769 F. Supp. 2d 605
S.D.N.Y.
2011
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Background

  • Republic of Iraq sues BNP Paribas and others for damages arising from alleged Oil-for-Food abuses underpinning UN program.
  • BNP predecessor opened an escrow account for Oil-for-Food funds under a 1996 Banking Agreement with the United Nations.
  • Banking Agreement required BNP to follow UN instructions and barred BNP from taking Iraqi government instructions.
  • Banking Agreement contains an arbitration clause providing arbitration between the two parties to the contract under UNCITRAL Rules.
  • Republic moves to compel arbitration; BNP moves to enjoin arbitration; dispute centers on who may decide arbitrability and whether Republic can compel arbitration.
  • Court must decide whether Republic, as a non-signatory third party, may compel arbitration and whether arbitrability should be decided by the court or an arbitrator.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Can Republic compel arbitration as a third-party beneficiary? Republic argues it has third-party beneficiary rights to enforce arbitration. BNP contends Banking Agreement limits arbitration rights to BNP and UN only. No; Republic cannot compel arbitration.
Who decides arbitrability, court or arbitrator? Republic contends arbitrability should be decided by arbitrator. BNP argues the court should determine arbitrability. Court decides arbitrability.
Are the Republic's claims arbitrable under New York law? Republic seeks to enforce arbitration under NY contract principles. BNP asserts the Banking Agreement does not grant Republic arbitration rights. Not arbitrable; the agreement confines arbitration to BNP and UN.

Key Cases Cited

  • Arthur Andersen LLP v. Carlisle, 129 S. Ct. 1896 (2009) (non-party arbitration rights can be asserted under traditional contract principles)
  • Smith/Enron Cogeneration Ltd. P'ship v. Smith Cogeneration Int'l, Inc., 198 F.3d 88 (2d Cir. 1999) (New York Convention scope and arbitrability presumption)
  • Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396 (2d Cir. 2009) (arbitrability generally decided by courts; clear-and-unmistakable evidence required for arbitrator)
  • First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (Supreme Court 1995) (question of arbitrability ordinarily for courts)
  • Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir. 1992) (contract interpretation to give effect to parties' intent in arbitration)
  • Waldron v. Goddess, 61 N.Y.2d 181 (1984) (clear language required to confer arbitration rights on non-signatories)
  • Warner v. U.S. Securities & Futures Corp., 257 A.D.2d 545 (1st Dep't 1999) (non-signatory cannot compel arbitration absent explicit intent)
  • Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205 (2d Cir. 2005) (relational sufficiency for non-signatories to compel arbitration varies by context)
  • McPheeters v. McGinn, Smith & Co., Inc., 953 F.2d 771 (2d Cir. 1992) (non-signatories may be barred from compelling arbitration absent shown intent)
  • John Hancock Life Ins. Co. v. Wilson, 254 F.3d 48 (2d Cir. 2001) (interpretation of arbitration provisions to reflect contracting parties' intent)
  • Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir. 2008) (non-signatory relationships must be sufficiently connected to contract)
  • Choctaw Generation Ltd. P'ship v. Am. Home Assurance Co., 271 F.3d 403 (2d Cir. 2001) (relation between dispute and arbitration agreement matters)
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