Arochem v. Wilomi

As maritime trade is quintessentially international, it often gives rise to unique and interesting questions of which nation’s laws are to be applied in a particular controversy. One such case was recently decided by an appellate court in the United States, in which the tribunal, borrowing from American legal doctrine governing personal injury at sea, applied United States law to decide the propriety of the arrest of a vessel and its cargo. The court did so notwithstanding that the carriage contract was, pursuant to its own terms, explicitly governed by English law. While that case very much turned on its own facts, it nevertheless provides a noteworthy insight into the factors which persuade a court in making such decisions.

In Arochem Corp. v. Wilomi Inc.,1 the defendant Wilomi entered into a charter agreement with Marimpex, a German firm, for the transport of crude oil on board Wilomi’s tanker, the Czantoria, from Scotland to the Gulf of Mexico. The charter specified that English law was to govern the agreement’s construction and performance. While the tanker was en route, the plaintiff Arochem purchased the crude oil from Marimpex. Arochem directed that the vessel change course and proceed to Arochem’s refinery in Puerto Rico. Upon arriving and anchoring off the island’s coast, the Czantoria began transferring its cargo into the Phillips Venezuela. The lightering operation involved three separate loadings spread over a nine-day period, and at a significant cost. Wilomi demanded payment for the total freight, including the demurrage for the extra time expended in off-loading and discharging the crude oil. Due to its own financial difficulties, Marimpex was unable to pay Wilomi at that time. As the charter granted Wilomi a maritime lien upon the cargo for all freight and demurrage costs, Wilomi exercised those rights by immediately filing lien notices, pursuant to United States statute. In addition, it commenced an action in the federal District Court of Texas, asserting its maritime lien on the crude oil now on board the Phillips Venezuela. Notwithstanding its status as the new owner of the oil cargo, Arochem was never notified of either of the above actions taken by Wilomi. Thereafter, the U.S. Marshal arrested the cargo on board the Phillips Venezuela. Arochem refused to pay Wilomi to secure the release of its crude oil, rather contesting the arrest as an unlawful taking. Within a few days, Marimpex made good on its debt to Wilomi, and the cargo was immediately released. Nevertheless, aggrieved by what it considered to be the wrongful arrest of its property, Arochem brought suit against the shipowner, seeking damages of approximately $350,000 flowing from Wilomi’s allegedly wrongful act. The court