Review of Court Decisions - Dispute Resolution Journal - Vol. 41, No. 2
Originally from Dispute Resolution Journal
The guarantor was a party to the contract and was thus bound to arbitrate the dispute alleging fraud and claims arising under the Racketeer Influenced and Corrupt Organizations Act. Chemtex, a United States corporation, contracted with American Philippine Fiber Industries, Inc. (APFI), a Philippine corporation, for the dismantling and reassembly of a synthetic fiber plant. The contract called for arbitration of any disputes in New York under the auspices of the International Chamber of Commerce. Chemtex agreed to provide the financing for the project, and Development Bank of the Philippines (DBP) guaranteed the loans made by Chemtex to APFI. When APFI defaulted on some of the notes due to Chemtex, DBP made the payments. DBP then filed suit, alleging that Cbemtex submitted false accounis and further alleging claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 1B U.S.C. § 1962 et seq. Chemtex moved for arbitration of the dispute in accordance with the contract. DBP resisted arbitration, claiming that, as guarantor. It was not a party to the contract and thus was not bound to arbitrate and that its RICO claims were not arbitrable in any event. The court disagreed, finding that DBP was in fact a signatory to the contract and was involved at every stage of contract negotiations. It further found that RICO claims raised in an international context are arbitrable, under the recent U.S. Supreme Court holding In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., _ U.S. _ , 105 S. Ct. 334b (1985). The court ordered arbitration to proceed.
Development Bank of the Philippines v. Chemtex Fibers, Inc., 617 F. Supp. 55 (S.D.N.Y. 1985).