § 3(8). That section responds to the inequality of
bargaining power inherent in bills of lading and to carriers'
historic tendency to exploit that inequality whenever possible to
immunize themselves from liability for their own fault. A bill of
lading is a form document prepared by the carrier, who presents it
to the shipper on a take-it-or-Ieave-it basis. See Black, The
Bremen, COGSA and the Problem of Conflicting Interpretation, 6
Vand. J. Transnat'l L. 365, 368 (1973); Liverpool Steam, 129 U. S.,
at 441. Characteristically, there is no arm's-length negotiation
over the bill's terms; the shipper must agree to the carrier's
standard-form language, or else refrain from using the carrier's
services. Accordingly, if courts were to enforce bills of lading as
written, a carrier could slip in a clause relieving itself of
allliability for fault, or limiting that liability to a fraction of
the shipper's damages, and the shipper would have no recourseY
COGSA represents Congress' most recent attempt to respond to this
problem. By its terms, it invalidates any clause in a bill of
lading "relieving" or "lessening" the "liability" of the carrier
for negligence, fault, or dereliction of duty.
11 See
United States v.
Farr Sugar Corp.,
191 F.2d
370, 374
(CA2 1951), aff'd,
343 U. S. 236 (1952):
"One other fact requires special note. The shipowners stress the
consensual nature of the ["Both-to- Blame"] clause, arguing that a
bill of lading is but a contract. But that is so at most in name
only; the clause, as we are told, is now in practically all bills
of lading issued by steamship companies doing business to and from
the United States. Obviously the individual shipper has no
opportunity to repudiate the document agreed upon by the trade,
even if he has actually examined it and all its twenty-eight
lengthy paragraphs, of which this clause is No.9. This lack of
equality of bargaining power has long been recognized in our law;
and stipulations for unreasonable exemption of the carrier have not
been allowed to stand. Hence so definite a relinquishment of what
the law gives the cargo as is found here can hardly be found
reasonable without direct authorization of law." (Citations
omitted.)
551
When one reads the statutory language in light of the policies
behind COGSA's enactment, it is perfectly clear that a foreign
forum selection or arbitration clause "relieves" or "lessens" the
carrier's liability. The transaction costs associated with an
arbitration in Japan will obviously exceed the potential recovery
in a great many cargo disputes. As a practical matter, therefore,
in such a case no matter how clear the carrier's formal legal
liability may be, it would make no sense for the consignee or its
subrogee to enforce that liability. It seems to me that a
contractual provision that entirely protects the shipper from being
held liable for anything should be construed either to have
"lessened" its liability or to have "relieved" it of liability.
Even if the value of the shipper's claim is large enough to
justify litigation in Asia,12 contractual provisions that impose
unnecessary and unreasonable costs on the consignee will inevitably
lessen its net recovery. If, as under the Court's reasoning, such
provisions do not affect the carrier's legal liability, it would
appear to be permissible to require the consignee to pay the costs
of the arbitration, or perhaps the travel expenses and fees of the
expert witnesses, interpreters, and lawyers employed by both
parties. Judge Friendly and the many other wise judges who shared
his opinion were surely correct in concluding that Congress could
not have intended such a perverse reading of the statutory
text.
More is at stake here than the allocation of rights and duties
between shippers and carriers. A bill of lading, besides being a
contract of carriage, is a negotiable instrument that controls
possession of the goods being shipped. Accordingly, the bill of
lading can be sold, traded, or used to obtain credit as though the
bill were the cargo itself. Disuniform-
12 The majority's reasoning is not, of course, limited to
foreign forums as accessible as Tokyo. A carrier who truly wished
to relieve itself of liability might select an outpost in
Antarctica as the setting for arbitration of all claims. Under the
Court's reasoning, such a clause presumably would be
enforceable.
552
STEVENS, J., dissenting
ity in the interpretation of bills of lading will impair their
negotiability. See
Union Ins. Soc. of Canton, Ltd. v. S. S.
Elikon, 642 F. 2d, at 723; G. Gilmore & C. Black, Law of
Admiralty 146-147 (2d ed. 1975). Thus, if the security interests in
some bills of lading are enforceable only through the courts of
Japan, while others may be enforceable only in Liechtenstein, the
negotiability of bills of lading will suffer from the uncertainty.
COGSA recognizes that this negotiability depends in part upon the
financial community's capacity to rely on the enforceability, in an
accessible forum, of the bills' terms. Today's decision destroys
that capacity.
The Court's reliance on its decision in
Carnival Cruise
Lines, Inc. v.
Shute, 499 U. S. 585 (1991), is
misplaced. That case held that a domestic forum selection clause in
a passenger ticket was enforceable. As no carriage of goods was at
issue, COGSA did not apply to the parties' dispute. Accordingly,
the enforceability of the ticket's terms did not implicate the
commercial interests in uniformity and negotiability that are
served by the statutory regulation of bills of lading. Moreover,
the
Carnival Cruise holding is limited to the enforceability
of
domestic forum selection clauses. The Court in that case
pointedly refused to respond to the concern expressed in my dissent
that a wooden application of its reasoning might extend its holding
to the selection of a forum outside of the United States. See id.,
at 604. The wooden reasoning that the Court adopts today does make
that extension, but it is surely not compelled by the holding in
Carnival Cruise.13
13 Nor is it compelled by logic. It is true that some domestic
forums are more distant than some foreign forums-a citizen of Maine
may have less trouble arbitrating in Canada than in Arizona. But
that is no reason to eschew any distinction between foreign and
domestic forums. If it is to adhere to
Carnival Cruise and
yet avoid an outrageous result, the Court must draw a line
somewhere. The most sensible line, it seems to me, is at the United
States border. Transaction costs generally, though not always,
increase when that line is crossed. Passports usually must be
obtained, language barriers often present themselves, and
distances
553
Finally, I am simply baffled by the Court's implicit suggestion
that our interpretation of the Harter Act (which preceded the Hague
Rules), and the federal courts' consistent interpretation of COGSA
since
lndussa was decided in 1967, has somehow been
unfaithful to our international commitments. See
ante, at
536-539. The concerns about invalidating freely negotiated forum
selection clauses that this Court expressed in
The Bremen v.
Zapata Off-Shore Co., 407 U. S. 1 (1972), have no bearing on
the validity of the provisions in bills of lading that are commonly
recognized as contracts of adhesion. Our international obligations
do not require us to enforce a contractual term that was not freely
negotiated by the parties. Much less do they require us to ignore
the clear meaning of COGSA-itself the product of international
negotiations-which forbids enforcement of clauses lessening the
carrier's liability. Indeed, discussing
The Bremen's impact
on COGSA, Professor Black observed:
"[I]t is hard to see how it can be looked on as other than a
'lessening' of the carrier's liability under COGSA to remit the
bill of lading holder to a distant foreign court. It is quite true
that the difficulty imposed would vary with circumstances; Canada
is not Pakistan. But there is always some palpable 'lessening,' for
if the choice-offorum clause is ever enforced, the result must be
to dismiss the litigant out of the United States court he has
chosen to sue in. On most moderate-sized claims, remission to the
foreign forum is a practical immunization of the carrier from
liability." 6 Vand. J. Transnat'l L., at 368-369.
The majority points to several foreign statutes, passed by other
signatories to the Hague Rules, that make foreign forum selection
clauses unenforceable in the courts of those
are usually greater when litigants are forced to cross that
boundary. I think
Carnival Crnise was wrongly decided, but
adherence to the holding in that case does not require the result
the majority reaches today.
554
STEVENS, J., dissenting
countries. See
ante, at 537. The majority assumes
(without citing any evidence) that these statutes were passed in
order to depart from the Hague Rules, and that COGSA, our Nation's
enactment of the Hague Rules, should therefore be read to mean
something different from these statutes. I think the opposite
conclusion is at least as plausible: These foreign nations believed
nonenforcement of foreign forum selection clauses was consistent
with their international obligations, and they passed these
statutes to make that explicit. If anything, then, these statutes
demonstrate that several foreign countries agree that the United
States courts' consistent interpretation of COGSA does not
contravene our mutual treaty obligations. Moreover, because
Congress is presumed to know the law,
Cannon v.
University of Chicago, 441 U. S. 677, 696-699
(1979), it has been justified in assuming, based on the courts'
uniform interpretation of COGSA prior to today, that no specific
statute such as Australia's or South Africa's was necessary to
invalidate foreign forum selection and arbitration clauses. The
existence of these foreign statutes, then, proves nothing at
all.14
III
Lurking in the background of the Court's decision today is
another possible reason for holding, despite the clear meaning of
COGSA and decades of precedent, that a foreign arbitration clause
does not lessen liability. It may be that the Court does violence
to COGSA in order to avoid a perceived conflict with another
federal statute, the Federal Arbitration Act (FAA), 9 U. S. C. § 1
et seq. (1988 ed. and Supp. V). The FAA requires that courts
enforce arbitration clauses in contracts-including those requiring
arbitration in foreign coun-
14 The majority's puzzling reference to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral
Awards,
ante, at 538, strikes me as irrelevant. Nothing in
that treaty even remotely suggests an intent to enforce arbitration
clauses that constitute a "lessening" of liability under COGSA or
the Hague Rules.
555
tries-the same way they would enforce any other contractual
clause. See,
e. g., Volt Information Sciences, Inc. v.
Board of Trustees of Leland Stanford Junior Univ., 489 U. S.
468, 478 (1989). This statute was designed to overturn the
traditional common-law hostility to arbitration clauses. See
Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U. S. 52, 55 (1995);
Allied-Bruce Terminix Coso v.
Dobson, 513 U. S. 265, 270
(1995). According to the Court of Appeals, reading COGSA to
invalidate foreign arbitration clauses would conflict directly with
the terms and policy of the FAA.
Unfortunately, in adopting a contrary reading to avoid this
conflict, the Court has today deprived COGSA § 3(8) of much of its
force. The Court's narrow reading of "lessening [of] liability"
excludes more than arbitration; it apparently covers only formal,
legal liability. See
supra, at 551-552. Although I agree
with the Court that it is important to read potentially conflicting
statutes so as to give effect to both wherever possible, I think
the majority has ignored a much less damaging way to harmonize
COGSA with the FAA.
Section 2 of the FAA reads:
"A written provision in any maritime transaction ... to settle
by arbitration a controversy thereafter arising out of such
contract ... shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation
of any contract." 9 U. S. C. §2.
This language plainly intends to place arbitration clauses upon
the same footing as all other contractual clauses. Thus, like any
clause, an arbitration clause is enforceable, "save upon such
grounds" as would suffice to invalidate any other, nonarbitration
clause. The FAA thereby fulfills its policy of jettisoning the
prior regime of hostility to arbitration. Like any other
contractual clause, then, an arbitration clause may be invalid
without violating the FAA if, for exam-
556
STEVENS, J., dissenting
pIe, it is procured through fraud or forgery; there is mutual
mistake or impossibility; the provision is unconscionable; or, as
in this case, the terms of the clause are illegal under a separate
federal statute which does not evidence a hostility to arbitration.
Neither the terms nor the policies of the FAA would be thwarted if
the Court were to hold today that a foreign arbitration clause in a
bill of lading "lessens liability" under COGSA. COGSA does not
single out arbitration clauses for disfavored treatment; it
invalidates any clause that lessens the carrier's liability.
Illegality under COGSA is therefore an independent ground "for the
revocation of any contract," under FAA § 2. There is no conflict
between the two federal statutes.
The correctness of this construction becomes even more apparent
when one considers the policies of the two statutes. COGSA seeks to
ameliorate the inequality in bargaining power that comes from a
particular form of adhesion contract. The FAA seeks to ensure
enforcement of freely negotiated agreements to arbitrate.
Volt, 489 U. S., at 478-479. As I have discussed,
supra, at 543-544, 550, foreign arbitration clauses in bills
of lading are not freely negotiated. COGSA's policy is thus
directly served by making these clauses illegal; and the FAA's
policy is not disserved thereby. In contrast, allowing such
adhesionary clauses to stand serves the goals of neither
statute.
IV
The Court's decision in this case is an excellent example of
overzealous formalism. By eschewing a commonsense reading of
"lessening [of] liability," the Court has drained those words of
much of their potency. The result compounds, rather than contains,
the Court's unfortunate mistake in the
Carnival Cruise
case.
I respectfully dissent.
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