Ambraco Inc (the plaintiff) claimed for damage to a cargo of bailer twine carried from Brazil to Louisiana on the MV Clipper Faith. The lawsuit was filed against Bossclip BV (Bossclip), Dockendale Shipping Co Ltd, and Faith Shipping Co Ltd, collectively the vessel interests, and Pacorini Holding LLC (Pacorini), the stevedore company. The cargo was damaged while it was in the custody of the vessel interests or Pacorini. Bossclip issued 17 bills of lading with identical terms and conditions to the other vessel interests. The bills of lading contained a clause providing for the application of English law, and naming the High Court of Justice in London as the exclusive competent forum. The bills of lading also contained a clause paramount providing for the application of the Carriage of Goods by Sea Act (COGSA), 46 USC § 30701, if the carriage was to or from the United States. The plaintiff threatened to arrest the vessel to gain in rem jurisdiction. A letter of undertaking was issued to prevent the arrest.

The District Court for the Eastern District of Louisiana dismissed the claims against the vessel interests based on the forum selection clause, continued the case against Pacorini and asserted jurisdiction in rem over the letter of undertaking. The plaintiff appealed to the Court of Appeals, Fifth Circuit, arguing that the forum selection clause was invalid as a violation of the public policy codified in COGSA § 3(8), which limits the carrier's freedom to lessen the minimum liability contained in the Act.

Held: The District Court judgment is affirmed.

COGSA § 3 provides 'explicit standards of conduct, and it is designed to correct specific abuses by carriers' as '[i]n 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 the plaintiffs had to present their notice of claim or bring suit, and capping any damage awards per package': Vimar Seguros y Reaseguros SA v M/V Sky Reefer 515 US 528, 534-35, 115 S Ct 2322, 132 L Ed 2d 462 (1995) (CMI1456). COGSA imposes substantive obligations and particular procedures with which carriers participating in international maritime commerce must comply, and § 3(8) 'prohibits a carrier from altering its substantive obligations to its advantage in a bill of lading'. COGSA states that carriers may not lessen their liability beyond that stipulated by law, but does not prohibit the parties from agreeing to enforce the bill of lading provisions in a particular forum: Sky Reefer 535, 2322. Thus, a choice-of-forum clause is presumptively valid, but will be 'held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision': M/S Bremen v Zapata Off–Shore Co 407 US 1, 15, 92 S Ct 1907, 32 L Ed 2d 513 (1972). The main question to determine whether a clause violates public policy is whether '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': Mitsubishi Motors Corp v Soler Chrysler–Plymouth Inc 473 US 614, 637 n 19, 105 S Ct 3346, 87 L Ed 2d 444 (1985); Mitsui & Co (USA) Inc v Mira M/V 111 F3d 33, 36 (5th Cir 1997). The party resisting enforcement on these grounds bears a 'heavy burden of proof': Haynsworth v The Corporation 121 F 3d 956, 963 (5th Cir 1997).

The plaintiff argued that the enforcement of the forum selection clause and the choice of law provisions would lessen the statutory remedies available under COGSA. This is because, first, English courts would not recognise the vessel interests as carriers, which would lessen their liability below that which COGSA guarantees; and, second, English courts would not permit an in rem action in this case, and the right to an in rem action is substantively guaranteed.

The Court stated that the English courts have been repeatedly recognised to be fair and impartial and that they meet the standards of neutrality and long experience in admiralty litigation, so they may be presumed to be fair. However, it is necessary to look beyond this presumption of fairness to assess if, in deciding this case, the English courts will impermissibly limit the vessel interests' liability. The clause paramount of the bills of lading provided for the application of COGSA if the carriage was to or from the United States. The plaintiff asserts that English courts will apply English law. An examination of English decisions suggests that English courts are likely to apply COGSA if the parties so intended. The Queen's Bench considered the role of US law in a clause paramount in a charterparty governed by English law in Mauritius Oil Refineries Ltd v Stolt–Nielsen Nederlands BV (The Stolt Sydness) [1997] 1 Lloyd's Rep 273. The clause paramount in that case expressly incorporated COGSA into the bill of lading, and the English court honoured the parties' intention in this regard. The House of Lords also considered in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446 (HL) whether stevedores could take advantage of a limitation of liability clause contained in the bill of lading governed by COGSA. The House of Lords stated that there was no reason for the word 'carrier' in the bill of lading or in COGSA to be extended to stevedores. The House of Lords relied on Robert C Herd & Co v Krawill Machinery Corp 359 US 297, 79 S Ct 766, 3 L Ed 2d 820 (1959) (CMI1735), where the Supreme Court held that COGSA does not define 'carrier' to include stevedores. This decision persuaded the Court that the English courts would honour the parties' intention to apply COGSA. The plaintiff had not provided evidence that the English courts would impermissibly limit the vessel interests' liability.

The plaintiff also argued that the forum selection clause would lessen the vessels interests' liability because an action in rem against the vessel was unavailable in the UK. English courts do not recognise in rem actions 'when the ship owner is entitled to sovereign immunity, nor when the plaintiff has already obtained [or is seeking] judgment against the shipowner in personam in relation to the same dispute': Martin Davies, 'In Defense of Unpopular Virtues: Personification and Ratification' (2000) 75 Tulane LR 337, 342. Therefore, if an in rem action is a substantive right protected under COGSA, a failure to provide an in rem action might be unreasonable against COGSA's public policy: Allianz Ins Co v Cho Yang Shipping Co 131 F Supp 2d 787, 794 (ED Va 2000). The Court did not have to decide this argument as the District Court retained jurisdiction in rem over the letter of undertaking, which replaced the ship: Thyssen Inc v Calypso Shipping Corp SA 310 F3d 102, 107 (2d Cir 2002).