Case note
Karpik v Carnival: Foreign Law Does Not Beat Australian Unfair Terms
What the High Court decided in [2023] HCA 39, and what it means if your terms were drafted overseas.
In short
In Karpik v Carnival plc [2023] HCA 39 the High Court held that Australia's unfair contract terms regime could apply to a consumer contract that nominated foreign law, and that a class action waiver in those terms was unfair and therefore void against the passenger. Choosing another country's law in your terms does not switch off Australian consumer protection.
Next step: if your standard terms were drafted overseas or copied from a US template, they are worth a review. Ask us to look at them.
This is the decision to point to whenever someone argues that their contract "is governed by US law, so the Australian rules don't apply". It arose from the Ruby Princess COVID-19 class action, but the commercially useful part has nothing to do with cruises. It is about whether a foreign governing law clause and a class action waiver can keep an Australian customer out of an Australian court.
What happened
Passengers brought a representative proceeding in the Federal Court arising from the March 2020 Ruby Princess voyage. Some passengers, including a US-resident passenger, had booked on terms that nominated United States law and contained a class action waiver — a clause requiring claims to be brought individually rather than as part of a class proceeding. Carnival sought to hold the passenger to those terms and keep her out of the class action.
What the High Court held
- The Australian Consumer Law's unfair contract terms regime was capable of applying to the contract, notwithstanding the clause nominating foreign law.
- The class action waiver was unfair in the statutory sense — it was not reasonably necessary to protect the supplier's legitimate interests, it caused detriment, and it was in a standard form consumer contract the passenger had no ability to negotiate.
- Being unfair, the waiver was void, and could not be relied on to exclude the passenger from the representative proceeding.
The practical outcome: the waiver did not work, and the foreign law clause did not save it.
Why it matters beyond cruise ships
Four lessons transfer directly to ordinary commercial terms:
- A governing law clause is not a shield against statute. Australian statutory protections attach to conduct connected with Australia. You cannot contract out of them by nominating another jurisdiction's law — see governing law and jurisdiction clauses.
- Imported US templates carry risk here. Class action waivers, mandatory arbitration, sweeping liability exclusions and unilateral variation rights are standard in US consumer terms and are exactly the categories Australian law treats as suspect.
- "Standard form" is a wide net. If the customer had no real opportunity to negotiate, the regime is in play — and it now covers small business contracts, not only consumers.
- The downside has grown. Since the November 2023 amendments, proposing or relying on an unfair term can attract civil penalties. Previously the worst case was that the term was void; now it can cost money.
What to check in your own terms
- Class action waivers and any clause forcing individual-only claims
- Mandatory foreign arbitration in a consumer or small business contract
- Unilateral rights to vary price, scope or terms without notice
- Broad exclusions or caps on liability that bite only one way
- Automatic renewal with a long or unclear cancellation window
- Indemnities that make the customer responsible for the supplier's own conduct
- A governing law clause that does not match where you actually trade
Our page on unfair contract terms sets out the statutory test and the categories in more detail, and SaaS terms of service covers the online-terms version of the same problem.
Frequently asked questions
Does this mean foreign governing law clauses are pointless?
No. They still determine the contractual rules of interpretation and non-statutory rights. They simply do not displace Australian statutory protections for conduct connected with Australia.
Are all class action waivers void?
Not automatically — unfairness is assessed on the term, the contract and the circumstances. But after Karpik, a waiver in Australian standard form consumer or small business terms is a poor bet.
Does it apply to business-to-business terms?
The unfair contract terms regime covers standard form small business contracts, so yes in that band. Large, genuinely negotiated commercial contracts sit outside it.
What should an overseas supplier selling into Australia do?
Run an Australian-specific set of terms, or an Australian addendum. Relying on a single global template drafted for US law is the exact position Carnival was in.
Where can I read the decision?
The judgment is Karpik v Carnival plc (The Ruby Princess) [2023] HCA 39, available on the High Court of Australia website and on AustLII.
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