The opinion of the court was delivered by: Robert L. Carter, District Judge.
Each of these two consolidated petitions seeks an order,
pursuant to 9 U.S.C. § 4, compelling arbitration on an alleged
voyage charter. Ward Marine, a broker, allegedly agreed to the
two charters on behalf of the respondent. The case hinges on
whether Ward Marine had authority (or failing that, apparent
authority to do so. No written charter parties were ever
signed, but petitioners allege that they and Ward concluded a
fixture incorporating a pro forma charter party,*fn1 which
includes the provision that "[a]ll disputes arising out of this
contract shall be arbitrated at
New York . . . and be subject to U.S. Law. . . ." See R.Ex. 6 &
7, clause 44.*fn2
All events relevant to this case took place in 1987. Most of
the facts in this case can be gleaned from the telexes and
other documents exchanged between the participants in the
Persons and Entities Involved
The Ministry of Supply of the Hashemite Kingdom of Jordan
(the "Ministry"), respondent in these cases, was the alleged
charterer of the vessel. The Minister of Supply, Rajai Muasher;
the Undersecretary of the Tender Committee, Abdalah el
Hawamdeh; and the Director of Trade, Suleiman Belbeisi, were
involved in the transactions in this case.
Ward Marine ("Ward") of Washington, D.C., was in the business
of representing foreign governments that needed to obtain
shipping related to certain programs of the United States
Agency for International Development ("USAID"). McD.Tr.5. Ward
had entered into a non-exclusive agency agreement to charter
ships for the Ministry. R.Ex.5. Donald Pressley, the President
of Ward, and Karima McDaniel, a broker at Ward, represented
Ward in the transactions.
World Bulkers Inc. ("World Bulkers") was a ship operator that
had entered into a charter party with the Ministry through Ward
to ship wheat from Texas to Jordan. World Bulkers defaulted on
the charter party.
Petitioner Herlofson Management A/S ("Herlofson") of Oslo,
Norway, is a ship owner that allegedly entered into a charter
party with the Ministry through Ward to ship a portion of the
wheat that World Bulkers was to have transported. Hudson
Chartering, Inc. ("Hudson") of Yonkers, New York, represented
by Bryan McNelis, was the ship broker through which Ward
arranged the transaction with Herlofson. Sal Gambino of S.G.
Trading ("S.G.") had put Ward in contact with Hudson . Joachim
Grieg and Co. ("Grieg") of Oslo, Norway, was the agent for
Herlofson with whom Hudson transacted business.
Petitioner Belstove Management A/S ("Belstove") of Oslo,
Norway, as owner of the M.V. Belocean, allegedly entered into
a charter party with the Ministry through Ward to ship another
portion of the wheat that World Bulkers was to have
transported. World Trade Shipping Corporation ("World Trade")
of Oyster Bay, New York, was the ship broker through which Ward
arranged the transaction with Belstove. World Trade had also
served as broker for World Bulkers. Arne Fronsdal (also spelled
Froensdahl in some of the papers filed in this case), a broker
and president of World Trade, Fro.Tr. 12 represented World
Trade in these transactions. F.H. Lorentzen & Sons
("Lorentzen") of Oslo, Norway, was the agent for Belstove with
whom World Trade transacted business. Ward dealt directly with
Lorentzen, bypassing World Trade, after May 23, 1987.
Thus, the lines of communication may be summarized by the
following diagram, with the main lines of negotiation or agency
relevant to this case indicated by double lines:
As already noted, Ward is the weak link in this chain: the
dispute centers on Ward's authority to act on behalf of the
Ministry with regard to the Belstove and Herlofson charters.
World Bulkers and Unicargo Charter Parties
The events leading to this litigation began on March 21,
1987, when the Ministry, under Belbeisi's supervision,
published an invitation to submit bids to supply United States
wheat to Jordan and to transport the wheat to a Jordanian port,
in connection with a USAID program. R.Ex.4; see Bel.Tr. 35,
79-80. Under a non-exclusive shipping-agency agreement, R.Ex.5,
that had been entered into between the Ministry and Ward on
February 22, Ward was to assist the Ministry of Supply in
obtaining ships to transport the wheat.
Ward received various bids offering to enter into charter
parties to transport the wheat. Following negotiations, the
Ministry approved the final drafts of charter parties with
Unicargo Shipping Co. S.A. ("Unicargo"), R.Ex. 6, and World
Bulkers Inc., R.Ex. 7, and authorized Ward to execute the
contracts sometime in April. Bel.Tr. 55, Bel.Ex. A-9. Unicargo
performed under its charter party. Bel.Tr. 61.
In mid-May, however, it became apparent to Ward and the
Ministry that World Bulkers would not perform under its charter
party. Bel.Tr. 61-62. The first shipment was to be loaded by
May 25, McD.Tr. 22, and the supplier was pressing the Ministry
to nominate a vessel by May 21. Bel.Tr. 119. The Ministry thus
needed to find ships on short notice.
Negotiations for Replacement Ships
Ward proceeded to search on behalf of the Ministry for a
replacement for World Bulkers. In a letter dated May 14,
Belbeisi (of the Ministry) had instructed Pressley (of Ward)
that the charter party should require, among other things, that
the owner issue a 10 percent performance bond.
Ward conducted negotiations with Hudson by telex for the
Herlofson charter. The negotiations culminated in a recap
telex*fn3 sent by McNelis (of Hudson) to McDaniel (of Ward) on
May 20 at 4:48 P.M.,*fn4 beginning as follows:
HEREWITH RECAP OF FIXTURE AS PER AUTHORITY GIVEN
BY BOTH PARTIES.
SUBJECT SHIPPERS/REC[ei]V[e]RS APPROVAL BY LATEST
1200 HRS [New York time] 5/21/87. . . .
McN.Ex 1H & 8 (msg. no. BJM691) (emphasis added). The telex
states various terms, including the following freight payment
CLS 66 OF SUBJECT CP [charter party] DELETE PARA B
AND INSERT THE FOLLOWING: 95 PCT OF FRGHT TO BE
PAID WITHIN 5 BANKING/WORKING DAYS UPON
PRESENTATION OF [documentation]. THE 5 PERCENT
BALANCE TO BE SETTLED TOGETHER WITH [demurrage or
dispatch]. . . .
id. (emphasis added). The deleted Clause 66, Paragraph B, of
the pro forma charter party had provided for a performance
bond, which was one of the conditions set forth in Belbeisi's
May 14 letter to Pressley. The telex concludes as follows:
OTHERWISE ALL TERMS AND CONDITIONS AS PER
CH[a]RT[erer']S PORFORMA [sic] CP WITH LOGICAL
ALTERATIONS AS APPLICABLE. . . . THANK YOU FOR YOUR
COOPERATION IN CONCLUDING THIS FIXTURE.
GOOD LUCK WITH THE SUBJECTS.
On or prior to May 20, McNelis had come to doubt Ward's
authority to act on the Ministry's behalf, because of "rumors
in the market" that Ward was acting without authority.
See McD.Tr. 23, 45, Gam.Tr. 11-12. McDaniel assured McNelis
that she was acting on full authority, including the authority
to fix a charter without approval from the Ministry. See, e.g.,
McN.Tr. 128, 146-47, 181-82. McNelis believed this to be
contrary to the usual practice, which requires the principal to
approve all charters. See McN.Tr. 100-108, 138, Gam.Tr. 14.
It is somewhat more difficult to reconstruct the Belocean
negotiations because a number of the relevant documents were
destroyed in a fire at World Trade in October of 1988. Fro.Tr.
7, 85. Moreover, a substantial part of the negotiations took
place over the telephone. Fro.Tr. 129. Fronsdal and McDaniel
both testified at their depositions that a fixture was agreed
upon that did not require the posting of a performance bond.
See Fro.Tr. 129, 132-33, McD.Tr. 29.
The hand-printed recap letter dated May 20, which Fronsdal
faxed to McDaniel, indicates Fronsdal's position that a fixture
had been concluded ("CONFIRM OUR TODAY'S FIXTURE AS follows").
McD.Ex. 20. The letter names the "M/S `BEL OCEAN,'" and
specifies a variety of terms. The letter makes no mention of a
performance bond, but it contains a provision for freight
payment that is substantially identical to the Herlofson
charter, and which McDaniel contends was intended as an
alternative to the performance bond: "95% FREIGHT PAYABLE INTO
OWNERS' BANK PRIOR [to] RELEASE [of] B/LS [bills of lading], 5%
ON SETTLEMENT [of] DEM[urrage]. . . ." It concludes by stating
that the fixture is "SUBJECT C/P [charter party] PROFORMA
DETAILS WHICH OWNERS WILL REVIEW IN THE A M. . . ." and asking
Ward to "PLEASE FAX RECONFIRMATION." Fronsdal and McDaniel both
testified that McDaniel accepted this fixture recap over the
telephone on behalf of the Ministry, and that the fixture was
not subject to the Ministry's approval. Fro.Tr. 132-33.
On May 20, at 2:45 A.M., during the course of negotiations,
Pressley sent Belbeisi a telex, setting out the terms that had
been negotiated. McD.Ex. 11 (msg. no. 1446). At 6:40 P.M. the
same day, Pressley sent Minister ...