Enforcement of POEA Contracts in American Courts


Published: 10 November 2003

A short summary of the current position in the US.

Despite the plain language in the POEA contract, which requires Philippine arbitration for claims arising from the seaman’s employment, crewmembers repeatedly file suit in state courts in the U.S. seeking damages far in excess of those available in the Philippines. Over the last few years, and in a recent high profile case, U.S. courts have ordered Filipino crewmembers that file suit in the U.S. to arbitrate their claims against shipowners in the Philippines.

Shipowners have been able to remove the case from state court to federal court and seek to compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. §§ 201-208, ("Convention") to which the U.S. and the Philippines are both signatories. In a series of cases over the last two years, U.S. federal district courts have granted motions to stay U.S. litigation and ordered that disputes between crewmembers and shipowners should be resolved through arbitration in the Philippines. U.S. courts have enforced arbitration clauses both in cases where non-U.S. based shipowners call the U.S. on a sporadic basis as well as those cases where shipowners headquartered in the U.S. have numerous vessels calling at American ports each week.

Crewmembers raise various arguments seeking to overcome the presumption in favor of arbitration. They may argue that they had to sign the POEA Contract as presented, without any ability or opportunity to read the contract terms. They may also claim that they were not provided with any notice of the arbitration provisions. Such arguments, however, have not been successful and courts have repeatedly ordered crewmembers to arbitrate their claims in the Philippines. See Francisco v. StoltLejano v. K.S. BandakGavino v. EurochemAdolfo v. Carnival CorporationSantos v. Carnival CorporationVillavicencio v. Royal Caribbean Cruise LinesGonzalo v. Celebrity Cruises.

The Bautista v. Norwegian Cruise Lines case, decided in October 2003, involved various lawsuits arising out of a boiler explosion aboard a cruise ship in Miami, Florida in May 2003. While this was not a Skuld case, it involved issues of interest to all P&I Clubs as the damages recoverable could result in a pool claim. The case is indeed significant because the explosion killed six Filipino seaman and seriously injured four others, making the case one of the most serious accidents aboard a cruise ship in U.S. waters. The four surviving seaman and the personal representatives of the six deceased crewmembers thereafter filed suit in the Miami state court each seeking millions of dollars in damages and alleging negligence and unseaworthiness, as well as failure to provide maintenance, cure and unearned wages under U.S. general maritime law. The cruise line removed these cases to the federal court, alleging that the crewmembers had entered into written agreements to arbitrate claims arising from their employment and that these agreements were subject to the Convention. Following similar rulings in the out of the Louisiana courts, the federal district in Florida granted the motion to compel arbitration.

For a shipowner to seek enforcement of the arbitration agreement under the Convention, suits filed in a state court must be removed to the federal court. Some Florida courts, however, have ruled that the removal from state to federal court must be done within thirty days of suit being filed. In Espinola v. Princess Cruise Lines, Ltd.Velchez v. Carnival CorporationTare v. Carnival CorporationRadam v. Carnival Corporation, all cases where the removal petition was filed after the thirty day period had expired, the federal district courts in Florida have remanded the cases back to state court and therefore precluded shipowners from compelling Philippine arbitration under the Convention. So our advice to Members is to file the removal petition within thirty days.

In order to succeed in a stay of U.S. proceedings, shipowners must be able to prove that the crewmember was given a copy of the documents containing the forum selection clause. To avoid crewmembers claiming that they never saw or had the arbitration provision explained to them, Members should require the standard contract to be initialed or signed by the crewmember. It would also assist if shipowners required manning agency representatives, who are licensed by the POEA to recruit seaman, to confirm that they explained the employment documents to the seamen in their native language and that the seamen had an opportunity to review the documents.

Given the potentially enormous disparity in the amount of money a crewmember can recover in the U.S. versus the Philippines, we should anticipate crewmembers and their counsel will be creative in their efforts to challenge the arbitration clause in the POEA contract. Members may defeat these efforts and enforce the arbitration provision so long as they promptly remove cases from state to federal court in the U.S. and can prove that the crewmember received and understood the terms of the POEA contract.