The case of the day is Fitzpatrick International Ltd. v. Republic of Equatorial Guinea (S.D. Tex. 2013). In 2004, Equatorial Guinea made a contract with Fitzpatrick Equatorial Guinea Ltd., whose majority owner was Fitzpatrick Gibraltar Ltd., for the construction of a highway between the airport in Malabo and the town of Ela Nguema. Disputes were to be referred to ICC arbitration in Paris. After a dispute arose, Fitzpatrick Equatorial Guinea terminated the contract in 2005. Equatorial Guinea claimed that the termination was a wrongful repudiation of the contract. Fitzpatrick Equatorial Guinea demanded arbitration in 2006. Fitzpatrick International Ltd. represented Fitzpatrick Equatorial Guinea in the arbitration, held in Paris, pursuant to a power of attorney.
After Equatorial Guinea received notice of the arbitration, it filed a petition in the Malabo Court of First Instance to declare Fitzpatrick Equatorial Guinea insolvent. Fitzpatrick Equatorial Guinea was not notified of the proceedings until it had been declared bankrupt and a receiver appointed. It appealed to the Supreme Court of Justice, but the appeal was dismissed because it was taken to the wrong court; only the Court of Appeal could hear it.
Equatorial Guinea notified the arbitral tribunal of the bankruptcy decision, and the receiver asserted to the tribunal that he was the only person with authority to represent Fitzpatrick Equatorial Guinea. The tribunal held, in a preliminary award, that the insolvency proceeding was not entitled to recognition because Fitzpatrick Equatorial Guinea had not received notice of the proceedings, and thus Fitzpatrick Equatorial Guinea’s management, not the receiver, had standing.
While the arbitration was proceeding, Equatorial Guinea sought to annul the preliminary award in the Court of Appeal of Paris, and it sought a stay of the arbitration while its annulment claim was pending (the Court of Appeal ultimately rejected the annulment claim). When the tribunal denied the request for a stay, Equatorial Guinea sued Fitzpatrick Equatorial Guinea and the arbitrators in the District Court of Paris, seeking to enjoin the arbitration pending the Court of Appeal’s decision. The District Court declined to exercise jurisdiction over this claim. Equatorial Guinea also filed a criminal complaint (in France, apparently) against Fitzpatrick Equatorial Guinea, claiming that it was guilty of fraud in connection with a bond it obtained on the highway project, and it again sought a stay of the arbitration in light of the pending criminal charges.
Despite Equatorial Guinea’s attempt to obtain a stay, the arbitration hearing went ahead. After the hearing concluded, Equatorial Guinea sought and obtained an order from the District Court of Paris recognizing the Equatorial Guinean insolvency proceeding. Nevertheless, the tribunal issued a final award that expressly incorporated the preliminary award and held that Fitzpatrick International, not the receiver, had standing to represent Fitzpatrick Equatorial Guinea in the arbitration. It awarded more than € 12 million to Fitzpatrick.
Fitzpatrick Equatorial Guinea assigned its interest in the award to Fitzpatrick International. Meanwhile, Equatorial Guinea brought an action in the Court of Appeal of Paris to set aside the award, again on standing grounds. Fitzpatrick obtained recognition of the award in the High Court in London, and then filed its action in New York seeking confirmation.
Equatorial Guinea moved to dismiss for lack of subject matter jurisdiction, again citing standing. This was a pretty smart way to frame the issue, since in the US federal courts questions of standing go to the power of the court under the Constitution (because the courts are courts of limited jurisdiction that have power to hear only actual cases and controversies). But the court held that it lacked the power to review the arbitral tribunal’s decision about who had standing to represent Fitzpatrick Equatorial Guinea. Thus it denied Equatorial Guinea’s motion to dismiss (or more precisely, the magistrate judge recommended denial of the motion):
Although presented as an issue of standing, the argument is premised on a supposition directly contrary to the finding of the arbitral tribunal. A ruling in Defendant’s favor would require this court to vacate, or at the very least, to modify the Final Award.
This seems like the right outcome, that is, the outcome that a court should want to try to reach. But there may be complexities here that are worth pondering. Is there not a circularity problem? Isn’t the court giving effect to the arbitral award, when precisely what is to be decided is whether it should give effect to the arbitral award?