Guam court defers to International Arbitration Agreement in P&I club rules

Jason P Minkin and Jonathan A Cipriani of BatesCarey LLP have noted that in Hill v. Assuranceforeningen Skuld the district court enforced a Norway arbitration clause
against the wife of a deceased Jones Act seaman who sought to enforce a judgment against the shipowner’s insurer in Guam.

The writers noted that in Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas the US Supreme Court ruled unanimously that a valid forum selection clause should be “given controlling weight in all but the most exceptional cases” and this standard continued to impact international marine insurance disputes.

In the Hill v Skuld P&I case the P&I Club defendants were in one case a Norwegian entity and in the other Bermudian, both with principal places of business in Norway. Skuld’s P&I rules provide for arbitration of disputes in Norway. Skuld insured Guam entity Majestic Blue Fisheries LLC owner of F/V Majestic Blue, which sank on the high seas, killing Captain David Hill. His widow brought a wrongful death suit and a jury in the District of Guam issued a verdict in her favour for more than $3m. Majestic Blue appealed. Hill then filed a direct action against Skuld in the District Court of Guam after Majestic Blue allegedly refused to pay the judgment and failed to provide security to stay execution of the judgment.

Skuld moved to dismiss Hill’s suit on multiple grounds, including the doctrine of forum non conveniens, on the grounds that Guam law and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (aka the New York Convention) required Hill to arbitrate her claims in Norway, given the Norway arbitration and forum selection clauses in Skuld’s Rules. A federal magistrate judge issued a report recommending that the Guam district judge deny the motion to dismiss for forum non conveniens, but that the case be stayed and Hill compelled to arbitrate in Norway after perfecting service and the underlying appeals were resolved.

The district judge adopted the report’s recommendation that the dispute be arbitrated in Norway, but reversed on the forum non conveniens issue and concluded that the case should be dismissed instead.

The court noted that the forum non conveniens analysis first requires a determination of whether an adequate alternative forum exists. It found that Hill had not properly objected to the report’s conclusion on this point and that Skuld had “met their burden of showing that Norway is an adequate alternative forum” because Skuld “is subject to service of process in Norway and Norway also permits direct actions against insurers.” On the next phase of the forum non conveniens analysis, a review of the “private interest” and “public interest” factors. Acknowledging that it did not have to consider the private interest factors under Atlantic Marine, the court nonetheless observed that one of those factors – enforceability of judgments – weighed in favour of dismissal.

The court noted that while the US, like Norway, was a party to the New York Convention, it was not a party to any treaty allowing for enforcement of its court’s judgments abroad. Therefore, were Hill to obtain a judgment against Skuld in the US, she would still need to obtain a Norwegian judgment to enforce the US judgment’s terms. That. said the court, could prove difficult, since any such US judgment would have been obtained in disregard of the New York Convention and the provisions in Skuld’s Rules calling for arbitration in Norway. Thus, the Norway arbitration and forum selection clauses weighed further in favour of transfer under the forum non conveniens analysis. The court found that the Hill-Skuld dispute was not a “localized” Guam controversy, as Guam had “little interest” in a breach of contract action by a Florida plaintiff against a Norwegian company, particularly given that the only relevant Guam entity – Majestic Blue – had chosen to arbitrate in Norway under Norwegian law.

For the same reasons, a local Guam jury would be unfairly burdened by having to serve in an essentially foreign dispute. Any issues of conflict of law weighed in favour of Norway because the choice of law clause at issue specified Norwegian law. The court concluded that Hill had not met her burden to oppose dismissal on forum non conveniens grounds, therefore all arguments on other grounds were moot, and that the case should be dismissed in favour of arbitration in Norway. Hill raised arguments based on waiver and reverse-preemption of the New York Convention under the U.S. McCarran-Ferguson Act, but the court found these arguments to be untimely and thus declined to consider them.

The writers concluded that the Hill v Skuld P&I case was “a stark reminder of the deference that courts will give to valid foreign arbitration clauses under the New York Convention and Atlantic Marine”. They added that marine insurers and practitioners should be aware of the Hill decision and the significant deference that courts will pay to foreign arbitration clauses under Atlantic Marine. The Hill v Skuld P&I case is being appealed, “which means there will be further argument on the disputed issues in the Ninth Circuit Court of Appeals”.