277 A.D. 531 100 N.Y.S.2d 747 In the Matter of the Arbitration between AMTORG TRADING CORPORATION, Appellant-Respondent, and CAMDEN FIBRE MILLS, INC., Respondent-Appellant. Supreme Court of New York, First Department. November 28, 1950
CROSS APPEALS (1) by petitioner from so much of a resettled order of the Supreme Court at Special Term (MCNALLY, J.), entered April 3, 1950, as (a) adjudged that the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission, named as arbitrator in an agreement between the parties, was disqualified from acting in the proceeding, and (b) appointed an arbitrator in the place of the one named by the parties, and (2) by respondent from so much of said order as (a) denied a motion by said respondent for a stay of arbitration proceedings, and (b) granted a motion by petitioner for a stay of an action between the parties until the arbitration be had.
Osmond K. Fraenkel of counsel (Charles Recht, attorney), for appellant-respondent.
Alexis C. Coudert of counsel (Frederic R. Coudert, and A. Michael Frothingham with him on the brief; Coudert Brothers, attorneys), for respondent-appellant.
Petitioner Amtorg Trading Corporation appeals from an order determining that the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission, in Moscow, is disqualified to act as an arbitration board in the determination of a commercial controversy arising under a contract made in 1947, in which it was designated by the parties to act in that capacity. The arbitration proceeding has been directed to proceed before another arbitrator appointed by the court. The other contracting party, a Pennsylvania corporation, now asserts that when it signed this agreement designating the arbitration board, it was ignorant of the fact that the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission had been established by a decree of the Soviet Government, and was composed of persons designated by the Presidium of the All-Union Chamber of Commerce, which in turn is controlled by a governing body largely made up of representatives of various Soviet Government organs. Inasmuch as petitioner is beneficially owned by the Soviet Government, it is contended that an impartial arbitration cannot be had before such a body.
The difficulty with this contention is that, unlike judges under section 14 of the Judiciary Law, arbitrators are not disqualified on account of being interested in the result, if that circumstance has been disclosed to the adversary. Although 'the courts closely scrutinize the action of an arbitrator whose relation to one of the parties was such as to naturally influence the judgment even of an honest man', such relationship does not necessarily preclude the arbitrator from acting ( Sweet v. Morrison, 116 N.Y. 19, 27). In this instance, although respondent may not have known in detail how the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission was constituted, it is chargeable with notice as recently as 1947 that such an organization could not function in the U.S.S.R. unless it were subject to over-all control by the Soviet Government. Having entered into such an arbitration agreement, it does not lie in respondent's mouth at this point to declare that it was ignorant of this matter of common knowledge. No fraud or deception has been shown on the part of Amtorg inducing respondent to agree to the designation of this board of arbitration. The interrelation between organizations in Russia and the Soviet State is so open and notorious that no businessman dealing with Amtorg in 1947 could have been unaware of it.
The order appealed from should be modified so as to substitute the arbitration body specifically agreed upon by the parties in their contract, viz., the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission, in place of the arbitrator named in the order, and, as so modified, the order appealed from should be affirmed, with $20 costs and printing disbursements, without prejudice to a renewal of the application in event that visas are not obtainable or if for other reasons it becomes impossible or impracticable to conduct this arbitration in Moscow, U.S.S.R.
CALLAHAN, J. (dissenting).
I dissent. I think we would be justified in holding in the present case that there was absolute disqualification of the arbitrator as a matter of law, and of public policy, because of its relationship to one of the parties, and that, therefore, the appointment was void.
But in any event, it seems to me improper to hold upon the present record that the officers of the Camden Fibre Mills, who are merchants, are to be charged with knowledge (the existence of which it denies) that the U.S.S.R. Chamber of Commerce Foreign Trade Arbitration Commission as well as Amtorg Trading Corporation were both instrumentalities of the Russian Government. The use of the words 'Chamber of Commerce' as part of the arbitrator's title might well lead an American merchant to believe that such a body would be wholly disassociated from the government. At least, there should be a trial of the existence of such knowledge on the part of Camden before we compel arbitration by one whose relation to one of the parties prevents any hope of an impartial hearing.
Sweet v. Morrison (116 N.Y. 19) is distinguishable. There the person selected by the parties was in the employ of neither party, although he sustained certain relations with both parties which made them stand upon an equal footing before him.
I vote to affirm the order appealed from or to modify the said order by directing a trial of the issue of Camden's knowledge of the relationship of the arbitrator to Amtorg.
PECK, P. J., GLENNON, VAN VOORHIS and SHIENTAG, JJ., concur in Per Curiam opinion; CALLAHAN, J., dissents in opinion.
Order modified in accordance with opinion herein and, as so modified affirmed, with $20 costs and printing disbursements to the petitioner-appellant, without prejudice to a renewal of the application in event that visas are not obtainable or if for other reasons it becomes impossible or impracticable to conduct the arbitration in Moscow, U.S.S.R. Settle order on notice. [See 278 A.D. 653.]