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China National Chartering, Corp v. Pactrans Air & Sea

December 6, 2012

CHINA NATIONAL CHARTERING, CORP., PLAINTIFF,
v.
PACTRANS AIR & SEA, INC., DEFENDANT.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge;

MEMORANDUM OPINION

This matter comes before the Court on Plaintiff China National Chartering Corp.'s ("China National") petition for recognition and confirmation of a foreign arbitration award against the Defendant, Pactrans Air & Sea, Inc. ("Pactrans"). China National also moves for an award of attorneys' fees against Pactrans and seeks the entry of a final judgment against Pactrans pursuant to Federal Rule of Civil Procedure Rule 54(b). For the reasons set forth below, the foreign arbitrational award is confirmed, the Court grants an award of reasonable attorneys' fees and final judgment is entered.

BACKGROUND

In 2006, Devon International Trading Inc. ("Devon") retained Pactrans, as a freight forwarder, to ship a load of gypsum wallboard from China to Pensacola, Florida. Pactrans is an international importer/exporter with its primary place of business located in Bensenville, IL and branch offices located in Beijing, Tianjin, Dongguan, and Qingdao, in the People's Republic of China ("PRC"). Acting as Devon's agent, Pactrans chartered the ship M/V SANKO RALLY from China National to transport the cargo. China National is an international shipping company which ships cargo throughout the world. On April 24, 2006, Pactrans and China National signed a Uniform General Charter Agreement ("Charter Agreement") securing China National's shipping vessel for the transportation of the wallboard. The Charter Agreement included a provision for the arbitration of disputes arising from the Charter Agreement to take place in Beijing, China. When the shipment of wallboard arrived in Pensacola in June 2006, an inspection of the cargo revealed that it had been damaged during transport.

A prolonged series of litigation ensued. In November 2006, China National filed suit in the Southern District of New York seeking the pre-judgment attachment of Pactrans's assets to resolve its demurrage claim. China Nat. Chartering Corp. v. Pactrans Air & Sea, Inc., 2009 WL 3805596 (S.D.N.Y. Nov. 13, 2009).

While the Southern District of New York suit was pending in the United States, China National pursued the arbitration of its demurrage claims against Pactrans in Beijing, China. In February 2009, China National and Pactrans appeared before the China Maritime Arbitration Commission ("CMAC") to arbitrate China National's demurrage charge. On March 31, 2009 the CMAC found in favor of China National issuing an award of $543,814.74, plus attorney and handling fees totaling $105,056.41 and arbitration costs of $8,575.53.

Pursuant to the procedures of PRC Arbitration Law, on August 7, 2009, Pactrans appealed the CMAC arbitration award to the Tianjin Maritime Court. Pactrans raised a multitude of procedural and substantive legal issues challenging the CMAC award. On October 14, 2009, the Tianjin Maritime Court affirmed the CMAC award and thoroughly addressed the reasoning for its decision. China National then sought the recognition and enforcement of the CMAC award in the Southern District of New York. Id. On November 13, 2009, the district court for the Southern District of New York confirmed the foreign arbitration award, and awarded judgment in the amount of the CMAC award. Id. Pactrans appealed the district court's determination of personal jurisdiction in the matter to the Second Circuit Court of Appeals.

On December 8, 2009, China National filed a petition for the recognition of a foreign arbitration award with this Court.*fn1 This Court stayed the case pending the resolution of Pactrans's appeal to the Second Circuit. China Nat. Chartering Corp. v. Pactrans Air & Sea, Inc., 09-cv-7629, No. 30 (N.D. Ill. Jul. 13, 2010). On January 19, 2011, the Second Circuit determined that the maritime attachment of wire funds did not provide the district court with personal jurisdiction over Pactrans. China Nat. Chartering Corp. v. Pactrans Air & Sea, Inc., 411 Fed. Appx. 370 (2nd Cir. 2011). The district court for the Southern District of New York dismissed China National's petition to enforce the foreign arbitration award accordingly. China Nat. Chartering Corp. v. Pactrans Air & Sea, Inc., 2012 WL 3101274 (S.D.N.Y. Jul. 31, 2012). On August 22, 2012, this Court lifted the stay of the case and further took under advisement the merits of China National's petition. China Nat., 09-cv-7629, No. 39 (N.D. Ill. Aug. 22, 2012). The parties have completed briefing and the issues are ripe for decision.

LEGAL STANDARD

Confirmation of foreign arbitration awards are governed by the Convention on Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention ("Convention"). See Slaney v. The Intern. Amateur Athletic Federation, 244 F.3d 580, 588 (7th Cir. 2001). The requirements of the Convention were incorporated into federal law in Chapter 2 of the Federal Arbitration Act ("FAA"). 9 U.S.C. § 201, et seq. "The goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries." Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974).

Under 9 U.S.C. § 207, within three years after an award falling under the Convention is made, "any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention." 9 U.S.C. § 207.

Comporting with the deference accorded to foreign arbitral awards, Article 5 of the Convention enumerates seven narrow grounds which can serve as the basis for a courts refusal to recognize and enforce a foreign arbitration award. See Slaney, 244 F.3d at 588. Pactrans opposes confirmation of the foreign arbitration award and argues that Article 5 bars enforcement based on 1) the invalidity of the arbitration agreement, 2) its lack of ability to present its case, 3) the failure of the arbitration panel to follow the applicable law, and 4) recognition of the arbitration award would be against the public policy of the United States. The Court will address each in turn.

DISCUSSION

I. Validity of Arbitration Agreement

Pactrans first contends that the arbitration provision contained in the Charter Agreement did not conform with the requirements of a valid arbitration agreement under PRC Arbitration Law. This failure Pactrans argues, means that the CMAC did not have jurisdiction to arbitrate the disputed claims, and consequently under Article 5(1)(a) the enforcement of the award must be denied. Article 5(1)(a) provides that "recognition and enforcement of the award may be refused if the competent authority in the country where recognition and enforcement is sought finds that . . . the [arbitration] agreement is not valid under the law to which the parties subjected it to or . . . under the law of the country where the award was made." (Convention, Art. 5(1)(a)).

Pactrans raises three grounds challenging the validity of the CMAC's jurisdiction over the arbitration proceeding. Pactrans argues that the Charter Agreement failed to meet the requirements of a valid arbitration agreement by: 1) failing to specify the matters to be arbitrated, 2) failing to state the applicable law to be applied, and 3) failing to set forth the appropriate Arbitration Commission to conduct the arbitration. Under PRC Arbitration Law, a valid arbitration agreement must contain: 1) the assent of the parties to arbitrate their claims, 2) the matters to be arbitrated, 3) the Arbitration Commission selected by the parties. Article 16 Chapter III, Arbitration Law of the PRC, Adopted 1994.

Before we examine the contract, the Court recognizes "[t]he preeminent concern of Congress in passing the [Arbitration] Act was to enforce private agreements into which parties had entered, a consideration which requires that we rigorously enforce agreements to arbitrate." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985). When parties agree to have their disputes resolved through arbitration, they also agree to accept the arbitrator's view of the facts and the meaning of the contract. See United Paperworkers Int'l. Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 37-38 (1987). In interpreting a contract the court's primary ...


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