Copragi S.A. v. Agribusiness United DMCC, No. 20 Civ. 5486 (LGS) (S.D.N.Y. Mar. 15, 2021) [click for opinion]

In August of 2013, Petitioner, Copragi S.A. (“Copragi”), a Moroccan entity, and Respondent, Agribusiness United DMCC (“Agribusiness”), a citizen of the United Arab Emirates, entered into two contracts for grain cargoes (collectively, the “Sales Agreements”). The Sales Agreements contained a Grain and Free Trade Association (“GAFTA”) arbitration provision, dictating that any disputes regarding the Sales Agreements be arbitrated under GAFTA rules and under English law. GAFTA rules mandate that parties are to commence arbitration of certain disputes no later than one year after “the date of completion of final discharge of the ship at port of destination.”

Pursuant to the Sales Agreements, Agribusiness arranged for the transportation of the goods by sea, chartering a vessel to transport the goods from Louisiana, USA, to Morocco. Bills of lading for the cargoes were issued by the vessel’s master to Agribusiness. The bills of lading called for arbitration by the Society of Maritime Arbitrators, Inc. (“SMA”) in New York. Due to delays of the vessel and other expenses incurred at the discharge port in Morocco, the vessel’s master presented a demurrage claim against Agribusiness, and on November 7, 2013, Agribusiness presented an indemnity claim against Copragi. Six years later, in September of 2019, Agribusiness commenced SMA arbitration of the indemnity claim.

Copragi objected on no less than five separate occasions to the SMA arbitration, both in correspondence to Agribusiness and to the appointed SMA arbitrators. Notably, Copragi objected to the jurisdiction and arbitrability of the claim presented, asserting that it was not a party to the bills of lading on which the claim was predicated; that the dispute arose under the Sales Agreements, which mandated that any claims be pursued before a GAFTA arbitration panel under English law; and that any such claim was time-barred under the applicable GAFTA arbitration rules.

Notwithstanding Copragi’s repeated objections, the SMA tribunal entered an award against Copragi in the amount of $208,300. The tribunal’s award did not address Copragi’s five objections and made no mention of the Sales Agreements between Copragi and Agribusiness.

On July 16, 2020, Copragi moved to vacate the award. After attempting to obtain service on Agribusiness through conventional means, service was obtained through alternative means under Federal Rule of Civil Procedure 4(f)(3). Agribusiness did not appear. The district court accordingly granted Copragi’s motion to vacate the award for two independent reasons under Section 10 of the Federal Arbitration Act, 9 U.S.C. § 10, holding that the arbitrators acted outside of the scope of their authority and acted in manifest disregard of the law.

First, relying on the axiomatic principle that a party cannot be required to submit to arbitration any dispute to which it has not contractually agreed to submit, the district court found that the tribunal exceeded its authority because there was no basis to subject Copragi to SMA arbitration. Rather, Copragi only consented to arbitration of disputes arising from the Sales Agreements under GAFTA rules, under English law.

Second, the district court concluded that the tribunal’s failure to address, in any fashion, Copragi’s objections to the SMA arbitration and jurisdiction was in “manifest disregard of the law.” The tribunal was aware that Copragi disputed arbitrability and the SMA’s jurisdiction—including the outcome determinative question of whether Agribusiness’s claims were time-barred—yet, the tribunal proceeded, and at no point acknowledged those issues. Accordingly, the district court vacated the SMA award.

 

A version of this post originally appeared in the May 2021 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Jacob Kaplan.

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