Confirmation / Vacation of Arbitration Awards

On June 24, 2010, we reported on a dispute between BG Group, a British company that invested in Argentinean gas distribution, and Argentina over losses incurred by BG Group after Argentina enacted emergency laws in response to an economic crisis in 2002. A U.S. district court has now confirmed an arbitration award in excess of $185 million over Argentina’s contention that the award violated public policy and was thus improper under the New York Convention. The court’s decision was based upon the following determinations: (1) that the panel correctly found that the governing investment treaty’s condition precedent for suit in Argentinean court to precede arbitration was invalid in light of Argentina’s emergency laws, which made it effectively impossible to comply with that condition; (2) that the arbitration was not an impermissible “derivative claim” brought by a non-party to the investment treaty because the duty that BG Group claimed Argentina violated was a duty contemplated by the treaty to extend to an investor; (3) that in calculating damages, the panel’s consideration of a transaction that occurred four years prior to the economic crisis was not improper because the panel considered it only to assist it in determining BG Group’s fair market value prior to its loss in 2002; and (4) that the award did not run afoul of the “just compensation” prong of the U.S. Takings Clause because the panel had held that no property had been expropriated by Argentina, and in any event, the panel was not an arm of the government, and a “judicial taking” is not an action under the law that is “well defined and dominant” so as to constitute a violation of public policy. Republic of Argentina v. BG Group PLC, Case No. 08-485 (USDC D.D.C. Jan. 21, 2011). This post written by Michael Wolgin.

On October 7, 2009, we reported on See More Light Investments v. Morgan Stanley DW Inc., Case No. CV 08-580 (USDC D. Ariz. July 29, 2009), in which a court vacated an arbitration award for “manifest disregard of the law” based on the failure to apply the Cuban Assets Control Regulations (CACR), which the arbitrators had initially recognized as applicable law. On January 14, 2011, the Ninth Circuit Court of Appeals reversed, holding that the CACR is not “well defined, explicit, and clearly applicable” to the transaction at issue because the arbitrators may have concluded that the CACR should not apply based on its provisions, or simply “interpreted the CACR differently, then the district court did.” See More Light Investments v. Morgan Stanley DW Inc., No. 09-16953 (9th Cir. Jan. 14, 2011).

This post written by Michael Wolgin.

Three prospective buyers of certain multi-million dollar beach condo properties, who paid twenty percent down, but later refused to purchase the condos due to alleged deficiencies, brought suit against the owner/builder, who allegedly improperly retained a portion of the down payment. The parties arbitrated their dispute pursuant to the arbitration provision in the purchase agreement, and the plaintiffs were awarded compensatory and punitive damages on a conversion claim. However, disputing the damages calculation, the plaintiffs brought an action in court seeking to vacate the damages award in favor of a higher figure. The trial court generally confirmed the arbitration award, with only a slight modification based on a computational error. The appellate court affirmed, reiterating the principles of deference codified in the Federal Arbitration Act, and rejecting “manifest disregard of the law” as a proper basis on which to challenge an arbitration award. Kitchens v. Turquoise Properties Gulf, Inc., No. 2090791 (Ala. Civ. App. Nov. 12, 2010) (opinion not available without charge).

This post written by John Pitblado.