Asignacion v. Rickmers Genoa Schiffarts

A recent decision of the United States District Court for the Eastern District of Louisiana affirmed the continuing role of the courts as guardians of the rights of seamen and the concomitant status of seamen as “wards of the court”.

A Filipino sailor was seriously injured when a cascade tank in a vessel’s engine room overflowed and splashed scalding water on him.  He sustained severe burns to 35% of his body.  He was initially treated in the United States and was then repatriated, where he continued to receive medical attention.

At the time of the incident, the M/V RICKMERS DALIAN was owned by defendant, a German corporation, and was flagged in the Marshall Islands.  The employment contract incorporated the Philippine government’s Standard Terms and Conditions, requiring that all employment claims be resolved through arbitration in the Philippines, under Philippine law.

Despite the arbitration clause, plaintiff filed suit in Louisiana state court seeking damages under the Jones Act and general maritime law.  The state court stayed the action and ordered arbitration to take place in the Philippines, pursuant to the arbitration clause in the employment contract.

The Philippine arbitral panel issued a decision that United States law did not apply, that Philippine law controlled, and that the plaintiff was entitled to an award of only $1,870.00, representing the lowest award available for plaintiff’s corresponding level of disability under the scheduled benefits.

Plaintiff returned to state court requesting that the stay be lifted and that the arbitration decision be set aside as against the “public policy of the United States.”  The vessel owner removed the action to federal court and concurrently filed a separate action seeking to have the court enforce the award.

The matter came before the federal court on a Motion to Recognize and Enforce Arbitral Award.  The court noted that the United States and the Philippines were signatories of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”).  The Convention provides that when an award is rendered in a signatory country, courts in that country, in this case, the Philippines, have primary jurisdiction over the award.  Courts in other signatory countries have secondary jurisdiction, which limits them to considering only whether to enforce the award in their country, a role limited further by the seven exclusive grounds for refusing enforcement that are listed in Article V of the Convention.

Recognizing that its role was limited by the Convention, the court examined the only Article V ground identified by plaintiff, the public policy defense.  Article V(2)(b) provides that recognition and enforcement of an arbitral award may be refused if the court finds that “[t]he recognition or enforcement of the award would be contrary to the public policy of that country.”  The defense is narrowly construed and applied only where enforcement “would violate the forum state’s most basic notions of morality and justice.”  [p. 7].

Plaintiff argued that enforcement of the award violated public policy under the Supreme Court cases of Mitsubishi and Vimar.  These cases established what is referred to as the “prospective waiver” defense, where certain contractual clauses operate in tandem as a prospective waiver of a party’s right to pursue certain legal remedies.  In this case, plaintiff argued that the employment contract’s arbitration clause and the election of Philippine law worked in tandem to prospectively waive his right to pursue the remedies he was entitled to under United State law.  The court agreed.

Stepping into its role as guardian of the rights of seamen, the court began with a choice of law analysis, noting that the parties’ contractual choice of law carried little weight given the disparity in bargaining power between a seaman and his employer.  Applying the Lauritzen-Rhoditis eight-factor test, the court determined that the law of the vessel’s flag—the Marshall Islands, which adopted the general maritime law of the United States—had the greatest interest in the dispute and controlled.  As such, the court found that plaintiff’s claims should be governed by the general maritime law of the United States, as adopted by the Marshall Islands.

Citing the country’s strong public policy in favor of protecting seamen and their unique status as “wards of the court,” the court found that the deprivation of the rights and protections that injured seamen are afforded under United States maritime law constituted a violation of the public policy of the United States.  Specifically, the arbitral panel’s ruling based on scheduled benefits and failure to consider any evidence pertaining to plaintiff’s lost wages and medical expenses or “the moral and compensatory damages and punitive damages to which he had a right to seek” under United State law, constituted the violation.  In other words, “the remedies available under Philippine law were not less favorable, but rather were non-existent.” [p. 22].   In reaching its decision, the court emphasized that its finding was not based on the arbitral panel’s decision to apply foreign law but, rather, that the law applied did not provide similar remedies, stating: “Had the panel applied a set of foreign laws which provided a basis for pursing similar rights and protections, public policy would have been satisfied.” [p. 24].