Enforcement of Broad Arbitration Clauses

Enforcement of Broad Arbitration Clauses

By: Bryan O'Neil

Edited by: Tiffany Morales

Crystal Pool AS v. Trefin Tankers, Ltd., 2014 WL 1883506 (S.D.N.Y. 2014).

Trefin Tankers Limited, a Greek company, chartered two vessels from Crystal Pool, a Norwegian company, pursuant to two charter parties. Both charter parties contained a standard arbitration clause requiring arbitration in the city of New York. Crystal Pool sought to commence arbitration to collect unpaid invoices from Trefin, which never responded to the request for arbitration and never appointed its own arbitrator.The court first determined that it had jurisdiction under the Federal Arbitration Act (FAA) because the issue arose under admiralty law. The court had personal jurisdiction because of Trefin’s consent in the charter party. As a second independent jurisdictional basis, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (9 U.S.C. Sec. 901-908) applies because both parties are foreign corporations. Since the inception of the FAA there has been a strong policy in favor of arbitration, especially in international transactions. In determining whether to uphold motions to compel arbitration, the court analyzes the arbitration clause under a two-part test. First, the court must determine whether the parties agreed to arbitrate. Second, the court must determine if the scope of the agreement encompasses the asserted claims.In analyzing the arbitration clause under the first part of the test, the court relied on precedent that held essential terms of charter parties are binding between the parties, even noting one case describing such agreements as inescapable. The two parties agreed to arbitrate disputes by incorporating the arbitration clause into the terms of their contract. The court determined the scope of the agreement included Crystal Pools claims to collect unpaid invoices. The clause is a typical broad catch-all arbitration provision. Arbitration was intended to cover “any and all differences and disputes of whatsoever nature” arising between the parties. The court also notes that in order to compel arbitration, Trefin must have refused to arbitrate. By failing to comply with the arbitration demand Trefin, in effect, refused to arbitrate. The court briefly decides that Crystal is not entitled to attorney’s fees, noting that a party’s refusal to arbitrate does not justify granting attorney’s fees absent bad faith.Thus, the court granted Crystal Pools petition to compel arbitration, finding the arbitration clause in the charter parties was a valid agreement that covered the current dispute. Arbitration was to take place in New York as agreed and Trefin was given fifteen days to appoint an arbitrator.