In Confirming a Foreign Arbitral Award Court Looks to Underlying Dispute to Determine Personal Jurisdiction

Conti 11. Container Schiffarts-GMBH & Co. KG M.S. v. MSC Mediterranean Shipping Co. S.A., WL 319267 (5th Cir., Jan. 29, 2024)

            The tragic facts[1] which form the background to this foreign arbitral award confirmation are detailed in the opinion of the Second Circuit Court of Appeals in IN RE: M/V MSC FLAMINIA.[2] Succinctly stated, three tank containers of 80% divinylbenzene were loaded on the vessel in New Orleans; but due to improper land storage the chemical underwent “autopolymerization”[3] and exploded during transport to Belgium resulting in the deaths of three crewmen and $100 million in damage to the vessel.[4]

            Conti 11. Container Schiffarts-GMBH & Co. KG M.S. (Conti), located in Hamburg, owned the vessel which was chartered to MSC Mediterranean Shipping Co. S.A. (MSC), a Swiss corporation located in Geneva.[5] The charterparty contained an arbitration clause requiring any disputes between Conti and MSC to be resolved by arbitration in London.[6] As a result of the damage to the vessel, the London arbitral panel determined that MSC breached the charterparty and issued an Award of $200 to Conti.[7]

            Conti then filed a suit in the U.S. District Court for the Eastern District of Louisiana against MSC to confirm the arbitral award pursuant to the New York Convention.[8] MSC challenged personal jurisdiction over it and filed a Motion to Dismiss.[9] During the pendency of the Motion, the underwriter for MSC submitted a Letter of Undertaking (LOU) in the amount of $220 million but reserved “’any and all rights or defenses MSC, its agents or affiliates have or may have’ in the Eastern District of Louisiana proceedings.”[10]

            The district court denied the Motion to Dismiss on the basis that the underlying dispute was related to MSC’s contacts in New Orleans where the cargo was initially loaded and alternatively on the LOU.[11] The trial judge then entered judgment confirming the Award.[12] MSC appealed challenging the ruling on personal jurisdiction over it and the trial court’s analysis looking to the underlying dispute, loading and storage of the cargo in New Orleans as well as the LOU.[13]

            The Fifth Circuit panel, Judges Jones, Stewart and Duncan, who authored the unanimous opinion, rebuffed MSC’s challenge to looking to the underlying dispute to determine whether the court has personal jurisdiction. The Second and Tenth Circuits look to the underlying claim to determine personal jurisdiction in confirming a foreign arbitral award. Six other federal courts of appeal follow the reasonings of these courts.[14] Though the Fifth Circuit has not directly addressed the issue, other federal courts have.[15] Interestingly, the panel went no further and failed to state it would adopt this precedent but applied it.

            The panel reversed the trial court, nonetheless. Even considering the underlying dispute, the contact in New Orleans was through the U.S. subsidiary of MSC and third parties.[16] Conti failed to show that the U.S. subsidiary and Swiss company were not separate entities.[17] The choice of shipping the cargo from the Port of New Orleans was also made by Deltech, a third party, not MSC.[18]

            In addition, the trial court erred in holding that the LOU waived personal jurisdiction over MSC.[19] The LOU explicitly was without prejudice to all defenses and explicitly reserved rights as to the determination of the defense of personal jurisdiction.[20]

            The judgment confirming the Award was reversed with instructions to dismiss the suit for lack of personal jurisdiction.[21]

            A copy of the Fifth Circuit opinion is attached.

[1] The incident occurred in July, 2012. (2024 U.S. App. LEXIS 1928 at *3-4).

[2] 72 F.4th 430 (2d Cir. 2023) Conti filed a limitation proceeding in the Southern District of New York. The Second Circuit affirmed the determination of the trial court that both Conti and MSC were free of fault. See also 2024 U.S. App. LEXIS 1928 at *4, footnote 1)

[3] MSC Mediterranean Shipping Co. S.A., WL 319267 at *3

[4] Id.

[5] Id. at *2

[6] Id.

[7] Id. at *4. The arbitral panel determined that

[8] The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. §207.

[9] MSC Mediterranean Shipping Co. S.A., WL 319267 at *4.

[10] Id.

[11] Id. at *5-6.

[12] Id.

[13] Id. at *8.

[14] MSC Mediterranean Shipping Co. S.A., WL 319267 at *8-10.

[15] Id. at *10.

[16] Id. at *19.

[17] Id. at *20.

[18] Id. at *22.

[19] MSC Mediterranean Shipping Co. S.A., WL 319267 at *17-18.

[20] Id.

[21] Id. at *23.