Usinor Steel v. m/v Koningsborg

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DMC/SandT/04/31
Usinor Steel Corp. v. M/V Koningsborg
United States District Court for the Southern District of New York: District Judge: Alvin K. Hellerstein.:No. 03 Civ. 4301; 2004 U.S. Dist. LEXIS 1615; 4 February 2004
arbitration: charter party: arbitration clause: Whether mandatory or permissive: federal policy: final order
Summary
In this case, the court granted defendant shipowner's motion to stay an action in favor of arbitration pursuant to an arbitration clause which provided that "arbitration, if any, to be settled in Paris…." The shipowner contended that the clause required mandatory arbitration, but the cargo owner argued that the clause only required foreign arbitration if the parties agreed to arbitrate a dispute. The court held that, in view of federal policy in favor of arbitration, the arbitration clause was mandatory rather than permissive.

DMC Category Rating: Developed

Case Note Submitted by Monique des Rosiers, an attorney with the firm of Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States of America

Facts
Plaintiff cargo owner sued defendants, a vessel and its owner, alleging that its cargo was damaged during shipment on the vessel. The vessel owner moved to dismiss or stay the action in favor of foreign arbitration which, it alleged, was required by the charter party incorporated by reference in the bills of lading.

The arbitration clause provided as follows:
"Arbitration, if any, to be settled in Paris by Chambre Arbitrale Maritime and French Law to apply. General Average, if any, to be settled in Paris."

The issue was whether the words "if any" in the clause rendered the clause permissive, and therefore unenforceable

Judgment
The District Court noted that relatively few cases had interpreted clauses with the precise language - "if any" - that was present here. Although Eurosteel Corp. v. M/V Millenium Falcon, 2002 U.S. Dist. Lexis 15905 (N.D. Ill. 2002), confronted a clause identical to this and held the clause not to be a mandatory call for arbitration, the New York case of H.V.B. Smith v. Polar Cia De Navegacion Ltda., 15 Misc. 2d 301, 181 N.Y.S.2d 368 (N.Y. Sup. Ct. 1958), held compulsory the language "Arbitration, if any, to be held in New York, New York."

The Court ultimately rejected cargo’s argument that "if any" undermined the mandatory nature of the arbitration clause, concluding that the qualifier "if any," by its natural language, simply meant that if any sort of dispute arose, resolution by arbitration became mandatory. Furthermore, the court noted that the Bills of Lading specifically highlighted the charterparty's "arbitration clause," and, by incorporating it, reflected the intent of the parties to arbitrate any disputes that might arise.

The Court held that granting a stay in favor of arbitration was preferable to dismissing the case entirely, because a stay was not appealable as a final order and therefore could avoid needless delay of the arbitration by saving the time required for appellate review.

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