Federal Law Governs Whether or Not Admiralty Jurisdiction Applies to a Dispute

The Fourth Circuit court of appeals has reiterated the principle that U.S. federal law governs procedural inquiries, namely, whether or not admiralty jurisdiction governs a claim. In Flame S.A. v. Indus. Carriers, Inc., 2:13-CV-658, 2014 WL 108897 (E.D. Va. Jan. 10, 2014), plaintiff, FLAME S.A., obtained a judgment in the High Court of England against defendant, International Carriers Inc., for breaching a Freight Forward Swap Agreement. FFAs are derivative financial contracts

used to hedge against shipping risks.Seeking to enforce the English judgment in the U.S., FLAME filed in New York federal court and obtained a default judgment against International. FLAME then registered the judgment in Virginia and moved the court to attach defendant’s vessel under Rule B. The vessel was owned by Freight Bulk Pte., whom FLAME alleged was the corporate alter ego of International. Under English law, disputes regarding FFAs are notconsidered actions in admiralty. But, under U.S. federal law, FFAs are maritime contracts that confer admiralty jurisdiction. Accordingly, the question in this case was what law the court had to use to determine if admiralty law applied to the dispute?Whether or not a court has admiralty subject matter jurisdiction under 28 U.S.C. § 1333 is a procedural inquiry. Put differently, admiralty jurisdiction depends on the application of admiralty law. If a court were to apply foreign law in determining jurisdiction in lieu of admiralty law, this would imply that the scope of U.S. admiralty jurisdiction would be subject to the uncertainties of foreign law. The court found this fact particularly significant considering that a Rule B action would not have been available had English law applied. Recognizing that such an outcome would be contradictory to the well-established goal of preserving uniformity within U.S. admiralty law, the court held that federal admiralty law informs a court’s determination of whether a certain dispute confers admiralty jurisdiction.