When Enforcement of a Seaman’s Arbitration Award Violates United States Public Policy and the “Prospective Waiver” Defense
When Enforcement of a Seaman’s Arbitration Award Violates United States Public Policy and the “Prospective Waiver” Defense
By: Maria Aurora P. Deguzman
Edited by: Tiffany Morales
Asignacion v. Schiffahrts, No. CIV. A. 13-0607, 2014 WL 632177, 2014 U.S. Dist. LEXIS 24472 (E.D. La. Feb. 10, 2014).
This case from the Eastern District of Louisiana has prior history at both the state and federal level. The issue before the Court in this particular case was whether to grant the Defendant’s motion to recognize and enforce the award. The Court DENIED the defendant’s motion for two reasons:
- Enforcing the arbitration award would violate the public policy of the United States.
- Enforcing the arbitration award would also violate the “prospective waiver” defense.
According to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”), the United States court has secondary jurisdiction to decide whether or not to enforce the arbitration award that was issued in the Philippines.However, this power is limited to the seven situations enumerated in Article V of the Convention, with the burden of proof placed upon “[t]he party defending against enforcement of the arbitral award.” Asignacion at *3. “[I]f the court having secondary jurisdiction does not find any of the Article V grounds to be applicable,” the award must be enforced. Id.Enforcing the Arbitration Award Would Violate the Public Policy of the United StatesAsignacion “invoke[d] the public policy defense of Art. V(2)(b)… [which] provides that recognition and enforcement of an arbitral award may be refused if the competent authority in the country where recognition and enforcement is sought finds that ‘[t]he recognition or enforcement of the award would be contrary to the public policy of that country.’” Id. Specifically, a court needs to find that “enforcement of an award would violate the forum state’s most basic notions of morality and justice.”The Court agreed with Asignacion that enforcing the arbitral award would violate the public policy of the United States in light of the fact that “many decades of binding court decisions, the deprivation of the rights and protection that injured seamen are afforded under United States general maritime law constitutes a violation of [US] public policy.” Asignacion at *9.Enforcing the arbitration award would also violate the “prospective waiver” defense.Supreme Court decisions (Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) and Vimar Seguros y Reaseguros v. M/V Sky Reefer, 515 U.S. 528 (1995)) have led to the creation of the “prospective waiver” defense. According to the Court, this defense is correctly invoked only after arbitration has been enforced. It is the choice-of-law and the outcome it creates that becomes the basis for later choosing not to enforce an award, not the choice-of-forum.In conducting the choice-of-law inquiry for a maritime injury case, the Court applied the Laurizten-Rhoditis (Hellenic Lines Ltd. V. Rhoditis, 398 U.S. 306 (1970) and ultimately decided “that the law of the vessel’s flag should be applied” because it is the most significant factor in determining the applicable law. Asignacion at *7. Since the vessel was registered in the Marshall Islands, the law of that nation applied. The Marshall Islands adopted U.S. maritime law as its applicable maritime law.It was clear to the Court that the rights to which Asignacion “was entitled… were not available to him in the arbitration,” not only because the “arbitral panel refused to consider [Asignacion’s] claims for maintenance and cure, negligence, and unseaworthiness under United States law,” but also because “the award of $1,870.00 did not address [his] legitimate interest in the enforcement of United States general maritime law.” Asignacion at *7-8. That being said, had the choice-of-law afforded Asignacion “adequate protection to pursue the rights to which he was entitled,” this case would be akin to Haynsworth v. The Corporation, 121 F.3d 956 (5th Cir. 1997) and it would have been appropriate to enforce the arbitration award as the court had done in Haynsworth.
