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ANTCO SHIPPING CO. v. SIDERMAR S. P. A.

June 28, 1976

Application of ANTCO SHIPPING COMPANY, LIMITED, Petitioner,
v.
SIDERMAR S. p. A., Respondent. For an Order and Judgment pursuant to Article 75, CPLR staying a certain proposed arbitration. In the Matter of the arbitration between SIDERMAR S. p. A., Cross-Petitioner, and ANTCO SHIPPING COMPANY, LIMITED and New England Petroleum Corporation, Cross-Respondents



The opinion of the court was delivered by: HAIGHT

MEMORANDUM

 HAIGHT, District Judge:

 Antco Shipping Company, Limited ("Antco") petitioned the New York State Supreme Court for a stay of arbitration proceedings demanded by Sidermar S.p.A. ("Sidermar"). Sidermar removed the proceeding to this Court, and cross-petitioned for an order directing Antco to proceed to arbitration. In its cross-petition, Sidermar also prays that New England Petroleum Corporation ("Nepco"), as alleged guarantor of Antco's pertinent contractual obligations, be directed to arbitrate with Sidermar. Sidermar's cross-petition is predicated upon the United States Arbitration Act, 9 U.S.C. §§ 1, 4 and 206.

 The Court denies Antco's petition for a stay of arbitration, and grants Sidermar's cross-petition for an order directing a consolidated arbitration between Sidermar, Antco and Nepco.

 The Contract

 The case arises out of a contract of affreightment dated as of February 13, 1973 between Sidermar, as owner of unnamed vessels, and Antco as charterer. Part "A" of the contract covered a period of one year, commencing August 1/October 31, 1973, and called for the ocean carriage of 500,000 tons of crude oil. Part "B" was for a period of five years, commencing April/July 1974, and called for the ocean carriage of 1,100,000 tons of crude oil per year. *fn1"

 Parts "A" and "B" of the contract both provide, in respect of loading and discharging ports, as follows:

 
"ARTICLE 4
 
"Loading One (1) or two (2) safe port (s) Mediterranean Sea, excluding Israel, or in case of necessity, at Charterer's option, (1) one or two (2) safe port (s) Nigeria.
 
If two load ports used, such ports to be in rotation East/West. However if a mandatory situation should arise Owner to agree to a rotation out of this order with a mutually agreed compensation so as to keep Owner whole.
 
"ARTICLE 5
 
"Discharging One (1) or two (2) safe port (s) Bahamas or other Caribbean port (s) excluding Cuba, or at Charterer's option one (1) or two (2) safe port (s) United States Atlantic Coast." (emphasis added).

 Each part also provided, in Article 9, as follows:

 
"Owners shall supply Charterers forty-five (45) days prior to each quarterly period, a tentative schedule of lifting dates and quantities for that period. It is understood that Owners intention is to perform this contract with combined carriers which will load dry cargoes for their own account as back-haul voyage to Mediterranean. The dry cargo trade could involve delays at loading and discharging ports as well as lack of cargoes and same would compel Owners to divert the ships to other loading ports. For all the above considerations Owners deem it would be very difficult to give Charterers exact scheduling. They can only undertake to keep Charterers continuously posted of vessel's position." (emphasis added).

 The voyages called for by Part "A" of the contract were performed. *fn2" One lifting of cargo took place under Part "B", the M/T MARCUS LOLLIGHETTI loading 1,024,624 barrels of fuel oil at Libyan ports in June, 1974 for carriage to Freeport, Bahamas. Antco then totally ceased performance of the contract. *fn3"

 Sidermar, claiming a breach of contract by Antco, demanded arbitration with Antco and Nepco as the latter's guarantor. The contract provides for arbitration. Parts "A" and "B" both provide, in Article 22:

 
"The provisions of Part II of the Essovoy (1969) form of Charter attached hereto are incorporated in this Contract by reference and shall apply to each voyage. Wherever there shall be any conflict between the Contract and the Essovoy (1969) form, the Contract shall govern."

 Article 23 provides:

 
"If arbitration becomes necessary under Clause 24 of Essovoy (1969) such arbitration shall be held in New York, New York."

 Clause 24 of the printed Essovoy (1969) form, attached to the contract, provides in pertinent part:

 
"Arbitration. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Part I of this charter pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen. The decision of any two of the three on any point or points shall be final. Either party hereto may call for such arbitration by service upon any officer of the other, wherever he may be found, of a written notice specifying the name and address of the arbitrator chosen by the first moving party and a brief description of the disputes or differences which such party desires to put to arbitration. * * *"

 By separate letters dated April 19, 1976, Sidermar named Franklin G. Hunt, Esq., as its arbitrator, and demanded that both Antco and Nepco, its corporate parent, arbitrate Sidermar's claim for approximately $14,000,000 arising out of Antco's breach and repudiation of the contract. The claim against Nepco is founded upon a written guarantee given by Nepco under date of November 1, 1973, which is addressed to Sidermar and reads:

 
"In the event that Antco Shipping Company Ltd. ("ANTCO"), a Bahamian corporation, fails to perform its duties and obligations as Charterers, under the Contract of Affreightment (Part "A" and Part "B") dated February 13, 1973 between Sidemar S.P.A. [sic] as owners and Antco as Charterers, then New England Petroleum Corporation hereby guarantees to fulfill and perform any and all legal obligations that Antco may be liable for as Charterers under said Contract of Affreightment."

 Antco's Petition for a Stay of Arbitration

 Antco contends that the entire contract of affreightment, including the arbitration clause, is illegal and unenforceable because it contravenes the public policy of the United States and the State of New York. Consequently, the argument runs, either party could with impunity cease performance of this illegal contract at any time it chose, leaving the other party with no remedy that the law will enforce.

 Sidermar denies any illegality, and appeals to that public policy of the United States which encourages and enforces international arbitration agreements.

 Antco's charge of illegality is based upon the provision in Article 4 of the contract "excluding Israel" from Mediterranean loading ports. Antco characterizes that provision as a boycott or blacklist of Israel, a nation friendly to the United States.

 An expression of public policy condemning this boycott is said to be found in the Export Administration Act of 1969, 50 U.S. C.App. §§ 2401-2413. That statute took effect upon the expiration of the Export Control Act of 1949, 50 U.S.C.App. §§ 2021-2032.

 Section 3 of the 1969 Act, 50 U.S.C.App. § 2402, sets forth the "Congressional declaration of policy" underlying the statute. Antco places particular reliance upon § 2402(5), which reads in part:

 
"It is the policy of the United States (A) to oppose restrictive trade practices or boycotts fostered or imposed by foreign countries against other ...

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