Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & Cie KG
783 F.3d 1010, 2015 WL 1840880 (2015)
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Rule of Law:
A foreign arbitral award will not be refused enforcement on U.S. public policy grounds merely because the award is substantially lower than what U.S. law might provide; the party resisting enforcement must prove the award violates the nation's "most basic notions of morality and justice." Furthermore, the prospective-waiver doctrine, which invalidates clauses that waive a party's right to pursue statutory remedies, does not apply to claims arising under general maritime law.
Facts:
- Lito Martinez Asignación, a Filipino citizen, signed an employment contract with Rickmers, a German corporation, to work as a seaman on the M/V RICKMERS DAL-LAN, a vessel flagged in the Marshall Islands.
- The contract was mandated by the Philippine Overseas Employment Administration (POEA) and incorporated its 'Standard Terms,' which required that all disputes be resolved through arbitration in the Philippines under Philippine law.
- While the vessel was docked in the Port of New Orleans, Asignación suffered severe burns covering 35% of his body when a cascade tank aboard the vessel overflowed.
- After receiving initial treatment in a U.S. hospital for nearly a month, Asignación was repatriated to the Philippines, where he continued to receive medical attention.
Procedural Posture:
- Lito Martinez Asignación sued Rickmers in a Louisiana state trial court for his injuries.
- The state court granted Rickmers's motion to stay the lawsuit and compel arbitration in the Philippines, as required by the employment contract.
- A Philippine arbitration panel, applying only Philippine law, awarded Asignación $1,870 after finding he had the lowest grade of compensable disability.
- Asignación filed a motion in the Louisiana state court to set aside the arbitral award.
- Rickmers removed the case to the U.S. District Court for the Eastern District of Louisiana and filed a separate action to confirm the award.
- The U.S. District Court consolidated the actions and issued an order refusing to enforce the arbitral award, finding it violated U.S. public policy and the prospective-waiver doctrine.
- Rickmers (as appellant) appealed the district court's refusal to enforce the award to the U.S. Court of Appeals for the Fifth Circuit, with Asignación as the appellee.
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Issue:
Does enforcing a Philippine arbitral award, which granted a Filipino seaman $1,870 for injuries sustained in a U.S. port by applying a contractually mandated Philippine compensation scheme, violate U.S. public policy under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Opinions:
Majority - Priscilla R. Owen
No, enforcing the Philippine arbitral award does not violate U.S. public policy. The court must enforce the award. The public policy defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards is construed narrowly and applies only where enforcement would violate the United States' 'most basic notions of morality and justice.' While the U.S. has a public policy of providing 'special solicitude to seamen,' it has an even more 'emphatic federal policy' favoring arbitral dispute resolution, which applies with special force in international commerce. A disparity in remedies between foreign law and U.S. law is insufficient, by itself, to prove a violation of public policy. Asignación failed to produce evidence showing the award was so inadequate for his lasting injuries that it was fundamentally unjust. Additionally, the district court erred in applying the prospective-waiver doctrine, as that doctrine is limited to the waiver of statutory rights, not claims under general maritime law like those for maintenance and cure, negligence, and unseaworthiness.
Analysis:
This decision significantly reinforces the high bar for invoking the public policy defense to avoid enforcement of foreign arbitral awards under the Convention. It clarifies that a mere disparity between remedies available under foreign law and U.S. law is insufficient to block enforcement, requiring a showing that the award is so unjust it shocks the conscience. The ruling also narrowly construes the prospective-waiver doctrine by limiting its application to statutory rights, thereby declining to extend its protections to general maritime law claims. This strengthens the enforceability of choice-of-law and forum-selection clauses in international maritime contracts, promoting predictability in global commerce at the potential expense of individual seamen's remedies.
