Copragri S.A. v. Agribusiness United DMCC

Background

Copragri S.A. petitioned under Section 10 of the Federal Arbitration Act to vacate, or cancel, a June 15, 2020 arbitration award issued by the Society of Maritime Arbitrators, Inc. The award required Copragri to pay USD 208,300. Agribusiness United DMCC did not appear in the case and did not oppose the petition.

Copragri and Agribusiness entered into two grain-sales contracts, AUD 715 and AUD 716. Those contracts required Agribusiness to arrange sea transportation and included an arbitration provision using the Grain and Free Trade Association rules and English law. The contracts required certain disputes to be submitted to arbitration within one year after the ship’s final discharge at the destination port.

Agribusiness later sought indemnity from Copragri for a demurrage claim involving delays and other expenses at the discharge port. About six years after the relevant shipment, Agribusiness began arbitration before the Society of Maritime Arbitrators in New York. The bills of lading issued for the shipment called for Society of Maritime Arbitrators arbitration, but Copragri was not a party to those bills of lading.

Copragri repeatedly objected to the arbitration. It stated that the sales contracts, not the bills of lading, governed its relationship with Agribusiness; that it had agreed to Grain and Free Trade Association arbitration rather than New York arbitration; and that the claim was untimely under the applicable rules. Copragri also objected to the arbitrators’ authority, possible conflicts of interest, and the use of a statement of facts allegedly prepared by Agribusiness. The arbitrators’ award did not address these objections, jurisdiction, arbitrability, or the sales contracts.

Jurisdiction and standard of review

The court held that it had subject-matter jurisdiction under 9 U.S.C. § 203 because the dispute involved foreign entities and an arbitration award governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Because the award was issued in New York, the domestic provisions of the Federal Arbitration Act also applied. The court stated that an unanswered petition to vacate an arbitration award is treated as an unopposed motion for summary judgment, while emphasizing that judicial review of an arbitration award is normally narrow and deferential.

Section 10 of the Federal Arbitration Act permits vacatur in limited circumstances, including when arbitrators exceed their authority or fail to make a final and definite award on the submitted subject. An award may also be vacated for manifest disregard of the law, meaning that the arbitrators knew a controlling legal principle, understood that it mattered, and nevertheless deliberately refused to apply it.

Court’s analysis

The court held that the arbitrators exceeded their authority. Copragri had agreed to arbitrate disputes arising from the sales contracts under the Grain and Free Trade Association rules and English law. The court found no contractual basis for requiring Copragri to participate in Society of Maritime Arbitrators arbitration. Although the bills of lading called for Society of Maritime Arbitrators arbitration, Copragri was not a party to them and had not consented to arbitration in New York under United States law.

The court separately held that the award was issued in manifest disregard of the law because the arbitrators did not address Copragri’s five objections. The objections informed the arbitrators that the sales contracts governed, that those contracts required Grain and Free Trade Association arbitration, and that the claim appeared to have been commenced several years after the applicable one-year deadline. The court concluded that the arbitrators’ failure even to address jurisdiction and arbitrability supported vacatur. The court expressly did not decide whether Agribusiness’s indemnity claim was arbitrable because there was no contractual basis for subjecting Copragri to the Society of Maritime Arbitrators proceeding.

Disposition

The court granted the petition and vacated the arbitration award. The Clerk of Court was directed to close the case.