Clothing Manufacturer (Ukraine) v. Textiles Manufacturer (Germany)

A clothing manufacturer (plaintiff) and a textiles manufacturer (defendant) entered into a contract under which the clothing manufacturer would make clothes out of textiles provided by the textiles manufacturer. The contract, which was set to expire on December 31, 2004, contained an arbitration clause, as well as a clause requiring all changes to the contract to be made in writing and signed by both parties. The original contract was signed by Mr. P. on behalf of the textiles manufacturer. The parties continued to work together beyond the end of 2004, and an extension of the contract to December 2007 was signed by Mr. P. A dispute arose regarding the nonpayment of an invoice in 2007. The clothing manufacturer initiated arbitration proceedings, but the textiles manufacturer objected, arguing that the sole arbitrator did not have jurisdiction to hear the dispute because the textiles manufacturer was not bound by the arbitration agreement contained in the original contract. Specifically, the textiles manufacturer asserted that Mr. P. was not authorized to enter into agreements on behalf of the textiles manufacturer and, further, that Mr. P.’s signatures on all of the contractual additions—including the extension to 2007—were forged. The clothing manufacturer argued that even if Mr. P. was without authority to sign the agreements, the textiles manufacturer ratified the agreements by continuing to supply materials and, therefore, was bound by the agreements. The clothing manufacturer offered no other evidence regarding the validity of the contract additions. After finding jurisdiction, the sole arbitrator issued an award in favor of the clothing manufacturer. The clothing manufacturer then sought enforcement of the award in German court.