Forum Selection Clause in a Bill of Lading Is Very Difficult to Beat

April 23, 2014

It would seem reasonable that a U.S. shipowner would provide in its bill of lading that all shipments carried to and from the United States will be subject to U.S. law and that any suits by the cargo owner must be filed in a specified U.S. court. It would seem equally reasonable that a foreign shipowner’s bill of lading would provide that any claims against it would be subject to the laws of its own country and that any suits against it must be filed in its country.

Well, it depends. If the claim involves a choice of foreign law, the foreign choice of law will not stand up in a U.S. court because the U.S. Carriage of Goods by Sea Act, 1936, is “compulsorily” applicable under U.S. law to all shipments carried to and from the United States.

But the clause providing that all suits must be filed in the foreign shipowner’s country will usually be upheld by a U.S. court. There is no U.S. law requiring that all cargo loss or damage suits against an ocean carrier must be filed in the United States. Therefore, if an American importer chooses to ship with a Japanese carrier, he may have to comply with a foreign forum clause specifying that suits must be filed only in Tokyo.

The Supreme Court recently held that a choice of forum clause providing that all disputes must be litigated in Virginia was valid, and that a suit filed in Texas could be transferred to Virginia by moving to transfer under 28 U.S.C. ยง 1404(a). That Texas was a more convenient forum because of witnesses, etc. made no difference, and Texas law would not be applied in Virginia. A transfer would be denied unless the plaintiff could prove “extraordinary circumstances unrelated to the convenience of the parties.” Atlantic Marine Construction Co. v. U.S.D.C. for the Western District of Texas, 134 Supreme Court 568 (2013).