Harren & Partner Ship Management de Mexico S.A.P.I. v. American Bureau of…

Background

The petitioners asked the court to temporarily stop an arbitration that the respondents had started against them before the Society of Maritime Arbitrators. The court had previously ordered the respondents to explain why a temporary restraining order and preliminary injunction should not issue. The respondents opposed the request, and the petitioners filed a reply.

The Parties’ Arguments

The petitioners argued that no arbitration agreement was currently in force between them and the respondents. The respondents relied on two theories. First, they argued that the petitioners accepted and paid invoices and received a certificate that incorporated the respondents’ rules, including an arbitration provision. Second, they argued that the petitioners were barred from denying an obligation to arbitrate because they allegedly benefited directly from an arbitration agreement between the respondents and COSCO Nantong Shipyard, a third party.

Court’s Analysis

To obtain a preliminary injunction, a party must show a likely success on the merits, likely irreparable harm without an injunction, a favorable balance of hardships, and that an injunction would serve the public interest.

The court held that the petitioners had shown a likelihood of success on their argument that no enforceable written arbitration agreement existed. It explained that the Federal Arbitration Act’s provisions concerning international arbitration applied because the petitioners were corporations formed under the laws of the United Mexican States with principal offices in Mexico. Under the applicable international arbitration rules, an arbitration agreement must be in writing, meaning it must be signed by the parties or contained in an exchange of letters or telegrams. The invoices and certificates were sent after the respondents performed services, were not signed by both parties, and did not appear to constitute an exchange of letters or telegrams.

The court also found that the petitioners had shown a likelihood of success against the respondents’ estoppel theory. Because the respondents had not shown that an arbitration agreement existed with the petitioners or with a third party connected to them, the court stated that the petitioners could not be prevented from denying an obligation to arbitrate. The respondents identified a 2007 arbitration agreement with COSCO Nantong Shipyard but did not provide a sufficient legal basis for applying that agreement against the petitioners.

The court found likely irreparable harm because the petitioners would otherwise have to spend time and resources arbitrating an issue that was not arbitrable and for which any award would not be enforceable. It found that the balance of equities favored the petitioners because the injunction would preserve the pause in the arbitration, while the respondents would not materially lose their opportunity to arbitrate if they ultimately prevailed. The court also found that enforcing a dispute-resolution process to which a party did not agree would not serve the public interest.

Disposition

Judge Lorna G. Schofield granted the petitioners’ request to preliminarily enjoin the arbitration until the petitioners’ request to permanently enjoin the arbitration is resolved. The court canceled the conference scheduled for July 8, 2021, and ordered the parties to submit a joint letter by July 14, 2021, proposing next steps. The order did not resolve the request for a permanent injunction.