Facts
- New York parties entered a written contract for sale and delivery of zinc concentrates in the United States.
- The contract required that “all differences arising thereunder” be arbitrated in London under Great Britain’s arbitration law.
- A delivery dispute arose; the buyer notified the sellers in New York to concur in selecting a London arbitrator or face an application in England for appointment under the English Arbitration Act of 1889.
- After the sellers did not respond, the buyer obtained an English court order allowing issuance of an originating summons to appoint an arbitrator and served that summons on the sellers in New York.
- The sellers again did not appear; a London master appointed an arbitrator.
- The arbitrator served notices in New York directing the sellers to produce documents and attend proceedings in London; the sellers ignored those notices and a later peremptory notice.
- The arbitrator proceeded ex parte in London and issued an award of £46,000 against the sellers.
- The buyer sued in New York to recover the award amount, alleging the English proceedings complied with the 1889 Act.
- The sellers admitted the contract and arbitration clause but denied a binding submission and challenged jurisdiction, public policy, and due process.
Issues
- Whether an agreement by New York residents to arbitrate in London under English arbitration law constitutes consent to English court and arbitral procedures, including extraterritorial service in New York.
- Whether enforcing an award rendered after such procedures is barred by New York public policy or constitutional due process.
- Whether judgment on the pleadings was proper where the complaint alleged compliance with English arbitration law.
Decision
- The Court of Appeals reversed the dismissal and denied defendants’ motion for judgment on the pleadings.
- The court held the arbitration clause could constitute an implied submission to English jurisdictional machinery and procedures specified by English arbitration law.
- The court rejected, at the pleading stage, the claim that such an agreement was contrary to New York public policy or necessarily violated due process.
- The case was remitted for further proceedings to determine whether English law was followed and whether its application conflicted with New York public policy.
Legal Principles
- A contract requiring arbitration in a foreign country under that country’s arbitration law may imply the parties’ consent to the foreign forum’s arbitral and related judicial procedures.
- Consent by contract can supply a jurisdictional basis supporting enforcement of a foreign arbitral award, even when notices authorized by foreign law are served outside the foreign territory.
- New York’s policy favors arbitration; agreements to arbitrate abroad are not invalid merely because they require use of foreign procedural mechanisms.
- On a motion for judgment on the pleadings, well-pleaded allegations (including compliance with the chosen foreign arbitration law) are taken as true, and dismissal is improper where factual/legal compliance questions remain for trial.
Conclusion
The court allowed an action to enforce a London arbitral award to proceed, reasoning that an agreement to arbitrate in London under English law can operate as consent to English arbitration and court appointment procedures, including extraterritorial notice, subject to later proof of actual compliance and any conflict with fundamental New York policy.