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SOCIEDAD ANONIMA DE NAVEGACION PETROLERA v. CIA. D

May 7, 1986

SOCIEDAD ANONIMA DE NAVEGACION PETROLERA, Petitioner, against CIA. DE PETROLEOS DE CHILE S.A. and LILIAN SHIPPING CORP., Respondents


The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

Sociedad Anonima De Navegacion Petrolera ("SONAP"), the time charterer of the vessel LUCERNA, petitions for an order directing consolidation of two arbitration proceedings, one between itself and Lilian Shipping Corporation ("Lilian"), the owner of the LUCERNA, and the other between itself and Compania De Petroleos De Chile S.A. ("COPEC"), the subcharterer of the vessel.

COPEC opposes SONAP's motion on the grounds that (1) this Court lacks authority to compel consolidation of the arbitrations, and (2) consolidation is not warranted in this case in any event.

 FACTUAL BACKGROUND1

 On June 1, 1985, SONAP entered into a time charter agreement with Lilian for use of the LUCERNA for a renewable period of twelve months. The vessel was to be placed at SONAP's disposal "no later than June 30, 1985, in default of which Charterer shall have the option to cancel this Charter ...." Heard Affidavit of February 25, 1986, Exhibit A, cl. 5(b). The agreement also provided that "[a]ny and all differences and disputes of whatever nature arising out of this Charter shall be put to arbitration ...." Id. at Exhibit A, cl. 28. Shortly after chartering the LUCERNA, SONAP subchartered the vessel to COPEC. The subcharter agreement contained the same cancellation and arbitration provisions as those quoted above. SONAP, as the "Chartered Owner," was to deliver the vessel at Curacao no later than June 30, 1985; COPEC had the option of canceling the subcharter if the vessel was not timely delivered. The vessel was not delivered by June 30, 1985. On July 10, COPEC canceled its subcharter with SONAP. Thereafter, SONAP canceled its charter party with Lilian.

 Lilian demanded arbitration with SONAP regarding the cancellation. SONAP, in turn, demanded arbitration with COPEC. COPEC is willing to arbitrate with SONAP alone, but opposes SONAP's request for consolidation of the arbitrations into one proceeding. Lilian does not oppose consolidation.

 DISCUSSION

 SONAP contends that the arbitrations should be consolidated because they involve common issues of law and fact, and because SONAP would be prejudiced by having to arbitrate separately with COPEC and Lilian. COPEC argues that consolidated arbitration cannot be compelled when the parties have not expressly consented thereto.

 A. Authority to Compel Consolidation of Arbitrations

 As a threshold issue, we must consider whether this Court has authority to compel consolidation of arbitrations. In Compania Espanola de Petroleos, S.A. v. Nereus Shipping, S.A., 527 F.2d 966 (2d Cir. 1975), cert. denied, 426 U.S. 936, 49 L. Ed. 2d 387, 96 S. Ct. 2650 (1976) (hereafter "Nereus "), the Court of Appeals for the Second Circuit held that consolidation can be compelled absent the parties' express consent. The Second Circuit noted that,

 there is more than ample support in the case law for the propriety of a court's consolidation of arbitrations under the federal statute. See, e.g., Robinson v. Warner, 370 F. Supp. 828 (D.R.I. 1974); Lavino Shipping Co. v. Santa Cecilia Co., 1972 A.M.C. 2454 (S.D.N.Y. 1972); Matter of Arbitration Between Chilean Nitrate & Iodine Sales and Intermarine Corp., 1972 A.M.C. 2460 (S.D.N.Y. 1971). We agree that Fed. R. Civ. P., Rules 42(a) and 81(a)(3), are applicable. Moreover, we think the liberal purposes of the Federal Arbitration Act clearly require that this act be interpreted so as to permit and even to encourage the consolidation of arbitration proceedings in proper cases, such as the one before us.

 Id. at 974-75 (footnote omitted).

 Numerous decisions since Nereus have agreed that district courts have the power to consolidate arbitration proceedings. In Matter of Czarnikow-Rionda Co., 512 F. Supp. 1308 (S.D.N.Y. 1981), this Court ordered consolidation of two arbitration proceedings arising out of a dispute among a vessel's owner, a time charterer, and a voyage charterer. As noted in that case,

 Enforcement of an arbitration clause in federal court is controlled by the Federal Arbitration Act ("Act"), 9 U.S.C. §§ 1-14. Although the Act does not specifically provide for consolidated arbitrations, courts have frequently ordered consolidation proceedings when the "interests of justice" so require either because the issues in dispute are substantially the same and/or ...


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