## Facts

- Sumitomo Corporation (Japan) contracted to construct and sell a bulk carrier to Parakopi Compania Maritima, S.A. (Panama/Greece); Oshima Shipbuilding Co., Ltd. (Japan) agreed to be bound by applicable contract terms as builder.
- The contract’s dispute clause distinguished technical disputes (referred to a Japanese classification society as final and binding) from all other disputes, which were to be arbitrated in New York under the United States Arbitration Act.
- The arbitration clause required each party to appoint an arbitrator; those two arbitrators were to select a third arbitrator to form a three-member panel.
- A dispute arose over Parakopi’s payment obligations after changed economic conditions.
- Parakopi filed an action in Greece seeking judicial permission to suspend or modify payments; at the time of the U.S. proceeding, no Greek merits ruling or substantive relief had issued affecting the contract or arbitration clause.
- Sumitomo and Oshima demanded arbitration in New York and appointed an arbitrator; Parakopi timely appointed its arbitrator but refused, along with its arbitrator, to participate in selecting the third arbitrator.
- Petitioners sought in federal court an order compelling arbitration and court appointment of the third arbitrator.

## Issues

1. Whether the court should compel arbitration under the New York Convention and the Federal Arbitration Act despite a pending related action in Greece.
2. Whether the court may appoint a third arbitrator under FAA § 5 when the party-appointed arbitrators fail to select one, notwithstanding respondent’s reliance on the Greek proceeding.

## Decision

- The court granted the petition to compel arbitration in New York.
- The court rejected the request to withhold enforcement on international comity grounds because the foreign case had not produced a judgment or substantive order rendering the arbitration agreement inoperative.
- The court ordered appointment of a third arbitrator to complete the three-member tribunal because the contractual selection method had broken down.

## Legal Principles

- Under the New York Convention, a court must enforce a written international arbitration agreement and refer the parties to arbitration unless the agreement is “null and void, inoperative or incapable of being performed.”
- A pending foreign lawsuit concerning the underlying dispute, without a conflicting foreign judgment or substantive relief affecting the arbitration agreement, does not justify refusing to compel Convention arbitration on comity grounds.
- FAA § 5 authorizes a court to appoint an arbitrator when the parties’ agreed method fails or cannot be followed, including when party-appointed arbitrators cannot agree on a third arbitrator required by the contract.

## Conclusion

The court enforced the parties’ New York arbitration clause under the New York Convention and the FAA despite ongoing Greek litigation, and it used FAA § 5 to appoint a third arbitrator after the contractual appointment process reached an impasse.


Sumitomo Corp. v. Parakopi Compania Maritima, S.A., 477 F. Supp. 737 (S.D.N.Y. 1979)