December 2005
On May 25, 2003, the S/S Norway's steam boiler exploded while the cruise ship was in the Port of Miami. Six crewmembers were killed and four were injured. At the time of the explosion each crewmember's employment was governed by the terms of a standard employment contract executed by crewmembers and representatives of Norwegian Cruise Line, Ltd. ("NCL") in the Philippines.
The plaintiffs filed complaints alleging wrongful death and personal injury in state court. NCL removed the cases to federal court, and moved to compel arbitration pursuant to written arbitration agreements between the Company and the plaintiff seamen, claiming that the agreements were subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the Convention"). The District Court agreed, and rejected the plaintiffs' assertion that the Motion to Compel Arbitration must be denied because seaman's contracts were exempt from the coverage of the Convention. Dismissing the case, the Court granted Norwegian's motion to compel arbitration in the Philippines. Bautista v Star Cruises and Norwegian Cruise line, Ltd., 286 F. Supp 2d 1352 ( S.D. Fla. 2003).
On January 18, 2005, the Eleventh Circuit affirmed the ruling of the District Court. Bautistia v Star Cruises and Norwegian Cruise line, Ltd, 396 F. 3d 1289 (Eleventh Cir. 2005). This landmark decision found that foreign seaman's contracts are commercial legal relationships under the Convention and that the contracts signed by each crewmember fulfilled the jurisdictional prerequisite that the court be provided with an agreement to arbitrate signed by the parties. The decision confirmed that the seamen's claims for personal injury (negligence and unseaworthiness) and maintenance and cure were claims arising from their employment. (Though not specifically addressed in the opinion claims for wages and into the U.S. Penalty Wages Statute are not, however, subject to arbitration). The Standard Terms and Conditions Governing the employment of Filipino Seafarers, a document incorporated by reference in the seaman's employment contract, contained the arbitration agreement.
Most importantly, the Court paved the way for shipowners to arbitrate all claims where a foreign crewmember signs an agreement to arbitrate in a country which is a party to one of the two treaties which enforce arbitration - the New York Convention ("New York Convention") and the Convention on International Commercial Arbitration. ("Panama Convention"). The Eleventh Circuit's opinion suggested that not only could arbitration be enforced where a governmentally imposed compensation scheme like the POEA was involved, but in all cases where a seaman signed an employment contract which required arbitration in one of the countries of the two treaties.
The threshold criteria for enforcing arbitration agreements under the Conventions are that there must be an actual "agreement" which must be "in writing." If there is a written agreement; if the agreement requires arbitration in a country which is a party to the New York Convention; if the agreement arises out of a commercial relationship; and if the dispute either involves a foreign citizen or a reasonable relationship with a foreign state, then there is a prima facie requirement that the parties arbitrate.
The most effective method of establishing that a seaman/crew member has agreed to arbitrate is appropriate language in the crewmember's written employment contract. As long as the employment contract has a clause expressly referring to "arbitration" and it is signed by the crew member, the employment contract should satisfy the "actual agreement" and "in writing" elements.
If for some reason it is not feasible to place an express arbitration clause in an employment contract, the arbitration agreement may be set forth in a separate (signed) document or it may be adopted by reference. For example, the employment contract may refer to a collective bargaining agreement which in turn has an arbitration requirement.
In addition to drafting the actual arbitration agreement the employer must also designate the place where the arbitration is to take place, which in turn must be a signatory to one of the Conventions. The place must be accessible to the crewmember, have some reasonable relationship with the crewmember, the location of events giving rise to the claim, or the line itself, such as the flag state, country of incorporation or base of operations. In choosing the governing law, an employer should therefore investigate the governing remedies and damage awards in the nations under consideration. Before selection of a foreign jurisdiction a shipowner must determine whether there may be some legislation which may interfere or prohibit the enforcement of the award. Lastly, it is important to determine if the arbitral system and arbitral awards are adequate. It must determine if there are caps to the damage awards or if there is a system which provides predetermined awards for specific injuries.
In sum, in paving the way for shipowners to arbitrate injury and other employment claims where a foreign crewmember signs an agreement to arbitrate in a country which is a party to one of the two Conventions, the Bautista Court ushered in a host of new issues which can affect the maritime employer. Such issues will be addressed as employers pursue their right to arbitrate the claims of foreign seamen. Maritime employers plying U.S. ports should take note of this decision and assess whether it makes sense for them to take advantage of it in their crewmember employment agreements.
With thanks to Curtis J. Mase and Beverly D. Eisenstadt of Mase & Lara, P.A., Miami, for preparing this article. Mase & Lara represented NCL in this case.
