Republic of Nicaragua v. Standard Fruit Co.
United States Court of Appeals for the Ninth Circuit
937 F.2d 469 (1991)
- Written by Mary Katherine Cunningham, JD
Facts
In 1979, the Sandinistas overthrew the government in Nicaragua and later declared a state monopoly over the Nicaraguan banana industry. Standard Fruit Company (SFC) (defendant) ceased all operations in Nicaragua, and the Nicaraguan government (plaintiff) asked for a summit meeting to resolve the issues between SFC and the new government. On January 8, 1981, the parties produced a Memorandum of Intent (MOI), which contained an arbitration provision and clauses envisioning the renegotiation and replacement of the previous contracts. The arbitration clause stated that all disputes would be referred to arbitration under the rules of international arbitral tribunals, “such as the rules of the London Arbitration Association,” an entity which did not exist. Although SFC resumed operations in Nicaragua shortly thereafter, the parties never renegotiated and replaced new contracts. In October 1982, SFC left Nicaragua and ceased all operations. The Nicaraguan government sued SFC in federal district court, moving to compel arbitration. The district court applied a three-part test for arbitrability considering whether the parties entered into a contract, whether the contract included an arbitration agreement, and whether the disputes under the arbitration agreement included the disputes before the court. Applying this tripartite test, the federal district court found that the MOI was not a binding contract and that the arbitration provision was not a present agreement to submit to arbitration. Nicaragua appealed, arguing that an arbitral tribunal should have decided the questions of whether the MOI was a valid contract and whether SFC was bound by the contract.
Rule of Law
Issue
Holding and Reasoning (Ferguson, J.)
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