The "Goldmar"

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DMC/SandT/06/39
Stena Bulk, as disponent owner of the M/T "Goldmar", Claimant v. Citgo Asphalt Refining Co., as Charterer, Respondent
United States of America: Society of Maritime Arbitrators of New York, Inc.: David W. Martowski, Chairman, Manfred W. Arnold and Jack Berg, arbitrators: Award Number 3902: November 22, 2005
John D. Kimball, of Healy & Baillie, for Stena
Derek A. Walker, of Chaffe McCall, for Citgo
WHETHER OWNERS, NOT A PARTY TO THE CHARTERPARTY BETWEEN DISPONENT OWNERS AND SUBCHARTERERS, COULD BE COMPELLED TO TAKE PART IN ARBITRATION PROCEEDINGS UNDER THE SUBCHARTER: WHETHER AN AFFILIATE OF THE SUBCHARTERERS, NOT A PARTY TO THE SUBCHARTER, COULD BRING A CLAIM IN SUCH PROCEEDINGS
Summary
A majority of the arbitration panel in this case a) allowed a company, not itself a signatory to the charterparty containing the arbitration clause, to bring a claim in the arbitration, on the grounds that its claim arose from a breach of charter, was "intertwined" with other claims under the charter arising from the same incident and it was itself in close corporate relationship with the signatory party, and b) refused to compel another non-signatory, namely the vessel owners, to participate in the proceedings, on the ground that parties to contracts with separate arbitration agreements could not be compelled to consolidate those proceedings.

DMC Category Rating: Developed

This case note has been contributed by Patrick V. Martin, a retired New York attorney and active arbitrator, who specializes in charterparty and commodity disputes.

Facts
On 23 September 2003, the M/T "Goldmar" was chartered on an ASBATANKVOY form by her disponent owners, Stena Bulk, to the charterers Citgo. Under this charter, the vessel proceeded to Venezuela for loading. On October 7, the vessel aborted her berthing operation because a breasting fender at the berth collapsed. Charterers contended that the stern of the vessel struck the fender, while Stena argued that the fender collapsed because of its inherently defective condition. The vessel returned to the anchorage awaiting repair of the fender. Stena billed Citgo for the resulting demurrage. Citgo denied the claim and counterclaimed for damage to the fender (owned by its parent PDVSA) and indemnity for demurrage on other vessels held out while the fender was being repaired.

The arbitration proceedings were at a preliminary stage and the factual allegations were sketchy. The vessel was owned by Stelmar – a party unrelated to Stena - who chartered it to Stena, the claimant. Stena chartered the vessel to Citgo, the respondent. The berth owner was PDVSA. Citgo requested that the Panel issue an order that all these parties be joined in a consolidated arbitration.

Issues
There were two issues before the panel. The first was whether they had the authority to grant Respondent’s request and second, if so, whether they should exercise their discretionary powers.

The Award
In the award, which was issued as a Partial Final Award), the first issue was easily resolved against Citgo. The panel determined that it was bound by the Court of Appeals for the Second Circuit’s decision in The Government of the United Kingdom of Great Britain v. The Boeing Company, 998 F.2d 68 (2d Cir. 1993). In that case the court held that parties to contracts with separate arbitration agreements could not be compelled to consolidate those proceedings. In doing so, the court declared prior decisions to the contrary to be bad law. Thus the Panel denied Citgo’s request to add Stena as a party to the pending arbitration.

The second issue was governed by a different case, Astra Oil Company, Inc. v. Rover Navigation, 344 F. 3d 276 (2d Cir. 2003). Astra was the affiliate of the charterer AOT. Astra was not a signatory to the charter party, which contained a New York arbitration clause. The performing vessel was delayed in transit allegedly due to its unseaworthiness. Astra claimed damages, based on loss of market. Astra demanded that the Owner (Rover) arbitrate this claim. The Owner refused and the District Court [the court of first instance] denied Astra’s motion to compel arbitration. The Second Circuit Court of Appeals reversed the District Court’s decision. It held that, since the Owner was a signatory to the charter party, it could be compelled to arbitrate claims brought by a non-signatory where the claim arose out of the alleged breach of charter, where the non-signatory’s claim was closely intertwined with the charterparty and there was a close corporate and operational relationship between the signatory and the non-signatory claimant – in this case, Astra and AOT, the Court finding that the Owner had treated Astra as the de facto charterer.

The panel majority, applying these principles to the dispute at hand, found that Citgo and PDVSA were closely related companies and further that PDVSA’s claim for dock damage was closely intertwined with Stena’s claim for demurrage and Citgo’s counterclaim, all of them arising out of a single incident, namely, the aborted berthing operation of the "Goldmar". Thus, the panel allowed PDVSA to intervene in the pending arbitration.

There was a vigorous dissent by the Chairman, Mr. Martowski. He asserted that PDVSA’s claim for dock damage was in tort, not in contract, and should be properly asserted against the vessel owner, Stelmar, who was not a signatory to the charter between Stena and Citgo..

The dispute was subsequently settled and no final award was issued.

Comment
The significance of this partial final award is that the panel decided that it had the power to determine who would be required or allowed to participate in the arbitration and made two rulings in this regard:

1. a non-signatory (Stelmar) could not be compelled to arbitrate;
2. a non-signatory (PDVSA) would be allowed to intervene in the arbitration over the objections of a signatory (Stena)

Since there was no final award, the extent of the arbitrators’ powers on these issues was not tested in legal proceedings.

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