The plaintiff-shipper Caterpillar Inc (Caterpillar) contacted the defendant, Neptune Lines Inc (Neptune), a non-vessel operating common carrier (NVOCC) for a shipment of five power generators from Panama to Chile. The cargo was on board the M/V Karonga and was damaged during the shipment. The bills of lading provided for the application of the US COGSA/the Hague Rules, unless the shipment was to or from a port where there was a compulsory ordinance or statute 'similar in nature to' the Hague Rules. The COGSA/the Hague Rules adopted by the US imposes a one-year statute of limitations, and a USD 500 per package limitation on a carrier’s liability. On the contrary, Chile has ratified the Convention of the United Nations on the Carriage of Goods by Sea 1978 (the Hamburg Rules), which provides a two-year statute of limitations, and limits a carrier’s liability on a per-kilogram basis. The case before the court involved cross-motions for partial summary judgment on the question of choice of law. Caterpillar maintained that Chilean law should apply to this dispute, whereas Neptune argued for the application of US law.

Held: US law applies.

Although Chile has adopted the Hamburg Rules, a US court is not bound to apply them but will apply US maritime choice of law rules to determine what law applies. Under US maritime choice of law principles, when a maritime contract contains a choice of law clause, the law chosen by the parties governs, unless: (1) that jurisdiction has no substantial relationship to the parties or the transaction; or (2) that jurisdiction’s law conflicts with the fundamental purposes of maritime law.

In this case, the parties chose US COGSA/the Hague Rules in the bills of lading. There is a substantial relationship to the US as both parties are US entities, and the chosen law does not conflict with any fundamental purpose of the US maritime law. In addition, the Hamburg Rules are not 'similar in nature' to the Hague Rules. The Hamburg Rules were intended as a complete replacement of the Hague Rules with a different regime. The Hamburg Rules explicitly require any contracting State to denounce the Hague Rules. 

Caterpillar offered no evidence that it objected to the form of the bill of lading when it entered into it, or any evidence that it believed that the Hamburg Rules applied. The Hamburg Rules provide that every bill of lading subject to the Rules must 'expressly state that it is subject to the provisions of this Convention which nullify any stipulation derogating therefrom to the detriment of the shipper or the consignee'. The fact that this clause was absent from the Neptune bills of lading, and that Caterpillar did not object to the absence of this language, indicates a lack of intent to select the Hamburg Rules in any circumstances.