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The Fifth Circuit Court of Appeals addresses the outer limits of forum selection clauses

In Ambraco Inc. v. Bossclip B.V., Docket No. 07-30727 (5th Cir. 2009), the Fifth Circuit Court of Appeals demonstrated that even a masterly draft of a forum selection clause in a bill of lading does not entirely guarantee a carrier the forum of his choice, or his choice of law, for all proceedings relating to a cargo claim. Local contractors, such as stevedores or terminal operators cannot, be required to defend claims against them in foreign jurisdictions nor to seek their indemnity there from the carrier. As a result, proceedings may become quite tangled with part of the adjudication in one jurisdiction and part of it in another.

In Ambraco, a cargo of bailing twine sustained considerable damage in its shipment from Brazil to New Orleans. The cargo interests, Ambraco, immediately sought compensation from the vessel interests and the local stevedore, and a letter of undertaking was provided to avoid the arrest of the vessel. Ambraco then filed a Complaint in the District of Louisiana against the vessel interests, amending the Complaint several months later to name the stevedore as an additional defendant. The vessel interests then filed a motion to dismiss the complaint, invoking the forum selection clause in the bills of lading that required claims to be brought in the High Court in London under English law. The District Court granted the vessel interests' motion and the complaint was dismissed as against the vessel interests.

Thereafter, the stevedore filed a third-party complaint under F.R.C.P. 14(c), seeking indemnification from the dismissed vessel interests, as third-party defendants. On motion from the vessel interests, the District Court dismissed the stevedore's third party complaint, holding that Rule 14(c) was not available to implead parties previously dismissed from the action. Although the stevedore's motion for consideration was denied, the District Court certified the issue of the dismissal as an appealable final judgment for review by the Fifth Circuit.

Relying on the United States Supreme Court's decisions in "Sky Reefer", 515 U.S. 528 (1995) and M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972), the Fifth Circuit Court of Appeals upheld the dismissal of Ambraco's complaint in favor of the bill of lading forum selection clause. The Court found that the English courts would apply the U.S. Carriage of Goods by Sea Act (COGSA) and would not apply it in a manner that would limit the carrier's liability in violation of U.S. public policy.

However, the Fifth Circuit vacated the District Court's decision to dismiss the stevedore's third party complaint, upholding the stevedore's right to bring its indemnity claim against the vessel interests in federal district court, as third-party defendants under F.R.C.P. 14(c). The Court noted that the forum selection clause contained in the bill of lading did not bind the stevedores who were not parties to it. Notwithstanding, the Court recognized that "it would be the height of judicial inefficiency to conduct two separate inquiries into fault arising from the same transaction" with the stevedore's third party action proceeding in American court while the cargo interests proceeded in the English court. Accordingly, the Court left the matter up to the discretion of the trial court on remand to stay the third party proceedings pending the English Court's resolution of the dispute between cargo claimant and the vessel interests.

To read the US Supreme Court's decision in Ambraco v. Bossclip, please click here.

For more information on the Fifth Circuit's decision, please do not hesitate to contact us at: info@chaloslaw.com.

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