Encyclopaedia Universalis SA v. Encyclopaedia Britannica, Inc.

403 F.3d 85 (2005)

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Encyclopaedia Universalis SA v. Encyclopaedia Britannica, Inc.

United States Court of Appeals for the Second Circuit
403 F.3d 85 (2005)

Facts

In 1966, Encyclopaedia Universalis S.A. (EUSA) (plaintiff) and Encyclopaedia Britannica, Inc. (EB) (defendant) entered a license agreement granting EB the right to produce and distribute a French-language reference work for royalties for the sale of the non-French editions of the work. The license agreement provided for arbitration before the Tribunal of Commerce of Luxembourg (tribunal). In October 1995, EB stopped making royalty payments to EUSA. In May 1998, EUSA sent a letter of its claim to EB, naming its arbitrator. In July 1998, EB appointed its own arbitrator. In March 1999, the EUSA arbitrator wrote to the president of the tribunal, asking the tribunal to name a third arbitrator pursuant to the license agreement as the arbitrators had been unable to agree on a third arbitrator. Two weeks later, the EB arbitrator informed the tribunal that he objected to the request for a third arbitrator. Before receiving the letter of objection from EB, however, the tribunal appointed the third arbitrator. The EB arbitrator then informed the tribunal, stating he and the EUSA arbitrator did not confer on the third arbitrator as required by the license agreement. The tribunal issued an order in February 2000 that the arbitration could proceed with the third arbitrator. In July 2000, the third arbitrator informed both parties that the arbitral tribunal would commence proceedings without the EB arbitrator. In January 2002, the arbitral tribunal found EUSA was entitled to terminate the License Agreement and ordered EB to pay EUSA damages. In June 2003, EUSA filed suit in the Southern District of New York, seeking recognition and enforcement of the arbitration award. The district court denied enforcement, concluding the request from the EUSA to appoint a third arbitrator was premature. The district court concluded that the arbitral tribunal was therefore improperly composed under Article V(1)(d) of the convention and exceeded its mandate. EUSA appealed to the Second Circuit.

Rule of Law

Issue

Holding and Reasoning (Parker, J.)

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