Opinion ID: 789753
Heading Depth: 2
Heading Rank: 2

Heading: New York Convention, Article V(1)(d)

Text: 13 When a party applies to confirm an arbitral award under the New York Convention, [t]he court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention. 9 U.S.C. § 207. Article V of the Convention specifies seven exclusive grounds upon which courts may refuse to recognize an award. See New York Convention art. V; see also Yusuf Ahmed Alghanim, 126 F.3d at 19-20. These grounds include when [t]he composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties. Art. V(1)(d). The District Court held, pursuant to Article V(1)(d), that the Board of Arbitration was improperly composed and EUSA's arbitral award could not be enforced. We agree. 14 The party opposing enforcement of an arbitral award has the burden to prove that one of the seven defenses under the New York Convention applies. Art. V(1); Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 313 (2d Cir.1998). The burden is a heavy one, as the showing required to avoid summary confirmance is high. Yusuf Ahmed Alghanim, 126 F.3d at 23 (quoting Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir.1987)). Given the strong public policy in favor of international arbitration, see Compagnie Noga D'Importation et D'Exportation, S.A. v. Russian Federation, 361 F.3d 676, 683 (2d Cir.2004), review of arbitral awards under the New York Convention is very limited ... in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation. Yusuf Ahmed Alghanim, 126 F.3d at 23 (quoting Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 111 (2d Cir.1993)). We find that EB has carried this substantial burden. 15 The License Agreement, which incorporates by reference the arbitration procedures set forth in the Two Party Agreement, provides that disputes between the parties are to be resolved by arbitration, and that the Board of Arbitration is initially to be composed of two arbitrators, one chosen by EUSA and one by EB. The Two Party Agreement further provides that [i]n the event of disagreement between these two arbitrators, they shall choose a third arbitrator.... Upon the failure of the two arbitrators to reach agreement upon the choice of a third arbitrator, the third arbitrator is to be selected by the President of the Tribunal from a list maintained by the British Chamber of Commerce. As previously noted, the Chamber ceased maintaining such a list prior to this dispute. 16 We agree with the District Court that the parties' agreement contains three requirements: (1) the arbitrators must disagree before appointing a third arbitrator; (2) the two party-appointed arbitrators must attempt to choose a third arbitrator; and (3) upon the failure of the two party-appointed arbitrators to agree on a third, the Tribunal must appoint one from the Chamber's list. See Encyclopaedia Universalis, 2003 WL 22881820, at . Here, the first requirement was met because the arbitrators disagreed about the procedural rules to be applied to the proceedings. We reject EB's contention that Layton and Danziger were required to disagree as to the merits of the case. Nothing in the language of the Two Party Agreement limits the subject of qualifying disagreements. 17 Fatally for EUSA, the second requirement was not met. There is no evidence that the parties attempted to agree upon a third arbitrator before Danziger asked the Tribunal to appoint one. EUSA points to Danziger's May 27, 1999 letter to Layton, in which Danziger stated that he disagreed with Layton that the third arbitrator should be a New York or London lawyer; Layton had originally expressed this preference in his April 28, 1999 letter to the Tribunal. Danziger concluded in his May 27 letter to Layton that, [t]herefore, there is no doubt that we failed to reach an agreement upon the choice of the third Arbitrator. In relying on Danziger's letter, EUSA fails to appreciate that the arbitration clause required the two party-appointed arbitrators to disagree on a third arbitrator before asking the Tribunal to appoint one. However, Danziger's letter was written after Layton's letter, which was written after Danziger petitioned the Tribunal. Thus, it cannot serve as evidence that they disagreed before he approached the Tribunal. We agree with the District Court that the letter was merely an ingenious but disingenous attempt to construct a process of deliberation and deadlock after the fact. Id. at . 18 That the Tribunal ultimately stayed Decker's appointment for approximately nine months did not remedy EUSA's failure to comply with the agreement. We agree, for the reasons expressed by the District Court, that the Tribunal's premature appointment of Decker irremediably spoiled the arbitration process. Id. Once it was clear that the Tribunal would likely reappoint Decker if Danziger and Layton failed to agree on a third arbitrator, there was no incentive for Danziger to negotiate in good faith. The nine-month hiatus had no remedial effect. 19 Furthermore, contrary to EUSA's assertion, the District Court did not improperly elevate form over substance in requiring that the two arbitrators disagree before Danziger petitioned the Tribunal. While we acknowledge that there is a strong public policy in favor of international arbitration, see Compagnie Noga, 361 F.3d at 683, we have never held that courts must overlook agreed-upon arbitral procedures in deference to that policy. Indeed, as the Supreme Court has said in the related context of compelling arbitration under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., the federal policy is simply to ensure the enforceability, according to their terms, of private agreements to arbitrate. Volt Info. Scis., Inc. v. Bd. of Trs. of the Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) (emphasis added). Moreover, the issue of how the third arbitrator was to be appointed is more than a trivial matter of form. Article V(1)(d) of the New York Convention itself suggests the importance of arbitral composition, as failure to comport with an agreement's requirements for how arbitrators are selected is one of only seven grounds for refusing to enforce an arbitral award. As to the complaint that this result exalts form over substance, at the end of the day, we are left with the fact that the parties explicitly settled on a form and the New York Convention requires that their commitment be respected. 20 We thus conclude that the District Court properly refused to confirm Plaintiff's arbitral award on the grounds that the appointment of a third arbitrator was premature, and, therefore, the composition of the arbitral authority was not in accordance with the parties' agreement. See New York Convention Art. V(1)(d).