Parsons & Whittemore Overseas Co., Inc. v. Societe Generale De L'industrie Du Papier (Rakta)

508 F.2d 969 (2nd Cir. 1974)

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Nature of the Case

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Facts

Overseas entered into a contract Societe (RAKTA) to construct and run a paperboard mill in Alexandria, Egypt. A branch of the United States State Department was to finance the transaction. There was an arbitration clause in the contract as well as a force majeure clause. Work proceeded until the 1967 Arab Israeli Six Day War which caused the majority of the Overseas work crew to leave the country. On June 6, diplomatic ties were broken with the United States, and all Americans were expelled from Egypt except those who would apply and qualify for a special visa. Overseas invoked the force majeure clause and RAKTA invoked arbitration. Overseas essentially lost the arbitration because it determined that the force majeure clause was only valid for a short period of time. Overseas sought a declaratory judgment to prevent RAKTA from collecting the award out of a letter of credit issued in RAKTA's favor by Bank of America at Overseas' request. RAKTA counterclaimed and sought enforcement of the arbitration. RAKTA won, and Overseas' appealed.