## Facts

- K.K. Amerido Nihon (Amerido), a Japanese company, entered a written exclusive sales agency and distribution contract to sell Drew Chemical Corporation’s (Drew) products in Japan.
- The contract provided that New York law governed the agreement.
- The contract also contained a broad arbitration clause stating that disputes arising from or in relation to the contract could, at either party’s option, be submitted to arbitration in New York.
- The written contract reached the end of its stated term and was not formally renewed in a new written instrument.
- After expiration, Amerido and Drew continued to conduct business in a manner consistent with the expired written contract, as if the prior arrangement remained in effect.
- Drew later established a subsidiary in Japan and concluded it no longer needed Amerido to act as its intermediary in Japan.
- Drew sent Amerido a notice stating that the contractual relationship was terminated.
- Amerido filed suit against Drew in Japan (Yokohama District Court), seeking damages allegedly caused by Drew’s termination.
- Drew moved to dismiss the Japanese action based on the New York arbitration clause.
- Amerido opposed dismissal, arguing (1) Drew could not invoke the arbitration clause because Drew asserted no claim against Amerido, and (2) the arbitration clause was unenforceable because the written contract had expired.

## Issues

1. Whether a defendant may rely on an arbitration clause to seek dismissal of a court action even if the defendant asserts no affirmative claim against the plaintiff.
2. Whether an arbitration clause in an expired written contract remains effective where the parties continue dealing as though the contract’s terms still govern their relationship.
3. Whether a Japanese court should decline to proceed on the merits of a damages suit when the dispute falls within a valid agreement to arbitrate in New York at either party’s option.

## Decision

- The court granted Drew’s request to enforce the arbitration agreement as a bar to proceeding with the Japanese court action on the merits.
- The court treated the arbitration clause as available to either party, including a defendant invoking it in response to a lawsuit.
- The court treated the arbitration clause as continuing to apply despite the written contract’s expiration where the parties’ post-expiration dealings reflected continuation of the same commercial relationship and the dispute related to that relationship.
- The court directed the parties to resolve the dispute through the agreed New York arbitration process rather than litigating the merits in Japan.

## Legal Principles

- A bilateral arbitration clause that permits either party to elect arbitration may be invoked by a defendant to stop or defeat court litigation, even when the defendant has not filed its own affirmative claim.
- An arbitration clause may remain operative after the stated term of a written contract ends when the parties’ conduct indicates they continued their relationship on substantially the same terms and the dispute is connected to that continued relationship.
- When the parties have agreed to arbitrate covered disputes in a foreign forum, a court should refrain from reaching the merits and should give effect to the parties’ agreement by referring the dispute to arbitration, absent a showing that the arbitration agreement is invalid or inapplicable.

## Conclusion

K.K. Amerido Nihon v. Drew Chemical Corp. held that Drew could invoke the parties’ New York arbitration clause to block Amerido’s Japanese damages action, rejecting arguments that the clause could not be used defensively or that it lapsed upon the written contract’s expiration where the parties continued to transact as though the contract remained in force.


K.K. Amerido Nihon v. Drew Chemical Corp., 1981 Quarterly of the Japan Commercial Arbitration Association (Nos. 81–82) 1 (1981)