Petrol Shipping Corp. v. Kingdom of Greece, Ministry of Com.

Decision Date21 April 1966
Docket NumberDocket 29935.,No. 133,133
PartiesPetition of PETROL SHIPPING CORPORATION, as owner of TANKER ATLANTIS, Petitioner-Appellee, for an order directing The KINGDOM OF GREECE, MINISTRY OF COMMERCE, PURCHASE DIRECTORATE, Respondent-Appellant, to proceed to arbitration.
CourtU.S. Court of Appeals — Second Circuit

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Eli Ellis, New York City (Robert W. Mullen, and Hill, Betts, Yamaoka, Freehill & Longcope, New York City, on the brief), for petitioner-appellee.

Arthur M. Becker, New York City (Ronnie A. Yoder, Nixon, Mudge, Rose, Guthrie & Alexander, New York City, on the brief), for respondent-appellant.

Before LUMBARD, Chief Judge, and FRIENDLY and SMITH, Circuit Judges.

J. JOSEPH SMITH, Circuit Judge:

Respondent Kingdom appeals from an order of the United States District Court for the Southern District of New York, Wilfred Feinberg, District Judge, directing it to proceed to arbitration. We find no error and affirm the order.

Petrol Shipping, as owner of the tanker Atlantis, entered into a written charter party with respondent dated February 12, 1960, in New York City, and agreed thereby to transport grain acquired by respondent from the United States government pursuant to an agreement between the two governments. The United States was acting under the Agricultural Trade Development and Assistance Act of 1954, 7 U.S.C. 1691 et seq. The grain was to be shipped from Houston, Texas, and/or Baton Rouge, Louisiana, to Piraeus, Greece.

The shipment apparently had to be transported at least 50% by U. S. flag vessels, of which Atlantis is one. See 46 U.S.C. § 1241(b). The ship sustained bottom damage at the discharge berth in Piraeus, allegedly due to an unsafe berth, but the charterer disclaimed responsibility. The shipowner alleged damages were about $287,000.

The charter party contained the following arbitration clause:

Should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them, shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the Court. The Arbitrators shall be commercial men.

By letter of September 29, 1961 the shipowner named its arbitrator, and demanded that the charterer appoint its; a further demand was made on December 15, 1961. Although respondent said that it had advised its Foreign Trade Administration in Washington to proceed, no arbitrator was named.

On January 14, 1963 Petrol brought this petition in the District Court for the Southern District of New York, under § 4 of the United States Arbitration Act, 9 U.S.C. § 4. Service of process was allegedly effected by ordinary mail to respondent's Ministry of Trade, State Purchase Directorate, Washington; to Becker & Greenwald, described as proctors for the Directorate; and to respondent's Ministry of Commerce, Purchase Directorate, New York City.

The charterer appeared specially, and submitted a suggestion of the Greek Ambassador, that as Greece was a friendly sovereign and therefore immune, the court lacked jurisdiction. No advice from the State Department was transmitted to the court. The District Court, Judge Dawson, denied the petition to compel arbitration on February 21, 1963, on the ground of sovereign immunity.

This judgment was affirmed by a panel of this court, 326 F.2d 117 (2 Cir. 1964), with Judge Clark dissenting, and suggesting the matter should be reversed and remanded to ascertain the position of the State Department. On rehearing en banc, 332 F.2d 370 (2 Cir. 1964), per curiam, the United States Department of Justice having submitted an amicus curiae brief, the matter was remanded for further development of facts. The case was assigned to Judge Feinberg.

Before the District Court heard the case on remand, a panel of this court decided Victory Transport, Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354 (2 Cir. 1964), cert. den. 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965), a case substantially similar in its facts to the present case, holding that a branch of the Spanish Ministry of Commerce could be sued without its consent in that suit, and despite its plea of immunity.

On remand in this case, the parties entered into a stipulation in lieu of a hearing, and introduced exhibits, including the Charter Party and certain documents of correspondence with the State Department. These documents were a request by the Greek Ambassador to the State Department for recognition of immunity and a letter from counsel for petitioner to the Legal Advisor of the State Department asking that the Department decline the Ambassador's request, and citing Victory Transport; the reply of the State Department, declining to recognize any sovereign immunity in the case, on the ground that the matter was jure gestionis, and referring the Ambassador to the Tate letter; and a reply of the Legal Advisor to counsel for petitioner, noting that the Department had declined to intervene.

The District Court requested an amicus curiae brief from the United States, but the government declined, in view of the controlling nature of Victory Transport. By opinion of June 4, 1965, the court directed the Kingdom to proceed to arbitration, refusing to recognize any immunity, relying on Victory Transport. 37 F.R.D. 437 (S.D.N.Y.1965). The Kingdom appeals.

The proper theoretical approach to the issues in this case is indicated by the brief of the United States as amicus curiae in the rehearing en banc. There, at page 17, the brief states,

the immunity of sovereign did not present a "jurisdictional" defect such as improper service might. Under the Supreme Court\'s analysis in Ex Parte Republic of Peru, 318 U.S. 578 63 S.Ct. 793, 87 L.Ed. 1014 (1943), it appears that in an action against a sovereign just as in any other suit, jurisdiction must be acquired either by service of process, or by the defendant\'s appearance in court, or in rem by seizure and control of property. Only after such jurisdiction is acquired, does the sovereign immunity defense property sic come into consideration. Instead of being a "jurisdictional" matter in the same sense as acquiring jurisdiction over a person or property, sovereign immunity presents a ground for relinquishing the jurisdiction previously acquired.

The first issues, then, deal not with immunity, but rather with jurisdiction in personam and the adequacy of service.

I. Jurisdiction

In Farr & Co. v. Cia Intercontinental de Navegacion, 243 F.2d 342 (2 Cir. 1957), this court held that in a suit under the Arbitration Act, where the parties had agreed to arbitrate and that "this submission may be made a rule of court by either party," by agreeing to arbitrate in New York a party "makes himself as amenable to suit as if he were physically present in New York." 243 F.2d at 347. Farr was followed in Orion S. & T. Co. v. Eastern States Petro. Corp. of Panama, 284 F.2d 419 (2 Cir. 1960), where the contract read, "for the purpose of enforcing awards this agreement shall be made a Rule of of sic Court." Although the suit was to compel arbitration, not to enforce an award, the court concluded that as in Farr the parties were as if physically present. We conclude that this states a rule of federal law, under the Arbitration Act.

Here the contract reads, "for the purpose of enforcing any award, this agreement may be made a rule of the Court." This is not appreciably different from the Orion contract, and as was said in Victory Transport, "the fine distinction" between a submission to enforce an award and a general submission "did not trouble this court in Orion * * *. Implicit in the agreement to arbitrate is consent to enforcement of that agreement." 336 F.2d at 363, 4.

The fact that one party is a branch of a foreign sovereign does not affect the conclusion that by entering into an arbitration agreement containing a submission such as here, the sovereign becomes amenable to suit. The question of immunity does not bear on the question of amenability, or personal jurisdiction. What Farr and Orion compel is that the Kingdom be treated as if it is physically present.

Moreover, the branch of respondent being sued is actually present. The Purchase Directorate maintains an office in New York, the one served; and it negotiated the charter party in New York, perhaps at that same office. Thus no doctrine of constructive presence by consent is necessary.

II. Service

Regardless, however, of what theory makes the Purchase Directorate present, service must be adequate. Here Farr again arguably controls. Farr may be read as meaning that an arbitration agreement such as construed there gives consent to service by any method designed to give adequate notice, as well as consent to personal jurisdiction, all as a matter of federal law. In fact, however, Farr says that applicable New York law is that consent to jurisdiction includes consent to service by any method consistent with due process.

Farr was a suit against a foreign corporation. Once it was held that service was adequate under New York law, that service sufficed in federal court by virtue of Rule 4(d) (7), Federal Rules of Civil Procedure. But that provision applies only to parties described in Rule 4(d) (1) or (3), and in our view respondent is not one of them.

It is, of course, not an individual, and Rule 4(d) (1) is inapplicable. Rule 4(d) (3) is not a catch-all for categories of parties not otherwise considered in Rule 4. The only entity covered in 4(d) (3) that is remotely like respondent is "other unincorporated association which is subject to suit under a common name." Beyond a doubt, if the Purchase Directorate is subject to suit, it may be sued under a common name, because a right under the Arbitration Act is surely "a substantive...

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