Foreign flagged cruise ships and the Americans with Disabilities Act

Journal of Legal, Ethical and Regulatory Issues, Jan, 2008 by Debra D. Burke, E. Malcolm Abel

ABSTRACT

The Americans with Disabilities Act of 1990 (ADA) is applicable to businesses in the United States, and, generally, not applicable to businesses outside of the country. But is the ADA applicable to foreign flagged cruise ships docked at U.S. ports? While general statutes, such as the ADA, are presumed to apply to conduct that takes place aboard a foreign-flag vessel in United States territory if the interests of the United States or its citizens are at stake, if instead interests internal to the ship are at stake, then the "clear statement rule" requires Congress to clearly state that the law is to be applied in such a manner. Absent a clear statement by Congress, a law cannot be applied if it would affect the internal operations of the business, such as those relating to matters of internal order and discipline. In Spector v. Norwegian Cruise Line, LTD the Supreme Court held that Title III of the ADA may apply to foreign flagged cruise ships departing from, and returning to, ports in the United States. The plurality opinion concluded that the ADA lacks a sufficiently clear statement that it applies to the internal affairs of foreign vessels, at least insofar as it could be read to require structural changes that might conflict with international legal obligations or pose a real threat to the safety of the crew or other passengers. However, the plurality determined that the clear statement rule does not render Title III entirely inapplicable to foreign vessels, concluding instead that the statute applies to foreign ships to the extent to which it does not bear on their internal affairs. This paper will discuss the ADA and the cruise industry, and the likely effects of this decision.

INTRODUCTION

Cruising is an extremely popular vacation option today, and represents the fastest growing sector of the travel industry with eleven million passengers cruising each year (Mitchell, 2006). Since 1970 the cruise industry has experienced a phenomenal 1,800 percent growth in the number of passengers cruising annually (Sheehan, 2006). To accommodate that volume of travelers, ships became mega vessels during the 1990s, with Carnival's Destiny being the first passenger ship to break the 100,000 ton barrier (Marsano, 1999). Royal Caribbean's Eagle Project launched three ships during that decade, each of which weigh 142,000 gross registered tons, cost $500 million, accommodate as many as 3,838 passengers, and provide an amazing array of activities, such as an ice skating rink, golf course, regulation size basketball and volleyball courts, a twenty foot high rock-climbing wall and an in-line skating track (Snow, 1999). Carnival Corporation, of which the Cunard Lines is a subsidiary, launched the Queen Mary in 2003 (151,400 gross tons), intended to be the largest trans-Atlantic liner ever, until trumped by Royal Caribbean's Freedom of the Seas and upcoming Liberty of the Seas (160,000 gross tons). In comparison, the Titanic was only 43,239 gross registered tons! Norwegian Cruise Lines (NCL) recently ordered up to three 150,000-ton, 4,200-passenger vessels, which would be the fourth-largest class of ships in the world, behind QM2, Royal Caribbean's two existing vessels, and the additional 220,000-ton ships Royal Caribbean has on order for 2009 (Hannafin, 2006). Over sixty new ships have entered service in the past five years (Readers' Poll, 2006). Five new ships are scheduled for launch in 2007 alone: Costa's Serena, Royal Caribbean's Liberty of the Seas, Cunard's Queen Victoria, and the Emerald Princess and Royal Princess (Mitchell, 2006).

Cruise ships are almost exclusively foreign flagged. American flagged cruise ships are clearly subject to U.S. laws, such as the Americans with Disabilities Act ("ADA") (Deck v. American Hawaii Cruises, Inc., 1999), as are passenger ships traveling exclusively within internal U.S. navigable waters (Symeonides, 2005). In order to be flagged American, the ship's hull must be built domestically, which in effect acts as a deterrent to U.S. registration (Fields, 1998). In general, shipbuilding costs in the United States are twice those in Europe, and compliance with American regulatory laws is expensive, so very few cruise ships fly the American flag. Another deterrent to being American flagged is the potential tax burden. Cruise lines that are registered as foreign corporations and sail foreign-flagged ship pay no federal income tax. Carnival, a Panamanian corporation with headquarters in Miami, earned $2 billion in profits between 1995 and 1998, yet paid less than one percent in income taxes, while Royal Caribbean Cruises reported $657 million over the same period and did not even include a line for income taxes in its financial statements (Frantz, 1999).

On the other hand, an advantage to being American flagged is that the ship may sail from and among American ports, and then return to an American port without first sailing to a foreign port, such as to Canada in the Alaska market. Federal law prohibits ships not built in the United States from sailing between U.S. ports without first calling on a foreign country before returning to a U.S. port (Carothers, 2004); under the Jones Act, only American owned ships may transport goods and people between American ports. An all-American itinerary, however, is particularly attractive in the Hawaiian cruise market, which is why in 1999 American Classic Voyages announced plans for "Project America," a venture designed to build at least two, possibly three, ships in American shipyards. American Hawaiian Cruises, a subsidiary of American Classic Voyages, which had operated 1950s American-built ocean liners in the Hawaiian Islands, planned to sail the newly ordered ships, until the drop in tourism after 9-11 forced the company into bankruptcy. Subsequently, the Omnibus Appropriations Bill passed by Congress in 2003 contained a provision to return the Project America ships to Hawaii for inter-island cruises under an agreement with Norwegian Cruise Lines. NCL purchased the two unfinished Project America hulls, which were built in Mississippi, and completed construction of the ships in Europe. It launched the Pride of America in 2004, the first new ocean-going passenger ship to fly the American flag in nearly fifty years. Then in April 2006, NCL christened the Pride of Hawaii, the largest U.S. flagged passenger ship ever built, and at least for now, the fastest ocean liner ever built as well (NCL America, 2006). As part the agreement, they were permitted to re-flag another ship, previously sailing as the Norwegian Sky, as the Pride of Aloha, providing that all of the ships operate with American crews and be subject to U.S. taxation, environmental, and labor laws, including minimum-wage laws.