Spineway SA v. Strategos Group LLC, No. 22-mc-00604-JLH (D. Del. Mar. 1, 2024)[1]
Factual Background
Spineway SA (“Spineway”) and Strategos Group LLC (“Strategos”) were collaborators on a business venture in South America. According to Spineway, it was required under the terms of the agreement to purchase an ownership interest from Strategos in an investment fund, with the understanding that Strategos would return Spineway’s funds if the parties did not enter into a further partnership agreement within six months of the purchase.
Spineway proceeded to purchase the requisite ownership interest from Strategos. However, when the parties subsequently failed to enter into a further partnership agreement within six months, Strategos did not return Spineway’s investment. Following a deterioration of the parties’ relationship, Spineway commenced an arbitration proceeding against Strategos before the Swiss Chambers Arbitration Institution (“SCAI”) pursuant to the Swiss Rules of International Arbitration (“SCAI Rules”).
While the parties acknowledged that they had agreed to arbitrate any disputes, they disagreed on the arbitral institution and corresponding rules, because the institution and rules identified in the agreement were “the Geneva International Chamber of Commerce” and the “Mediation and Arbitration Rules of the Geneva International Chamber of Commerce,” which do not exist. As a result, while Spineway claimed that the parties intended to arbitrate before the SCAI under the SCAI Rules, Strategos countered that the intended arbitral institution was the International Chamber of Commerce (“ICC”) under the ICC Rules.
Consistent with its position that it never agreed to arbitrate before the SCAI, Strategos did not appear at the arbitration before the SCAI that Spineway had commenced. Nonetheless, the arbitrator issued a final award, holding that he had jurisdiction over the dispute and awarding Spineway restitution, among certain fees and costs.
The District Court Decision
Spineway sought to confirm the SCAI’s award in the U.S. District Court for the District of Delaware. The court denied Spineway’s request upon determining that the award was not issued in accordance with the underlying agreement between the parties and thus met the ground for refusing to enforce an award under Article V(1)(d) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“).
Looking to the text of the arbitration clause under French contract law, which the parties agreed governed the agreement, the court first considered that, as Strategos contended and Spineway could not rebut, countless French courts interpreted similar references to “the Geneva International Chamber of Commerce” to refer to the ICC and its rules, with an arbitral seat in Geneva.
The court noted that the extrinsic evidence bolstered this conclusion. Reviewing the drafting history, the court highlighted that, while every draft of the agreement contained references to the “International Chamber of Commerce,” there were no such express references to the SCAI. In fact, the only reference to the SCAI was in a comment bubble during the parties’ drafting process, which contained a hyperlink to a website that tangentially referred to the SCAI. Based on the foregoing, the court concluded that the agreement required the parties to proceed before the ICC, not the SCAI, and that the SCAI award was therefore not enforceable under the New York Convention.
The court determined that Spineway’s remaining arguments were meritless as well. Although Spineway contended that Strategos had waived its right to oppose confirmation of the award by failing to appear at the SCAI arbitration, the court remarked that none of the cases Spineway cited actually required Strategos to appear to contest jurisdiction.
Next, while Spineway averred that the court should defer to the SCAI arbitrator, the court rejected this assertion because the parties agreed that an ICC arbitrator would determine arbitrability under the ICC rules.
Finally, the court rejected Spineway’s position that Strategos must establish substantial prejudice as a result of the SCAI arbitration to avoid confirmation of the award. The court explained that it identified no binding authority to support Spineway’s assertion and that, in any event, Strategos had suffered prejudice given the material differences between the rules of the ICC and the SCAI.
For these reasons, the court denied Spineway’s request to confirm the arbitral award.
This Article was originally published in the North America Newsletter.
