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LA SOCIETE NATIONALE POUR LA RECHERCHE v. SHAHEEN

November 15, 1983

LA SOCIETE NATIONALE POUR LA RECHERCHE, LA PRODUCTION, LE TRANSPORT, LA TRANSFORMATION ET LA COMMERCIALISATION DES HYDROCARBURES, Plaintiff, against SHAHEEN NATURAL RESOURCES COMPANY, INC., Defendant.


The opinion of the court was delivered by: DUFFY

MEMORANDUM & ORDER

KEVIN THOMAS DUFFY, D.J.:

 Plaintiff, La Societe Nationale Pour La Recherche, La Production, Le Transport, La Transformation et la Commercialisation Des Hydrocarbures ("Sonatrach") seeks an order confirming an arbitration award rendered by a three-member International Chamber of Commerce ("ICC") panel on November 27, 1981 in Geneva, Switzerland. Defendant Shaheen Natural Resources Company, Inc. ("Shaheen") moves pursuant to 9 U.S.C. § 207 to dismiss the plaintiff's complaint on the ground that the arbitral award on which the complaint is based is not entitled to recognition and enforcement under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 3 U.S.T. 2517, T.I.A.S. No. 6997, as implemented by sections 201 to 208 of the Federal Arbitration Act, 9 U.S.C. § 201-08 (1976 Supp.) [hereinafter the "Convention"]. Defendant has moved alternatively, should plaintiff's complaint not be dismissed, for a stay of the arbitration award's enforcement pending the filing of an answer by the defendant. I deny defendant's motions and the aribtration award is confirmed pursuant to Article IV of the Convention.

 I.

 FACTS

 Plaintiff, Sonatrach, is a company owned by an arm of the Algerian Government. The defendant is an Illinois corporation with its principal place of business in New York. On June 1, 1974, a written contract was entered into between Shaheen and Sonatrach providing for the sale to Shaheen of 273,000 metric tons of crude oil to be shipped over a seven month period. The contract between the parties contained an arbitration clause that provided:

 Any dispute arising out of this Contract shall be permanently settled according to the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbiters named in accordance with these Rules.

 The arbitration shall take place in Geneva.

 The law in force in Algeria is applicable for the settlement of any dispute.

 Contract, Article 19 (June 1, 1974) (translation), Affidavit of Mohammed Bayou, Exh. A [hereinafter the "Contract"].

 A dispute under the contract arose when the full payment for the second cargo shipped to a refinery operated by a subsidiary of Shaheen in Come-By-Chance, Newfoundland was not remitted to Sonatrach. After demanding that Shaheen effect a cure, Sonatrach notified Shaheen on September 25, 1974 that the contract was considered repudiated.

 On July 16, 1976 Sonatrach instituted a breach of contract action against Shaheen in the Supreme Court, New York County. Shaheen was notified on April 7, 1978 that Sonatrach also had commenced an arbitration proceeding before the ICC in accordance with the arbitration clause in the contract. Shaheen moved for summary judgment in the state court action arguing that by commencing an action in state court before proceeding to arbitration, Sonatrach had waived its right to have the dispute arbitrated. On July 28, 1978 the New York Supreme Court denied summary judgment. The court held that Algerian law, not New York law, applied to the waiver issue and that under Algerian law, the commencement of a court action does not waive the right to arbitrate if the other party has not yet served its answer in the court suit.Defendant appealed to the Appellate Division, First Department but on October 23, 1978 the lower court's judgment was affirmed.

 In accordance with the rules of the ICC, the terms of reference to the arbitration panel were drafted at a meeting held in Paris on February 28, 1980 and signed on March 7, 1980. Shaheen did not appear at this meeting to sign the document or submit any papers or pleadings to the panel other than an affidavit for the purpose of contesting the jurisdiction of the panel. Shaheen again argued that the ICC panel lacked jurisdiction because Sonatrach had waived its right to arbitrate by instituting the state court action on the same claim in New York.

 In the arbitration award rendered on November 27, 1981, the panel found that it had jurisdiction to hear the dispute and therefore rejected the defendant's defense. The panel ultimately found in favor of the plaintiff. Specifically, the arbitration panel found that a valid and binding contract was entered into between Shaheen and Sonatrach on June 1, 1974 and that pursuant to the contract's arbitration clause, Algerian law applied to the dispute.The panel found that Shaheen accepted only a portion of the oil delivered to its refinery and that full payment including late payment penalties was not made to the plaintiff. *fn1" The panel held therefore that the plaintiff ...


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