Case of the Day: International Trading & Industrial Investment Co. v. Dyncorp Aerospace Technology
Posted on January 26, 2011
The case of the day, International Trading & Indus. Inv. Co. v. DynCorp Aerospace Tech., No. 09-791 (D.D.C. Jan. 21, 2011), is Judge Walton’s second opinion on confirmation of an international arbitral award in a week. Way to go, Judge Walton!
DynCorp was a logistics and security contractor for the U.S. military in Qatar. International Trading was its “service agent” and was responsible for helping DynCorp obtain contracts in Qatar. The dispute between the parties was whether DynCorp had the power to terminate the contract when it did, or whether its termination was premature. The parties had agreed to submit disputes under the contract to arbitration before the ICC (the English version of the contract said that the ICC would “finally settle” disputes; the Arabic version said that the ICC would “settle” disputes. More on that point in a moment).
The ICC, pursuant to its own rules, selected Paris as the seat of the arbitration. The parties had chosen Qatari law to govern the substance of the dispute. The tribunal found that DynCorp had breached the contract and awarded more than a million dollars in damages.
DynCorp sought to stay the award in the Qatari courts—not the French courts—and the Qatar Court of Cassation found that the tribunal had misconstrued the contract and thereby failed to follow Qatari law. International Trading participated in the Qatari proceedings.
International Trading then sought recognition and enforcement of the award in the United States. DynCorp argued that the Qatari courts had already set the award aside and that the court should deny confirmation in any case. But perhaps concerned that it should have sought to vacate the award in France, the seat of the arbitration, DynCorp simultaneously began proceedings in France to set aside the award. The parties stipulated that the U.S. proceedings should be held in abeyance pending the outcome of the French proceedings. Ultimately, the Paris Court of Appeal rejected DynCorp’s position.
DynCorp’s argument about the effect of the Qatari proceedings relied on two points: first, the parties had not intended the arbitration to be binding, and Qatari law gave its courts the power to review non-binding arbitral awards; and second, because it participated in the Qatari proceedings, International Trading should be estopped to contest their outcome. On the first point, the court found the ICC award was indeed binding. Even if one of the versions of the agreement lacked the word “finally”, the ICC Rules, which the agreement invoked, make all ICC awards binding on the parties. On the second point, the court noted–and the parties agreed–that in general, the courts at the seat of the arbitration are the competent authorities under Article V(1)(e) of the New York Convention to set aside an award. The court construed this as a grant of exclusive subject-matter jurisdiction, and it held that the parties could not confer such jurisdiction on another court by consent. I question whether it makes sense to invoke boundary-policing jurisdictional notions from the law of federal courts in this context. Arbitration, unlike the jurisdiction of the federal courts, is a creature of contract, and if there was no objection under Qatari law to the exercise of jurisdiction, why should the parties not be able to agree that they will regard the award as binding if the Qatari courts uphold it, and not otherwise? That being said, it is somewhat mysterious why International Trading would not have preserved the argument that only the French courts could set aside the award when litigating in the Qatar courts.
The court then turned to DynCorp’s argument that the Qatari courts had found, in effect, that the tribunal had acted in manifest disregard for Qatari law, though the Qatari court did not put it in those precise terms. While in Argentina v. BG Group Judge Walton pulled his punches, here he squarely held that the New York Convention did not permit a court, faced with a motion to confirm, to deny the motion on grounds of manifest disregard of the law. He focused on the distinction between a court’s power, under § 10 of the FAA, to vacate an award where the tribunal has exceeded its authority and the much more limited power of the court under Article V of the Convention to refuse confirmation where the award “deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.” The matter before him related to recognition and enforcement of the award, not setting the award aside; under Article V, the latter issue was for the French courts to decide.