Many parties insert arbitration clauses mandating arbitration in the event of a dispute in commercial agreements. In the United States, form agreements which include such provisions often defer to the American Arbitration Association in the event of a dispute. Such provisions are usually binding upon the parties. However, a recent decision concerning fruit shipped from Morocco to Massachusetts may limit the application of arbitration clauses in shipping documents. In Maroc Fruit Board S.A. v. M/V Vinson, 2012 WL 2989195 (D. Mass. Jul. 11, 2012), Judge Tauro of the federal district court in Massachusetts, held that an arbitration clause in a charter party could not be incorporated into a bill of lading without the shipper’s signature on the bill.
The Maroc Fruit case concerned a bill of lading between parties in different countries. A 1958 treaty between the United States and most other United States trading partners was deemed applicable and said treaty requires that any arbitration agreement be contained in a writing signed by both parties. No such writing existed here. The bill in Maroc Fruit was also issued by the charterer of a vessel, and general maritime law considers such bills to be mere receipts, rather than transportation contracts. Historically, however, courts in the United States have enforced arbitration agreements included in bills of lading, even though bills of lading are typically not signed by the shipper (whether they have been issued by a vessel owner or charterer). Yet, the Maroc Fruit court found that a different rule would apply to bills of lading between parties doing business from different countries relying on the 1958 treaty.
It is not clear if the rule in the Maroc Fruit case will apply to all bills of lading between shippers and carriers who reside in different countries, or just to bills issued under charters. However, there is good reason to suppose that it will apply to all bills. Under the rule, since the shipper has not (usually) signed the bill of lading, the shipper will not be bound by any agreement to arbitrate that may be contained or referred to in the bill. For businesses that rely on shipping documents to carry out their day-to-day operations, the Maroc Fruit case may provide reason to contest whether a shipping dispute must be arbitrated. The prospect of avoiding arbitration in London or Singapore should be encouraging to U.S. businesses and their insurers. If you are insistent upon arbitration, make sure you have a signed agreement from the other party and do not rely on an unsigned bill of lading.