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SUPREME COURT OF THE UNITED STATES
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No. 94-623
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VIMAR SEGUROS Y REASEGUROS, S. A., PETI-
TIONER v. M/V SKY REEFER, HER
ENGINES, etc., et al.
on writ of certiorari to the united states court
of appeals for the first circuit
[June 19, 1995]

  Justice Stevens, dissenting.
  The Carriage of Goods by Sea Act (COGSA), enacted
in 1936 as a supplement to the 1893 Harter Act,
regulates the terms of bills of lading issued by ocean
carriers transporting cargo to or from ports of the
United States.  Section 3(8) of COGSA provides:
-Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from
liability for loss or damage to or in connection with
the goods, arising from negligence, fault, or failure
in the duties and obligations provided in this
section, or lessening such liability otherwise than as
provided in this chapter, shall be null and void and
of no effect.-  46 U. S. C. App. 1303(8).
  Petitioners in this case challenge the enforceability of
a foreign arbitration clause, coupled with a choice-of-
foreign-law clause, in a bill of lading covering a ship-
ment of oranges from Morocco to Boston, Massachusetts.
The bill, issued by the Japanese carrier, provides (1)

that the transaction -`shall be governed by Japanese
law,'- and (2) that any dispute arising from the bill
shall be arbitrated in Tokyo.  See ante, at 2.  Under the
construction of COGSA that has been uniformly followed
by the Courts of Appeals and endorsed by scholarly com-
mentary for decades, both of those clauses are unen-
forceable against the shipper because they -relieve- or
-lessen- the liability of the carrier.  Nevertheless, relying
almost entirely on a recent case involving a domestic
forum selection clause that was not even covered by
COGSA, Carnival Cruise Lines, Inc. v. Shute, 499 U. S.
585 (1991), the Court today unwisely discards settled
law and adopts a novel construction of 3(8).

                            I
  In the 19th century it was common practice for ship
owners to issue bills of lading that included stipulations
exempting themselves from liability for losses occasioned
by the negligence of their employees.  Because a bill of
lading was (and is) a contract of adhesion, which a
shipper must accept or else find another means to
transport his goods, shippers were in no position to
bargain around these no-liability clauses.  Although the
English courts enforced the stipulations, see Compania
de Navigacion la Flecha v. Brauer, 168 U. S. 104,
117-118 (1897), citing Peck v. North Staffordshire Rail-
way, 10 H. L. Cas. 473, 493, 494 (1863), this Court
concluded, even prior to the 1893 enactment of the
Harter Act, that they were -contrary to public policy,
and consequently void.-  Liverpool & Great Western
Steam Co. v. Phenix Ins. Co., 129 U. S. 397, 442 (1889).
As we noted in Brauer, several District Courts had held
that such a stipulation was invalid even when the bill
of lading also contained a choice-of-law clause providing
that -the contract should be governed by the law of
England.-  168 U. S., at 118.  The question whether
such a choice-of-law clause was itself valid remained
open in this Court until the Harter Act was passed in
1893.
  Section 1 of the Harter Act makes it unlawful for the
master or owner of any vessel transporting cargo
between ports of the United States and foreign ports to
insert in any bill of lading any clause whereby the
carrier -shall be relieved from liability for loss or
damage arising from negligence.-  In Knott v. Botany
Mills, 179 U. S. 69 (1900), we were presented with the
question whether that prohibition applied to a bill of
lading containing a choice-of-law clause designating
British law as controlling.  The Court held:
      -Th[e] express provision of the act of Congress
overrides and nullifies the stipulations of the bill of
lading that the carrier shall be exempt from liability
for such negligence, and that the contract shall be
governed by the law of the ship's flag.-  Id., at 77.
  The Court's holding that the choice-of-law clause was
invalid rested entirely on the Harter Act's prohibition
against relieving the carrier from liability.  Id., at 72.
Since Knott, courts have consistently understood the
Harter Act to create a flat ban on foreign choice-of-law
clauses in bills of lading.  See, e.g., Conklin & Garrett,
Ltd. v. M/V Finnrose, 826 F. 2d 1441, 1442-1444 (CA5
1987); Union Ins. Soc. of Canton, Ltd. v. S. S. Elikon,
642 F. 2d 721, 723-725 (CA4 1981); Indussa Corp. v.
S. S. Ranborg, 377 F. 2d 200 (CA2 1967).  Courts have
also consistently found such clauses invalid under
COGSA, which embodies an even broader prohibition
against clauses -relieving- or -lessening- a carrier's
liability.  Indeed, when a panel of the Second Circuit in
1955 interpreted COGSA to permit a foreign choice-of-
law clause, Muller v. Swedish American Line Ltd., 224
F. 2d 806, scholars noted that -the case seems impossi-
ble to reconcile with the holding in Knott.-  Eventually
agreeing, the en banc court unanimously overruled
Muller in 1967.  Indussa Corp., 377 F. 2d, at 200.
  In the 1957 edition of their treatise on the Law of
Admiralty, Gilmore and Black had criticized not only the
choice-of-law holding in Muller, but also its enforcement
of a foreign choice-of-forum clause.  They wrote:
      -The stipulation for suit abroad seems also to
offend Cogsa, most obviously because it destroys the
shipper's certainty that Cogsa will be applied.
Further, it is entirely unrealistic to look on an
obligation to sue overseas as not `lessening' the
liability of the carrier.  It puts a high hurdle in the
way of enforcing that liability.-  G. Gilmore & C.
Black, Law of Admiralty 125, n. 23.
  Judge Friendly's opinion for the en banc court in
Indussa endorsed this reasoning.  In Indussa, the bill of
lading contained a provision requiring disputes to be
resolved in Norway under Norwegian law.  Judge
Friendly first remarked on the harsh consequence of
-requiring an American consignee claiming damages in
the modest sum of $2600 to journey some 4200 miles to
a court having a different legal system and employing
another language.-  377 F. 2d, at 201.  The decision,
however, rested not only on the impact of the provi-
sion on a relatively small claim, but also on a fair read-
ing of the broad language in COGSA.  Judge Friendly
explained:
-[Section] 3(8) of COGSA says that `any clause,
covenant, or agreement in a contract of carriage * *
*  lessening [the carrier's liability for negligence,
fault, or dereliction of statutory duties] otherwise
than as provided in this Act, shall be null and void
and of no effect.'  From a practical standpoint, to
require an American plaintiff to assert his claim
only in a distant court lessens the liability of the
carrier quite substantially, particularly when the
claim is small.  Such a clause puts `a high hurdle'
in the way of enforcing liability, Gilmore & Black,
supra, 125 n. 23, and thus is an effective means for
carriers to secure settlements lower than if cargo
could sue in a convenient forum.  A clause making
a claim triable only in a foreign court would almost
certainly lessen liability if the law which the court
would apply was neither the Carriage of Goods by
Sea Act nor the Hague Rules.  Even when the
foreign court would apply one or the other of these
regimes, requiring trial abroad might lessen the
carrier's liability since there could be no assurance
that it would apply them in the same way as would
an American tribunal subject to the uniform control
of the Supreme Court, and  3(8) can well be read
as covering a potential and not simply a demonstra-
ble lessening of liability.-  Id., at 203-204 (citations
omitted).
  As the Court notes, ante, at 5, the Courts of Appeal
without exception have followed Indussa.  In the 1975
edition of their treatise, Gilmore and Black also en-
dorsed its holding, adding this comment:
-Cogsa allows a freedom of contracting out of its
terms, but only in the direction of increasing the
shipowner's liabilities, and never in the direction of
diminishing them.  This apparent onesidedness is a
commonsense recognition of the inequality in bar-
gaining power which both Harter and Cogsa were
designed to redress, and of the fact that one of the
great objectives of both Acts is to prevent the
impairment of the value and negotiability of the
ocean bill of lading.  Obviously, the latter result can
never ensue from the increase of the carrier's
duties.-  G. Gilmore & C. Black, Law of Admiralty
146-147 (2d ed.) (emphasis in original) (footnote
omitted).
  Thus, our interpretation of maritime law prior to the
enactment of the Harter Act, our reading of that statute
in Knott, and the federal courts' consistent interpretation
of COGSA, buttressed by scholarly recognition of the
commercial interest in uniformity, demonstrate that the
clauses in the Japanese carrier's bill of lading purporting
to require arbitration in Tokyo pursuant to Japanese law
both would have been held invalid under COGSA prior
to today.
  The foreign arbitration clause imposes potentially
prohibitive costs on the shipper, who must travel-and
bring his lawyers, witnesses and exhibits-to a distant
country in order to seek redress.  The shipper will
therefore be inclined either to settle the claim at a
discount or to forgo bringing the claim at all.  The
foreign-law clause leaves the shipper who does pursue
his claim open to the application of unfamiliar and
potentially disadvantageous legal standards, until he can
obtain review (perhaps years later) in a domestic forum
under the high standard applicable to vacation of
arbitration awards.  See Wilko v. Swan, 346 U. S. 427,
436-437 (1953).  Accordingly, courts have always held
that such clauses -lessen- or -relieve- the carrier's
liability, see, e.g., State Establishment for Agricultural
Product Trading v. M/V Wesermunde, 838 F. 2d 1576,
1580-1582 (CA11), cert. denied, 488 U. S. 916 (1988),
and even the Court of Appeals in this case assumed as
much, 29 F. 3d 727, 730, 732, n. 5 (CA1 1994).  Yet
this Court today holds that carriers may insert foreign-
arbitration clauses into bills of lading, and it leaves in
doubt the validity of choice-of-law clauses.
  Although the policy undergirding the doctrine of stare
decisis has its greatest value in preserving rules govern-
ing commercial transactions, particularly when their
meaning is well understood and has been accepted for
long periods of time, the Court nevertheless has
concluded that a change must be made.  Its law-chang-
ing decision is supported by three arguments: (1) the
statutory reference to -lessening such liability- has been
misconstrued; (2) the prior understanding of the meaning
of the statute has been -undermined- by the Carnival
Cruise case; and (3) the new rule is supported by our
obligation to honor the 1924 -Hague Rules.-  None of
these arguments is persuasive.

                           II
  The Court assumes that the words -lessening such
liability- must be narrowly construed to refer only to the
substantive rules that define the carrier's legal obliga-
tions.  Ante, at 6.  Under this view, contractual provi-
sions that lessen the amount of the consignee's net
recovery, or that lessen the likelihood that it will make
any recovery at all, are beyond the scope of the statute.
  In my opinion, this view is flatly inconsistent with the
purpose of COGSA 3(8).  That section responds to the
inequality of bargaining power inherent in bills of lading
and to carriers' historic tendency to exploit that inequal-
ity whenever possible to immunize themselves from
liability for their own fault.  A bill of lading is a form
document prepared by the carrier, who presents it to the
shipper on a take-it-or-leave-it basis.  See Black, The
Bremen, COGSA and the Problem of Conflicting Inter-
pretation, 6 Vand. J. Transnat'l L. 365, 368 (1973);
Liverpool Steam, 129 U. S., at 441.  Characteristically,
there is no arms-length negotiation over the bill's terms;
the shipper must agree to the carrier's standard-form
language, or else refrain from using the carrier's
services.  Accordingly, if courts were to enforce bills of
lading as written, a carrier could slip in a clause
relieving itself of all liability for fault, or limiting that
liability to a fraction of the shipper's damages, and the
shipper would have no recourse.  COGSA represents
Congress' most recent attempt to respond to this
problem.  By its terms, it invalidates any clause in a
bill of lading -relieving- or -lessening- the -liability- of
the carrier for negligence, fault, or dereliction of duty.
  When one reads the statutory language in light of the
policies behind COGSA's enactment, it is perfectly clear
that a foreign forum selection or arbitration clause
-relieves- or -lessens- the carrier's liability.  The trans-
action costs associated with an arbitration in Japan will
obviously exceed the potential recovery in a great many
cargo disputes.  As a practical matter, therefore, in such
a case no matter how clear the carrier's formal legal
liability may be, it would make no sense for the con-
signee or its subrogee to enforce that liability.  It seems
to me that a contractual provision that entirely protects
the shipper from being held liable for anything should
be construed either to have -lessened- its liability or to
have -relieved- it of liability.
  Even if the value of the shipper's claim is large
enough to justify litigation in Asia, contractual provi-
sions that impose unnecessary and unreasonable costs on
the consignee will inevitably lessen its net recovery.  If,
as under the Court's reasoning, such provisions do not
affect the carrier's legal liability, it would appear to be
permissible to require the consignee to pay the costs of
the arbitration, or perhaps the travel expenses and fees
of the expert witnesses, interpreters, and lawyers
employed by both parties.  Judge Friendly and the many
other wise judges who shared his opinion were surely
correct in concluding that Congress could not have
intended such a perverse reading of the statutory text.
  More is at stake here than the allocation of rights and
duties between shippers and carriers.  A bill of lading,
besides being a contract of carriage, is a negotiable
instrument that controls possession of the goods being
shipped.  Accordingly, the bill of lading can be sold,
traded, or used to obtain credit as though the bill were
the cargo itself.  Disuniformity in the interpretation of
bills of lading will impair their negotiability.  See Union
Ins. Soc. of Canton, Ltd. v. S. S. Elikon, 642 F. 2d, at
723, Gilmore & Black, Law of Admiralty 146-147 (2d
ed. 1975).  Thus, if the security interests in some bills
of lading are enforceable only through the courts of
Japan, while others may be enforceable only in Liech-
tenstein, the negotiability of bills of lading will suffer
from the uncertainty.  COGSA recognizes that this
negotiability depends in part upon the financial
community's capacity to rely on the enforceability, in an
accessible forum, of the bills' terms.  Today's decision
destroys that capacity.
  The Court's reliance on its decision in Carnival Cruise
Lines, Inc. v. Shute, 499 U. S. 585 (1991), is misplaced.
That case held that a domestic forum selection clause in
a passenger ticket was enforceable.  As no carriage of
goods was at issue, COGSA did not apply to the parties'
dispute.  Accordingly, the enforceability of the ticket's
terms did not implicate the commercial interests in
uniformity and negotiability that are served by the
statutory regulation of bills of lading.  Moreover, the
Carnival Cruise holding is limited to the enforceability
of domestic forum-selection clauses.  The Court in that
case pointedly refused to respond to the concern ex-
pressed in my dissent that a wooden application of its
reasoning might extend its holding to the selection of a
forum outside of the United States.  See id., at 604.
The wooden reasoning that the Court adopts today does
make that extension, but it is surely not compelled by
the holding in Carnival Cruise.
  Finally, I am simply baffled by the Court's implicit
suggestion that our interpretation of the Harter Act
(which preceded the Hague Rules), and the federal
courts' consistent interpretation of COGSA since Indussa
was decided in 1967, has somehow been unfaithful to
our international commitments.  See ante, at 8-10.  The
concerns about invalidating freely negotiated forum
selection clauses that this Court expressed in The Bre-
men v. Zapata Off-Shore Co., 407 U. S. 1 (1972), have
no bearing on the validity of the provisions in bills of
lading that are commonly recognized as contracts of
adhesion.  Our international obligations do not require
us to enforce a contractual term that was not freely
negotiated by the parties.  Much less do they require us
to ignore the clear meaning of COGSA-itself the prod-
uct of international negotiations-which forbids enforce-
ment of clauses lessening the carrier's liability.  Indeed,
discussing The Bremen's impact on COGSA, Professor
Black observed:
-[I]t is hard to see how it can be looked on as other
than a `lessening' of the carrier's liability under
COGSA to remit the bill of lading holder to a dis-
tant foreign court.  It is quite true that the diffi-
culty imposed would vary with circumstances; Can-
ada is not Pakistan.  But there is always some pal-
pable `lessening,' for if the choice-of-forum clause is
ever enforced, the result must be to dismiss the
litigant out of the United States court he has chosen
to sue in.  On most moderate-sized claims, remis-
sion to the foreign forum is a practical immunization
of the carrier from liability.-  Black, 6 Vand. J.
Transnat'l L., at 368-369.
  The majority points to several foreign statutes, passed
by other signatories to the Hague Rules, that make
foreign forum-selection clauses unenforceable in the
courts of those countries.  See ante, at 8.  The majority
assumes (without citing any evidence) that these stat-
utes were passed in order to depart from the Hague
Rules, and that COGSA, our Nation's enactment of the
Hague Rules, should therefore be read to mean some-
thing different from these statutes.  I think the opposite
conclusion is at least as plausible: these foreign nations
believed non-enforcement of foreign forum selection
clauses was consistent with their international obliga-
tions, and they passed these statutes to make that
explicit.  If anything, then, these statutes demonstrate
that several foreign countries agree that the United
States courts' consistent interpretation of COGSA does
not contravene our mutual treaty obligations.  Moreover,
because Congress is presumed to know the law, Cannon
v. University of Chicago, 441 U. S. 677, 696-699 (1979),
it has been justified in assuming, based on the courts'
uniform interpretation of COGSA prior to today, that no
specific statute such as Australia's or South Africa's was
necessary to invalidate foreign forum selection and
arbitration clauses.  The existence of these foreign
statutes, then, proves nothing at all.

                           III
  Lurking in the background of the Court's decision
today is another possible reason for holding, despite the
clear meaning of COGSA and decades of precedent, that
a foreign arbitration clause does not lessen liability.  It
may be that the Court does violence to COGSA in order
to avoid a perceived conflict with another federal stat-
ute, the Federal Arbitration Act (FAA), 9 U. S. C. 1 et
seq. (1988 ed. and Supp. V).  The FAA requires that
courts enforce arbitration clauses in contracts-including
those requiring arbitration in foreign countries-the
same way they would enforce any other contractual
clause.  See, e.g., Volt Information Sciences, Inc. v.
Board of Trustees of Leland Stanford Junior Univ., 489
U. S. 468, 478 (1989).  This statute was designed to
overturn the traditional common-law hostility to arbitra-
tion clauses.  See Mastrobuono v. Shearson Lehman
Hutton, Inc., 514 U. S. ___, ___ (1995) (slip op., at 3);
Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. ___, ___
(1995) (slip op., at 4).  According to the Court of Ap-
peals, reading COGSA to invalidate foreign arbitration
clauses would conflict directly with the terms and policy
of the FAA.
  Unfortunately, in adopting a contrary reading to avoid
this conflict, the Court has today deprived COGSA 3(8)
of much of its force.  Its narrow reading of -lessening
[of] liability- excludes more than arbitration; it appar-
ently covers only formal, legal liability.  See supra, at
9-11.  Although I agree with the Court that it is impor-
tant to read potentially conflicting statutes so as to give
effect to both wherever possible, I think the majority has
ignored a much less damaging way to harmonize COGSA
with the FAA.
  Section 2 of the FAA reads:
-A written provision in any maritime transaction
. . . to settle by arbitration a controversy thereafter
arising out of such contract . . . shall be valid,
irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any
contract.-  9 U. S. C. 2.
This language plainly intends to place arbitration clauses
upon the same footing as all other contractual clauses.
Thus, like any clause, an arbitration clause is enforce-
able, -save upon such grounds- as would suffice to
invalidate any other, non-arbitration clause.  The FAA
thereby fulfills its policy of jettisoning the prior regime
of hostility to arbitration.  Like any other contractual
clause, then, an arbitration clause may be invalid
without violating the FAA if, for example, it is procured
through fraud or forgery; there is mutual mistake or
impossibility; the provision is unconscionable; or, as in
this case, the terms of the clause are illegal under a
separate federal statute which does not evidence a
hostility to arbitration.  Neither the terms nor the
policies of the FAA would be thwarted if the Court were
to hold today that a foreign arbitration clause in a bill
of lading -lessens liability- under COGSA.  COGSA does
not single out arbitration clauses for disfavored treat-
ment; it invalidates any clause that lessens the carrier's
liability.  Illegality under COGSA is therefore an
independent ground -for the revocation of any contract,-
under FAA 2.  There is no conflict between the two
federal statutes.
  The correctness of this construction becomes even more
apparent when one considers the policies of the two
statutes.  COGSA seeks to ameliorate the inequality in
bargaining power that comes from a particular form of
adhesion contract.  The FAA seeks to ensure enforce-
ment of freely-negotiated agreements to arbitrate.  Volt,
489 U. S., at 478-479.  As I have discussed, supra, at
2, 9-10, foreign arbitration clauses in bills of lading are
not freely-negotiated.  COGSA's policy is thus directly
served by making these clauses illegal; and the FAA's
policy is not disserved thereby.  In contrast, allowing
such adhesionary clauses to stand serves the goals of
neither statute.

                           IV
  The Court's decision in this case is an excellent exam-
ple of overzealous formalism.  By eschewing a common-
sense reading of -lessening [of] liability,- the Court has
drained those words of much of their potency.  The
result compounds, rather than contains, the Court's
unfortunate mistake in the Carnival Cruise case.
  I respectfully dissent.