MSC Mediterranean Shipping Company has been ordered to pay nearly $1m after US regulators ruled it wrongfully held up legal proceedings by refusing to turn over documents.

Federal Maritime Commission administrative law judge Erin Worth entered default judgement against the container shipping giant over complaints from the company that complying with discovery would violate Swiss law.

“[MSC+'s] alleged to be one of the largest container lines in the world. It has voluntarily chosen to conduct business in United States ports and is regulated by the Federal Maritime Commission,” Wirth wrote in her order signed on 13 January.

“It has not met its burden to show that the discovery sought is prohibited by foreign law and the undersigned is not required to resolve a conflict between the judicial and executive branches in Switzerland.

“This proceeding is at an impasse as MCS Industries cannot proceed with its case without the discovery and [MSC] has refused to provide the discovery despite multiple orders to do so.”

MSC has been locked in a dispute with Pennsylvania furniture manufacturer MCS Industries since July 2021. MCS Industries alleges MSC violated the US Shipping Act by reneging on its carriage contract and forcing it to pay sky-high spot prices during the pandemic-fuelled market surge.

MSC has long argued that if it were to turn over certain documents, it could be subject to criminal sanctions in Switzerland.

The two sides sent a letter to a Swiss court, seeking to collect documentation under the Hague Evidence Convention. The court said the administrative nature of the proceedings meant that it fell outside the scope of the convention, and Wirth ordered MSC to move forward with fact discovery.

MSC, however, contacted the Swiss Federal Office of Justice for further clarification.

In her order, Wirth said MSC’s continued engagement with Swiss authorities suggested it “will not follow rulings of the courts in Switzerland unless those rulings are in its favour”.

She also argued MSC had repeatedly attempted to limit the scope of claims and discovery.

In response, the company said it would appeal the decision and that Wirth's order does not address the merits of MCS Industries claims.

“The decision is based on a procedural finding that misapprehends the Swiss law issues that preclude MSC from complying with FMC’s prior discovery order,” MSC said in a statement.

“No Swiss authority has held that MSC could produce the information consistent with Swiss criminal law without appropriate authorisation.”

Federal Maritime Commission chairman Daniel Maffei has overseen increased scrutiny of container shipping. Photo: FMC

The company further argued that the Shipping Act has language dealing with blocking statutes, like the Swiss laws preventing certain documents from being turned over.

MSC has also reiterated its belief that its dispute with MCS Industries is entirely contractual.

“MSC has investigated the matter and has concluded that MCS Industries’ difficulties with its cargo bookings arose from errors and communication issues between MCS Industries and third-party intermediaries, and not from any wrongdoing by MSC,” the company said.

“MCS Industries is seeking to hold MSC liable for not carrying cargo MCS [Industries] never asked it to carry, and the decision to award it damages for harm it has never proved is in error.”

MCS Industries is also seeking more than $600,000 in attorneys fees, but Wirth ruled that this needs to be applied for separately.