{"id":98,"date":"2016-06-08T21:13:46","date_gmt":"2016-06-08T21:13:46","guid":{"rendered":"https:\/\/ajborrassolaw.com\/briefs\/?p=98"},"modified":"2017-02-24T02:17:35","modified_gmt":"2017-02-24T02:17:35","slug":"inability-pay-not-stop-international-arbitration","status":"publish","type":"post","link":"https:\/\/ajborrassolaw.com\/briefs\/inability-pay-not-stop-international-arbitration\/","title":{"rendered":"Inability to Pay Does Not Stop International Arbitration"},"content":{"rendered":"

The Eleventh Circuit Court of Appeals recently addressed an issue of first impression – whether a party can prevent an international arbitration from going forward by arguing high costs keep him from effectively vindicating his rights.\u00a0The Court noted that existing precedent under the Federal Arbitration Act and New York Convention suggest that such a public policy defense can be raised at the confirmation stage <\/em>but not at the\u00a0enforcement stage<\/em>.\u00a0Recognizing that such a defense would likely fall within the \u201ceffective vindication doctrine<\/em>\u201d available in domestic arbitration cases under Chapter 1 of the FAA, the Court noted the doctrine had never been invoked \u201cto invalidate an arbitration agreement in the context of a New York Convention case.\u201d<\/p>\n

The facts are straightforward.\u00a0Willman Suazo, a Nicaraguan seaman, signed an employment agreement with NCL that provided any dispute would be resolved exclusively by binding arbitration pursuant to the New York Convention in the seaman\u2019s country of origin (Nicaragua) or, if unavailable, the Bahamas.\u00a0The Agreement did not contain a costs provision but incorporated a collective bargaining agreement that provided that NCL would pay the costs of the arbitration, including forum and arbitrator fees, if the seafarer was represented by the Union but otherwise was silent as to who would pay costs if the seaman opted out and selected his own counsel.\u00a0The rules of the administering institution, the International Centre for Dispute Resolution, provided that each party would bear half of the costs pending the arbitrator\u2019s ultimate costs ruling.<\/p>\n

Following his injury, Suazo retained his own counsel and filed suit in Miami-Dade County circuit court.\u00a0NCL removed the case to federal district court pursuant to Chapter 2 of the FAA and then moved to compel arbitration.\u00a0In response, Suazo submitting an affidavit stating he could not bear the expense of arbitration.\u00a0The district court granted the motion to compel arbitration reasoning that Suazo\u2019s public policy defense <\/em>could not be considered at the arbitration enforcement stage pursuant to the New York Convention.\u00a0Suazo appealed.<\/p>\n

On appeal, the Court held that the four-part test to determine whether an international arbitration should be enforced was met:\u00a0the agreement was \u201cin writing,\u201d provided for arbitration in a territory of a signatory to the New York Convention, arose from a commercial relationship, and at least one party was not an American Citizen (or the commercial relationship related to a foreign state).\u00a0Next, the Court ruled that the only viable challenges to an international arbitration were the defenses set forth in Article II of the New York Convention: that the agreement is null and void, inoperative or incapable of being performed.<\/p>\n

The Court noted that the precise issue of whether a \u201ccost-based effective vindication defense\u201d falls within the \u201cincapable of being performed<\/em>\u201d defense had not been previously adjudicated.\u00a0However, the Court held that Suazo failed to prove his inability to pay and compelled arbitration.\u00a0Suazo\u2019s election not to proceed with union-appointed counsel at NCL\u2019s expense also undermined his effective vindication defense.<\/p>\n

This case highlights the different standards that apply to compel domestic and international arbitration.\u00a0It also leaves open the possibility as to whether a party can effectively avoid international arbitration with substantiated evidence establishing the inability to pay rendering the arbitration agreement incapable of performance.\u00a0The case is Suazo v. NCL (Bahamas), Ltd.<\/em>, No. 14\u201315351 (11th Cir. May 10, 2016).\u00a0The opinion is here<\/a>.<\/p>\n

If you have questions or issues regarding this post, please contact me.\u00a0Please look for my post next Wednesday and follow me on twitter<\/a>.<\/p>\n

Ava Borrasso<\/strong>\u00a0<\/em><\/a>is the principal of\u00a0<\/em>Ava J Borrasso, P.A<\/strong>.<\/em><\/a>, a Miami-based law firm that concentrates on business and international litigation and arbitration. She also serves as an Arbitrator.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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