American Marine Ltd shipped four yachts on the Pacific Defender (a bulk carrier) from Hong Kong. Three of the yachts were sent to Milwaukee and one was sent to Toronto. The carriage of each yacht was booked with a separate bill of lading. Each bill of lading contained a forum selection clause providing that disputes arising from carriage would be heard in the 'Exchequer Court of Canada, Quebec Admiralty District, Montreal Registry'. Each bill of lading also contained a paramount clause providing that US maritime law would apply to cargo destined for the US and Canadian law would govern the carriage of the cargo destined for Canada. The bills of lading provided that the carriage of deck cargo was to be governed by the terms of the bills of lading.

The yachts were strapped to the deck of the Pacific Defender. All four were damaged en route from Hong Kong to Los Angeles where the ship stopped to refuel. The shipper and charterer discussed offloading the cargo in Los Angeles, but all the yachts were taken to their original destinations after inspection of the damage.

The shipper's insurers and assignees in interest, North River Insurance Co, and Northwestern National Insurance Co, compensated the shipper. They then filed suit in the Central District of California to recover their losses from the charterer, Fed Com. Fed Com moved to dismiss on the basis of the Canadian forum selection clause in the bill of lading. The insurers opposed the dismissal, arguing that jurisdiction over the dispute involving the Toronto-bound yacht was proper because the shipper and charterer allegedly agreed that Fed Com would offload that yacht in Los Angeles. The insurers claimed that the charterer's refusal to do so constituted a deviation from the contract, thereby nullifying the forum provisions in the bill of lading.

The District Court dismissed the action on the basis of the foreign forum clause. The insurers appealed.

Held: Appeal dismissed. The decision of the District Court is affirmed.

The US Carriage of Goods by Sea (COGSA) applies to international trade leaving or entering United States ports. The scope of COGSA may be incorporated by contract to govern situations normally outside its scope. Grace Line Inc v Todd Shipyards Corp 500 F 2d 361 (9th Cir 1974) (CMI1737)) held that parties may contractually choose to apply the provisions of COGSA to the carrier's agent. Thus parties may contractually choose to apply the provisions of COGSA to individuals otherwise exempt from maritime law. They may also contractually incorporate COGSA where the Harter Act would apply.

In this case, the parties agreed that the yachts would be carried on the deck of the Pacific Defender. COGSA does not apply to cargo carried on deck. However, the parties incorporated COGSA contractually with respect to cargo destined for US ports, even though the cargo was carried on deck. Therefore, COGSA applies with respect to the Milwaukee-bound yachts. The parties agreed that Canadian maritime law would control litigation concerning the Toronto-bound cargo.

The insurers claimed that the District Court has jurisdiction over cases governed by COGSA, and consequently over the Milwaukee-bound cargo. The insurers asserted that foreign jurisdiction clauses are invalid when COGSA governs. Fed Com countered that when COGSA has been contractually incorporated rather than applying of its own force, a foreign forum clause is a contract term entitled to as much respect as the provision incorporating COGSA.

Parties may contractually provide for a forum in which to litigate, just as they may contractually agree on COGSA as the governing law with respect to certain parties. Because the language of COGSA is not inconsistent with foreign jurisdiction clauses, the view that COGSA pre-empts all contract terms when its sole force is by incorporation into a contract for foreign transportation is rejected. When international parties contractually provide for COGSA to govern disputes, they need not be barred from determining where they want disputes to be held.

A carrier deviation from the original bill of lading will prevent the carrier from relying on its terms. The carrier becomes strictly liable for all damages to the relevant cargo resulting from the deviation. Carriage beyond a designated port is a deviation, but the breach of an oral agreement outside the terms of the bill of lading is not. Here the carrier complied strictly with its terms by unloading the cargo in Toronto.

The Canadian jurisdiction provision in the bill of lading over the Toronto-bound yachts remains in effect.