The opinion of the court was delivered by: Freeh, District Judge:
Rio Energy International, Incorporated ("Rio Energy"), has
filed a motion with this Court to consolidate certain
arbitrations. Hilton Oil Transport ("Hilton Oil"), opposes the
motion. For the reasons stated herein, the motion is granted.
On August 30, 1990 Hilton Oil and Rio Energy executed a
charter party agreement for the transportation of bulk asphalt
from Curacao, Netherland Antilles to Puerto Cortez, Honduras.
Also on August 30, 1990 Rio Energy executed a sub-charter
party agreement with Comision Administradora del Petroleo
("CAP") for the same cargo of asphalt. Both agreements
incorporated standard arbitration clauses.
Shortly after the charter party agreements were signed, the
loading port was changed from Curacao to Amuay Bay, Venezuela.
Shortly after that, the barge incurred mechanical problems
which delayed the heating of the asphalt. Further delays ensued
when CAP requested a discharge temperature in excess of the
discharge temperature contained in the Hilton Oil-Rio Energy
charter party. The discharge port was then changed to another
port in Honduras. After discharge the Barge incurred problems
in sailing and she eventually grounded and sank.
On November 19, 1990 Hilton Oil commenced arbitration
proceedings against Rio Energy. On November 27, 1990, Rio
Energy commenced arbitration proceedings against CAP. Neither
arbitration has begun.
Rio Energy with the approval of CAP now seeks to Consolidate
the arbitrations between Rio Energy and Hilton Oil and Rio
Energy and CAP. Rio Energy contends that the Court has the
power to consolidate the pending arbitrations and that because
there are common questions of law and fact between the two
arbitrations the Court should grant the motion.
Hilton Oil opposes the motion to consolidate the
arbitrations. It contends that the facts in its arbitration
proceeding with Rio Energy are different from the facts in Rio
Energy's arbitration with CAP. Hilton Oil further argues it
will be prejudiced by delay if the arbitrations are
consolidated. Finally, Hilton Oil argues that this Court lacks
the power to consolidate the arbitrations when in this case
Hilton Oil's agreement with Rio Energy did not consider
In Compania Espanola de Petroles, S.A. v. Nereus Shipping,
S.A., 527 F.2d 966, 974 (2d Cir. 1975), the Second Circuit held
that a district court has the power to consolidate arbitrations
in the appropriate circumstances. The Court based its decision
on the Federal Arbitration Act and Fed.R.Civ.P., Rules 42(a)
and 81(a)(3). The exercise of that power, however, is
discretionary. Sociedad Anonima de Navegacion Petrolera v. Cia.
de Petroles de Chile S.A., 634 F. Supp. 805 (S.D.N.Y. 1986).
Hilton Oil points out that Nereus and its progeny have been
criticized by several courts. See, Weyerhaeuser Co. v. Western
Seas Shipping Co., 743 F.2d 635 (9th Cir.) cert. denied,
469 U.S. 1061, 105 S.Ct. 544, 83 L.Ed.2d 431 (1984); Ore & Chemical
Corp. v. Stinnes Interoil, Inc., 606 F. Supp. 1510 (S.D.N Y
1985). Those cases held that the court lacked the power to
compel consolidation since the express terms of the parties'
agreements did not provide for consolidation of related
arbitrations. However, Weyerhaeuser is not controlling
precedent and contrary to the reasoning in Ore & Chemical,
Nereus remains good law in this circuit. Moreover, nothing in
Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct.
1238, 84 L.Ed.2d 158 (1985), overrules Nereus.
Having concluded that this Court has the power to Compel
consolidation, the question is whether consolidation is
permitted here. Consolidation is proper where there are common
questions of law or fact and a possibility of conflicting
awards or inconsistent results. Sociedad Anonimia v. Cia. de
Petroleos de Chile S.A., 634 F. Supp. 805, 809 (S.D.N.Y. 1986).
To defeat a motion for consolidation of arbitrations, a party
must show prejudice that is sufficiently substantial to
outweigh the advantages of deciding the dispute in a
consolidated proceeding. Sociedad Anonimia, 634 F. Supp. at 809;
See Insco Lines, Ltd. v. Cypromar Navigation Co., A.M.C. 2233,
2235 (S.D.N.Y. 1975).
In this case, there are common questions of law and fact in
the two arbitrations as well as a danger of conflicting
findings, particularly regarding the agreed temperature of the
cargo upon discharge. Additionally, access to information
regarding the factual disputes about the cargo delivery
temperature will be promoted by consolidated arbitration.
Sociedad Anonima v. Cia. de Petroleos de Chile S.A.,
634 F. Supp. 805, 809 (S.D.N.Y. 1986). Moreover, Hilton Oil has
failed to demonstrate that prejudice would result if the
arbitrations were consolidated. The Crux of Hilton Oil's claim
of prejudice, as argued in its papers and at oral argument, is
that unfair delay will result if the arbitrations are
consolidated. Hilton Oil, inter alia, has specifically
complained that such delay has been precipitated by CAP's
general nonresponsiveness and initial appointment of a
Spanish-speaking arbitrator, as well as anticipated resistance
by Rio Energy to nominate acceptable arbitrators in a prompt
manner. At oral argument however, CAP informed the Court that
they would consent to appointing ...