## Facts

- The *Angelina Lauro* burned while docked in Charlotte Amalie, St. Thomas, causing substantial loss.
- The vessel was under a time charter between its owner (Achille Lauro) and the time-charterer (Costa Armatori S.p.A.).
- Rhone, Costa’s insurer, reimbursed Costa for property and fuel losses exceeding $1 million and sued as Costa’s subrogee.
- The complaint alleged breach of the time charter, unseaworthiness, and crew negligence.
- The time charter contained an arbitration clause calling for arbitration in Italy, with each side selecting an arbitrator and a mechanism to appoint a third if needed.
- Defendants moved to stay the Virgin Islands action pending arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Federal Arbitration Act.

## Issues

1. Whether the district court’s order staying the action pending arbitration was immediately appealable under 28 U.S.C. § 1292(a), or nonappealable as an interlocutory stay in an admiralty matter.
2. Whether the arbitration clause was unenforceable under Article II(3) of the Convention because it was allegedly “null and void” under Italian law due to an asserted defect concerning the number of arbitrators.

## Decision

- The Third Circuit denied defendants’ motion to dismiss and held it had appellate jurisdiction to review the stay.
- The court affirmed the stay pending arbitration.
- The court held the arbitration agreement fell within the Convention and was not “null and void” within the meaning of Article II(3).

## Legal Principles

- A stay of an action at law pending arbitration may be treated as an appealable interlocutory injunction under 28 U.S.C. § 1292(a) (Enelow–Ettelson), and the nonappealability rule for stays in admiralty does not control when the action is treated as one at law on a charter contract.
- Article II(3) of the Convention requires referral to arbitration unless the agreement is “null and void, inoperative or incapable of being performed.”
- The “null and void” exception in Article II(3) is construed narrowly, generally limited to internationally recognized contract defenses (e.g., fraud, duress, mistake, illegality, or strong public policy), not technical or procedural objections under a particular nation’s arbitration law.
- In deciding a referral to arbitration under Article II(3), a court may apply forum law consistent with the Convention’s pro-enforcement policy, rather than importing Article V’s award-enforcement choice-of-law framework into Article II.

## Conclusion

The Third Circuit exercised jurisdiction over an interlocutory stay and enforced an Italian-seated arbitration clause under the Convention, holding that alleged technical invalidity under foreign arbitration procedure did not render the agreement “null and void” for purposes of Article II(3).


Rhone Mediterranee Compagnia Francese di Assicurazioni e Riassicurazioni v. Lauro, 712 F.2d 50 (3d Cir. 1983)