Rhone Mediterranee Compagnia Francese v. Lauro

• Decision Date: 04 October 1982
• Docket Number: Civ. No. 81-116.
• Citation: 555 F. Supp. 481
• Parties: RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZIONI, Plaintiff, v. Achille LAURO, et al., Defendants.
• Court: U.S. District Court — Virgin Islands

555 F. Supp. 481

RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZIONI, Plaintiff, v. Achille LAURO, et al., Defendants.

Civ. No. 81-116.

District Court, Virgin Islands, D. St. Thomas and St. John.

October 4, 1982.

John Short, Dudley, Dudley & Topper, Charlotte Amalie, St. Thomas, V.I., for plaintiff.

Thomas D. Ireland, Charlotte Amalie, St. Thomas, V.I., for defendants.

MEMORANDUM AND ORDER

CHRISTIAN, Chief Judge.

Before the Court is the motion of the defendants to dismiss the amended complaint and for an order directing the plaintiff to arbitrate the instant controversy in Napoli, Italy. The motion will be granted in part and denied in part.

I. Facts

The relevant facts of this cause are as follows. On March 30, 1979, the vessel "Angelina Lauro" caught fire and burned while tied up at the dock of the West Indian Co., Ltd. in Charlotte Amalie, St. Thomas, U.S. Virgin Islands. The fire resulted in a total loss of the vessel. The "Angelina Lauro" was allegedly owned by an Italian citizen, defendant Achille Lauro, who is doing business under the name of Achille Lauro-Armatore, a/k/a Flotta Lauro, a/k/a Lauro Lines (hereinafter "Achille Lauro"), and by defendant X Company, an unknown corporation, partnership, joint venture, trust and/or other business entity which may have owned all or part of the vessel. All business addresses of defendant Achille Lauro are in Italy.

On the date of the fire, the ship was under time-charter to Costa Armatori S.P.A. (hereinafter "Costa") an Italian corporation, whose principal place of business is in Genoa, Italy. Costa lost property and fuel in the fire which was worth at least 910 million liras (over $1 million). Costa was reimbursed for its losses by its insurer, plaintiff Rhone Mediterranee Compagnia Francese di Assicurazioni e Riassicurazioni (hereinafter "Rhone"), an Italian insurance company.

Rhone filed this law suit, as subrogee of Costa, to recover the payments it made to its insured. Rhone alleges that the fire was caused by the unseaworthy condition of the vessel "Angelino Lauro," and/or by the negligence of the employees and/or agents of defendant Achille Lauro and X Company, and/or by the negligence of defendant Antonio Scotto di Carlo, an Italian citizen, who was the master and/or captain of the "Angelino Lauro" on March 30, 1979, and who was the agent of Achille Lauro and/or X Company. Plaintiff also contends that defendants breached the time-charter agreement with Costa.

Defendants Achille Lauro and Antonio Scotto di Carlo have filed a motion to dismiss the amended complaint because they contend that the plaintiff is required to arbitrate this dispute in Napoli, Italy. They note that plaintiff's claim is derived from the rights of its insured, Costa, and that Costa agreed to arbitrate all disputes arising out of the charter of the "Angelino Lauro," pursuant to a time charter agreement, dated January 22, 1977, that it entered into with Achille Lauro-Armatore. The relevant portions of the agreement are as follows:

"23. Arbitration

Any dispute arising under the charter to be referred to arbitration in London (or such other place as may be agreed according to box 24) one Arbitrator to be nominated by the Owners and the other by the Charterers, and in case the Arbitrators shall not agree then to the decision of an Umpire to be appointed by them, the award of the Arbitrators or the Umpire to be final and binding upon both parties."

"Box 24

Place of arbitration (only to be filled in if place other than London agreed) (Cl.23)

NAPOLI"

The plaintiff does not contest the fact that Costa entered into an agreement with the foregoing clause, or that the plaintiff is bound to arbitrate the action if Costa would have been so bound. Plaintiff has opposed defendant's motion on the grounds that the agreement to arbitrate is null and void under Italian law and therefore need not be complied with. Plaintiff further argues that even if it is compelled to arbitrate, this action should not be dismissed, but merely stayed during the pendency of the arbitration. Finally, plaintiff notes that even if it is required to arbitrate its claim against Achille Lauro, its claim against defendant Antonio Scotto di Carlo should be allowed to proceed to trial because Mr. di Carlo was not a party to the time-charter agreement. Further, plaintiff argues that this Court is not required to dismiss its claim against Mr. di Carlo under the doctrine of forum non conveniens. We will treat each of the foregoing points in turn.

II. Federal Law Determines the Enforceability of the Arbitration Provision

The arbitration provision at issue is contained in a maritime contract between two foreign citizens (from Italy), and therefore the mandates of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (hereinafter "Convention") must be followed by this Court.¹ Article II of the convention which contains the provisions relevant to this dispute, states the following:

"1. Each Contracting State shall recognize an agreement the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.

3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed."

In sum, the Convention states that this Court must refer Achille Lauro and Rhone (as subrogee of Costa) to arbitration, pursuant to the terms of the time-charter agreement, unless the agreement to arbitrate is "null and void, inoperative or incapable of being performed." However, the Convention does not specify which nations' law should be utilized when determining whether the agreement to arbitrate is valid. See discussion in 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, 1064 (1961); Matter of Ferrara S.p.A., 441 F.Supp. 778, 780-81 at n. 2 (S.D. N.Y.1977).

Although the Convention is silent on this issue, the United States Court of Appeals for the Third Circuit has issued a pertinent ruling which we are bound to follow. In Becker Autoradio v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3rd Cir.1978), the appellate court was asked to rule whether a West German corporation and a Pennsylvania corporation should be required to arbitrate their contract dispute. The arbitration clause at issue read as follows:

"The Arbitration Court domiciled in Karlsruhe Federal Republic of Germany shall have sole jurisdiction with regard to all disputes arising out of and about this agreement. The Arbitration Court shall determine its procedures according to the Rules of Procedure of the International Chamber of Commerce, Paris. The arbitral award shall have the effect, with respect to the parties, of a legally valid court judgment."

Becker, supra, at 42. In deciding the question before it, the Third Circuit stated,

"There has been much discussion by the parties concerning the applicability of German law or Pennsylvania law in the resolution of this dispute. It may well be that the question of which law is to be applied will have to be answered in deciding the merits of the underlying controversy. However, the case before us presents only the issue of the arbitrability of that controversy when a contract involves `commerce,' as this one does, whether as `suit proceeding is referable to arbitration ... under an agreement to arbitrate' pursuant to ... or to the Convention on Recognition and Enforcement of Foreign Arbitral Awards ... is clearly a matter of federal substantive law. Thus, the question of whether, in contracts involving commerce, there is an agreement to arbitrate an issue or dispute upon which suit has been brought is governed by federal law. Concomitantly, questions of interpretation and construction of such arbitration agreements are similarly to be determined by reference to federal law.... numerous citations omitted As the court in Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1211 (2nd Cir.1972), stated, `once a dispute is covered by the federal Arbitration Act, federal law applies to all questions of the arbitration agreement's interpretation, construction validity, revocability, and enforceability.'"

Becker, supra at 43 (emphasis added). Thus, the Third Circuit's position is that normal conflicts of law rules should not be used to determine which law should govern the validity of an arbitration clause, when the parties are subject to the dictates of the Convention. Neither the law of a foreign country, or the law of a particular state (or territory) can ever be chosen — only federal law is controlling.

This approach was explained further in Matter of Ferrara, supra. First, the district court noted that "since this court's jurisdiction over these actions is conferred by Chapter 2 of the Federal Arbitration Act² ... it would seem that the enforceability of the arbitration clause at issue must be determined in accordance with federal law, i.e., generally accepted principles of contract law," at 780. It then explained that this rule appears to be in accord with the scheme set up by the Convention. "Article II of the Convention does not indicate which law is to govern enforceability of an arbitral agreement, but it appears that the drafters intended to impose on the ratifying states a `broad undertaking' to give effect to such...