Arbitration. Enforcement of Awards. District court confirms and enforces two arbitral awards against a party that neither personally signed an arbitration agreement nor directly involved itself in the arbitration proceedings.

Generali España de Seguros Y Reaseguros, S.A. v. Speedier Shipping, Inc., No. 21-CV-4080 (E.D.N.Y. May 17, 2022) [click for opinion]

In August 2014, Marítima Bizcaina, S.A. (“Mabisa”), a Spanish logistics company, entered into a contract with TSK Electrónica y Electricidad, S.A. (“TSK”), a transformer supplier, to transport an industrial transformer from Brazil to Nicaragua. Mabisa subcontracted the entirety of the transportation job to two entities: Speedier Shipping, Inc. (“Speedier”), a freight forwarder with its principal place of business in Jamaica, New York; and Wasa Projects & Logistics Ltd. (“Wasa”), a shipping solutions company based in Brazil.

The terms of Mabisa’s subcontract agreement with Wasa and Speedier were set forth in a booking note, dated August 18, 2014 (the “Booking Note”). The Booking Note included an arbitration clause (the “Arbitration Clause”), which provides that “any dispute arising out of or in connection with this contract or concerning the validity of this arbitration clause shall be referred to arbitration in London.” In addition, the Arbitration Clause states it is to be commenced and conducted in accordance with the Arbitration Act of 1996 and the London Maritime Arbitrators Association’s Terms. Importantly, the Booking Note was signed by Wasa under the signature line specifying “Speedier Shipping Inc. USA” as the “Carrier.”

In September 2014, the transformer was materially damaged when the truck carrying it struck a bridge. TSK subsequently brought a legal action against Mabisa to recover for the damage to the transformer, but the parties eventually settled upon payment by Mabisa’s insurer, Generali España de Seguros Y Reaseguros, S.A. (“Generali España”), to TSK in the amount of €545,000.00. Following the settlement, Mabisa and Generali España attempted to amicably recover from Wasa and Speedier for the monetary damages that Generali España paid to TSK (on behalf of Mabisa), but negotiations failed.

As a result, Generali España and Mabisa commenced arbitration proceedings against Wasa and Speedier, asserting claims for breach of contract, breach of duty, and/or negligence. On October 15, 2018, a two-person arbitral tribunal (the “Tribunal”) in London concluded that Wasa and Speedier were jointly and severally liable to Mabisa, and ordered that they pay a liability award of €545,000.00 in damages and €16,815.00 in costs at an interest rate of 4.5 percent per annum. Furthermore, on October 8, 2019, the Tribunal issued a second costs award in favor of Mabisa, holding Wasa and Speedier jointly and severally liable for payment of £83,904.58 at an interest rate of 4.5 percent per annum.

Speedier did not pay any portion of the amounts owed from either arbitration award. Therefore, Generali España filed a petition with the U.S. District Court for the Eastern District of New York seeking enforcement of the awards pursuant to Section 207 of the Federal Arbitration Act, 9 U.S.C. § 207, and Article III of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958 (the “New York Convention“).Speedier filed its answer, resisting enforcement and arguing that (1) the Booking Note containing the Arbitration Clause was invalid because Speedier was not a party to the underlying transaction for the shipment of the transformer and that Wasa signed the Booking Note on Speedier’s behalf without consent, and (2) Speedier never agreed to and did not participate in the arbitration proceedings that resulted in the arbitration awards issued against it.

In conducting its highly deferential review of the Tribunal’s final award, the court began by noting that Speedier’s submissions contained no citations to the seven defenses to enforcement available under Article V of the New York Convention, nor to any caselaw construing those defenses. Nevertheless, in order to give Speedier the benefit of the doubt, the court attempted to identify which of the Article V defenses best aligned with the arguments that Speedier presented.

First, the court addressed Speedier’s assertion that the Tribunal’s awards should be rendered invalid and unenforceable because Speedier was not involved in the underlying shipping transaction and did not personally sign the Booking Note. The court interpreted this argument as invoking the defense to enforcement available under Article V(1)(a), which challenges the validity of the arbitration agreement. The court noted, however, that a party need not sign an arbitration agreement to be bound by it, if the party commits itself to the agreement by actions or conduct. Accordingly, “if a party participates in arbitration proceedings without making a timely objection to the submission of the dispute to arbitration, that party may be found to have waived its right to object to the arbitration.”

The court found that this had occurred here. Although Wasa signed the Booking Note, Speedier had consented to be represented by Wasa and its counsel during the arbitration. This consent was evidenced by email correspondence, in which Speedier acknowledged this representation. The court also showed great deference to the Tribunal’s prior conclusion that Wasa’s signature on the Booking Note under Speedier’s designation as “Carrier” was sufficient to bind both parties to the contract because no “as agents only” qualification was added. In addition, the court concluded that Speedier offered no concrete evidence to substantiate its claim that it was not a party to the underlying shipping event.

Next, the court addressed Speedier’s argument that it was not bound by the Tribunal’s decisions because Speedier did not otherwise agree to or participate in the arbitration. The court “[g]enerously construed” this argument to be categorized within Article V(1)(b), which states that a defense to enforcement exists when the resisting party is not given “proper notice” of the arbitration or “was otherwise unable to present [its] case[.]” While both the Tribunal and the court acknowledged that Speedier was not directly involved in the arbitration proceedings, both emphasized that Speedier had notice of the arbitration and was aware that Wasa was acting on its behalf. Thus, because Speedier knew of the arbitration yet declined to participate in the proceedings directly, the court dismissed the idea that the arbitration awards could in any way be barred by Article V(1)(b). Therefore, the court confirmed and enforced the two arbitration awards issued against Speedier.

Sydney Hunemuller and George Patrick, a Summer Associate, of the Dallas office contributed to this summary.