Originally from Dispute Resolution Journal

INTERNATIONAL—U.N. CONVENTION—CONFLICT OF LAWS—U.S. ARBITRATION ACT—PUERTO RICO DEALERS ACT

The purpose and intent of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards overrides contravening domestic or parochial law. Two Puerto Rican corporations sought to avoid arbitration of a dispute arising over the cancellation of a distributorship agreement with an Italian corporation which manufactures ceramic tiles. The contract provided for exclusive rights to distribute the product in the Antilles and contained a clause providing for arbitration of any dispute before an arbitrator in Modena, Italy. The Puerto Rican parties argued ihai the arbitration clause of the contract was void and unenforceable because it conflicted with the Puerto Rico Dealers Act, 10 L.P.R.A. § 278 e! seq. Section 27yb-2 of that law provides that; "Any stipulation that obligates a dealer to adjust, arbitrate or litigate any controversy that comes up regarding his dealer's contract outside of Puerto Rico, or under foreign law or rule of law, shall be likewise considered as violating the public policy set forth by this chapter and is therefore null and void." They therefore contended that the contract fell within the exceptions outlined in chapter 1 of the U.S. Arbitration Act, 9 U.S.C. ? 1 et seq., and arbitration could not be compelled. The court first noted that the contract was governed, not by chapter I of the U.S. Act, but by chapter 2, which is the section of the Act implementing the U.N. Convention. After establishing the proper law to be applied, the court ruled that "the parochial interests of the Commonwealth, or of any stale, cannot be the measure of how the 'null and void' clause is interpreted. Indeed, by acceding to and implementing the treaty, the federal government has insisted that not even the parochial interests of the nation may be the measure of interpretation. Rather, the clause must be interpreted to encompass only those situations— such as fraud, mistake, duress, and waiver—that can be applied neutrally on an international scale." The decision of the lower court was therefore affirmed.

Ledee v, Ceramiche Ragno, 684 F.2d 184 (1st Cir. 1982), aff'g 528 F. Supp. 243 (D.P.R. 1981).