October 16, 2017 Practice Points

Be Careful to Avoid Conflicting Arbitration Clauses

By Kevin Casey

In UPM-Kymmene Corp. v. Renmatix Inc., Case No. 2017-0363 (Oct. 6, 2017), the Delaware Chancery Court resolved a dispute created by conflicting ADR clauses. In 2013, Finnish company UPM-Kymmene Corp. (UPM) and Pennsylvania-based biotechnology startup Renmatix Inc. (Renmatix) entered into two agreements to explore potential collaborations involving technology related to renewable fuels that Renmatix developed. The first agreement, which was bilateral, contained a clause stipulating that disputes would be arbitrated before the International Chamber of Commerce. The second agreement, which was made a bit later in time, was trilateral and included BASF SE as a party. The second agreement contained a clause stating that disputes would be arbitrated before the American Arbitration Association.

A patent dispute arose between UPM and Renmatix, and Renmatix filed an arbitration demand against UPM (only) with the AAA in April. UPM wanted the ICC to conduct the arbitration, so it filed a lawsuit asking the court to prevent Renmatix from arbitrating its claims before the AAA or any forum other than the ICC. The court rejected UPM’s position and held that the language in the trilateral agreement allows Renmatix to pursue UPM (alone) in the arbitration before the AAA.

UPM supported its argument in favor of the ICC with the arbitration demand. The demand referenced UPM’s breaching “multiple” agreements, which UPM stated referenced the bilateral agreement. In rejecting that argument, the court stated that: "Although this phrase read in isolation creates a level of ambiguity about Renmatix’s intentions, it is not necessarily inconsistent with Renmatix’s representation that the Demand seeks to assert claims only under the Tri-Lateral Agreement given that multiple agreements are incorporated by reference into the Tri-Lateral agreement." Both agreements incorporated arbitration rules empowering the arbitrator to decide whether the claims belonged in arbitration, although the agreements called for different arbitrators to resolve the issue. Therefore, the court was unable to discern an intention by the parties to prefer one arbitration forum over the other and decided the issue accordingly.

Practice Pointer
The lesson for parties is to be careful that the arbitration provisions in related contracts are consistent with each other and, if they are not, be clear about which one takes precedence.

Kevin Casey is a partner with Stradley Ronon in Philadelphia, Pennsylvania.


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