Opinion ID: 3051351
Heading Depth: 3
Heading Rank: 1

Heading: recognition of the choice of law provision

Text: [8] Absent a strong showing that it should be set aside, the parties’ choice of law provision, as part of a “freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power . . . should be given full effect.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13 (1972). This presumption in favor of enforcing contract provisions encourages predictability in the law, particularly in the international arena. See RESTATEMENT § 187(2) cmt. e (stating that predictability is best served “by letting the parties choose the law to govern the validity of the contract and the rights created thereby”). That this transaction involved multiple foreign points of contact does not dissuade us from recognizing the parties’ agreed-upon law and jurisdiction. In Liverpool & London S.S. Protection & Indemnity Association v. Queen of Leman MV, 296 F.3d 350 (5th Cir. 2002), the Fifth Circuit upheld a maritime lien asserted by an English insurer against a vessel whose insurance premiums had gone unpaid. Even though the insurance contract was governed by English law, the court TRANS-TEC ASIA v. M/V HARMONY CONTAINER 2267 honored a provision in the contract that the insurer could “enforce its right of lien in any jurisdiction in accordance with local law in such jurisdiction.” Id. at 353. By bringing suit in the Eastern District of Louisiana, the insurer was entitled to seek a maritime lien under the FMLA, as United States law was the “local law.” The Fifth Circuit declared that “there is nothing absurd about applying the law of the jurisdiction into which the ship sails, as the ship’s presence in the jurisdiction represents a substantial contact.” Id. at 354. [9] Queen of Leman thus counsels that where foreign parties have specified that they want United States law to determine the existence of a maritime lien in a transaction involving multiple foreign points of contact, and the ship has sailed into the United States, it is reasonable to uphold the choice of American law. That a maritime lien might exist on the vessel under United States law, but would not exist under Malaysian law, was a consequence obviously contemplated by the contracting parties, and because the Harmony sailed into a United States port, results in no fundamental unfairness.8 We agree with the Fifth Circuit’s holding in Queen of Leman, but recognize that it is in tension with the Second Circuit’s view in Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024 (2d Cir. 1973). There, the court refused to apply a United States choice of law clause to decide whether a charterer was entitled to a maritime lien because application of United States law would have adversely affected the rights of a third-party creditor. Id. at 1026. Rather than apply the charter’s choice of law clause, the Second Circuit conducted a Lauritzen analysis to determine which country’s law governed 8 Our holding in Tento supports this conclusion. 694 F.2d 1191. There, in the absence of an express choice of law, we conducted a Lauritzen analysis and held that United States law properly applied, notwithstanding the “foreignness” of the transaction: the vessel and its owner were Norwegian, the fuel supplier was Italian, and the fuel was provided in an Italian port. Id. at 1196. 2268 TRANS-TEC ASIA v. M/V HARMONY CONTAINER the existence of a maritime lien. Id. at 1026-27. It is worth noting that the adversely affected party involved in Rainbow Line was a third-party lender to a subsequent owner of the vessel, an entity far removed from the original parties to the charter. For the reasons previously stated, we prefer the Fifth Circuit’s rule in Queen of Leman. A Canadian court that recently faced a similar choice of law provision and an array of foreign players applied the parties’ choice of United States law and recognized the existence of a maritime lien under the FMLA. Kirgan Holding S.A. v. Ship Panamax Leader, [2002] F.C. 1235 (Can.), reprinted in 2002 A.M.C. 2917. Although Canadian law has no precedential value here, the decision is instructive, particularly in light of the relatively uncharted waters presented by this appeal. The court upheld the parties’ chosen law, even though, as Splendid would put it, all the points of contact involved were “foreign”: the supplier was Panamanian, the vessel was registered under the flags of Malta and Cyprus, the vessel owner was Maltese, the charterer was Caribbean, and the provision of fuel bunkers occurred in Malta. The only contact that the transaction had with Canada, whose law does not provide for a maritime lien for the supply of necessaries, was that the vessel was arrested in a Quebec port. The Canadian court concluded that the provision should be respected. Id. We agree with that conclusion and now turn our focus to the FMLA.