tion, as embodied in the United States Arbitration Act, 9 U.S.C. 1 et seq. (1970)....That Act, “reversing centuries of judicial hostility to arbitration agreements, was designed to allow parties to avoid 'the costliness and delays of litigation,' and to place arbitration agreements upon the same footing as other contracts. ... Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11 (1974), quoting H.R. Rep. No. 96, 68th Cong., 1st Sess., at 1, 2 (1924). In addition to speed and economy, the advantages that may commend arbitration to parties are manifold: informality, the possibility of coordination with other modes of conciliation, and the ability to preselect the location of, a set of procedural rules or substantive law governing, or even the language to be used in, dispute resolution. . . . Even where, as here, such preselection has not explicitly been made, the parties may wish to leave to the arbitrators, rather than to a court of a particular jurisdiction, the authority to make such choices.

[S]everal of these advantages may be especially important when the dispute committed to arbitration is international in character. The uncertainties arising from possible adjudication in forums that may be far away, conducted in a foreign language, with unknown or alien procedures and substantive rules, plainly are more substantial in such a situation. Within only the last two years, the Supreme Court recognized the particular importance of agreements to arbitrate in international commercial transactions. In Scherk v. Alberto-Culver Co., supra, the Court indicated that the international character of an arbitration agreement constituted a special reason for judicial deference to the arbitral process, 417 U.S. at 515-16, . . . emphasizing that reliance upon that process aided in limiting the uncertainties inherently attendant upon international trade and commerce, id. at 516-19. . . . These considerations indicate to us that the District Court's assumption of declaratory judgment jurisdiction . . . so as to displace international arbitration proceedings was improper.

The argument in favor of deference to the arbitral process fails, of course, if there is no issue which falls within the scope of the arbitrator's authority. Hence, . . . we must inquire both (1) whether the parties' agreement contemplated commitment to arbitration of questions relating to the statute of limitations, and (2) if so, whether such an intent is appropriately given legal force. As to the first inquiry, we begin with the accepted premise that, in construing arbitration agreements, every doubt is to be resolved in favor of arbitration . . . . That canon of construction implements several important policies: it eases court congestion; it provides broad latitude to permit effectuation of the intent of the parties; and it limits the delay in dispute resolution that would occur were a wide range of issues to require judicial consideration prior to commencement of arbitration-delay that would undermine a principal objective of arbitration itself.

Although the second issue may be somewhat less free from doubt, we believe that there is no persuasive reason for not giving legal force to the parties' intent to encompass the statute of limitations issue within the arbitration clause. Again, we start from an accepted premise that after determining the existence of a valid and enforceable agreement that extends to the dispute at hand, courts should not play a broad role in denying effect to agreements to arbitrate. This premise, too, is a product of the strong Federal policy favoring arbitration.

We conclude . . . that the strong policy in favor of arbitration, especially in international commerce, and the precedents both directly on point and relevant by analogy, suggest the appropriateness of giving legal force to the parties' arbitration agreement as it encompasses the statute of limitations question. That being so, assumption of declaratory judgment jurisdiction over Count II of the complaint was inappropriate.

The U.S. District Court for the Southern District of New York, on May 13, 1976, held in Reefer Express Lines Pty., Ltd. v. Petmovar, S.A., 420 F. Supp. 16 (1976), that a vessel owner, by demanding arbitration in a dispute with a charterer, had not waived its right to pursue certain judicial remedies. Plaintiff, as owner of the vessel, had by letter dated December 31, 1975, demanded arbitration pursuant to a clause of the charter party contract with the defendant charterer. A hearing was held before arbitrators on March 10, 1976, and no decision had been rendered when plaintiff brought action in the District Court on March 12, 1976. Defendant moved to dismiss on the ground that plaintiff had chosen the forum of arbitration to resolve the dispute.

Section 8 of the Arbitration Act (9 U.S.C. 8) provides:

If the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, and the court shall then have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award.

The Court, therefore, held that an agreement to arbitrate does not oust the Federal court of jurisdiction and, despite the agreement of the parties to arbitrate, the traditional admiralty procedure should be available to the aggrieved party. It said that the arbitration is made a phase of the suit in admiralty, and it appears immaterial whether arbitration has been initiated prior to the time of the commencement of the court action.

Defendant also moved to vacate a maritime attachment dated March 12, 1976, attaching $40,000 at the Marine Midland Bank held for defendant in the name of All Seas Shipping Agency, Inc. The motion was made on the ground that defendant was “jurisdictionally present" in the district. The Court denied the motion to vacate the maritime attachment. Using the dual rule applicable to foreign corporations, the Court said there was insufficient evidence to conclude (1) that the defendant, a Panamanian corporation, was doing business within the district so as to subject it to the Court's jurisdiction, or (2) that All Seas, as its "general agent" in New York, had adequate authority and discretion to act for the defendant so as to accept service of process.

Fuller Company v. Compagnie des Bauxites de Guinee, 421 F. Supp. 938 (1976), decided on October 19, 1976, by the U.S. District Court for the Western District of Pennsylvania, involved an interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517) as it applies to contracts between citizens of the United States. The Court decided that in this case the contract involved a sufficient connection with a foreign country to sustain jurisdiction in the Federal court.

Fuller Company, a Pennsylvania corporation which manufactures and sells equipment, filed a petition for declaratory judgment in the Court of Common Pleas of Allegheny County seeking determination of the effect of an alleged settlement between it and the defendant, a Delaware corporation (hereinafter CBG), which had purchased equipment from Fuller. CBG removed the case to the U.S. District Court, invoking its jurisdiction pursuant to the terms of the Foreign Arbitral Awards Convention.

The District Court turned for guidance to the legislative history of the Act of July 31, 1970 (9 U.S.C. 201-208), which implements the Convention. It quoted the following testimony by Ambassador Richard D. Kearney, Chairman of the Secretary of State's Advisory Committee on Private International Law, before the Senate Committee on Foreign Relations on February 13, 1970:

We have included in section 202 a requirement that any case concerning an agreement or award solely between U.S. citizens is excluded unless there is some important foreign element involved, such as property located abroad, the performance of a contract in a foreign county, or a similar reasonable relation with one or more foreign states. The reasonable relationship criterion is taken from the general provisions of the Uniform Commercial Code. Section 1-105(1) of the code permits the parties to a transaction that bears a reasonable relationship to any other state or nation to specify that the law of that state or nation will govern their rights and duties.

In this connection of course, it should be recalled that what we are dealing with under the Convention is solely a situation in which the parties have voluntarily agreed to arbitration. The Convention and implementing legislation will apply to a transaction only because the parties to that transaction have agreed to settle disputes by arbitration. The provision on choice of law in the Uniform Commercial Code is also based on the same kind of voluntary action by the parties to a transaction. Since the Commercial Code is basic law on commercial transactions in the United States it seemed appropriate to incorporate its test of reasonable relationship into the implementing legislation on foreign arbitral awards. Appendix to S. Rep. No. 702, 91st Cong. 2d Sess. at 6 (1970).

In addition, the Court noted the comments to section 1-105 concerning what constitutes a legal relationship (12A-PS1-105) and the Pennsylvania Bar Association's notes to 12A-PS1-105, on choice of

law.

It concluded that the contract between Fuller and CGB bore a sufficient connection with the Republic of Guinea to sustain jurisdiction under the Convention, specifically that it met the requirements under 9 U.S.C. 202 of envisaging performance abroad. The Court accordingly denied plaintiff's motion to remand. Further, since of the four possible inferences arising from the conduct of the parties at the alleged settlement meeting, only one was that there was a settlement agreement terminating the life of a broad arbitration clause, the Court ordered that arbitration be convened and trial stayed pending issuance of a final award in the arbitration.

Foreign Arbitral Awards

In Imperial Ethiopian Government v. Baruch-Foster Corp, 535 F.2d 334 (1976), the U.S. Court of Appeals for the Fifth Circuit, on July 19, 1976, affirmed confirmation of a foreign arbitral award in favor of the Ethiopian Government. It held that the burden of proof is on the party defending against enforcement under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517).

Baruch-Foster Corporation (BFC) had invoked arbitration to settle a dispute under a petroleum development agreement with Ethiopia. Ethiopia had repudiated its obligations under the agreement, following BFC's delayed performance of an obligation to drill a test oil well. Pursuant to the agreement, an arbitral board was set up. It entered a unanimous award, rejecting BFC's defense to its contractual breach and awarding Ethiopia's counterclaim for damages. BFC neither made payment nor challenged the award, and Ethiopia petitioned in Federal district court for confirmation of the award under the Foreign Arbitral Awards Convention, im

plemented by 9 U.S.C. 201-208. The U.S. District Court for the Northern District of Texas confirmed the award and the corporation appealed.

The dispositive issue on appeal was whether the District Court erroneously entered judgment without compelling Ethiopia to honor BFC's far-reaching requests for discovery. BFC had called for Ethiopia to produce documents spanning a 21-year period and relating to an assertion by BFC that the president of the arbitration panel had a disqualifying connection with the Ethiopian government. In confirming the award, the District Court held that BFC had waived any objection to the composition of the board and was estopped from contesting it.

In affirming the order of the District Court, the Court of Appeals said its rationale was somewhat different. The opinion stated, in part:

*

"The goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries." Scherk v. AlbertoCulver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). To advance those objectives the implementing legislation prescribed a summary procedure in the nature of Federal motion practice to expedite petitions for confirmations of foreign arbitral awards. In addition, 9 U.S.C. 207 mandates that "the court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention." The burden of proof is on the party defending against enforcement. See Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1066 (1961), and Parsons & Whittemore Overseas Co., Inc. v. Societe Generale de L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (C.A.2, 1974), where the Second Circuit reviewed the legislative backdrop of the Convention and concluded that it "clearly shifted the burden of proof to the party defending against enforcement.'

*

The Court went on to state that BFC had brought forward nothing to show that its claim of a disqualifying connection had any semblance of substance or that it was even asserted in good faith. On the other hand, it found that there were statements by the arbitrator and others indicating that there was no such connection and that the arbitrator was respected and a man of integrity.

An exporter of automobiles petitioned for confirmation of a foreign arbitration award in Audi Nsu A. U. Aktiengesellschaft v. Overseas Motors, 418 F. Supp. 982 (1976). On the importer's motion to dismiss,