On February 21, 2024, the U.S. Supreme Court issued a landmark decision in Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, resolving a significant legal issue regarding the enforceability of choice-of-law clauses in maritime contracts.

The case arose from a dispute involving a marine insurance contract between Raiders Retreat Realty Co., LLC, a vessel owner based in Pennsylvania, and Great Lakes Insurance SE, a marine underwriter headquartered in the United Kingdom. After the insured vessel ran aground off the coast of Florida, the insurer denied coverage.

Raiders Retreat, in response, sought coverage under Pennsylvania law. The insurer insisted that the contract’s choice-of-law clause, which named New York law, should be followed and applied to the dispute. While the District Court upheld the clause, the Third Circuit Court of Appeals reversed that decision, suggesting that a public policy exception might apply.

In a unanimous opinion authored by Justice Brett Kavanaugh, the US Supreme Court reversed the Third Circuit and held that:

“Choice-of-law provisions in maritime contracts are presumptively enforceable as a matter of federal maritime law, with certain narrow exceptions.”

This ruling promotes uniformity and predictability in the interpretation and application of maritime contracts—key objectives in federal maritime law due to the inherently international and interstate nature of maritime commerce.

Scope and Reasoning

The Supreme Court did not limit its decision to marine insurance contracts but clarified that the holding applies to all maritime contracts. The Court drew upon its earlier precedent in The Bremen v. Zapata Off-Shore Co. (1972), which held that forum-selection clauses in maritime contracts are presumptively valid unless enforcement would be unreasonable. Extending this reasoning, the Court affirmed that choice-of-law clauses deserve similar treatment.

Recognised Exceptions

The Court identified two narrow exceptions to the general enforceability of such clauses:

1. Conflict with a Controlling Federal Statute:
   A choice-of-law provision will not be enforced if the chosen law contravenes a mandatory federal statute, like by allowing a carrier to avoid liability for negligence in violation of U.S. maritime law.
2. Lack of a Reasonable Basis:
   A clause will also be unenforceable where the parties cannot demonstrate a reasonable basis for selecting the chosen jurisdiction.

However, the Court made it clear that selecting a legal system that is «well developed, well known, and well regarded»—such as New York law—satisfies the reasonable basis requirement, even in the absence of any physical or transactional connection to that jurisdiction.

Accordingly, the Court upheld the choice of New York law in this case, recognising it as a “well-known and highly elaborated commercial law.”

Implications of the Decision

The ruling has wide-reaching implications. It resolves a circuit split among U.S. federal appellate courts and affirms the enforceability of choice-of-law clauses under federal maritime law. Moreover, the decision may also prompt both U.S. and international parties to select New York law for their maritime contracts, confident that this choice will be respected unless exceptional circumstances render it unreasonable or in conflict with U.S. federal law—even if the parties have no ties to New York.

By reinforcing contractual autonomy and legal predictability, the decision strengthens the foundations of U.S. maritime law and enhances the reliability of contractual arrangements in the global maritime sector