Spier v. Calzaturificio Tecnica SpA

• Decision Date: 29 June 1987
• Docket Number: No. 86 Civ. 3447 (CSH).,86 Civ. 3447 (CSH).
• Citation: 663 F. Supp. 871
• Parties: I. Martin SPIER, Petitioner, v. CALZATURIFICIO TECNICA S.p.A., Respondent.
• Court: U.S. District Court — Southern District of New York

663 F. Supp. 871

I. Martin SPIER, Petitioner, v. CALZATURIFICIO TECNICA S.p.A., Respondent.

No. 86 Civ. 3447 (CSH).

United States District Court, S.D. New York.

June 29, 1987.

Pavia & Harcourt, New York City (David A. Botwinik, David G. Glasser, of counsel), for petitioner.

Holtzmann, Wise & Shepard, New York City (R. Nicholas Gimbel, Kathy Dutton Helmer, Paula C. Dicks, of counsel), for respondent.

MEMORANDUM OPINION

HAIGHT, District Judge:

This is a petition to enforce an arbitration award rendered in Italy. Respondent cross-moves to dismiss the petition, or in the alternative to stay decision pending resolution of respondent's challenges to the award in the Italian courts. Subject matter jurisdiction derives from the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517, TIAS 6997 (1970) (the "Convention")¹, implemented by 9 U.S.C. §§ 201-208. Respondent does not contest the venue.

I.

Petitioner I. Martin Spier is an engineer and citizen of the United States, resident in New York City. Respondent Calzaturificio Tecnica, S.p.A. ("Tecnica") is an Italian corporation headquartered in Treviso, Italy. In 1969 Spier and Tecnica entered into a written contract in which Spier agreed to furnish Tecnica with expertise for the manufacture of plastic footwear and ski boots, in exchange for the payment of certain fees by Tecnica. The contract contained a provision providing for the resolution of disputes by a panel of three arbitrators in Italy.

Disputes arose. After protracted proceedings, on October 15, 1985 the arbitrators rendered a unanimous award in Spier's favor. The award directed Tecnica to pay Spier one billion Italian Lire, the equivalent at the time of filing of the present petition of U.S. $672,043, plus interest at the rate of 15% from January 1, 1985.

Tecnica has not paid that award. Instead, on November 20, 1985 Tecnica commenced litigation in an Italian court in Treviso to challenge the validity of the award. Spier has not appeared in the Italian action. Instead, he filed the captioned petition in this Court on June 23 1986. Tecnica then filed the cross-motion summarized above. Both sides have submitted voluminous affidavits of counsel which attach as exhibits the texts of Italian statutes, decisions of Italian and German courts, and law journal articles.

II.

9 U.S.C. § 203 gives the district courts of the United States subject matter jurisdiction over an "action or proceeding falling under the Convention ..." Section 207 provides:

"Within three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The 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."

The "grounds for refusal or deferral of recognition or enforcement" of an award falling under the Convention, incorporated by reference in the last sentence of § 207, appear in articles V and VI of the Convention, set forth in a note following 9 U.S.C. § 201. The following provisions are pertinent to the case at bar:

"Article V

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or ...

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contain decisions on matters submitted to arbitration may be recognized and enforced; or ...

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

* * * * * *

Article VI

If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security."

III.

Tecnica cross-moves to dismiss Spier's petition on several grounds.

First, Tecnica contends that under Italian law the form of arbitration agreed to by the parties does not give rise to a binding arbitral award of the sort entitled to enforcement by summary proceedings under the Convention. Tecnica bases that argument upon Article V(1)(e) of the Convention.

Second, Tecnica contends that the entire contract between the parties, including its arbitration clause, is invalid because it violated an Italian currency exchange statute requiring prior governmental approval of such transactions between Italian and foreign residents. In that regard, Tecnica relies upon Article V(1)(e) of the Convention.

Third, Tecnica contends that the arbitrators exceeded their proper functions, in violation of Article V(1)(c) of the Convention.

In its challenge to the award before the Italian court, Tecnica makes arguments comparable to and proceeding from the second and third contentions in support of its cross-motion here.

In those circumstances, Tecnica asks in the alternative that this Court stay its decision on the cross-motions until the Italian courts have adjudicated Tecnica's challenges to the award. In that regard Tecnica relies upon Article VI.

IV.

The issue of whether the Italian arbitrators' award in this case falls within the Convention as an enforceable award implicates the distinction in Italian law between different kinds of arbitration. Specifically, Tecnica's Italian counsel, Professors Giorgio Bernini and Domenico Borghesi, distinguish in their affidavits between "arbitrato rituale", or "procedural arbitration", and "arbitrato irrituale", or "contractual arbitration." The case for Tecnica is that whereas an "arbitrato rituale" gives rise to an award challengeable in the Italian courts only on the most limited grounds, an "arbitrato irrituale" results only in "what is considered as a contract to which the parties have agreed", and is accordingly subject under Italian law to a much wider range of defenses.

Tecnica argues at bar that the arbitration procedure contained in its contract with Spier constitutes an "arbitrato irrituale." As such, Tecnica argues, the arbitration proceedings under the contract did not give rise to an "award" which is "binding" within the meaning of Article V(1)(e) of the Convention.

To the extent that I comprehend these relatively esoteric concepts, it would appear that the parties agree that they participated in an "arbitrato irrituale." The bone of contention is whether the award generated by such a procedure is a binding award entitled to enforcement under the Convention.

On that issue, Tecnica has submitted declarations of its Italian counsel; a sworn statement of Professor Pieter Sanders of the Netherlands, a principal draftsman of the Convention; a 1979 Opinion of the Secretary General of the United Nations; a number of Italian court decisions; and a decision rendered by the Bundesgerichtshof of the Federal Republic of Germany on October 8, 1981, which Tecnica says is the "only case which has considered the effect of arbitrato irrituale conducted in Italy under the ... Convention", main brief at 24. That case does indeed to say that an "irrituale" award made under Italian law does not fall within the Convention. And Professor Sanders states in his declaration at 8-9:

"The purpose of the New York Convention was and is to facilitate recognition and enforcement of foreign arbitral awards in the proper sense.... The introduction of the term "binding" was certainly not intended to open the door for arbitrato irrituale or similar alternative methods of private settlement, which are not supported by the same statutory guarantees for proper proceedings as is the case for arbitration."

On the other hand, Spier cites and proffers translations of a number of Italian court decisions which appear to characterize an arbitrato irrituale as falling under the Convention. Reply brief at 6-7; exhibits to Glasser affidavit. One of these, the judgment of Italy's Supreme Court (the "Corte Di Cassazione"), decided on September 18, 1978, No. 4167, was described thus by Professor Bernini himself in a recent article: "the Supreme Court of Cassation went so far as to explicitly hold that even arbitrato irrituale falls with sic; no doubt should be "within" the scope of the New York Convention." Bernini, Domestic and International Arbitration in Italy after the Legislative Reform, 5 Pace Law Review, 543, 554 (1985). Bernini goes on in that article to describe the effect of 1983 Italian legislation upon the distinction between procedural and contractual or "free" arbitration in Italy.

As for Tecnica's second claim, that the underlying contract between the parties is invalid under Italian laws of currency regulation, the parties again exchange contentions whose proper resolution depends upon first comprehension,...