and then chartered back to the foreign corporation. Although the transaction involved a transfer of legal title, such that the U.S. corporations would have been the legal "owners" of the vessels, the Coast Guard concluded that the sales and the charters, taken as a whole, allowed the foreign corporation to retain so much control that it could also be considered an "owner." Like PNBW, the U.S. firms divested themselves of almost all control over the vessels, with their primary functions being to furnish their names as titleholders and to act as financing intermediaries. In looking to the "substance" of the transaction rather than its "form," the Coast Guard determined that Shell, the foreign corporation, must be viewed as an owner for purposes of the Shipping Act.
The presence of the foreign corporation in the chain of title of the tankers is an insufficient basis to distinguish the Shell case from the case at bar. The charter arrangement itself, however, contains elements which indicate that the American titleholders of the vessels in Shell were to obtain significantly less of an interest in the tankers than PNBW obtained in the GLACIER QUEEN. Most significant are Shell's unilateral right to extend the charter indefinitely or terminate it and buy the tankers back at any time, as well as Shell's obligation to buy them back at the termination of the charter for a sum which was anticipated to be substantially less than the fair market value of the vessels. Under the PNBW-Westours charter, in contrast, PNBW retains several important rights, including reversion to the bank at the expiration of the charter, which constitutes an absolute right to the GLACIER QUEEN at the end of as little as seven or no more than seventeen years. Further, PNBW retains all tax benefits which result from ownership, and may require Westours to reimburse it if tax benefits are recaptured. Westours has no right to assign its charter to a third party without PNBW's consent; nor can Westours terminate the charter for seven years. Finally, unlike the Shell case, where the American corporations were set up solely to take title for the foreign corporation, it cannot be said here that PNBW is a mere "front" for Westours. Instead, the bareboat charter negotiated between Westours and its bank was an arms-length transaction in which, it may be assumed, PNBW extracted what it believed to be a reasonable profit for its participation, just as any American owner would extract a reasonable profit from a bareboat charter of its vessel.
Just as PNBW retained rights in the GLACIER QUEEN that would be expected of an owner, Westours' rights and obligations are limited in several significant ways to those one would expect of a charterer. Westours does not have the right to extend the charter indefinitely. At the end of the term of the charter, which Westours may terminate after seven years or yearly thereafter, and which terminates of its own terms after seventeen years, Westours has neither the right nor the obligation to purchase the GLACIER QUEEN. Westours has no right to terminate the charter prior to the expiration of the initial seven-year term. Finally, Westours has no right to demand that PNBW pass the investment tax credits on to Westours.
It is unnecessary for the court to determine precisely which of the factors present in the Shell case would convert the transaction between Westours and PNBW into a transfer of ownership for purposes of the Shipping Act. That determination is within the jurisdiction of Marad and the Coast Guard. Those agencies may well determine that the Shell case represents the threshold beyond which a titleholder can no longer be said to be the "sole" owner of a U.S.-flag vessel. Instead, they may decide that the PNBW-Westours charter represents the most that a titleholder can transfer to a charterer before the charterer is also deemed an owner under the Shipping Act, or they may decide that the line between a sale and a charter lies somewhere between the Shell case and the PNBW-Westours arrangement. Although the court rejects the argument that those agencies lack the duty to prevent approval or documentation of transfers which result in de facto ownership by a noncitizen, the court is unable to conclude that the bareboat charter between Westours and PNBW transformed Westours from a charterer to a de facto owner as a matter of law. Wherever the line between a charterer and an owner is ultimately drawn, it is sufficient to conclude that the agencies have not acted arbitrarily or capriciously in determining that Westours has not crossed it.
For these reasons, the approval of the PNBW-Westours bareboat charter by Marad and the Coast Guard's documentation of the GLACIER QUEEN as American-owned will be upheld. Similarly, the court is unable to conclude that the Coast Guard's refusal to initiate an investigation into the ownership of the GLACIER QUEEN was arbitrary or capricious. See General Motors v. Federal Energy Regulatory Commission, 198 U.S. App. D.C. 206, 613 F.2d 939, 944 (D.C. Cir. 1979).
In addition to challenging approval of the bareboat charter to Westours, AEC also challenges Marad's approval of Westours' February 11, 1983 request that the bareboat charter be interpreted to allow the GLACIER QUEEN to engage in a local harbor tour service. Charter Order MA-5258 had approved the bareboat charter to Westours
of the passenger ferry GLACIER QUEEN . . . . for the carriage of passengers with baggage - Prince William Sound between Valdez and Whittier, Alaska, and or Lynn Canal between Yankee Cove (35 miles north of Juneau, Alaska) and Skagway, Alaska.
On May 23, 1983, Marad agreed in principle with Westours that Charter Order Ma-5258 allowed expansion of the GLACIER QUEEN's service to include a harbor tour as this proposed service came within the "geographic scope" of operations of Charter Order MA-5258. AEC challenges this conclusion on the ground that the plain meaning of the Charter Order was to allow the GLACIER QUEEN to be used as a "passenger ferry" to carry "passengers with baggage" across the Prince William Sound with "point-to-point" transportation between Valdez and Whittier, Alaska and/or along the Lynn Canal between Yankee Cove and Skagway, Alaska. AEC contends that the use of the term "passenger ferry" demonstrates that the Charter Order permitted only ferry transportation service within the specified geographic area, and not that Westours was granted general authority to conduct any type of service within the geographic limitations of MA-5258. Therefore, plaintiff contends, because the harbor tour service constituted a new service, it required a new approval and a new charter order. For the same reason, Marad's reliance on its original justifications for approving MA-5258 was arbitrary and capricious and denied AEC its right to challenge the approval of the "new" service by Marad.
The court is unable to conclude, however, that Marad's interpretation of the charter order was either unreasonable or clearly erroneous. Marad's position is that the term "passenger ferry" does not describe the intended service of the vessel, but rather provides a classification of the GLACIER QUEEN to distinguish it from larger vessels that would include sleeping accommodations for the passengers. This interpretation is supported by the fact that the term "passenger ferry" is used only to describe the vessel and does not appear in the description of the service to which the GLACIER QUEEN is to be put. Therefore, the government's position that reference to the vessel as a "passenger ferry" does not create a use limitation or imply that the vessel may be used only for point-to-point transportation and not for harbor tours does not appear to be irrational. By interpreting the charter order to describe the geographic area within which the GLACIER QUEEN could operate, rather than reading it to impose restrictions on how the vessel could be operated within that geographic area, Marad was exercising its discretion so as to allow Westours to adapt to the changing needs of the Alaska tourist market. Marad's discretion in this regard is quite broad. Cf. Carolina Freight Carriers Corp. v. Interstate Commerce Comm'n., 201 U.S. App. D.C. 104, 627 F.2d 563, 565 (D.C. Cir. 1980). In light of the reasonableness of this interpretation, Congress' explicit recognition of the unique circumstances in southeastern Alaska, and Marad's broad authority to regulate foreign operation of domestic vessels, AEC's challenge to the agency's interpretation of Charter Order MA-5258 must be rejected.
An appropriate Order accompanies this Memorandum.
This matter comes before the court on the parties' cross-motions for summary judgement. For reasons discussed in the accompanying Memorandum, filed by the court this date, it is, by the court, this 3d day of May, 1985,
ORDERED that plaintiff's motion for summary judgment is denied; and it is further
ORDERED that defendants' motions for summary judgment are granted.