## Facts

- Cargill B.V. (CBV) purchased 7,000 metric tons of crude Argentine degummed soybean oil from Cargill International S.A. (CISA).
- CISA chartered the M/T Pavel Dybenko from Novorossiysk Shipping Co. (a state-owned entity) to carry soybean oil from Argentina and Brazil to the Netherlands.
- The charter party required arbitration of disputes in either New York or London as specified; London was designated, and the charter also directed that bills of lading state “Arbitration in London.”
- Bills of lading were issued for cargo loaded in Argentina and Brazil, but the bills did not incorporate the charter party’s arbitration clause.
- After arrival in Amsterdam, CBV alleged the cargo was contaminated and asserted damages of about $920,000.
- CBV and CISA sued in the Southern District of New York to compel Novorossiysk to arbitrate in London and to preserve a U.S. forum given potential defenses.
- Novorossiysk moved for summary judgment, asserting foreign sovereign immunity under the Foreign Sovereign Immunities Act (FSIA).
- The district court held Novorossiysk was covered by the FSIA and that no FSIA exception applied, entered summary judgment for Novorossiysk, and denied the request to compel arbitration; CBV appealed.

## Issues

1. Whether Novorossiysk qualified as a “foreign state” agency or instrumentality under the FSIA despite alleged privatization.
2. Whether agreeing to arbitrate in London constituted an explicit or implied waiver of FSIA immunity in U.S. courts under 28 U.S.C. § 1605(a)(1).
3. Whether the FSIA arbitration exception, 28 U.S.C. § 1605(a)(6)(B), supplied jurisdiction through the New York Convention where CBV was not a charter party signatory.
4. Whether CBV could enforce the charter party’s arbitration clause as a third-party beneficiary, notwithstanding bills of lading that omitted the clause.
5. Whether the district court was required to conduct factual and legal inquiry necessary to decide application of an FSIA exception (“jurisdiction to determine jurisdiction”).

## Decision

- The Second Circuit reversed the grant of summary judgment and remanded.
- The court agreed Novorossiysk was an FSIA agency or instrumentality; alleged privatization was insufficient to negate that status on this record.
- The court held that an agreement to arbitrate in London, standing alone, did not imply a waiver of immunity from suit in U.S. courts under § 1605(a)(1), particularly as to a nonsignatory.
- The court held the district court erred by not examining CBV’s claim of third-party beneficiary rights to the charter party arbitration clause when assessing the § 1605(a)(6)(B) arbitration exception.
- The case was remanded for proceedings to determine whether CBV could establish an enforceable “agreement to arbitrate” under the New York Convention via third-party beneficiary principles, and thus whether the FSIA arbitration exception applied.

## Legal Principles

- A state-owned shipping company may qualify as an “agency or instrumentality” of a foreign state under the FSIA absent adequate proof that privatization transferred ownership to private hands.
- An agreement by a foreign state entity to arbitrate outside the United States does not, by itself, constitute an implied waiver of FSIA immunity in U.S. courts under 28 U.S.C. § 1605(a)(1).
- The FSIA arbitration exception, 28 U.S.C. § 1605(a)(6)(B), can supply jurisdiction where the arbitration agreement (or resulting award) is governed by an enforcement treaty in force for the United States, including the New York Convention.
- Whether a nonsignatory can invoke the FSIA arbitration exception may depend on contract-law doctrines (such as third-party beneficiary status) establishing an enforceable agreement to arbitrate.
- Courts applying the FSIA may take evidence and resolve disputed jurisdictional facts necessary to determine whether an immunity exception applies (“jurisdiction to determine jurisdiction”).

## Conclusion

The Second Circuit held that Novorossiysk was presumptively immune under the FSIA and that the London arbitration clause was not an implied waiver of U.S. immunity, but it required remand because the district court had to assess whether CBV could enforce the charter party’s arbitration clause as a third-party beneficiary and thereby invoke the FSIA arbitration exception through the New York Convention.


Cargill Int’l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993)