Stolt-Nielsen v. Animalfeeds International
In this decision, the United States District Court for the Southern District of New York overturned an Arbitration Panelís decision permitting a class action arbitration where the arbitration clauses in the applicable charterparties were silent regarding class actions. The Court held that custom and usage in maritime commerce, and hence the law, did not allow such a result. The Court also held that New York law would lead to the same conclusion as under Federal maritime law
DMC Category Rating: Developed
This case note has been contributed by Steven J.Hollander of Healy & Baillie, LLP in New York. Healy & Baillie are the international contributors to this website for the USA
Stolt moved to vacate (set aside) the award in the United States District Court for the Southern District of New York on the grounds that the Arbitration Panel manifestly disregarded the law, which is one of the few grounds under US Federal law for overturning an arbitration panelís ruling. In order to find that an arbitration panel manifestly disregarded the law, the court must find "both that (1) the arbitrators knew of a governing legal principle and ignored it or refused to apply it and that (2) the law that was not applied was well-defined, explicit and clearly applicable to the case."
Stolt argued that because the two charterparties in issue, or more specifically the two arbitration clauses, were standard in the shipping community and had never before been used as the basis for a class arbitration, the commercial maritime parties could not have intended these clauses to permit a class arbitration, and that therefore no such class action should be allowed. The District Court agreed and held that contract interpretation is significantly influenced by custom and usage in the maritime area due to the international nature of the business. Hence, the District Court held that the Arbitration Panel had acted in manifest disregard of the law, and its ruling must be reversed.
The District Court further held that the law of New York similarly supported the courtís ruling, noting that New York law also bases its decisions on "industry custom and practice". Because the Arbitration Panel did not perform a proper choice-of-law analysis as a basis for its decision, the Panel failed to acknowledge that New York law also supported Stoltís position.
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