The case of the day is Thai-Lao Lignite Co. v. Government of the Lao People’s Democratic Republic (S.D.N.Y. 2014). I’ve covered the case several times before. Here is my brief description from my first post on the case:
The case of the day is Sea Hope Navigation, Inc. v. Novel Commodities, SA (S.D.N.Y. 2013). Sea Hope claimed that it had chartered a vessel to Novel. Holders of a bill of lading later asserted claims against Sea Hope for damage to the cargo caused by “rough handling.” Sea Hope commenced an arbitration against Novel in London, seeking indemnification. Novel never responded to the notice of appointment of Sea Hope’s arbitrator, so the arbitration proceeded before a sole arbitrator, who awarded damages to Sea Hope. Sea Hope then sought confirmation of the award in New York and served the summons and the petition on Novel’s registered agent for service of process in New York. Novel defaulted, and Sea Hope sought a default judgment. The court ordered Sea Hope to send a copy of the papers to the address given on Novel’s website, which it did. Novel, seventeen days after receipt of the papers, entered an appearance and opposed the motion for entry of a default judgment (which the court treated also as a motion to vacate the default). Novel claimed that it had never received notice of the action and indeed, that it had never received notice of the arbitration!
One of the factors a defendant seeking relief from a default must show is that it has a potentially meritorious defense. Thus not only was the supposed lack of notice of the confirmation proceeding at issue; Novel’s claim that it had never received notice of the arbitration is also relevant, because under Article V(1)(B) the lack of notice is a basis for refusing to confirm an award.
The magistrate judge gave Novel the benefit of the doubt on this issue. Sea Hope had sent the notice to what Novel described as “a generic Novel email address, which was not actively monitored by anyone at Novel,” and that it received no notice by post or other means. Sea Hope submitted an affidavit that cast doubt on Novel’s account, but the judge refused to consider the credibility of the competing affidavits when determining, for default purposes, whether the defendant has a meritorious defense. Weighing this and the other relevant factors, the judge held that Novel was entitled to relief from the default.
The case of the day is FDIC v. IIG Capital, LLC (11th Cir. 2013). In a short, per curiam decision, the court affirmed the confirmation of an international arbitral award over IIG’s argument that an arbitrator was not impartial because he had had contacts with the FDIC’s counsel; that IIG had not agreed to the composition of the arbitral tribunal because it had been unaware of the contacts at the relevant times; and that recognition of the award would be against public policy. All three are possible defenses to recognition and enforcement under Article V of the New York Convention. However, the court held that the evidence of bias was insufficient to warrant an evidentiary hearing under its precedents. The arbitrator had hired the lawyer as a faculty member in an international arbitration program, the two were both founders of the International Chamber of Commerce’s Latin American Arbitration Group, and they were both founding members of the Latin American Arbitration Association. One of the contacts was sufficiently far in the past that it could not support a plausible claim of bias. With regard to the joint participation in an academic international arbitration program, the court repeated a remark of the district court judge: the contact showed “nothing beyond the kind of professional interactions that one would expect of successful lawyers active in the specialized area.” The court also pointed out that it was the arbitrator who hired the lawyer, and not the other way around.
The precedent on which the court relied, University Commons–Urbana v. Universal Constructors, Inc., 304 F.3d 1331 (11th Cir.2002), involved a domestic arbitration. Because the court held that even under that decision IIG was not entitled to an evidentiary hearing, it did not need to decide the point the FDIC raised, namely, that University Commons had no application in a New York Convention case.