Tag Archives | Panama Convention

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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Case of the Day: Figueiredo Ferraz E Engenharia De Projecto Ltda. v. Republic of Peru

By on December 20, 2011 in Arbitration

The case of the day is Figueiredo Ferraz E Engenharia De Projecto Ltda. v. Republic of Peru (2d Cir. 2011). Figueiredo, a Brazilian corporation, made a contract with the Programa Agua Para Todas, an instrumentality of the Peruvian government, to prepare engineering studies on water and sewage services. The contract contained an agreement to arbitrate disputes, and after a fee dispute arose, Figueiredo demanded arbitration. The arbitrator, sitting in Peru, awarded Figueiredo more than $21 million in damages, $5 million of which was principal and the remainder of which was accrued interest and cost of living adjustments. The Ministry of Housing, Construction, and Sanitation unsuccessfully sought to have the award nullified in the Court of Appeals in Lima. Figueiredo then moved for confirmation in New York. Peru is a party to both the New York Convention and the Panama Convention.

Peru opposed confirmation on a forum non conveniens theory (and on other theories, including a FSIA theory, which are not relevant to the case of the day). The district court denied Peru’s motion to dismiss. On appeal, a divided panel of the Second Circuit took the highly unusual step of reversing a district court’s denial of a motion to dismiss on forum non conveniens grounds, focusing mainly on a Peruvian law that forbade a government agency from devoting more than 3% of its budget per year towards paying judgments. Allowing Figueiredo to look to the Peruvian defendants’ US assets in an attempt to get paid more quickly than Peruvian law permitted would, of course, run afoul of the statute, and the panel focused much of its attention on the importance of the Peruvian alw. In the background of the case was the Second Circuit’s decision in Monegasque de Reassurances v. NAK Naftogaz, 311 F.3d 488 (2d Cir. 2002), which held that forum non conveniens was a permissible defense to a motion for confirmation of an award under the New York Convention.

In light of Monegasque, the decision is not surprising. There is a strong argument that forum non conveniens should never be a defense to a motion to confirm an arbitral award, because the prevailing party should be entitled to look to the losing party’s assets anywhere in the world, and application of forum non conveniens seems to frustrate that end. But in light of Monegasque, it would be too much to expect a Second Circuit panel to adopt such a categorical rule. However, as Judge Lynch’s dissent shows, there are particularly strong reasons to think that the panel got this case wrong even in light of Monegasque. First, the majority focused on the public interest factors, which are, of course, relevant to any forum non conveniens analysis. But the court held that Peru’s substantive law—the 3% statute—caused the public interest factors to weigh in favor of a Peruvian forum for confirmation. As Judge Lynch points out, it is a bit startling for the substantive law that would govern if the case were heard in Peru to count as part of the public interest factors that weigh in favor of a Peruvian forum. Judge Lynch points out that the Supreme Court rejected the favorability of the foreign substantive law as a factor in the analysis in Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981). Second, Monegasque affirmed a district court decision on forum non conveniens. This case reverses the district court. But even if the court’s basic approach is correct, I find it hard to see how the public interest factors could weigh so heavily in favor of Peru as to require a form non conveniens dismissal.

I agree with esteemed fellow blogger Marc J. Goldstein that Monegasque warrants en banc consideration.

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Case of the Day: DRC, Inc. v. Republic of Honduras

By on March 31, 2011 in Arbitration, Panama Convention

The case of the day, DRC, Inc. v. Republic of Honduras (D.D.C. 2011), is an action to enforce an arbitral award made in Honduras.  It is also the first case of the day arising under the Panama Convention. (Why does the Panama Convention, rather than the New York Convention, apply? The FAA has an express provision providing that the Panama Convention prevails when “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”).

DRC had a contract with the Honduran government to construct water and wastewater projects in the aftermath of Hurricane Mitch. According to Honduras, the contract provided that the U.S. Agency for International Development would pay DRC for its work.; USAID gave DRC a “letter of commitment” to that effect. After a dispute about payment arose, DRC sued the United States in the Court of Federal Claims. The United States then sued DRC in the District Court for the District of Columbia asserting claims under the False Claims Act (in particular, that DRC was guilty of fraud in the procurement and performance of the contract), and it moved to stay the case in the Court of Federal Claims on the grounds that the outcome there would depend on the resolution of the fraud question. That court granted the motion to stay. DRC unsuccessfully sought to dismiss the False Claims Act case. Thus there are now two pending cases between DRC and the United States–DRC’s claim for payment, which has been stayed, and the False Claims Act case, which is in discovery.

After the court denied DRC’s motion to stay the False Claims Act case, DRC demanded arbitration with the Honduran government for breach of the construction contract. The arbitration took place in Honduras. The tribunal awarded DRC $51 million in damages. DRC filed a petition in the Supreme Court of Honduras seeking “acknowledgment and execution” of the award (I take it this is the same as recognition and enforcement). DRC requested a sixty-day stay of the Honduran proceedings while the parties sought to settle the case, and the court stayed the case as requested. In parallel with the Honduran proceedings, DRC sought to enforce the award in the U.S. District Court, and Honduras sought to stay or dismiss the action.

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