Robert Mongole, a second year law student at LSU, recently finished his legal paper, “Seastead Strategies for Preventing Litigation in the United States.” Prior to completion, Mongole also authored three introductory blog posts (part 1, part 2, part 3) to the subject. This, the fourth and final blog post, gives a layperson’s overview of the legal issues discussed in more technical language in the paper itself.
The United States Constitution gives courts broad powers in deciding maritime claims. Seasteads will want to limit this power wherever possible. (See page 1.)
The Jones Act
Essentially, to qualify for Jones Act status, a seaman must perform a duty that contributes to the function of his vessel or the accomplishment of its mission, and must have a substantial connection to the vessel in navigation. To bring a claim under the Jones Act a seaman must face injury or death from an injury suffered during employment. (page 1.) The Jones Act was amended to bar foreign citizens from bringing suit in American courts when their injuries occurred outside of American waters when they are “engaged in the exploration, development, or production of offshore mineral energy resources-included but not limited to drilling, mapping, surveying, diving, pipelaying, maintaining, repairing, constructing, or transporting supplies, equipment or personnel.” The only exception to this is if the foreign seaman can prove he has no remedy under the laws of the seaman’s citizenship or the nation’s laws where the injury occurred. If seasteads are engaged in the mineral industry, it will bar foreigners from bringing suit in American courts. (page 2.)
Choosing a Flag
Seasteads should examine the accessibility of a foreign nation before flying their flag. If the nation’s courts have delayed, prolonged, expensive or uncertain litigation this opens the door for litigation in the United States, defeating the purpose of flying an open registry flag. An open registry flag is when a ship registers in a different nation than the ship’s owners. This is in contrast to a closed registry flag in which a nation requires a ship to be owned by its citizens and at least partially crewed by its citizens. (page 3.) American ownership in a seastead can easily undermine the benefits of flying a foreign flag if the court views it as a way of escaping the obligations of American law. While a court could view a seastead as attempting to escape American law, American courts have stressed that a ship carries the nationality of the state to which it is registered.
In order to properly register a ship and authorize it to fly the state’s flag, there must be a genuine link between the state and the ship. (page 5.)
A selection clause is a contractual clause which limits where a dispute can be heard. Selection clauses are quickly becoming essential for international businesses. (page 2.) They can be used to specify where geographically a suit will take place and what type of court will hear the case. A seastead seemingly can avoid litigation in American courts by using selection clauses in their contracts. (page 3.) If there is no selection clause in place, a plaintiff will be permitted to bring suit in the United States and the court will determine whether it is one of the proper places for the case to be heard. (page 4.) The Supreme Court, in Bremen, suggests that selection clauses are an indispensable element within contracts with international flavor. (page 8.) Forum and venue selection clauses are generally considered valid and will be enforced unless the resisting party can show the enforcement is unreasonable under the circumstances. (page 9.) The clauses will likely be enforced under the Jones Act, but there are multiple court interpretations, one of which (Boutte) goes against enforcement of selection clauses. (See generally pages 10-15.)
Selection Clauses for Non-Employees
There are three reasons the court has allowed cruise ships to place selection clauses on ticket stubs and seasteads should be able to adopt a similar practice. First, cruise ships carry passengers from many different locations and a cruise ship has an interest in limiting where it can be sued. Next, by agreeing on the forum in advance, the clause limits the waste of judicial resources. Finally, the passengers likely paid less for their tickets because of the selection clause, which is a desirable market allocation. (page 15.) The ticket stub selection clause must be reasonably communicated to the passenger. The reasonably communicated standard is a two-part analysis. First examining the text to see if it is “clear and conspicuous” and then examining the circumstances around the receipt of the ticket to determine the likelihood that the passenger had the opportunity to be informed. The court has declined to enforce a forum selection clause when a passenger must buy a non-refundable ticket before receiving notice of the forum selection clause. (pages 16 – 17.) The notion that forum selection clauses are presumed valid, despite the possible inequity of bargaining power, has been applied to maritime and non-maritime cases.