Source: https://globalarbitrationnews.com/arbitrability-venue-questions/
Timestamp: 2019-04-23 19:09:14+00:00

Document:
Law code, gavel and books.
Appellant Bamberger Rosenheim, Ltd. (“Bamberger”) is an Israeli company, that raises capital for real estate investments. Appellee OA Development, Inc. (“OAD”) is an American company, incorporated in the state of Georgia, that develops real estate. The parties entered into a solicitation agreement in 2008 that contained an arbitration clause calling for the seat of arbitration to be in Atlanta, Georgia if Bamberger submitted the dispute and in Tel Aviv, Israel if OAD submitted the dispute.
Bamberger commenced arbitration in Atlanta, claiming OAD had breached the contract. OAD submitted a counterclaim in the same arbitration alleging that Bamberger had defamed OAD in statements to Israeli investors. Bamberger objected to the counterclaim’s arbitration in Atlanta, arguing that it was a dispute submitted by OAD and must be arbitrated in Tel Aviv. The arbitrator determined that venue was proper in Atlanta, in part because the “dispute” was submitted by Bamberger. The arbitrator found Bamberger liable on OAD’s defamation counterclaim.
Bamberger filed a petition to vacate the arbitrator’s defamation award and OAD filed a petition to confirm the award. The district court affirmed the award and Bamberger appealed. Bamberger argued on appeal that the district court erred in confirming the arbitration award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“). Bamberger also argued that the district court erred in denying its petition to vacate the award under 9 U.S.C. § 10, as Bamberger argued that the arbitrator exceeded its power, which is grounds for vacatur under 9 U.S.C. § 10(a)(4).
The appellate court analyzed the arguments under the New York Convention and 9 U.S.C. § 10(a)(4) together because the dispositive issue was whether the court must defer to the arbitrator’s venue determination. The court noted that there are certain presumptions that assist courts in determining the parties’ intent when arbitration contracts are silent as to specific questions. Questions as to arbitrability are presumed to be questions for the courts, whereas procedural questions are for the arbitrator, absent a contractual provision otherwise.
Here, Bamberger conceded that the arbitration clause was binding and that the clause applied to the defamation counterclaim. Bamberger only argued that the arbitration was conducted in the wrong arbitral venue. The Eleventh Circuit held that disputes over the interpretation of forum selection clauses in arbitration agreements raise presumptively arbitrable procedural questions, in agreement with the Second, Fourth, Tenth and First Circuits. The court thus determined its review was limited to whether the arbitrator arguably interpreted the contract, not whether he got the meaning right or wrong.
In making this determination, the Eleventh Circuit addressed the three cases primarily relied upon by Bamberger. The court first distinguished its precedent in Sterling Financial v. Hammer. In that case the court found it had jurisdiction to enforce an unambiguous venue provision; the court did not hold that it could review arbitral-venue provisions de novo. The Eleventh Circuit also expressly declined to follow the Ninth Circuit’s decision in Polimaster Ltd. v. RAE Systems, Inc., interpreting a similar provision. The Eleventh Circuit noted that the majority’s holding rested on its conclusion that the arbitral-venue provision was “not ambiguous,” a determination with which it did not agree. The Eleventh Circuit also noted that the Ninth Circuit had failed to engage in any analysis as to whether arbitral venue was a question of arbitrability. Finally, the Eleventh Circuit stated that it found no reason why the international character of the arbitration should change its decision. The language cited by Bamberger from the Supreme Court’s Scherk v. Alberto-Culver Co. decision—about the importance of respecting a contractual provision specifying forum—did not concern the choice between different arbitral forums, but whether a particular dispute should be resolved in arbitration or in court.
For the foregoing reasons, the Eleventh Circuit denied Bamberger’s appeal and affirmed the district court’s confirmation of the arbitral award.
A version of this post originally appeared in the November 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.
Eileen Flynn is a member of the Dispute Resolution team at Baker McKenzie in Chicago. Ms. Flynn is experienced in various domestic and international litigation and arbitration matters. Her practice focuses on representing multinational corporations in commercial litigation and antitrust matters. Eileen Flynn can be reached at Eileen.Flynn@bakermckenzie.com and +1 312 861 2602.
Grant Hanessian is a member of the Dispute Resolution team at Baker McKenzie New York. Grant Hanessian serves as global co-chair of the Firm’s International Arbitration Group. He chaired the Litigation Department of the Firm’s New York office from 2003 to 2012. Mr. Hanessian is the US alternate member of the ICC International Court of Arbitration in Paris, vice chairman of the Arbitration Committee of the US Council for International Business (US national committee of the ICC), and a member of the ICC’s Commission on Arbitration and its Task Forces on Arbitration Involving States or State Entities and on Financial Institutions and International Arbitration (leader of Investment Arbitration and Banking & Finance work stream). He is also a member of the American Arbitration Association—International Centre for Dispute Resolution’s International Advisory Committee and its Advisory Committee on Brazil, the International Arbitration Club of New York, the Arbitration Committee of the International Institute for Conflict Prevention and Resolution, the New York City Bar Association's Committee on International Commercial Disputes and Club Español del Arbitraje, and is a founding board member of the New York International Arbitration Center. Grant Hanessian can be reached at Grant.Hanessian@bakermckenzie.com and +1 212 891 3986.

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