## Facts

- A New York fruit importer contracted to buy citrus shipped from Morocco to Massachusetts aboard the M/V *Sky Reefer*.
- The carrier issued a standard-form bill of lading providing that Japanese law governed and that disputes would be arbitrated in Tokyo.
- After arrival, cargo shifted and was damaged; the cargo insurer paid the importer and became subrogated to the claim.
- The insurer and importer sued the vessel and owner in federal court under the bill of lading, invoking the Carriage of Goods by Sea Act (COGSA).
- The defendants moved to stay the case and compel arbitration in Tokyo under the Federal Arbitration Act (FAA).
- The plaintiffs argued the foreign arbitration clause was unenforceable because it was adhesive and because it violated COGSA § 3(8) by effectively “lessening” carrier liability through added cost and by risking nonapplication of COGSA protections.

## Issues

1. Whether COGSA § 3(8) renders void a bill-of-lading clause requiring foreign arbitration (and applying foreign law) because the forum and expense may deter claims and thereby “lessen” liability.
2. Whether a foreign arbitration clause is unenforceable at the outset due to the possibility that arbitrators will apply law in a way that reduces the carrier’s substantive obligations below COGSA’s minimum standards.

## Decision

- The Supreme Court affirmed enforcement of the Tokyo arbitration clause and upheld the stay of the federal action.
- The Court held that COGSA § 3(8) does not nullify foreign arbitration clauses merely because they select a foreign forum and increase cost or inconvenience.
- The Court concluded that any concern about diminished COGSA protections was premature and could be addressed when enforcement of an arbitral award is sought.

## Legal Principles

- COGSA § 3(8) prohibits contractual terms that relieve a carrier from, or substantively lessen, liability for breach of COGSA duties; it does not bar procedural arrangements selecting a forum or arbitral mechanism.
- Increased transaction costs or inconvenience from foreign arbitration, without an actual reduction of substantive obligations, is not a “lessening” of liability within the meaning of COGSA § 3(8).
- The FAA requires enforcement of written arbitration agreements in maritime contracts where no valid statutory bar applies.
- A foreign arbitration clause is not invalidated based on speculation that arbitrators will misapply substantive law; courts may scrutinize enforcement of an award if it reduces the carrier’s substantive obligations below COGSA’s minimum protections.

## Conclusion

The Court held that COGSA does not invalidate foreign arbitration clauses in maritime bills of lading simply because arbitration abroad may be more burdensome or because foreign law may apply; instead, U.S. courts may address any actual reduction of COGSA substantive rights at the award-enforcement stage.


Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995)