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KONSTANTINIDIS v. S. S. TARSUS

May 20, 1965

Andrew KONSTANTINIDIS, Libellant,
v.
S. S. TARSUS, her engines, boilers, etc. and against Denizcilik Bankasi T.A.O., in a cause of contract civil and maritime, Respondent


McLean, District Judge.


The opinion of the court was delivered by: MCLEAN

MCLEAN, District Judge.

On June 16, 1961, libellant filed a libel in this court seeking damages in the amount of $1,660,000 for alleged breach of a charter party, dated September 1, 1959 and signed September 29, 1959, between respondent, a Turkish banking corporation, owner of the S.S. Tarsus, and libellant, a Turkish citizen, charterer of the vessel. The charter party was made in Turkey. It contained an arbitration clause providing for arbitration in Turkey of any dispute arising under it. The clause further provided that the Turkish laws should apply to the determination of the dispute.

 On September 19, 1961, Judge MacMahon signed an order staying all proceedings "relating to the trial of this action" until "the arbitration has been had in accordance with the terms of the charter party * * *." The stay is still in effect.

 When the libel was filed, a writ of attachment was issued and served upon several New York banks in which respondent had accounts, thereby attaching respondent's property in the amount of $1,660,000. By order dated July 26, 1962, Judge Metzner directed that the attachment be released upon the posting by respondent of a bond in the sum of $250,000. The bond was posted and the attachment was released. Judge Metzner's order was affirmed by the Court of Appeals on August 30, 1962. Konstantinidis v. Denizcilik Bankasi T.A.O., 307 F.2d 584 (2d Cir. 1962). The bond is still in effect.

 Respondent now moves to dismiss the libel, and for an order pursuant to Admiralty Rule 8 terminating the security, on the ground that the arbitration has been had, that an award of the Turkish arbitrators in favor of libellant has been confirmed by the Turkish courts and paid by respondent, and that the controversy is therefore ended. In substance, respondent claims that because of these events occurring subsequent to the filing of the libel, the controversy has become moot and there is now nothing for this court to decide.

 Respondent's claim of payment is based upon the contention that it paid the award, which was computed in Turkish liras, by depositing the amount of the award, less certain deductions, to the credit of libellant in the Central Bank of Turkey. At the time of the arbitration and of the award and the alleged payment, libellant was no longer in Turkey, but was residing in New York.

 Voluminous affidavits and exhibits were submitted in support of and in opposition to respondent's motion, bristling with contradictory assertions as to the Turkish law and procedure. Libellant also claimed that respondent had bribed the Turkish arbitrators, and that in any event, the award was not yet final in Turkey despite several unsuccessful applications on his part to the Turkish courts to overturn it. I was of the opinion that questions of fact were raised which could not be determined upon affidavits. Accordingly, by memorandum dated December 18, 1964, I directed that a hearing be held on January 21, 1965, for the purpose of taking testimony on three issues: (1) whether payment by respondent to the Central Bank of Turkey constituted a valid payment and discharge under Turkish law, (2) whether, if so, the amount so paid by respondent was correct, and (3) whether the award was final under Turkish law.

 A hearing was duly held and extensive testimony was taken. Although language difficulties, both with the witnesses and the documents, were not inconsiderable, I am satisfied, after seeing and hearing the witnesses and studying the documents, that the evidence is adequate to reveal the true factual situation. On the basis of the evidence adduced at the hearing, and also upon such of the material in the affidavits as is not disputed, I find the facts to be as follows: *fn1"

 In 1961, pursuant to the charter party, each of the parties appointed an arbitrator to conduct the arbitration in Turkey of this controversy consisting of libellant's claims and certain counterclaims interposed by respondent. Each party was represented by counsel. The proceedings commenced in November 1961. In June 1962 the two arbitrators concluded that they were unable to agree. Thereupon, pursuant to the charter party, they applied to the Fourth Commercial Court of Istanbul to appoint a third arbitrator. The court appointed the President of the Second Commercial Court. Libellant, through his Turkish attorney, consented to this. The three arbitrators continued their deliberations until December 28, 1962, when they announced to counsel for the respective parties that their decision of the case would be pronounced on January 7, 1963.

 On January 7, 1963, the arbitrators met, together with counsel, for that purpose. The arbitrators then advised counsel that they had received a telegram from libellant sent from New York on January 5, 1963, and received by them on January 7, 1963, advising the arbitrators that libellant had dismissed his counsel and asserting that there was nobody to represent him and that accordingly, the arbitrators no longer had "jurisdictional authority." Libellant's counsel stated that he had not received any notice of his dismissal, but that in view of this telegram he would leave the meeting.

 The arbitrators decided that this action of libellant was ineffective to deprive them of jurisdiction or to require the postponement of the announcement of their decision on this matter which had been under advisement for more than a year. Consequently, they proceeded to announce a summary of their award. It sustained libellant's claim in part, sustained respondent's counterclaim in part, and provided that the arbitrators', clerk's and lawyers' fees be borne by the parties "in proportion with justified and unjustified amounts."

 The detailed award, in complete text, was published by the arbitrators shortly thereafter, dated as of January 7, 1963. It set forth their reasons for their decision in some 24 pages. It awarded to libellant TL [Turkish Liras] 1,350,000 on his claim, TL 1,130,000 of which was to bear interest at 10 per cent from November 9, 1961. It awarded to respondent TL 40,000 on its counterclaim, to bear interest at 10 per cent from January 12, 1962. As to attorneys' fees, it directed respondent to pay to libellant his attorneys' fees in the amount of TL 70,380, and directed libellant to pay to respondent its attorneys' fees in the amount of TL 322,596.50. It directed that the fees of arbitrators and clerks and expenses of the arbitration aggregating TL 347,523.25 be paid one-fourth by respondent and three-fourths by libellant. It made the same division with respect to any court expenses to be incurred subsequently.

 An authenticated copy of the award was sent to the Turkish Consul in New York for service upon libellant. On April 15, 1963, the Consul requested libellant to call at the Consulate to receive service. Libellant declined to do so, and instead engaged in correspondence with the Consul. He demanded that the award be served upon his present attorney in New York. The Consul declined to do so on the ground that this attorney had not appeared in the arbitration proceedings in Turkey and was not of record there as libellant's attorney in those proceedings. This attorney finally obtained a copy of the award from the Consul in August 1963, but by that time libellant's time to appeal from the award on the merits, under Turkish law, had long since expired.

 On July 8, 1963, the Third Commercial Court of Istanbul, on respondent's application, "certified" the award, thereby making it legally enforceable in Turkey. Libellant meanwhile embarked upon a series of applications to the Turkish courts and appeals from unfavorable decisions which continued for more than a year. His attempts to upset the award and the certification thereof may be summarized as follows:

 On September 10, 1963, he petitioned the Turkish Court of Appeal (Commercial Chamber) for permission to appeal from the arbitration award. On October 21, 1963 the Court took note of libellant's actions in dismissing his attorney and in refusing to accept service of the award in New York and held that "the alloted period for appeal has expired." The permission to appeal was therefore denied "on grounds of prescription."

 Nothing further occurred until April 1, 1964, when a new Turkish attorney for libellant, Mr. Osman Dervis Kuntman, obtained from the Commercial Court a copy of the arbitration award. On or about April 9, 1964, he petitioned the Court of Appeal in libellant's behalf for a reconsideration of the October 21, 1963 decision. On May 23, 1964, the Court of Appeal rejected this petition stating that "no necessity existed to reconsider the case, since a Court decision ...


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