## Facts

- Encyclopaedia Universalis, S.A. (EUSA) and Encyclopaedia Britannica, Inc. (EB) were parties to a long-running license agreement requiring EB to pay royalties for non-French editions of a French reference work.
- The agreement required arbitration by a three-member tribunal: each party appointed one arbitrator; the two appointees then attempted to agree on a chair; if they could not agree, the President of the Tribunal de Commerce of Luxembourg would appoint the chair from a specified list maintained by the “British Chamber of Commerce.”
- A royalty dispute went to arbitration in the mid-1990s; EUSA appointed Raymond Danziger and EB appointed Robert Layton.
- In 1998–1999, Danziger and Layton disputed governing rules and procedures.
- In 1999, Danziger contacted the Luxembourg appointing authority stating the arbitrators could not agree on a chair and requested an appointment, noting the contract’s referenced list no longer existed and asking that the appointment proceed without it.
- The President appointed Nicolas Decker as the third arbitrator.
- Layton objected that the contractual prerequisite—an effort by the two party-appointed arbitrators to agree on the third—had not occurred; EB refused to participate further after Decker’s appointment.
- The tribunal proceeded without EB and issued an award in January 2002 for EUSA.
- EUSA petitioned a federal district court to confirm the foreign arbitral award under the New York Convention and the Federal Arbitration Act; EB opposed confirmation.

## Issues

1. Whether enforcement had to be refused under New York Convention Article V(1)(d) because the tribunal’s composition was not in accordance with the parties’ agreed appointment procedure.
2. Whether EB’s refusal to participate in the arbitration barred it from raising an Article V(1)(d) objection at the enforcement stage.
3. Whether, after refusing confirmation, the court could grant additional relief concerning the arbitrators’ authority or the conduct of any renewed arbitration.

## Decision

- The court denied EUSA’s petition to confirm the arbitral award.
- The court held EB established an Article V(1)(d) defense because the tribunal was not constituted in the manner the parties agreed.
- The court did not treat EB’s non-participation as forfeiting its tribunal-composition objection where EB objected contemporaneously and raised the defect in the enforcement proceeding.
- The court addressed, in addition to non-enforcement, questions about arbitrators’ powers and potential directions for future proceedings.

## Legal Principles

- Under the New York Convention, a court may refuse recognition and enforcement when “the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties.” (Art. V(1)(d))
- Party consent controls arbitral legitimacy; courts defer to arbitration only when the tribunal is formed and proceeds according to the parties’ bargained-for method.
- A contractually required sequence for appointing arbitrators can be a substantive condition of enforceability, not a minor formality.
- A party that objects to a defective tribunal constitution may preserve the objection for enforcement proceedings, even if it declines to participate after the alleged defect occurs.

## Conclusion

The court refused to confirm the foreign arbitral award because the third-arbitrator appointment did not follow the agreement’s required sequence, rendering the tribunal’s composition inconsistent with the parties’ contract and triggering non-enforcement under New York Convention Article V(1)(d).


Encyclopaedia Universalis, S.A. v. Encyclopaedia Britannica, Inc., No. 03 Civ. 4363 (SAS), 2003 WL 22881820 (S.D.N.Y. Dec. 3, 2003)