407 U.S. 1 (1972)
In November 1967, respondent Zapata, a Houston-based American corporation, contracted with petitioner Unterweser, a German corporation, to tow Zapata's ocean-going, self-elevating drilling rig Chaparral from Louisiana to a point off Ravenna, Italy, in the Adriatic Sea.1 Zapata had solicited bids for the towage, and Unterweser was the low bidder.2 Unterweser submitted a contract containing a forum-selection clause providing that any dispute arising must be treated before the London Court of Justice, as well as exculpatory clauses.3
After reviewing the contract and making several changes but without altering the forum-selection or exculpatory clauses, a Zapata vice president executed the contract and forwarded it to Unterweser in Germany, where Unterweser accepted the changes and the contract became effective.4
On January 5, 1968, Unterweser's deep sea tug Bremen departed Venice, Louisiana, with the Chaparral in tow bound for Italy.5 On January 9, while the flotilla was in international waters in the middle of the Gulf of Mexico, a severe storm arose.6 The sharp roll of the Chaparral caused its elevator legs, which had been raised for the voyage, to break off and fall into the sea, seriously damaging the Chaparral.7 In this emergency situation Zapata instructed the Bremen to tow its damaged rig to Tampa, Florida, the nearest port of refuge.8
On January 12, Zapata commenced a suit in admiralty in the United States District Court at Tampa, seeking $3,500,000 damages against Unterweser in personam and the Bremen in rem, alleging negligent towage and breach of contract.9 Unterweser responded by invoking the forum clause of the towage contract.10 It moved to dismiss for lack of jurisdiction or on forum non conveniens grounds, or in the alternative to stay the action pending submission of the dispute to the London Court of Justice.11 Shortly thereafter, Unterweser commenced an action against Zapata seeking damages for breach of the towage contract in the High Court of Justice in London.12 Zapata appeared in that court to contest jurisdiction, but its challenge was rejected.13
Unterweser was faced with a dilemma in the pending action in the United States court at Tampa because the six-month period for filing action to limit its liability was about to expire.14 On July 2, 1968, Unterweser filed an action to limit its liability in the District Court in Tampa.15 That court entered the customary injunction against proceedings outside the limitation court, and Zapata refiled its initial claim in the limitation action.16 It was only at this juncture, on July 29, after the six-month period had run, that the District Court denied Unterweser's January motion to dismiss or stay Zapata's initial action.17 The District Court later denied another motion by Unterweser to stay the limitation action and granted Zapata's motion to restrain Unterweser from litigating further in the London court.18 On appeal, a divided panel of the Court of Appeals affirmed, and on rehearing en banc the panel opinion was adopted, with six of the 14 en banc judges dissenting.19 The Supreme Court granted certiorari to review the judgment.20
Whether a forum-selection clause in an international towage contract should be enforced in federal admiralty courts?21
Forum-selection clauses are prima facie valid and should be enforced unless the resisting party clearly shows that enforcement would be unreasonable and unjust or that the clause is invalid for reasons such as fraud or overreaching.22 This doctrine applies in federal district courts sitting in admiralty and reflects the expansion of international commerce where parties seek certainty through neutral forums.23 The rule replaces older views that such clauses oust jurisdiction or violate public policy, recognizing instead that experienced parties in arm's-length negotiations can select a forum with expertise in the subject matter.24
Yes. Zapata and Unterweser negotiated and executed a towage contract containing the London Court of Justice clause after Zapata reviewed it and made changes that left the clause untouched.25 The transaction involved an American corporation and a German corporation for towing a drilling rig across the Gulf of Mexico, the Atlantic Ocean, and the Mediterranean Sea to Italy.26 The Supreme Court held that such a freely negotiated clause in an international commercial agreement controls absent a strong showing otherwise, and the established facts contain no evidence of fraud, undue influence, or overweening bargaining power that would render enforcement improper.27
The forum-selection clause in the international towage contract is enforceable in federal admiralty courts.28
Related opinions on this issue
Justice White concurred in the opinion and judgment of the Court except insofar as the opinion comments on the issues which are remanded to the District Court.29 In his view these issues are best left for consideration by the District Court in the first instance.30 He expressed no view on how the District Court should resolve the remanded questions concerning reasonableness and public policy.31
This limited concurrence underscores that the District Court should apply the new enforcement standards to the record in the first instance.32
Whether enforcement of the forum-selection clause would be unreasonable or unjust under the circumstances of this case?33
Enforcement of a forum-selection clause is unreasonable or unjust only if the resisting party shows that trial in the contractual forum will be so gravely difficult and inconvenient that it will for all practical purposes be deprived of its day in court.34 Foreseeable inconvenience at the time of contracting does not render the clause unenforceable.35
No. The established facts show that Zapata and Unterweser were sophisticated parties who negotiated the clause at arm's length as part of an international towage spanning multiple jurisdictions.36 Any inconvenience of litigating in London was clearly foreseeable when the contract was made.37 The casualty in the Gulf of Mexico and tow to Tampa were mere fortuities that do not alter the parties' prior selection of a neutral forum experienced in admiralty matters.38 No facts indicate that Zapata would be deprived of its day in court or that the balance of convenience is so strongly in favor of Tampa that enforcement would be unjust.39
Enforcement of the forum-selection clause would not be unreasonable or unjust under the circumstances of this case.40
Related opinions on this issue
Justice Douglas dissented and would have affirmed the judgment below.41 He reasoned that the forum-selection clause is part and parcel of the exculpatory provisions in the towing agreement, which are not enforceable in American courts under the Bisso doctrine.42
He concluded that the District Court judge exercised his discretion wisely in enjoining petitioners from pursuing the litigation in England given the location of the casualty, the availability of witnesses, and the policy against exculpatory agreements.43
Whether enforcement of the forum-selection clause would contravene a strong public policy of the forum?44
A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.45 The Bisso policy against exculpatory clauses in towage contracts applies to American waters and does not control international commercial agreements between parties of different nations.46
No. The established facts involve a freely negotiated international commercial transaction between a German and an American corporation for towage from the Gulf of Mexico to the Adriatic Sea.47 The Bisso doctrine rests on considerations specific to towage business strictly in American waters that are not controlling here.48 The Court of Appeals majority erred in relying on Bisso to refuse enforcement.49 The evidence disputes any notion of overreaching.50
The uncertainties of transoceanic towage may have led the parties to allocate risks in the contract price.51 No facts support a conclusion that enforcement would significantly encourage negligent conduct within the United States.52
Enforcement of the forum-selection clause would not contravene a strong public policy of the forum.53
Related opinions on this issue
Justice Douglas dissented and argued that the other objective of the Bisso doctrine, to discourage negligence by making wrongdoers pay damages, applies here and in every case regardless of the relative bargaining strengths of the parties.54 He noted that judges in this country have traditionally been hostile to attempts to circumvent the public policy against exculpatory agreements, including through clauses specifying a foreign forum.55 Unless the Court is prepared to overrule Bisso it should not countenance devices designed solely for the purpose of evading its prohibition.56