## Facts

- PepsiCo, through its Venezuelan subsidiary Pepsi-Cola Panamericana, S.A., entered exclusive Pepsi-Cola bottling agreements (effective Jan. 1, 1988) with a group of Venezuelan bottling companies represented by Oficina Central de Asesoría y Ayuda Técnica, C.A. (OCAAT).
- Each agreement granted exclusive territorial bottling rights for 15 years and included a liquidated-damages clause for premature termination.
- The agreements provided that Venezuelan law governed the contracts’ substance, while disputes were to be arbitrated under ICC rules with the seat in New York and New York law governing arbitral procedure.
- The Cisneros bottling companies terminated the agreements before the 15-year term ended; PepsiCo demanded liquidated damages.
- OCAAT initiated litigation in Venezuela seeking a declaration of lower damages and a determination that the arbitration clause was inoperative under Venezuelan law.
- PepsiCo filed in the Southern District of New York under the New York Convention and 9 U.S.C. §§ 201–208 to compel arbitration and to enjoin the Venezuelan litigation.
- Respondents conceded federal jurisdiction to compel arbitration but urged the court, based on international comity, to defer to the Venezuelan courts on the arbitration clause’s operability under Venezuelan law.

## Issues

1. Whether the court should immediately compel arbitration under the New York Convention and the Federal Arbitration Act.
2. Whether the court should issue an anti-suit injunction barring respondents from pursuing related litigation in Venezuelan courts.
3. Whether international comity warranted a temporary stay to permit a Venezuelan court to decide a threshold Venezuelan-law question affecting the arbitration clause’s validity or operability.

## Decision

- The court denied immediate relief to compel arbitration and denied an immediate anti-suit injunction against the Venezuelan proceedings.
- The court retained jurisdiction over the petition to compel arbitration.
- The court stayed the federal proceedings for 60 days to allow the Venezuelan court, if it chose, to address a threshold question of Venezuelan law concerning the arbitration clause.

## Legal Principles

- Federal courts may have jurisdiction to compel arbitration under the New York Convention while still exercising discretion over the timing and scope of relief in light of parallel foreign proceedings.
- International comity can justify restraint, particularly where the foreign litigation involves the same dispute and presents a threshold question under the foreign law designated by the parties as governing the contract.
- Anti-suit injunctions affecting foreign proceedings are disfavored absent a strong showing; courts may opt for a limited stay to reduce conflict while preserving Convention-based rights.
- A limited, time-bound stay can balance the federal policy favoring arbitration with respect for a foreign sovereign’s interest in applying its own law to contracts governed by that law.

## Conclusion

The court declined to compel arbitration and enjoin the Venezuelan litigation on an expedited basis, instead staying the federal case for 60 days on comity grounds so a Venezuelan court could address a threshold Venezuelan-law issue concerning the arbitration clause, while the federal court maintained jurisdiction to act thereafter.


PepsiCo, Inc. v. Oficina Cent. de Asesoría & Ayuda Técnica, C.A., 945 F. Supp. 69 (S.D.N.Y. 1996)