In November 1967, respondent Zapata, a Houston-based American corporation, contracted with petitioner Unterweser, a German corporation, to tow Zapata's ocean-going, self-elevating drilling rig Chaparral from Louisiana to a point off Ravenna, Italy, in the Adriatic Sea. Zapata had solicited bids for the towage, and Unterweser was the low bidder. Unterweser submitted a contract containing a forum-selection clause providing that any dispute arising must be treated before the London Court of Justice, as well as exculpatory clauses.
After reviewing the contract and making several changes but without altering the forum-selection or exculpatory clauses, a Zapata vice president executed the contract and forwarded it to Unterweser in Germany, where Unterweser accepted the changes and the contract became effective.
On January 5, 1968, Unterweser's deep sea tug Bremen departed Venice, Louisiana, with the Chaparral in tow bound for Italy. On January 9, while the flotilla was in international waters in the middle of the Gulf of Mexico, a severe storm arose. The sharp roll of the Chaparral caused its elevator legs, which had been raised for the voyage, to break off and fall into the sea, seriously damaging the Chaparral. In this emergency situation Zapata instructed the Bremen to tow its damaged rig to Tampa, Florida, the nearest port of refuge.
On January 12, Zapata commenced a suit in admiralty in the United States District Court at Tampa, seeking $3,500,000 damages against Unterweser in personam and the Bremen in rem, alleging negligent towage and breach of contract. Unterweser responded by invoking the forum clause of the towage contract. It moved to dismiss for lack of jurisdiction or on forum non conveniens grounds, or in the alternative to stay the action pending submission of the dispute to the London Court of Justice. Shortly thereafter, Unterweser commenced an action against Zapata seeking damages for breach of the towage contract in the High Court of Justice in London. Zapata appeared in that court to contest jurisdiction, but its challenge was rejected.
Unterweser was faced with a dilemma in the pending action in the United States court at Tampa because the six-month period for filing action to limit its liability was about to expire. On July 2, 1968, Unterweser filed an action to limit its liability in the District Court in Tampa. That court entered the customary injunction against proceedings outside the limitation court, and Zapata refiled its initial claim in the limitation action. It was only at this juncture, on July 29, after the six-month period had run, that the District Court denied Unterweser's January motion to dismiss or stay Zapata's initial action. The District Court later denied another motion by Unterweser to stay the limitation action and granted Zapata's motion to restrain Unterweser from litigating further in the London court. On appeal, a divided panel of the Court of Appeals affirmed, and on rehearing en banc the panel opinion was adopted, with six of the 14 en banc judges dissenting. The Supreme Court granted certiorari to review the judgment.
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