The Ninth Circuit has reversed and remanded a district court’s confirmation of an arbitration award because the plaintiff/counterclaim defendant, a manufacturer located in Belarus, established a defense under the New York Convention. The parties agreed to an arbitration clause that requires disputes to be arbitrated where the “defendant” is located. Arbitration was commenced in California, but the plaintiff expressly reserved the right to have any counterclaims asserted against it arbitrated in Belarus. When counterclaims were filed, the arbitrator refused to dismiss them on the ground they should have been filed in Belarus. The district court confirmed the California arbitrator’s award against the plaintiff, which appealed to the Ninth Circuit.
On appeal, the court held that procedures used in the arbitration of “counterclaims” were not in accordance with the agreement. Invoking a defense under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), the plaintiff contended the “arbitral procedure was not in accordance with the agreement of the parties” because the counterclaims should have been arbitrated in Belarus. The Ninth Circuit agreed. The arbitration agreement required that any “dispute” be arbitrated at “the defendant’s [site].” The term “dispute” encompassed both claims and counterclaims. Further, a party is a “defendant” as to any dispute whenever another party seeks damages or other form of relief against it. Polimaster Ltd. v. RAE Systems, Inc., No. 08-15708 (9th Cir. Sept. 28, 2010).