USA Law and Practice Contributed by: Seward & Kissel LLP, Seward & Kissel LLP
arbitration. Many charters specifying arbitration in New York are ad hoc and do not require that arbitrators be selected from any specific arbitral body. The SMA provides only limited administration of arbitrations, which generally proceed autono - mously under the rules published by that body. The SMA is very active in promoting maritime arbitration in the USA, in maintaining its roster of arbitrators and in publishing panel awards, which are available on the LEXIS and Westlaw services. The SMA likewise publishes rules for confidential, voluntary and non-binding media - tion proceedings, should circumstances warrant the use of that device. 6.6 Remedies Where Proceedings Are Commenced in Breach of Foreign Jurisdiction or Arbitration Clauses A motion to compel arbitration or a motion to dismiss for lack of jurisdiction would be the typi - cal first-line remedies for a situation where pro - ceedings are commenced in breach of a foreign jurisdiction or arbitration clause. Additional remedies for responding to pro - ceedings commenced in breach of a valid and enforceable foreign jurisdiction or arbitration clause, such as seeking an award of sanctions or attorneys’ fees, would require an additional showing of clear evidence of bad-faith conduct, in order to fall outside the general rule in the USA that each party pays its own attorneys’ fees. 7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies The United States imposes a flat 4% tax on a non-US corporation’s US-sourced gross trans -
portation income, which includes income from spot and time charters where the vessel carries cargo to or from a US port, to the extent that such income is not considered Effectively Con - nected Income (ECI). A non-US corporation may be eligible for a statutory exemption from this tax if it is organised in a qualifying foreign jurisdiction and satisfies certain ownership and documenta - tion requirements. US persons who own foreign corporations that own vessels may be subject to certain US fed - eral income tax consequences and filing obliga - tions. Beginning in 2018, shipping income that was previously excluded from subpart F income of a “United States shareholder” of a “controlled foreign corporation” was subject to US taxa - tion as “global intangible low-taxed income”, or GILTI. In 2019, the Internal Revenue Service released guidance informing taxpayers that an election could be made with respect to GILTI, which may mitigate potentially adverse US fed - eral income tax consequences of GILTI. 8. Implications of Non- Performance, the IMO 2020, Trade Sanctions and the War in Ukraine 8.1 Force Majeure and Frustration “Force majeure” events are recognised under US law and will in general be governed by the par - ticular terms of the parties’ agreement as well as the governing law, which may be subject to vari - ation from state to state. Force majeure clauses may permit a party to terminate or waive certain performance obligations due to the occurrence of an event which causes that party to have delayed performance or to have failed to perform under the parties’ agreement, but do not typical - ly protect against risks that are contemplated or obligations expressly assumed at the time of the
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