SDNY grants motion to compel arbitration in New York based on "clear intent" of parties | Practical Law

SDNY grants motion to compel arbitration in New York based on "clear intent" of parties | Practical Law

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP

SDNY grants motion to compel arbitration in New York based on "clear intent" of parties

Published on 30 Jun 2011International, USA (National/Federal)
Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP
The District Court for the Southern District of New York has found that where one provision in an arbitration clause included the term New York, the parties clearly intended arbitration to take place in New York. This was the case even though the parties failed to specify in another provision whether arbitration would be in New York or London, and relied on the federal policy favouring arbitration to enjoin proceedings in Brazil.
In Stolt Tankers BV v Allianz Seguros, SA, (S.D.N.Y. June 16, 2011), Stolt and Tricon Shipping entered a Voyage Charter Party (Charter). It included an arbitration clause providing that "[a]ny and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Part I of this charter." Part I of the Charter provided that "[t]he place of General Average and Arbitration proceedings to be London/New York (strike out one)". The parties did not strike out a city. The Charter also included the phrase "General Average/Arbitration New York."
Stolt arranged with Klabin and Suzano, consignees to bills of lading incorporating the Charter, for a shipment to Brazil. Klabin and Suzano alleged that the goods arrived damaged and Allianz and Ace, the subrogated underwriters of Klabin and Suzano, commenced a lawsuit in Brazil against Stolt. Stolt responded by demanding arbitration, but Allianz and Ace refused to nominate an arbitrator as required by the arbitration agreement.
Stolt petitioned in the US District Court for the Southern District of New York to compel arbitration in New York based on the arbitration agreement in the Charter. Allianz and Ace responded, arguing that the agreement provided for arbitration in New York only for disputes concerning the General Average based on the phrase "General Average/Arbitration New York."
The court granted the petition to compel arbitration and rejected Allianz and Ace's argument, relying on the "plain reading of the entire contract" and the court's prior jurisprudence to find that the phrase "General Average/Arbitration New York" showed that the parties unambiguously intended to arbitrate any disputes in New York. The court noted that even without the phrase, the parties would still be required to arbitrate in New York because another clause stated that "[i]f no selection is made, New York shall be deemed to be selected under Part I". Therefore, if the parties made a deliberate choice to arbitrate in New York, or made no choice, any disputes arising out of the agreement would have to be arbitrated in New York.
Stolt also moved to enjoin Allianz and Ace from proceeding with their lawsuit in Brazil. Courts can issue an anti-suit injunction to enjoin foreign proceedings if the parties are the same and resolution of the case in the enjoining court is dispositive of the litigation being enjoined. The court rejected Allianz and Ace's arguments that the parties were different because Stolt's Brazilian affiliate was the defendant in the Brazilian proceedings. Finding that the threshold considerations were met, the court then considered principles of comity that "require injunctions restraining foreign litigation be used sparingly and granted only with care and great restraint." The court found, among other reasons, that allowing the litigation to continue in Brazil would undermine both the federal policy promoting arbitration and the purpose of an arbitration clause, which is, to avoid extensive and expensive litigation.
This case shows how courts address anti-suit injunctions when the dispute involves an arbitration clause, demonstrating the broad application of the federal policy favouring arbitration.