Arbitration

• Author: International Law Group

Czarina, LLC, is the assignee of Halvanon Insurance Co. Ltd.

Halvanon, an Israeli company, entered into a 1984 agreement with the Florida reinsurance company W.F. Poe Syndicate (Poe). According to industry custom, before they had worked out all the details, the companies agreed that Poe would reinsure Halvanon, and that their underwriters would get together later to draft a written agreement.

They never did. The following year, Halvanon became insolvent and was liquidated. Czarina bought some of Halvanon's accounts receivable, including the Poe account. None of the communications exchanged between Poe and Czarina had mentioned arbitration. Halvanon's 1982 Sample Wording form for similar agreements did include a clause specifying arbitration in London before a two-member panel. Neither party here, however, had signed any such form.

When Poe refused to pay, Czarina filed for arbitration in London to collect the alleged indebtedness. The only part Poe took in the arbitration was to send the panel two short letters declaring that it had never agreed to arbitrate this dispute and that the merits weighed heavily on Poe's side. The panel nevertheless awarded Czarina over 150,000 British Pounds.

Czarina then sued Poe in a Florida federal court under Article II of the Federal Arbitration Act (FAA) [9 U.S.C. Sections 201-208] to confirm the foreign arbitral award. After a three-day bench trial, the court ruled that there had never been an agreement to arbitrate. Thus, lacking subject matter jurisdiction to confirm the award, it dismissed Czarina's case. Czarina appealed. The U.S. Court of Appeals for the Eleventh Circuit, however, affirms.

Czarina argued that the district court erred in holding that the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards [21 U.S.T. 2517; T.I.A.S. 6997; 330 U.N.T.S. 3] (the Convention) required that there can be no valid arbitration award without a written arbitration agreement.

Incorporating the terms of the Convention, the FAA provides that federal district courts have original jurisdiction over two types of actions coming within the Convention. The first is an action under FAA Section 206 to compel a future arbitration proceeding pursuant to a valid written agreement to arbitrate.

Secondly, pursuant to Section 207, a federal court...