## Facts

- Polish Steamship Co. (PSC) owned the *M/V Ziemia Suwalska* and time-chartered it to Trans Sea Transport (TST) under a charter party containing a New York arbitration clause.
- TST contracted to carry a steel cargo owned by Trade–Arbed; bills of lading were issued for the shipment.
- The bills of lading stated that the charter party’s terms and conditions were incorporated, including dispute-resolution terms.
- The cargo was damaged during the voyage.
- Trade–Arbed was paid by its cargo insurer, Continental Insurance Company; Continental sued PSC and the vessel in federal court as subrogee to recover the paid loss.
- PSC sought dismissal on the ground that the incorporated arbitration clause required arbitration rather than court litigation.

## Issues

1. Whether the charter party’s arbitration clause was effectively incorporated by reference into the bills of lading governing the cargo shipment.
2. Whether a subrogated cargo insurer is bound by an incorporated arbitration clause to the same extent as the cargo owner.

## Decision

- The Second Circuit affirmed the district court’s dismissal in favor of arbitration.
- The court held the bills of lading effectively incorporated the charter party’s arbitration clause.
- The court held Continental, as subrogee of the cargo owner, was bound to arbitrate because it acquired no greater rights than its insured.

## Legal Principles

- A bill of lading may incorporate a charter party by reference; sufficiently clear and broad incorporation language can include the charter party’s arbitration clause.
- Cargo interests taking under a bill of lading are bound by incorporated charter-party terms not inconsistent with the bill’s express provisions.
- A subrogated insurer stands in the shoes of the insured and is subject to the insured’s contractual burdens, including agreed arbitration and forum provisions.
- Where all claims are referable to arbitration, a federal court may dismiss the action rather than stay it, consistent with Second Circuit admiralty practice.

## Conclusion

The court enforced an arbitration clause incorporated from a time charter into bills of lading and required the cargo insurer, suing as subrogee, to arbitrate its cargo-damage claim, affirming dismissal of the federal action.


Continental Ins. Co. v. Polish S.S. Co., 346 F.3d 281 (2d Cir. 2003)