Fish-eye view of Singapore city skyline at sunset.

China Shipping Container Lines Co. Ltd. v. Big Port Serv. DMCC, No. 15 Civ. 2006 (S.D.N.Y. Jan. 15, 2019) [click for opinion]

Through a series of subcontracts, Big Port Service DMCC (“BPS”) supplied marine fuel oil to a vessel owned by CSCL Container Lines Co. Ltd. (“CSCL”). After one of the intermediary contractual parties’ affiliates filed for bankruptcy, BPS sought payment of its outstanding invoice directly from CSCL. However, BPS’s contract to supply the fuel—and the agreement to arbitrate in New York contained therein—was with an intermediary party, not directly with CSCL.

BPS commenced an action in Singapore and convinced the court there to arrest CSCL’s vessel, requiring CSCL to pay millions of dollars in security to obtain the vessel’s release. BPS then served CSCL with a demand to arbitrate in New York and sought a stay of the Singapore proceedings pending arbitration. In response, CSCL challenged the warrant of arrest for the vessel and moved to dismiss the Singapore action on the grounds that there was no contract between the parties.

CSCL also commenced an action in the New York district court seeking to enjoin the arbitration that BPS had commenced. BSL opposed that motion, arguing, inter alia, that Singapore was the proper venue for the dispute and that the Singapore courts should adjudicate arbitrability. Accordingly, at BPS’s urging, the New York action was stayed for more than two years while the issue of arbitrability was litigated in Singapore.

Ultimately, the Singapore High Court held that CSCL was not a party to the New York arbitration agreement; accordingly, the court dismissed BPS’s action and ordered the security returned to CSCL. BPS unsuccessfully pursued every available appeal until the decisions refusing to stay the Singapore action in favor of New York arbitration and dismissing the Singapore action became final and non-appealable.

Following the conclusion of the Singapore action, the New York district court lifted the stay, and addressed BPS’s objections to CSCL’s petition to enjoin the arbitration. BPS first challenged the court’s jurisdiction over CSCL’s motion; however, the court determined it had admiralty jurisdiction because a contract for the supply of marine fuel is a maritime contract and because a court has admiralty jurisdiction over a declaratory action brought by a party claiming that it is not a party to a maritime contract.

BPS also contested the venue of the action, arguing that New York was an improper venue because none of the events giving rise to the petition occurred in the district. This argument, too, was rejected because BPS’s pursuit of arbitration against CSCL in New York constituted consent to venue of the courts of that jurisdiction for actions regarding the arbitration clause.

Having confirmed its jurisdiction and propriety of venue, the New York court granted CSCL’s motion to recognize the Singapore decisions, providing three reasons in support therefor. First, the Singapore courts had jurisdiction over the arbitrability issue, which BPS itself had repeatedly affirmed. Second, the Singapore decisions would not prejudice the rights of a U.S. citizen, as BPS was a UAE entity. Third, recognition would not violate any domestic public policy, including the policy favoring arbitration, because the policy favoring arbitration applies only in determining the scope of issues subject to arbitration, not in deciding the threshold issue of the existence of an agreement to arbitrate.

The court also accorded preclusive effect to the Singapore decisions under the principle of collateral estoppel. Collateral estoppel was appropriate because (1) BPS raised the identical issue of arbitrability in the Singapore court, and represented to the New York court that the Singapore court should decide the issue; (2) BPS actually and extensively litigated the issue in Singapore; (3) BPS had a full and fair opportunity to litigate the issue in Singapore; and (4) BPS’s contention that an arbitration agreement existed was the central allegation in the Singapore action. Accordingly, the court held that BPS was collaterally estopped from relitigating the issue of whether the parties had a valid arbitration agreement, as the Singapore courts had already held that they did not.

In addition, the court found that BPS was judicially estopped from arguing that CSCL could be ordered to arbitrate. BPS’s current position was clearly inconsistent with its earlier position in the case that, if the Singapore courts found the dispute was not arbitrable, then CSCL would not be forced to arbitrate.

In light of its decision, the court entered declaratory judgment in CSCL’s favor stating that CSCL had no agreement to arbitrate with BPS, and permanently enjoined the arbitration demanded by BPS.

A version of this post originally appeared in the March 2019 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.

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