Foster Wheeler Energy Corp. v. AN NING JIANG MV, Fifth Circuit No. 03-30038 (Sept. 13,2004).

In a bill of lading between a U.S. shipper and a U.S. carrier, the Spanish Hague-Visby Rules will be applied for determination of the carrier’s liability.

Foster Wheeler Energy Corp. v. AN NING JIANG MV, Fifth Circuit No. 03-30038 (Sept. 13, 2004).

Foster Wheeler, a multi-national corporation principally domiciled in the US, engaged International Maritime Carriers (“IMC”), a corporation organized under the laws of the Bahamas with its principal place of business in New Orleans, to ship generation equipment from Spain to China aboard the AN NING JIANG. IMC issued CONLINEBILL form bills of lading in Hamburg, Germany, listing Foster Wheeler as shipper with Tarragona and Gijon, Spain, as ports of loading and Xingang, China, as port of discharge. The bills bore no explicit reference to any limitation of liability. The bills contained a Clause Paramount calling for application of the Hague-Visby Rules as enacted in the country of shipment. When no such enactment is in force in country of shipment, then the corresponding legislation of country of destination shall apply. The bills also contain, however, a Jurisdiction clause which calls for any lawsuits arising under the bill to be filed in the Eastern District of Louisiana with application of U.S. law.

In May 1999, the equipment was delivered in good order to the ports and loaded aboard the AN NING JIANG. During transit to China, the ship encountered heavy weather damaging the equipment. Foster Wheeler brought suit in the Eastern District of Louisiana against IMC and the AN NING JIANG (though, the ship was never served) seeking $228,576.73 in damages for IMC’s breach of its duties under COGSA and/or the Harter Act. IMC answered that its liability was limited under COGSA to $500 per package, or $39,453.74. IMC then filed a motion for summary judgment seeking a declaration that COGSA applied, pursuant to the Jurisdiction clause, rather than the Spanish Hague-Visby Rules which call for a higher limitation. The Eastern District of Louisiana granted IMC’s motion for summary judgment reasoning that the Jurisdiction clause designating U.S. law was a forum selection and choice-of-law clause calling for application of COGSA. The court also found the Jurisdiction clause was specific and could not be trumped by the terms of an “amorphous” Clause Paramount. Foster Wheeler appealed the court’s decision.

On appeal, no party disputed IMC’s liability, the sole issue was whether COGSA or the Hague-Visby Rules as enacted by Spain governed the carriage and, therefore, the carrier’s limitation of liability. Foster Wheeler asserted that as a simple matter of contract interpretation, a reading of the bill of lading as a whole revealed that while the Jurisdiction clause contractually invoked COGSA, its application only existed during periods, and for claims, not governed by the Hague-Visby Rules referenced in the Clause Paramount.

The Fifth Circuit noted the Spanish Hague-Visby Rules applied ex proprio vigore, or compulsorily by force of law since Spain was the country of shipment. The court also noted the Hague-Visby Rules govern carriage from tackle-to-tackle whenever either: (1) the bill of lading is issued in a signatory country, (2) carriage is from a port in a signatory country, or (3) the bill of lading reference the Hague-Visby Rules. In this matter, the Hague-Visby Rules applied compulsorily because (1) the bills were issued in Germany, a signatory country, (2) the carriage departed from Spain, a signatory country, and (3) the bills references the Hague-Visby Rules “compulsorily” through their Clause Paramount. The Fifth Circuit added COGSA would only apply compulsorily during carriages to or from U.S. ports in foreign trade or by contract.

The Fifth Circuit addressed the district court’s reasoning that the Jurisdiction clause was a forum selection and choice-of-law clause by holding that the call for application of U.S. law within the Jurisdiction clauses means that U.S. law applies to the extent that it does not contravene the compulsorily-applicable Hague-Visby Rules referenced in the Clause Paramount. The court further noted that IMC drafted the bills and could have made the distinction clearer if it wanted application of U.S. law over the Hague-Visby Rules referenced in the Clause Paramount.

The Fifth Circuit concluded that, “we find that the most reasonable interpretation of the parties’ contract of carriage, and the one that gives effect to all of its provisions without rendering any superfluous, is that the Jurisdiction clause provides for the application of U.S. law only during periods of responsibility and to the types of claims to which the Spanish Hague-Visby Rules referenced the General Clause Paramount do not apply ex proprio vigore. … U.S. law applies under the Jurisdiction clause to the litany of non-cargo maritime claims that may be brought as well to cargo claims stemming from damage outside the tackle-to-tackle period. For example, as Foster Wheeler points out, U.S. law would govern substantive maritime claims that are neither subject to COGSA nor the Hague-Visby Rules such as claims for demurrage, products liability, general average, and pollution.”

The court remanded to the district court for a determination of IMC’s liability under the Spanish Hague-Visby Rules.