Asoma Corp. v. SK Shipping

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Asoma Corp. v. SK Shipping Co., Ltd.
United States of America: United States Court of Appeals for the Fifth Circuit: 2006 U.S. App. LEXIS 26427: 24 October 2006
Charterparty: Bills of Lading: damage to Cargo: claim by assignee of charterer: Conflicting Forum Selection Clauses: whether charterparty or bill of lading governs
In this decision, the United States Court of Appeals for the Second Circuit reversed the decision of the lower court and held that, as between a charterer and the shipowner, the forum selection clause in the charterparty, and not that in the bill of lading, governs, even in cases where the charterer is not the original shipper of the goods and obtains its interest in the goods by becoming holder of the bill of lading

DMC Category Rating: Confirmed

This case note has been contributed by the New York firm Blank Rome LLP. With effect from 1 October 2006, Healy & Baillie has combined its practice with Blank Rome LLP, and Blank Rome is now the International Contributor to this website for the United States.

In September 1999, Macsteel Far East Limited ("Macsteel Far East"), an affiliate of Asoma, contracted with Yieh Loong for the purchase of 10,000 metric tons of steel coils FOB Kaohsiung, Taiwan for shipment to the United States. Metall und Rohstoff Shipping London Ltd. ("MUR London"), another affiliate of Asoma, entered into a voyage charter with SK Shipping for carriage of the steel from Kaohsiung to three US ports on a vessel to be nominated by SK Shipping. The charter party identified SK Shipping as the time chartered owner and named the charterer as "MUR London or nominee." The charterparty required litigation of all cargo loss or damage disputes in the District Court for the Southern District of New York. In a letter addressed to Macsteel International USA Corp. ("Macsteel USA"), SK Shipping nominated the M/V "Faros" to carry the steel coils. Defendants Pelagos Shipping Ltd, ("Pelagos") and Columbia Shipmanagement Ltd. ("Columbia") were the owners and operators, respectively, of that vessel.

In January 2000, Macsteel Far East sold the steel coils to Asoma, with payment conditioned on the production of, inter alia, a full set of clean on board bills of lading.

SK Shipping issued twelve bills of lading to Yieh Loong as the shipper of the steel. The consignee was designated "To Order." The bills of lading designated the Seoul District Court as the proper forum for resolving all disputes concerning the goods. The front of each bill of lading also stated that freight was "Payable As Per Charter Party."

Asoma claimed that sometime after Yieh Loong delivered the steel coils onto the M/V "Faros", but before the steel coils were delivered in the United States, the cargo was damaged by seawater.

In February 2001, MUR London executed an Assignment, Ratification and Nomination which nominated Asoma as the charterer under the charter party, assigned all MUR London’s rights under the charter party to Asoma, and ratified Asoma’s impending litigation against SK Shipping.

Asoma filed suit against SK Shipping, Pelagos and Columbia in the District Court for the Southern District of New York. The defendants moved [applied to the court] to dismiss the case, seeking to enforce the Seoul forum selection clause in the bills of lading. The District Court granted the defendants’ motion [application]. Asoma filed an appeal to the Second Circuit Court of Appeals

The Second Circuit held that the District Court should have enforced the forum selection clause contained in the charter party [namely, disputes relating to cargo to be determined by the District Court for the Southern District of New York. with respect to Asoma’s claim against SK Shipping. The Second Circuit held that, "[t]he rule is that where there is a charter party, the bill of lading operates as the receipt for the goods, and as a document of title passing the property of the goods, but not as varying the contract between the charterer and the shipowner." The Second Circuit further held that Asoma’s right to rely on the forum selection clause in its charter party with SK Shipping was not affected by SK Shipping’s issuance of bills of lading containing a different forum selection clause to Yieh Loong.

In discussing the lower court’s analysis, the Second Circuit stated, "[t]he [district] court … apparently believed that when a charterer negotiates a contract with the owner of a vessel, chartering the vessel to carry cargo, the terms of that contract will not apply as between those parties unless the charterer itself consigns the goods to the carrier. There is no such rule…Such a rule would have no logical justification." Thus, the Second Circuit reversed the decision of the District Court and remanded the case to it, in so far as Asoma’s claim against SK Shipping was concerned.

In regard to Asoma’s claim against Pelagos and Columbia, the Second Circuit affirmed the District Court’s decision stating that, since Pelagos and Columbia were not parties to the charterparty, the bill of lading (and its Seoul forum selection clause) was the operative document governing the relationship between those parties and Asoma.

This decision makes clear that in a situation where a party succeeds to the role of charterer by authorized assignment or designation and is also the cargo owner (regardless of whether it was the original shipper or whether it bought the bill of lading from another party to become the cargo owner), the contract terms of the charterparty are superior to the terms of a bill of lading issued for the cargo, as between that party and the vessel owner.

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