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Vimar Seguros y Reaseguros, S. A. v. M/V Sky Reefer (94-623), 515 U.S. 528 (1995).
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[ O'Connor ]
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[ Stevens ]
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[ Kennedy ]
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NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D.C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES


No. 94-623


VIMAR SEGUROS Y REASEGUROS, S. A., PETITIONER v. M/V SKY REEFER, HER ENGINES, etc., et al.

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

[June 19, 1995]

Justice Kennedy delivered the opinion of the Court.

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 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 law 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 (Vimar 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 arbitration 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), 29 F. 3d, 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. ___ (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 (CA11) (declining to enforce foreign arbitration clause because that would violate COGSA), cert. denied, 488 U.S. 916 (1988). We now affirm.

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.

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 banc). 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. M/V Finnrose, 826 F. 2d 1441, 1442-1444 (CA5 1987); see also G. Gilmore & C. Black, Law of Admiralty 145-146, n. 23 (2d ed. 1975) (approving Indussa 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 Indussa 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 Indussa applies). The logic of that extension would be quite defensible, but we cannot endorse the reasoning or the conclusion of the Indussa rule itself.

The determinative provision in COGSA, examined with care, does not support the arguments advanced first in Indussa and now by the 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 or 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 or 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 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' " in violation of the Limitation of Vessel Owner's Liability Act, 499 U. S., 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," id., at 596-597, and enforced the agreement over the dissent's argument, based in part on the Indussa 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: 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 Indussa 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 aesthetic 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 Indussa, supra, 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 resistance 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 & Politics 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. I. 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 Cos. v. Dobson, 513 U. S. ___ (1995), and in maritime transactions, including bills 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 ("forum 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.

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 Japanese 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 & Minerals Corp. v. M/V Arktis Sky, 978 F. 2d 47, 50 (CA2 1992). But see COGSA §4(2)(i), 46 U.S.C. § 1304(2)(i) ("[N]either 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, 473 U. S., 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, 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, 574-575 (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 law question, 29 F. 3d, at 729, n. 3, as it must be decided in the first instance by the arbitrator, cf. Mitsubishi Motors, supra, 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.