Reinsurance & Arbitration Focus

Big Port Service DMCC and China Shipping Container Lines Co. Ltd. (CSCL) litigated in Singapore a dispute regarding a supply of marine fuel oil for a CSCL vessel. CSCL subsequently filed suit in the Southern District of New York seeking a permanent injunction against arbitration. The Singapore litigation decided issues related to damages alleged by Big Port Service as well as whether the parties had entered into an arbitration agreement. The Singaporean court determined that CSCL could not be forced to arbitrate because there was no binding arbitration agreement between the parties. The Southern District of New York accorded that decision preclusive effect and entered a permanent injunction against arbitration.

On appeal, Big Port Service first argued that the district court lacked subject-matter jurisdiction, but the court rejected that argument. The court next held that it was proper to recognize the Singaporean judgment under principles of international comity. The Singapore judgment "was a full decision addressing the existence of the arbitration agreement," which was the relevant issue before the Southern District of New York, and the liberal federal policy favoring arbitration did not require Big Port Service to get a "second hearing" regarding whether an agreement to arbitrate existed.

The court also held that it was proper to give preclusive effect to the Singaporean court's determination regarding the existence of an arbitration agreement. To accord a foreign court's determination preclusive effect, the American court must find that there is an "identity of issues" addressed by both courts, meaning that "the legal standards … must … be identical." The foreign court need not consider or apply American law, in particular, to be accorded preclusive effect. Here, the legal standards applied to the dispute were "substantively the same" and the agency principles applied were "in accord with New York agency law." As such, the court found there was a sufficient "identity of issues." The court determined that Big Port Service had an opportunity to "fully and fairly litigate" the question of arbitrability in the Singapore action and that this issue was "necessary to the judgment," which also supported the grant of preclusive effect.

Lastly, the court found that it was proper to enter a permanent injunction against arbitration, as "[f]ederal courts generally have remedial power to stay arbitration," including in situations in which the court determines "that the parties have not entered into a valid and binding arbitration agreement." As such, the district court had the authority to issue the permanent injunction and it was proper to do so.

China Shipping Container Lines Co. Ltd. v. Big Port Service DMCC, No. 19-1111 (2d Cir. Mar. 5, 2020).