Gerald Dahir, an American crewmember working for Royal Caribbean Cruise Line ("RCCL"), was injured during his service on-board the vessel as a result of which he filed suit in Federal Court, Texas for damages.
In response, and in accordance with the terms of his employment contract, RCCL filed a motion to have the claim removed to arbitration.
When determining whether to refer a case to binding arbitration the court must first consider whether the employment contract falls within the terms of the New York Convention ("the Convention"). The Convention applies to the recognition and enforcement of foreign arbitral awards and requires the courts of contracting states to give effect to agreements to arbitrate. The Convention requires the party seeking to rely upon the agreement to show:
1. There is a written agreement to arbitrate the matter;
2. The agreement provides for arbitration in a Convention signatory nation; and
3. The agreement arises out of a commercial legal relationship;
The US courts have also held that agreements arising out of a relationship which is entirely between citizens of the United States do not fall under the Convention.
Fairly bargained arbitration clauses in the employment contracts of non-US crew are now routinely upheld by the courts. See Lindo v. NCL (Bahamas) Ltd (11th Cir. Aug.29, 2011) - "US - Enforcement of Arbitration Clauses in Crew Contracts".
However, often a US crewmember will contend they are exempt from having to submit their Jones Act and General Maritime Law claims to arbitration1 because:
i) The agreement includes a US party and;
ii) The employment agreement constitutes a seaman's employment contract and, as such, is expressly excluded from coverage under the Federal Arbitration Act ("FAA"). (The FAA is a domestic act passed by congress which allows disputes to be resolved via arbitration but which does not apply to employment contracts.)
When considering the first point the courts have determined that it is not as simple as merely determining if one of the parties to the agreement is a US citizen but that one also needs to determine whether the relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relationship with one or more foreign states.
So far as the second point is concerned, the courts have considered this and ruled that the FAA only applies to the extent that it is not in conflict with the Convention. Because the Convention does not recognise an exception for seaman's contracts there is a conflict and the exclusion under the FAA, therefore, does not apply.
In Dahir the plaintiff did not dispute the fact that the first three requirements for arbitration to be compelled had been met and the argument focused upon whether his status as a US citizen rendered the arbitration agreement invalid.
Dahir argued that the contract did not envisage performance abroad because he only worked in international waters and not ashore at a foreign destination. The court in Dahir looked to the decision in Alberts v Royal Caribbean Cruises Limited (Alberts) for guidance.
In Alberts the court concluded that it was sufficient for the employment to involve performance “in or travelling to or from foreign state” to prove that performance abroad was contemplated. It held that the contract envisaged performance abroad because the vessel the crew member was assigned to did enter international waters on route to foreign destinations and, therefore, the arbitration clause was enforceable.
The Dahir court adopted this line of reasoning and held that it was not necessary for the crew member to work on foreign shores to evidence performance abroad. It was enough that the accident occurred in international waters, on route to a foreign port, to demonstrate the contract between employer and employee did envisage performance abroad. This being the case the Convention requires that the claimant be compelled to arbitrate his claim against RCCL.
Dahir argued that to compel arbitration went against the public policy of protecting seaman and also that the Federal Employer’s Liability Act prohibited an employer from exempting themselves from Jones Act liabilities. In response to these two arguments the court held that, firstly, there is a very strong public policy favouring arbitration and that it was the plaintiff’s burden to provide persuasive evidence that enforcement created a compelling issue of public interest; a burden which in this case he failed to meet. The court further rejected the second argument on the grounds that when arbitrating a case the seaman does not relinquish the rights they have but rather they simply move to a different forum with all rights preserved.
This decision is helpful to ship-owners employing US crew working abroad where there is a desire to have those crew submit to binding arbitration, outside of the high exposure US court system.
1 See also "Post-Accident Arbitration Clauses for Jones Act Crew Claims".
