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SUMITOMO CORP. v. PARAKOPI COMPANIA MARITIMA

October 12, 1979

In the Matter of the Arbitration between SUMITOMO CORPORATION, and OSHIMA SHIPBUILDING CO., LTD., Petitioners, against PARAKOPI COMPANIA MARITIMA, S.A., Respondent.


The opinion of the court was delivered by: WERKER

Petitioners Sumitomo Corporation ("Sumitomo") and Oshima Shipbuilding Co., Ltd. ("Oshima") commenced this action against respondent Parakopi Compania Maritima, S.A. ("Parakopi") for an order compelling Parakopi to proceed to arbitration and appointing a third arbitrator.

BACKGROUND

The principal facts are not in dispute.

 Sumitomo and Oshima are corporations organized and existing under the laws of Japan. Sumitomo has its principal place of business in Tokyo, Japan, and Oshima has its principal place of business in Nagasaki, Japan. Parakopi is incorporated in Panama, and has its principal place of business in Piraeus, Greece.

 In September 1975, Sumitomo and Parakopi entered into a contract whereby Sumitomo agreed to construct for and sell to Parakopi a bulk carrier. *fn1" Oshima, as the builder, agreed to be bound by all the terms and conditions of the contract applicable to it.

 Section 1 of Article XIV of the purchase agreement provides for the resolution of all non-technical disputes by arbitration in New York:

 
Should any dispute arise between the parties in regard to the construction of the VESSEL, her engines and/or materials or to any other technical matters, such dispute shall forthwith be referred to the Principal Surveyor of the Classification Society in Japan, whose opinion shall be final and binding upon both parties hereto. Any other dispute arising under or by virtue of this Contract or any difference of opinion between the parties hereto concerning their rights and obligations under this Contract . . . shall be settled by arbitration in New York, New York in accordance with the rules of the United States Arbitration Act.

 Under section 2 of Article XIV, a party seeking arbitration must serve a written demand for arbitration on the other side and designate an arbitrator. The other party is obligated, within 20 days after receiving the written demand, to designate its arbitrator. The two arbitrators are then to select a third arbitrator, and the three arbitrators will constitute the arbitration panel.

 The vessel was completed in 1977 and was delivered to and accepted by Parakopi in June of that year. Under the terms of the contract, the purchase price of the vessel was fixed in terms of Japanese yen. Some 70 per cent of the purchase price was to be paid over a seven-year period in 14 semi-annual installments. Although Parakopi has been paying the installments due to date, it commenced an action in Greece in January 1979 *fn2" seeking to be relieved of its obligations under the contract on the basis of unforeseeable circumstances, I. e., the sharp rise in value of the yen against the dollar, *fn3" and on the ground of fraud, I. e., the petitioners' alleged fraudulent concealment from Parakopi of knowledge that the yen would increase in value. *fn4" See exh. B to Petition To Compel Arbitration and for Appointment of Arbitrator.

 Petitioners served a demand for arbitration of the matter in controversy on Parakopi in April 1979 and designated an arbitrator pursuant to section 2 of Article XIV of the contract. Although Parakopi did subsequently select an arbitrator, its arbitrator refused to proceed with the selection of a third arbitrator. Thereafter, it became apparent that Parakopi was not going to voluntarily proceed to arbitration, and petitioners commenced this action.

 Parakopi's opposition to the petition is predicated on four arguments: (1) that the parties entered into a stipulation which precludes the petitioners from taking any action to proceed to arbitration until October 19, 1979; (2) that the Court lacks subject matter jurisdiction; (3) that the petitioners' proper remedy is to seek a stay of the suit in Greece from a Greek court; and (4) that even assuming this Court has jurisdiction, it should defer to the Greek litigation for reasons of comity. See Respondent's Mem. of Law in Opp. to Petitioner, at 2.

 DISCUSSION

 A. Preclusion by Stipulation

 As noted above, Parakopi commenced an action in Greece in January 1979. Service upon Sumitomo and Oshima was made in March 1979. A hearing was scheduled for May 18, 1979, and Sumitomo and Oshima had until that date to answer the complaint. In April 1979, petitioners' attorneys in Greece advised Parakopi's Greek lawyers that they intended to seek an adjournment of the May 18th hearing and deadline. Although Parakopi consented to an adjournment until October 19, 1979, it presently contends that it gave its consent to an adjournment only because petitioners agreed that they would not take further steps to proceed to arbitration until after the new hearing ...


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