Commercial Litigation and Arbitration

New York Convention — ‛Agreement in Writing“ to Arbitrate — Interplay with Federal Arbitration Act

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 201, et. seq. requires an ‛agreement in writing“ before arbitration may be compelled. The plaintiff in Interested Underwriters at Lloyd's v. M/T San Sebastian, 2007 U.S. Dist. LEXIS 24817 (N.D. Ga. April 3, 2007) was the subrogated insurance carrier for the purchaser of product that was to be delivered pursuant to a sub-Charter Party agreement between the charterer of a vessel and the seller of the product. The only ‛agreement in writing“ to arbitrate was the Charter Party agreement between the owner of the vessel and the charterer. Was that sufficient to satisfy the New York Convention and permit the Court to compel arbitration? District Judge William S. Duffy, Jr., answered that question in the affirmative because the agreement to which Lloyd's insured was a party incorporated by reference the Charter Party Agreement that contained the arbitration clause. Further, the Court held, Lloyd's insured was an intended third party beneficiary of the Charter Party Agreement. Held, the Court was empowered to compel arbitration.

The second question was where the prospective arbitration would be held, and that raised the issue of the interplay between the New York Convention and the Federal Arbitration Act. Preliminarily, the Court noted that ‛both the FAA and NYC [New York Convention] have ‘overlapping coverage’ to a dispute ‘to the extent that they do not conflict“ (citing Yusuf Ahmed Alganim & Sons, W.L.L. v. Toys ‛R“ Us, Inc., 126 F.3d 15, 20 (2d Cir. 1997). But the locus of the arbitration was an issue on which the FAA and NYC do conflict. Under the FAA, 9 U.S.C. § 4, the Court may order arbitration only ‛within the district in which the petition for an order directing such arbitration is filed“ — here, New York (in related proceedings), not Atlanta, where this Court sits. The New York Convention, in contrast, permits a court to ‛direct that arbitration he held in accordance with the agreement at any place therein provided for, whether that place is within or without the United States“ (9 U.S.C. § 206). Held, the New York Convention prevails and the Court may order arbitration anywhere, including New York.

The next question was whether the movant had waived the right to arbitrate by participating in three years of litigation before seeking to compel arbitration. Unsurprisingly, the answer to that question was also affirmative.

The last question was whether the defendant signatory to the Charter Party Agreement was equitably estopped from arguing against the availability of arbitration. The Court noted that: ‛Equitable estoppel prevents contract signatories from using contracts as both a sword and shield against a non-signatory.“ Held, because defendant ‛has not sought to use the Charter Party at all … [e]quitable estoppel does not apply in this situation.“

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