In Bechtel do Brasil Construcoes Ltda v UEG Araucaria Ltda, (2d Cir. Mar. 22, 2011), the Second Circuit found that a contract requiring arbitration in accordance with the International Chamber of Commerce (ICC) rules, with New York law governing the procedure and administration of any arbitration, did not clearly require the court to decide whether a claim was timely.

Bechtel and UEGA entered into a series of agreements requiring that any disputes be settled by arbitration according to the ICC rules "except as modified herein." The arbitration clauses further provided that New York law governed the "procedure and administration of any arbitration" and "the validity, effect, and interpretation" of the arbitration agreement.

When a dispute arose, UEGA filed a request for arbitration with the ICC. In response, Bechtel sought a permanent stay of arbitration in New York state court arguing that UEGA's claims were time-barred. Bechtel relied on section 7502(b) of the New York Civil Practice Law and Rules, which provides that if an arbitration claim would have been time-barred if asserted in state court, the other party may "assert the limitation as a bar to the arbitration on an application to the court."

After UEGA removed the dispute to federal court, it argued that the arbitrator, not the court, should decide whether the claim was timely. The district court rejected this argument and found that the parties' agreement showed that they clearly intended New York law to govern arbitration procedure, including the section 7502(b) limit on the power of arbitrators to decide preliminary issues of timeliness.

The Second Circuit reversed and rejected Bechtel's application to stay the arbitration. It first explained that the court's job was to look to when the parties entered into the contract and determine if they intended the arbitrator to decide issues of timeliness. Under the Federal Arbitration Act, parties' intentions must be construed "generously in favour of arbitration" and "any ambiguity in the contract must be resolved in favour of arbitration."

The court found that the scope of the parties' intentions to arbitrate claims was not clear. The broad arbitration clause seemed to provide that an arbitrator should decide whether a statute of limitations bars a claim. However, the provisions stating that New York law applies would seem to allow courts to decide the issue. Relying on Second Circuit precedent and the contract provisions, the court decided that the "parties' fundamental and broad commitment to arbitrate" disputes was not modified by the references to New York law. Because the contracts did not mention timeliness or when a party can resort to court, there was "no clear statement" that an arbitrator cannot decide issues of timeliness. Thus, the contracts were ambiguous as to whether courts can decide if a claim is timely and ambiguities are resolved in favour of the arbitrator.

This case demonstrates courts' adherence to the federal policy favouring arbitration. Parties who wish courts to decide issues of timeliness must clearly state so in their agreement to arbitrate, as general references to state law are inadequate.