Marcel Engholm Cardoso to Speak on Hot Topics in International Arbitration at 5th NYU/Sciences Po Intergenerational Arbitration Symposium

New York appellate court holds that prior arbitration award precluded claim by party’s affiliate under doctrine of res judicata:

Non-party to arbitration was precluded from bringing breach of contract claim when the same issue was or could have been adjudicated by a related party in a prior arbitration.

Gulf LNG Energy, LLC v. Eni S.p.A., 219 N.Y.S.3d 17 (1st Dep’t Sep. 24, 2024).

The doctrine of res judicata or claim preclusion prevents parties from relitigating claims that were or could have been raised in a prior action. U.S. courts have long applied this doctrine “with equal force” to claims brought in arbitration, thus barring parties from raising the same claim resolved in a prior arbitration in a subsequent court action. Gulf v. Eni S.p.A, is a reminder of two fundamental aspects of res judicata. First, non-parties in privity with the parties to a prior action may find themselves precluded from pursuing related claims that were or could have been litigated in the prior arbitration.  Second, claim preclusion may bar not only claims that were previously decided in a prior action, including a prior arbitration, but also those that were litigated but not ultimately decided.

The dispute in Gulf involved a series of related agreements among several entities for the construction and operation of a facility to handle the importation and regasification of Liquified National Gas (LNG). The main agreement was executed between two subsidiaries of Gulf Port on one side, and Eni USA, the American affiliate of the major Italian energy company, Eni S.p.A., on the other.  There were also separate parental guarantees on each side.  Eni S.p.A. guaranteed the payment obligations of Eni USA, and Gulf Port guaranteed its subsidiaries’ undertaking in the main agreement not to use the planned facility for any activities other than the importation and regasification of LNG. Ultimately these multiple contracts led to two arbitrations and four court cases in Delaware and New York state courts.

Prior to completion of the facility, changes in the U.S. energy market stemming from the shale boom drastically reduced demand for imported LNG. In light of these changed circumstances, Gulf proposed to its customers – including Eni USA – to include additional capabilities in the facility, including gas export (as well as import) and liquefaction (in addition to regasification), however no written agreement was executed. After completion of the facility, Eni USA decided not to ship its liquefied gas to Gulf and instead sold it to other markets.

Eni USA initiated arbitration proceedings against the two Gulf signatories to the main agreement seeking termination of that agreement for frustration-of-purpose. In the alternative, it claimed it could terminate the agreement for breach of contract, based on the Gulf initiative to add liquefaction and export to the facilities original, contractually agreed capabilities. The Gulf signatories disputed both claimed grounds for termination. On June 2018, the arbitral tribunal agreed with Eni USA that the main agreement was terminated because of frustration of purpose, but nonetheless ordered Eni USA to pay Gulf approximately $450 million as equitable compensation. Because it found the contract was terminated, the tribunal did not reach Eni USA’s breach of contract claims. The Delaware Chancery Court confirmed the award and Eni USA paid the outstanding amounts.

Months later, the two Gulf signatories to the main agreement sued Eni S.p.A. under its parental guaranty in a New York court, seeking additional monies allegedly due from Eni USA.  Eni S.p.A. counterclaimed alleging, among other things, that those Gulf entities had breached the main agreement by using the port for activities beyond import and regasification. It also moved, successfully, for summary judgment dismissing the Gulf entities’ claims on the grounds that the main agreement had been terminated and the arbitral award paid in full.

While proceedings continued on its counterclaim, Eni S.p.A. also filed a separate action directly against Gulf Port under its parental guarantee agreement based on the same allegations concerning the improper use of the facility. After the two actions were effectively consolidated by stipulation, Gulf Port and its subsidiaries moved for summary judgment dismissing all of Eni S.p.A.’s claims and counterclaims on the basis, inter alia, that the prior arbitration award made them res judicata. The New York Supreme Court agreed and granted the motion. Eni S.p.A. appealed and the Appellate Division affirmed.

The Appellate Division held first that the Supreme Court did not err in ruling that the arbitration award precluded Eni S.p.A.’s claims, because it was in privity with Eni USA, a party to the arbitration, and the Gulf signatories and Gulf Port were also privies. Not only did the parent companies on both sides hold 100% ownership of their subsidiaries, they also worked with those subsidiaries to pursue the same business objectives. Most importantly, the contracts executed by both parent companies were ancillary to and intertwined with the main agreement between their respective subsidiaries. Thus, the fact that neither parent company was actually a party to the prior arbitration did not bar preclusion.

Nor did the fact that the arbitral tribunal had not reached the issue of Gulf’s alleged breach of the main agreement help Eni S.p.A avoid preclusion.  It was sufficient under New York law, the court held, that that claim had been litigated. i.e., the parties to the arbitration had fully briefed, argued and submitted Eni S.p.A.’s  issues to the arbitral tribunal.  To allow re-litigation of claims fully presented in a prior proceeding, but whose resolution had proved to be unnecessary there, would “engender endless litigation, wreaking havoc” on businesses and courts.

Lastly, the court addressed whether the lower court erred in finding an identity of claims, since the claims in the arbitration were brought under the main agreement and the litigation focused on the parental guarantees. The court held that res judicata issues should be assessed under a “transactional analysis,” that looked beyond the single agreement at issue in the arbitration to determine whether the current claim and the former claim were part of the same transaction or connected transactions. Because Eni S.p.A.’s claims related to the performance of the same obligation adjudicated in the arbitration – the limitation on the use of the facility to import and regasification – the prior arbitration award precluded Eni S.p.A.’s claims.

Read the court’s full decision here.

Fifth Circuit holds that arbitrators interpret their own authority to modify awards under ICC Rules:

Arbitrators did not exceed their authority by modifying final award where they determined that ICC rules authorized them to do so.

RSM Prod. Corp. v. Gaz du Cameroun, S.A., 117 F.4th 707 (5th Cir. 2024).

Under the common law doctrine of functus officio – Latin for having performed one’s office – once an arbitrator renders a final decision on the merits, with certain limited exceptions for ministerial and computational corrections, he or she may not revisit and modify the award. However, functus officio is a common law default rule, which the parties are free to contract around. One way they may do so is by adopting institutional rules that permit arbitrators to modify their awards.

However, a party may still challenge a modified award on the grounds that the arbitrators exceeded their authority by modifying or amending an award in contravention of the applicable institutional rules. That was the circumstance in RSM. And, as the Court of Appeals for the Fifth Circuit’s decision demonstrates, such challenges raise a more fundamental question – who, as between the arbitrators and the court, interprets the scope of the arbitrators’ power to modify an award under the institutional rules. In RSM, the Fifth Circuit determined that the interpretation of the scope of the arbitrators’ authority under the International Chamber of Commerce Rules (ICC Rules) adopted by the parties was itself a matter committed to arbitration, and thus deference was due to the arbitrators’ determination that the rules permitted modification of a prior award.

Article 36 of the ICC Rules authorized arbitral tribunals to modify an award to “correct a clerical, computational or typographical error.” As we previously reported, the trial court had ruled the arbitrators in RSM exceeded their authority under Article 36 when they revised their initial award to remove certain categories of damages.  (https://www.chaffetzlindsey.com/report/arbitration-in-the-courts-december-2023vol-12/.)

On appeal, the Fifth Circuit reversed.  The arbitration clause by which the parties had incorporated the ICC rules also provided that the arbitrators would resolve “[a]ny and all claims, demands, causes of action, disputes, controversies and other matters in question arising out of or relating to” their agreements.  Therefore, the court held, it was for the arbitrators, not the district court, to interpret the scope of the arbitrators’ authority to modify an award under Article 36 of the ICC Rules.

In the court’s words, “the Tribunal not only had the contractual authority to correct computational errors, but it also had the authority to determine what constituted a computational error in the first instance.” The relevant question was simply “whether the Tribunal even arguably construed the parties’ agreements when it issued the Addendum Award.” Finding it had, the Fifth Circuit held the Addendum would be enforced whether their interpretation was correct.  In so holding, the court noted, “the potential for . . . mistakes is the price of agreeing to arbitration. . .. The arbitrator’s construction holds, however good, bad, or ugly.”

Read the court’s full decision here.

D.C. Court holds that limitations period for recognition and enforcement of ICSID awards is governed by forum state’s statute of limitations for enforcing state court money judgments:

Because Section 1650a requires that ICSID awards be accorded the same full faith and credit as state court money judgments, state law rather than the FAA governs the time to petition for enforcement.

Webuild S.p.A. v. Argentine Republic, No. CV 21-2464 (D.D.C. Nov. 19, 2024).

The recognition and enforcement of commercial arbitration awards are generally governed by the Federal Arbitration Act, with Chapter 1 governing domestic awards and Chapters 2 and 3 governing international awards falling under the New York and Panama Conventions, respectively. Under Section 207 of the FAA, parties have three years to seek confirmation of international awards falling under the Conventions. However, the recognition and enforcement of awards in investor-state disputes governed by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”) fall outside the FAA. The ICSID Convention is adopted into federal law by another statute, 22 U.S.C. §1650a (the “Investment Disputes Act”). Section 1650a is silent on the time for seeking recognition and enforcement of investor-state awards. But it does require that ICSID awards “shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States.”

In Webuild v. Argentina, the district court for the District of Columbia held that, because ICSID awards are on equal footing with state court judgments, the enforcing court must apply the forum state’s limitations periods for enforcing a state court judgment, rather than the three-year limitations period for enforcing international awards under Chapter 2 of the FAA.

Webuild involved a petition to enforce an ICSID award against Argentina under the Argentina-Italy BIT. The claim arose out of a concession for the provision of sewage services in the Province of Buenos Aires. Starting in 2001, Argentina took several unilateral measures that hindered the value of the investment (including unpegging the contract from the U.S. dollar, freezing tariffs, preventing the investor from billing work charges and suspending its right to interrupt services for customers who did not pay their bills), and ultimately terminated the concession in 2006. Webuild started proceedings under the ICSID Convention, resulting in a 2011 award ordering Argentina to pay $21.3 million (in U.S. currency) plus interest. In January 2014, an ad hoc committee – the body authorized under the ICSID Convention to address annulment petitions – rejected Argentina’s plea to annul the award.

Webuild petitioned the D.C. district court to enforce the award in September 2021. Argentina moved to dismiss the petition as time-barred, arguing that FAA §207’s three-year limitation period applied so that the petition, filed ten years after issuance of the award, was untimely.

The district court denied Argentina’s motion, holding that the petition was timely filed. Because the Investment Disputes Act, 22 U.S.C. §1650a, does not contain its own statute of limitations, the court found it needed to “borrow the most suitable statute or other rule of timeliness from some other sources.” In such cases, when Congress fails to provide an express limitations period, there is a strong presumption that the limitation period is to be drawn from “the state statute most closely analogous to the federal Act in need.” This presumption can be overcome in favor of a federal law that “clearly provides a closer analogy” if the federal policies at stake and the practicalities of litigation make it more appropriate.

The district court held the appropriate limitation period was the twelve years provided in D.C. Code §15-101 for the enforcement of civil money judgments. According to the court, D.C. Code §15-101 was appropriate because Section 1650a requires courts to treat an ICSID award “as if [it] were a final judgement of a court of general jurisdiction of one of several States.” Accordingly, a law governing the enforcement of money judgments from D.C. courts was “a sensible choice.”

In reaching its holding, the court rejected Argentina’s argument that the FAA was more closely analogous to Section 1650a. Central to the court’s reason was its view that the ICSID Convention and Section 1650a compel courts to enforce ICSID awards as if they were state court judgments, not mere arbitration awards. While the FAA provides grounds to refuse recognition of an award, Section 1650a precludes such merits-based challenges to ICSID awards, leaving the courts with a largely “perfunctory” role when it comes to enforcement.

The decision in Webuild followed the D.C. district court’s similar decision in a prior case from last August, Titan Consortium 1, LLC v. Argentine Republic, No. 21-cv-2250 (D.D.C. Aug. 19, 2024), which also involved the enforcement of an ICSID award against Argentina. As in Webuild, the court held that the D.C. Code §15-101, rather than the FAA, was the “best option” from which to borrow a statute of limitation for the Investment Disputes Act and held the enforcement petition filed four years after issuance of the award was timely filed.

Read the court’s full decision here.

California federal court compels arbitration of dispute under side agreement related to reinsurance contract:

Arbitration clause in reinsurance treaty was broad enough to require arbitration of claims concerning related memorandum of understanding executed 15 years later.

Truck Insurance Exchange v. Certain Underwriters of Lloyd’s London et al., No. 2:24CV08157 (C.D. Cal. Nov. 15, 2024).

Although arbitration is a matter of contract, Truck Insurance is a reminder that an agreement to arbitrate may, by its terms, extend to disputes under later executed agreements that are interrelated with the contract containing an arbitration clause. In Truck, the United States District Court for the Central District of California held that an arbitration clause in a reinsurance treaty applied to a separate Memorandum of Understanding executed more than 15 years after the original agreement.

The underlying dispute involved a 1968 reinsurance treaty between Truck Insurance Exchange (“Truck”) and various reinsurers (“the Reinsurers”) covering a series of comprehensive liability policies issued to Kaiser Cement & Gypsum Company (“Kaiser”). In the early 1980s, Truck began reporting various claims arising out of Kaiser’s asbestos liabilities. A dispute arose between Truck and the Reinsurers over whether and to what extent those claims were covered under the reinsurance treaty and the parties executed a Memorandum of Understanding (MOU) in 1984 memorializing how they would handle such claims. In relevant part, §3 of the MOU provided that “[b]oth [Truck] and [the Reinsurers] fully reserve all their rights as to all issues of coverage herein and agree that no activity by either party nor the Understanding set forth herein shall ever be argued or deemed to constitute a waiver of the contractual rights of the parties or their rights under the law in the event of future applicable legislation, case law decision or participation by [Truck] in the Asbestos Claims Facility.”

After the MOU, Truck did not bill the Reinsurers for asbestos losses under the Kaiser policies, until 2023, when Truck informed the Reinsurers that it would resume billing for these claims. In response, the Reinsurers commenced arbitration under the arbitration clause in the reinsurance treaty seeking a declaration that these losses were not covered. Truck, in turn, filed a civil complaint in the California Superior Court claiming breach of the reinsurance treaty and seeking a declaratory judgment that the reinsurers were obligated to pay the new claims. Truck later amended the complaint to include additional reinsurers and remove the breach of contract claim, thus proceeding only on its claim for declaratory judgment under the MOU. The Reinsurers removed the case to federal court under FAA §205, and then moved to compel arbitration and dismiss or stay the complaint pending the arbitration.

The central issue was whether Truck’s claim fell within the scope of the arbitration agreement in the reinsurance treaty. Truck did not dispute that the case would be subject to arbitration if it related to the reinsurance treaty, but argued that its claim for declaratory judgment was based solely on the MOU. Truck argued it would only ask the court to examine the last sentence of §3 of the MOU – providing the MOU should not constitute a waiver of the parties’ contractual rights under future applicable legislation and caselaw – and declare whether the MOU allowed Truck to bill the Reinsurers in accordance with California case law. According to Truck, the arbitration clause in the reinsurance treaty was inapplicable because the MOU was a separate agreement, which did not contain its own arbitration provision.

The court rejected this argument and granted the Reinsurers’ motion to compel, holding, “where two contracts are merely interrelated contracts in an ongoing series of transactions, an arbitration provision in one contract could apply to subsequent contracts.” In this case, the MOU and the reinsurance treaty were part of the same transaction, as the MOU concerned the interpretation of the reinsurance agreement. The MOU did not by itself provide any rights or obligations in relation to the payment of asbestos claims. This meant that any billings Truck wished the court to address were made solely under the reinsurance treaty. Truck’s claims thus fell within the scope of the reinsurance treaty’s arbitration clause, which required the arbitration of “any dispute… between [the parties] with reference to the interpretation of this Contract or the rights with respect to any transaction involved.”

Read the court’s full decision here.

Arbitrating The Arbitrability Of Arbitrability?

Supreme Court holds that court decides whether subsequent forum selection clause supersedes an arbitration agreement, even if the arbitration agreement delegates arbitrability questions to the arbitrators. 

Coinbase, Inc. v. Suski, 144 S.Ct. 1186 (2024).

The Supreme Court has long held that whether a dispute falls within the scope of the parties’ arbitration agreement, an issue often termed “arbitrability,” is a gateway question that is presumptively for the court, rather than the arbitrators, to decide.  However, it is equally well-established that courts will enforce “delegation clauses” reflecting the parties’ “clear and unmistakable” intention to arbitrate the arbitrability question itself.

In Coinbase v. Suski, the Supreme Court was faced with an unusual dilemma: the parties entered two agreements concerning the same transaction with conflicting dispute resolution clauses. One contract contained an arbitration clause delegating arbitrability disputes to arbitration, but a later agreement contained a forum-selection clause providing that all disputes would be submitted to California courts.  In this situation, the Supreme Court ruled that a court in the first instance must determine which contract controls, including whether the delegation clause in the earlier arbitration agreement applied.

The underlying dispute in Coinbase concerned Coinbase’s operation of a sweepstakes program to promote its cryptocurrency exchange platform in which customers could win a cryptocurrency called Dogecoin.  Participants entered two agreements: (1) the Coinbase User Agreement, which contained a broad agreement to arbitrate disputes arising out of use of the cite; and (2) Coinbase’s subsequent Official Rules of the sweepstakes, which contained a broadly worded forum selection clause providing that California courts would have “sole jurisdiction over any controversies” regarding the sweepstakes.

Following conclusion of the sweepstakes, certain participants filed a class action in the United States District Court for the Northern District of California alleging that Coinbase had violated various California laws.

Coinbase moved to compel arbitration, invoking the arbitration clause in the User Agreement.  The participants opposed arbitration, arguing that the forum selection clause in the Official Rules superseded the prior agreement to arbitrate.  Coinbase argued that the delegation clause in the User Agreement’s arbitration provision required the parties to arbitrate whether the User Agreement’s arbitration provision controlled over the Official Rules’ forum selection clause.  The district court and the Ninth Circuit both ruled that the courts, rather than the arbitrators, must decide whether the Official Rules superseded the User Agreement.

The Supreme Court unanimously affirmed.  The Court held that whether the parties agreed to arbitrate arbitrability could only be answered by first “determining which contract applie[d].”  In other words, a threshold determination was needed to determine whether the arbitration provision delegating arbitrability applied to begin with.  The court described this as a “higher-order” determination, which, like other questions regarding whether the parties agreed to arbitrate in the first instance, could only be made by courts.

In so holding, the Court rejected Coinbase’s argument that the arbitration clause was separable from the contract and the delegation clause separable from the arbitration agreement, and thus only a direct challenge to the delegation clause itself was for the courts in the first instance.  The Court held the separability principle inapposite here, because the participants’ challenge applied “equally” to the whole User Agreement and its delegation provision.  Here, the issue was whether the subsequent Official Rules, including the forum selection clause, superseded the entirety of the User Agreement, including the arbitration clause. In these circumstances, the challenge need not go “only” to an arbitration or delegation provision to require judicial resolution.

The Court also rejected Coinbase’s concern that the approach adopted would “invite chaos by facilitating challenges to delegation clauses,” pointing out the approach adopted applies only where the court is called upon to determine which agreement among multiple conflicting contracts governs.  Where there is one contract containing a delegation provision, arbitrability disputes remain arbitrable absent a successful challenge to the delegation provision itself.

In a brief concurrence, Justice Gorsuch observed that, even in the case of multiple agreements, the parties could themselves resolve any conflict by, for example, agreeing to a “master contract” providing that “all disputes arising out of or related to this or future agreements between the parties, including questions concerning whether a dispute should be routed to arbitration, shall be decided by an arbitrator.”  Such a provision, he suggested, “would seem to require a court to step aside.”

Read the court’s full decision here.

Supreme Court Holds Courts Must Stay Suits After Compelling Arbitration:

Where they issue an order to compel arbitration, courts must stay and lack discretion to dismiss the case, even if all claims are arbitrable.

Smith v. Spizzirri, 601 U.S. 472 (2024).

Section 3 of the Federal Arbitration Act (FAA) states that when a dispute pending in domestic court is subject to arbitration, courts “shall on application of one of the parties stay the trial of the action until such arbitration” has been completed.  Nevertheless, federal courts have been split on whether Section 3 requires a court to stay litigation pending parallel arbitration proceedings, or instead affords courts discretion to dismiss a suit in its entirety when the claims are subject to arbitration.  In Smith v. Spizzirri, the U.S. Supreme Court resolved this dispute, holding that when a party requests a stay of litigation pending arbitration, Section 3 requires a stay, and precludes dismissal.

Smith involved allegations by delivery drivers that their employer, an Arizona delivery service, violated certain federal and state employment laws.  After the employees sued in Arizona state court, the employer removed the case to the U.S. District Court for the District of Arizona and moved both to compel arbitration and dismiss the case.  Although the delivery drivers ultimately conceded that their claims were arbitrable, they maintained that dismissal was unwarranted because Section 3 required the court to stay the litigation pending completion of the parties’ arbitration.

Both the district court and the Ninth Circuit disagreed.  Relying on Ninth Circuit precedent, the district court found that Section 3 allowed it discretion to “either stay the action or dismiss it outright,” and dismissed the case.  On appeal, the Ninth Circuit affirmed, holding itself bound by its prior decisions.  The court, however, acknowledged that “the plain text of the FAA appears to mandate a stay,” and two judges issued concurring opinions stating that the Circuit’s precedent was incorrect and urging the Supreme Court to resolve the issue.

The Supreme Court obliged, unanimously holding that the plain language of Section 3 precludes dismissal of a suit on the basis that all the claims are subject to arbitration.  The word “shall” creates “an obligation impervious to judicial discretion,” and furthermore the “long-established meaning” of “stay’” denotes only a “temporary suspension” of legal proceedings.  In other words, “’shall’ means ‘shall’ and ‘stay’ means ‘stay.’”

The Court further noted that its reading of Section 3 comported with the key underlying goals of the FAA.  First, consistent with a pro-arbitration policy that aims to move parties “out of court and into arbitration as quickly and easily as possible,” the FAA allows for an immediate interlocutory appeal of an order denying a motion to compel arbitration, but not an order compelling arbitration.  Yet, because a dismissal results in an immediately appealable final judgment, interpreting Section 3 to permit courts to dismiss lawsuits while compelling arbitration would in effect allow parties to appeal motions compelling arbitration, despite the FAA “forbid[ing] such an appeal.”  Giving effect to the plain terms of Section 3 therefore preserves the FAA’s pro-arbitration policy of allowing appeals from motions denying, but not those granting, orders to compel arbitration.

Likewise, giving effect to Section 3’s mandate to stay also facilitates the courts’ supervisory role envisioned by the FAA. The FAA provides mechanisms for courts to provide relief in aid of arbitration, including by appointing an arbitrator, enforcing subpoenas issued by arbitrators, and enforcing arbitral awards. Staying a case during the pendency of an arbitration avoids the costs and complications that might arise if a party were required to bring a new suit to obtain the court’s assistance in aid of arbitration.

Read the court’s full decision here.

New York Federal Court Lacks Jurisdiction to Vacate Arbitration Award Issued Under Swiss Law: 

Only Swiss courts have the power to vacate an award “made” in Switzerland.

Molecular Dymanics, Ltd. V. Sprectrum Dynamics Medical Ltd., Case No. 22 Civ. 5167 (KPF) (S.D.N.Y. July 23, 2024).

In the context of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the courts of the country under whose laws an arbitration award is “made” – i.e., the “seat” of the arbitration – are said to have “primary jurisdiction” over the award.  Other States in which enforcement may be sought are said to have “secondary jurisdiction.”

It is generally accepted that, under the Convention, only courts in the primary jurisdiction may set aside an award as invalid under its own laws. Courts of secondary jurisdiction may rule only on the enforceability of the award and may only deny enforcement on the limited grounds set forth in the Convention.

In Molecular Dynamics, the Southern District of New York applied these principles in holding that it lacked jurisdiction to apply the provisions of Section 10 of the Federal Arbitration Act (FAA) to vacate an award issued in Switzerland under Swiss law.

The underlying dispute arose out of a series of agreements establishing a joint venture known as Molecular Dynamics or “MD,” which concerned the development of certain nuclear medicine devices.  All of the relevant agreements provided that they were governed by New York law, and that any disputes arising out of the venture were to be resolved through arbitration in Geneva, Switzerland under the Swiss Rules of International Arbitration of the Swiss Chambers Arbitration Institution.”  These included a License Agreement, which also contained a forum selection clause providing that “on matters of injunctive relief” New York courts would have non-exclusive jurisdiction, and “on matters concerning the Chosen Arbitration,” New York courts would have “exclusive jurisdiction.”

After disputes arose under the Licensing Agreement, the licensee Spectrum terminated the agreement and filed a Notice of Arbitration with the Swiss Arbitration Center.  The arbitration was held between April 2018 and May 2022, during which time MD claimed a number of irregularities, including fraudulent and perjurious conduct by Spectrum, the resignation of one of the arbitrators due to allegations of bias and conflict of interest, and the tribunal’s refusal to reopen proceedings in response to the alleged submission of new evidence.

Despite these protests, the tribunal issued a Partial Award in favor of Spectrum and a Final Award awarding costs to Spectrum.  Following issuance of the Partial Award, MD filed a petition in the Southern District of New York to vacate the award under Section 10 the FAA claiming, inter alia, that (i) the award was procured by fraud and tainted by evident partiality; and (ii) the arbitrators committed misconduct.  It later amended its petition to also seek vacatur of the Final Award on the same grounds.

Spectrum opposed the petition, arguing that the court lacked jurisdiction to vacate the award because the award was made in Switzerland under Swiss law.  The court agreed.

The court began its analysis by explaining that, under Article V(1)(e) of the New York Convention, “only a ‘competent authority’ of the country in which, or under the law of which, an award was made, may vacate or annul the award under domestic law.”  Whether the court was “competent” under Article V(1)(e) went to the court’s subject matter jurisdiction.  And a court outside the seat, sitting in secondary jurisdiction, lacks subject matter jurisdiction “over claims seeking to vacate, set aside, or modify foreign arbitral awards.”

The court held that Switzerland had primary jurisdiction over the award because the parties’ agreement called for arbitration in Switzerland, the tribunal explicitly recited, without objection, that the awards were rendered under Swiss law, and there is a “strong presumption,” absent explicit agreement to the contrary, that the place of arbitration designated by the parties “also designates the law under which the award is made.”  Accordingly, the award was “made” in Switzerland, and Swiss courts had exclusive jurisdiction to vacate or annul the awards.

The court rejected petitioners’ claim that the forum selection clause in the License Agreement evidenced the parties’ intent to “bifurcate primary jurisdiction” such that “Swiss arbitral law would govern the conduct of the arbitration, while U.S. arbitral law would govern any post-award proceedings, including to vacate.”

First, the court noted, the forum selection clause “specifies neither that it applies to applications to vacate an award, nor that the United States is intended to serve as the primary jurisdiction for the arbitration.”  More fundamentally, for the court, such agreement would impermissibly “circumvent” the New York Convention.  The forum selection clause had to be interpreted “in light of the New York Convention,” which governed the agreement from the outset.  The Convention contemplates only that that the courts of the country in which or under the laws of which an award is made “will be free to set aside or modify an award in accordance with its domestic law,” while “all other states have only ‘limited authority’ to review arbitral awards.”  It was “settled” that “U.S. courts can apply the domestic provisions of the FAA” to vacate awards governed by the Convention,” and made in the United States.  But the court was aware of “no decision from a U.S. court in the 54 years since this country acceded to the New York Convention … holding that a U.S. court could vacate an award made in a foreign state under foreign law.”

Read the court’s full decision here.

Second Circuit Holds Section 1782 Discovery Not Available In Aid Of ICSID Arbitration:

ICSID panel does not qualify as a “foreign or international tribunal” under Section 1782.

Webuild S.P.A. v. WSP USA Inc., 2024 WL 3463380 (2d Cir. July 19, 2024).

Section 1782, a federal statute (28 U.S.C. § 1782), allows U.S. federal courts to compel witness testimony and document discovery for “use in a proceeding in a foreign or international tribunal.”  In 2022, U.S. Supreme Court decided ZF Automotive US, Inc. v. Luxshare, Ltd. and AlixPartners, LLC v. Fund for Protection of Investors’ Rights in Foreign States, resolving a long-standing conflict among lower federal courts by ruling that neither private commercial arbitration tribunals nor tribunals presiding over ad hoc investor-state arbitrations were “foreign tribunals” within the meaning of Section 1782.

However, the Court seemingly left open whether a tribunal constituted under the aegis of the International Centre for Settlement of Investment Disputes (“ICSID”) qualified as a “foreign or international tribunal” under Section 1782.

In Webuild S.P.A. v. WSP USA Inc., the Second Circuit addressed this very issue, holding that an ICSID tribunal also does not qualify as an “international tribunal” under Section 1782.

The Webuild case arose in connection with an arbitration between Italian company Webuild and Panama under the Italy-Panama bilateral investment treaty.  Webuild obtained an ex parte order from the U.S. District Court for the Southern District of New York permitting it to subpoena evidence from WSP, a non-party located in New York.  Upon being served with the subpoena, WSP moved to vacate the order and quash the ensuing subpoena.

The district court granted WSP’s motion and quashed the subpoena.  Webuild appealed, and the Second Circuit affirmed, holding that the ICSID tribunal “does not qualify as a ‘foreign or international tribunal’ as that term is used in [Section] 1782.”

The Second Circuit, relying on the Supreme Court’s reasoning in ZF Automotive, found that ICSID tribunals were not meaningfully distinguishable from other private tribunals constituted pursuant to agreements to arbitrate, and appointed and funded by the parties.  While sovereign States may help to fund the ICSID Centre, these sovereign contributions do “not fund the Tribunal, directly or indirectly,” which is “instead funded through advances on arbitrator fees and expenses paid by the parties.”

The Second Circuit rejected Webuild’s contention that ICSID tribunals were different because of “the ICSID Convention’s unique post-award procedures (both through annulment and enforcement mechanisms),” reasoning that “these procedures merely facilitate the enforcement of ICSID awards.”  These so-called unique post-award procedures, which include the Convention’s requirement that member States treat ICSID awards as judgments of their own courts, did not otherwise demonstrate an “exercise of governmental authority” or indicate that “the Webuild Tribunal is itself imbued with governmental authority.”

The Second Circuit also rejected Webuild’s argument that sovereign States “play[] a more significant role in the composition of [ICSID] panels” because arbitrators may be appointed from “an ICSID-maintained Panel of Arbitrators” selected by member States.  But here, the court’s decision was arguably narrower.  It held the “possibility” of ICSID’s involvement in composing the tribunal “has no relevance to this case, as the parties agreed on the arbitrators and the [ICSID] Chairman did not appoint any member of the Webuild Tribunal.”  This potentially leaves open the question of whether Section 1782 discovery might be available in aid of an ICSID arbitration where the arbitrators are appointed by ICSID from the State-approved roster of arbitrators.  Whether that narrow class of ICSID tribunals qualifies as an “international tribunal” under Section 1782 remains to be seen, but it is clear that the availability of Section 1782 discovery for use in international arbitration has been further curtailed.

Read the court’s full decision here.

Southern District of New York twice finds that, under the McCarran Ferguson Act, Louisiana statute barring arbitration of insurance disputes reverse-preempts the New York Convention:

Arbitration agreements were not “forum selection clauses” exempted from Louisiana statute’s proscription on arbitrating insurance disputes.

Certain Underwriters at Lloyds, London et al v. Mpire Properties, LLC, No. 22-CV-9607, 2023 WL 6318034 (S.D.N.Y. Sept. 28, 2023).

Certain Underwriters at Lloyds, London et al. v. 3131 Veterans Blvd LLC, No. 22-CV-9849, 2023 WL 5237514 (S.D.N.Y. Aug. 15, 2023).

Under the Supremacy Clause of the U.S. Constitution, the Federal Arbitration Act (“FAA”) and the New York Convention (codified in Chapter 2 of the FAA) generally preempt state laws invalidating arbitration agreements.  However, the McCarren-Ferguson Act (MFA), another federal statute, provides that “the business of insurance” is “subject to the laws of the several States,” and that “no Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance[.]”  In other words, the MFA “reverse-preempts” federal laws that conflict with state laws regulating insurance, unless the federal law is specifically addressed to the business of insurance.

Several states have enacted statutes declaring that insurance disputes are not arbitrable.  Courts have held that, under the MFA, these state laws invalidate domestic arbitration agreements governed by FAA Chapter 1.  But there is a circuit split over whether MFA reverse-preemption applies where state laws purport to invalidate international arbitration agreements governed by the New York Convention.  On the one hand, the First, Fourth, Fifth, and Ninth Circuits have held that the MFA does not reverse preempt the Convention, and therefore state laws prohibiting the arbitration of insurance disputes are inapplicable to arbitration clauses in policies issued by foreign insurers.  See, e.g. Green Enterprises, LLC v. Hiscox Syndicates Limited at Lloyd’s of London, 68 F.4th 662, 668 (1st Cir. 2023); ESAB Group, Inc. v. Zurich Ins. PLC, 685 F.3d 376, 385 (4th 2012); Safety Nat. Cas Corp. v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714, 725 (5th Cir. 2009); CLMS Management Services Limited Partnership v. Amwins Brokerage of Georgia, LLC, 8 F.4th 1007, 1012 (9th Cir. 2021).  The Second Circuit, however, has held that state insurance laws do reverse-preempt the New York Convention, because the Convention is not self-executing, but rather it is incorporated into domestic law by Chapter 2 of the FAA, which is an “Act of Congress” under the MFA.  See Stephens v. American Intern. Ins. Co., 66 F.3d 41, 45 (2d Cir. 1995).

This circuit split was on display in two recent decisions from the SDNY, which held that Louisiana Revised Statute § 22:868, which invalidates arbitration clauses in insurance policies, reverse-preempts the FAA and the New York Convention, and therefore precludes the arbitration of insurance disputes under policies issued in Louisiana by foreign insurers.

The two cases, Mpire and 3131 Veterans Boulevard, arose from essentially the same basic facts.  In each case, a Louisiana policyholder disputed its insurers coverage determinations regarding property damage caused by Hurricane Ida.  Both policies were issued by a combination of foreign and domestic insurers, and each contained an arbitration provision.  The policyholder in each case sued only its domestic insurers in Louisiana state court (waiving its claims against the foreign insurers’ share of the policy).

In both cases, the insurers petitioned the SDNY to enjoin the Louisiana actions and compel arbitration.  In opposing the motions, the policyholders argued that Louisiana Revised Statute § 22:868, which invalidates any policy provision “depriving the courts of this state of the jurisdiction or venue of action against the insurer,” rendered the arbitration provisions unenforceable.

Each court rejected the insurers’ argument that § 22:868 permitted arbitration in these cases under an exception permitting “a forum or venue selection clause” in surplus lines policies.  As the policies at issue were surplus lines policies, the insurers argued that the arbitration agreements were enforceable because they were a form of “forum-selection clause.”  In each case, the court disagreed, holding that, under Louisiana law, an arbitration agreement is not a form of forum-selection clause, because a forum-selection clause, unlike an arbitration clause, does not “have the effect of excluding judicial remedies.”

The insurers next argued that, even if the statute applied to arbitration clauses in surplus lines policies, MFA reverse-preemption was inapplicable because the arbitration agreements fell under the New York Convention.  Here the insurers argued that under a doctrine known as Grigson estoppel, the arbitration agreements fell under the Convention, notwithstanding the policyholders’ decision to proceed only against the domestic insurer-signatories, because its signatories included foreign insurers. (For a discussion of Grigson estoppel see Port Cargo Serv., LLC v. Certain Underwriters at Lloyd’s, 2018 WL 4042874 (E.D. La. 2018).)

In each case the court rejected this argument.  Assuming, but not deciding, that the Convention applied, the court held that it was bound by Second Circuit precedent holding that state insurance laws reverse-preempt the Convention under the MFA.  Accordingly, § 22:868 would invalidate the policies’ arbitration provisions, even if they fell within the Convention.

These decisions are now on appeal to the Second Circuit, which will have the opportunity to reconsider its prior holding that the MFA reverse-preempts the New York Convention.  If the Second Circuit affirms its prior holding and preserves the circuit-split on this important question, the issue could come before the Supreme Court.

Read the court’s full decisions here and here.

Don’t I know you?

Eleventh Circuit refuses to vacate award based on arbitrators’ non-disclosure of professional experience with co-arbitrators and counsel.

Grupo Unidos por el Canal, S.A. v. Autoridad del Canal de Panama, 78 F.4th 1252 (11th Cir. 2023).

Federal Arbitration Act (FAA) § 10 provides that arbitral awards issued in the US may be vacated “where there was evident partiality or corruption in the arbitrators.”  A movant may prove evident partiality by showing either (1) an arbitrator has an actual conflict of interest or (2) an arbitrator failed to disclose information that would lead a reasonable person to believe that a conflict exists.  Like all grounds for vacating an award, the evident partiality prong is strictly construed.  To warrant vacatur, the “alleged partiality must be direct, definite and capable of demonstration rather than remote, uncertain and speculative.”  Challenges based on evident partiality rarely succeed.

Certain international arbitrators are in such high demand that they may serve together as co-arbitrators, and experienced counsel may appear before them in more than one case.  In some cases, parties have argued that an arbitrator’s failure to disclose such relations warrants vacatur of an award for arbitrator bias.  This was the case in Grupo Unidos, where the Eleventh Circuit Court of Appeals confirmed that the failure to disclose such professional contacts, without more, does not demonstrate evident partiality warranting vacatur of an award.

The dispute in Grupo Unidos arose from a five-year arbitration between Grupo Unidos por el Canal, a consortium of European companies hired to design and construct a new set of locks to expand the Panama Canal, and the Canal’s operator, Autoridad del Canal de Panama.  After extensive proceedings – which included over 3,500 pages of pleadings, 78 fact witnesses, 63 expert witnesses, over 3,500 exhibits, a 20-day merits hearing, and 1,290 pages of post-hearing briefing – the three-arbitrator panel issued a partial award of more than $238 million in favor of the Autoridad.

Following the partial award, Grupo Unidos sought a series of additional disclosures from the arbitrators.  After the arbitrators made the additional disclosures and issued a Final Award, Grupo Unidos moved to vacate the award for evident partiality based on four of these disclosures: (i) a co-arbitrator’s nomination of the tribunal’s president to serve as president of another tribunal in an unrelated arbitration while the Panama Canal arbitration was pending; (ii) an arbitrator’s service as co-arbitrator with counsel for the Autoridad in an unrelated arbitration while the Panama Canal arbitration was pending; (iii) an arbitrator’s service on a tribunal with one of the Autoridad’s counsel in an unrelated arbitration that ended before the Panama Canal arbitration commenced; and (iv) an arbitrator’s service on the tribunal in an unrelated case where one of the Autoridad’s counsel represented a party.

The Eleventh Circuit refused to vacate the award based on these nondisclosures.  The court considered it “well-taken” that “arbitrators should err on the side of greater, not lesser, disclosure.”  But to vacate the award on these facts, the court “would need to hold, in essence, that mere indications of professional familiarity are reasonably indicative of possible bias.”

In the first three instances, the court held that a reasonable person would not suspect bias based on the non-disclosure of co-service on arbitral tribunals in unrelated proceedings, because there were sound and impartial reasons for the various appointments.  This included, among other things, these individuals’ extensive expertise and experience in resolving complex construction disputes.  The court concluded that “such familiarity due to confluent areas of expertise does not indicate bias.”

The court likewise held that the remaining failure to disclose that a party’s counsel’s appearance before one of the arbitrators in a prior, unrelated arbitration did not demonstrate evident partiality. According to the court, repeated appearances by experienced counsel before experienced arbitrators were common and anticipated, and such “repeated appearances establish only familiarity, and familiarity does not indicate bias.”

In sum, the court observed that it was “little wonder, and of little concern,” that leading arbitrators and counsel in a small professional community “would cross paths in their work.”

Read the court’s full decision here.

Southern District of New York Confirms Award Enjoining Parallel Arbitration:

Agreement and AAA Commercial Rules granted arbitrators broad authority to grant injunctive relief, including the power to enjoin parallel arbitrations seeking to circumvent the arbitration agreement and undermine the panel’s authority.

Telecom Business Solution, LLC v. Terra Towers Corp., et al., No. 22-CV-1761, 2023 WL 5748199 (S.D.N.Y. Sept. 6, 2023).

One way parties may attempt to circumvent an unfavorable award is by initiating parallel proceedings before a court or arbitral tribunal they expect will rule in their favor. The question then arises of whether arbitrators are empowered to enjoin parallel proceedings to thwart such gamesmanship and preserve the integrity of the arbitration. In Telecom Business Solution, the SDNY was asked to confirm an award ordering the respondents to terminate parallel arbitration proceedings directly aimed at undermining the ongoing arbitration.

The case arose from a dispute between the shareholders of Continental Towers LATAM Holdings Ltd. regarding the sale of the company.  Specifically, the minority shareholders alleged that the majority shareholders had prevented the sale of the company by wrongfully restricting the minority shareholders’ right to sell their shares.  They therefore invoked the arbitration clause in the shareholders’ agreement and initiated an arbitration in New York under the Commercial Rules of the American Arbitration Association, seeking an award requiring the sale of the company.  The tribunal ultimately issued a unanimous first partial final award ordering the sale of Continental Towers, which was later confirmed in the SDNY.  This was followed by a second partial final award that imposed sanctions on the majority shareholders, including staying their counterclaims until they complied with the tribunal’s order to complete the sale of Continental Towers.

Rather than comply with the awards, the majority shareholders took their fight abroad.  A few months following the second partial final award, wholly-owned subsidiaries of Continental Towers initiated arbitrations in Peru and Guatemala, asserting claims mirroring the majority shareholders’ stayed counterclaims in the New York arbitration.  The Guatemala tribunal even issued an injunction purporting to enjoin the minority shareholders from, among other things, undertaking “transactions that change the equity interests that [the majority shareholders] hold in certain of [Continental Towers’] subsidiaries,” directly conflicting with the New York tribunal’s ordering of the sale of Continental Towers.  The minority shareholders therefore moved for an anti-arbitration injunction from the New York tribunal to enjoin the South American arbitrations.

The New York tribunal found that, because the majority shareholders were the real parties in interest in all three arbitrations, the South American arbitrations were a transparent attempt to circumvent the New York tribunal’s orders.  The New York tribunal therefore issued a third partial final award ordering the majority shareholders to terminate the parallel arbitrations.

The minority shareholders then petitioned the SDNY for expedited confirmation of the third award. The majority shareholders cross-moved for vacatur.

The court rejected the majority shareholders’ vacatur motion, and confirmed the award.  The court rejected the respondents’ contention that the injunction exceeded the arbitrators’ authority, holding that the arbitrators had the authority to issue the anti-suit injunction.  The arbitrators’ scope of authority “generally depends on the intention of the parties to an arbitration, which is determined by the parties’ agreement.”  The shareholder agreement granted the tribunal broad authority to decide “any controversy, claim or dispute arising out of or in connection” with the shareholders’ agreement, and authorized the arbitrators to award specific performance and injunctive relief.  The agreement further provided that the arbitration would be conducted under the AAA Rules, which likewise granted the arbitrators authority to issue injunctive relief.  The arbitrators had found that the shareholders’ parallel arbitration violated the arbitration clause and the implied covenant of good faith, and awarded the anti-suit injunction as the appropriate remedy.  The court held that it was well within the arbitrators’ authority, as defined by the agreement, to order an anti-suit injunction to remedy these breaches.

Read the court’s full decision here.

Southern District of Texas finds arbitrators exceeded their powers in amending award:

Tribunal’s redetermination of substantive issue of law went beyond correction of computational errors permitted by ICC Rules.

RSM Production Corp. v. Gaz du Cameroun, S.A., No. 4:22-CV-03611, WL X (S.D. Tx. Nov. 6, 2023).

The common law doctrine of functus officio bars an arbitrator from revisiting the merits of an award once issued.  The rule recognizes that once the arbitrators render an award, their contractual powers are exhausted.  If a tribunal modifies the substance of an award after it is functus officio, the amended award is subject to vacatur under FAA § 10(a)(4), which provides for vacatur “where the arbitrators exceed their powers.” This common law doctrine is, however, subject to certain well-known exceptions.  Most notably, arbitrators may correct clerical or computational errors, which are properly viewed as perfecting or explaining their determination, rather than altering the substance of their conclusions.  Moreover, because arbitration is a matter of contract, the parties are free to empower the arbitrators to revisit and modify their awards.  This can be accomplished by agreeing to arbitrate under the rules of an arbitral institution, such as the International Chamber of Commerce (ICC), which empower arbitrators to revise their awards in the manner specified in the rules.  However, the ICC Rules, like most, limit the arbitrators’ authority to correcting the same type of computational or clerical errors permitted under the functus officio doctrine.

In RSM Production Corp., the United States District Court for the Southern District of Texas held that the addendum modifying a final award may be vacated under FAA § 10(a)(4) where the arbitrators exceed their authority to correct awards under the institutional rules chosen by the parties.  Specifically, RSM Production Corp. concerned a petition to vacate an addendum issued pursuant to Article 36 of the ICC Rules, which grants arbitrators the power to correct “a clerical, computational, or typographical error, or any errors of a similar nature contained in an award.”

The underlying dispute arose from a set of agreements between RSM Production Corp. (RSM) and Gaz Du Cameroun, S.A. (GdC) concerning a natural gas production and distribution project.  Under the contracts, GdC would advance certain costs and serve as operator in exchange for a 60% interest in the project, while RSM retained a 40% interest for itself.  However, RSM was not entitled to receive its share of the proceeds until GdC recuperated 100% of its costs from the gas proceeds.  Thus, the contracts defined RSM’s “payout date” as “the first day of the calendar month following the calendar month” in which GdC fully recovered its costs.

The parties’ dispute concerned when GdC recuperated all costs and thus what constituted the contractual “payout date.”  GdC claimed that it had not recouped its costs until May 2016, and thus it did have to begin paying RSM its share of the proceeds until June 1, 2016.  RSM disagreed, claiming that GdC had recouped the costs recoverable under the contract by January 2016, and therefore the payout date was months earlier on February 1.  According to RSM, GdC’s arrived at the June 1 payout date by improperly including payments GdC made to a third company under a separate royalty contract in calculating its recoverable costs.  RSM therefore commenced arbitration, claiming its share of the proceeds based on a February 1 payout date.  RSM claimed a total of $10,578,123 comprised of three components: (i) $6,566,497 on the proceeds from sales generated between February 1 and June 1; (ii) $3,866,616 on the proceeds from sales generated prior to February 1, but received on or after February 1, 2016; and (iii) $145,009 on the proceeds received between GdC’s full cost recovery in January and the February 1 payout date.  The tribunal labelled this three-part claim as “Claim No. 1.”

In the alternative, RSM argued that, if the correct payout date was June 1, it was nevertheless entitled to components two and three of Claim No. 1, albeit calculated based on GdC’s alleged cost recovery in May 2016. The tribunal labelled RSM’s alternative claim as “Claims Nos. 2 and 3.”

The tribunal issued an award in RSM’s favor entitled, “RSM Claim No. 1: GdC’s Inclusion of the CHL Royalty in the Calculation of ‘Payout.’”  The tribunal found that GdC had improperly included the royalty payments in its recoverable costs, the proper payout date was February 1, and RSM was entitled to the full $10,578,123 it demanded.  In reaching this conclusion, the tribunal explicitly found that RSM’s compensation was calculated in “three steps,” citing specific contractual provisions entitling RSM to recover each of the three components of Claim No. 1.  The tribunal further found that Claims Nos. 2 and 3 were moot because they arose only in the event the tribunal deemed the proper payout date to be June 1, 2016.

In response, GdC filed an application under Article 36 of the ICC Rules seeking a “correction” of the amounts awarded.  GdC did not contest the tribunal’s conclusion that the proper payout date was February 1.  Rather, it argued that the tribunal had erred in granting the full $10,578,123 because, according to the title of the award, the tribunal only decided that the proper payout date was February 1.  Therefore, GdC argued, the tribunal did not address the second and third components Claim No. 1 concerning RSM’s share of the proceeds generated before February 1.  Those claims, GdC argued, were only encompassed in what the tribunal had labelled Claim Nos. 2 and 3.  GdC further argued that those claims were therefore not moot, the tribunal had yet to decide RSM’s entitlement to the second and third components of Claim No. 1, and it therefore erred in awarding RSM the full $10,578,123.

The tribunal issued an addendum award in which it agreed with GdC, and characterized its award to RSM of amounts generated prior to the payout date as a “miscalculat[ion of] the appropriate relief due to RSM.”  The Addendum Award then purported to correct this “computational error” by limiting the damages awarded RSM to $6,566,497.38 (the first component of Claim No. 1).

RSM moved to vacate the Addendum Award under FAA § 10(a)(4), arguing that the arbitrators had exceeded their powers under the ICC Rules by issuing the Addendum Award, because it did not merely correct a computational error, but amounted to a “re-do” of its prior merits determination.  The court agreed.

The court observed that mere computational errors are typically straightforward and involve simple mistakes, such as 2+2=5.  Here, however, rather than making such ministerial corrections, the tribunal revisited the merits and “effectively reversed” its “comprehensive breakdown” of why RSM was owed amounts corresponding to the second and third components of Claim No. 1.  The court emphasized that the tribunal’s Addendum Award “conflate[d] the title of its original decision with its substance.”  The title of the tribunal’s first award may have suggested it was limited to determining the appropriate payout date, and thus only RSM’s entitlement to the first component of Claim No. 1.  But RSM’s submissions were clear that it was seeking all three components of Claim No. 1, and the “substance of [the tribunal’s] decision expressly determined that RSM was entitled to recover on each of the three components that made up the $10,578,123.28 award.”

The court therefore held that “the tribunal committed a textbook case of reversing course on a substantive legal issue previously decided.”  Notably, in reaching this conclusion, the court rejected GdC’s argument that “the tribunal is entitled to extreme deference on the interpretation of its power, including what constitutes a ‘computational error’” under the ICC Rules.  Rather, for the court, “the tribunal exceeded its authority by modifying the award in a way forbidden by the plain text of the agreement.”  The parties agreed to the application of the ICC Rules, and the meaning of ICC Rule 36 was clear.

Read the court’s full decision here.