Cooper v. Ateliers de la Motobecane, S.A., 57 N.Y.2d 408 (1982)
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (UN Convention) prohibits pre-arbitration attachment as it undermines the purpose of minimizing uncertainty and avoiding foreign law in international trade disputes resolved through arbitration.
Summary
Cooper sued Ateliers de la Motobecane (a French corporation) in New York, seeking an attachment of the defendant’s assets before arbitration, pursuant to a contract with an arbitration clause. The New York Court of Appeals reversed the Appellate Division’s order, holding that pre-arbitration attachment is inconsistent with the UN Convention’s goal of streamlining international dispute resolution through arbitration. Allowing such attachments would reintroduce the uncertainties and complexities the Convention aimed to eliminate, hindering international trade.
Facts
Cooper and others contracted with Motobecane to form a New York corporation for product distribution. The agreement included a clause requiring arbitration in Switzerland for valuation disputes regarding share repurchase. Cooper tendered shares for repurchase, leading to stalled negotiations and Motobecane’s demand for arbitration. Cooper then filed suit in New York and obtained an ex parte attachment of Motobecane’s assets. The underlying dispute concerned the valuation of shares tendered for repurchase. The agreement explicitly stated that disputes over valuation would be resolved through arbitration in Switzerland.
Procedural History
Cooper initially sought to stay arbitration (Action I), but the Court of Appeals reversed the Appellate Division and denied the stay. While Action I was pending, Cooper commenced a separate action (Action II) seeking a money judgment and obtained an attachment of Motobecane’s assets. The Supreme Court initially confirmed the attachment, but after the Court of Appeals’ ruling in Action I, the Supreme Court vacated the attachment. The Appellate Division reversed, but the Court of Appeals then reversed the Appellate Division’s decision, effectively reinstating the vacating of the attachment.
Issue(s)
Whether, under the UN Convention, a party can obtain a pre-arbitration attachment of assets in a contract dispute subject to mandatory arbitration in a foreign country.
Holding
No, because allowing pre-arbitration attachments undermines the purpose of the UN Convention, which is to minimize uncertainty and avoid the complexities of foreign law in international trade disputes subject to arbitration.
Court’s Reasoning
The court emphasized the strong public policy favoring arbitration, especially in international trade, where litigation can be complex and unfamiliar. The UN Convention aims to ease enforcement of international arbitration agreements by minimizing uncertainties and shifting the burden of proof to the party opposing enforcement. The court reasoned that allowing pre-arbitration attachments would inject uncertainty into the process, subjecting foreign entities to unfamiliar laws, thus defeating the UN Convention’s purpose. The court distinguished cases allowing attachment in admiralty cases under 9 U.S.C. § 8, noting the present case did not involve a maritime contract. The court stated, “The essence of arbitration is resolving disputes without the interference of the judicial process and its strictures. When international trade is involved, this essence is enhanced by the desire to avoid unfamiliar foreign law. The UN Convention has considered the problems and created a solution, one that does not contemplate significant judicial intervention until after an arbitral award is made.” Furthermore, the court noted that the UN Convention allows for security after an award is made. The court explicitly rejected the argument that attachment was necessary to secure the potential award. The court stated, “Permitting this type of attachment to stand would expose American business to that risk in other countries.”