Maritime law

• Pages: 91-96

91

international law update Volume 20, October–December 2014

© 2014 International Law Group, LLC. All rights reserved. ISSN 1089-5450, ISSN 1943-1287 (on-line) | www.internationallawupdate.com

MARITIME LAW

Where cargo operator is seeking to

enforce English court’s judgment on

a forward freight agreement, Second

Circuit reviews whether under § 1333

United States courts have jurisdiction

to enforce a judgment of a foreign non-

admiralty court if the claim underlying

that judgment would be deemed maritime

under the standards of U.S. law

D’Amico Dry Limited (“D’Amico”) brought

this suit in the United States District Court for

the Southern District of New York to enforce an

English court’s judgment on a forward freight

agreement (“FFA”) with Primera Maritime (Hellas)

Limited (“Primera”).

D’Amico operates Panamax dry bulk cargo

vessels in the business of carriage of goods by sea. Its

major business risk is that a slowdown in worldwide

commercial activity will lead to diminution

in shipments of cargo, causing vessels to make

expensive voyages partially empty or to lay idle.

During such slowdowns, the rates carriers charge

for carriage of goods fall too. D’Amico’s cost of

maintaining one of Panamax dry bulk cargo vessels

in an unemployed, idle state is roughly $12,000

per day on average. As a way to osetting these

losses D’Amico enters into futures contracts on

international shipping rates called “forward freight

agreements”. FFAs specify a base rate (the “contract

rate”) for a hypothetical shipment of specied

goods over specied routes and future dates for

comparison of the contract rate with the market

rates on such future dates. e responsibility of

contracting parties are as follow: if on a specied

future date the market rate is above the contract

rate, then the party that took the downside of the

agreement must pay the other party the dierence,

and vice versa, if on the future date the market

rate is below the contract rate the party that took

upside of the contract must pay the other party the

dierence. In D’Amico’s case, prots realized from

such contracts as rates fall will increase D’Amico’s

revenue when demand is low, counteracting its

losses from underemployment, while losses on such

contracts will decrease net revenues when demand

is high and rate rise.

In September 2008, Luciano Bonaso, D’Amico’s

Chief Executive Ocer, projected that for the

rst quarter of 2009, 280 vessel days remained

unchartered. Bonaso decided that D’Amico should

hedge against the underemployment by entering

into an FFA. On September 2, 2008, D’Amico

entered into an FFA with Primera, taking the

downside of freight rates for forty-ve Panamax

vessel days over four “Baltic Exchange” charter

routes. e FFA used a contract rate of $55,750 per

day to be compared to market rates for the Baltic

Panamax Index (“BPI”), as published by the Baltic

Exchange, at specied dates during the rst quarter

of 2009.

Furthermore, the FFA provided that all

disputes arising under it would be submitted to

the English High Court of Justice. According

to the FFA contract, Primera was obliged to pay

D’Amico if the market freight rates, published in

the BPI, for a specied shipping route on agreed

future dates were lower than the price specied in

the contract. By early 2009, the market rate had

declined signicantly and on January 30, 2009,

D’Amico invoiced Primera for $795,963.20 under

the terms of the FFA. Primera failed to pay.

D’Amico brought suit in England at the High

Court of Justice to enforce the agreement. e case

was heard by the Commercial Court of Queen’s

Bench Division, not the Admiralty Court. e

court entered a judgment in D’Amico’s favor in

the amount of $1,766,278.54, including interest

and other components. Primera did not pay the

judgment.

D’Amico brought the suit in the United States

District Court for the Southern District of New

York to enforce the English judgment. D’Amico

asserted federal subject matter jurisdiction under

28 U.S.C. § 1333. is statute gives the federal

district court exclusive jurisdiction to hear “[a]ny

civil case of admiralty or maritime jurisdiction.”

Primera moved to dismiss for lack of subject matter

jurisdiction. e District Court granted Primera’s

motion to dismiss. e district court concluded

that it lacked admiralty jurisdiction to enforce