Arbitration

• Author: International Law Group

Glencore Grain Rotterdam B.V. (Glencore), a Dutch company located in Rotterdam, concluded 11 contracts to buy 300,000 tons of rice from Shivnath Rai Harnarain Co. (Shivnath), a rice exporter doing business in New Delhi, India. Under the contracts, Shivnath was to have the rice delivered at the Port of Kandla, India. The arbitration clauses provided that a panel of arbitrators of the London Rice Brokers' Association (LRBA) would decide all contract disputes. As for choice of law, the contracts provided that they "shall be deemed to have been made in England and ... shall be governed in all respects by English Law."

A dispute sprang up between the parties about the delivery of the rice. In 1997, an LRBA panel awarded Glencore more than $7 million in damages and interest. The award became final in England and remains enforceable there. Shivnath neither paid, nor challenged, the award. In 1998, Glencore sought enforcement of the award in India, in an action currently pending in the High Court of Delhi. In 2000, Glencore sought enforcement of the award in district court in California under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards [June 10, 1958, T.I.A.S. 6997, 330 U.N.T.S. 38, 21 U.S.T. 2517, reprinted following 9 U.S.C.A. Section 201 (West 1999)]. Both the U.S. and the United Kingdom are parties to the Convention. In support of its claim, Glencore submitted evidence that Shivnath had a sales agent in California, and had made several shipments to California destinations. Shivnath filed a motion to dismiss based, inter alia, on the lack of personal jurisdiction over it.

The district court did in fact dismiss for lack of personal jurisdiction. First, it could not find that Shivnath carried on any direct business activity in the U.S. Secondly, the activities performed through a Shivnath sales agent failed to make out enough contacts for general jurisdiction. The district court refused to exercise specific jurisdiction because Glencore's cause of action did not arise out of, or relate to, Shivnath's activities within the forum. Glencore appealed. The U.S. Court of Appeals for the Ninth Circuit affirms.

Congress implemented the Convention by passing Chapter II of the Federal Arbitration Act (FAA) [9 U.S.C. Sections 201-208]. Section 203 provides that "an action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United...