Bergesen v. Joseph Muller Corp.

• Decision Date: 17 June 1983
• Docket Number: D,No. 951,951
• Citation: 710 F.2d 928
• Parties: Sigval BERGESEN, as Owners of the M/T SYDFONN, FROSTFONN and NORDFONN, Petitioner-Appellee, v. JOSEPH MULLER CORPORATION, Respondent-Appellant. ocket 82-7880.
• Court: U.S. Court of Appeals — Second Circuit

Page 928

710 F.2d 928

Sigval BERGESEN, as Owners of the M/T SYDFONN, FROSTFONN and NORDFONN, Petitioner-Appellee, v. JOSEPH MULLER CORPORATION, Respondent-Appellant.

No. 951, Docket 82-7880.

United States Court of Appeals, Second Circuit.

Argued Feb. 28, 1983.

Decided June 17, 1983.

Michael R. Sonberg, New York City (Michael T. Sullivan, Moore, Berson, Lifflander & Mewhinney, New York City, of counsel), for respondent-appellant.

Elisa M. Pugliese, Raymond A. Connell, Healy & Baillie, New York City, for petitioner-appellee.

Before FEINBERG, Chief Judge, and CARDAMONE and PIERCE, Circuit Judges.

CARDAMONE, Circuit Judge:

The question before us on this appeal is whether the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.S. 38, is applicable to an award arising from an arbitration held in New York between two foreign entities. Responding to the rapid expansion of international trade following World War II, the Convention reflects the efforts of businessmen involved in such trade to provide a workable mechanism for the swift resolution of their day-to-day disputes. International merchants often prefer arbitration over litigation because it is faster, less expensive and more flexible. But previous international agreements had not proved effective in securing enforcement of arbitral awards; nor had private arbitration through the American Arbitration Association, the International Chamber of Commerce, the London Court of Arbitration and the like been completely satisfactory because of problems in enforcing awards. See generally Pisar, The United Nations Convention on Foreign Arbitral Awards, 33 S.Cal.L.Rev. 14 (1959) (Pisar); Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1051 (1961) (Quigley).

In 1958, a convention was called to deal with these problems. The United States attended and participated in the conference but did not sign the Convention. Ten years later, in 1968, the Senate gave its consent, but accession was delayed until 1970 in order for Congress to enact the necessary implementing legislation. See McMahon, Implementation of the United Nations Convention on Foreign Arbitral Awards in the United States, 2 J.Mar.L.Com. 735, 737 (1971) (McMahon). There was no opposition to the proposed legislation, H.R.Rep. No. 91-1181, 91st Cong., 2d Sess. 2, reprinted in 1970 U.S.Code Cong. & Ad.News 3601, 3602, which became 9 U.S.C. Secs. 201-208 (1976).

In resolving the question presented on this appeal, we are faced with the difficult task of construing the Convention. The family of nations has endlessly--some say since the Tower of Babel--sought to breach the barrier of language. As illustrated by the proceedings at this conference, the delegates had to comprehend concepts familiar in one state that had no counterpart in others and to compromise entrenched and differing national commercial interests. Concededly, 45 nations cannot be expected to produce a document with the clear precision of a mathematical formula. Faced with the formidable obstacles to agreement, the wonder is that there is a Convention at all, much less one that is serviceable and enforceable. Yet, the proposals agreed upon in the Convention have not raised the kinds of legal questions that a commentator reported one of the delegates feared would be the joy of jurists, but the bane of plaintiffs, see Contini, International Commercial Arbitration, 8 Am.J.Comp.L. 283, 293 (1959) (Contini).

I

The facts are undisputed and may be briefly stated. Sigval Bergesen, a Norwegian shipowner, and Joseph Muller Corporation, a Swiss company, entered into three charter parties in 1969, 1970 and 1971. The 1969 and 1970 charters provided for the transportation of chemicals from the United States to Europe. The 1971 charter concerned the transportation of propylene from the Netherlands to Puerto Rico. Each charter party contained an arbitration clause providing for arbitration in New York, and the Chairman of the American Arbitration Association was given authority to resolve disputes in connection with the appointment of arbitrators.

In 1972, after disputes had arisen during the course of performing the 1970 and 1971 charters, Bergesen made a demand for arbitration of its claims for demurrage and shifting and port expenses. Muller denied liability and asserted counterclaims. The initial panel of arbitrators chosen by the parties was dissolved because of Muller's objections and a second panel was selected through the offices of the American Arbitration Association. This panel held hearings in 1976 and 1977 and rendered a written decision on December 14, 1978. It decided in favor of Bergesen, rejecting all of Muller's counterclaims save one. The net award to Bergesen was $61,406.09 with interest.

Bergesen then sought enforcement of its award in Switzerland where Muller was based. For over two years Muller successfully resisted enforcement. On December 10, 1981, shortly before the expiration of the three-year limitations period provided in 9 U.S.C. Sec. 207, Bergesen filed a petition in the United States District Court for the Southern District of New York to confirm the arbitration award. In a decision dated October 7, 1982 and reported at 548 F.Supp. 650 (S.D.N.Y.1982), District Judge Charles S. Haight, Jr. confirmed Bergesen's award, holding that the Convention applied to arbitration awards rendered in the United States involving foreign interests. Judgment was entered awarding Bergesen $61,406.09, plus interest of $18,762.01. Additionally, Bergesen received $8,462.00 for Muller's share of arbitrators' fees and expenses which it had previously paid, together with interest of $2,253.63 on that amount.

On appeal from this $90,883.73 judgment, Muller contends that the Convention does not cover enforcement of the arbitration award made in the United States because it was neither territorially a "foreign" award nor an award "not considered as domestic" within the meaning of the Convention. Muller also claims that the reservations adopted by the United States in its accession to the Convention narrowed the scope of its application so as to exclude enforcement of this award in United States courts, that the statute implementing the treaty was not intended to cover awards rendered within the United States, and finally, that Bergesen's petition to obtain enforcement was technically insufficient under the applicable requirements of the Convention.

II

Whether the Convention applies to a commercial arbitration award rendered in the United States is a question previously posed but left unresolved in this Court. See Andros Compania Maritima, S.A. v. Marc Rich & Co., A.G., 579 F.2d 691, 699 n. 11 (2d Cir.1978); I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424, 426 n. 2 (2d Cir.1974). The two district courts that have addressed the issue have reached opposite conclusions, with little in the way of analysis. Compare Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co., A.G., 480 F.Supp. 352, 353 (S.D.N.Y.) (Haight, J.) (finding the Convention applicable), aff'd mem., 614 F.2d 1291 (2d Cir.1979), cert. denied, 445 U.S. 930, 100 S.Ct. 1318, 63 L.Ed.2d 763 (1980) with Diapulse Corporation of America v. Carba, Ltd., No. 78 Civ. 3263 (S.D.N.Y. June 28, 1979) (Broderick, J.) (Convention did not apply "by its terms"), remanded on other grounds, 626 F.2d 1108 (2d Cir.1980). The facts of the instant case make it necessary to resolve what this Court earlier termed an "intriguing" issue, see Andros Compania Maritima, S.A., 579 F.2d at 699 n. 11.

To resolve that issue we turn first to the Convention's history. Under the auspices of the United Nations, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards was convened in New York City in 1958 to resolve difficulties created by two earlier treaties--the 1923 Geneva Protocol on Arbitration Clauses, 27 L.N.T.S. 157 (1924), and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, 92 L.N.T.S. 301 (1929). Because of the legal and practical difficulties which arose from application of these earlier treaties, ¹ one commentator wrote "The formidable amount of highly qualified labor which went into their preparation has not been rewarded by any perceptible progress in international commercial arbitration." Nussbaum, Treaties on Commercial Arbitration--A Test of International Private-Law Legislation, 56 Harv.L.Rev. 219, 236 (1942).

A proposed draft of the 1958 Convention which was to govern the enforcement of foreign arbitral awards stated that it was to apply to arbitration awards rendered in a country other than the state where enforcement was sought. See G. Haight, Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1 (1958) (Haight). This proposal was controversial because the delegates were divided on whether it defined adequately what constituted a foreign award. On one side were ranged the countries of western Europe accustomed to civil law concepts; on the other side were the eastern European states and the common law nations. Contini at 292. For example, several countries, including France, Italy and West Germany, objected to the proposal on the ground that a territorial criterion was not adequate to establish whether an award was foreign or domestic. These nations believed that the nationality of the parties, the subject of the dispute and the rules of arbitral procedure were factors to be taken into account in determining whether an award was foreign. Id.; Haight at 2. In both France and West Germany, for example, the nationality of an award was determined by the law governing the procedure. Thus, an award rendered in London under German law was considered domestic when enforcement was attempted in Germany, and an award rendered in Paris under foreign law was...