Eastern District of Louisiana Judge Determines FFAs are Not Maritime Contracts
In the on-going dispute as to whether Forward Freight Agreements ("FFAs") are considered maritime contracts, another US Federal court has now determined that claims arising from the breach of an FFA are not maritime. Judge Jay Zainey of the Eastern District of Louisiana held, in an Order issued on November 15, 2012, as follows in evaluating a motion to vacate a Rule B maritime attachment:
FFA or Forward Freight Agreements are futures contracts based upon the cost of freight associated with maritime trade routes. FFA contracts involve financial speculation but they do not directly involve maritime commerce or an actual commitment to move cargo. Plaintiff cites no controlling authority for the assertion that these agreements were maritime contracts.
Farenco Shipping Co v. Farenco Shipping Pte, 2012 U.S. Dist. LEXIS 163469, * 5 (E.D. La. 2012). Interestingly, earlier this year, another Judge in the Eastern District of Louisiana, Judge Stanwood R. Duval, Jr. held that FFAs are maritime contracts. Judge Duval reasoned:
…the very essence of these FAAs concerns commitments to perform shipping services in the future. The subject FAAs contained agreements concerning the contract routes, contract months, contract quantity, the date upon which payment was due for such services and contract rates that would govern each particular contract. Indeed, it was the calculation of the payment that was due and by whom thereunder that is at issue. Clearly, these Forward Freight Agreements can fairly be said to be maritime contracts.
Transfield Er Futures Ltd. v. Deiulemar Shipping S.P.A., 2012 U.S. Dist. LEXIS 5040, *7 (E.D. La. Jan. 16, 2012).
The divide within the Eastern District of Louisiana regarding whether FFAs are maritime contracts is indicative of the equally divided position taken by Rule B parties throughout the U.S. on this issue. No Circuit Court (i.e. the Federal appellate court) has ruled on whether FFAs are maritime contracts; however, this issue was raised in a matter presently pending before the Second Circuit Court of Appeals, D'Amico Dry Limited v. Primera Maritime (Hellas) Limited et. al. (11-3473-cv). A decision from the Second Circuit in this matter is expected in the coming months.
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