Archive | Arbitration

Case of the Day: Concesionaria Dominicana de Autopistas y Carreteras v. Dominican Republic

By on January 2, 2013 in Arbitration

Welcome back, and happy new year! The case of the day is Concesionaria Dominicana de Autopistas y Carreteras v. Dominican State (D.D.C. 2012). In 2001, the Concesionaria Dominicana de Autopistas y Carreteras (CODACSA) entered into a contract with the government of the Dominican Republic to develop several highways. Under the contract, CODACSA was entitled to collect tolls in exchange for financing and construction work. But according to CODACSA, the government breached the contract by failing to provide required bank guaranties. CODACSA initiated an arbitration before the Arbitration Court of the ICC in Washington, and the tribunal found that the Dominican Republic had breached the contract and awarded more than $33 million in damages.

CODACSA moved to confirm the award in the District of Columbia. It served the papers on the Dominican Republic by private courier (DHL), and while the Republic accepted service, it did not respond to the petition. CODACSA then sought a default judgment.

The judge found that he had jurisdiction. He had subject-matter jurisdiction because under 28 USC § 1605(a)(6)(B), there is no sovereign immunity from jurisdiction “in any case … in which the action is brought … to confirm an award made pursuant to … an agreement to arbitrate, if … the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.” He had personal jurisdiction because the courts have personal jurisdiction over all actions against foreign states in which subject-matter jurisdiction exists and service of process has been effected.

The judge found that CODACSA was entitled to confirmation. Since the Dominican Republic had defaulted, it had not even sought to argue that any exceptions to the the requirement of confirmation applied. But under 28 USC § 1608(e), a court can enter a default judgment against a foreign state only where the claimant established its claim “by evidence satisfactory to the court.” The judge undertook his own review of the record and found that CODACSA had proved its case. 1 Easy case.

Notes:

  1. As the judge noted, it’s proper in such cases for the court to credit the claimant’s uncontroverted evidence, and in particular affidavits. ↩
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Case of the Day: Nanda v. Nanda

By on December 13, 2012 in Arbitration

The case of the day is Nanda v. Nanda (N.D. Tex. 2012). Jay and Atul Nanda, brothers, were fighting over control of Dibon Solutions, Inc. in the Texas state courts. In 2011, they dismissed the Texas litigation and agreed to settle some of their disputes in arbitration. The arbitrator’s award, rendered only a month or so after the settlement, divided ownership in Dibon and other company, RTS. Jay accused Atul of refusing to comply with the award, and he sued Atul and Dibon Solutions in the 44th Judicial District Court of Dallas County. Atul and Dibon removed the case to the Northern District of Texas on the grounds that case related to the award and that the award fell under the New York Convention. After the judge denied Jay’s motion to remand, 1 Jay amended his complaint to seek confirmation of the award.

Atul argued that he had been denied the opportunity to present his case because the arbitrator had misconstrued the evidence. He submitted an email that the arbitrator probably regrets sending:

In any event, the suggestion has been made that the evidence has been “misunderstood or ignored”, and the award contains “clearly an error of omission”.

I will always concede that evidence may have been misunderstood. I will never concede that evidence was ignored.

Is there not another possibility?

That in the parties obsessive haste, where urgency and a desire for speed rendered a desire for an orderly process moot, where the original hearing date, which all acknowledged was unreasonably hasty, was moved up by two weeks to accommodate the travel plans of family, resulted in a hearing process where the evidence was poorly, and sloppily, presented, where after the hearing, non-parties are sending ex parte communications asking for modifications to an award? I didn’t design the process. I argued against it.

The judge concluded, apparently correctly, that the email was not an admission that the arbitrator had misconstrued evidence. But it’s mysterious why the arbitrator thought it was a good idea to engage in this kind of back-and-forth with the litigants after rendering the award.

Atul made a number of other minor arguments, which the judge rejected, but his main alternate argument was that Dibon, a defendant in the action for confirmation, was not a party to the arbitration agreement. The agreement itself is a little confused. On the one hand, it does not name Dibon as a party. On the other hand, all of Dibon’s shareholders signed it, and why would they have signed if Dibon was not intending to be bound? Fortunately, there were sound reasons to hold that Dibon was bound by the agreement to arbitrate notwithstanding the agreement’s ambiguities. For one thing, Dibon ratified the arbitration agreement by performing obligations under it (e.g., dismissing its lawsuit against Jay, making payments to RTS). For another, Dibon judicially admitted that it was a party to the arbitration agreement in appellate proceedings in its lawsuit against Jay.

The oddest thing about this case is the speed with which the parties arbitrated. It seems both parties must have thought that the most important thing was a quick decision, up or down. Why, then, did Atul resist the award? When we read cases on confirmation or vacation or arbitral awards, there is always a tension between the justification for enforcing arbitral agreements—the parties’ consent—and the facts on the ground, at least in cases where the losing party isn’t able to make a credible showing that the award comes within one of the narrow exceptions to enforcement in the Convention.

Notes:

  1. The decision on the remand is not the subject of today’s post, but it’s interesting nonetheless. Both brothers resided in Texas, but both were citizens of India. Under 9 U.S.C. § 202, commercial arbitral awards fall under the Convention unless it is “entirely between citizens of the United States.” Is it sensible to make citizenship rather than domicile the key here? See 3 Ved P. Nanda and David K. Pansius, Litigation of International Disputes in U.S. Courts § 19:9 (“Consider the reverse. Jane Doe is a citizen of India. She is domiciled in California. She has legal permanent residence status and expects to get her citizenship soon. A California company contracts with Jane for the software. Jane has all of the look, feel, and appearance of a U.S. citizen. Does the fact that she ‘only’ has a green card invoke the Convention because the dispute involves a person who is not a U.S. citizen? Would the result change if Jane were not a citizen when the legal relationship was created; but was a citizen when the dispute arose?”) ↩
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Case of the Day: China National Chartering v. Pactrans Air & Sea

By on December 10, 2012 in Arbitration

The case of the day is China National Chartering Corp. v. Pactrans Air & Sea Inc. (N.D. Ill. 2012). In 2006, Pactrans, a freight forwarder with its main offices in Illinois and branch offices in China, chartered the M/V Sanko Rally from China National to transport a cargo of gypsum board from China to Florida for Devon International Trading Inc. The charter party between Pactrans and China National had an arbitration clause providing for arbitration in Beijing. The gypsum board was damaged during transit, leading to litigation between China National and Pactrans about demurrage.

China National sued Pactrans first in the Southern District of New York seeking a prejudgment attachment of assets. While that claim was pending, China National also began an arbitration in Beijing before the China Maritime Arbitration Commission. The arbitration resulted in an award in favor of China National for more than $500,000, plus attorney’s fees and costs. Pactrans appealed the award to the Tianjin Maritime Court as provided for in China’s arbitration law. The Tianjin court affirmed the award. China National then sought recognition and enforcement of the award in the New York proceeding. The New York court confirmed the award and entered final judgment, and Pactrans appealed.

China National then sought to confirm the award in Chicago. The judge stayed the proceedings pending the outcome of Pactrans’s appeal of the New York decision. In 2011, the Second Circuit determined that the New York court had lacked personal jurisdiction over Pactrans, and on remand the New York judge accordingly dismissed the motion to confirm the award. This left the field clear for the judge in Chicago.

Pactrans raised various arguments on the validity of the arbitration agreement, all of which failed. It argued that it had not agreed to arbitrate the matters the award actually decided, but the charter party provided that “any dispute arising out of this Charter [Agreement] shall be referred to arbitration at the place indicated in box 25 [Beijing], subject to the procedures applicable there.” Pactrans argued that English rather than Chinese law should have governed the arbitration, but the charter party also provided that “The laws of the place indicated in box 25 shall govern this Charter.” It’s not necessarily the case that the law governing the substantive contract between the parties should also be the law of the arbitration, but certainly the default rule is that the arbitration itself is governed by the law of the place of the arbitration. Pactrans argued last that it had not agreed to the choice of arbitrator,which can be fatal under Chinese arbitration law, but in an email Pactrans’s counsel had “confirm[ed] agreement to arbitration of demurrage claims before CMAC.”

Pactrans also argued that it was unable to present its case, noting supposed errors in the admisison of evidence and lack of an opportunity to cross-examine witnesses. These arguments failed, too, as they do in all but the highly unusual case.

Last, Pactrans argued that confirmation of the award was contrary to public policy because the arbitral tribunal and China National were “both controlled by the Chinese Government.” But Pactrans failed to show that the outcome of the hearing was somehow influenced by the connection between China National and the arbitrators.

The judge was sufficiently unimpressed with Pactrans’s arguments that he awarded attorney’s fees to China National:

Pactrans has submitted baseless and unsubstantiated arguments to support [its] position. … The Court finds that an award of reasonable attorney’s fees is warranted based on Pactrans’s submission of baseless arguments which unnecessarily multiplied the proceedings.

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