USA (2) Virginia Allan Nicolette Ward. Allen & Overy

Transcription

1 USA (2) Virginia Allan Nicolette Ward Allen & Overy

2 Review of Public Policy Cases Citing Article V(2)(b) of the New York Convention To Either Enforce or Nullify an Arbitral Award in the United States Nicolette Ward Successful challenges based on PP grounds (NYC V(2)(b) or V(1)(e)) Date Case Circumstances Reasons given by Court Notes July 1, 2009 Puliyurumpil Mathew Thomas v. Carnival Corporation, CV-JAL, 11th Cir Personal injury of an employee on board a cruise ship. Thomas brought a statutory claim for damages resulting from his injuries. The Court considered Article V(2)(b) of the NYC to create an affirmative public policy defense that could be used at the motion to compel state to find an arbitration clause unenforceable because it requires a prospective waiver of [Thomas s] rights to pursue statutory remedies without the assurance of a subsequent opportunity for review. The Court determined that the dispute was not capable of settlement by arbitration. THIS IS BAD LAW AND HAS BEEN OVERTURNED IN THE 11TH CIRCUIT. The line of cases below that cite Thomas were not successful in denying confirmation of an award based on Thomas, but did result in some cases where the Court severed the offending portion of the arbitration clause, and then compelled arbitration. This award created a bad precedent in the 11th circuit saying that an arbitration agreement could be unenforceable based on public policy grounds under the NYC. This case was overturned and the 11th Circuit consistently holds that V(2)(b) of the NYC is only applicable during confirmation and enforcement proceedings. PERSONAL-WARDNI NY:

3 May 25, 2007 TermoRio S.A. E.S.P. (Colombia) v. Electranta S.P. (Colombia), , Court of Appeals of the District of Columbia Circuit Dispute regarding a power purchase agreement between TermoRio, the seller, and Electranta, the buyer. Tribunal issued an award in favour of TermoRio. Electranta applied to set aside the award in Columbian Court. TermoRio sought enforcement of the award in the District of Columbia. The District Court refused to enforce the award because it had been annulled in Columbia. The Court of Appeals for the District of Columbia affirmed the judgment of the District Court and denied enforcement of the award. Recognition and enforcement must be refused if the award has been set aside by a competent authority in the country of origin of the award. The Court found that the Consejo de Estado was a competent authority in Columbia, and accordingly, the arbitral award was lawfully nullified and the Appellants had no cause of action in the U.S. to seek enforcement of the award. The Court dismissed the argument that proceedings before the Consejo de Estado or the judgment of that Court violated any basic notions of morality and justice, and noted that there was no public policy ground on which to refuse enforcement under Article V(2)(b) of the NYC. Enforcement denied because a competent Court in the country of origin of the award had set aside the decision. Enforcement NOT denied on V(2)(b) grounds. This has a public policy gloss. PERSONAL-WARDNI NY:

4 August 12, 1999 Baker Marine (Nigeria) Ltd. v. Chevron (Nigeria) Ltd. v. Danos and Curole Marine Contractors, , , 2nd Cir. Dispute arising from a contract providing for Baker Marine and Danos to provide barge services for Chevron in Nigeria. Baker Marine initiated arbitration against Chevron and Donos for breach of contract. Two Nigerian tribunals found for Baker Marine, who then sought enforcement in Nigerian Federal Court. The Nigerian Court set aside the arbitration awards. Baker Marine sought to confirm the awards in the NDNY. The District Court denied Baker Marine s petitions to enforce the awards, and Baker Marine appealed. The Second Circuit affirmed the decision of the District Court and declined to enforce the arbitration awards because they had been set aside by a competent authority of the country in which, or under the law of which, the award was made, in accordance with Article V(1)(e) of the NYC. Baker Marine did not deny that the contract was governed by Nigerian law and the awards were set aside by a competent Nigerian Court. As such, the Second Circuit declined to confirm the awards. The Court did not cite Article V(b)(2) s public policy exception as the basis for refusing to enforce the arbitral awards. However, there is a public policy gloss to Article V(1)(e) based in principles of comity. PERSONAL-WARDNI NY:

5 Failed challenges based on PP grounds (NYC V(2)(b) or V(1)(e)) Date Case Circumstances Reasons given by Court Notes August 27, 2013 Corporacion Mexicana de Mantenimiento Integral, S. De R.L. De C.V. v. Pemex- Exploracion Y Produccion, 10 Civ. 206(AKH), SDNY The Second Circuit remanded the case to address the effect of a Mexican Court decree of nullification on a Mexican arbitration award, and on the district Court s judgment confirming the award in favour of COMMISA, a Mexican subsidiary of a U.S. Corporation, and against Pemex, an instrumentality of Mexico. Pemex moved to dismiss COMMISA s petition to confirm the award. The District Court here confirmed the arbitral award. The Court held that under the Panama Convention, deference to the Mexican Court s decree nullifying the Mexican arbitration award on the basis of a state agencies special privilege to rescind a contract for the public good, and a newly passed law requiring challenges to administrative matters to be heard exclusively in a special administrative Court, was not required because the Mexican Court decision violated basic notions of justice in that it applied a law that was not in existence at the time the parties contract was formed and left private enterprise without an apparent ability to litigation its claim. The Court explicitly differentiated the situation here with that in TermoRio (see above). While the basis for the confirmation challenge here was not Article V(2)(b), the Court (citing TermoRio) noted that there is a narrow public policy gloss on Article V(1)(e) of the Convention and that a foreign judgment is unenforceable as against public policy to the extent that it is repugnant to fundamental notions of what is decent and just in the United States. Id. at 939 (internal quotation marks omitted). In TermoRio, in the absence of evidence that the nullification proceedings or nullification judgment violated any basic notions of justice to which we subscribe, the public policy gloss could not save a nullified award. Id. August 7, 2013 Federal Deposit Insurance Corporation v. IIG Capital LLC., 1:11-cv UU, 11th Cir Alleged bias of arbitrator. No discussion of the public policy position. Not discussed. Public Policy is listed as a basis for setting aside the agreement, but it is not explicitly discussed in this decision. PERSONAL-WARDNI NY:

6 August 6, 2013 Yukos Capital S.A.R.L. v. OAO Samaraneftegasz, 10 Civ (PAC), SDNY Dispute over loan agreements. Claim that the Court should grant preclusive effect to a Russian Court s refusal to enforce the award, and that enforcement would violate public policy because the underlying loan agreements are themselves fraudulent. 1. Issues of a contract s validity are matters for the arbitrator to consider in the first instance. Since the arbitrators have determined that the contracts are valid, the Court will not find otherwise (that they are a product of fraud) in the name of public policy. The Court notes Nor does the fact that [the Court] is inquiring into a possible violation of public policy excuse a Court for doing the arbitrator s task. Citing United Paperworkers Int l Union v. Misco. Inc., 484 U.S. 29, 45 (1987). New York enforced the award, despite the Russian Court refusing to enforce the award on public policy grounds. 2. No cognizable public policy is identified. There is no public policy that requires the U.S. to police claims of foreign tax fraud. September 6, 2012 Agility Public Warehousing Co. K.S.C. Professional Contract Administrators, Inc. v. Supreme Foodservice GMBH, cv, 2d Cir. Agility witnesses refused to testify, citing the indictment, then recently unsealed, of Agility Public Warehousing Co. KSC. New York public policy, as opposed to national public policy, cannot be a basis for refusing to enforce an arbitration award. Thus, New York policy providing that a party may not make a claim for affirmative relief and at the same time refuse to disclose information bearing upon his right to maintain his action is not relevant for purposes of the public policy exception. PERSONAL-WARDNI NY:

7 March 16, 2012 Aggarao v. MOL Ship Management Company, Ltd. et al., , 4th Cir. Claim for damages arising from injuries sustained aboard a ship. Aggarao argues that enforcement of the arbitration clause as to his Jones Act and Seaman s Wage Act claims will contravene public policy of the United States because it would deny him the right to pursue his federal statutory claims. The Court stayed the case pending the arbitration proceedings to ensure that Aggarao would have an opportunity at the award-enforcement stage for judicial review of his public policy defense. However, the Court notes that the public policy defense can only be asserted at the award-enforcement stage after an arbitration award has been made, and not prior to that point. March 13, 2012 Subway International B.V. v. Bletas, 3:10-cv-1714 (JCH), District of Conn. Claim against franchisee of Subway International B.V. for failure to pay royalties and fees under the Franchise Agreement. Bletas argues that the award violates public policy because it does not specifically order the payment of relevant taxes on the award. The Court agrees that an award that does not permit the payment of applicable taxes on an award might violate public policy. However, here the award is silent on the issue of taxes and does not require the non-payment of taxes. Therefore, there is no conflict with laws requiring the payment of relevant taxes, and there is no violation of public policy. PERSONAL-WARDNI NY:

8 March 23, 2012 Maynor Centeno v. NCL (Bahamas) Ltd., civ-Martinez- Mcaliley, SD Florida Personal injury case on board a Bahamian flagged ship while employed. Employment contract includes an arbitration clause. As in Aggarao, Plaintiff argued that the arbitration clause itself is unenforceable as contrary to public policy. As in Aggarao, the Court here determined that the public policy defense may only be used at the enforcement stage of the arbitration. The Court here, as in Aggarao, noted that the 11th Circuit in Thomas was wrong, and its creation of a new public policy defense under Article II, based on the elimination of a U.S. statutory claim under the Seaman s Wage Act. This was a violation of the precedent under Bautista and other prior precedent. This Court takes the decision in Lido, addressing the Circuit spit as final, and holds that the public policy defense may only be used on the enforcement of an award. February 17, 2012 Sei Societa Esplosivi Industriali SpA v. L-3 Fuzing and Ordinance Systems, Inc., Civ No, RGA, D. Del. Dispute arising from a purchase order for fuses for aircraft-delivered attack munitions. PO subject to arbitration. Defendant sought to set aside the arbitral award on the basis that the arbitrator s errors violate contract principles and therefore American public policy. Citing Karaha Bodas Co., LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 306 (5th Cir. 2004), the Court noted erroneous legal reasoning or misapplication of law is generally not a violation of public policy within the meaning of the New York Convention. February 3, 2012 Scandinavian Reinsurance Co. Ltd. v. Saint Paul Fire and Marine Insurance Co. et. al., cv, 2d Cir. Dispute over a reinsurance contract known as a stop-loss retrocessional agreement. No discussion of the public policy defense. PERSONAL-WARDNI NY:

9 December 8, 2011 Iran v. Cubic Defense Systems, Inc. CV RMB, 9th Cir. Arbitration award confirmed in the district Court in favour of Iran on a dispute over air combat maneuvering range for use by Iran s military. The Iranian Revolution resulted in non-performance of the contracts. Iran filed a request for arbitration and seeks to enforce its award. Cubic argues enforcement would be contrary to US Policy because it would violate Iranian sanctions. The Court finds that there is no public policy against confirmation of the award, even if there is a public policy against payment of the award due to sanctions against Iran. Therefore, the Court confirmed the award. The Court distinguished expressly between confirmation of an award, and payment of an award. October 18, 2011 Maxwell v. NCL (Bahamas), Ltd, d.b.a. NCL, 1:11-cv MGC, 11th Cir Personal injury case of an employee on board a ship. The employment contract included an arbitration clause. The Plaintiff sought to void the clause as violating US Federal policy because it restricted his ability to bring federal claims. The Court reiterated that Thomas was a mistake, and the Court is bound by Lindo and Bautista, which limited the defenses available to enforcement of an arbitration agreement, and concluded that public policy cannot be used to invalidate an arbitration clause. Public Policy applies only on enforcement. August 29, 2011 Lindo (Nicaragua) v. NCL (Bahamas),Ltd., , 11th Cir. Another employment case in the 11th Circuit involving personal injury on a ship. The Plaintiff sought to void the clause as violating US Federal policy because it restricted his ability to bring federal claims. As referenced in Maxwell, the Court found that a public policy defense could only be used in the enforcement stage of arbitration, and not to invalidate an arbitration clause. Public Policy applies only on enforcement. PERSONAL-WARDNI NY:

10 August 29, 2011 Pineda Lindo v. NCL (Bahamas), Ltd., , 11th Cir Another employment case in the 11th Circuit involving personal injury on a ship. The Plaintiff sought to void the clause as violating US Federal policy because it restricted his ability to bring federal claims. The null and void defense in Article II(3) NYC entails only standard breachof-contract defenses, such as fraud, mistake, duress, and waiver, which can be applied neutrally on an international scale. It excludes public policy and unconscionability defenses, which vary from one legal system to another. Public Policy applies only on enforcement. February 16, 2011 Ameropa AG v. Havi Ocean Co. LLC, 10 civ 3240(TPG), SDNY Contract dispute over the sale of Iranian Sulphuric Acid. The Defendant argued against enforcement of the arbitral award on the grounds that it violates the U.S. Sanctions against Iran The public policy exception is granted only where enforcement would violate the forum state s most basic notions of morality and justice. According to the Court, implications of foreign policy disputes with another country are not sufficient to satisfy this threshold, and in any event, the Plaintiff was a Swiss company and thus not subject to the United States sanctions Iran Case PERSONAL-WARDNI NY:

11 January 21, 2011 Republic of Argentina v. BG Group PLC, (RBW), DDC BIT case involving BG s investment in one of Argentina s gas distribution companies. Argentina passed an emergency law that BG argued expropriated BG s shareholding and negatively affected BG s rights under the license. BG received an award. 1. Argentina s claim that the Court should deny confirmation of the award on public policy grounds because the dispute is not arbitral would secondguess the tribunal s decision on arbitrability, and is not grounds for a public policy defense. 2. Argentina s claim that the tribunal s method of assessing damages is contrary to public policy does not stand. When determining whether enforcement of the Award is contrary to public policy, the Court is without authority to conduct an exercise in factfinding. The Court, therefore, cannot second-guess the arbitral panel s reliance on a particular transaction in determining the fair market value of the BG company s investments. Additionally, the decision cannot be considered a judicial taking contrary to the 5th amendment because the arbitral panel is not an arm of government. The Court will not second guess decisions that are within the auspices of the arbitral tribunal, including arbitrability and fact-finding. PERSONAL-WARDNI NY:

12 December 15, 2010 AO Techsnabexport v. Globe Nuclear Services and Supply GNSS Lmt., , 5th Cir. Arbitration brought on breach of an SPA. Proceedings separated into three phases, the last of which was reserved for determining the validity of the contract pending the outcome of a related criminal investigation in Russia. The Tribunal issued a partial award for Globe, but then issued a final award for Tenex after the Russian proceedings finding that the contract was invalid under Swedish law. Tenex sought to confirm the award while Globe sought to confirm the partial award and vacate the final award on NYC grounds. The tribunal s finding did not constitute an assessment of criminal law, nor did the tribunal at6tempt to hold any7 individual or entity criminally liable in any respect, or cite to Russian criminal law or include applicable of Russian criminal law principles. Therefore, the tribunal s consideration of evidence from the Russian criminal investigation did not violate the public policy interest in protecting the integrity of international arbitration by mimicking a Russian criminal Court. Defense of mimicking a Russian criminal Court did not violate public policy just because the tribunal considered evidence from a Russian criminal Court. October 12, 2010 NTT Docomo Inc. v. Ultra D.O.O., 10 civ 3823 (RMB)(JCF), SDNY Breach of contract for the purchase of stock by instalment resulted in arbitration. Award to petitioner for specific performance to pay in exchange for the stock. Respondent argues that the award violates public policy of the United States because it calls for specific performance where monetary damages are sufficient. The Court holds that this is not an explicit, well-defined, or dominant public policy, and enforcement would not violate our most basic notions of morality and justice. PERSONAL-WARDNI NY:

13 October 7, 2010 Karla Monica Orozco v. Princess Cruise Line Ltd., , SD Florida Sexual harassment and personal injury case involving the Plaintiff, who was an employee on Defendant s ship. Another case touching on the 11th Circuit split on whether or not you can use the public policy defense to find an arbitration clause invalid prior to arbitration commencing. Plaintiff argues prohibitive costs violate public policy and invalidate the agreement to arbitrate. The Court does not agree. Nor does the Court find that the Plaintiff s Jones Act claims prohibit enforcement of the venue selection clauses. June 14, 2010 Nurettin Mayakan v. Carnival Corporation, 2099-Orl-31DAB, MD Florida Personal injury of employee on board a cruise ship. Employee brought suit in Court, and the defendant seeks to compel arbitration. The Court grants the motion to compel. Another case where the party seeks to invalidate the arbitration clause on the basis of public policy. As with the other later cases, the Court found that the public policy exception applies at the enforcement stage, and cannot be used to enforce or challenge an arbitration clause in a contract or an arbitration agreement. PERSONAL-WARDNI NY:

14 May 11, 2010 Anna Dockeray v. Carnival Corp., , SD Florida Personal injury of employee on board a cruise ship. Complaint filed in Court, defendant seeks to compel arbitration. Plaintiff argues that Defendant waived its right to arbitrate by litigating in state Court prior to removal, and, relying on Thomas, that the arbitration agreement is contrary to public policy. Acknowledging the decision in Thomas by the 11th Circuit, that there is a split in authority, and that the 11th Circuit will have to decide the issue, the Court determines that the 8th paragraph of the agreement that would require Panamanian law to apply to her statutory claims is unenforceable, is severed, and then compels arbitration. Acknowledges Thomas. No longer good law. Note that the 11th Circuit decision Thomas, which provides for a prearbitration determination on public policy that might render the arbitration agreement unenforceable, was overturned. All of the decisions applying Thomas have likely been overruled by the August 29, 2011 decisions Lindo and Pineda. DO NOT USE THESE CASES AS A BASIS FOR CURRENT LAW ON PUBLIC POLICY. April 14, 2010 Sivkumar Sivandi v. NCL (Bahamas) Ltd., CIV-UNGARO, SD Florida Personal injury on board a ship. Applies Thomas to find that arbitration clause is unenforceable as against public policy. No longer good law. Do not use. March 15, 2010 Agnelo Cardoso v. Carnival Corp., civ-gold/mcaililey, SD Florida Personal injury on board a ship. Applies Thomas to sever the choice-oflaw provision and compel arbitration. No longer good law. Do not use. PERSONAL-WARDNI NY:

15 December 3, 2009 China Nat l Building Material,. Investment Co. Ltd. v. BNK Int l LLC, A- 09-CA-488-, WD Texas SPA for hardwood floor products. Arbitrators rendered a first award for the Plaintiff out of arbitration proceedings in Hong Kong. Tribunal rendered a second award for Plaintiffs on costs. Plaintiff seeks confirmation of both awards. Defendant seeks non-enforcement of the award on public policy grounds because the arbitration hearing was ex parte. The Court finds that the tribunal s hearing, held on an ex parte basis, was not a violation of due process because the witness was given the opportunity to attend the hearing by videoconference and refused. Therefore, there was also no violation of public policy. November 19, 2009 Steel Corp. of the Philippines v. Int l Steel Services Inc., / , 3rd Cir. Contract dispute over the building of an acid regeneration plant for SCP. An award was issued for ISSI. A subsequent award was issued on a separate claim for SCP. ISSI moves for non-enforcement of the award, or to set the award off by the amount of the award in ISSI s favour. ISSI contends that enforcing the SCP Award would violate the public policy against forum shopping in the United States, as well as res judicata unless the Court defers to the Courts of the Philippines who are also considering the validity of the award. The Court found that the principle purpose for the NYC is to encourage the recognition and enforcement of commercial arbitration agreements, and that parties may bring suit to enforce awards notwithstanding the existence of ongoing proceedings elsewhere. PERSONAL-WARDNI NY:

16 August 28, 2009 AO Techsnabexport v. Globe Nuclear Services and Supply Lmt., AW , D Maryland Arbitration brought on breach of an SPA. Proceedings separated into three phases, the last of which was reserved for determining the validity of the contract pending the outcome of a related criminal investigation in Russia. The Tribunal issued a partial award for Globe, but then issued a final award for Tenex after the Russian proceedings finding that the contract was invalid under Swedish law. Tenex sought to confirm the award while Globe sought to confirm the partial award and vacate the final award on NYC grounds. GNSS contends that the Arbitration tribunal improperly imported into the arbitration a sham criminal prosecution from the Russian Federation, thereby rendering the Final Award unenforceable as contrary to the public policy of the United States. The Court noted that there was no evidence that documents were being intentionally gathered for the purpose of subverting the commercial arbitration, and there is no evidence of a lack of due process. District Court decision. decision described above. Fifth Circuit PERSONAL-WARDNI NY:

17 May 12, 2009 Four Seasons Hotels and Resorts B.B. et al. v. Consorcio Barr S.A., CIV-Mooreisimont, SD Florida Contract dispute relating to agreements between the parties on the management of the Four Seasons Hotel Caracas (Venezuela). Four Seasons was issued a partial award and sought to enforce the award in the Southern District of Florida despite a finding in Venezuelan Court that the partial arbitration award was null and void, and granting a motion to suspend execution of the award. Four Seasons also sought to bar Consorcio Barr from any further proceedings before the Venezuelan Court. Four Seasons was subsequently issued a final award. Consorcio argued that confirmation of the final award is contrary to public policy because it would require the Court to supervise the operation of the Four Seasons Hotel, which would be impractical or impossible, and would be in contravention of rulings by other Venezuelan Courts and comity considerations. The Court found that there was insufficient specificity provided concerning the alleged conflicts with foreign Court rulings, and the possibility that confirmation of the award might result in conflict with a foreign Court s valid ruling is insufficient to raise comity or other public policy concerns under Article V(2)(b). Additionally, if Four Seasons brought an enforcement action in the Southern District of Florida, the Court found that there was no reason to believe the Court would be unable to assess the claims and resolve them without supervising the day to day operations of the hotel. PERSONAL-WARDNI NY:

18 September 16, 2008 Gas Natural Aprovisionamientos SDG S.A. v. Atlantic LNG Co. of Trinidad and Tobago, 08 Civ (DLC), SDNY Dispute arose from a price reopener provision in a long term contract for the sale of LNG to Spain. Atlantic asserted that, by effectively merging the two conditions precedent of Article 8.5(a) in the contract, the Tribunal contravened the fundamental and well established public policy in the United States that a contract be applied and enforced as written. However, the Court found that the Tribunal had not failed to take into account the provisions of Article 8.5(a), the decision was plainly grounded in its reading of the parties contract and thus not at odds with any public policy identified by Atlantic. PERSONAL-WARDNI NY:

19 November 2, 2007 Telenor Mobile Commc ns AS v. Storm LLC, 07 Civ (GEL), DDC Dispute between joint venture partners over the validity and effect of a shareholders agreement related to the corporate governance and management of a jointly owned Ukrainian telecommunications company. Telenor invoked arbitration and was granted a final award granting various relief. The Ukrainian Courts separately held that the Shareholders Agreement was null and void. Storm sought to avoid enforcement of the award because the conditional divestiture order, which is based on Storm s violation of the non-compete clause, is unenforceable in Ukraine because such clauses are specifically prohibited by Ukrainian antimonopoly law. Storm argues that these conflicting directives violate New York s public policy against enforcement of arbitral awards that compel a violation of law. The Court found first, that it was unclear that the award conflicts with Ukrainian law since the relevant inquiry is not whether the issues overlap, or if the reasoning is consistent, but whether the resulting decisions are directly contrary in such a way as to make compliance with one necessarily a violation of the other. Second, even if it did, Storm did not demonstrate that an established New York public policy exists against enforcement of arbitral awards that compel a violation of foreign law. Finally, even if there were such a policy, it is outweighed in this case by the public policy in favour of encouraging arbitration and enforcing arbitration awards. In any case, enforcement of the award would not violate the most basic notions of morality and justice in New York. Note that the Court here articulates the standard as being a violation of the forum where enforcement is sought, which the Court identifies here as New York. Agility Public Warehousing Co. K.S.C. Professional Contract Administrators, Inc. v. Supreme Foodservice GMBH (above) disagrees with this position, and finds that only national public policy, and not New York public policy can form the basis of a refusal to enforce an arbitration award under NYC V(2)(b). PERSONAL-WARDNI NY:

20 July 31, 2006 Steel Corp. of the Philippines v. Int l Steel Services, Inc., , WD Penn. Contract dispute over the building of an acid regeneration plant for SCP. An award was issued for ISSI. A subsequent award was issued on a separate claim for SCP. ISSI moves for non-enforcement of the award, or to set the award off by the amount of the award in ISSI s favour. ISSI argues that the award is contrary to public policy because there is currently other litigation in the Philippines. However, the Court finds that the litigation in the Philippines is based on a dispute over a different agreement from that in the arbitration, and any disagreement arising under different agreements may be filed separately and potentially in different forums. This is not improper forum shopping. Additionally, ISSI s public policy arguments were insufficiently developed and specific to justify nonenforcement of the arbitral award. This is the District Court case for the 3rd Circuit case, Steel Corp. of the Philippines v. Int l Steel Services Inc., / discussed above. March 6, 2006 R.M.F. Global, Inc., et al. v. Elio D. Cattan, et al., 04cv0593, WD Penn. Contract dispute relating to patent infringement and tortious acts. A complaint was filed and defendants moved to dismiss based on an arbitration clause in the marketing agreement between the parties. The case was stayed and the parties arbitrated under the Italian Arbitration Association. An award was rendered for Cattan, R.M.F. Global seeks to vacate the award. R.M.F. argues that enforcement of the award would violate the public policy of the United States because it was entered in violation of their due process rights. The Court determined that R.M.F. had sufficient notice of the IAA proceedings and opportunity to be heard. Thus they were afforded due process and declined to avail themselves of it. No public policy is therefore implicated by confirmation of the award. PERSONAL-WARDNI NY:

21 June 17, 2005 TMR Energy Ltd. (Cyprus) v. State Property Fund of Ukraine (Ukraine), , Court of Appeals D.C. Circuit Contract dispute between TMR and SPF. TMR filed an action in federal Court to confirm an arbitral award against the SPF. The Court ruled in favour of TMR and SPF appealed on the basis that confirmation of the award violates public policy. SPF contended that it could not have compelled Linos to deliver to Lisoil the share of refined oil to which it was entitled under the 1993 agreement because, from 1996 through the arbitration proceedings, Linos was in bankruptcy so such delivery would have constituted a preference in violation of Ukrainian bankruptcy law. The Court found that SPF knew that Linos was in bankruptcy when it signed the 1999 agreement, and that the arbitrators did not specify that SPF should have forced Linos to deliver oil to Lisoil. SPF intentionally caused Lisoil harm by doing nothing to comply with or make Linos comply with the 1993 agreement, and failed to mitigate harm to Lisoil s economic interests. Therefore, confirmation of the arbitral award does not violate public policy. PERSONAL-WARDNI NY:

22 March 25, 2005 Chemical Overseas Holdings, Inc. et al. v. Republica Oriental del Uruguay, 05 Civ. 260, SDNY Chemical Overseas Holdings seeks to confirm an arbitration award against Uruguay. Uruguay objects to confirmation of the award on the grounds that the proceeds of the suit have been attached through an order of an Uruguayan Court, and thus confirmation of the award would put Uruguay in the untenable position of being subject two irreconcilably inconsistent Court orders, which would be contrary to public policy because Uruguay would have to violate one of the orders. The Court found first that Uruguay waived its objection based on irreconcilable Court orders because it failed to present the argument during the arbitration. Second, the Court finds that there is no inconsistency between the Uruguayan attachment and the judgment sought by petitions. The Uruguayan Court has not adjudicated any rights between the parties, and has made no ruling contradicting the arbitrator s awards. TO the contrary, the Uruguayan attachment order appears to presume that such a debt does exist. The Uruguayan order is simply a provisional remedy in favour of plaintiffs before it against petitioners. There is nothing contrary. Motion for reconsideration denied on May 5, PERSONAL-WARDNI NY:

23 September 29, 2004 Stawski Distributing Co., Inc. v. Browary Zywiec S.A., 02 C 8708, ND Illinois Dispute over a beer distribution agreement. The 7th Circuit determined that the agreement s forum selection clause was enforceable while its choiceof-law clause was not unenforceable under Illinois law because it contradicted the Illinois Beer Industry Fair Dealing Act. The 7th Circuit compelled arbitration in Poland and asked the arbitrators to apply Illinois law. Zywiec received an award finding that the agreement was terminated under both Polish law and the IBIFDA. Zywiec seeks to confirm the arbitration award. Stawski opposed on the basis of public policy claiming the arbitrators improperly applied Polish law rather than Illinois law. The Court found that the arbitral decision explicitly applied Illinois law, and the Illinois Beer Industry Fair Dealing Act when making its decision. So there is no substance to Stawski s claim that they failed to apply Illinois law. The arbitration award was confirmed. Note that the 7th Circuit invalidated the choice-of-law clause on the basis of public policy as contradicting an Illinois statute. May 25, 2004 Nicor Int l Corp., et al. v. El Paso Corp., , SD Florida Plaintiff brings suit set aside a final arbitration award on the basis of collateral estoppel and public policy grounds. A Court in the Dominican Republic had found that the defendants had waived their right to arbitration. The sole arbitrator disagreed and issued a final judgment for the defendants. The Court determined that the Dominican Republic Court s finding that the defendant had waived its right to arbitrate was contrary to the public policy favouring arbitration, particularly because the Dominican Republic Court failed to apply a heavy burden to demonstrate waiver. Because the Court did not find the collateral estoppel arguments valid based on public policy, they did not set aside the arbitration award. Minimal discussion of NYC V(2)(b). No actual motion to confirm the arbitration award. This order addresses several other motions, but Plaintiffs motion for rehearing, reconsideration, alteration and or amendment is denied, so it appears that an order confirming the arbitration award was already made. PERSONAL-WARDNI NY:

24 April 23, 2004 Karen Maritime Ltd. v. Omar Int l Incorp., CV , EDNY Dispute over a charter-party agreement. An arbitral tribunal ordered Omar to pay damages to Karen. Karen filed suit to confirm the award. Omar opposes confirmation on the grounds that enforcement of the award would be contrary to public policy because Section 48 of the agreement prohibiting the vessel from entering Israel or being Israeli owned or controlled is contrary to Section 2407 of the Export Administration Act which prohibits any US person from complying with a boycott imposed by a foreign country against a country friendly to the U.S. The Court confirmed the award, noting that the clause in Section 48 of the agreement prohibiting the vessel from entering Israel or being Israeli owned or controlled was contrary to U.S. public policy, but Karen s non-performance under the contract had nothing to do with the Arab boycott of Israel. Instead, Omar violates Section 2407 of the Export Administration Act in signing the agreement with such language, and he had not raised objections when signed. Note that while the Court did not refuse to confirm the award, had the nonperformance under the contract been based on Karen s entry of the vessel into Israel, or Israeli control or ownership of the vessel, it seems likely the Court would have found the clause unenforceable, and not confirmed the award on public policy grounds. PERSONAL-WARDNI NY:

25 March 23, 2004 Karaha Bodas Co. (Cayman Islands) v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Indonesia), , , 5th Cir. Dispute over a contract between Pertamina, a company owned by the Government of Indonesia, and KBC, a Cayman Island Company to develop geothermal energy sources in Indonesia for electrical power generation. KBC received an arbitral award and seeks to enforce the award. Pertamina sought to set aside the award in Switzerland. Then Pertamina sought annulment in Indonesia, which annulled the award. The award was enforced in District Court. Pertamina appealed. Pertamina asserts that the Award violated public policy because it violated the international law doctrine of abuse of rights because it imposes punishment for obeying a government decree. Pertamina also argues that KBC s failure to disclose the political risk insurance policy during arbitration was a violation of public policy. The Court disagrees and finds that the abuse of rights doctrine is not established in American law, and in any case, KBC s actions do not meet the factors required to trigger its application. On the second argument, the Court finds that failing to disclose the insurance policy did not constitute fraud. There is no evidence that KBC deliberately m8isled the tribunal, and when the question of insurance arose and was not clearly resolved, Pertamina had the opportunity to ask questions, and chose not to. KBC s failure to produce evidence of insurance, and Pertamina s decision not to pursue the subject does not violate public policy. PERSONAL-WARDNI NY:

26 November 26, 2003 Consorcio Rive S.A. de C.V. (Mexico) v. Briggs of Cancun, Inc. (US), , 5th Cir. Dispute over a contract for Rive to provide property and permits for Briggs to open a restaurant in Mexico. An arbitration award was rendered in favour of Rive. Rive filed suit to enforce the award. The Court for the Northern District of Louisiana enforced the award against Briggs, but refused to enforce the award against its parent company, David Briggs Enterprises. Rive appealed the district Court s decision to dismiss DBE from the case. Briggs appealed the award on public policy grounds because Mexican criminal proceedings had been instituted as a tool of intimidation and extortion against Briggs and the parent company. The Fifth Circuit affirmed the lower Court holding and enforced the award against Briggs. It rejected the public policy argument because it is not uncommon for civil and criminal proceedings to run concurrently. The Court noted that difficult litigation choices may result from a party s being involved in concurrent civil and criminal proceedings do not substantially infringe Fifth Amendment rights, and therefore they do not violate our most basic notions of morality and justice. Additionally, Briggs had ample opportunity present its case to the arbitrator without his physical presence at the arbitration, so fear of criminal prosecution did not prevent Briggs from presenting his case. Enforcement of the award is confirmed. PERSONAL-WARDNI NY:

27 June 4, 2003 Four Seasons Hotels and Resorts, B.V., et al. v. Consorcio Barr, S.A., , SD Florida Four Seasons seeks to confirm a partial award for breach of several agreements between the parties as to the management and operation of a hotel in Caracas, Venezuela. Four Seasons argues that Consorcio violated the award by filing a motion in Venezuelan Court to remove Four Seasons from operating the hotel. The Venezuelan Court declared the substance of the partial award null and void. The partial award prohibited Caracas from engaging in litigation before the Venezuelan Courts. The Court considers Consorcio s collateral estoppel and res judicata arguments as an attempted public policy defense as there is no other basis to consider those arguments. The Court found no collateral estoppel because the issues presented are not identical, and Consorcio s full participation in the arbitration proceedings prevents Consorcio from now maneuvering to escape the effects of the subsequent award. There are no circumstances therefore to preclude confirmation of the award on Article V(2)(b) grounds. See related case above. September 2, 1998 Europcar Italia, S.p.A. v. Maiellano Tours, Inc., , 2d Cir. A dispute arose between Maiellano, a U.S. travel agency, and Europcar, an Italian car rental business over a service agreement. An arbitral tribunal rendered a monetary award in favour of Europcar. Europcar commenced actions in Italy and the EDNY to confirm the award and direct payment. EDNY confirmed the award. Maiellano appealed in part on public policy grounds. Maiellano argued that enforcement of the award would be contrary to public policy because the underlying contract was forged. The Court rejected this argument finding first, that the issue of whether the underlying contract was forged is a matter to be determined exclusively by the arbitrators, and second, that Maiellano had failed to raise this claim before the tribunal, and therefore forfeited the argument. PERSONAL-WARDNI NY:

28 May 22, 1998 Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, , , 11th Cir. SPA between Nitram and Bernard and Burk Group, which contracted with MAN GHH to purchase equipment for resale. Dispute over the SPA led to an award in favour of MAN. Bernard and Burk filed a motion to vacate. The district Court denied the motion, and Bernard and Burk appeal in part on the grounds that he award violated public policy because the arbitrators improperly admitted certain testimony and evidence. The Court affirmed the District Court s judgment confirming the award, but vacated the order refusing to award prejudgment interest to MAN GHH. On the issue of public policy, the Court found that the admission of testimony did not violate public policy because the public policy in this case was not an explicit public policy that is welldefined and dominant. The public policy cited were fundamental principles of fairness and professional conduct, which appellants argued were violated when their expert switched sides The appellants cited no rule of procedure or evidence, no case against side-switching PERSONAL-WARDNI NY:

29 July 31, 1996 Chromalloy Aeroservices v. The Arab Republic of Egypt, , DDC Chromalloy, a defense contractor, brought action to enforce an arbitration award entered in its favour in a dispute arising from a contract with the Egyptian Air Force. An Egyptian Court of Appeals nullified the arbitration award, and Chromalloy seeks to confirm and enforce the award in the United States. In this case, the Court had the authority to set aside the arbitral award under Article V(1)(e) because the award was governed by Egyptian law, was made in Egypt, and was nullified by the Court designated by Egypt to review arbitral awards. However, while there is a public policy interest in comity, the U.S. public policy in favour of final and binding arbitration of commercial disputes is unmistakable, and supported by treaty, by statute, and by case law. The Court determined that the arbitral award was proper as a matter of U.S. law, and the arbitration agreement between Egypt and Chromalloy precluded an appeal in Egyptian Courts. For those reasons, the Court confirmed and enforced the award, and held that the Egyptian decision has no res judicata effect. The Court addressed Article V(1)(e) s public policy considerations in this case, and not public policy under Article V(2)(b). Note that the Court declined to recognize the nullification of an arbitral award rendered in Nigeria, and instead confirmed the arbitral award, despite the option to decline to confirm the award based on Article V(1)(e), and public policy considerations of comity. Instead, the tribunal determined that the public policy supporting enforcement of arbitral awards (that were deemed valid under U.S. law) outweighed the consideration of comity. PERSONAL-WARDNI NY:

30 August 24, 1990 Int l Standard Elec. Corp. v. Bridas Sociedad Anonima Petrolera, Indus. Y Comercial, 90 Civ (KC), SDNY A dispute arose between ISEC, an American corporation, and Bridas, an Argentinean company over a shareholders agreement. An arbitral tribunal ruled in favour of Bridas. ISEC filed a petition in the SDNY to vacate, Bridas crosspetitioned for enforcement. ISEC argued, in part, that enforcement would violate public policy because secret procedures utilized by the arbitrators in appointing an expert violated due process standards. The Court noted that ISEC failed to object to the appointment procedure used in the selection and consultation of the expert on New York Law, and therefore that any objections ISEC had were waived. The Court noted that ISEC s claim then morphed into one of manifest disregard for the law. The Court found that manifest disregard of the law is a creature of domestic arbitration cases and whatever the concept means, it does not rise to the level of contravening public policy as relates to Article V of the NYC. PERSONAL-WARDNI NY:

31 October 27, 1988 Geotech Lizenz A.G. v. Evergreen Systems, Inc., CV , EDNY A dispute arose between Geotech, a Swiss company, and Evergreen, an American company over a partnership agreement that referred to a license agreement. The parties settled. Subsequently, Geotech commenced arbitration and obtained an award. Geotech applied for recognition and enforcement in the EDNY. Evergreen resisted enforcement, arguing in part that enforcement of the award would violate public policy. The Court granted enforcement of the award. Evergreen argued that the arbitration award violates this nation s most basic notions of justice because it was rendered in the absence of a valid agreement to arbitrate, deals with matters beyond the scope of the arbitrator s powers, and was rendered without proper notice. The Court addressed each of these arguments outside the context of public policy and found that each did not warrant denial of enforcement. Considered together as a violation of public policy, they still do not amount to a violation of this Country s most basic notions of morality and justice. Enforcement is not barred by the public policy exception. Very little discussion of the public policy exception. Summarily dismissed. PERSONAL-WARDNI NY:

32 July 2, 1985 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, , SCOTUS A dispute arose between Mitsubishi, a Japanese company, and Soler Chrysler, a Puerto Rican company concerning a distribution contract. Mitsubishi brought suit in district Court to compel arbitration in Japan. Soler objected on the basis that tis counterclaims were based on Sherman Antitrust act violations, and the claims could not be disposed of in arbitration. The district Court ruled the antitrust claims were arbitrable, the circuit Court reversed. SCOTUS affirmed the district Court s decision and compelled arbitration. The Second Circuit had found the claims non-arbitrable based on the pervasive public interest in enforcement of the antitrust laws, and the nature of the claims that arise in such cases. SCOTUS overturned the Second Circuit found that the American Safety doctrine (the fundamental importance to American democratic capitalism of the regime of the antitrust laws) is very important, but a tribunal can effectuate that interest, and the national Courts of the U.S. will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed. Here SCOTUS means that the U.S. Courts could refuse enforcement of an award on public policy grounds if the award violates the antitrust laws. SCOTUS upholds the arbitrability of the antitrust claims, but maintained the right of U.S. Courts to refuse to enforce an award that violated the antitrust laws on public policy grounds. This supports the later cases that suggest that the Court should not refuse to compel arbitration on public policy grounds, because the public policy exception is applied to enforcement of an award. PERSONAL-WARDNI NY: