A Turkish manufacturer of motor coaches entered into a distribution agreement with a Delaware-based corporation for the exclusive distribution of its motor coaches in the United States. Years later, a dispute arose over the Delaware corporation’s (CH Bus) nonpayment for 72 motor coaches and its failure to repay a $1 million loan from the Turkish company (Temsa). Temsa commenced arbitration before the International Centre for Dispute Resolution, a division of the American Arbitration Association, pursuant to the arbitration clause contained within the parties’ distribution agreement. After a hearing, the arbitration panel awarded Temsa approximately $17.2 million. Temsa then sought confirmation of the award in the U.S. District Court for the Southern District of New York.
CH Bus did not oppose or otherwise appear in the action. Nevertheless, the court noted: “Default judgments in the context of confirmation and vacatur proceedings are generally inappropriate; an unopposed petition should instead be resolved under a summary judgment framework.” The court found that it had jurisdiction over the award pursuant to chapter 2 of the Federal Arbitration Act. Next, the court stated that an arbitration agreement falls within the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards if four requirements are met:
- There must be a written agreement;
- It must provide for arbitration in the territory of a signatory of the Convention;
- The subject matter must be commercial; and
- The agreement cannot be entirely domestic in scope.
Here, the distribution agreement was written; the United States is a signatory to the Convention; the subject matter was commercial (i.e., the sale of motor coaches); and the distribution agreement was a non-domestic agreement because the importation of motor coaches from Turkey was not entirely domestic in scope.
The court then discussed the seven grounds for nonrecognition of an award under the Convention:
- The parties to the arbitration agreement were under some incapacity or the agreement “is not valid” under the law designated by the parties, or in the event they have not designated any, the law of the country where the award was made;
- The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
- The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place;
- The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made;
- The competent authority in the country where recognition and enforcement is sought finds that the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
- The competent authority in the country where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country.
None of the bases provided by the Convention for refusing to recognize and enforce an arbitration award applied here. The court also noted that, in this case, because the arbitration took place in the United States, the award was also subject to the FAA provisions governing domestic arbitration awards, including the four grounds enumerated by the FAA for vacatur. However, none of those grounds applied either. As such, the court confirmed the arbitration award in favor of Temsa.
Temsa Ulasim Araclari Sanayi Ve Ticaret A.S. v. CH Bus Sales, LLC, No. 1:22-cv-00492 (S.D.N.Y. Sept. 1, 2022).