In Arauz v Carnival Corp., (11th Cir. Apr. 10, 2012), a Panamanian seaman suffered an injury while working aboard a Carnival cruise ship. His employment contract required arbitration of all disputes "arising out of or in connection with" the contract. However, Arauz sued Carnival in a Florida state court, bringing claims under the Merchant Act of 1920. Carnival removed to the US District Court for the Southern District of Florida and moved to compel arbitration.

Arauz argued that the arbitration clause was unenforceable because it required application of foreign law in a foreign forum and thus was a prospective waiver of his statutory rights under US law. He further argued that under US public policy this prospective waiver should be "null and void." In response, Carnival filed a stipulation agreeing to the application of US law to Arauz's statutory claims. Arauz rejected the stipulation as a unilateral modification of the arbitration provision. The district court disagreed and compelled arbitration because it found Carnival's unilateral stipulation eliminated the public policy concerns.

On appeal, Arauz raised two issues. He argued that a public policy defence exists at the arbitration-enforcement stage and that unconscionability is a standard breach of contract defence and thus also allowed at the arbitration enforcement stage. The court explained that under the New York Convention only standard breach of contract defences ("such as fraud, mistake, duress, and waiver - that can be applied neutrally on an international scale") can be raised at the stage of enforcing an arbitration agreement. Public policy and unconscionability are not available because they are not standard breach of contract defences that can be applied neutrally across a range of countries. Therefore, the Eleventh Circuit affirmed the district court's order to compel arbitration.

Similarly, in Lujan v Carnival Corp., (S.D. Fla. Apr. 2, 2012), the US District Court for the Southern District of Florida granted a motion to compel arbitration against a Peruvian seaman, alleging claims for injury sustained while working on a Carnival cruise ship. Lujan contended that the agreement was "null and void" because it deprived him of relief under US law and thus violated public policy.

The district court found that Lujan, like Arauz, failed to raise a proper affirmative defence to enforcement of the arbitration agreement. The court explained that Lujan's arguments were inapplicable because public policy cannot be applied neutrally on an international scale. Therefore, Lujan also could not avoid arbitration on any public policy basis.

These cases demonstrate the available affirmative defences at the enforcement of arbitration stage and the proper time for raising public policy defences.