[Federal Register Volume 62, Number 22 (Monday, February 3, 1997)]
[Notices]
[Pages 5005-5007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2531]


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FEDERAL MARITIME COMMISSION

[Docket No. 86-9]


A/S Ivarans Rederi v. Companhia De Navegacao Lloyd Brasileiro, et 
al.; Order

    This case originated with the complaint of A/S Ivarans Rederi 
(``Ivarans'') filed in 1986, which sought a cease and desist order and 
reparations for violations of the Shipping Act, 1916, 46 U.S.C. 
Sec. 801 et seq. (1982) (``1916 Act''), and the Shipping Act of 1984, 
46 U.S.C. app. Sec. 1701 et seq. (``1984 Act''), resulting from 
attempts by respondent carrier members of the Brazil/U.S. Atlantic 
Coast Pool Agreement (FMC No. 10027) (``Respondents''), to enforce an 
arbitration award obtained in Brazil. The Commission's proceeding was 
discontinued in 1990 with the understanding that no further efforts to 
enforce the arbitration award would be undertaken by the parties 
pursuant to rulings by the U.S. Court of Appeals for the D.C. Circuit 
that enforcement of the arbitration award would result in violation of 
the 1984 Act. Nevertheless, it appears that a new effort to enforce the 
arbitration award is being made in Brazil by one of the original six 
Respondents, Companhia de Navegacao Maritima Netumar (``Netumar''). 
Therefore, Ivarans filed the Motion to Reinstate Complaint and for a 
Cease and Desist Order (``Motion'') which is before us.

Background

    Ivarans, a party to Agreement No. 10027, a revenue pooling 
agreement in the northbound Brazil/U.S. Atlantic coast trade, filed its 
complaint against the other members of the Agreement in 1986. In 
addition to Netumar and Ivarans, the Respondents and parties to the 
Agreement were Companhia de Navegacao Lloyd Brasileiro (``Lloyd 
Brasileiro''), another Brazilian-flag carrier, referred to along with 
Netumar and the U.S.-flag carrier (originally Moore-McCormack succeeded 
by United States Lines, (S.A.) Inc. (``USLSA'')) as the ``National-Flag 
Lines,'' and Empresa Lineas Maritimas Argentinas, S.A. (``ELMA''), A. 
Bottachi S.A. de Navigacion C.F.I.I. (``Bottachi''), and Van Nievelt 
Goudriaan and Co., B.V. (``Hopal''), referred to as the ``Non-national 
Flag Lines.''
    The Agreement divided the pool cargo among the members, assigning 
an 80 per cent share to the National-Flag Lines, divided equally 
between Brazilian and U.S.-flag lines, and a 20 per cent share to the 
Non-national Flag Lines; provided for a minimum number of sailings per 
pool period for each member carrier; established penalties for over-
carriage; and provided for automatic suspension of the pool when any 
party or combination of parties exceeding one third of the total pool 
share failed to provide the minimum number of sailings.
    In 1982, Moore-McCormack, then the only U.S.-flag carrier member, 
fell substantially short of its minimum 40 sailings. The other members 
of the Agreement sought substantial penalties from Ivarans which had 
carried a greater proportion of the trade cargo as a result of Moore-
McCormack's missed sailings. Pursuant to the Agreement's provision for 
arbitration, an arbitration panel was assembled in Brazil. The panel 
ruled that the Agreement had not been suspended during the 1982 pool 
period. The panel found that Ivarans owed some $1,475,017 in over-
carriage penalties to be paid to the other agreement parties in 
proportion to their pool shares. However, the panel reasoned that, 
because Moore-McCormack's failure to make its sailings had been 
voluntary, the over-carriage penalties due Moore-McCormack's corporate 
successor, USLSA, should be paid instead to the remaining Agreement 
parties in proportion to their pool shares.
    Ivarans then filed its FMC complaint, contending that the 
interpretation of the Agreement by the other parties and the 
arbitration panel was inconsistent with the Agreement's own terms and 
the Commission's intention in approving the Agreement and thus, 
enforcement of the arbitration award would result in implementation of 
the Agreement not in accordance with its terms in violation of the 1984 
and 1916 Acts. The presiding administrative law judge (``ALJ'') agreed 
with the arbitration panel's interpretation of the Agreement, but found 
that the remedy fashioned by the arbitration panel was unauthorized by 
the Agreement and that its implementation would result in a violation 
of the 1984 Act.
    The Commission adopted this finding, agreeing with the ALJ that the 
thrust of

[[Page 5006]]

the pooling agreement was to divide the rights to pool cargo between 
National-Flag Lines and Non-national Flag Lines, and that the National-
Flag Lines could be considered as a group for purposes of considering 
whether there was a failure to meet its minimum sailings by any party 
or combination of parties exceeding one third of the total pool. In 
addition, finding that the mere ``homologation,'' or judicial approval, 
of the arbitration panel's decision would not result in the enforcement 
of the unauthorized remedy, because the arbitration award was not self-
enforcing and had, in fact, been vacated by a Brazilian court, the 
Commission denied the cease and desist order sought by Ivarans.
    On appeal by Ivarans, the U.S. Court of Appeals for the D.C. 
Circuit reversed the Commission's dismissal of the complaint, finding 
that the language of the Agreement required that the Agreement be 
suspended under the facts presented.\1\ On remand, the Commission again 
denied Ivarans' request for an order directing the Respondents to cease 
and desist from attempting to collect monies under the Agreement and 
for attorney's fees. The Commission concluded that a cease and desist 
order was unnecessary, despite the intervening decision of the 
Brazilian Supreme Court said to reinstate the arbitrators' award of 
pool payments for the 1982 pool period when the Agreement was 
suspended. The Commission found Ivarans' concerns unwarranted, because 
``no payments under the Agreement may lawfully be made for the 
suspension period by virtue of the Court of Appeals' decision, and 
enforcement of the Agreement for this period appears unlikely.'' ____ 
F.M.C. ____, 25 S.R.R. 1061, 1062 (1990). The Commission noted, 
moreover, that USLSA had stated that it ``will take no action to 
enforce the arbitration award [,]'' and that the Brazilian and 
Argentina carriers recognized that ``the arbitral decision was contrary 
to the terms of the Pooling Agreement and could not be enforced by any 
party without violating the 1984 Act and/or the 1916 Act.'' Id. at 
1062.
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    \1\ A/S Ivarans Rederi v. United States, 895, F.2d 1441 (D.C. 
Cir. 1990).
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    Therefore, the Commission found no indication that violation of the 
statute was likely and considered an injunction to obey the statute 
unnecessary. In dismissing Ivarans' compliant, however, the Commission 
acted * * *

* * * without prejudice to its reinstatement if any action is taken 
by respondents to enforce the Agreement for the suspended period.* * 
* Furthermore, to save Ivarans the additional expense of filing a 
new complaint * * *, the Commission will permit reinstitution of 
this proceeding upon motion * * * should further action with respect 
to the complaint become necessary.

Id. at 1063.

Ivarans' Motion To Reinstate the Complaint and for a Cease and Desist 
Order

    After recounting the history of this proceeding, Ivarans states in 
its Motion that on April 11, 1996, Netumar secured a judicial ``Writ of 
Enforcement'' from the 33rd Civil Court of Rio de Janeiro for 
enforcement of the arbitration award. The amount claimed by Netumar for 
its share of the original award plus interest totals $936,587. No 
response to Ivarans' Motion was received from any party.\2\
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    \2\ Ivarans served its Motion on counsel who had represented 
Netumar, Lloyd Brasileiro, USLSA, ELMA and Bottachi before the 
proceeding was discontinued in 1990. It does not appear from the 
record that service on attorneys who represented Netumar in the 
bankruptcy proceeding was attempted.
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    Ivarans reports that Netumar has filed for protection from 
creditors under Chapter 11 of the U.S. bankruptcy codes and has 
obtained an order from the U.S. bankruptcy court in Newark, N.J., 
bifurcating the case. Under the order, the court declines jurisdiction 
over any Netumar assets located in Brazil and excludes from 
participation in the U.S. bankruptcy case any claims arising from or 
relating to transactions in Brazil or creditors whose claims arise from 
such transactions. Thus, Ivarans states, it will be unable to secure 
relief from the U.S. bankruptcy court if Netumar succeeds in collecting 
the arbitration award in Brazil. Ivarans states, to the best of its 
knowledge, that Netumar has not filed a bankruptcy petition in Brazil.
    Ivarans requests that the Commission reinstate this proceeding and 
order Netumar to cease and desist from proceeding in Brazil with its 
efforts to enforce the arbitration award. Such an order is appropriate, 
Ivarans advises, because, absent such an order, Ivarans will suffer 
irreparable injury, that is, injury for which a later Commission award 
for reparations would be ineffective due to the Netumar bankruptcy 
proceeding. Ivarans argues that a cease and desist order is within the 
Commission's authority and is the most appropriate form of relief, 
citing Trans-Pacific Freight Conference v. FMC, 314 F.2d 928 (9th Cir. 
1963); Pacific Coast European Conference v. FMC, 537 F.2d 333 (9th Cir. 
1976); and FMC v. Australia/U.S. Atlantic & Gulf Conference, 337 
F.Supp. 1032 (S.D.N.Y. 1972). It is, says Ivarans, its intention to 
present the cease and desist order to the Brazilian court with a 
request that the Brazilian court ``recognize'' the Commission's action 
as a matter of comity.

Discussion

    The relief requested by Ivarans was denied by the Commission in 
1990 only because Netumar's representations that it recognized the 
unlawfulness of the arbitration award under U.S. law rendered a cease 
and desist order unnecessary. The Commission stated that:

    It appears that no payments under the Agreement may lawfully be 
made for the suspension period by virtue of the court of appeals' 
decision and enforcement of the Agreement for this period appears 
unlikely. * * * Moreover, the Brazilian and Argentinean carriers 
have done nothing to date which would constitute a violation of law. 
* * * [T]he Brazilian and Argentinean carriers recognize that ``the 
arbitral decision is contrary to the terms of the Pooling Agreement 
and could not be enforced by any party without violating the 1984 
Act and/or the 1916 Act.'' * * * We have no basis to find that 
respondents will act to enforce a decision which they recognize is 
unlawful, and thus see no purpose to be served by issuing a cease 
and desist order in this proceeding.

25 S.R.R. at 1062.

    However, since the last occasion on which we had examined this 
matter, Netumar appears to have ceased all active service in the U.S. 
trades. Netumar was a member of the Inter-American Freight Conference 
until May 16, 1994. Netumar has no current tariff on file with the 
Commission.\3\ We are therefore concerned that the Commission may lack 
jurisdiction over Netumar because it is no longer a common carrier in 
U.S. commerce.
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    \3\ This information is based on examination of the Commission's 
tariff and agreement files, of which the Commission herein takes 
official notice pursuant to 46 CFR Sec. 502.161. Netumar's only ATFI 
tariff, Tariff No. 030, was canceled as of May 23, 1995 (Notice 
published in the Federal Register, 60 FR 25910 (May 15, 1995)). 
Netumar was reflected in FMC tariff organization records as an 
affiliate of the Inter-American Freight Conference until May 16, 
1994.
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    Ivarans contends that, as a result of Netumar's action in Brazil, 
it is likely to suffer injury for which it could not be made whole. 
Ivarans argues that the Commission would be unable to effectively make 
an award of reparations due to Netumar's U.S. bankruptcy and the order 
of the bankruptcy court bifurcating the proceeding. Ivarans indicates 
that it intends to present the cease and desist order it requests from 
the Commission to the Brazilian court, with a request that it be 
recognized and accorded ``comity.'' However, Ivarans makes no statement 
as to whether it

[[Page 5007]]

participated in the proceeding before the Brazilian court before entry 
of the order of enforcement; whether it has presented or plans to 
present to the Brazilian court the decision of the U.S. Court of 
Appeals finding that the arbitration award was not in accordance with 
the Shipping Act of 1984; whether it presented to the Brazilian court 
the Commission's 1990 order on remand or Netumar's own acknowledgment 
in the Commission proceeding on remand that ``the arbitral decision was 
contrary to the terms of the Pooling Agreement and could not be 
enforced by any party without violating the 1984 Act and/or the 1916 
Act;'' or whether Ivarans has appealed the decision of the Brazilian 
court.\4\ Nor does Ivarans raise or address the issue of present 
Commission jurisdiction over Netumar, or the extraterritorial nature of 
the relief it requests.
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    \4\ A copy of Netumar's March 7, 1996 application to the 
Brazilian court for enforcement of the award and an English 
translation are attached as Exhibit 1 to Ivarans' Motion. However, 
no copies of other pleadings or the court's order of enforcement are 
provided.
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    There is a troubling corollary issue raised by Ivarans' argument 
that the Commission would be unable to effectively make an award of 
reparations due to Netumar's U.S. bankruptcy and the order of the 
bankruptcy court bifurcating the proceeding; it is unclear whether 
under these circumstances a cease and desist order issued by the 
Commission would be enforceable. We are also concerned that the issue 
of present Commission jurisdiction over Netumar be addressed.
    While Netumar may have acted in violation of the 1984 Act by 
seeking to enforce an unlawful interpretation of the pooling agreement, 
Ivarans has not offered compelling evidence that it has been damaged by 
Netumar's action. Ivarans has not provided a copy of the Brazilian 
court's order of enforcement nor any evidence of action by Netumar to 
secure attachment or other action against Ivarans' assets in Brazil. 
Therefore, we are disposed to grant Ivarans' Motion only to the extent 
of re-opening the proceeding and allowing Ivarans an opportunity to 
present evidence as to the present status of proceedings in Brazil 
(including the orders of the Brazilian court not previously provided by 
Ivarans in support of its Motion), actual or likely damages to Ivarans, 
and what form of relief it believes the Commission can effectively 
grant.
    Therefore, it is ordered, That F.M.C. Docket No. 86-9, A/S Ivarans 
Rederi v. Companhia de Navegacao Lloyd Brasileiro, et al., is re-opened 
and it is referred to the Chief Administrative Law Judge, for 
assignment and issuance of an initial decision;
    It is further ordered, That the administrative law judge to whom 
this proceeding is assigned shall exercise his discretion to insure 
that the issues are resolved by the most expeditious means consistent 
with due process and a sufficient record upon which to render a 
decision;
    It is further ordered, That the following issues be addressed by 
Ivarans in the proceeding:
    1. Commission jurisdiction over Netumar;
    2. Ivarans' role in the proceedings in Brazil and the status of 
those proceedings;
    3. Damage to Ivarans resulting from Netumar's action; and
    4. What relief the Commission might effectively grant.
    It is further ordered, That pursuant to Rule 61 of the Commission's 
Rules of Practice and Procedure, 46 C.F.R. Sec. 502.61, the initial 
decision of the Administrative Law Judge shall be issued by November 1, 
1997 and the final decision of the Commission shall be issued by 
February 28, 1998;
    It is further ordered, That notice of this Order be published in 
the Federal Register, and a copy be served on A/S Ivarans Rederi;
    It is further ordered, That other persons having an interest in 
participating in this proceeding may file petitions for leave to 
intervene in accordance with Rule 72 of the Commission's Rules of 
Practice and Procedure, 46 C.F.R. Sec. 502.72;
    It is further ordered, That all further notices, orders, and 
decisions issued by or on behalf of the Commission in this proceeding, 
including notice of the time and place of hearing or prehearing 
conference, shall be served on parties of record; and
    It is further ordered, That all documents submitted by any party of 
record in this proceeding shall be directed to the Secretary, Federal 
Maritime Commission, Washington, D.C. 20573, in accordance with Rule 
118 of the Commission's Rules of Practice and Procedure, 46 C.F.R. 
502.118, and shall be served on all parties of record.

    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 97-2531 Filed 1-31-97; 8:45 am]
BILLING CODE 6730-01-M