Foreign Seaman Arbitration Award Vacated by District Judge for Violating U.S. Public Policy

Foreign Seaman Arbitration Award Vacated by District Judge for Violating U.S. Public Policy

By: Sarah Thompson

Edited by: Molly MacKenzie

Aggarao v. MOL Ship Mgmt. Co., 2014 WL 3894079, 2014 U.S. Dist. LEXIS 108692 (D. Md. Aug. 7, 2014)

Mr. Potenciano Aggarao, a Filipino sailor, brought a claim against MOL Ship Management Co., Ltd., Nissan Motor Car Carrier Co., Ltd., and World Car Carriers, Inc., together known as “vessel interests,” for injuries he sustained while working aboard the Liberian flagged ship M/V ASIAN SPIRIT.The United States District Court for the District of Maryland initially dismissed the complaint for improper venue on the basis that the Philippine Overseas Employment Administration Contract of Employment ("the POEA Contract") required Mr. Aggarao to submit to arbitration in the Philippines.  The Fourth Circuit reversed and remanded, stating that Mr. Aggarao was bound to arbitrate, but that the case should be stayed pending arbitration.  After the arbitration award was issued, the employer sought to confirm it; and Mr. Aggarao sought to vacate it pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("the New York Convention").The arbitrator decided that U.S. law did not apply and that, under the POEA Contract, Philippine law instead governed. Further, the POEA only allowed for the company-provided physician to determine the award of disability benefits, and absent a showing of bad faith, that award would be binding. The arbitrator determined that because Mr. Aggarao filed for disability compensation, he was not entitled to any other forms of compensation and was thus limited to the disability award.The District Court for the District of Maryland gave two reasons for vacating the arbitration award. First, the court held that U.S. maritime law should apply, as opposed to Philippine law. The court applied the Supreme Court's seven factors from the Lauritzen-Rhoditis decision to determine which country’s law governed. In so doing, the court found most compelling the fact that M/V ASIAN SPIRIT was under Liberian registry, and that Liberia had adopted general U.S. maritime law. Once it was established that U.S. maritime law would apply, the court found that, pursuant to such law and contrary to Philippine law, Mr. Aggarao was entitled to seek maintenance and cure and to pursue claims for negligence and for breach of the warranty of seaworthiness.

Second, the court found strong U.S. public policy guiding against limiting Mr. Aggarao’s remedy to that provided by the POEA Contract. The court reasoned that because the POEA Contract barred Mr. Aggarao from seeking relief for maintenance and cure, it violated the U.S. policy of protecting and providing for injured seamen. The court relied on a decision of Judge Zaney of the U.S. District Court for the Eastern District of Louisiana, Asignacion v. Rickmers Genoa Schiffahrts, which is on appeal to the U.S. Fifth Circuit Court of Appeals and was argued before that court in September 2014.