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July 18, 1985


The opinion of the court was delivered by: CANNELLA



Defendants' motion to reopen is granted. Fed. R. Civ. P. 60(b). Defendants' motion to dismiss on grounds of forum non conveniens is granted.

 Plaintiff's motion to amend this Court's prior order is denied. Fed. R. Civ. P. 59, 60(b).


 The facts and procedural history of this contract action are discussed in this Court's prior opinion, familiarity with which is assumed. See Memorandum and Order, 84 Civ. 6620 (JMC) (S.D.N.Y. Mar. 7, 1985) ["March Memorandum and Order"]. The underlying dispute concerns the calculation of royalty payments on hydrocarbons produced by defendant BHP Petroleum Proprietary Limited ["BHP Petroleum"] in the offshore waters of Australia. Plaintiff claims that the royalty payments have been calculated incorrectly to the tune of over $350,000,000.

 Both parties previously moved for an order compelling arbitration. Plaintiff requested that the venue of arbitration be in New York; defendants preferred that it be held in Australia. In its March Memorandum and Order the Court ordered that arbitration be held in New York, because under Chapter 2 of the Federal Arbitration Act the Court had no power to order arbitration in Australia. See id.; 9 U.S.C. ยง 201 et seq. Defendants had not at that time moved for dismissal on forum non conveniens grounds, and the Court declined to "order such a drastic remedy sua sponte, particularly in light of the ongoing dispute concerning the Australian court's jurisdiction over plaintiff." March Memorandum and Order at 4. Since the date of the Court's prior decision, defendants have moved for dismissal on grounds of forum non conveniens and the Australian Supreme Court has affirmed the Australian trial court's finding that it has personal jurisdiction over plaintiff. See BHP Petroleum Pty. Limited v. Oil Basins Limited, No. 3949 (Austr. S. Ct. June 20, 1985).

 Accordingly, the Court finds that the issue is properly before the Court and is ripe for decision. The Court, therefore, grants defendants' motion to reopen for consideration of this issue. Fed. R. Civ. P. 60(b).


 The Second Circuit has recently held "squarely that district courts have the power to dismiss a petition to compel arbitration on the ground of forum non conveniens." Maria Victoria Naviera, S.A. v. Cementos del Valle, 759 F.2d 1027, 1031 (2d Cir. 1985). The only restriction on this power is created by a contract expressly designating the forum for arbitration. Id. This Court has already held in its March Memorandum and Order that no such designation was made in the parties' contract ["Royalty Agreement"]. March Memorandum and Order at 6 - 8.

 Under the doctrine of forum non conveniens, the moving party bears the burden of showing that the alternative forum is clearly more convenient and appropriate. See, e.g., Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255, 70 L. Ed. 2d 419, 102 S. Ct. 252 (1981); Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978), cert. denied, 440 U.S. 908, 59 L. Ed. 2d 455, 99 S. Ct. 1215 (1979). In deciding whether to dismiss a case, the court may look to "the convenience of the parties, convenience of material witnesses, place where events occurred, access to sources of proof, and plaintiff's choice of forum" Lovebright Diamond Co. v. Spragins, 574 F. Supp. 76, 80 (S.D.N.Y. 1983). An additional factor is whether the law governing the substantive issues is that of the instant forum or the alternative forum. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 509, 91 L. Ed. 1055, 67 S. Ct. 839 (1947). Generally, the choice of forum will not be disturbed pursuant to this doctrine unless the interests of justice weigh strongly in favor of defendant. See, e.g., Lovebright Diamond, 574 F. Supp. at 80; Leif Hoegh & Co. v. Alpha Motor Ways, Inc., 534 F. Supp. 624, 626 (S.D.N.Y. 1982); Troyer v. Karcagi, 488 F. Supp. 1200, 1207 (S.D.N.Y. 1980).

 All the factors point to Australia being the proper forum for litigation in this case. The contract at issue was to be performed in Australia. The hydrocarbons are produced there and the royalty payments are calculated and paid to defendant in Australia. Further, the witnesses who will testify as to the manner in which royalties are calculated are all in Australia. Plaintiff has been able to suggest only one witness in America -- Paul Temple, who resides in Virginia and was, at best, only tangentially involved in the drafting of the Royalty Agreement. The documentary evidence is also in Australia.

 Moreover, neither party is domiciled in New York. Plaintiff is a corporation organized under the laws of Bermuda, with its principal place of business in Bermuda. The sole function of plaintiff corporation is to act as trustee for the royalty payments, and its majority shareholder is Weeks Petroleum Limited, a subsidiary of the Australian Bell Group, which operates out of Melbourne. Thus, the majority of the royalties never leave Australia. Both defendants are Australian corporations and have maintained no office in New York since December 1984. As the Supreme Court emphasized in Piper Aircraft, the presumption in favor of the plaintiff's choice of forum is less weighty when the plaintiff is a foreign corporation "[b]ecause the central purpose of any forum non conveniens inquiry is to ensure that the trial is convenient." 454 U.S. at 256. When neither party is domiciled in this jurisdiction, the presumption is even less compelling.

 The only factor that presents any problem results from the choice of law clause in the Royalty Agreement. That clause provides: "Except as otherwise required by the law of the place where the said hydrocarbons are produced or as otherwise herein provided this Agreement shall be interpreted and applied in accordance with the law of the State of New York." *fn1" Thus, New York law applies unless Australian law must be applied by virtue of Australia's own laws. If New York law governs the issues in this case, the Court must weigh that factor in determining the appropriate forum. *fn2" The wording of the choice of law clause makes it necessary for the Court to determine the central issue in the underlying substantive dispute in order to decide which law will apply. See Overseas Programming Cos. v. Cinematographische Commerzanstalt, 684 F.2d 232, 235 (2d Cir. 1982). The litigation results from differing interpretations and applications of the poorly worded clause governing calculation of royalties:


Royalty shall be payable in cash unless the Royaltyholder by written notice elects to receive the same in kind in the form of hydrocarbons and the value for purposes of calculating royalty whether payable in cash or in kind shall be the same as that on which royalty to the State is based or if no royalty be payable to the State the value at the place of production as determined by mutual agreement or failing mutual agreement as determined by arbitration as hereinafter provided PROVIDED that the value shall be the gross value without deduction of any costs amortisation royalty rental or taxes. *fn3"

 Plaintiff claims that the "PROVIDED" clause applies even when there is a royalty paid to the State and, therefore, the royalty payment to plaintiff must be calculated without deduction of any costs, amortization, royalty rental or taxes, whether or not the state royalty is so calculated. Defendants claim that the royalties paid to plaintiff are based upon State royalty calculations, which are calculated before deduction of taxes. The State royalty calculation is necessarily determined in accordance with Australian law and was worked out after negotiations with the Australian "Designated Authority," which is the Minister for Minerals and Energy of Victoria.

 There appear, therefore, to be two levels to the case: first, whether the "PROVIDED" clause limits the royalty calculation when there is a State royalty payment; and second, whether the State royalty is calculated to exclude the disputed excise tax and other costs. The first issue would seem to be a simple question of contract interpretation, governed by New York law, but primarily presenting questions of fact. It is not clear from the parties' papers that this issue is even in dispute. The second question necessarily involves the interpretation of Australian law, at least in its application. That is, the arbitrators will have to determine whether Australian law requires calculation of State royalties before excluding taxes, and if so, whether the specific royalties at issue were correctly calculated. Accordingly, the Court finds that Australian law will necessarily play a major part in the resolution of the dispute. To the extent that New York law will govern certain issues, those issues will only require the implementation of general principles of contract interpretation, which should not be difficult to prove in a foreign forum. Plaintiff has pointed to no specific areas of New York law that will be at issue.

 Accordingly, the Court finds that the balance of interests weigh overwhelmingly on the side of dismissal in favor of the Australian forum. Because the case is hereby dismissed, plaintiff's motion is denied as moot.


 Defendants' motion to reopen is granted. Fed. R. Civ. P. 60(b). Defendants' motion to dismiss on grounds of forum non conveniens is granted and the March Memorandum and Order is vacated to the extent that it compelled arbitration in New York.

 Plaintiff's motion to amend the March Memorandum and Order is denied. Fed. R. Civ. P. 59, 60.


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