Article: US Courts Generally Refuse to Second-Guess Foreign Arbitral Decisions

Article: US Courts Generally Refuse to Second-Guess Foreign Arbitral Decisions

U.S. courts generally will not second-guess decisions issued by foreign arbitral tribunals. The ruling issued on July 7, 2017 by the U.S. Court of Appeals for the D.C. Circuit in Getma International v. Republic of Guinea, Case No. 16-7087, is a good reminder of the high bar required to convince a U.S. court to “intervene in [a] quintessentially foreign dispute.” (Slip Op. at 2).

In 2008, Getma International entered into a contract with the Republic of Guinea to expand and operate Guinea’s port in Conakry. The contract contained an arbitration clause.

Following a change in administration, Guinea terminated the contract in 2010, causing Getma to seek arbitration for breach of contract before the Common Court of Justice and Arbitration of the Organization for the Harmonization of Business Law in Africa (CCJA).

A panel of three arbitrators was appointed. The CCJA set the arbitrators’ fees at €61,000 in accordance with its rules, but the arbitrators demanded a fee of €450,000. The CCJA rejected the arbitrators’ demand and warned that an invalid fee arrangement could subject the underlying award to annulment.

The arbitral panel awarded Getma €39 million plus interest, and despite the CCJA’s warning, continued to demand €450,000 as their fee. Getma acceded to the demand and paid €225,000 to the arbitrators. Guinea did not, so the arbitrators filed suit in Paris to collect the remaining €225,000 from Guinea.

Guinea meanwhile sought annulment of the underlying breach of contract arbitral award before the CCJA. The CCJA granted Guinea’s petition, noting that the entire award should be annulled because the arbitrators deliberately ignored the CCJA’s fee rules and thus breached their duties. The CCJA informed Getma that it could seek to have the underlying proceedings reopened.

Instead of continuing to fight before the CCJA, Getma filed a petition to enforce the original-but-now-vacated arbitral award against Guinea in U.S. court. Getma argued that the U.S. court should enforce the original award because the CCJA’s annulment order violates U.S. public policy and basic notions of morality and justice. The D.C. Circuit disagreed. The court held that Getma and Guinea had agreed, in their original contract, to be bound by CCJA’s arbitration rules – which includes the CCJA’s fee rules – so it did not violate any basic notion of justice to require both parties to play by those rules. Moreover, there was insufficient evidence that the CCJA proceedings were tainted or that the CCJA failed to act in accordance with its own rules.

This case is just one more example that U.S. courts will not undo foreign arbitral rulings except in extraordinary circumstances.

 

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