FMC TAKES ON NVO SERVICE CONTRACT DISPUTE WITH COSCO CONTAINER LINES
The Federal Maritime Commission has decided to take on a service contract dispute between Cargo One Inc., a small non-vessel-operating common carrier and COSCO Container Lines, an arm of China Ocean Shipping Co.
In so doing, the FMC decided to revisit a test case handed down in the early 1990s in which it ruled that all service contract disputes, even though they may contain allegations of shipping act violations, are to be decided in a federal court.
Under that policy, the court would decide standard breach of contract cases, and alleged violations of the shipping act would go by the wayside.
The ruling represents a major victory for Cargo One, whose chief objective in filing the complaint in November, 1999, was to convince the FMC to accept jurisdiction and thereby avoid arbitration in Beijing, as specified in the contract.
The FMC ruling means that the courts will continue to review strictly breach of contract cases, but that the agency will assume jurisdiction over alleged shipping act violations such as discriminatory treatment arising out of service contract disputes.
Cargo One is seeking $121,750 in liquidated damages from COSCO Container Lines. The NVO alleges that the shipping line refused to book an agreed volume of cargo under a contract covering freight moving from Hong Kong to U.S. West Coast ports. The NVO succeeded in shipping only 6.5 TEUs out of 250 TEUs specified in the contract.
The FMC rejected COSCO Container Line’s argument that the only forum for contract dispute cases is in a federal court.
The case will be reviewed by FMC administrative law judge Frederick M. Dolan. His initial decision will be due June 20. A final FMC decision
will be handed down by Oct. 18.
