## Facts

- Encyclopaedia Universalis S.A. (EUSA) and Encyclopaedia Britannica, Inc. (EB) entered a 1966 Literary Property License Agreement granting EB rights to translate and distribute non-French editions of a French reference work in exchange for royalties.
- The License Agreement required arbitration of all disputes and incorporated a procedure requiring a three-arbitrator tribunal: each party appoints one arbitrator; those two arbitrators must attempt to agree on a third; only if they cannot agree may the President of the Tribunal of Commerce of Luxembourg appoint the third.
- In October 1995, EB stopped making royalty payments, triggering a dispute.
- In 1998, EUSA initiated arbitration and appointed an arbitrator; EB appointed its arbitrator shortly thereafter.
- In March 1999, before the two appointed arbitrators attempted to agree on a third arbitrator, EUSA’s arbitrator requested the Luxembourg tribunal president to appoint the third, asserting an inability to agree.
- The tribunal president appointed a third arbitrator; EB’s arbitrator objected that the contract-required consultation had not occurred.
- The Luxembourg tribunal permitted the arbitration to proceed with the appointed third arbitrator; EB’s arbitrator ultimately stopped participating.
- In January 2002, the arbitral tribunal awarded EUSA damages and found EUSA entitled to terminate the License Agreement.
- In 2003, EUSA sought recognition and enforcement of the Luxembourg award in the Southern District of New York under the New York Convention; the district court denied enforcement and also prescribed procedures for any future arbitration.

## Issues

1. Whether enforcement was properly refused under New York Convention Article V(1)(d) because the tribunal was not composed in accordance with the parties’ agreed method for appointing the third arbitrator.
2. Whether “exceeded powers/mandate” is an independent ground to refuse enforcement of a foreign arbitral award under the New York Convention.
3. Whether a federal court may impose a supplemental remedy specifying procedures for a renewed arbitration after denying enforcement.

## Decision

- The Second Circuit affirmed denial of enforcement under Article V(1)(d) because the third arbitrator was appointed without satisfying the contract’s prerequisite that the two party-appointed arbitrators first attempt to agree on the third.
- The court reversed the district court’s reliance on “exceeded powers” as an additional, independent ground for non-enforcement under the New York Convention.
- The court vacated the district court’s supplemental remedy directing procedures for any future arbitration, holding that such relief exceeded the court’s authority under the Convention.

## Legal Principles

- Under New York Convention Article V(1)(d), a court may refuse recognition and enforcement when the composition of the arbitral authority or arbitral procedure is not in accordance with the parties’ agreement.
- Where the parties’ agreement makes party-appointed arbitrators’ attempt to select a third arbitrator a prerequisite to court/official appointment, skipping that step renders the tribunal improperly composed for Article V(1)(d) purposes.
- The New York Convention’s defenses to enforcement are enumerated and exclusive; domestic arbitration concepts such as “exceeded powers” do not operate as free-standing Convention defenses.
- A court’s remedial authority in a Convention enforcement action is limited to confirming or refusing enforcement on Convention grounds; it may not redesign or dictate procedures for future arbitration.

## Conclusion

The Second Circuit refused to enforce the foreign arbitral award because the tribunal was constituted contrary to the parties’ agreed appointment process, clarified that non-enforcement must rest on the Convention’s specified defenses, and held that courts may not impose forward-looking arbitration procedures as part of Convention enforcement proceedings.


Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85 (2d Cir. 2005)