In what is seen as a landmark decision, the United States Eleventh Circuit Court of Appeals upheld an arbitration clause contained in Filipino crewmembers’ contracts requiring them to arbitrate their employment claims in the Philippines, pursuant to an arbitration clause in the standard Philippine Overseas Employment Administration (POEA) employment contract. Mase, Gassenheimer & Lara PA of Miami acted for the shipowner, a West of England Member and their report on the case may be summarised as follows:
A group of Filipino crewmembers and their heirs sued in Florida State Court for damages for death and personal injury resulting from an accident on board a vessel in 2003. All the claimants sought relief under the Jones Act and general US maritime law, whereby an injured or deceased seaman is able to bring an action claiming negligence, unseaworthiness and maintenance and cure. These remedies entitle the claimant to damages for past lost wages, future lost wages and pain and suffering. Damages awarded under the Jones Act and general maritime law can be significant particularly in those cases where death did not occur instantaneously and there was considerable pre-death pain and suffering. Each crewmember was employed pursuant to the POEA standard contract, which has a clause requiring all claims arising from his employment to be arbitrated in the Philippines. The POEA limits the amounts recoverable based on the severity of the injuries in the region of USD80,000 to USD120,000. The court of first instance decided that the arbitration provision should be enforced. The court based its decision on the International Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). Both the United States and the Philippines are parties to the New York Convention which requires the courts of a signatory nation to enforce written agreements requiring arbitration in any signatory country. U.S. law implementing the Convention allows parties to request that federal courts enforce arbitration clauses regardless of where the underlying claims are filed.
On appeal, the crewmembers argued that seamen are exempt from being forced to arbitrate under U.S. law, relying heavily on the liberal protection which U.S. courts traditionally give seamen. The Eleventh Circuit Court rejected this argument, and held that the enforcement of multi-national arbitration agreements only requires proof of a written agreement to arbitrate disputes arising from a commercial relationship in a country which is a party to the Convention. Significantly, the Court held that crewmember employment contracts are commercial agreements, and that the broad terms of the International Convention do not exclude seamen.
The decision may have implications far beyond the POEA contract at issue. Mase,
Gassenheimer & Lara believe that this decision could have an application
for maritime employers worldwide in that it provides foreign employers with
a potential way of removing crewmember lawsuits from U.S. courts. In its ruling
the Eleventh Circuit Court of Appeal joined the Fifth Circuit in enforcing arbitration
pursuant to the POEA. The Eleventh Circuit, however, went much further and concluded
that not only could arbitration be enforced in the context of a workers compensation
scheme enforced by the crewmembers’ government (such as is the case with
the POEA) but in all cases where a crewmember has signed an agreement to arbitrate
in a country which is a party to one of two treaties (conventions): the New
York Convention and the Inter-American Convention on International Commercial
Arbitration (the U.S. is party to both). Based on the reasoning of this decision,
U.S. Courts will enforce agreements to arbitrate employment disputes formed
in signatory countries which require arbitration in a signatory country. It
is this aspect of the Eleventh Circuit’s ruling which appears to give
ship owners a real prospect of crewmember employment related claims in U.S.
courts, including claims for personal injury being determined in accordance
with arbitration clauses in crew employment contracts.
The only basis upon which such arbitration clauses may not be relied upon is that the arbitration agreement is null and void, inoperative, or incapable of being performed. In evaluating such a basis, however, courts must use standards that can be applied universally from country to country (such as fraud). Purely domestic concerns which might otherwise prevent arbitration - such as the U.S. domestic seaman’s exemption - are not sufficient.
There are two important considerations about the choice of the arbitral forum. First, it must have a reasonable relationship to the parties and the claim. For example, a clause requiring a seaman from one country to arbitrate in another might be hard to enforce. This does not mean, however, that all crew must be allowed to arbitrate in their home countries. For example, a seaman from a nation which is not a party to the two arbitration treaties might reasonably be required to arbitrate in a signatory country near his home state, or at his employer’s base of operations. Secondly, consideration must be given to the law governing arbitration in the arbitral forum. Employers should make sure that the choice of arbitral forum is not more disadvantageous than U.S. courts. Members seeking assistance in drafting such arbitration clauses may wish in the first instance to contact the Club.
A copy of the judgment can be obtained from the Managers in London or Mase
Gassenheimer & Lara, through their website;
or through e-mail cmase@mgtrial.net or
cbailey@mgtrial.net.