(Article from Insurance Law Alert, May 2023)
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Holding
The Second Circuit affirmed a New York district court decision confirming and enforcing two foreign arbitration awards, rejecting plaintiff’s assertion that it was not bound by the arbitration provision because it was a non-signatory to the agreement. Generali Espana de Seguros Y Reaseguros, S.A. v. Speedier Shipping, Inc., 2023 U.S. App. LEXIS 11568 (2d Cir. May 11, 2023).
Background
Mabisa, a Spanish logistics company, was hired by a supplier of industrial transformers to arrange for transport of a transformer. Mabisa subcontracted the transportation to Wasa and Speedier, a New York freight company, to be performed jointly. The terms of transport were specified in a “Booking Note” signed by Mabisa and Wasa. While the Booking Note specified Speedier as the carrier and provided a signature line for Speedier, only Wasa signed the agreement.
When the transformer incurred damage during transit, the transformer supplier sued Mabisa in a Spanish court. The suit settled, and payment was made by Generali Espana, Mabisa’s insurer. Thereafter, Mabisa and Generali Espana initiated an arbitration in London against Speedier and Wasa pursuant to an arbitration clause in the Booking Note. The panel issued an award finding Speedier and Wasa jointly liable. Speedier refused to pay, arguing that it had not been involved in the underlying shipping transaction and that Wasa had not adequately represented its interests during the arbitration proceedings. Generali Espana filed a petition in federal district court to enforce the award under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. A New York district court ruled in the insurer’s favor, finding the arbitration award valid and enforceable against Speedier.
Decision
Affirming the district court decision, the Second Circuit rejected Speedier’s assertion that as a non-signatory to the Booking Note, it was not bound by the arbitration agreement. Applying English law (as specified in the Booking Note), the court ruled that the absence of a signature on a written agreement to arbitrate is not determinative as to the validity of that agreement. Further, the court emphasized that Speedier’s decision to allow Wasa to represent it in the arbitration, without objection, rendered its subsequent challenge to the arbitration agreement unavailable under English law. Similarly, the court rejected Speedier’s assertion that its lack of participation in the arbitration proceedings warranted vacatur, noting that Speedier received notice of the arbitration and chose not to participate directly in the proceedings.
Comments
Decisions addressing whether and under what circumstances a non-signatory may be bound by an arbitration clause frequently turn on application of equitable doctrines, such as the “direct benefits estoppel” theory, under which a non-signatory may be bound to an arbitration agreement if it seeks to derive a direct benefit from that agreement. In the present case, which applied English law, the court analogized to the American law equitable doctrine of waiver, which precludes a party that participated in arbitration proceedings from raising a challenge as to arbitrability for the first time following an adverse result.