Tag Archives | Netherlands

Case of the Day: In re Hawker Beechcraft

By on February 6, 2013 in Hague Service Convention, MK, Service by mail

The case of the day is In re Hawker Beechcraft, Inc. (Bankr. S.D.N.Y. 2013). Hawker Beechcraft was an aircraft manufactuer. In November 2009, Hawker and Lider International Aviation, B.V., entered into a sales contract for a $3.9 million used Premier aircraft, and the sale was consummated. Lider later sold the aircraft to Helicoptor Finance LLC, which the leased the aircraft to Rotorwing B.V., with an option to purchase.

In 2012, Hawker filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the Southern District of New York. Hawker moved for rejection of certain aircraft purchase agreements; the aim was to shed certain warranty obligations. Rotorwing objected to the motion. It asserted various substantive and procedural objections, but for our purposes the issue was whether Hawker had served the motion on Rotorwing, as required by Bankruptcy Rule 6006. Without going into detail, Rule 6006 requires that motions to reject executory contracts must be served in the manner provided for the service of a summons and complaint under FRCP 4. Hawker served the motion on Rotorwing, a Dutch company, by private courier (Fedex or the like) addressed to the “president or legal department” of the company. As we know, FRCP 4(f)(1) permits service by internationally agreed means, and FRCP 4(f)(2)(C)(ii) permits service by “any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt.”

The bankruptcy judge held, correctly in my view, that a private courier is within the Hague Service Convention’s definition of “postal channels”, because it is the functional equivalent of mail. The judge also rejected, again correctly in my view, the minority view that service of process by postal channels is never permissible under Article 10 of the Convention.

But I think the judge missed the main question here. The main question, it seems to me, is whether the service complied with FRCP 4(f)(2)(C)(ii), and if not, whether it was nevertheless authorized by FRCP 4(f)(1). The return of service doesn’t mention a signed receipt, and it seems clear from the return that Hawker itself, not the clerk, mailed the documents. Some cases have given some leeway under FRCP 4(f)(2)(C)(ii) when, for example, the clerk refuses to mail the documents and directs the plaintiff to mail them. But in the absence of a return receipt it seems clear that the service did not meet the requirements of the rule. So the remaining question is whether FRCP 4(f)(1) itself authorizes the service. In the Second Circuit, it may be enough to simply mail the document, without complying with Rule 4(f)(2)(C)(ii), because in Ackerman v. Levine, 788 F.2d 830 (2d Cir. 1986), as interpreted by Papir v. Wurms, No. 02 Civ. 3273 (RCC), 2005 WL 372061 (S.D.N.Y. Feb. 15, 2005), the court arguably held that Article 10 of the Convention affirmatively authorizes service by mail rather than merely permitting it to the extent it is authorized by the law of the forum. I don’t agree with this outcome, and other courts (e.g., Brockmeyer v. May, 383 F.3d 798 (9th Cir. 2004)) have rejected it. But the bankruptcy judge didn’t even address the question.

There is a practical point to all of this. Bankruptcy cases frequently require mass mailings, given the large number of creditors and others involved. It’s worth asking whether a mass-mailing approach is sufficient when sending documents abroad, given the kind of objection that Rotowing raised here.

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Chevron Seeks Confirmation of its Arbitral Award Against Ecuador

By on July 30, 2012 in Arbitration

In May 2012, I noted that a Dutch court had refused to vacate a $96 million arbitral award Chevron had obtained against Ecuador on its 2006 claims that Ecuador violated the US/Ecuador BIT. Now Chevron has moved to confirm the award in the District of Columbia. Aside from the fact of the complaint, there is not much to report—if there is any point of interest in the complaint, it comes from the fact that the US and Ecuador are both parties to both the New York Convention and the Panama Convention. The complaint seems to indicate that Chevron has a preference for proceeding as though the New York Convention applies, but FAA § 305 suggests that the Panama Convention may instead apply:

When the requirements for application of both the Inter-American Convention and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, are met, determination as to which Convention applies shall, unless otherwise expressly agreed, be made as follows:
(1) If a majority of the parties to the arbitration agreement are citizens of a State or States that have ratified or acceded to the Inter-American Convention and are member States of the Organization of American States, the Inter-American Convention shall apply.
(2) In all other cases the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall apply.

No doubt Chevron has a reason for its view, but on the face of the statute and in light of the dicta in Republic of Ecuador v. ChevronTexaco Corp., 376 F. Supp. 2d 334, 353-54 (S.D.N.Y. 2005) (Sand, J.), 1 I am curious what its reasons can be. Is it that Ecuador, itself a state, is not a citizen of Ecuador for purposes of § 305? We will have to wait and see whether this becomes an issue.

Notes:

  1. “Strictly speaking, this is probably not a case covered by the New York Convention. The United States and Ecuador are both members of the Organization of American States and parties to the Inter-American Convention, so that a majority of the parties are citizens of a State or States that have ratified or acceded to the Inter-American Convention and are member States of the Organization of American States, and thus that Convention rather than the New York Convention appears to apply” (citations and internal quotation marks omitted). ↩
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Chevron Turns Back A Challenge To A BIT Arbitral Award

By on May 9, 2012 in Arbitration

I’ve previously written about the BIT arbitration between Chevron and Ecuador that Chevron commenced in September 2009. This is the arbitration in which the tribunal ordered Ecuador to take steps to suspend the effectiveness of the Lago Agrio judgment. But I don’t think I’ve yet written about an earlier BIT arbitration between Chevron and Ecuador that Chevron commenced in 2006. In the 2006 proceedings, Chevron claimed that Ecuador was liable to it for damages on account of a breach of Article II(7) of the bilateral investment treaty between the United States and Ecuador, which provides:

Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations.

The claim was that Chevron had suffered damages on account of undue delay in the settlement of lawsuits TexPet (of which Chevron was a shareholder) had brought against Ecuador in the early 1990s. In 2011, the tribunal awarded damages of more than $96 million, with interest.

Ecuador sought to have the award set aside in the District Court of the Hague (which was the appropriate forum insofar as the arbitration’s seat was in the Hague). It raised two arguments: (1) there was no valid agreement to arbitrate, because the BIT came into force after Chevron made its investments in Ecuador; and (2) the tribunal’s decision was so erroneous that the decision cannot be said to be a “reasoned decision.” The court rejected Ecuador’s arguments in a decision dated May 2.

On the first question, the judge’s basic decision was that since Article VI of the BIT provided for binding arbitration of “any investment dispute” and there was no dispute that an “investment dispute” existed, it was for the arbitrators to decide whether Article VI had to be read in light of Article XII, which provides that the treaty applies “to investments existing at the time of entry into force as well as to investments made or acquired thereafter.” In other words, the tribunal was competent to rule on its own competence.

On the second question, the judge goes through Ecuador’s objections to the reasoning of the tribunal and rejects each one. I don’t review this in detail, as it really has to do with the substantive law of investment treaties. The short version is that claims of error, no matter how you couch them, are very, very difficult to win in proceedings to set aside arbitral awards.

Reports indicate that Ecuador is considering an appeal. I’ll keep you posted on this head of the Lago Agrio Hydra branch of the Lago Agrio case.

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