## Facts

- Bauhinia Corporation, a California company, contracted with China National Machinery & Equipment Import & Export Corp. (CMEC), a Chinese state trading entity, to purchase nails in 1981–1982.
- The contracts were executed in California and called for delivery to multiple U.S. ports, including locations in California and Seattle, Washington.
- CMEC failed to deliver, asserting that a governmental edict from the People’s Republic of China prevented performance.
- Bauhinia sued CMEC in the U.S. District Court for the Eastern District of California for breach of contract.
- CMEC moved to compel arbitration based on arbitration language contained in multiple written agreements.
- One contract (in Chinese) provided only that the parties would consult to resolve quality problems.
- Two English-language contracts contained an arbitration clause that referenced arbitration “to be held in Peking” before a Chinese commission, but also included an alternative arbitration arrangement with unfilled blanks for (i) the arbitration location and (ii) an additional arbitrator nationality.
- The district court compelled arbitration but directed that it proceed in the Eastern District of California before the American Arbitration Association (AAA), rather than in Beijing before the referenced Chinese commission.
- CMEC appealed the portion of the order selecting a domestic forum and the AAA.

## Issues

1. Whether, under the Federal Arbitration Act and the New York Convention’s implementing provisions, a district court may compel arbitration in its own district and designate the AAA when the contract references arbitration in Beijing before a Chinese commission but also contains an incomplete alternative forum provision.
2. Whether the FAA limits a court’s authority to compel arbitration outside the district when the parties’ agreement does not clearly and exclusively specify a foreign arbitral seat.

## Decision

- The Ninth Circuit affirmed the order compelling arbitration and the designation of the AAA in the Eastern District of California as the arbitral forum.
- The court held the arbitration provisions were ambiguous as to an exclusive place and institution for arbitration because the clause contemplated alternatives but left key terms blank.
- Because the agreement did not clearly require arbitration in Beijing before a specific institution, the district court could compel arbitration within its district consistent with the FAA’s territorial limitations.
- The selection of a domestic arbitral administrator (AAA) was permissible to implement the parties’ agreement to arbitrate where the contract did not supply a definite, exclusive forum.

## Legal Principles

- Federal law governs arbitrability questions in international commercial agreements, and federal policy strongly favors arbitration, including in international commerce.
- An arbitration clause that is internally inconsistent or incomplete as to forum does not unambiguously mandate a particular arbitral seat or institution.
- When the agreement fails to clearly provide a single place for arbitration, a federal court may compel arbitration within its district under FAA § 4.
- FAA § 206 authorizes courts to direct arbitration at a place “provided for” in the agreement; when the agreement does not clearly provide a place, the court may rely on default statutory authority to ensure arbitration proceeds.
- Courts may designate an appropriate arbitral mechanism to effectuate the parties’ intent to arbitrate when the contract evidences agreement to arbitrate but does not definitively settle the forum details.

## Conclusion

The Ninth Circuit upheld compelling arbitration while approving a domestic seat and the AAA because the contracts showed an intent to arbitrate but did not clearly and exclusively require arbitration in Beijing before the referenced Chinese commission, permitting the district court to order arbitration within its district under the FAA.


Bauhinia Corp. v. China Nat’l Mach. & Equip. Imp. & Exp. Corp., 819 F.2d 247 (9th Cir. 1987)