## Facts

- Saudi Arabia undertook construction of a hospital in Jubail; Dongsan Constr. Co., a Korean general contractor, held the prime contract.
- Dongsan subcontracted architectural and engineering design work to Rogers, Burgun, Shahine & Deschler, Inc. (RBSD), a New York firm.
- The subcontract price was approximately $2.596 million, including a 20% advance payment of $519,217.
- To secure the advance, RBSD obtained a letter of guarantee from Bank Al-Jazira; the guaranteed amount decreased as RBSD performed work and was paid.
- The subcontract included a broad clause requiring arbitration in Paris under ICC rules.
- RBSD performed part of the work and received partial payment; disputes over specifications and delays were mostly resolved and led to an August 22, 1984 modification setting a completion schedule.
- A later dispute arose over RBSD’s performance; Dongsan stated it would perform certain RBSD obligations itself and would not pay the remaining balance.
- By then, the remaining secured amount under the guarantee was about $155,766.
- RBSD sued in the Southern District of New York for breach of contract, claiming about $900,000 due, and sought a TRO and preliminary injunction to prevent Dongsan from drawing on the letter of guarantee.
- The court initially issued a TRO; Dongsan moved to dismiss or stay the action pending arbitration.

## Issues

1. Whether the Federal Arbitration Act and the New York Convention required the court to stay the action in favor of ICC arbitration in Paris, and whether Dongsan had waived arbitration.
2. Whether the court could grant provisional injunctive relief in aid of arbitration by enjoining Dongsan from drawing on the letter of guarantee.

## Decision

- The court granted Dongsan’s motion to stay the action pending ICC arbitration, finding the dispute within a mandatory, non-waived arbitration clause.
- The court ordered Dongsan to commence arbitration within 30 days and indicated failure to do so could be treated as waiver.
- The court granted RBSD’s motion for a preliminary injunction enjoining Dongsan from calling the letter of guarantee pending arbitration (or further order).
- The court found RBSD showed irreparable harm and at least serious questions going to the merits, and that the balance of hardships favored maintaining the status quo until arbitration.

## Legal Principles

- Under the Federal Arbitration Act and the New York Convention, courts must enforce covered arbitration agreements and stay judicial proceedings when the dispute falls within the clause.
- Waiver of the right to arbitrate is not lightly inferred; conduct short of clear relinquishment generally does not waive arbitration.
- A court may issue provisional equitable relief in aid of arbitration to preserve the status quo and protect the effectiveness of the arbitral process.
- Preliminary injunctive relief may be granted upon a showing of irreparable harm and either likelihood of success on the merits or sufficiently serious questions going to the merits, plus a favorable balance of hardships.

## Conclusion

The court compelled ICC arbitration by staying the litigation, but it also used its equitable power to prevent a potentially irreversible draw on a bank guarantee, preserving the parties’ positions until the arbitrators could decide the merits.


Rogers, Burgun, Shahine & Deschler, Inc. v. Dongsan Constr. Co., 598 F. Supp. 754 (S.D.N.Y. 1984)