A shipment of steel tubing carried on the M/V Ocean Sunrise from Japan to New Orleans, Louisiana, and Houston, Texas, arrived damaged at the destination ports. The cargo owners, Kanematsu USA Inc and Mitsubishi Corp, and the cargo insurer, Tokio Marine & Fire Ins Co (the plaintiffs), brought an admiralty action under the Carriage of Goods by Sea Act, 46 USC § 1300 ff (US COGSA) seeking recovery for the cargo damage. The owner of the M/V Ocean Sunrise, Sirhan Compania Maritime SA (the defendant), filed this motion to dismiss the suit in favour of litigation in Japan.

The forum selection clause stated:

The contract evidenced by this bill of lading shall be governed by the law of Japan except as otherwise provided in this bill of lading. Any action concerning custody or carriage under this bill of lading shall be brought before the Tokyo District Court in Japan.

The plaintiffs argued that the forum selection clause should not be enforced. The Court must apply US COGSA, which governs bills of lading for cargo shipments carried by sea to or from ports in the United States, and the Harter Act. US COGSA recognises the defendant as a 'carrier' because it is the owner of the M/V Ocean Sunrise. The Japanese forum would not apply the minimum protections afforded by US law. Applying the Japanese Carriage of Goods by Sea Act (Japan COGSA) would lessen the carrier's liability and violate s 3(8) of US COGSA. The Japanese courts would also not recognise its claims against the defendant as a 'carrier' under the bill of lading. Accordingly, the plaintiffs' rights to pursue statutory remedies under US COGSA would be waived if the Court were to dismiss this action in favour of litigation in Japan. The plaintiffs cited the Supreme Court decision in Vimar Seguros y Reaseguros SA v M/V Sky Reefer 515 US 528 (1995) (CMI1456) for the proposition that historically US courts refused to enforce foreign forum selection clauses or arbitration clauses, reasoning that such clauses violated US COGSA's minimum protections.

The plaintiffs also relied on Central National-Gottesman Inc v M/V 'Gertrude Oldendorff' 204 F Supp 2d 675 (SDNY 2002), where the Court refused to enforce a foreign forum selection clause requiring litigation in London, because an English lawyer witness attested that a London court would not adopt a construction of the term 'carrier' similar to that used in the Southern District of New York. The Court explained that courts in the Southern District of New York had expansively construed the term 'carrier' to include all owners and charterers participating in the carriage of goods. The Court reached its decision not to dismiss the case based on the 'real danger that a London court may not hold [one defendant], as time charterer, to the same duties that he would be expected to comply with were the action brought in this district under COGSA'.

The defendant contended that the plaintiffs' claims had to be based in tort, as there was no contractual relationship between the plaintiffs and defendant. The plaintiffs' claims would still be applicable as a tort claim in Japan. The defendant responded to the plaintiff's reliance on M/V 'Gertrude Oldendorff' by distinguishing the broad interpretation of 'carrier' accepted by the Second Circuit from the Fifth Circuit's narrow interpretation of 'carrier', which requires privity of contract.

The plaintiffs and the defendant submitted affidavits of Japanese attorneys in support of their respective positions.

Held: Motion to dismiss denied.

Generally, a foreign forum selection clause in a bill of lading is presumed valid. The burden is on the plaintiffs to overcome this presumption of validity by showing that the carrier's liability will be lessened under Japanese law. A forum selection clause may be unreasonable if:

1. It was incorporated into the agreement through fraud or overreaching;
2. The plaintiffs will, for all practical purposes, be deprived of their day in court because of grave inconvenience or unfairness;
3. The chosen law is unfair and will deprive the plaintiffs of a remedy;
4. Enforcement of the forum selection clause would contravene a strong public policy.

Several courts after the Sky Reefer decision, in cases involving bills of lading subject to US COGSA, extended the Sky Reefer holding to foreign forum selection clauses, finding that the reasoning and language of the Sky Reefer decision do not limit the holding to arbitration clauses. These courts also noted that the concurring and dissenting opinions in Sky Reefer recognise that the holding will also apply to forum selection clauses. The weight of authority thus supports a conclusion that a bill of lading subject to US COGSA does not, in and of itself, preclude the application of a foreign forum selection clause. It may do so only if the plaintiffs meet their burden to show that the application of the foreign law will deprive them of rights and protections afforded to them under US COGSA.

It appears from the affidavits of the Japanese attorneys that the defendant would not be a 'carrier' under Japan COGSA and, thus, any claims against the defendant would be relegated to tort claims. The parties do not dispute that under US COGSA, the plaintiffs would have a claim against the defendant as a carrier based on the bill of lading. Under Japan COGSA, they would not have a claim. Instead, any claim would sound in tort and would deprive the plaintiffs of rights they have under US COGSA. On this basis, the motion to dismiss must be denied because of the uncertainty and risk that the plaintiffs' rights under US COGSA would not be protected under Japan COGSA.

The Court notes that under Japan COGSA, the term 'carrier' is defined in art 2 as 'the owner, lessee and charterer of a ship who is engaged in the carriage of goods by ship'. US COGSA defines 'carrier' in 46 USC § 1301(a) to include 'the owner or charterer who enters into a contract of carriage with a shipper'. Neither the parties nor the Japanese attorneys explain why the defendant would not be considered a carrier under Japan COGSA. The defendant's Japanese attorney suggests that Japan COGSA would still apply to the plaintiffs' tort claims against the defendant. However, again, neither the parties nor the Japanese attorneys explain whether or how the tort claim would be treated differently from a claim based on the bill of lading under Japan COGSA.