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Lawyers and other representatives

Partial Final Award

INTRODUCTION

[1].
On July 1, 2005, an Agency Agreement was concluded between Ocean World Lines, Inc. (hereinafter OWL, or Claimant) and Transocean Shipping Transportagentur GesmbH (hereinafter TOS or Respondent), under which the parties performed for a period of more than seven years.
[2].
Certain disputes have arisen between the parties concerning i.a. the formation and legality of the July 1, 2005 Agency Agreement (hereinafter Contract) whether US law or Austrian law is applicable, as well as questions of conduct, including infringements and monetary claims. On November 30, 2012, OWL terminated the Contract. These issues, on which the parties fundamentally disagree, led to this arbitration.

PROCEEDINGS

[3].
OWL commenced this arbitration in December 2012 pursuant to Clause 16 of the Contract1 and appointed David Martowski as arbitrator; Clause 16 does not specify the size of the panel, but throughout refers to arbitrator in the singular. OWL requested TOS to appoint an arbitrator and granted them 20 days to do so. When TOS failed to respond, OWL asked Mr. Martowski to act as sole arbitrator and proceed with the arbitration. TOS objected and asked Mr, Martowski to stand down. The reason for this request was that TOS raised questions as to the validity of the Contract as executed and the effects of Austrian law. OWL disagreed with TOS and so did the arbitrator who then set a briefing schedule. Pursuant to the timetable established, OWL filed their initial brief on February 22, 2013, which was to be followed by TOS' reply on March 22. Instead of responding to Claimant's brief, TOS appointed David Loh as arbitrator, but continued to reserve their right to contest the validity of the Contract. Mr. Martowski withdrew from this arbitration and OWL appointed John Devine in his place. On June 1, 2013, Manfred Arnold accepted the appointment as third arbitrator and chairman for procedural matters. After the panel submitted its disclosure statements, counsel confirmed that the panel as now constituted was acceptable to OWL and TOS.2
[4].
At this particular time, the panel's authority is founded in the parties' ad hoc agreement to have the arbitrators decide their own jurisdiction. Specifically, the parties have agreed that the panel should rule on the threshold questions whether or not,

• a binding and enforceable agreement was ever entered into between OWL and TOS;

• the arbitration clause by itself is binding and enforceable and

• as a choice of law question, New York law should govern.

• The parties have briefed the issues and supplemented their submissions with case law and arguments at the October 15, 2013 hearing.

[5].
OWL submitted a claim for $1,232,917.26 and €98,418.23 plus fees and costs with a request for an immediate award on the stated accounts which supposedly are fully submitted, accepted and thus ripe for immediate payment.
[6].
The panel acknowledged having received those special claims, however, deferred dealing with them until the threshold questions were resolved.
[7].
In general, unlike in other jurisdictions, me arbitrators cannot determine their own power to act. In such cases, the issue of "Kompetenz/Kompetenz" is to be decided by the courts, the parties, if they concur, or by the arbitrators if so directed by the courts or the parties. In this particular case, the parties disagree on the existence of a valid and enforceable contract, but concur that the panel, as now constituted, is empowered to rule on its competence under the ad hoc agreement, as stipulated to by counsel.

DISCUSSION AND DECISION

[8].
In reaching the following rulings, the panel has carefully reviewed the arguments, the underlying facts and the legal precedents cited.
[9].
It might be helpful to quote from the transcript of the October 15, 2013 hearing,3 where Mr. Lennon sets forth TOS' position on the issues to be decided.

I think that we do have a disconnect in the way that we see where we stand.

I think that the history is actually welt documented in what the panel has in writing, as opposed to the way that Mr. Foley just described it, which I think was not entirely comprehensive in terms of what has taken place from the beginning to now.

In particular, what I would say is I think that we fundamentally disagree about what we have agreed to do.

I think in a big picture way what we can say is we have agreed to arbitrate disputes between the parties, as opposed to going to court to contest any issues, including arbitrability, choice of law, validity of the agency agreement, and so on.

In terms of this panel having to determine its own jurisdiction, I don't even think that is a live issue, I think that the parties have, in fact, agreed to waive objections in that regard, at least that is how we came to agree, or we believe we came to agree on this proceeding.

Before this panel is a whole host of issues, some of which Mr. Foley has laid out.

I think probably the most primary issue is whether or not this agency agreement is valid and binding. That was, in fact, an issue that my client raised, that TOS raised, from the beginning of my involvement in the case anyway. In particular, as he mentioned, this goes to, I think, a very critical issue, which is the authority of the signatory on OWL’s behalf to the agency agreement, and that was a person he named named Cord Bruegge.

I think that at this point it is very important for the panel to appreciate the OWL entities.

Mr. Foley spoke of them almost in the singular, and, in fact, that are multiple OWL entities.

Mr, Bruegge did not work for the claimant in this proceeding. Mr. Bruegge did not work for the company, the OWL company that is a party to that agency agreement.

Mr. Bruegge worked for a subsidiary company, which I will call OWL GmbH, for short.

He has testified by affidavit, and will testify before this panel, that he did not have specific authority to sigri that agreement on OWL's behalf.

So there is a very real issue as to whether or not that agreement was validly executed at the time it was made.

I don't think there is any question that the parties performed pursuant to the terms of the agreement, but the question is whether that agreement, and specifically the arbitration clause, is valid.

That is the real issue that we have raised.

There is no doubt that the parties performed in accordance with the general terms of what was written in the agency agreement.

The question is, is that agency agreement valid and binding, and is the arbitration clause, as a subset of that question, binding.

I think the nuance to the question of that has been raised on our side is regardless of whether or not the agency agreement itself is void or voidable, then there is a subset of that question, which is, is the arbitration agreement enforceable, and that was an issue, of Austrian law which we submitted an expert affidavit on, they submitted an expert affidavit on, and I think that the real key to that issue being raised isn't the question of arbitrability - and I have said, we have agreed to arbitrate - but the question realty goes to choice of law.

That is an issue that I tried to crystallize in our response submission as being the real central issue for the panel, what law if going to apply.

I think in very broad terms we both agree that that is an issue the panel has to decide.

I think that Mr. Foley is arguing it from the standpoint that the agency agreement is valid, and the arbitration clause is, therefore, valid, and that applies New York law, and, therefore, New York law must govern.

We see it differently, that if, A, the agency agreement itself is void, then there is no arbitration agreement, but even if that agency agreement is valid, for whatever reason, if, under Austrian law, there is a legal principle that the person signing the agreement did not have authority to bind the parties to make an agreement on arbitration, then we are back in the same position that I mentioned before, which is, we had an agreement as to the terms of the agency relationship, but no choice of law.

I think this panel has to decide, is it Austrian law or is it New York law on that question, and that will drive the resolution of the substantive claims that are being presented to the panel.

That is, I think, how we got to the point where we are at today with respect to the threshold issue that the panel needs to decide.

As I see it, and as I think we put it in our response brief, we see this as an ad hoc arbitration proceeding.

In other words, the parties have disputes as to arbitrability. There was a lot of back and forth in writing between. Mr. Foley and myself prior to Mr, Devine's involvement, and probably prior to your involvement, Mr. Arnold, as to how this proceeding was to unfold.

I think that the net upshot of all of that is that we decided to set those disputes to the side by making an ad hoc agreement.

I think, if I heard Mr. Foley correctly, what he is suggesting is that the parties appointed the individual arbitrators - Mr, Mqrtowski before Mr. Devine, and. Mr. Loh pursuant to the agency agreement - and then only made an ad hoc agreement on appointing a chairperson, and I don't think that that is what the letters reflect.

I submitted that correspondence as part of our response submission, so they are before the panel as exhibits tour response memorandum, and I think they speak for themselves as to what the parties agreed to do.

I think that is the issue, as I would frame it, for the panel to decide as a threshold question.

This issue as to whether or not the case he has handed you as the first panel exhibit is determinative realty, I think, is counter-balanced by our view that if you look at simple choice-of-law issues, if you don't find that the agency agreement is enforceable, or that the arbitration agreement is not enforceable, which contains the law and jurisdiction clause, you then have to do to a choice-of-law analysis.

On a totality of the circumstances of this dispute, there is very little connection to New York and these parties in this dispute.

The only connection really is OWL, the parent company, their presence in New York.

The rest of the dealings happened in Europe. They were for agency services to be provided in Europe, agency services that were, in fact, provided in Europe, and we think under the restatement of conflict of laws that we have appended to our response submission, that if you apply those factors, there is no doubt that Austrian law should govern the dispute between the parties.

Those are the threshold issues.

[10].
The circumstances of the case are not a model of clarity, but it is nevertheless amazing that with all flaws and deficiencies asserted by TOS, the contract lasted for more than seven years and governed the transactions under the Agency Agreement of July 1 , 2005 to November 30, 2012, when OWL terminated its relationship with TOS.

Was a binding and enforceable agreement ever entered into between OWL and TOS?

[11].
The respondent argues that the contract was never properly executed because it was signed by Mr. Bruegge, a non-authorized signatory of an OWL affiliate, albeit not the contractual partner. Presumably, in 2005, the same Austrian law, which TOS now attempts to invoke, was in force and would have been in force if it had been meant to govern and would have been explicitly part of the Contract. For seven years, the "wrong" OWL signature did not disturb the relationship and at no time during the course of the contract did TOS object to Mr. Bruegge's signature. Since there was performance under the contract with which both parties, in general, complied, the issue of the unauthorized or non-qualified signer on behalf of OWL is moot. OWL lived with the signed Contract and never argued that Mr. Bruegge did not have the direct or implied authority to bind the Claimant. There are no arguments by TOS or any factual evidence that the authority of Mr. Bruegge was or should eventually give rise to the validity. Due diligence or vigilance by TOS in 2005 might have given rise to potential questions, but, at this time, the panel is not persuaded by the arguments as to the application of Austrian law.

Is the arbitration clause by itself binding and enforceable?

[12].
Since the panel has found that a valid contract existed between the parties, the question of the independent authority arising from the arbitration clause is moot.
[13].
On the other hand, as a general statement, the panel would have found that the arbitration provision contained within Clause 16 forms an integral part of the Agency Agreement and, therefore, under the principles of contract interpretation, cannot assume an independent role.

The choice of law question: should Austrian law apply instead of New York State law?

[14].
Since the choice of Law and Jurisdiction Clause4 provides for New York law and reference the Rules and Procedures of the SMA, it is a more persuasive factor to accept than speculate on the application of Austrian law, which TOS was aware of when they fixed this contract but chose not to make it part of the negotiations and insist on its inclusion.
[15].
It is only now, after disputes have arisen, that TOS claimed that the agreement was invalid and not binding under Austrian law. Even TOS' counsel, by letter dated December 10, 2012, stated that OWL could not terminate the contract and demanded that it withdraw its termination letter. It is certainly a discord in TOS' arguments. Therefore, in the panel's view, the Contract, as well as the arbitration clause contained therein, is valid and binding, which only leaves the underlying disputes and quantitative damages to be determined by the.panel.

COSTS AND FEES

[16].
The panel does not make an award for attorneys' fees and costs at this time, but reserves this matter to its Final Award.
[17].
The arbitrators' fees and expenses are reflected in Appendix A, which is a joint and several obligation of both parties.

CONCLUSION

[18].
Having decided that a binding and enforceable agreement was reached by OWL and TOS, which validates the existing arbitration clause5 and that New York law is applicable to this arbitration, the panel stands ready to receive the parties' further submissions and arguments with respect to the merits and quantum of the underlying claims.
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