Case of the Day: Belize Social Development Ltd. v. Government of Belize

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The case of the day is Belize Social Development Ltd. v. Government of Belize (D.C. Cir. 2012).

The Contract and the Arbitration

In 2005, the Prime Minister of Belize, Said Musa of the People’s United Party, on behalf of the government, signed a contract with Belize Telemedia Ltd., under which Telemedia was going to acquire properties “in order to better accommodate the Government’s telecommunications needs”, and the government was going to give Telemedia favorable tax treatments. The contract had an arbitration agreement providing for arbitration at the LCIA. The agreement “stated that it was governed by Belize law.” In 2008, the United Democratic Party took power on a good government platform, and the new prime minister, Dean Barrow, asserted that the contract was invalid and repudiated it. Telemedia initiated an arbitration, but the government, though it received notice, did not participate in the arbitration. The tribunal issued a final award in 2009 in favor of Telemdia, awarding damages of more than 38 million Belize dollars. The government, noting that the Belize courts had already rejected the agreement’s tax provisions, rejected the award. Telemedia assigned its rights to Belize Social Development Ltd., a British Virgin Islands corporation.

The Petition to Confirm

The Attorney General of Belize sued Telemedia and BSDL in the Belize Supreme Court, seeking to prevent enforcement of the award on the grounds that it was contrary to Belize law. The court enjoined Telemedia from seeking to enforce the judgment anywhere in the world, pending the resolution of the claim. BSDL nevertheless sought to confirm the award in the District of Columbia. Belize moved to stay or dismiss the petition. BSDL did not oppose the motion, but intendmoved for a status conference and for a suspension of the scheduling order. It stated that its failure to respond to the motion to stay was not on account of an agreement that a stay was warranted but on fear of criminal sanctions for violation of the Belize court’s injunction. The district court stayed the petition to confirm pending resolution of the Belize proceedings. BSDL sought a writ of mandamus to review the stay order.

A divided panel held that the stay was improper and remanded the case for further proceedings. Mandamus is proper only if (1) there is no other adequate means of obtaining relief; (2) the petitioner shows that its right to the writ is “clear and indisputable”; and (3) the court, in its discretion, determines that the writ is “appropriate under the circumstances.” Writing for herself and Judge Garland, Judge Rodgers noted that there was no alternate means of relief, since the stay is not a final order and thus is not appealable under 28 U.S.C. § 1291. Although the order might have been appealable under the collateral order doctrine, the panel, “mindful of the advantage of limiting the use of appellate recourse in response to stay orders,” treated the proceeding as a petition for mandamus rather than an appeal.

Turning to the merits, Judge Rodgers found that BSDL’s claim was clearly meritorious, because the stay was contrary to the New York Convention. Article VI of the Convention provides:

If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied may, if it considers it proper, adjourn the decision on the enforcement of an award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security

Article V(1)(e) refers to “a competent authority of the country in which, or under the law of which, that award was made.” So Article VI permits a stay when there has been an application for a stay before the courts of the country “under the law of which” the award was made. Belize asserted that because the contract provided that it was governed by Belize law, the proceedings in Belize satisfied the conditions of Article VI. But this is plainly wrong—the reference to the law under which the award is made is a reference to the law that governed the arbitration, not the law that governed the substance of the dispute. The arbitration took place in London and (in the absence of an agreement to the contrary) was governed by the law of England and Wales. So the district court had violated its “virtually unflagging obligation … to exercise the jurisdiction given [to it].” The panel also found that the stay was “immoderate” because it was indefinite in duration.

Judge Kavanaugh dissented. But he did not really assert that the district court’s decision was substantively correct, but only that that case was not sufficiently extraordinary to warrant mandamus relief.

The Comparison With The Chevron/Ecuador Case

I can’t help but think of Judge Kaplan’s now-vacated anti-suit injunction in the Chevron/Ecuador case, which, like the Belize injunction here, purported to enjoin proceedings for recognition and enforcement anywhere in the world, even though the judgment was not a US judgment (just as the award here was not made in Belize). Obviously we can’t make too much of the comparison, because the New York Convention applies in this case but not in Chevron/Ecuador. But it strikes me that watching the courts in another country enjoin litigation in the United States to enforce a judgment made in a third country helps us to understand why such an injunction doesn’t sufficiently respect the comity concerns at stake.

Follow-on litigation

There is an interesting coda to all of this. When the UDP came to power, the government, which was a significant shareholder, sought to remove some of Telemedia’s directors. The dispute went all the way to the Privy Council, resulting in Attorney General of Belize v. Belize Telcom Ltd., [2009] UKPC 10.

One response to “Case of the Day: Belize Social Development Ltd. v. Government of Belize”

  1. Marc J. Goldstein has posted a review of the case on Arbitration Commentaries.

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