The plaintiffs chartered the defendant’s vessel to move chemicals from Houston, Texas to Ulsan, South Korea. They alleged that the chemicals changed colours during the ocean carriage (which diminished their value) and that the cause of the changed colour was residue from other chemicals previously carried on the defendant’s vessel. Pursuant to an arbitration clause in the underlying charterparty, plaintiffs brought in action in New York before the Society of Maritime Arbitrators. Applying COGSA / Hague Rules, the arbitral tribunal held that the plaintiffs had not met their burden in demonstrating a prima facie case and did not prove damages.

The plaintiffs filed suit in the United States District Court for the Southern District of New York arguing that the award should be vacated on grounds that the arbitral tribunal ‘manifestly disregarded COGSA’ in reaching its result. The District Court affirmed the arbitral award and the plaintiffs appealed to the United States Court of Appeals for the Second Circuit, alleging the District Court erred in concluding that the arbitral tribunal did not manifestly disregard COGSA.

The relevant issue before the court was whether the arbitral tribunal manifestly disregarded COGSA / Hague Rules.

Held: The District Court was correct that the arbitral tribunal did not manifestly disregard COGSA / Hague Rules. The arbitral tribunal ‘recognized that COGSA permits a shipper to make a prima facie case by establishing that it delivered goods to a carrier in sound condition, and that the goods arrived in damaged condition following carriage'. Applying these standards, the arbitral tribunal was within its rights to find that the plaintiff’s evidence was insufficient to meet this burden. Even though it was ‘arguable’ that the plaintiff’s evidence could have supported a contrary finding, this did not mean that the arbitral tribunal manifestly disregarded COGSA / Hague Rules.