SSI (Beijing) Company Ltd. v. Prosper Business Development Corporation

At a glance

Parties

SSI (Beijing) Company Ltd. (petitioner) v. Prosper Business Development Corporation (respondent)

Case no.

No. 18-CV-8408 (VEC)

Court

U.S. District Court, Southern District of New York (Judge Valerie Caproni)

Forum and rules

Ad hoc arbitration under the contract, first seated in Delaware and later moved to New York by agreement; New York Convention and FAA Chapter II

Treaty

None. The case turned on the contract's arbitration clause (§ 9(f)) and its Chinese governing-law clause (§ 9(e))

Outcome

The Court adopted the Magistrate Judge's Report and Recommendation in full. It granted Prosper's motion to compel arbitration and denied SSI Beijing's cross-motion to stay arbitration.

The dispute

SSI Beijing, a Chinese joint venture, made a contract with one of its members, Prosper. The contract provided for binding ad hoc arbitration in Delaware, and Chinese law governed it. In June 2018 Prosper started arbitration, alleging that SSI Beijing had breached the contract. SSI Beijing at first took part, but on 14 September 2018 it sued for a declaration that the arbitration clause was invalid and an order stopping the arbitration. Its argument was that the clause named no "arbitration institution", as Articles 16(2) and 18 of the PRC Arbitration Law require. Prosper counterclaimed for a declaration that the clause was valid and an order compelling arbitration under the New York Convention and Chapter II of the FAA.

Key holdings

1. SSI Beijing's objections repeated the arguments it had made to the Magistrate Judge. The Court therefore reviewed the Report and Recommendation only for clear error and found none. pp. 3–4
2. Federal law decides whether the arbitration clause is valid and enforceable. The parties clearly agreed to arbitrate, and an objection to the content of the clause (here, the lack of a named institution) is an issue "peculiar to arbitration". The Chinese governing-law clause therefore does not apply to it. pp. 5–6
3. Motorola Credit Corp. v. Uzan does not control. That case was about whether the parties had agreed to arbitrate at all, a general contract question. It did not concern the content of an arbitration clause. Second Circuit precedent on this choice-of-law question is "less than crystal clear". pp. 4–6
4. The FAA does not require an arbitration agreement to name an arbitration institution, so the ad hoc clause is valid and enforceable. Applying Chinese law would have voided the parties' clear agreement to arbitrate. Applying federal law respects that agreement and the policy favouring arbitration. p. 7
5. Prosper's motion to compel arbitration is granted and SSI Beijing's cross-motion to stay arbitration is denied. The parties were to report by 15 September 2020 on whether the case should be stayed pending arbitration or closed. pp. 7–8

Procedural history

1. June 2018Prosper started arbitration in Delaware, alleging breach of contract. The parties later agreed to move the arbitration to New York.
2. 14 September 2018SSI Beijing filed suit seeking a declaration that the arbitration clause was invalid and an injunction against the arbitration.
3. 16 October 2018Prosper answered and counterclaimed to compel arbitration.
4. 12 December 2018Prosper moved for judgment on the pleadings and to compel arbitration. SSI Beijing cross-moved to stay arbitration on 30 January 2019.
5. 30 July 2020Magistrate Judge Moses issued a Report and Recommendation in favour of compelling arbitration. SSI Beijing objected on 13 August 2020.
6. 3 September 2020Judge Caproni adopted the Report and Recommendation in full and compelled arbitration.

Tribunal, counsel and experts

Decided by

• Valerie Caproni Judge, U.S. District Court, Southern District of New York

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Keywords

• motion to compel arbitration
• New York Convention
• Federal Arbitration Act Chapter II
• PRC Arbitration Law
• Article 16 Arbitration Law
• Article 18 Arbitration Law
• ad hoc arbitration
• arbitration institution
• choice of law
• validity of arbitration agreement
• Motorola Credit Corp. v. Uzan
• Sarhank Group v. Oracle
• stay of arbitration
• Chinese joint venture
• report and recommendation

Summary generated with AI from the published documents — refer to the award for the authoritative text.