Court denies DaPuzzo's motion for an order compelling arbitration in New York.
D. STAY OF JUDICIAL PROCEEDINGS
Having determined that under an application of either Chapter 1 or Chapter 2 of the FAA the Court is precluded from compelling arbitration in the Bahamas, and that the terms of the controlling agreement here cannot reasonably be read to support a contractual commitment by the parties to arbitrate disputes in New York, the Court turns to consideration of an appropriate remedy to address these circumstances. Defendants assert that, should the Court decline to compel arbitration in the Bahamas, it should stay this action either pursuant to Chapter 1, 9 U.S.C. § 3, or in the exercise of the Court's inherent discretion to control its docket.
DaPuzzo counters that under the Convention and Chapter 2 this Court not only cannot compel arbitration of this dispute in the Bahamas, but that there is also no authority under these provisions for the Court to stay the instant litigation pursuant to § 3 of Chapter 1. According to DaPuzzo, a federal court may issue a stay pursuant to § 3 only where the issue involved in the underlying litigation is referable to arbitration. In other words, under this theory, a stay of proceedings in a lawsuit is appropriate only where arbitration could be compelled by the federal court in which the litigation is pending, even if, in accordance with its terms, arbitration could be enforced by a court situated in another contemplated forum. Furthermore, DaPuzzo asserts that because this Court cannot, consistent with § 202 of Chapter 2, compel arbitration in the Bahamas — a non-signatory to the Convention — the dispute at bar does not qualify as one "referable to arbitration" and therefore is not subject to the stay authority conferred by § 3.
The Court has found no controlling authority, and the parties have supplied none, squarely addressing the question as to whether § 3 provides a basis for a court to stay litigation in a case where it cannot compel arbitration under an application of either Chapter 1 or Chapter 2 of the FAA and where the forum designated in the parties' arbitration agreement is that of a non-signatory to the Convention. As context for its response to Defendants' request for a stay as the issue arises in the instant case, the Court notes an inherent tension between some of the aims of the Convention and those reflected by the policy embodied in the FAA as a whole. One of the central purposes of the Convention is to promote stability, economy and efficiency in international commerce through more expenditious resolution of contractual disputes and greater uniformity in the standards governing the recognition and enforcement of foreign arbitral awards involving international transactions. See Scherk, 417 U.S. at 520 n. 15; Threlkeld, 923 F.2d at 248. To maximize those ends, Congress, in adopting the Enabling Act, enlarged the range of actions that could be brought in federal courts to enforce qualifying arbitration agreements. It did so specifically by vesting federal courts with original jurisdiction over proceedings commenced under the Convention, regardless of the foreign citizenship of the parties and the amount in controversy, and by authorizing federal courts to compel arbitration in any district, even extraterritorially in other signatory nations. See 9 U.S.C. § 203, 206; Jain, 51 F.3d at 689.
At the same time, however, as discussed above, as authorized by Congress in implementing the Convention, courts lack jurisdiction to compel arbitration agreements in non-signatory countries. See National Iranian Oil, 817 F.2d at 331. Moreover, pursuant to the optional protocol contained in Article I(3) of the Convention,*fn12 which the United States adopted when it ratified the treaty,*fn13 the Convention may be applied on the basis of reciprocity to the recognition and enforcement of only those awards made in contracting states. See id. at 335. These limitations, as the Fifth Circuit noted in National Iranian Oil, may have been meant
only to allow signatories to partake of the
Convention's benefits in U.S. courts and thus to give
further incentives to non-signatory nations to adhere
to the Convention. . . . Were we to order arbitration
in the U.S. in the face of a forum selection clause
designating a non-signatory forum, which was
unenforceable ab initio, the non-signatory would
have little reason to leave the Hobbesian jungle of
international chaos for the ordered and more
predictable world of international commercial law.