## Facts

- Rederi Aktiebolaget Sally (Finland) chartered a vessel to Termarea S.r.l. (Italy) under a charter-party.
- The charter-party contained a London arbitration clause (often referenced as Clause 24).
- The clause provided for party appointment of one arbitrator each and contemplated a third decision-maker to be chosen by the two arbitrators; the clause also indicated that a decision agreed by two members would be binding.
- A dispute arose under the charter-party, and Sally commenced arbitration in London.
- Each party appointed an arbitrator, but the two arbitrators did not appoint the third decision-maker mentioned in the clause.
- The two arbitrators proceeded, reached agreement, and issued an award in Sally’s favor ordering Termarea to pay damages.
- In reaching that procedural result, the arbitrators treated the clause as falling within section 9(1) of the English Arbitration Act 1950, under which a clause in that form is treated as providing for two arbitrators with an “umpire” who becomes relevant only if the two arbitrators do not agree.
- Termarea did not satisfy the award voluntarily.
- Sally applied to the Corte d’Appello di Firenze (Florence Court of Appeal) for recognition and enforcement in Italy of the London award.
- Termarea opposed enforcement, arguing that the award was invalid because it was rendered by only two arbitrators despite the clause’s reference to a third.

## Issues

1. Whether recognition and enforcement in Italy should be refused on the ground that the arbitral tribunal was not constituted in the manner stated in the parties’ arbitration clause (two arbitrators issued the award and no third decision-maker was appointed).
2. Whether, for purposes of assessing the tribunal’s constitution in enforcement proceedings, the arbitration clause should be interpreted under English law as the law of the seat, including section 9(1) of the English Arbitration Act 1950 (treating the third as an umpire needed only upon disagreement).
3. Whether the absence of a third decision-maker, given the agreed London seat and the operation of English arbitration law, amounted to a procedural defect justifying denial of enforcement under the applicable enforcement regime (including standards reflected in New York Convention-type grounds, such as improper composition of the arbitral authority).

## Decision

- The Florence Court of Appeal granted recognition and enforcement (exequatur) of the London arbitral award in Italy.
- The court rejected Termarea’s objection that the tribunal was improperly composed solely because no third decision-maker was appointed.
- The court accepted that, because the arbitration was seated in London, English law governed the functioning of the tribunal and the meaning of the clause in this respect.
- Relying on the effect of English Arbitration Act 1950 § 9(1), the court treated the clause as establishing two arbitrators with an umpire mechanism, so that the absence of an umpire (or “third”) did not matter where the two arbitrators agreed and issued an award.
- The court found no basis, on these facts, to treat the award as procedurally defective in a way that would bar enforcement in Italy.

## Legal Principles

- In enforcement proceedings for a foreign award, an objection based on tribunal composition is assessed by reference to the parties’ agreement as properly interpreted and, where relevant, the arbitration law of the seat selected by the parties.
- Where the arbitration clause points to a foreign seat, the enforcing court may look to that seat’s arbitration statute to determine how the clause operates in practice (including whether a “third arbitrator” functions as an umpire who acts only upon disagreement).
- A party resisting enforcement on the basis of tribunal composition must show a real departure from the valid appointment and decision-making structure applicable to the arbitration; a formal reference to a third decision-maker is not enough if the seat’s law treats that role as contingent and not required when the two arbitrators agree.
- The enforcing court’s review remains limited to recognized refusal grounds; it does not re-decide the merits and will not deny enforcement absent a qualifying defect in the arbitral process.

## Conclusion

The Florence Court of Appeal enforced the London award in favor of Sally, holding that the tribunal’s issuance of an award signed by the two party-appointed arbitrators—without appointing a third—was consistent with the parties’ London seat choice and with English Arbitration Act 1950 § 9(1), which treats a clause in that form as providing for an umpire needed only if the arbitrators disagree.


Rederi Aktiebolaget Sally v. Termarea S.r.l., Corte d’Appello di Firenze [Ct. App. Florence], Mar. 13, 1978, translated in 4 Y.B. Com. Arb. 294 (1979).